Monday, December 5, 2016

BlackRock: "What we talk about when we talk about TIPS"

BlackRock owns the iShares brand of ETF's including the largest TIPS ETF.

From the BlackRock blog:
Matt explains why investors should look at Treasury Inflation Protected Securities (TIPS) and TIPS ETFs now, and what the differences are between the two. 

Inflation expectations have been on the rise since before the U.S. election, but markets are now more convinced of higher inflation to come due to President-elect Trump’s talk of fiscal stimulus and tax cuts. Measured by breakevens in the Treasury Inflation Protected Securities (TIPS) market, inflation expectations for the next 10 years rose to 1.93%, the highest level since the summer of 2015 (source: Bloomberg data, as of 11/18/2016). The long decline in inflation seems to be turning, as the Consumer Price Index (CPI) climbed 1.6% year-over-year, the most in two years (source: Bureau of Labor Statistics, as of 11/18/2016). This changing environment has piqued investor interest in TIPS, and in turn, TIPS ETFs.

As the name implies, Treasury Inflation Protected Securities can help protect investors against inflation, while also providing the potential for income. The payments on TIPS are adjusted according to changes in the CPI. That means the coupon and principal payments of TIPS increase with inflation and fall with deflation.

TIPS are also valued by investors for their historically low correlation with other asset classes, which can make them a good addition to a diversified portfolio.

Among the ways to buy exposure to TIPS is directly through the government (the government sells them on or through an ETF. But here are two key points to understand before deciding whether TIPS or TIPS ETFs are right for you:

Tax implications
For a taxable U.S. investor, both the bond coupon and the inflation adjustment of TIPS are taxed as income. But the majority of the inflation adjustment is paid when TIPS mature. This creates what has been coined “phantom income”, income that is taxed in the current period but not received until a later period.

iShares offers two ETFs that invest in the U.S. TIPS market: iShares TIPS Bond ETF (TIP) and iShares 0-5 Year TIPS Bond ETF (STIP). These funds address the phantom income issue by paying out a monthly distribution that includes both the coupon income coming from the underlying TIPS held in the funds, as well as the principal adjustment for inflation. The income that an investor is taxed on in the current period is received in the current period. But paying out both coupon income and realized inflation has an interesting impact on the amount of income a TIPS ETF distributes, which leads me to my second point.

Distributions will vary
Coupon income on TIPS is generally positive, but the inflation adjustment can be positive or negative depending upon changes in the CPI. Investors should be aware that during periods of high inflation, the distribution on a TIPS ETF will likely rise, but during periods of deflation, the distribution will likely fall. It can even fall to zero if deflation is strong enough—this happened in November 2016 with the iShares TIPS Bond ETF. It is important to keep in mind that the distributions will fluctuate over time.

Below is a chart that shows the historical CPI levels and distribution yields for the iShares TIPS Bond ETF (TIP). A change in CPI doesn’t impact the inflation accrual for a TIPS bond until two months later....MORE

Sunday, December 4, 2016

No, Google's Sidewalk Labs Doesn't Want To Take Over Urban Transit. Yet. (GOOG)

No, they have bigger plans.
There is big money and big politics behind this stuff and this June 2016 article is a good primer on what's coming.

From CityLab:
No, Alphabet Isn't Conspiring to Take Over Public Transit in Columbus
Contrary to a recent article, “smart” transportation technologies like those from Sidewalk Labs aren’t really a big secret. Plus, cities want them.

Google drives about a third of all internet traffic and has the best digital map of the world. Every day, its databases process billions of thoughts and queries, secret and banal, typed into search engines and email subject lines. Among other things, Alphabet Inc., Google’s holding company, builds robots of formidable intelligence. Its technologies will soon be chauffeuring us from points A to B.
Reading about Alphabet’s hush-hush projects, interconnected products, and disruptions both welcome and unwelcome, wary minds may well wonder if its ambitions might include world domination. An article published Monday in the Guardian, about an Alphabet subsidiary’s work with the finalists of the U.S. DOT’s $50 million Smart Cities Challenge, seemed to lean toward that suspicion, starting with a fairly alarmist headline and opening sentence:
Sidewalk Labs, a secretive subsidiary of Alphabet, wants to radically overhaul public parking and transportation in American cities, emails and documents obtained by the Guardian reveal.
It goes on to describe some of the services which would usher in this “radical overhaul,” as gleaned from the obtained documents: a platform that allows low-income bus riders to apply public subsidies to ride-sharing services; an app that unifies payment and service information for all modes of transit; public wi-fi kiosks with remote sensing capabilities; and “virtualized parking,” which would use camera-equipped vehicles to scan for empty spaces cities could sell on a virtual parking market.
As the article explains, all of the functions described here are proposed elements of Flow, the transportation-data collection and analysis platform. Flow is one of Sidewalk Labs’ two current, public products (the other is the aforementioned line of kiosks, some of which are in use now in New York City). Flow is currently being offered first to Columbus, Ohio, which won the U.S. DOT’s Smart Cities Challenge last week. The Guardian article goes on to examine a sample contract that describes the terms and conditions required of Columbus by Sidewalk Labs:
Cities like Columbus would be obliged to bring parking signs up to date, re-train enforcement officers and share parking and ridership information with Sidewalk in real time. The company also wants cities to share public transport data with ride-sharing companies, allowing Uber to direct cars to overcrowded bus stops.
All these conditions could mean expensive upgrades to existing technology. “Not every city would be ready to do that,” says [Alexei Pozdnoukhov, director of the Smart Cities Research Center at the University of California at Berkeley]. “Plus, you’ve got a variety of transit operators. Small ones might have to change their entire payment systems.”
Overall, the article gives the impression that Flow is some kind of top-down planning regime, conceived in secret by Sidewalk Labs and foisted on cities like Columbus. It makes it sound conspiratorial. But that isn’t really the case.

First, the Guardian article does not mention that Flow was announced in March, in partnership with the U.S. Department of Transportation, as technology offered for free by Sidewalk Labs to the Smart Cities Challenge victor. The exclusive documents obtained by the Guardian were, according to Sidewalk Labs, pitch materials shared with finalist cities that modeled some of the possible functions of Flow. Since the platform has still yet to be deployed in any city, the specific elements of Flow remain a work in progress.

This is not to say that the Guardian’s facts and images came out of nowhere. Flow will, in fact, aim to “increase the efficiency of roads, parking, and transit use,” says Anand Babu, COO of Sidewalk Labs. It will provide real-time transportation information to cities, and it “could be used to improve and plan public transportation, guide drivers directly to parking, or point commuters to shared mobility options they can use when public transportation is not an option.”

But the final product will ultimately be a result of a back-and-forth process with whatever city adopts it first—not a grand transit “fix,” ordained in the shadows. Sidewalk Labs’ CEO Dan Doctoroff writes in Co.Design that the company worked with the Smart Cities finalists to refine the functions of Flow. According to a number of officials from those cities, that is true. Sidewalk Labs reps flew to meet with each of the seven finalist cities to discuss how their services might work there. According to attendees, those meetings resembled meetings with any other vendor angling to sell young technology to a government: There was give and take....MORE

"Social Media Is Killing Discourse Because It’s Too Much Like TV"

From MIT's Technology Review, Nov. 29:
If I say that social media aided Donald Trump’s election, you might think of fake news on Facebook. But even if Facebook fixes the algorithms that elevate phony stories, there’s something else going on: social media represents the ultimate ascendance of television over other media.

I've been warning about this since November 2014, when I was freed from six years of incarceration in Tehran, a punishment I received for my online activism in Iran. Before I went to prison, I blogged frequently on what I now call the open Web: it was decentralized, text-centered, and abundant with hyperlinks to source material and rich background. It nurtured varying opinions. It was related to the world of books.

Then for six years I got disconnected; when I left prison and came back online, I was confronted by a brave new world. Facebook and Twitter had replaced blogging and had made the Internet like TV: centralized and image-centered, with content embedded in pictures, without links.
Like TV it now increasingly entertains us, and even more so than television it amplifies our existing beliefs and habits. It makes us feel more than think, and it comforts more than challenges. The result is a deeply fragmented society, driven by emotions, and radicalized by lack of contact and challenge from outside. This is why Oxford Dictionaries designated “post-truth” as the word of 2016: an adjective "relating to circumstances in which objective facts are less influential in shaping public opinion than emotional appeals."

Neil Postman provided some clues about this in his illuminating 1985 book, Amusing Ourselves to Death: Public Discourse in the Age of Show Business. The media scholar at New York University saw then how television transformed public discourse into an exchange of volatile emotions that are usually mistaken by pollsters as opinion. One of the scariest outcomes of this transition, Postman wrote, is that television essentially turns all news into disinformation. "Disinformation does not mean false information. It means misleading information—misplaced, irrelevant, fragmented or superficial information—information that creates the illusion of knowing something but which in fact leads one away from knowing ... The problem is not that television presents us with entertaining subject matter but that all subject matter is presented as entertaining.” (Emphasis added.) And, Postman argued, when news is constructed as a form of entertainment, it inevitably loses its function for a healthy democracy. "I am saying something far more serious than that we are being deprived of authentic information. I am saying we are losing our sense of what it means to be well informed. Ignorance is always correctable. But what shall we do if we take ignorance to be knowledge?"

The problem with today’s Internet, driven less by text and hypertext (hyperlink-enriched text), is that it not only shares many of TV’s ills but also creates new ones. The difference between traditional television and the form of TV that has reincarnated as social media is that the latter is a personalized medium. Traditional television still entails some degree of surprise. What you see on television news is still picked by human curators, and even though it must be entertaining to qualify as worthy of expensive production, it is still likely to challenge some of our opinions (emotions, that is).

Social media, in contrast, uses algorithms to encourage comfort and complaisance, since its entire business model is built upon maximizing the time users spend inside of it....MORE

"Inside the weirdly calming world of farming and truck simulators"

From NewScientist:
Harvesting takes me an hour. That’s an hour in which I drive at little more than walking pace from one end of a field to the other and back again 20 or 30 times. It’s not the most fun I’ve had in a video game, but then I do need the money.

Farming Simulator 17, released on 25 October, is the latest game in a series made by Giants Software in Schlieren, Switzerland. Players start out with little land and few machines and must plant, tend and harvest crops – or raise livestock – to earn money to buy more land and more machines.
Running a successful farm can get your goat. You need to carefully manage your spending on fields, fuel and fertiliser to make a profit. You have to decide when trading in your beaten up tractor for a new one makes more sense than paying for repairs. There are loans to consider and investments to monitor. But at its heart, Farming Simulator is a game about driving heavy machinery up and down in straight lines. And there’s a zen-like buzz to the monotony.

For many, that’s a bigger draw than the frantic action of a shooter. Most games are all about winning or losing, says Mason, who plays to unwind. “When I play Farming Simulator there is no losing – it’s just me driving a tractor.”

Farming Simulator games often top sales charts in the US and Europe. And they are not the only popular video games about farming. Games like Harvest Moon and Stardew Valley give players idyllic cartoon farmsteads to run. And at its peak, Zynga’s 2009 Facebook hit FarmVille hooked several million people into a daily routine of tending their crops of carrots, albino pineapples and watermelon babies. But FarmVille never let you spend hours behind the wheel of a Holmer Terra Felis 2 eco sugar-beet loader.

Racing games often let you cruise around in pixel-perfect replicas of real-life vehicles, boasting licensing deals with car makers. Last year’s Forza Motorsport featured hundreds of virtual rides, including supercars like the Aston Martin V12 Zagato and the Lamborghini Veneno.
 Down on the farm
Farming Simulator is no different. The Holmer Terra Felis 2 is just one of around 250 licensed farm machines you can take for a spin – from the Massey Ferguson 7726 with Joskin Betimax RDS 7500 trailer (capacity: nine pigs) to the Ponsse Buffalo forwarder, a forestry vehicle used for thinning trees.

It’s not always about speed, though. Truck-driving sims such as Euro Truck Simulator and American Truck Simulator have even more fans that Farming Simulator. There are driving sims for everyone, whether buses, trains, tanks or diggers float your boat. All drop you into the cab of a large vehicle and simply let you drive....MORE
HT: Marginal Revolution

Previously (yes, there was a previously):
Apparently A Farming Simulator Has Sold One Million Copies
Who knew?
And its gone through 15 iterations.... 

The Farming Simulation Competition Is About to Heat Up
Can you feel the excitement?... 

HBR: Golf is evil (from an investor's perspective)

That's the Professor's headline, not the Harvard Business Review.

From Professor Bainbridge:

The HBR reports:
A year before Bear Stearns failed during the financial crisis, there were signs that the Wall Street firm was in trouble. During July 2007, two of Bear Stearns’ large hedge funds were failing. What was CEO James Cayne doing at the time? That month, he spent ten “working” days either playing golf or the card game bridge. ...

Separate tests focusing on operating performance and stock market valuations both suggest that high levels of CEO leisure are associated with underperforming firms. The average return on assets (ROA) is over 100 basis points lower for the CEOs in our sample who were in the top 25% of most-frequent golfers. A similar relation exists between CEO leisure consumption and firm market capitalization, which suggests that shareholder wealth is also negatively affected by the time CEOs spent on the fairways and greens.
Go read the whole thing, it's quite interesting.

There Appears To Be a Lovefest Going On at Ft Alphaville

Keep in mind these are Financial Times readers, not Teen Beat or J-17 or Sugar or somesuch.

Just look at these comments:
senatus populusque 3 days ago
Kudos to this newspaper for allowing your work to flourish. We need antidotes to group-think 

Izabella Kaminska FT 3 days ago
 @senatus populusque

CThwaites 3 days ago
@Izabella Kaminska @senatus populusque
Yes, keep at it. 

HDA 3days ago
Hear Hear. IK at her best and her best is very good indeed. Thank you 

No. 5011348 3 days ago
Great piece. Great work by NC also.

ResilienceEconomist 3 days ago
Your unashamedly intelligent and independent-minded writing keeps my faith in journalism alive.

Lemmy 3 days ago
Thought-provoking as ever. 

willosaurus 3 days ago

Ubique 3 days ago
Outstanding journalism. Detailed, fact based reporting informed by political reality and human empathy. Thank you Ms Kaminska 

Anon 3 days ago
This is a great piece. Brilliant work. 

Olibee 3 days ago
Fantastic article - thank you so much (also for the link to Naked Capitalism). Keep it up!

LoggedOut 3 days ago
As a middle-ager, I've always hated being disrupted and fail to understand how now it's seen as a positive term. Great article!

lxduende 3 days ago
Kudos to linking to Naked Capitalism.

HisDudeness 3 days ago
Great stuff IK. Thanks. 

Grant 1 day ago
Finally, somebody is doing their job in calling out the unicorns for what they are: all style and no substance. Thank you

I've never seen anything like it. There were maybe four negative leavings among the 70 or so listed.

And this is a post about a taxicab unicorn.
The taxi unicorn’s new clothes

It got to be so overwhelming going through the comments, one after another that, I'm a bit embarrassed to say, I thought of this from one of our posts a year ago:
The internet has some odd offerings when you ask it for "Unicorn orgy". 

Saturday, December 3, 2016

Turkey's Erdoğan Backs Down In Battle Of Wills With Putin

Following up on Kremlin Unsure How to Take Erdogan's Vow to Topple Assad.*

From Hurriyat Daily News (since they're still publishing we can assume they speak for the government), Dec. 1: 

Operation in Syria only targets terror, Erdoğan clarifies 
Turkey’s military operation in Syria is not against any country or person but terror groups in general, President Recep Tayyip Erdoğan has said, in contrast to earlier remarks that Turkey’s objective was to topple Syrian President Bashar al-Assad following.

“The aim of the Euphrates Shield Operation is no country or person but only terror organizations. No one should doubt this issue that we have uttered over and over, and no one should comment on it in another fashion or try to [misrepresent its meaning],” Erdoğan said at a 30th gathering with village chiefs at the Presidential Palace in Ankara on Dec. 1.

On Nov. 29, Erdoğan sought to explain the reason for Ankara’s military offensive into Syria, saying: “We entered there to end the rule of the tyrant al-Assad who terrorizes with state terror. [We didn’t enter] for any other reason.”

Erdoğan referred to the ongoing Euphrates Shield Operation that was launched on Aug. 24, after Ankara and Moscow began new dialogue over the course of developments in Syria. Turkey said its aim was to secure the border from the Islamic State of Iraq and the Levant (ISIL) and to stop People’s Protection Unit (YPG) efforts to link its cantons in northern Syria.

Erdoğan’s remarks on Nov. 29 created unease in Moscow, as senior officials publicly criticized the Turkish government and expressed their demand for an explanation. The issue was also raised by Vladimir Putin, who talked to Erdoğan on the phone on Nov. 30 while the latter was chairing a National Security Council (MGK) meeting....MORE 
*The precedent is already established, the one used in "Reply of the Zaporozhian Cossacks", see below....
... And back to the Cossacks. A couple weeks ago we posted "Little Has Changed Between Turkey, Russia Despite Reconciliation" with this introduction:
Whenever I think about Turkish-Russian relations I think of this painting:
... That's "Reply of the Zaporozhian Cossacks" by Repin, hanging in the State Russian Museum, St. Petersburg.

As the story goes, in 1676 the Turkish Sultan, despite being beaten by the Cossacks when he tried to invade what is now southern Ukraine, demanded these guys surrender and submit to Turkish rule.

As can be seen, the Cossacks thought this was the funniest thing they had ever heard and wrote a letter in response.
A very profane, very defiant, very vulgar, very contemptuous letter.

These old boys just cracked themselves up with their letter.
And that's what I think of when I think of Russians and Turks.

Police State Investing: The Companies that Could Join China’s Orwellian Behavior Grading Scheme

From Fortune via VentureBeat:
A year after China’s central government proposed a far-sweeping social credit system to turn citizens’ mundane online activities into a record of creditworthiness, local governments are beginning to compile records in the system critics dismiss as Orwellian.

Cities like Hangzhou, home to Alibaba, are beginning to track citizens’ utility bills, criminal record, online shopping habits, and public transportation use, among other factors, to generate a social credit score, the Wall Street Journal reports. The paper said three dozen cities are beginning to compile records.

The news reflects the unease existing in China today.

China’s ruling Communist Party is nervous about the prospects of social unrest as economic growth slows and millions of eligible workers are laid off amid reforms to the country’s heavy industry sector. The social credit score program, which the government hopes will combine disparate big data on its citizens for the first time, will likely make it easier to monitor and reward citizens who act suitably while punishing those who don’t. It’s a program China’s government can’t do alone, so it is enlisting some of the country’s best-known companies to help create it.

Alibaba’s Alipay payment system is one of eight companies involved in the first experiments around China’s social credit scoring system, the WSJ said. Alipay compiles scores based upon a user’s smartphone brand and what they buy online, before offering users perks for high scores.
“We want people to be aware of” their online behavior having an influence on their online credit score “so they know to behave themselves better,” the WSJ quoted Joe Tsai, Alibaba’s executive vice chairman, as saying.

Tencent is another obvious candidate to join the government’s efforts. Tencent’s WeChat social network, which has a scrolling “moments” feed and messenger service similar to Facebook’s offerings, has 800 million monthly users....MORE

"Equity Analysts Join the Gig Economy"

From Bloomberg Gadfly:
The gig economy has arrived in banking.
French lender Societe Generale SA announced Thursday that it had struck a deal to provide Asian equity research to its clients from online financial research syndication platform Smartkarma. According to the release:
"Societe Generale is the first global investment bank to have an agreement with an emerging fintech company to provide equity research that is compliant with evolving research unbundling requirements, such as MiFID II."
If the letter soup in that sentence went above your head, here's a summary: Europe's proposed new investment regulation, the Markets in Financial Instruments Directive, will require equity research to be paid for independently, instead of bundled together with trading commissions. As they start looking into how to separate the areas, banks are finding that research can't always pay for itself, partly because of the competitive nature of the business.

Enter third-party providers, such as Smartkarma . The platform has found a niche aggregating and distributing research produced by small brokerages and, more often, by independent analysts who may use it as a venue to retain visibility and land consulting work after leaving positions at big banks or funds.

Until now, such services had been gaining subscribers but had not replaced in-house research desks. Societe Generale's announcement may indicate a bigger shakeup is coming. It makes sense under the new European rules so expect more such notices. With many jurisdictions considering emulating MiFID, it could even become the norm.
The bad news for employees is that if banks are using syndicated research, they will need fewer in-house analysts....MORE
Well, at least it's not the robots.
As noted in last Sunday's "The automation of creativity: scary but inevitable"
First they came for the journalists and I did not speak out-
Because I was not a journalist.

Then they came for the ad agency creatives and I did not speak out-
Because I was not an ad agency creative. (see below)

Then they came for the financial analysts and I
said 'hang on one effin minute'....

"Winton Capital’s David Harding on making millions through maths"

This article was at FT Weekend a week ago and got set aside in our queue of links. It should have gotten wider attention.
It's a very solid look at one of the smarter and more intellectually flexible people in fund management.
As an example, despite personally backing 'remain' on the Brexit vote to the tune of $5 mil., he was one of the few managers to make money off the 'Leave' result.
See the FT's "Hedge funds win big from Brexit bets".

Plus, the last time I looked he had just over $100 million worth of NVIDIA,what more needs to be said?
(just kidding, I'm  not really that arrogant)

Here's Winton's performance vs. the S&P and the BarclayHedge index (BTOP50):
From FT Magazine:

The founder of the $32bn hedge fund talks about physics, philanthrophy and why he believes in tax
In 1994 the Philosophical Transactions of the Royal Society, a leading scientific journal, published an unusual paper. Entitled “Making money from mathematical models”, it was authored by a young financial trader in London. His name was David Harding, he was a Cambridge physics graduate and he used the paper to lay out what he saw as the “intellectual front line” of investment research. Harding’s idea was that finance could use science to identify and exploit inefficiencies in the markets.

He was right. Today Harding is worth about £1.3bn and, in the course of putting those initial ideas profitably into action, has become one of Europe’s leading financial entrepreneurs. His privately owned investment company Winton Capital (for which he reluctantly accepts the “hedge fund” label) manages $32bn of assets. When I take a copy of his Royal Society publication out of my briefcase, his face breaks into a slightly mischievous smile. “I’m terribly impressed that you have a copy of my one and only scientific paper,” he says.

Harding’s tale begins with a mathematically minded boy, who became interested in investing while helping his civil servant father manage a modest share portfolio. Today, he is based at Winton Capital’s headquarters in Hammersmith — well west of the districts favoured by London’s financial community. On the approach from the Tube station, the long, low-rise building, originally constructed in the mid-20th century, looks underwhelming. A queue of people stretches outside the Job Centre that occupies the first section of the shared block.

Once through Winton’s doors, however, the ground floor opens up into a spacious waiting area, its curvaceous reception desk illuminated with recessed red lights. Much of the art on display has a scientific theme, including a series of large Raoul Dufy prints from 1937, celebrating science and technology.

Harding’s career is founded on the relentless pursuit of mathematical and scientific methods to predict movements in markets. This is a never-ending process because predictive tools lose their power as markets change; new ones are always needed. “We have 450 people in the company, of whom 250 are involved in research, data collection or technology,” he says. That is equivalent to a medium-sized university physics department.

After graduating, Harding began work as a financial trader. Over five years he began to see potential profit in adopting a more mathematical approach — and, in 1987, he co-founded AHL as a commodities trading firm with two other young physicists, Michael Adam and Martin Lueck. Their success, using quantitative methods, led to AHL’s purchase by Man Group in 1994. Harding struck out on his own in 1997, setting up Winton (he gave the company his middle name) with the aim of building a more substantial investment business on the back of empirical scientific research.

In his 1994 paper, Harding wrote that the methods with which conventional banks and brokers make money from trading have “all the intellectual purity of selling vegetables”, a phrase he uses again during our interview. As well as taking clients’ fees, these methods consist essentially of selling complex derivatives at marked-up prices and of arbitrage (taking advantage of small differences in the price of financial instruments on different markets).

Harding has a different approach. He exploits failures in efficient market theory — “the idea that markets are always rational, that they perfectly reflect all knowable information and always produce in some sense the ‘right’ price”. This theory still has a grip on western economic thinking, he says, despite much evidence that it is wrong. “It treats economics like a physical science when, in fact, it is a human or social science. Humans are prone to unpredictable behaviour, to overreaction or slumbering inaction, to mania and panic.”

The Winton investment system is based instead on “the belief that scientific methods provide a good means of extracting meaning from noisy market data. We don’t make assumptions about how markets should work, rather we use advanced statistical techniques to seek patterns in huge data sets and base all our investment strategies on the analysis of empirical evidence. We conduct our research in the manner of a science experiment — collecting and organising data, making observations and developing hypotheses and then testing these hypotheses against empirical evidence.”

Harding emphasises the breadth and volume of investments involved, covering bonds, currencies, commodities, market indices and individual equities. The aim is to exploit a large number of weak predictive signals, he says: “We don’t expect to find any strong relationships between data and the price of the market. That may sound counter-intuitive but if there are strong relationships, someone else is going to be exploiting those. Weak relationships are where we have a competitive advantage.”...MUCH MORE
As the author of the piece, the FT's science writer   points out, the approach is similar to that of Renaissance Technologies.

No kidding.
Compare the paragraph immediately above with this from Nov. 21's "Inside Renaissance Technologies' Medallion Fund: A Moneymaking Machine Like No Other (and President-elect Trump's Sharpe ratio)";
...At the 2013 conference, Brown referenced an example they once shared with outside Medallion investors: By studying cloud cover data, they found a correlation between sunny days and rising markets from New York to Tokyo. “It turns out that when it’s cloudy in Paris, the French market is less likely to go up than when it’s sunny in Paris,” he said. It wasn’t a big moneymaker, though, because it was true only slightly more than 50 percent of the time. Brown continued: “The point is that, if there were signals that made a lot of sense that were very strong, they would have long ago been traded out. ... What we do is look for lots and lots, and we have, I don’t know, like 90 Ph.D.s in math and physics, who just sit there looking for these signals all day long. We have 10,000 processors in there that are constantly grinding away looking for signals.”... 
Brown is Peter Brown, Co-Chief Executive Officer of RenTech.
I'd say Cookson got the money quote, so to speak.

Friday, December 2, 2016

Uber Is Now Tracking You After Your Trip

From TechCrunch:

Uber begins background collection of rider location data:
Imagine you’re on your way to a therapy appointment in a downtown high-rise. You hail an Uber and enter a nearby coffee shop as your destination so you can grab a snack before the appointment. In the car, you scroll through Instagram and check your email. You get out, buy your coffee, and walk around the corner to your therapist’s office.

If you installed the latest app update, Uber has been tracking your location the entire time.
The app update (it’s 3.222.4, for those keeping track) changes the way Uber collects location data from its users. Previously, Uber only collected location information while a user had the app open – now, Uber asks users to always share their location with the ride-hailing company.

Uber says that, even though it can harvest your location constantly while its app is running in the background on your phone, it won’t use that capability. Instead, Uber claims it just needs a little bit more location data to improve its service, and it has to ask for constant access because of the way device-level permissions are structured.

Specifically, Uber wants access to a rider’s location from the moment she requests a ride until five minutes after the driver drops her off, even if the app is not in the foreground of her phone. Previously, Uber would not collect a rider’s background location during the trip, or her location after drop-off.

The company will use this information to improve drop-offs and pick-ups, which have consistently been a pain point for Uber and other ride-hailing services. The most common reason for riders and drivers to contact each other is to communicate their location when the app does not provide an accurate pinpoint, and Uber hopes to cut down on confusion during pick-up.

Uber also wants to track how often riders cross the street directly after a drop-off, which the company believes could indicate a safety hazard. Riders shouldn’t have to dart through traffic to get to their destination, a spokesperson explained, and tracking a user after drop-off can help the company detect whether the driver dropped their passenger off in a risky place.

“We’re always thinking about ways we can improve the rider experience from sharpening our ETA estimates to identifying the best pick up location on any given street. Location is at the heart of the Uber experience, and we’re asking riders to provide us with more information to achieve these goals,” an Uber spokesperson said in a statement....MORE

June 2015 
Corrected--Starting July 15 Uber Will Track Your Location Whether You're Using the App Or Not
...An Uber spokesperson has clarified to Engadget that tracking passengers in real time and accessing users' address books are merely "potential new use cases." The company has no solid plans to roll those features out at the moment "We are not currently collecting this data and have no plans to start on July 15,"

November, 2014
UPDATED--Here's the Real Problem With Uber: You Can't Trust Them

"Tesla's Shares Are On A Slippery Slope" (TSLA)

The stock is at $180.32 down $1.56 (-0.86%) after trading down to $180.00.

From Forbes:
In the space of two months early this year Tesla’s shares almost doubled from $141.05 on February 9th to $269.34 on April 7th. However from a technical perspective they did not trade higher than the September 2014 intra-day high of $291.42 or July 2015’s $286.65. As can be seen in the chart below this was the start of an eight month downward movement of lower highs and lower lows.

I believe the combination of Tesla buying SolarCity and overall news flow turning negative on the company has led to the steady march downwards. The company’s stock dropped from $219.61 on June 21, the day the proposed merger was announced, to $196.66 the next day. It rallied until early August when it hit $236.63 but as can be seen in the chart that has formed a downward trend line from its early April peak.

Additionally recent news items such as the SEC saying that Tesla used “tailored accounting” in its August earnings release to Consumer Reports writing that the company was “showboating” and that “One of the things that frustrates us about the Model X is that Tesla went for needless flash over function.” are definitely not helping the shares.  Also having groups asking Telsa to stop using Autopilot in its marketing (I agree that it is not Autopilot) is another negative story.

It would not surprise me to see Elon Musk leverage the faith investors have in him or the company go on the positive spin offensive. Just yesterday Tesla sent invites to some investors for a January 4 tour of the Gigafactory and Musk makes off the cuff (but I’m sure planned) remarks such as another major announcement for the Model 3 will be in three or four months (said at the shareholder meeting on the SolarCity merger).

Stock needs to hold the $177 level
Excluding the stock market downdraft in early 2016 there is a key technical level at $177 (reached on May 9, 2014) and to a degree $181.40 (low on March 27, 2015) that the stock needs to stay above. If the shares start to trade below these prices and don’t stage a rebound the next support level is in the high $130’s to low $140’s....MORE
A Short-Seller Talks Tesla (TSLA)

Climateer Line of the Day: Oil Realpolitik Edition

Today's winner of the prestigious CLoD is former Saudi Oil Minister Ali al-Naimi:
"The only tool they have is to constrain production," the 22-year Saudi oil minister Ibrahim Al-Naimi told an audience in Washington at the Center for Strategic and International Studies think tank. "The unfortunate part is, we tend to cheat," he said.
-Washington Examiner, Dec. 2, 2016 

The futures are trading 'heavy', here's Brent but the pattern is similar in WTI:


Brent is trading at $54.09 up 15 cents, WTI $51.35 up 29 cents.

Ahead Of This Weekend's Votes In Italy and Austria: Is Doom Bad For The Stock Market?


Unless it's doom like getting caught on the wrong side of the Denarius/Shekel pair in A.D. 70 where it wasn't just the FX guys but the real estate developers out at the "Future site of Masada Manor" who got hammered.
Then it's a problem and you should probably brush up on your Latin.

From CXO Advisory:
Is proximity to doom good or bad for the stock market?
To measure proximity to doom, we use the Doomsday Clock “Minutes-to-Midnight” metric, revised occasionally via the Bulletin of the Atomic Scientists, which “conveys how close we are to destroying our civilization with dangerous technologies of our own making. First and foremost among these are nuclear weapons, but the dangers include climate-changing technologies, emerging biotechnologies, and cybertechnology that could inflict irrevocable harm, whether by intention, miscalculation, or by accident, to our way of life and to the planet.” Using the timeline for the Doomsday Clock since inception and contemporaneous annual returns for the Dow Jones Industrial Average (DJIA) during 1947 through most of 2016 (23 doom proximity judgments), we find that:
The following chart relates annual DJIA return (2016 partial) to same-year “Minutes to Midnight” judgment as available over the sample period based on two assumptions:
  1. Changes in “Minutes to Midnight” occur near the beginning of years. For example, the 3-minute proximity to doom for 2015 relates to the 2015 DJIA return of -2.2%.
  2. When there is no change for a given year, “Minutes to Midnight” is that same as the most recently issued judgment. For example, the proximity to doom for 2013 and 2014 is the same as that for 2012.
The Pearson correlation between these two series is -0.04 and the R-squared statistic 0.001, indicating practically no relationship between proximity to doom and annual DJIA return.

Might there be a lag between proximity to doom and stock market return?
The next chart summarizes annual correlations between “Minutes to Midnight” and DJIA annual return for lead-lag relationships ranging from DJIA return leads proximity to doom by five years (-5) to proximity to doom leads DJIA return by five years (5). All correlations are too small to indicate any relationship....MORE

"Economists React to the November Jobs Report: ‘Paves the Way for Fed Rate Hikes’"

From Real Time Economics:
The Labor Department on Friday reported that U.S. nonfarm employers added a seasonally adjusted 178,000 jobs in November and the unemployment rate fell to 4.6%, its lowest level since August 2007. The workforce-participation rate edged lower and average hourly earnings for private-sector workers softened. Here’s how economists and analysts reacted to the news.

Today’s jobs report sets a baseline for the Trump administration. Jobs gains were solid, led by professional and business services and construction. But manufacturing jobs fell yet again in November. The president-elect faces strong headwinds in bringing those jobs back. And recent wage gains and unemployment declines make this a tough economy to improve on.” —Jed Kolko, Indeed
“The decline in the unemployment rate to a new cyclical low of 4.6% last month, from 4.9%, was due to a combination of a 160,000 increase in the household survey measure of employment together with a 226,000 decline in the labor force….The upshot is that the labor market appears to be approaching full employment.” —Paul Ashworth, Capital Economics

This jobs report paves the way for Fed rate hikes. It also tops off a recent run of continually positive economic data.” —Jason Schenker, Prestige Economics

“In our view, this report easily clears the bar for a December rate hike and represents some of the continued progress towards the dual mandate that the committee desires. Of course, it could decide that the tightening of financial conditions since September is sufficiently large to forestall a hike, but we consider that to be very unlikely at this point.” —Michael Gapen and Rob Martin, Barclays
“Overall, the report shows modest job gains, which is not totally unexpected given the uncertainty surrounding the election.” —Joe Carson, AllianceBernstein

“Perhaps the most surprising development was the sharp decline in the unemployment rate, which fell to 4.6%—a nine-year low. Economists had respected it to remain steady at 4.9%. Positive job creation certainly contributed to that drop, but unanticipated declines in the civilian labor force and the labor-force participation rate reduced the estimated rolls of the unemployed by 387,000. It’s quite likely that both of those factors will move higher in the coming months. As such, it’s possible that the jobless rate could edge higher in the coming months—even if the recent trend in job creation remains positive—before resuming its downward trend.” —Jim Baird, Plante Moran Financial Advisors

This was the last hurdle on the path to a December hike, and it has been cleared convincingly. It is now incredibly hard to imagine what would stop the Fed from going. The debate now is all about what rates will do next year and beyond.” —Luke Bartholomew, Aberdeen Asset Management

"Atlanta Fed Raises Q4 GDP Forecast to 2.9%"

From Barron's Income Investing:
With some stronger economic news this week, the Atlanta Federal Reserve’s real-time gross domestic product tracker, known as GDPNow, raised its estimate for fourth quarter growth to 2.9% from 2.4% on November 30.

The model was above 3% most of November. The latest estimate for growth in the third quarter was 3.2%.

Here’s what the model was reacting to Thursday for the fourth quarter reading:
After this morning’s construction spending report from the U.S. Census Bureau, the forecasts of fourth-quarter real residential investment growth and real government spending growth increased from 7.1 percent to 12.4 percent and 0.1 to 0.6 percent, respectively. The forecast of real nonresidential structures investment growth fell from 1.4 percent to -3.4 percent after the same report....MORE

Tesla's European Gigafactory to Produce Cars, Batteries (TSLA)

Of course this doesn't happen unless the company can raise some serious money.
$3 to $12 billion serious.

From ElecTrek, Nov. 8:

Tesla plans to choose location for ‘Gigafactory 2’ in Europe next year, will produce both batteries and cars
Tesla CEO Elon Musk and CTO JB Straubel are in Germany today to announce the acquisition of a German engineering group, Grohmann Engineering. Following the announcement, they held a press conference during which Musk emphasised that Tesla is planning “significant investments” in Germany and the conversation quickly moved to Tesla not only investing in engineering in Europe, but also in production.

Musk confirmed that Tesla plans to choose a location for ‘Gigafactory 2’ in Europe next year and he added that the factory will combine both the production of batteries and complete cars.

It’s an interesting development considering the Gigafactory concept was originally only supposed to manufacture battery cells and packs, but we recently learned that Tesla is planning drive system production lines at the Gigafactory 1 in Nevada.

Now it looks like Tesla will take it a step further and vertically integrate the entire production process in one plant – for the ‘Gigafactory 2’ at least.

During the call early this morning, Musk made it clear that Tesla’s current focus is to bring the Model 3 to production, but he also said that through that process, the company is trying to reinvent their manufacturing strategy now referred to as “the machine that builds the machine”. The acquisition of Grohmann Engineering is part of Tesla’s effort to design that “machine” which will first come alive at Tesla’s Fremont plant, but he added that it will also eventually be deployed in Europe:
“This is something that we plan on exploring quite seriously with different locations for very large scale Tesla vehicles, and battery and powertrain production – essentially an integrated ‘Gigafactory 2’.”
He later referred to the plant as a “combined vehicle and Gigafactory”.
Musk clarified the timing of the new project and said that it will be once Tesla has “a clear handle on Model 3 production next year”. Tesla plans to start Model 3 production in “mid-2017” with volume production in “late-2017”.

Interestingly, he continued by saying:
“It is quite a significant scaling up of the rate because we are going from 100,000 cars a year to 600,000 cars a year in a very short period of time.”...

Also at ElecTrek:
Tesla Gigafactory 2: several countries launch efforts to attract Tesla’s new electric car & battery plant

Tesla acquires German engineering firm to create ‘Tesla Advanced Automation Germany’

"Now You Can Cruise Up To Your Aston Martin Condo In Your Aston Martin Powerboat"

From Forbes:
Now the 99-plus percent can do more than envy the owners of Aston Martin cars. We can envy the owner of Aston Martin powerboats, condos, and clothing.

The British brand synonymous with automotive opulence is in the midst of a huge spasm of brand extension as it seeks to create an Aston Martin "lifestyle" across all sorts of haute categories.
Rebecca Robins, global director of Interbrand, the global branding consultancy based in New York, told me that Aston Martin is among luxury businesses that "are acutely aware of the shift in what we value and why, in an economy that's revolving less around what we own and more around what we share and experience."

So in addition to fine Aston Martin automobiles that may have been inspired by James Bond, these days there's also an Aston Martin "design masterclass" about how the company fashions the cars, ice-driving outings in snowy climes, Aston Martin Residences high above the Miami River, 37-foot Aston Martin powerboats, and a new range of "luxurious clothing" with U.K. menswear retailer Hackett that "reflects the coming together of two stylish brands.

The London-based brand also just revealed a "portfolio of experiences" that it will offer in 2017 by its Art of Living program, which takes customers beyond sports cars and provides them with "the opportunity to live the brand's lifestyle," as the company puts it...

Who on earth are they marketing this to?
Oh wait the boat does look sharp:

Sort of a Chris-Craft throwback, what with the wood decking, but powered at 1040 bhp.
For a 12 meter long boat?

Here's Quintessence Yachts AM37 page.

The King of Zinc Watches and Waits (GLEN)

I'm not sure what they are waiting for at this point. Here's Kitco spot for the last year:
From Bloomberg Gadfly, Nov. 30:
The year's craziest industrial metal just got crazier.

Shanghai zinc futures hit their highest level in nine years on Tuesday, surging as much as 5.8 percent intraday. On Wednesday, after traders closing out positions pushed three-month contracts on the London Metal Exchange down 6.9 percent overnight, they posted a record drop, giving away all the gains made since last week.

The dog that hasn't barked here is Glencore Plc. The commodity trader is the king of zinc, accounting for more than 10 percent of global output in a good year. But it's been holding back since late last year, after the slump in prices reduced the profitability of its mines.

How Glencore chooses to dispose of its 500,000 metric tons of mothballed capacity -- equivalent to about 3.7 percent of global zinc output last year -- will be crucial in deciding whether the current run of high prices continues or sputters. If the company promises to continue its policy of watching and waiting in an investor update on Thursday, zinc bulls might do well to cut their positions.
Despite a bumper year for zinc in 2016, there's good reason to be cautious about the outlook. Much of the buoyant pricing has come as a result of withdrawn supply -- not just from Glencore's mines in Australia, Kazakhstan, and Peru, but also from sites like Vedanta Resources Plc's pits in India and Ireland.

Still Short
The world will still not have enough zinc next year, even if mine output rises sharply...MORE
"Goldman Overweights Commodities for First Time in Four Years"
...“The recent re-acceleration in global PMIs suggests commodity markets are entering a cyclically stronger environment,” Goldman analysts led by Jeff Currie wrote in a report e-mailed Monday. “Supply restrictions from policy actions should benefit oil, coking coal and nickel in the near term while economic reductions should boost natural gas and zinc.”...MORE
Just to hammer the point home, here's Kitco's 5-year chart:


Thursday, December 1, 2016

21st Century Headlines

I delude myself that I am reasonably up-to-speed on the zeitgeist and on technology but twenty or so times a day things are brought to my attention about which I was heretofore clueless.

Here's a headline from VentureBeat:
Bot-making service now supports Node.js
And all I can think of is a scene from Friends eighteen years ago:

Phoebe: They don't know we know they know we know. And Joey, you can't say anything.

Joey:      Couldn't if I wanted to.

And this one, also VentureBeat:
Super Evil Megacorp starts team-franchise program to energize Vainglory...
I would expect nothing less from SEMC.

According to CrunchBase Super Evil Megacorp has raised $42 million in three venture rounds.
I'd buy it just for the name. But wasn't invited.

Finally Quartz almost made the Questions America Wants Answered series with:
What Nike’s $720 self-lacing sneaker, releasing today, signals about Nike’s future
until I realized I didn't care what Nike's $720 self-lacing sneakers signaled about Nike's future.

And this happens every day.
I just nod my head and try to change the subject to something simpler.

If The U.S. Declares (economic) War On China

From FT Alphaville:

Of US-China trade war games
Well gentlemen, it seems that we have little option now but to declare war immediately.

We joke, we joke. A US-China trade war is obviously nobody’s base case. They all say so right up the top of notes, after all.

But considering base-cases haven’t been holding their own recently we should maybe take a look at what happens if a trade war does materialise. After all, lashing out internationally can make for good domestic politics, and China trade-war rhetoric was a recurring trope of the Trump presidential campaign, even if the real story is muddied by facts.
Here’s SocGen with a reminder of the president’s powers to act:
And here’s Deutsche with those facts about China’s real place in terms of trade with the US (our emphasis):
In fact, nearly 37 percent of China’s exports to the US in 2015 consisted of value-added imported from other countries (Figure 3). Redistributing the imported value-added to their original source countries gives a very different deficit decomposition picture for the US (Figure 4).1 While China still has the biggest “responsibility” for the US’s trade deficit, its share is only 16.4 percent. It is nowhere near the jaw-dropping 49.6 percent in Figure 1, which is about the combined share of the top 4 surplus partners (China, Japan, Germany and Korea) in the value-added based decomposition. Taiwan, previously not among the top 10 surplus partners in Figure 1, now ranks no. 6, accounting for 6.6 percent of the US’s trade deficit in 2015.
Thus a “trade war against China would be a war against all participants of the global supply chain, including some US companies.” So how would a President Trump actually fight one?

"Opendoor’s Home-Flipping Business Becomes the Latest Unicorn Startup"

From Bloomberg,
Silicon Valley's club of unicorn startups hasn't been growing as fast as it once was, and its newest member is unlike most of is venture-backed peers. Opendoor Labs Inc., a San Francisco startup that buys houses and then resells them, received a valuation of at least $1 billion after its latest funding round, said people familiar with the matter.

Opendoor said it raised $210 million, which it will use to fund expansion to 10 cities next year. The financing round was led by Norwest Venture Partners, with investments from New Enterprise Associates and others, OpenDoor said.

Opendoor buys and sells homes in the Dallas-Fort Worth area, Las Vegas and Phoenix, according to the company's website. The startup purchases houses with cash and then resells them at a higher price, sometimes after making minor repairs....MORE

A Short-Seller Talks Tesla (TSLA)

Our last serious post on Tesla (ex the mind control option and ex the Consumer Reports story) was November 18's "After the Merger Vote, What Now For Tesla? (TSLA)" we intro'd with:
One of the reasons we counsel discounting NVIDIA's autonomous vehicle opportunity is because their big tie-up with Tesla is dependent on Tesla being able to execute the master plan which in turn is dependent on TSLA coming up with somewhere between $3 and $12 billion dollars while the market is still accommodative....
I'm surprised we haven't heard anything from Mr. Musk on fundraising and with each passing day the uncertainty ratchets up a bit more until finally the longs can't t take the pressure anymore and crack psychologically and....pardon me, I started channeling a Palo Alto horror movie for some reason.

Ahem. The stock is down $8.15 (-4.30%) at $181.25.
And the company really should raise some money. Soon.

From ValueWalk, November 30:
Mark Spiegel’s Stanphyl Capital is having a killer year up close to 35% NET YTD – see below for an excerpt on Tesla Motors Inc (NASDAQ:TSLA) from their November shareholder letter.  But first… although he is known as Elon Musk’s number one enemy, Mr. Spiegel makes most of his money from killer small cap picks. His under the radar small caps which could pop just based on this piece (if we discussed it publicly) were profiled in ValueWalk’s 2nd edition of our quarterly premium newsletter. See some details followed by the Stanphyl section on Tesla Motors.

Stanphyl Capital Management LLC Stanphyl Capital GP, LLC Stanphyl Capital Partners LP
Friends and Fellow Investors:
For November 2016 the fund was up approximately 6.7% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 3.7% while the Russell 2000 was up approximately 11.2%. Year to date the fund is up approximately 34.7% net while the S&P 500 is up approximately 9.8% and the Russell 2000 is up approximately 18.0%. Since inception on June 1, 2011 the fund is up approximately 133.5% net while the S&P 500 is up approximately 84.0% and the Russell 2000 is up approximately 68.4%. (The S&P and Russell performances are based on their “Total Returns” indices which include reinvested dividends.) As always, investors will receive the fund’s exact performance figures from its outside administrator within a week or two.
And now for our individual stock positions…
We remain short shares of Tesla Motors Inc. (ticker: TSLA; November close: $189.40) as I continue to believe that it’s the market’s biggest single-company stock bubble. November was a good month for Tesla shorts– not just because the stock was down a bit but because shareholders approved the merger with the financial boat anchor known as SolarCity, complete with its nearly $2 billion a year in negative free [sic...probably "cash flow" omitted]
Regardless, this was a blatant bailout by Tesla shareholders of Musk’s 22 million otherwise soon-to-be worthless SolarCity shares, but as they voted to approve it and I’m glad they did, it’s a real kumbaya moment for all of us. Of course, the “bright shiny object” now for Tesla shareholders is the “$35,000 mass-market Model 3”; I thus urge you to read my new Seeking Alpha article as to why that will never happen, reinforced by a new Bloomberg article about how much money GM is losing on the Bolt despite having a battery cost equivalent to Tesla’s.
Meanwhile, following a leaked September memo from Musk urging employees to artificially inflate Q3 company results, in October Tesla did indeed manage to report a Q3 GAAP profit thanks primarily to the one-time sale of stockpiled California Zero Emission Vehicle (ZEV) credits, without which it would have booked a $117 million GAAP loss. Also helping to offset a loss were seemingly artificially low operating expenses (up just 7.4% vs. Q2 despite an 81% increase in revenue) and a substantial reduction in per-car warranty accrual despite the reliability issues detailed later in this letter. (Based on a back-of-the-envelope interpretation of the data in the 10-Q, I estimate the current warranty under-reserve to be nearly $2000 per car.) Tesla also proudly proclaimed itself “free cash flow positive,” a figure obtained only by massively increasing accounts payable (i.e., stiffing its vendors) and postponing approximately $500 million of capex from Q3 to Q4. Assuming Tesla spends the $1.1 billion in Q4 capex it projects and normalizes its accounts payable, I estimate that Q4 should be free cash flow negative to the tune of approximately $1.5 billion.

Although Musk proclaims otherwise, simple math thus implies that Tesla will soon need to do yet another massive capital raise to build the Gigafactory and get the Model 3 into production (not to mention to replenish the cash drain from the massive financial sinkhole created by buying SolarCity), even though it raised nearly $2 billion in 2014 explicitly to build the factory and $1.7 billion in May 2016 explicitly to put the Model 3 into production. As Tesla entered Q4 with around $3 billion in cash and on the Q3 conference call Musk said capex will be “higher in 2017 than 2016 for sure” and 2016 capex is projected to be $1.8 billion (including the aforementioned $1.1 billion scheduled for Q4), I’m guessing the company will be completely “cash free” by sometime in June and will thus look to raise money at least a quarter ahead of that. But wait a second! After the May 2016 raise didn’t Musk say he’d never need to raise capital again? Well actually he first said that in February… February 2012.

Tesla’s Q3 GAAP loss (excluding the non-repeatable ZEV credit sales) was $4710 per car sold, and contrary to the hopes and wishes of Teslarians and Teslemmings, Tesla would STILL be losing money even if it weren’t in “growth mode.” Q3 R&D spend was $8634 per car while R&D spend for slow-growing Porsche (Musk’s “profitability hero”) is approximately $10,800 per car. And while Tesla’s depreciation & amortization (a proxy for the “non-growth” component of its capex) was $11,299 per car while slowgrowth Porsche capex runs around $6100 per car, even if we were to adjust Tesla’s levels of both these metrics to that of Porsche, Tesla still would have lost $1677/car (GAAP, ex-ZEV sales) even if it weren’t “investing for growth.” Thus, Tesla’s (ex-ZEV credit sale) GAAP loss occurred because it’s a lousy business not because it’s a fast growing one.
Meanwhile, despite this nonsensically deceptive Musk comment from the October 26th earnings call…

One of the other things I’ve seen out there is that, like, somehow we achieved these numbers as a result of widespread discounting, that is absolutely false. There were a few discounts that – but they were few and far between and that has been absolutely shot down to zero.

…Tesla discounting continues unabated. Here’s a screenshot from Tesla’s website, taken while Musk was saying that there’s no discounting:...

...And here’s a link to a great web site showing just some of the additionally discounted inventory cars Tesla has available, many of which offer discounts of thousands of dollars on top of the $1000 referenced above and are brand new (with just 50 delivery miles) and were built expressly to be sold as discounted inventory. As of this morning- November 30th- I see discounts of as much as $8500 plus the $1000 referral discount. I hope for the sake of his astronauts that Musk’s definition of “zero” is more accurate for his Mars mission calculations than it is when he speaks about moving aluminum off overstuffed car lots.

Also in October Musk held a press conference introducing a new hardware suite for Tesla cars that he claimed would eventually provide fully autonomous coast-to-coast driving. However, according to industry experts it’s unsafe to even attempt to do that without lidar (laser scanners), which the new hardware doesn’t include. Of course, this isn’t stopping Tesla from trying to charge $3000 up front for “potential future capability” or from showing a strategically cut (and hence potentially highly misleading) video of those alleged “capabilities.” Musk also projected Tesla would attempt a hands-free coast-to-coast drive as soon as the end of 2017… perhaps he could first study the one Delphi did in early 2015.

Finally in October (in an effort to encourage “yes” votes for the SolarCity acquisition) Musk held a press conference to introduce a line of glass rooftop solar tiles not scheduled to go into production until summer 2017 and about which no specific details were released regarding price or efficiency. He also introduced a new Powerwall battery that offers approximately twice the storage of the old battery for the same price (and undoubtedly at little or no profit margin for Tesla), but despite that considerable improvement in the value quotient the unsubsidized economic case for the product is still nonexistent. (But then, the unsubsidized economic case for ANY of Musk’s products is nonexistent!)...MUCH MORE
See also:
MIT's Technology Review Takes A Whack At Tesla's Elon Musk (TSLA; SCTY)
Elon Musk Channels OK Go (TSLA)
Tesla, SolarCity Tumble Ahead Of New Merger Financials (TSLA; SCTY)
Today In Depreciation: Does Tesla Really Understand What It’s Buying in SolarCity? (TSLA; SCTY)
NVIDIA: Don't Buy the Stock For The Autonomous Car Stuff (or virtual reality) NVDA; TSLA; IBM
 NVDA's most headline-grabbing deal in autonomous vehicles is with Tesla about which we said:
Last week when Tesla formalized their relationship with NVIDIA, something we had already assumed into NVDA's stock price when TSLA parted ways with MobilEye, there was happiness among the longs that we didn't join...
There is a greater than trivial chance that Tesla won't be able to raise the money they need, variously estimated at 3, 6 and 12 billion dollars,* to achieve Elon's plan for world domination, or at least not at the time he will need it. If TSLA management is smart they would come to the market as soon as the SolarCity deal is done and grab, at minimum, the $3 billion while the window is open....
Tesla: "After All Is Said and Done, More Is Said Than Done" (TSLA)
JP Morgan Talks Tesla (TSLA)
Just A Reminder: "Musk Urges Tesla Workers to Cut Costs Ahead of Fundraising Round" (TSLA)
"Tesla Earnings Smash Expectations After Dramatic Change In Reporting Methodology" (TSLA)
Tesla Motors Plans to Change How it Reports its Earnings (TSLA)

That gets us to Oct. 26. For more, going back to the IPO, use the search blog box if one is so inclined. 
TSLA Tesla Motors, Inc. daily Stock Chart

Art In the 21st Century

From ArtNet:
Rachel Lee Hovnanian, FMLMBD Charging Station (2016).

That's in today's "Historical Women Dealers Lead the Way at X Contemporary", I think she nailed it.

"UberEATS Drastically Cut Wages for its Toronto Drivers"

From Fortune:

Delivery drivers and cyclists had no warning.

Delivery drivers and cyclists for UberEATS in Toronto woke up to discover that they were suddenly making less money.

The contracted workers received an email Tuesday morning that laid out the company’s new compensation policy, without prior warning that it would be implemented. One bike courier, Julia Pak, estimates that the new wages will reduce her income by 30-50%, The Star reports.

Before Nov. 29, delivery people made $6.50 for each order they picked up, plus $1.85 per kilometer traveled. This adds up if they collect several orders from one restaurant. But now, delivery people are making just $2.90 per pickup—a flat rate per restaurant versus getting paid per order. Their distance rate has also been reduced by 80 cents, while Uber’s cut of delivery fees remains 35%.

An Canada spokesperson told Fortune that this new policy comes with an added “boost” feature, a potential compensation bonus for workers in certain delivery zones. “Delivery fees are now made up of three parts—a pickup fee, a drop-off fee, and distance fees,” the spokesperson said. “Maximizing delivery partner earnings is a priority and we will continue to work to ensure a competitive income for all our partners.”...MORE

BOMBSHELL: Prince Was Secretly Married, Died To Protect CIA Connection !!!

From the New York Daily News:
A woman claims she married Prince before his death and is now hoping to cash in on his multi-million dollar estate.

Claire Elisabeth Elliott, 50, filed a request for control of Prince's estate, claiming she has a marriage certificate proving the two were married when the pop icon died of an accidental overdose on April 21.
In her filing, the California native is calling for the court to hand over control from Bremer Trust — which currently monitors the star's estate — as she is his "sole heir."

Elliot did not however include a copy of the marriage certificate in her court request and there is reportedly no evidence of one in Minnesota court, according to TMZ.

She wrote in the affidavit that she was secretly married to Prince in Las Vegas in 2002 by a rabbi named Ross Dreiblatt, who also allegedly drew up a “secret will” for the singer.

“Because the CIA and other agencies consider both documents to be Top Secret, Ross cannot publicly release either document without being properly served a subpoena,” the document reads.

On her Facebook page, Elliot posted a TMZ report about her marriage and responded to a comment from a user who questioned the pair's nuptials. "We didn't walk down the aisle, we just stood at the altar and got married," she wrote.

Her page also suggests that she lives in Georgia and is married to a man named Dean. On Monday, her hubby gifted her with a ring, which she wrote was her third one.

The woman — who specifically writes “I am not insane” in the filing — is no stranger to filings....

Scallywags and Vagabonds has more on Ms. Elliot/Nelson (pics) while the local CBS affiliate highlights the CIA angle:
...Elliott also filed documents to run for president last year.
Here are excerpts from her conversation with WCCO’s Edgar Linares:

Linares: You and Prince were married when?

Elliott: I believe the date was Jan. 14, 2002, when I was in Las Vegas. It was during the time when he was already married to his second wife. But when you’re in the CIA you can get married to more than one person at the same time. A lot of people don’t know that. And CIA law trumps American law, apparently.

Linares: So you were in the CIA? At what age were you in the CIA.

Elliott: I was born into the CIA. I am a victim of the CIA. My parents were involved in the CIA, and I became their victim....

Here's Sharae's cover of "Eye Wood Dye 4 U" with more clues.