Monday, January 16, 2017

"Kilkenomics, the world’s only festival of economics and comedy"

"Once described as ‘Davos without the hookers’"
From The Spectator:

If economists want to be trusted again, they should learn to tell jokes
This is a subject badly in need of healthy ridicule — and it’s happening at a festival in Ireland
Something I have long noticed is how, the moment they leave office, many politicians suddenly undergo a strange transformation where, overnight, they become much funnier, more likeable and intelligent. Two years after he had failed in his presidential bid, Bob Dole appeared on British television to comment on the American mid-term elections. To my astonishment, he was one of the wittiest people I have ever seen, delivering a series of perceptive barbs with a snarky, very British sense of ironic humour. I asked an American friend why we never saw this side of him when he campaigned for the presidency: ‘Oh, you can’t do that kind of humour in the US — it makes you look cruel.’ I’m not sure he would say that now.

Michael Portillo is much more interesting now than when in power. Watch Nick Clegg in conversation with Jonathan Haidt on and you will be awestruck. The same applies to programmes on the financial crisis: retired bankers are self-deprecating and honest; working bankers look shifty.

I suspect a little bit of is it down to dress. The standard-issue politico-business suit used to be a mark of respectability: now we instinctively associate it with people who need a cloak of anonymity behind which they can dissemble. Here’s some free advice if you’re appearing on television: buy a tweed jacket or, at any rate, don’t wear black or a conventional tie — you then look like a person not a spokesperson. After all, how independent-minded can someone be when they can’t even choose their own clothes?

But the larger part is language — the need to stay perfectly on-message and to deliver a few pre-agreed phrases makes perfect logical sense, but at the price of making people sound implausible or even dishonest. The need to pretend everything is under control creates the reverse impression. All over the world, from Beppe Grillo to Trump, we are seeing the rise of people who have a certain plausible randomness to their delivery. Trump’s use of aposiopesis and repeated parenthetic asides made him seem more authoritative, not less — because it made it clear that he was speaking his own mind. It would not surprise me for an instant to discover that there is an evolutionary instinct which causes us to prefer a slightly nasty and authentic person to someone who implausibly pretends to be flawless.

This is sometimes called the pratfall effect. People, men in particular, seem to prefer others who have some visible flaws, or who are capable of self-deprecation. You see this in advertising slogans — ‘We’re number 2 so we try harder.’ ‘Reassuringly expensive.’ ‘Marmite — you either love it or you hate it.’ ‘Good things come to those who wait.’ Or (Salman Rushdie’s) ‘Fresh cream cakes — naughty but nice.’ A claim that acknowledges a downside or trade-off carries more weight, as in that strange phrase ‘This is my mate Dave — he’s a bit of a wanker but he’s great.’

Humour plays a decisive role in honesty too. It allows people to ‘signal intelligence without nerdiness’ and naturally targets dogma, absolutism and self-aggrandisement. More magically still, it creates a parallel universe in which people or groups can change their minds, admit to failings or speak truth to power (the jester) without the dire reputational or coalitional consequences that pertain in the real, unfunny world. Humour allows us, for a time, to place ourselves in a different social network structure where the rules of interpersonal discourse and refutation change: it is, in short, a natural error-correction mechanism, an evolutionary miracle. We need more of it.

So, if you want to see the future of human discourse, book 9–12 November 2017 in your diary and make your way to Ireland for Kilkenomics, the world’s only festival of economics and comedy.
Once described as ‘Davos without the hookers’ until the real Davos complained, it is now more commonly billed as ‘Davos with jokes’. Being in Ireland, the standard of conversation from the audience is every bit as high as it is on stage (call me an old Celtic supremacist, but it is no coincidence that craic is not an Anglo-Saxon word)....MUCH MORE
HT: naked capitalism 

"The Chef of the Future Makes Only One Dish" Would You Like Some Bisque?

From Grub Street:
Crab bisque à la robot.
A few weeks before Christmas, I flew across the Atlantic into our culinary future, where a robot would cook me a bowl of fancy soup.
Like most of us, I’ve eaten food prepared by a robot before. On my flight from New York to London, for example, the meal I was served — a microwaved chicken sponge in salt-lick tomato sauce, accompanied by uniformly cylindrical green and yellow wax beans — was certainly made by machines. Same goes for the Diet Coke I drank, and the prepackaged granola bar I ate instead of the chicken.
But this robot, whose name is Moley, was promising something more than fast, cheap industrial food: a high-quality meal made from scratch and cooked at home — enticing, especially if, like me, you’ve always found cooking akin to a riddle you can’t solve. (My home-cooked seafood specialty is canned sardines on toast with cream cheese. It’s better than it sounds.)
Moley is the invention of a U.K.-based company called Moley Robotics. Sadly, he’s not a robot whirling about the pantry so much as a “robotic kitchen” — two sleek, humanoid arms that hang above an otherwise conventional stovetop, a sort of personal chef for the inept or harried home cook, capable of preparing all but the most complicated recipes. In theory, anyway. Right now, the robot makes bisque, and only bisque. Expensive, creamy crab bisque. A dish selected because it’s relatively difficult for home cooks, impressive and flavorful when shared by the spoonful at demos, and comfortably within the range of the robot’s ability. Moley Robotics hopes to bring its product to the consumer market by 2018. By then, it will make other dishes, presumably.
This is how Moley works: A chef cooks a recipe while being filmed with motion-capture cameras. That chef’s movements are then uploaded to Moley’s computer, which commands the robot to mimic them. The recipes are made available for download; the ingredients available for delivery; the tireless, never-complaining robot available to retrace the human chef’s steps at its hungry owner’s whim. Instead of sardines and cream cheese, crab bisque....MUCH MORE
...I’d eaten bisque only twice before. The first was lobster, bought from Whole Foods in advance of my visit with Moley. The store’s luridly pink, punishingly rich bisque called to mind a postcoital squid excretion. And so, after landing in London, I decided that to properly judge Moley’s one dish, I needed to be able to compare it to first-class bisque.

An embittered gourmand I used to know had told me about a restaurant in the city called Wiltons. Located in the formerly aristocratic, now merely very expensive, neighborhood of St. James’s, it has been in business serving classic English (and, bah, some French) cuisine for 274 years. I checked to ensure that it served bisque — it did — and made a dinner reservation....
HT: AEIdeas Links and Quotes, Jan. 13

Lyft May Beat Uber To Profitability Despite 9-Figure Losses In 2016

From recode:

Lyft is on track to turn a profit, but will need to spend more to add riders and drivers as it expands
Losses have narrowed, but new markets will mean new discounts and incentives.
Lyft, the ride-hailing service that’s been a perennial runner-up to Uber, is on track to be profitable by next year, according to its financial performance.

A bullish report in The Information revealed that in 2016 the startup lost $600 million on $700 million in revenue — a far better performance than the previous year, when it lost more than double its revenue. In other words, sales grew faster (at three and a half times) than losses (at 45 percent).

Those numbers are accurate, according to sources, but the suggested takeaway — that Lyft’s narrowing losses are “fresh evidence that the ride-hailing business can get to profitability, even if it’s a fraction of the size of Uber” — is harder to see.

Here’s why: Once Lyft gets the legal green light to enter new markets like upstate New York, Houston, Austin, St. Louis and Kansas City, it will also likely see a corresponding increase in losses as it works to ramp up both its supply of drivers and attract riders in these new cities. In other words, it will have to roll out subsidies again. 

There is, of course, the added revenue of new markets, especially those as big as Houston, but there will be the proportional spending required on incentives.

To be fair, in its established locations, Lyft has grown revenue without those subsidies, which is why the company’s spending on sales and marketing was significantly lower in the fourth quarter of 2016 than it was in the second quarter.

Still, that decrease was not consistent throughout the year. 

The company spent $91 million on “sales and marketing” — which can be generally defined as the cost of new driver and rider acquisition, such as subsidies — in the first quarter, $136 million in the second quarter and $80 million in the fourth quarter....

Euromoney Country Risks Survey

From Euromoney, January 13:

Euromoney Country Risk survey results 2016: Italy, UK and US shocks underline the risks of populism, as oil exporters take a caning
ECR’s crowd-sourcing survey shows global risk rising in 2016, with leading economists and political experts revising their views on asset safety.

Country risk scores continued to plunge in Q4 2016, prompted by uncertainty over Italy’s political and banking sector problems, and the outlook for global trade, with the rise of populism emanating from Brexit, Donald Trump’s election victory and prospective elections across Europe coming into view this year. The ECR survey is conducted on a quarterly basis, and quantifies the opinions provided by more than 400 contributors, uniquely aggregating the views of experts within the finance and non-finance sectors. Their scores on 15 key economic, political and structural factors are added to values for capital access, credit ratings and debt indicators to provide a total risk measure, ranging between a maximum 100 points (total safety) or zero (certain default). These final results update the preliminary figures recently published by ECR.
Global rout G10 scores weakened in Q4, as the investor outlook darkened for Belgium, the Netherlands, Italy, Japan and the US particularly. Worsening economic and fiscal problems for net oil producers saw Azerbaijan, Bahrain, Gabon, Nigeria, Saudi Arabia, the UAE and Venezuela downgraded, despite the mini-bounce in global oil prices towards year-end. There were large score declines for emerging and frontier markets, including Bolivia, Mongolia, Myanmar, Vietnam and several in sub-Saharan Africa (SSA) as capital access tightened. Scores fell for China, India and Turkey, with currency stability questioned....MUCH MORE
HT: True Economics

Dec. 29
Euromoney Free to View: (Your Chance To See the Alternative Year In Review)
Stratfor's Annual Forecast 2017 e.g. “European Union will eventually dissolve” (rincez et répétez)
Eurasia Group's Top Risks 2017: The Geopolitical Recession

U.S. Corn Production and Supplies In Storage

From SeeItMarket:
March corn futures moved slightly higher this week, closing up a ½-cent per bushel week-on-week, finishing on Friday (1/13) at $3.58 ½. The market focus all week was on the USDA’s January 12th WASDE report, which contained not only the U.S. and World supply and demand revisions from December, but more importantly finalized 2016 U.S corn and soybean production figures both nationally and state-by-state.

A full summary of the report is as follows:
  • RECORD U.S. CORN YIELD AND PRODUCTION – Thursday’s report revealed only minor tweaks to the U.S. corn balance sheet. In corn the USDA lowered the 2016/17 U.S. corn yield -0.7 bpa versus November to 174.6 bpa. However that yield figure still represented a crop-year record high, exceeding the previous high-water mark of 171.0 bpa from 2014/15. Total U.S. corn production was forecasted at 15,148 million bushels versus 15,226 million in November and the average trade guess of 15,196 million. Again despite production falling slightly below the average trade guess, it too reflected a new record high, eclipsing the prior record from 2014/15 by an incredible 932 million bushels.
  • RECORD STATE CORN YIELDS – A number of the major U.S. corn producing states experienced record growing seasons in 2016; however none bigger than Iowa and Minnesota. Iowa achieved a final state corn yield of 203 bpa versus its previous record of 192 bpa. This resulted in Iowa corn state production of 2,741 million bushels. Minnesota’s state corn yield was finalized at 193 bpa versus its previous record of 188 bpa. Minnesota’s state production was 1,544 million bushels. Therefore collectively Iowa and Minnesota’s combined 2016 corn production totaled 4,285 million bushels, which as a point of reference would theoretically make those 2 states the 3rd largest corn producer in the world by country (trailing the U.S. as whole and China, while exceeding the next largest corn producing country of Brazil whose 2016/17 production is currently estimated at 3,405 million bushels). The other major corn producing states achieving record yields in 2016 were North Dakota (158 bpa), South Dakota (161 bpa), and Wisconsin (178 bpa).
  • MASSIVE U.S. CORN ENDING STOCKS – 2016/17 U.S. corn ending stocks were lowered to 2,355 million bushels versus 2,403 million in December. The USDA did increase corn-ethanol demand 25 million bushels to 5,325 million, which seems appropriate following yet another weekly ethanol production record of 1.049 million bpd reported on Wednesday. That said the USDA did NOT increase U.S. corn exports leaving them unchanged at 2,225 million bushels even with year-to-date sales exceeding last year by +72% as of the week ending 1/5/17. Overall the revised ending stocks estimate still reflects a 29-year high, offering continued overhead price pressure on rallies (see U.S. corn stocks chart on page 4).

358.75 up half a penny 

Sunday, January 15, 2017

Yacht From James Bond Film Skyfall Is Up For Sale

From Superyachts.
Luxury Sailing Yacht Regina For Sale 
The sailing yacht "Regina" was featured on the big screen starring alongside actor Daniel Craig in the role of 007 in the 2012 James Bond film "Skyfall". 

"Regina" was built in 2011 and refitted last year. She measures 56 metres in length and 9.5 metres in width. Her maximum speed is 12 knots. Space, grandeur and elegance form the cornerstones of the yacht's interior design. This is reflected in the materials used, which include mahogany, marble and onyx....MORE

The sale is being brokered by Engel & Völkers Yachting.

Facebook Is Working On Technology To Read Thoughts (FB)

From Business Insider, Jan. 11:

Facebook has a mysterious team working on tech that sounds a lot like mind reading
Mark Zuckerberg's dream of gadgets that let humans read each other's thoughts and communicate with brain waves may be moving closer to reality.

A secretive hardware research division that Facebook created last year is developing "brain-computer interface" technology that sounds a lot like the mind reading and telepathy of science fiction movies.
Several recent job postings listed by Facebook's Building 8 group describe a hardware project involving "neuroimaging" and "electrophysiological data" to create a "communications platform of the future."
An open position for a brain-computer interface engineer seeks a Ph.D. in neuroscience who can help with a related project from "inception to product" over a two-year period. Another listing seeks an engineer who can "develop audio signal processing algorithms" for the platform.

Facebook declined to elaborate on the job listings, but a 2015 comment from CEO Zuckerberg suggests that the company could indeed be working on some kind of brain-controlled, telepathic communication device.
“One day, I believe we’ll be able to send full rich thoughts to each other directly using technology," Zuckerberg said during a June 2015 Q&A. "You’ll just be able to think of something and your friends will immediately be able to experience it too if you’d like."
"Non-invasive techniques"
Other listings seek engineers who can develop "novel non-invasive neuroimaging technologies" and create "realistic and immersive haptics experiences." Neuroimaging is an advanced field of science that uses various techniques to scan and understand what's happening in the human brain, while haptic technology simulates a sense of touch with computers....MORE
Well, at least it's non-invasive.

"The Deceptions of Luck"

From' Luck issue:

Nature makes chance, humans make luck. 
Would you say you are a lucky person? Have unexpected things turned up which made your life better? I don’t mean something as extreme as a major lottery win, but perhaps getting a job because a stronger candidate dropped out with the flu, or catching the train despite being late because it was delayed?

Or would you say you are unlucky? You missed the key job interview because you caught the flu, or missed that train because it was cancelled?

Or perhaps you don’t believe in luck, thinking that people make their own good—or bad—fortune, and that success in life is down to hard work and persistence. Of course, even if you believe that, it can’t be a complete explanation—no matter how hard you worked, you could not make that cancelled train appear. There are always things beyond your control.

Luck is obviously closely related to the concept of chance, but it’s not quite the same. Chance describes an aspect of the physical universe: It’s what happens out there. The coin coming up heads rather than tails, the die falling to show a six, and even a particular one of the 45,057,474 possible tickets in the United Kingdom National Lottery being drawn. In contrast, luck attaches a value to the outcome of chance. Luck is chance viewed through the spectacles of good or bad fortune. It’s really good news, at least for you, if you win the lottery, and it’s really bad news if you’re one of the passengers on the plane when it crashes.

Chance, then, is the objective reality of random outcomes in the real world, while luck is a consequence of the subjective value you place on those random outcomes. Luck, we might say, is chance with a human face. Understanding this gives us a clearer view of reality, and a clearer view of reality means we can choose better courses of action.

Good luck is something to be desired—having good luck means that the chance events you experienced had positive outcomes. And bad luck is something you hope you don’t get. Which naturally leads to the question: Is there anything we can do to make ourselves luckier?

We could try to do this by changing what we regard as a good outcome, but that seems unreasonable. Slipping on ice and breaking your leg seems unlucky however you look at it, whereas it’s hard to see winning the lottery as unlucky. So perhaps instead we should look for ways to alter the chance, the probability, that different outcomes will occur.

And the world is full of beliefs that we can change our chances, and hence our luck.

Superstitions are examples: baseball pitcher Turk Wendell drawing three crosses in the dirt before pitching; Manchester United soccer player Phil Jones putting his left sock on first when the team played at home, but his right sock on first when the team played away; you taking your favorite pen into the examination room. Unfortunately, there’s precious little evidence that any such things increase the chance of a favorable outcome.
By increasing the chance of a favorable outcome, you can make your own luck.
On the other hand, there’s an old saying, attributed in various forms to Thomas Jefferson, Stephen Leacock, Sam Goldwyn, and others: “The harder I work, the luckier I get.” It’s certainly true that if you train hard you are more likely to win a sporting event, but it clearly does not explain everything.

Your hard work does not reduce the chance of being kept awake by noisy neighbors the night before, or slipping on a wet patch as you run during the race. And people seem to win lotteries regardless of how dissolute a life they lead.

Louis Pasteur said something similar: “Chance favors the prepared mind”—making sure you are able to recognize and grasp opportunities when they arise.

One kind of preparation is to take advantage of what’s called the law of truly large numbers.1 This is not the same as the statistician’s law of large numbers, which describes how averages get closer and closer to a fixed value the more numbers you put into the average. It’s something quite different....MORE

Professor Damodaran's "Narrative and Numbers: How a number cruncher learned to tell stories! "

From Musings on Markets:
When I taught my first valuation class in 1986 at New York University, I taught it with numbers, with barely a mention of stories. It was only with the passage of time that I realized that my valuations were becoming number-crunching exercises, with little holding them together other than historical data and equations. Worse, I had no faith in my own valuations, recognizing how easily I could move my final value by changing a number here and a number there. It was then that I realized that I needed a story to connect the numbers and that I was not comfortable with story telling, and that realization led me to start working on my narrative skills. While I am still a novice at it, I think that I have become a little better at story telling than I used to be and it is this journey that is at the core of my newest book, Narrative and Numbers: The Value of Stories in Business.

Story versus Numbers
What comes more naturally to you, story telling or number crunching? That is the question that I start every valuation class that I teach and my reasons are simple. In a world where we are encouraged to make choices early and specialize, we unsurprisingly play to our strengths and ignore our weaknesses. I see a world increasingly divided between number crunchers, who have abandoned common sense and intuition in pursuit of data analytics and complex models and story tellers, whose soaring narratives are unbounded by reality. Each side is suspicious of the other, the story tellers convinced that numbers are being used to intimidate them and the number crunchers secure in their belief that they are being told fairy tales. It is a pity, since there is not only much that each can learn from the other, but you need skills in investing and valuation. I think of valuation as a bridge between stories and numbers, where every story becomes a number in the valuation and every number in a valuation has a story behind it.
When I introduce this picture in my first class, my students are skeptical, as they should be, viewing it as an abstraction, but I try to make it real, the only way I can, which is by applying it on real companies. I start every valuation that I do in class with a story and try to connect my numbers to that story and I try to be open about how much I struggle to come up with stories for some companies and have much my story has to change to reflect new facts or data with others. I push my students to work on their weaker sides when they do valuations, trying  asking story tellers to pay more heed to the numbers and beseeching number crunchers to work on their stories. Seeking a larger audience, I have not only posted many times on the process but almost every valuation that I have posted on this blog has been as much about the story that I am telling about the company as it is about the numbers. In fact, having written and talked often about the topic, I thought it made sense to bring it all together in a book, Narrative and Numbers, published by Columbia University Press, and available at bookstores near you now (and on Amazon in both physical and Kindle versions). (Update: The hardcover is not available yet outside the United States, but should be accessible in about 4-6 weeks. The Kindle version is available everywhere.)

From Story to Value: The Sequence
So, how does a story become a valuation? This book is built around a sequence that has worked for me, in five steps, starting with a story, putting the story through a reality check, converting the story into a valuation and then leaving the feedback loop open (where you listen to those who disagree with you the most and try to improve your story)....MORE
A couple of our earlier links to MoM:
Prof.Damodaran's Handy Uber Valuation Template (or, How to Price a Narrative)
"Discounted Cashflow Valuations (DCF): Academic Exercise, Sales Pitch or Investor Tool?"
Aswath Damodaran: "Tesla: It's a story stock, but what's the story?" (TSLA)
Over the years we've linked to almost all of the good Professor's postings on Tesla, see below....

Plus dozens more. Use the 'search blog' box if interested. 

Saturday, January 14, 2017

"I Just Watched A Rocket Land Back On A Drone Ship Live On My Phone"

That was the comment of one of Mr. Musk's Twitter followers.
Here's the replay from the rocket's point of view. ~Two minutes are compressed into 15 seconds:

"What is the greatest scientific paper ever published?"

From Real Clear Science, January 9:
"What is the greatest scientific paper ever published?"

Taken as worded, this is clearly an impossible question to conclusively answer, so we'll start by defining what exactly makes a paper "great."

Tony Padilla, an associate professor of physics at the University of Nottingham, provided a beautifully simple criterion in a recent episode of Numberphile: "impact per word." A short paper that was highly influential.

By that definition of "greatness" (which is, of course, open to debate) the best scientific paper ever written was probably John Nash's "Equilibrium Points in N-Person Games", published in January of 1950 to the Proceedings of the National Academy of Sciences. In just 333 words, Nash, then a 21-year-old graduate student at Princeton, outlined what became the cornerstone principle of game theory: the Nash equilibrium.
Nash would further elucidate the concept in his doctoral dissertation, published a year later. In essence, it states that in any competitive game or scenario, equilibrium is achieved when all of the players are making their best choices, whilst taking into account the strategies of all the other players. Motorists obeying traffic signals and driving on the right side of the road are two real-world examples of Nash equilibria. Nash demonstrated mathematically that these equilibria exist in any competitive situation with a finite number of players and strategies....MORE

"My next book won’t be the non-fiction Silicon Valley exposé we desperately need (but here’s what it will be)"

I'm all atingle waiting for Zuckerberg or somesuch Palo Alto panjandrum to run for President.

From Paul Bradley Carr's Notes:
I‘m probably asked a half dozen times a month when I’m going to write another book.

It’s a perfectly reasonable question. It’s been five years since Sober Is My New Drunk (still getting royalty checks) and seven since The Upgrade (no more checks no idea what’s happening with the movie). About damn time I got back to work.

In fact, I decided more than a year ago what my next book would be about.
Even before Peter Thiel slithered into the White House and the tech industry had its Come To Satan Moment, I knew I wanted to write about the Evil-ization of Silicon Valley. Specifically about how rapidly the Valley has transformed from an idealistic nerds’ paradise into America’s new center of power. A place, and an industry, drunk on cash and now cutting a destructive and belligerent swath through international politics, the military, business, media and culture.

It’s hard to pinpoint exactly when the transformation happened. Certainly it took me longer to recognize than it should have. Perhaps because the Valley is defined by constant change and it’s hard to identify permanent shifts, except in the rear view mirror. Or perhaps because I’m a shitty reporter.
When Sarah had her family threatened by Uber it still felt like a one-off: A rogue company, founded by an obnoxious frat bro, and staffed (for some reason) by a growing a team of former intelligence officials and Washington lobbyists who didn’t understand how things worked in the Valley.

Similarly, when Mark Ames showed me a document proving that eBay founder Pierre Omidyar had funded opposition groups in Ukraine right before the Maidan revolution, I assumed Omidyar – the Pez dispenser guy! – must have been duped by his friends in the State Department. Tech founders simply didn’t go around instigating military coups.

Perhaps I saw the first glimmer of the real story when I dug out the White House visitor logs and saw how many times Omidyar’s name appeared, and who he met. Or when I noticed the growing line of tech billionaires leading to the Oval Office, the Kremlin and various Saudi royal palaces....MUCH MORE
HT: Naked Capitalism

Frederick Taylor and Ray Dalio's Brain: "Working for an Algorithm Might Be an Improvement"

In December Izabella Kaminska's reports* on her time as a bicycle food delivery independent contractor got me thinking about "machine paced" work where even a cursory examination leads one to Frederick Taylor and his "Principles of Scientific Management".

Since everything in the literature seems to spring from Taylor, I thought I'd put a post together with the hook being Frank Woollard of Morris Motors and his work on production, management and automation in the early years of the 20th century rather than starting with Taylor.

And then I stuffed the idea in the link-vault.

Fortunately Elaine Ou writing at Bloomberg View yesterday did something much more creative, she comes at the topic with Bridegewater's Ray Dalio as the jumping off point.

From Bloomberg;
Bridgewater, the world's largest hedge fund, has been portrayed as a bizarre, Moneyball-type machine in which employees' every move is monitored and assessed, increasingly by computer algorithms.

Awful as that may sound, what if it's actually a step toward a happier and more prosperous world?
Granted, descriptions of the place -- including a recent Wall Street Journal article to which founder Ray Dalio has taken vociferous offense -- make it seem pretty dystopian. The firm, for example, amasses employee data to produce individual “Baseball Cards," with scores and ratings on dozens of attributes. That's great if the system turns you into a Honus Wagner card, but possibly demoralizing for anyone else.

Bridgewater isn’t alone. Offices around the country are deploying tools to continuously monitor and assess employee activity. Complaints about the dehumanizing nature of working for algorithmic bosses such as Uber and Amazon have inspired comparisons to “Taylorism,” a scientific management theory remembered primarily for its use of stopwatches and specialized slide rules (like the one pictured below).
Yet the theory's namesake, Frederick Taylor, didn’t set out to maximize efficiency at the expense of employees' sanity. Rather, he wanted to improve worker welfare. The Progressive movement was in its early days, and social and political activists wanted to stop industrialists from exploiting the working class. Taylor believed that his system for greater productivity would align the interests of employees and management.

Taylor emphasized the importance of linking pay to performance, but worried that workers would chase compensation to the point of fatigue and injury. The purpose of stopwatches and schedule micromanagement was not to push employees to their limits, but to pace them for long-term health. Taylor expected that the efficiency gained from scientific management would lead to higher wages, fewer working hours, and greater job satisfaction. The idea even helped inspire the creation of Harvard Business School's first MBA program in 1908....MORE
*Ha! We Were About To Publish A "Where In the World Is Izabella Kaminska" Post
 More On Izabella Kaminska's Adventures In Food Delivery and Deliveroo Responds

And the widely ref'd Dalio:
Bridgewater, World’s Largest Hedge Fund, Is Building An Algorithmic Model Of Ray Dalio's Brain

Bridgewater's Ray Dalio Really Didn't Like The Wall Street Journal Story on His Brain (he's also against fake news)

Facebook's Artificial Intelligence Plans (FB)

From Ars Technica:

“OK Facebook”—Why stop at assistants? Facebook has grander ambitions for modern AI
Facebook’s machine learning pipeline—from research to production—is aimed at an AI future.
Facebook will one day have a conversational agent with human-like intelligence. Siri, Google Now, and Cortana all currently attempt to do this, but go off script and they fail. That's just one reason why Mark Zuckerberg famously built his own AI for home use in 2016; the existing landscape didn't quite meet his needs.

Of course, his company has started to build its AI platform, too—it's called Project M. M will not have human-like intelligence, but it will have intelligence in narrow domains and will learn by observing humans. And M is just one of many research projects and production AI systems being engineered to make AI the next big Facebook platform.

On the road to this human-like intelligence, Facebook will use machine learning (ML), a branch of artificial intelligence (AI), to understand all the content users feed into the company’s infrastructure. Facebook wants to use AI to teach its platform to understand the meaning of posts, stories, comments, images, and videos. Then with ML, Facebook stores that information as metadata to improve ad targeting and increase the relevance of user newsfeed content. The metadata also acts as raw material for creating an advanced conversational agent.

These efforts are not some far-off goal: AI is the next platform for Facebook right now. The company is quietly approaching this initiative with the same urgency as its previous Web-to-mobile pivot. (For perspective, mobile currently accounts for 84 percent of Facebook's revenue.) While you can't currently shout "OK Facebook" or "Hey Facebook" to interact with your favorite social media platform, today plenty of AI powers the way Facebook engages us—whether through images, video, the newsfeed, or its budding chatbots. And if the company's engineering collective has its way, that automation will only increase.

Building an intelligent assistant, in theory
In its early stage, Project M exists as a text-based digital assistant that learns by combining AI with human trainers to resolve user intent (what the user wants, such as calling an Uber) that surfaces during a conversational interaction between a user and a Facebook Messenger bot trained using ML. When the human trainer intervenes to resolve intent, the bot listens and learns, improving its accuracy when predicting the user’s intent the next time.

When met with a question, if the bot calculates a low probability that its response will not be accurate, it requests the trainer's help. The bot responds to the user unnoticed by the trainer if it estimates its accuracy as high.

This interaction is possible because of the Memory Networks created by FAIR, the Facebook Artificial Intelligence Research (FAIR) group founded in December 2014. A Memory Network is a neural net with an associated memory on the side. Though not inspired by the human brain, the neural net is like the cortex, and the associated network memory is like the hippocampus. It consolidates information for transfer from long-term, short-term, and spatial navigation memory. When moved to the cortex or neural network, the information is transformed into thought and action.

Facebook open-sourced the Memory Networks intellectual property by publishing its advanced AI research throughout the research community. Artificial Intelligence Research Director Yann LeCun describes Facebook’s intelligent conversational agent of the future as a very advanced version of the Project M that exists today.

“It's basically M, but completely automated and personalized," he said. "So M is your friend, and it's not everybody's M, it's your M, you interacted with it, it's personalized, it knows you, you know it, and the dialogues you can have with it are informative, useful… The personalized assistant that you take everywhere basically helps you with everything. That requires human-level of intelligence, essentially.”

LeCun is a pioneer in AI and ML research. He was recruited to Facebook to build and lead FAIR, essentially leading the first stage in that supply chain between blue sky research and the artificially intelligent systems that everyone on Facebook uses today.

As the advanced research indicates, the current Project M bots are not LeCun’s end. They are a milestone, one of many in reaching the long-term goal of an intelligent conversational agent. LeCun cannot predict when the end-goal will be reached, and it may not even happen during his professional career. But each interim milestone defines the hardware and software that needs to be built so that a future machine can reason more like a human. Functionality becomes better defined with each iteration.

The obstacles to teaching computers to reason like humans are significant. And with his 30 years of research experience in the field, LeCun believes Facebook can focus on 10 scientific questions to better emulate human-like intelligence. He shared a few of these during our visit.

For instance, at ages three to five months, babies learn the notion of object permanence, a fancy way of explaining that the baby knows that an object behind another is still there and an unsupported object will fall. AI researchers have not built an ML model that understands object permanence.

As another example, today sentences like "the trophy didn't fit in the suitcase because it was too small" pose too much ambiguity for AI systems to understand with high probability. Humans easily disambiguate that the pronoun “it” refers to the suitcase, but computers struggle to resolve the meaning. This is a class of problem called a Winograd Schema. Last summer, in the first annual Winograd Schema Challenge, the best-trained computer scored 58 percent when interpreting 60 sentences. To contextualize that score, humans scored 90 percent and completely random guessing scored 44 percent—computers are currently closer to a guess than they are to humans when it comes to these problems.

“It turns out this ability to predict what's going to happen next is one essential piece of an AI system that we don't know how to build," LeCun says, explaining the general problem of a machine predicting that “it” refers to the suitcase. "How do you train a machine to predict something that is essentially unpredictable? That poses a very concrete mathematical problem, which is, how do you do ML when the thing to predict is not a single thing, but an ensemble of possibilities?”

Hardware as the catalyst
If these problems can be solved and the 10 scientific questions can be answered, then ML models can be built that can reason like a human. But new hardware will be needed to run them—very, very large neural networks, using a yet-to-be conceived distributed computational architecture connected by very high-speed networks running highly optimized algorithms will be necessary to run these models. On top of that, new specialized supercomputers that are very good at numerical computation will be needed to train these models.

The ML developments of the last decade give credence to the idea of new, specialized hardware as a catalyst. Though ML research was proven, few researchers previously pursued ML. It was believed to be a dead-end because generic hardware powerful enough to support research was not available. In 2011, the 16,000 CPUs housed in Google’s giant data center used by Google Brain to recognize cats and people by watching YouTube movies proved ML worked, but the setup also proved that few research teams outside of Google had the hardware resources to pursue the field.

The breakthrough came in 2011 when Nvidia researcher Bryan Catanzaro teamed with Andrew Ng’s team at Stanford. Together, these researchers proved that 12 Nvidia GPUs could deliver the deep-learning performance of 2,000 CPUs. Commodity GPU hardware accelerated research at NYU, the University of Toronto, the University of Montreal, and the Swiss AI Lab, proving ML’s usefulness and renewing broad interest in the field of research....MUCH MORE
HT: AEIdeas' Links and Quotes post, Jan. 13.

Friday, January 13, 2017

"Carl Icahn Has Chosen Trolling Bill Ackman Over Making Money"

From DealBreaker:
Now deep into his golden years, it seems Carl Icahn has decided that there are more important things than making money. Just days away from starting his dream job of managing the largest regulatory bonfire in history on the National Mall, for the past four years he seems to have derived most of his pleasure from torturing friend-turned-enemy-turned-friend-turned-maybe-enemy-again Bill Ackman.

Which is good, because for the last three of those four years, Icahn hasn’t been very good at making money. In fact, during that time, he’s actually been worse at it than Ackman, including a 20.3% drop in 2016 compared to Pershing Square’s 13.5% dip. Uncle Carl doesn’t seem to care. Instead,

infuriated by late-summer rumors that he was about to sell out HLF to Ackman, Icahn called off their truce and spent the ensuing months dumping another quarter-billion dollars into the stock, boosting his stake in the company to 23.1%. Shoving another 4.5 million shares in Ackman’s face may have been cathartic, if flatulence-inducing...

WSJ "Exclusive Peek at SpaceX Data Shows Loss in 2015, Heavy Expectations for Nascent Internet Service"

From the Wall Street Journal:
Internal documents reveal aerospace company has thin bottom line vulnerable to accidents, hopes planned satellite-internet business will finance eventual Mars missions

One hundred and thirty nine seconds is all it took for an unmanned rocket to explode after blastoff and turn Elon Musk’s booming Space Exploration Technologies Corp. into a geyser of red ink.
That June 2015 disaster, followed by months of launch delays, contributed to a quarter-billion dollar annual loss and a 6% drop in revenue, after two years of surging sales and small profits.

The numbers are revealed for the first time in internal financial documents reviewed by The Wall Street Journal. The reports and interviews with former SpaceX employees depict robust growth in new rocket-launch contracts and a thin bottom line that is vulnerable when things go awry. They also show the company putting steep revenue expectations on a nascent satellite-internet business it hopes will eventually dwarf the rocket division and help finance its goal of manned missions to Mars.

A second explosion during testing on the launchpad in September grounded SpaceX again, adding to losses and causing a four-month delay. Its next launch is planned for Saturday, when it will seek to regain momentum in the face of depressed revenue, jittery customers and a ballooning backlog of delayed missions.

SpaceX, based in Hawthorne, Calif., transformed the aerospace industry with innovative rocket features and Silicon Valley-style software design principles mandated by Mr. Musk, its billionaire founder and chief executive. The 15-year-old company became the first American firm in years to compete for commercial launch contracts, and the first company to launch and return a spacecraft from orbit.

SpaceX declined to comment on details of its finances, but said it has a solid record of success and strong customer relationships. “We have more than 70 future launches on our manifest representing over $10 billion in contracts,” said SpaceX Chief Financial Officer Bret Johnson. “The company is in a financially strong position and is well positioned for future growth,” adding it has over $1 billion of cash and no debt.

The Journal reviewed SpaceX’s financial results from 2011 through the end of 2015 as well as forecasts through the next decade. As a private company, SpaceX isn’t obligated to publicly disclose the figures, and the information has never been widely shared....MUCH MORE

Eugene Volokh on Libel Law: "When ‘there is serious reason to doubt’ rumors and allegations, is it libelous to publish them?"

More Just as importantly, after reading the schlocky, amateur, borderline retarded "35 pages" thing, how could anyone ever again justify paying Orbis Business Intelligence actual money for anything they produce?

(Nicholas Kamm/Agence France-Presse via Getty Images)
BuzzFeed, as everyone now knows, has published unverified allegations about Russia having “compromising material and information on [Donald] Trump’s personal life and finances”; the allegations had been apparently included in a “classified report delivered to President Obama and President-elect Donald Trump.” This raises all sorts of important questions about national security, journalistic ethics and more. I will set those aside under Mr. Ed’s Law, since I don’t have anything helpful to add about them.

But it also raises one question that a reader asked me about, and on which I actually know something: When a publisher knows “there is serious reason to doubt” certain allegations (which BuzzFeed’s top editor expressly said), is it libelous for the publisher to pass along those allegations (assuming they ultimately prove to be factually false)? Or is the publisher free to publish them on the theory that it is accurately reporting what has been alleged, even if the allegations are not accurate? It’s unlikely that Trump, despite his talk about libel law, will actually sue BuzzFeed over this, but these questions come up often with regard to reports about accusations about lower-level public figures. And the answer is, “It’s complicated.”

1. The republication rule: Say that Alan writes, “Betty alleges Charlie committed armed robbery.” Alan’s statement is literally true: Betty did make the allegation. But the statement Alan is reporting on (Betty’s statement) is false. American libel law has long adopted the “republication rule,” under which Alan is potentially liable for defamation — if Betty’s allegation actually proves to be false — even if he expressly attributes the statement to Betty. (See Restatement (Second) of Torts § 578.)
And this is true even if Alan distances himself from the allegation, for instance by saying that Charlie has denied the statement, or that Betty has reason to lie. The principle is that “Tale bearers are as bad as the tale makers.”

2. The “absence of malice” / absence of negligence defense: Of course, Alan (like Betty) would still have the benefit of the First Amendment defamation defenses that the Supreme Court has crafted. For instance, if Charlie is a public official or a public figure, Alan is immune from liability unless he spoke knowing that the statement was false, or at least having “serious doubts as to the truth of” the allegation. (That’s the famous “actual malice” standard, though that term is confusing, because it doesn’t actually mean “malice.”) If Charlie is a private figure, Alan would be immune from liability if he reasonably believed the allegations.
Very often, people who are passing along such allegations do sincerely believe them, even if they are unwise to do so. If that’s true, and Charlie is a public figure or public official, then Alan is off the hook. But assume, as in the BuzzFeed situation, that Alan does indeed know that “there is serious reason to doubt” the accuracy of Betty’s charges. The “absence of malice” defense thus falls away, and we get to the really interesting stuff.

3. The fair report privilege: The republication rule can’t be the whole story, though. Say a reporter is covering a trial, in which witnesses are making assertions that the reporter knows are false, or knows are likely false; or say a reporter is reporting on some official government report. The law has long recognized that such coverage must be immune from liability, under the so-called “fair report privilege,” at least when the coverage is substantially accurate and evenhandedly summarizes the testimony. In many states, this is an absolute privilege, applicable even when the reporter knows that the statements within those proceedings are likely to be false.
The fair report privilege also generally extends beyond reports of court proceedings, to include reports of public meetings of government bodies, including legislative and executive bodies. But most cases don’t extend it to reports of nonpublic government discussions. A report of allegations included in a secret government briefing, for instance, wouldn’t qualify for this privilege (though maybe they would qualify for others).

4. The possible neutral reportage privilege: But what if the statement is outside a government proceeding? Consider this incident, from Norton v. Glenn, a 2004 Pennsylvania Supreme Court case: William T. Glenn Sr., a city councilman, claimed that council president James B. Norton III and mayor Alan M. Wolfe were gay, implied that they were child molesters and claimed “that Norton had made homosexual advances toward Glenn which escalated to Norton grabbing Glenn’s penis.” A newspaper published an article accurately describing the charges and quoting Norton’s unequivocal denial; the newspaper didn’t endorse Glenn’s statements. Norton and Wolfe sued both the newspaper and Glenn, and the jury found that the statements were false....MUCH MORE

Cellphone Hacking Company Gets Hacked, 900 GB Of Logins, Log Files, And Forensic Evidence Taken

From Techdirt:
from the let-he-who-is-without-security-breaches-throw-the-first-All-Writs-Order dept

Everything is compromised. In the latest case of a hacking company being hacked, Israel's Cellebrite is the latest to have its internal data hauled off by hackers. Joseph Cox of Motherboard was given inside details by the crew that claims to have spirited away login info and other data from the cellphone-cracking company.
Motherboard has obtained 900 GB of data related to Cellebrite, one of the most popular companies in the mobile phone hacking industry. The cache includes customer information, databases, and a vast amount of technical data regarding Cellebrite's products.
Included in the data haul are some other nifty surprises: evidence files from forensic searches of cellphones and logs from Cellebrite devices.

Cellebrite is a major supplier to US law enforcement, as well as to government agencies in countries with sketchier human rights records like Turkey, Russia, and the United Arab Emirates. In many ways, the company is similar to Italy's Hacking Team, which found itself hacked and its emailed dirty laundry aired by enterprising hackers unimpressed by the company's malleable morality.

What's truly interesting about this hack (and those similar to it) is that they go right to the heart of what's wrong with the DOJ's insistence that any "one-time" phone crack -- like the one they pursued in the San Bernardino mass shooting case -- would be safe as houses in the government's hands....MORE 
Probably also important:
Media: Hulk Hogan Attorney Now Representing Self-Proclaimed Inventor of Email Files Suit Against TechDirt Founder

"Deutsche Bank Rejects Turkish Charge It Is An 'Economic Terrorist'"

Should I go for the Mandy Rice-Davies moment? Yeah, what the hell:
Well they would, wouldn't they?
From ZeroHedge:
Over the year, Deutsche Bank has been accused - and found guilty - of doing many illegal things (and paid handsomely for it, both in terms of penalties as well as sacked CEOs), but what happened yesterday was new.

As we observed yesterday morning, as part of his latest attack on currency speculators, Erdogan compared FX traders to terrorists, saying that "terrorists with dollars and with weapons have no difference." Furthermore, on Thursday the government friendly daily Yeni Safak reported that Deutsche Bank and other German institutions were attempting “economic terror” against Turkey by recalling loans to companies before their their due dates.

The German lender was not happy, and on Friday Deutsche Bank’s Turkish unit rejected claims that it’s plotting to undermine the economy, and said it’s “unacceptable” for the lender’s name to be associated with terrorism.

“Claims in the story about calling loans before their maturity and conducting operations in coordination with other institutions are totally groundless,” the bank’s Istanbul-based business said in an e-mailed statement Friday quoted by Bloomberg.

Like many other failing regimes, most notably Venezuela, Erdogan and his aides often invoke a conspiracy against Turkey by outside powers when the lira declines, "saying other nations are jealous of the country’s economic growth under his leadership." On Thursday, Erdogan accused Turkey’s enemies of speculating in the lira and again called on Turks to “thwart these games” by selling their holdings in other currencies. 

Meanwhile, the one thing that could prop up the crashing currency, a rate hike, has been virtually proihibted by Erdogan who has warned that any such action by the central bank will be rejected by his administration. Erdogan is hoping to boost the lagging economy with cheap loans, however in the process it has sent the currency plunging.

Thursday was not the first time that Deutsche Bank has been singled out by the Turkish press. In January 2014, the German lender denied local reports that it deliberately drove down shares of a Turkish state-run lender that had been implicated in a corruption scandal. Deutsche Bank said most of the shares it processed in that episode were owned by its clients, and it wasn’t trading sufficient volumes to affect the company’s share price. More recently, the Frankfurt-based institution figured in a different way in government rhetoric.

In an amusing interlude, last September, when Deutsche Bank's shares were plunging, amid capital concerns, Yigit Bulut, a chief adviser to Erdogan, said Turkey should consider buying Deutsche Bank....MORE

"Can Investors Profit Using Academic Research?" (II)

I used that headline once before, for this in 2014:
Here's an oddball example. In 1977 Roger Ibbotson and Rex Sinquefield published a very famous paper, Stocks, Bonds, Bills, and Inflation: The Past (1926–1976) and the Future (1977–2000), which tackled the equity premium puzzle and was right but for the wrong reasons.

The paper's equity risk premium and therefore its estimated returns were too high but the paper got a lot of people into equities and for the 18 years 1982-2000 the major U.S. indices returned 18% per year in price appreciation. Ta da!

Mr Ibbotson sold his company to Morningstar, put the proceeds into his Zebra Asset Management and has a comfy chair at the Yale School of Management! Profit baby, profit....
After my flippant intro the post went on to get serious with some meta-analysis of investment research but I still chuckle when I think about how things worked out for Professor Ibbotson.

Anyhoo... here's the latest iteration of the question, this time from Morningstar, January 3:

Academic Research Doesn't Always Make Grade in Real World
Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. There has been no shortage of academic contributions to the investing world finding ways for investors to maximize their returns. I'm here with Alex Bryan, he is our director of passive research here in North America, to look at some of these academic effects that maybe don't translate quite so well into the real world.
Alex, thanks for joining me.
Alex Bryan: Thank you for having me.

Glaser: Let's start with Fama-French Value Factor. This is one of the most famous. Can you talk just a little bit about what this research was and why investors haven't quite seen the full effects that Fama and French saw?
Bryan: Sure. So, Fama and French back in 1992 formally documented this effect where stocks that are trading at low valuations, specifically low price-to-book, have tended to give you higher returns than stocks that were trading at higher multiples. Now, practitioners have known this for quite some time. It was just discovered in the academic world about 25 years ago.
But anyway, the way that they constructed this factor is they ranked all U.S. stocks on the New York Stock Exchange, the NASDAQ, and the NYSE based on their price-to-book ratios and they sorted the stocks that traded at the lowest price-to-book into the value bucket. The highest 30% of stocks in the market went into the growth bucket. And then they tracked the performance of the cheap stocks, the value stocks relative to the growth stocks over the next year, and then they repeated that sorting process.

The way that they've constructed this portfolio is very different than the way that most actual investment strategists go about it, because they went by the number of stocks in the market. So, they are targeting the 30% of stocks that are trading at the lowest valuations, whereas most indexes, they are not looking for a certain number of stocks. They are looking to provide a certain coverage of the market. So most value and growth indexes try to cover about half of the market capitalization out there. The Fama-French factor gives you this bit of an imbalance where you're really going to a more extreme section of the market with the value bucket than you would with a traditional value index. So, it's very different from that way that most funds are actually being constructed.

Glaser: If it's being constructed differently, how big is that performance gap then?
Bryan: It's substantial. So, there's a few reasons for that. One, like I mentioned, the value factors that they constructed are a bit more extreme in its tilt than most actual index funds. But they also gave a lot--they gave equal weight to small-cap stocks the same weight that they have given to large-cap stocks. So, historically, the value effect has worked the best among the smallest stocks. And in the way that they constructed their portfolio, they give the same weighting to small-cap value stocks as they do to large-cap value stocks. So, if you look at the last 50 years of performance or so that academic factor returned about 3.7% annualized. Now, value and growth indexes don't go back that far. But from what we have for the Russell 1000 Value and Growth, that goes back to 1978, the 1000 Value Index outperformed its growth counterpart by about 1.1 percentage points annualized. It's quite a big difference from that 3.7% outperformance that you saw from the academic factors. So, there's a bit of slippage that you can see.

Glaser: Let's look at profitability, another academic or another factor that academics care for quite a bit. What have we seen in terms of the gap for that factor?
Bryan: So, this is newer one that was actually just discovered, so to speak, in the academic literature within the last decade. And it basically has documented this effect where stocks that are more profitable--either if you look at gross profitability, margins, or if you use a different measure of profitability--the more profitable stocks have tended to outperform their less profitable counterparts, particularly during market downturns. There's a couple of different explanations as to why that is. But this effect appears to be about as robust as the value effect that we've known about for quite some time. So, that's pretty interesting research and it jibes with the way that a lot of practitioners had thought about investing for quite some time....MORE
HT: Abnormal Returns

"Ten Pieces of Bad Economic News from Russia in Last 24 Hours Alone"

The Interpreter has a very anti-Russian slant. We use it in an attempt to balance a couple of the pro-government sites in the hope of getting closer to the truth of Churchill's riddle/mystery/enigma locution.

From The Interpreter:
Staunton, VA, January 12, 2017 - While the attention of Russians and others around the world have been diverted – and one should ask be asking what they have been diverted from and why – ten pieces of bad even disastrous economic news have come out from or about Russia in the last 24 hours alone.
Here is the list:
1. The World Bank says that Moscow now lacks the money to fulfill its social contract with the Russian people.
2. Moscow’s Higher School of Economics says that the real incomes of Russians fell for the 25th straight month.
3. Deputy Prime Minister Olga Golodets says almost five million Russians are receiving the minimum income in Russia.
4. More than 1.5 million highly qualified Russians are now working abroad.
5. Ten percent of Russians are again receiving at least part of their pay under the table, meaning that it is not taxed and that it will not be used for calculating their pensions.

6. Given falling incomes, Russians are drinking, eating and travelling less, substituting potatoes for meat and fish and having consumption patterns that compare unfavorably with urban Russians at the end of the tsarist period.... 

Thursday, January 12, 2017

In Prison, Bernie Madoff is Cornering the Market on Swiss Miss Hot Chocolate

From MarketWatch:
Bernie Madoff, who ran a nearly $65 billion Ponzi scheme, is one of the biggest criminals in human history. But he was also the product of a corrupt financial system, one where both clients and regulators looked the other way from cooked books in order to continue reaping the gains he so steadily delivered.

That’s one of the sure-to-be-controversial conclusions of “Ponzi Supernova,” a new Audible audio series built around extensive interviews with the now-jailed Madoff, including hours of previously unheard testimony where he discusses his crimes in his own words.

The first four episodes of the six-part series debuted on Thursday, while the final two parts will be released in coming weeks.

The host of the program is Steve Fishman, a longtime journalist who has covered and conversed with Madoff for years....MORE

... “He’s a star in prison. He stole more money than anyone in history, and to other thieves, this makes him a hero.” According to Fishman, he is frequently approached for financial advice, including by another inmate who was debating a stock purchase with his broker. “The guy later said he wished he had followed Bernie’s advice closer.”

Madoff, who opened his first business with money earned from working as a lifeguard, has even returned to entrepreneurship, albeit a crafty one.
“Bernie really was a successful businessman with quite original insights into the market, and he’s continued applying his business instincts in prison,” Fishman said. “At one point, he cornered the hot chocolate market. He bought up every package of Swiss Miss from the commissary and sold it for a profit in the prison yard. He monopolized hot chocolate! He made it so that, if you wanted any, you had to go through Bernie.”
HT: Economic Policy Journal

Saudis Need $60 Oil, External Investment--BAML

Brent $56.10 up 1.00; WTI $53.10 up 0.85
From Barron's Emerging Markets Daily:

Saudis Look To $60 Oil, External Investment
Saudi Arabia’s balance of payments data suggest financial outflows are continuing.

So says Jean-Michel Saliba, an economist and strategist at Bank of America/Merrill Lynch focused on fixed income, who thinks the latest Saudi outflows likely reflect “private sector hedging and official outward flows,” even if the data is difficult to confirm. Saudi flows are under scrutiny as the government restructures its domestically focused public investment fund and expands its sovereign investments abroad. Some data from November may show an accelerating pace of diversified global investments. Saliba writes:
“Within the official sector, the outward investment mandate of the Public Investment Fund (PIF) needs to be carefully managed in order not to pressure reserves. Ongoing fiscal reforms and higher oil prices could bring the current account deficit nearer to balance over the coming years as the external break-even oil price hovers around $60 per barrel. The drop in the Saudi Arabian riyal (SAR) forward points reflects this, but capital outflows and fiscal slippage remain risks. If outflows persist, authorities may consider resorting to administrative measures as the commitment to an open capital account is central to attracting foreign investment under the economic reform program …

"Facebook Risks Breaking Its Perfect Business Model" (FB)

The stock is up 31 cents at $126.39.
From Bloomberg Gadfly:
Facebook has a tortured but financially advantageous relationship with its suppliers -- that is, the people and companies that keep the social network stocked with posts, photos and videos. Those people and companies make Facebook an entertaining hangout. And Facebook essentially keeps all the money generated there.

But that is about to change.

Facebook will start to test slotting commercials into the middle of videos that media and entertainment companies publish on the social network, tech news publication Recode reported on Monday. And the company has agreed to let the video creators keep 55 percent of the money from those video ads, just as YouTube does.

Facebook executives until now haven't been wild about slotting in ads before or within videos. People will fixate on Facebook’s flip-flop, but the much, much bigger deal is the compensation change for the media and entertainment companies that helped Facebook become the place where the world spends a huge share of its leisure hours. And the shift could damage the best business model in technology.

Profit Powerhouse
Out of nearly 200 U.S. companies with at least $15 billion in yearly sales, only five have wider operating profit margins than Facebook
Facebook has become -- surprisingly -- the perfect business for the smartphone age, and a big reason is it has spent essentially nothing to keep users enthralled. For the most part, companies that publish political articles or cooking videos on Facebook don't make money directly from that material, 
although they use those items to assemble a big fan base and then point those people to websites and apps where the companies make money selling ads or subscriptions.

Those articles and cooking videos keep users hanging out on Facebook, and the company keeps all the money it makes from selling advertisements that fill in gaps between those posts and videos they paid nothing to publish. It may not be fair, but it has made for a wildly successful and profitable business.

If Facebook is now willing to give 55 percent of ad dollars from those video ads, that means cracks are emerging in Facebook's free ride with its army of content suppliers. (Facebook also has experimented with splitting ad dollars with semiprofessional video stars who have attracted television-sized audiences on YouTube.)...

Related: Yesterday's "Media: Was the Facebook Ad Economy All A Dream? (FB)". 

"USDA Data Pushes Up Soybean Market Double-Digits" Corn Down--WASDE

Last Chg
Corn 354-0-3-2
Soybeans 1024-2+12-6
Wheat 423-6+5-0


Yields and output pushed slightly lower by USDA. 

DES MOINES, Iowa — The U.S. farmers had a smaller haul in the fall of 2016 than first thought, according to the USDA Thursday.

As a result, the CME Group’s farm futures jumped double-digits on soybeans, corn moved higher then dropped, and wheat traded slightly higher.

In its January Crop Production and Supply/Demand Reports, the USDA/WASDE data shows the U.S. 2016/17 corn production at 15.148 billion bushels vs. the USDA’s November estimate of 15.226 billion bushels and the average analysts’ estimate of 15.19 billion....MORE
Here's the USDA's WASDE page. And the 5-minute chart via FinViz: