Wednesday, November 22, 2017

Thanksgiving Day Stories

First posted Wednesday, November 23, 2016.

From the Paris Review, November 25, 2015:
The Nexus of All Despair
by Jane Stern
Our Winter 2015 issue features an interview with Jane and Michael Stern, who have written more than forty books; their Roadfood, first published in 1978 and now in its eighth edition, brought a new fervor and attention to regional American cuisine. To celebrate the new issue and the holiday, Jane Stern reflects here on Thanksgivings past. Happiness abounds. —D. P.
I’ve always thought that Thanksgiving was my favorite holiday, based solely on the fact that I adore turkey. But if I were to remove turkey from the equation, I would probably realize that this holiday, for me, has been nothing but one hideous thing after another.

Why Thanksgiving is the nexus of all despair is a mystery. But to prove that it is, here’s a short list of some of the things I remember.

1956, New Haven, Connecticut
The table is beautifully set in the dining room of the gracious colonial house on Trumbull Street, where my aunt and uncle live. I am ten years old, and my older cousins—Eric, seventeen, and his sister, Willa, thirteen—are my teen idols. After the family takes a few snapshots of all of us smiling, the food is spread out on the table and the shit hits the fan. Uncle Henry makes a snide remark about Elvis Presley, who has just been on The Ed Sullivan Show, and cousin Willa flings herself from the table in a histrionic fit. The whole table erupts into a pro- and anti-Elvis fight. The dinner is ruined, no one is hungry, and the gravy curdles as “All Shook Up” blasts from the phonograph in Willa’s room behind the slammed door.

1971, New Haven, Connecticut
A newlywed, I forgo seeing my family for Thanksgiving, and for a change of pace Michael and I invite two friends over. The only flaw in this plan is that I do not know how to cook. Undeterred, I take cookbooks out of the library, buy bags and bags of food, and at some point realize the twenty-eight-pound turkey (for four) will not fit in our apartment’s modest oven. I hack it into pieces.

By the time the two guests arrive, I’ve been cooking for four days, making unspeakably horrible and complicated dishes. I’ve also arranged flowers, cleaned the apartment, repainted the bathroom, and stocked up on Mateus and Boone’s Farm apple wine. I vaguely remember the guests arriving. I’m told that twenty minutes after they did, I excused myself and went to bed. I wake up the next day to a sink full of dirty dishes.

1977, Evanston, Illinois
My in-laws live in the Midwest, and every other Thanksgiving Michael and I travel to see them. This year we’re going to a close relative’s house a few miles away from where his parents live. These relatives are very pretentious. The house is Japanesque. We are instructed to remove our shoes when we enter. The floors are highly polished wood; the furniture is low, uncomfortable, and expensive. The host, a doctor, collects small, tortured bonsai trees.

Seventy-seven is the year the Cuisinart hit the American food scene, and these relatives are nothing if not on trend. Their Thanksgiving menu: pureed capon, pureed creamed spinach, pureed potatoes, pureed carrots, and, for dessert, a pureed pumpkin puree with pureed chestnuts on top. When I am very old and in a nursing home, I will look back on this meal fondly. But now, not so much.

1981, New Haven, Connecticut
Much of my family has died, unexpectedly, from awful diseases and fateful occurrences: my mother from a brain tumor, my cousin Willa from breast cancer, another cousin from a car accident, my grandmother from a broken hip, my father from smoking five packs a day. Those of us who are still living are at my Uncle Henry’s house for the traditional Thanksgiving meal. My Aunt Liz is cooking from rote, undeterred by her galloping Alzheimer’s. We all sit around glumly forking at the stuffing and Uncle Henry begins reading the most ghastly poetry, stuff he’s written for the event. It is not so much poetry as a morbid recitation of terminal cancer symptoms in iambic pentameter. I want to go screaming into that good night.
1995 and 1996, Redding, Connecticut   
Michael is now devoted to AA.... 

And speaking of J.M.W. Turner (for folks who don't obsessively remember every word that appears herein, it was Monday)...

Again from the Paris Review, this time November 24, 2014:

Sleep of the Just
You know how J. M. W. Turner tried to exhibit his work at the Royal Academy and the Royal Academy was all, Wow, your work is way too innovative and interesting and we can’t show it because it would threaten all our hidebound, bourgeois ideas and force us to reevaluate everything and make important societal changes? Yeah, well, I totally see their point. Once a year, anyway.

Because every November, all the food magazines and blogs start trying to bully us into to reinventing the wheel. Don’t be a fogey! they scream. What, you’re still eating turkey? HAHAHA. Well, if you insist on being a “traditionalist,” stuff that turkey with linguica and kale! Baste it with ramen! Douse it in pomegranate molasses! (All this is said in a vaguely threatening, SportsCenter-style cadence.) This isn’t your mom’s green bean casserole! You’re not even seeing those losers, are you, with their stupid political views and opinions about your love life? Surely you’re having some awesome no-strings Friendsgiving celebrating the new family you’ve chosen! Right? RIGHT?! SRIRACHA. SRIRACHA. SRIRACHA. 

Look. I get the market demands of the newsstand. You can’t just recycle the same stuff year after year. Nor do I mean to advocate a slavish adherence to tradition. In my family’s case, that would mean cleaning the dining room table off in a panic at the last minute, barring entrance to the rooms where we’ve stuck all the mess, then watching my mother stand in front of the digital meat thermometer with tears rolling down her cheeks....MORE 
"...and the Royal Academy was all, Wow, your work is way too innovative and interesting and we can’t show it...."
Mr Turner Recreating theRoyal Academy Show of 1832
Because that's just the way they spoke at the Royal Academy, back in the day.

The pic is from Christie's "Mr Turner: Recreating the Royal Academy Show of 1832"

Gone for the Holiday, back for the short day Friday, maybe some more Thanksgiving stories or a recipe or two.

Price of a Turkey c. 1907

This was first posted for the 100th anniversary of the story, Now we're at the 110th.
Time flies.

Original post:
One of the things an investor should understand is the inevitable debasement of currency. But, every price series is different. Back in September we had a blurb at the end of a post:
If I recall correctly, the Ming Dynasty had to repudiate paper money in the 1450's to end a hyperinflation.
Update: I am pleased with myself.
Found this quote from "A History of Money":
1448 Hyperinflation in China
The Ming note nominally worth 1,000 cash has a market value of only three.
p 183

Here, from Division of Labor, are some topical datapoints:
From the Nov. 17, 1907 NYT:
A turkey at 35 cents a pound is not to be considered by the average housekeepers, and other things one is used to serving at a Thanksgiving dinner being equally expensive, very few persons feel that they can afford to follow the old custom of giving a big family dinner on a National feast day.
We bought our turkey today for $0.69 per pound (I could have paid less and I could have paid more). Thirty-five cents in 1907 was approximately $7.50 in 2006. $150 (equivalent) for a twenty pound bird, I am not sure I would be hosting Thanksgiving dinner either.

The American Farm Bureau at their "Voice of Agriculture" site claims that this year's dinner for 10 will average around $43.
Here's the nominal and real costs for Thanksgiving dinner since 1986.
More on Thanksgiving prices c. 1907
A follow up on yesterday's discussion of turkey prices, the Nov. 19, 1907 NYT reports the following prices for Thanksgiving staples (perhaps an undergraduate paper lies in these data?):

UN Study Warns: Growing Economic Concentration Leads to “Rentier Capitalism”

From ProMarket, the blog of the Stigler Center at the University of Chicago Booth School of Business, October 30, 2017:
A new study by the United Nations Conference on Trade and Development argues: The “endemic rent-seeking that stems from market concentration, heightened corporate power, and regulatory capture” has spread beyond the United States, leading to the emergence of “global rentier capitalism.
Earlier this year, a Stigler Center paper by Luigi Zingales [Faculty Director of the Stigler Center and one of the editors of this blog] argued that market concentration can lead to a vicious circle, in which companies use market power to gain political power that in turn allows them to gain more market power, and vice versa. Zingales called this the “Medici vicious circle”: “Money is used to gain political power and political power is then used to make more money.”

A new UN report shows that this vicious circle is now a prominent feature of the global economy. Thirty years of hyperglobalization, according to the report, have led to sharp increases in global market concentration and a proliferation of rentierism, whereby the world’s largest corporations attempt to protect their market power through a variety of rent-seeking activities, such as lobbying or systematic abuse of intellectual property laws. While many of these companies are headquartered in the United States, the “endemic rent-seeking that stems from market concentration, heightened corporate power, and regulatory capture” has spread much further, leading to the emergence of “global rentier capitalism.”

The annual report of the United Nations Conference on Trade and Development (UNCTAD) has expressed growing concerns regarding concentration and rent-seeking behavior in financial markets in recent years. This year’s report, however, is unusual in that it devotes an entire chapter to the issue of market power and its contribution to inequality worldwide. “While we have always been concerned with power imbalances and inequality in the global economy, the more extensive analysis of market concentration is a fairly recent concern for us,” Stephanie Blankenburg, chief of the Debt and Development Finance Branch at UNCTAD and co-author of the section on market power, tells ProMarket. “It was triggered by concerns about concentration trends in U.S. markets, particularly among economists.”

While the past two years have seen an explosion of interest around concentration and corporate rent-seeking among a growing number of economists, journalists, and politicians, the debate has so far remained largely confined to the US economy, where a substantial body of research has linked diminished competition to some of America’s biggest economic and political problems, like inequality, the decline of labor’s share of national income, and regulatory capture. Outside of the United States, as the European Commission’s chief competition economist Tommaso Valletti recently noted, research on this issue has been limited so far—partly due to a lack of data.

UNCTAD’s research is among the first to assess the rise in market concentration on an international scale. It also attempts to measure the growth of rents—that is, the income that large companies derive solely from the ownership and control of assets, rather than from innovation.

In order to do that, UNCTAD built a database comprised of financial statements made by publicly traded non-financial companies in 56 developed and developing countries between 1995 and 2015. Measuring the size of corporate rents is difficult due to the scarcity of data and the wide variety of rent-seeking activities companies can engage in, but the UNCTAD research team tries to approximate their magnitude by estimating surplus profits within specific sectors. Using the median value of firms’ rate of return on assets (ROA), they estimate the median performance of firms within a given industry. The difference between this estimate and the actual profits firms made is the surplus profit.

In the past two decades, the authors find, the world economy has seen a sharp increase in both surplus profits and market concentration. Concentration has increased markedly in terms of revenues, assets (both physical and non-physical), and market capitalization: in 2015, the combined market cap of the world’s top 100 firms was 7,000 times that of the bottom 2,000 firms, whereas in 1995 the same multiple was 31. At the same time, the share of surplus profits grew significantly for all firms in the database, from 4 percent of total profits in 1995–2000 to 23 percent in 2009–2015. For the top 100 firms, the share of surplus profits grew from 16 percent of total profits in 1995–2000 to 40 percent in 2009–2015.

The trend toward concentration, the authors note, has not extended to employment. Between 1995 and 2015, as the market cap of the world’s top 100 firms quadrupled, their share of the job market didn’t even double—a finding that echoes the results of previous studies that linked the decline of labor’s share to the rise of market power. This, they argue, lends support to the view that market concentration strongly contributes to inequality and leads to “profits without prosperity.”...MUCH MORE

"Why Uber's hacking scandal is worse than all the others"

From CNBC:
Uber made history and continues to do so by successfully disrupting a stale and often corrupt taxi industry across the world. But as Uber supplants one form of corruption, it's clearly fallen victim to another. And if the company doesn't clean up its act, the good it's doing to unshackle people pinned down by the constraints of traditional transportation will be lost and left for its imitators to continue.
The latest bit of corruption dogging Uber came to light Tuesday as the company admitted that it hid the fact that hackers breached and gained access to 57 million user accounts. To make matters worse, Uber also now says it paid hackers $100,000 to delete the data and keep the breach quiet, and did not report the incident.

In so doing, Uber moves from the lofty ranks of admirable disruptor to just another company doing what looks like a poor job or protecting its data and definitely doing a terrible job at handling the job of keeping its customers, investors, and the general public properly informed and prepared. This is essentially the same sin committed by Equifax, Target, Yahoo and many others.
"This is a company that doesn't just have your address and credit card information, but detailed data on your movements and general travel history."
But in some ways, a data breach at Uber is worse. This is a company that doesn't just have your address and credit card information, but detailed data on your movements and general travel history. A good hacker can find your home, and find where you are at any given time.

And that brings us to the second level of general corporate corruption that Uber has become a part of. That is the wave of sexual harassment and misconduct that is sweeping the nation right now. Actually, Uber's problems with this issue predate the fury that began this fall with the allegations surfacing against Hollywood Harvey Weinstein. "Way back" in June, the alleged culture of sexual harassment at Uber contributed greatly to the ouster of co-founder and CEO Travis Kalanick....MORE
And at recode, here come the Attorneys General:

Uber is under investigation by multiple states over a 2016 data breach
Regulators around the country are questioning Uber for staying silent after the hack, which affected 57 million people.

Uber Paid Hackers to Delete Stolen Data on 57 Million People

"Fruit Fly Brains Could Help Serve You Better Content"

Not a really high bar, eh?

From Discover Magazine:
The content you see on the internet is increasingly becoming tailored to you: Music based on your favorite jams, shopping suggestions corresponding to your recent purchases, and television shows similar to your most beloved episodes.
These “similarity searches” drive custom content, and they’re pretty tricky to do correctly and quickly.
I Know This Song
That is, for computers at least. Fruit flies, on the other hand, seem to be pretty good at them. A new study in the journal Science takes a look at how fruit flies quickly and efficiently sort out and identify different smells. Their neural architecture is so well-designed in fact, that it could hold the key to more effective similarity searches.
For brains, especially human brains, this kind of recognition isn’t too difficult, according to Saket Navlakha, assistant professor in Salk’s Integrative Biology Laboratory and lead author of the new paper. Many animals perform similarity searches all the time.
“For example, you might see someone and be like, ‘That guy reminds me of my uncle.’
Or you might hear a song and be like, ‘That band sounds like Nirvana.’ Or you might smell a perfume and be like, ‘That smell reminds me of an orange,’” Navlakha explains.
He says in each of these instances we’re comparing new stimuli to an existing database of information stored in our brains. It would be much the same with animals in the wild — seeing a red berry may trigger a similarity search to other red berries to indicate that it might be poisonous. “It’s quite a general problem faced by many species,” says Navlakha.

Fly On The Wall
The problem of categorizing and understanding new information is a little trickier for computers — you’ve likely received an automated suggestion for a movie or product that seemed way off base.
That’s because when most computers analyze data to categorize items, they pare down the information to work more efficiently. Computers assign a kind of digital shorthand, called a “hash,” to each item. From there, hashes are compared and matched with other, similar hashes, a process known as called locality-sensitive hashing. The simplified hashes make searching through thousands, if not millions, of other items faster and easier.

Fruit flies, however, have a mechanism in their brains that performs similarity searches in a very different way. Specifically, they expand the stimuli information, as opposed to compressing and simplifying it...MORE
I hate "Chosen especially for you."

Also at Discover:
Growing Up Neanderthal
High-Ranking Male Primates Keep Wafting Their Sex Stink at Females, Who Hate It
NOT chosen especially for anyone, actually. 

"From Alibaba to Zynga: 21 Of The Best VC Bets Of All Time And What We Can Learn From Them"

This is a primer on venture capital. Don't let the post-IPO performance of some of the names in the snapshots stop you from reading on, scroll down to the capsule descriptions for the mini case studies.
From the VC Mavens at CB Insights:
These venture bets on startups that "returned the fund," making firms and careers, were the result of research, strong convictions, and patient follow-through. Here are the stories behind the biggest VC home runs of all time.

In venture capital, returns follow the power law — 80% of the wins come from 20% of the deals.
Great venture capitalists invest knowing they’re going to take a lot of losses in order to hit those wins.

Chris Dixon of top venture firm Andreessen Horowitz has referred to this as the “Babe Ruth effect,” in reference to the legendary 1920s-era baseball player. Babe Ruth would strike out a lot, but also made slugging records.

Likewise, VCs swing hard, and occasionally hit a home run. Those wins often make up for all the losses and then some — they “return the fund.”
Fred Wilson of Union Square Ventures recently wrote that for his fund, this translates to needing at least two $1B exits per fund:

“If you do the math around our goal of returning the fund with our high impact companies, you will notice that we need these companies to exit at a billion dollars or more,” he wrote. “Exit is the important word. Getting valued at a billion or more does nothing for our model.”

We analyzed 21 of the biggest VC hits of all time — all of which are in the top 35 venture exits of all time — to learn more about what those home runs have in common.

To do so, we pulled data and information from web archives, books, S-1s, founder interviews, the CB Insights platform, and more.

For each company, we dove into the remarkable numbers they posted before their IPOs and acquisitions, the driving factors behind their growth, and the roles of their most significant investors. Below, we’ll show you our analysis on each specific case. You’ll read about how:

WhatsApp decided early on to work only with a single investor, Sequoia Capital, which invested a total of $60M into the company for a massive $3B return.

Facebook’s exponential growth resulted in huge successes for early investors like Accel Partners. Even Peter Thiel, who wrote the first check to Facebook, later worried the company was overvalued and sat out a subsequent round while Accel maintained its conviction in Facebook.

Groupon pivoted from a social activism platform to a local deals aggregator, and generated huge returns for co-founder, chairman, and biggest shareholder Eric Lefkofsky.

Cerent, which was founded by a Kleiner Perkins Caufield & Byers partner, saw investment from Kleiner Perkins from the very beginning and returned $2.1B.

Snapchat developed a tight relationship with Series A investor Benchmark Capital Partners as it shook off the early perception that it was just a faddish app for “sexting.”

King Digital Entertainment, maker of mobile game Candy Crush, was acquired for $5.9B, resulting in a huge payout for Apax Partners, which owned 44%.

UCWeb was acquired by Alibaba, a prior investor, because they offered services that would help Alibaba triple their own valuation.

Alibaba grew alongside the early growth of the internet, helping to make early investor Masayoshi Son, today chairman of Softbank Group, the richest man in Japan and a tech titan in his own right...

Egypt is getting a new capital.—courtesy of China

From CNN:
Egypt's new capital city moved a step closer to reality with the announcement that Chinese developers will largely fund the megaproject.
The China Fortune Land Development Company (CFLD) agreed to provide $20 billion for the currently unnamed city, after a meeting between heads of the firm and Egyptian President Abdel Fattah El Sisi. 
This follows a previous commitment of $15 billion from another Chinese state-owned company, bringing the project close to its $45 billion budget requirements for phase I. 
Plans for the new capital were first announced in March 2015. Government officials described the development as a solution to crowding, pollution and rising house prices in Cairo. 
"Cairo Capital is a momentous endeavor to build national spirit, foster consensus, provide for long-term sustainable growth," said the project website. "(The) new city will create more places to live, work and visit."
Under construction
The 700 square kilometer city to be constructed in the desert to the East of Cairo would become the new seat of government, and it is presented as a far grander vision than the current capital.
Proposals for the city include housing for five million people, over 1,000 mosques, smart villages, industrial zones, a 5,000-seat conference center, and the world's largest park. 
Interest in the project has been brisk. An Indian company is reportedly planning a vast medical center and university, while a Saudi firm intends to build a 12.6 hectare mosque and Islamic museum. 
Construction is already under way. According to Egypt's Al-Ahram newspaper, engineers have begun work on infrastructure including bridges and 210 kilometers of roads. 
The first phase of the project will see government ministries and residential blocks rise from the sand. This phase could be complete within five years, with the first residents moving in.
Ghost town?
Despite the optimism from officials, there are concerns that the project will encounter familiar problems. Egypt has already constructed several satellite towns around Cairo, which have registered low occupancy despite high investment....MORE,dpr_1.0,c_fill,g_auto,h_759,ar_16:9/

The World's Fastest Car Is Made in Sweden

That's fastest production car. And it's speed, not acceleration. And it's awesome.
From Fortune, November 6:
Koenigsegg, the Swedish company known for its hypercars, broke the world record for fastest production car with its Agera RS over the weekend. And in true ultra-luxe hypercar style, the company paid to shut down a section of Route 160 between Las Vegas and Pahrump, Nevada.
Test tracks are so conventional.
Here are the highlights:
  • The Agera RS hit an average speed of 277.9 miles per hour
  • The average speed was achieved during two runs
  • The test runs were held on a closed, 11-mile section of highway in Nevada
  • The Agera RS crushed the previous record of 267.8 mph, set in 2010 by the Bugatti Veyron Super Sport.
Here’s a video of the world-record runs. The data and video was recorded using a Racelogic VBOX HD2.
Factory test driver Niklas Lilja pushed the Agera RS to 284.55 mph in one direction on the stretch of highway and then 271.9 mph on the second run, which had an uphill gradient, Top Gear reported.

The average 277.9 mph time beats previous record holder Bugatti’s run in 2010 on the Ehra-Lessien test track in 2010....MORE
Here's Koenigsegg's RS page. $2.1 million, get in line.

Capital Markets: "Global Equity Rally Resumes, while Dollar Slips"

From Marc to Market:
Global equities are on the march. US indices shrugged off their first back-to-back weekly decline in three months to set new record highs yesterday. The MSCI Asia-Pacific followed suit and recorded their highest close. The Dow Jones Stoxx 600 is struggling, as the CAC and DAX are nursing small losses.

The synchronized global upturn and prospects for continued abundance of liquidity appear to be underpinning sentiment. At a speech in NY late yesterday, Yellen warned against raising rates too quickly and repeated her sense of mystery over the decline in inflation this year. The US two-year yield softened marginally, and the Fed funds futures rose. At 1.295%, the implied yield of the December Fed funds futures contract is precisely at what we think is fair value assuming a rate hike at the next FOMC meeting.

There seems to be some confusion
over what Yellen means, though she may very well be the most plain-speaking Fed Chair. She is not referring to structural influences. She is referring to the recent decline. Specifically, core CPI fell from 2.3% in January to 1.7%, where it was from May through September before ticking up to 1.8%. The targeted core PCE deflator fell from 1.91% last October to 1.30% in August before rising to 1.33% in September. It is this decline she regards as mysterious but sticks to the working hypothesis that the decline is due to a number of idiosyncratic factors.

Some reports play Yellen's dovish warning but also accused her of being too hawkish when the Fed last hiked rates in June. Others suspect that her caution against raising interest rates too fast is a signal to her successors at the Fed. Still, others are linking her dovish comments to the risk that the minutes from last months' FOMC meeting that will be released this afternoon will show some officials concerned about an undershoot of unemployment. Recently there has been some evidence of greater wage increase for employees in some sectors, including what are regarded as blue-collar occupations.

The main event today, however, is in the UK as Chancellor of the Exchequer Hammond delivers his Autumn Budget to parliament. There is much pressure on Hammond to deliver. Former Prime Minister Cameron thought a referendum on the EU would resolve the conflict that was ripping apart the Tory Party. Rather than resolve it, the referendum nationalized it, and the Tories lost their parliamentary majority. The markets may be particularly sensitive to the new forecasts by the OBR. The poor productivity record means weaker growth prospects, which in turn eat away at latitude to provide much fiscal succor. There continues to be the talk of a cabinet reshuffle....

Tuesday, November 21, 2017

Uber Paid Hackers to Delete Stolen Data on 57 Million People

Along with having ultimate responsibility for ensuring coffee logistics, sometimes having to don the risk manager hat and being on guard against the appearance of the Hubris-Nemesis Complex, (more accurately Sophocles' whole hubris, anagnorisis nemesis, catharsis story line - I'm forgetting a couple steps), I think about stuff.

A couple posts back. I even referenced the thinking-about-stuff bit: "having spent some time trying to front run Sand Hill Road and understand things like Uber...".

Don't tell anyone but sometimes that part is pretty easy, just pattern recognition:
November 19, 2014
Here's the Real Problem With Uber: You Can't Trust Them 
Yeah, three years ago.
At that time there weren't many of us saying there was something very wrong with Uber:
Izzy Kaminska at Alphaville, Sarah Lacy' at Pando, recovering VC Peter Sims and yours truly. Maybe one or two more.
Otherwise, the 2014 commentariat was happy, happy, joy, joy all over the Ubester.

Here's the latest from Bloomberg
Updated on
  • Company paid hackers $100,000 to delete info, keep quiet
  • Chief Security Officer Joe Sullivan and another exec ousted
Hackers stole the personal data of 57 million customers and drivers from Uber Technologies Inc., a massive breach that the company concealed for more than a year. This week, the ride-hailing firm ousted its chief security officer and one of his deputies for their roles in keeping the hack under wraps, which included a $100,000 payment to the attackers.

Compromised data from the October 2016 attack included names, email addresses and phone numbers of 50 million Uber riders around the world, the company told Bloomberg on Tuesday. The personal information of about 7 million drivers was accessed as well, including some 600,000 U.S. driver’s license numbers. No Social Security numbers, credit card information, trip location details or other data were taken, Uber said.

At the time of the incident, Uber was negotiating with U.S. regulators investigating separate claims of privacy violations. Uber now says it had a legal obligation to report the hack to regulators and to drivers whose license numbers were taken. Instead, the company paid hackers to delete the data and keep the breach quiet. Uber said it believes the information was never used but declined to disclose the identities of the attackers.

“None of this should have happened, and I will not make excuses for it,” Dara Khosrowshahi, who took over as chief executive officer in September, said in an emailed statement. “We are changing the way we do business.”

After Uber’s disclosure Tuesday, New York Attorney General Eric Schneiderman launched an investigation into the hack, his spokeswoman Amy Spitalnick said. The company was also sued for negligence over the breach, and the case is seeking class-action status.

Hackers have successfully infiltrated numerous companies in recent years. The Uber breach, while large, is dwarfed by those at Yahoo, MySpace, Target Corp., Anthem Inc. and Equifax Inc. What’s more alarming are the extreme measures Uber took to hide the attack. The breach is the latest scandal Khosrowshahi inherits from his predecessor, Travis Kalanick.

Kalanick, Uber’s co-founder and former CEO, learned of the hack in November 2016, a month after it took place, the company said. Uber had just settled a lawsuit with the New York attorney general over data security disclosures and was in the process of negotiating with the Federal Trade Commission over the handling of consumer data. Kalanick declined to comment on the hack.

Joe Sullivan, the outgoing security chief, spearheaded the response to the hack last year, a spokesman told Bloomberg. Sullivan, a onetime federal prosecutor who joined Uber in 2015 from Facebook Inc., has been at the center of much of the decision-making that has come back to bite Uber this year. Bloomberg reported last month that the board commissioned an investigation into the activities of Sullivan’s security team. This project, conducted by an outside law firm, discovered the hack and the failure to disclose, Uber said.

Here’s how the hack went down:...
...MUCH MORE, a rip-roaring yarn told on a classic hubris, anagnorisis, nemesis, catharsis arc.

That failure to disclose is just nasty and offers insight into how Uber got to where it is now, an over-valued taxi company with plans to go driverless.
And airborne.

"Faraday Future issues bombastic statement accusing former CFO of ‘malfeasance and dereliction of duty’"

Uh oh (see after the jump)

From The Verge:
Stefan Krause, previously of BMW, calls the claims ‘baseless’

Hours after it was made public that struggling electric car startup Faraday Future was losing three top executives, the company is coming out swinging against the one who was most deeply involved in trying to keep the lights on. In a post on the company’s website, Faraday Future is accusing now-former CFO Stefan Krause of “malfeasance and dereliction of duty,” as well as a “possible violation of law.” 

Faraday Future also claims that it terminated the executive when he left last month, as first reported by Jalopnik. The company says Krause was “hindering FF’s fundraising efforts.” 

“Stefan Krause’s possible violation of law and lack of contribution to FF’s goals over the course of his leadership since March has led to severe damages to the interests of FF and its investor,” the statement says. “FF is currently taking legal actions as a result of Stefan Krause’s malfeasance and dereliction of duty.” 

The company wouldn’t specify what those “violations of law” are, and, as Jalopnik reported, no legal action has been taken yet. In a statement, Krause reinforces that he resigned from the company and called the claims “baseless and defamatory.”
Faraday Future issued a statement today that falsely described my departure from the company. The truth is that I resigned from Faraday Future on October 14, effective immediately. The company’s statement inaccurately portrays the circumstances surrounding my departure, and includes baseless and defamatory statements about me and my contributions to the company. I have retained legal counsel and will be exploring all options available to me....

Our introduction to 2013's "How to Spot a Hedge Fund Fraudster":
Bombast. In my experience they are all bombastic.
And stripper poles. You would not believe the number of stripper poles that crooks collect....
And my all time favorite bit o'bombast, recounted as the intro to 2007's "Planktos Highlights Real Ocean/Climate Crises & Responds to Recent Misinformation Campaigns" about a Euro-American reinsurance scam that had reverse-merged its way onto the American Stock Exchange, gotten onto the Fed Board's margin list and then, rather than doing the dump half of a pump-n-dump as they gunned it from 50 cents to $15.00, had just margined  the hell out of their brokerage accounts, requested the excess buying power be wired out and skedaddled, picking up the remaining cash in the corporate bank accounts on their way out the door:
...But first, one of my favorite examples of a stock scam (I told you, I have a morbid fascination with the underbelly of the markets, it's like watching the lions approach the wildebeest at the watering hole, you don't want to see it but you can't look away):
...Peter Uttley, Equisure's chairman and a former Lloyds of London executive, took control of the company this week, assuming the chief executive post....

...Uttley said in the press release that his chairman role had been a "passive" one, but he now plans an active reorganization of the company, whose reputation has been stained by allegations that it is a scam insurance operation....
...In an unusually emotional statement to the press, sent from an Equisure board meeting Friday in London, Uttley told his version of events over the summer, which eventually led to the delisting of Equisure shares on the American Stock Exchange.
"The simple truth was consumed in the belly of deception, but now has been vomited for the world to see," Uttley began.
He then proceeded to tell a story of three men, whom he described as "liars," "cheats," and "scallywags," who worked with law enforcement officials and the press to spread false rumors about the company with the intent of buying Equisure out at 50 cents a share, a tiny fraction of the stock's trading price of $15, before AMEX suspended trading Aug. 1.
Isn't that damn fine bloviating? It's hard to research but I think Uttley et. al. got away with $100 mil.
Here's Russ George of Planktos responding (I think) to Greenpeace's submission to the recent meeting of the International Maritime Organization...
Who's going to top "The simple truth was consumed in the belly of deception, but now has been vomited for the world to see," in a press release?
Scallywags is a nice touch as well.

Is Venture Capital Destroying Online Journalism?

I don't know but having spent some time trying to front run Sand Hill Road and understand things like Uber I have to say this is an interesting insight.
From Talking Points Memo, November 17:

There’s a Digital Media Crash. But No One Will Say It
Yesterday I appeared on a panel about digital publishers who are ‘pivoting to video’. I’ve written about this before. But in case you’re new to it, there have been numerous cases over the last six months to a year in which digital publishers have announced either major job cuts or in some cases literally fired their entire editorial teams in order to ‘pivot to video.’ The phrase has almost become a punchline since, as I’ve argued, there is basically no publisher in existence involved in any sort of news or political news coverage who says to themselves, my readers are demanding more of their news on video as opposed to text. Not a single one. The move to video is driven entirely by advertiser demand.

What crystallized for me from this and other discussions I had yesterday is that we’re actually in the midst of a digital news media crash, only no one is willing to say it. I’ve noted before that digital news media in the midst of a monetization crisis. But it’s more than that. It’s a full blown crash.
Here’s why.

You have three different factors coming together at once: two primary ones and one secondary but critical one.

First, digital publishing has always been ruled by a basic structural reality: there are too many publications. Now, how can there be too many publications? The more information the better. Well, it’s like this: There are too many publications relative to the funding available to support them, given that it has been almost universally assumed that the funding comes from advertising. That creates the furious competition for clicks and the ever growing intrusiveness of ads. The advertisers have all the power. So rates are always going down.

This has been a fact for more than two decades. It is driven by the extremely low costs of entry in digital publishing which makes it very difficult to set up the kinds of de facto monopolies that existed for big city newspapers for most of the second half of the 20th century.

Then came the platform monopolies: Google, Facebook and a few others. Over the last five years or so but accelerating rapidly in the last 24 months, they’ve gobbled up almost all of the growth in advertising revenue and begun to engross a substantial amount of the existing advertising revenue as well.

Let’s try a very simple visualization of what I’m describing. Remember, there are too many publications relative to advertising revenue. So let’s imagine there are 30 publications and 25 revenue seats. The publications fight like hell to secure one of the seats. Then the platform monopolies came along and sat down in maybe 5 or 10 of the 25 seats. You can see the problem. The competition of 30 publications competing for 15 seats gets insane. A bunch of the publications are going to die or be forced to find another way to fund themselves.

Now, here’s the too little discussed part of the equation. A huge, huge, huge amount of digital media is funded by venture capital. That’s not just to say they had investors at the start but in effect a key revenue stream of many digital publications has been on-going infusions of new investment.
Much of that investment has been premised on the assumption that scale – being huge – would allow publications to create stable and defensible business models. There are a lot of moving parts to the strategies. But it essentially comes down to this idea: get big enough and you can solve the chronic problem of over-supply of publications in your favor through sales at volume and being able to command stable, premium advertising rates. But that hasn’t happened. Just as one fact point, The Wall Street Journal reported today that Buzzfeed is going to miss its revenue target this year by as much as 20%. That’s a lot.

Now, this doesn’t mean Buzzfeed’s about to go under. I don’t know all the details of their internal business operations. And in any case, this isn’t really about Buzzfeed. That’s just a number I saw today. But it does probably mean BuzzFeed likely won’t do an IPO in 2018 – which means their investors aren’t going to be able to get their exit any time soon. Indeed, they may never be able to get it at the level they expected. The point is that investors are realizing that scale cannot replicate the kind of business model lock-in, price premiums and revenue stability people thought it would. Another way of putting that is that the future that VCs and other investors were investing hundreds of millions of dollars in probably doesn’t exist. That means that they’re much less likely to invest more money at anything like the valuations these companies have been claiming.

The big picture is that Problem #1 (too many publications) and Problem #2 (platform monopolies) have catalyzed together to create Problem #3 (investors realize they were investing in a mirage and don’t want to invest any more). Each is compounding each other and leading to something like the crash effect you see in other bubbles.

Let’s go back to our chair analogy....MORE
We posted that same day:
"Bad news from Mashable, BuzzFeed, and Vice shows times are rough for ad-supported digital media 

"Bill Gates and China partner on world-first nuclear technology"

This story slipped under the radar but may be important.
Plus, we've been following it for a decade and aren't quitters.
(I know, it's a fine line between perseverance and pig-headedness) 

From the Sydney Morning Herald, Nov. 7:
Bill Gates' nuclear firm TerraPower and the China National Nuclear Corporation have signed an agreement to develop a world-first nuclear reactor, using other nuclear reactors' waste
TerraPower chairman Bill Gates and Chinese premier Li Keqiang signed a joint venture agreement to create the Global Innovation Nuclear Energy Technology company, which will build a Travelling Wave Reactor and commercialise the technology.

This joint venture aims to design and construct multiple nuclear power plants generating around 1150 megawatts over the next two decades which utilise this fourth generation nuclear technology.  
It expands a joint technology agreement between the two businesses signed in 2015.

Fourth generation Travelling Wave Reactors would differ from third generation, more traditional light water nuclear reactors, as they would not require enriched uranium to generate energy, and could instead use waste uranium

Travelling Wave Reactors would require less fuel per kilowatt-hour of electricity than light-water reactors, due to TWRs higher fuel burn, energy density, and thermal efficiency.

It is also safer as spent fuels, such as depleted uranium, from other reactor types could be recycled without separating out plutonium, and could operate without refuelling for up to 40 years.

TerraPower states that the US currently holds approximately 700,000 tonnes of depleted uranium, and the reactor would only need eight tonnes of this material to power 2.5 million homes for a year....MUCH MORE
"How Moore’s Law Has Spoiled Us for The Energy Revolution"
Bill Gates: ‘We Need an Energy Miracle’
Q and A: Bill Gates on Energy
July 2013
Nuclear: "Bill Gates Is Beginning to Dream the Thorium Dream"
Nov. 7, 2011 
Bill Gates and China Aren't Building a Traveling Wave Nuclear Plant (yet)
Feb. 2009
Inventing the Future
May 2008 
Who says big ideas are rare? (Using Nuclear Waste) 
"Bill Gates’ Children Mock Him With ‘Billionaire’ Song"

How Turkey, Iran, Russia and India are playing the New Silk Roads (hint: think Syria)

From Asia Times:

A pacified Syria is key to the economic integration of Eurasia through energy and transportation connections
Vladimir Putin, Recep Tayyip Erdogan and Hassan Rouhani will hold a summit this Wednesday in Sochi to discuss Syria. Russia, Turkey and Iran are the three power players at the Astana negotiations – where multiple cease-fires, as hard to implement as they are, at least evolve, slowly but surely, towards the ultimate target – a political settlement.

A stable Syria is crucial to all parties involved in Eurasia integration. As Asia Times reported, China has made it clear that a pacified Syria will eventually become a hub of the New Silk Roads, known as the Belt and Road Initiative (BRI) – building on the previous business bonanza of legions of small traders commuting between Yiwu and the Levant.

Away from intractable war and peace issues, it’s even more enlightening to observe how Turkey, Iran and Russia are playing their overlapping versions of Eurasia economic integration and/or BRI-related business.

Much has to do with the energy/transportation connectivity between railway networks – and, further on the down the road, high-speed rail – and what I have described, since the early 2000s, as Pipelineistan.
The Baku-Tblisi-Ceyhan (BTC) pipeline, a deal brokered in person in Baku by the late Dr Zbigniew “Grand Chessboard” Brzezinski, was a major energy/geopolitical coup by the Clinton administration, laying out an umbilical steel cord between Azerbaijan, Georgia and Turkey.

Now comes the Baku-Tblisi-Kars (BTK) railway – inaugurated with great fanfare by Erdogan alongside Azerbaijani President Ilham Aliyev and Georgian Prime Minister Giorgi Kvirikashvili, but also crucially Kazakh Prime Minister Bakhytzhan Sagintayev and Uzbek Prime Minister Abdulla Aripov. After all, this is about the integration of the Caucasus with Central Asia....

Dec. 2013
"The New New Great Game: Geography, Energy, The Dollar and Gold"
Just about the time 'the 'stans' start receding from the Western headlines it is probably most important to think about them.  

"Private equity to face competition from investors, says Carlyle Co-CEO"

From Reuters via PE Hub:
Private equity firms are awash in cash, with nearly US$1trn of available capital, but the industry is facing internal competition as limited partner (LP) investors seek to play a more active role in buyouts, according to David Rubenstein, co-founder and co-CEO of the Carlyle Group.

The structure and composition of private equity funds will change significantly as LPs that would previously have invested in the funds increasingly branch out into arranging buyouts themselves, Rubenstein said.

Rubenstein was giving his views on the future development of private equity firms, based on his 30-plus year career in the industry, at the SuperInvestor Conference in Amsterdam this week.
“I expect we’ll see longer duration funds become more prevalent, with consequently lower fees for LPs and carried interest for general partners [private equity firms].” Rubenstein said.
Many LPs are looking for longer-term investments with lower return targets, which will ripple through the conventional buyout community, Rubenstein said, adding that more permanent capital will also be sought to match longer investment duration needs.

Several LPs that would have previously invested in private equity funds, including Canadian pension funds PSP Investments and the Canadian Pension Plan Investment Board, have built their own operations to buy assets in recent years and some European firms are also looking at co-investment buyouts.

Rubenstein predicted that sovereign wealth funds will replace US public pension funds as the largest source of capital for buyout firms, and said that retail investors will also play a more significant role going forward.

“Individual retail investors will be the biggest new entry as regulations relax on investing in private equity,” he added.

He also highlighted private debt as a significant growth area....MORE
HT: Pension Pulse who also highlights Financial News' "David Rubenstein’s five predictions for the future of private equity"

May 2016
Family Offices Doing Private Equity On Their Own
August 2014
GS, JPM: "Here, Let Us Turn That Worthless Corporate Equity Into Valuable Fee Income"
April 2014
"McKinsey Gives “Dare to Be Great” Speech to Private Equity Investors as Returns Fall"

 And as a final note, the introduction to a December 2016 piece:

For some reason I still see Warren Buffet's 2008 Shareholders Letter when someone mentions the term "Private Equity":

...Some years back our competitors were known as “leveraged-buyout operators.” But LBO became a bad name. So in Orwellian fashion, the buyout firms decided to change their moniker. What they did not change, though, were the essential ingredients of their previous operations, including their cherished fee structures and love of leverage.

Their new label became “private equity,” a name that turns the facts upside-down: A purchase of a business by these firms almost invariably results in dramatic reductions in the equity portion of the acquiree’s capital structure compared to that previously existing. A number of these acquirees, purchased only two to three years ago, are now in mortal danger because of the debt piled on them by their private-equity buyers. Much of the bank debt is selling below 70¢ on the dollar, and the public debt has taken a far greater beating. The private- equity firms, it should be noted, are not rushing in to inject the equity their wards now desperately need. Instead, they’re keeping their remaining funds very private...

Driving Amazon's Last Mile (AMZN)

From Gizmodo:
Who delivers Amazon orders? Increasingly, it’s plainclothes contractors with few labor protections, driving their own cars, competing for shifts on the company’s own Uber-like platform. Though it’s deployed in dozens of cities and associated with one of the world’s biggest companies, government agencies and customers alike are nearly oblivious to the program’s existence.

In terms of size, efficiency, and ruthlessness, Amazon has few equals. The least publicly accountable of the big tech companies—Google, Apple, and Facebook face considerably greater scrutiny—Amazon’s stock is one of the most valuable on the market, it’s among the fastest-growing companies in the United States. Atop its vast empire, CEO Jeff Bezos commands the single largest personal fortune on the planet. Estimates place Amazon as the recipient of approximately one third of all dollars spent online. Control over the manufacture, storage, sales, and shipping of an extraordinarily diverse set of products has led the company to expand into film and TV production, web hosting, publishing, groceries, fashion, space travel, wind farms, and soon, pharmaceuticals, to name just a few. It’s a new kind of company, the likes of which the American economy has never before seen and is legislatively ill-prepared for.

Ingenuity alone doesn’t account for Amazon’s dominant position. The company’s Economic Development Team works hard to secure state and local subsidies, which research from watchdog group Good Jobs First indicates surpasses $1 billion, a figure which the advocacy group’s executive director, Greg LeRoy, freely admitted to Gizmodo is far from comprehensive. Infrastructure in the company’s home base of Seattle has strained to keep pace with Amazon’s meteoric growth, and the city has experienced massive increases housing costs. While North America’s metro areas—including Seattle—scramble to offer attractive incentives to host Bezos’s second headquarters, research indicates that when Amazon comes to town, it might be killing more jobs than it creates.
The majority of consumers, however, either don’t know or don’t care. Strip Amazon to its most familiar elements, and it’s a devilishly simple everything-store with limitless stuff-supply. You buy it. It shows up. Fast.

Near the very bottom of Amazon’s complicated machinery is a nearly invisible workforce over two years in the making tasked with getting those orders to your doorstep. It’s a network of supposedly self-employed, utterly expendable couriers enrolled in an app-based program which some believe may violate labor laws. That program is called Amazon Flex, and it accomplishes Amazon’s “last-mile” deliveries—the final journey from a local facility to the customer.

While investigating the nature of the program, we spoke to 15 current or former independent drivers across nine states and two countries whose enrollment spanned between a few weeks and two years, as well as three individuals attached to local courier companies delivering for Amazon. Their identities have all been obscured for fear of retribution.

A great opportunity to be your own boss

To understand the issues faced by the independent contractors handling last-mile delivery for Amazon requires some knowledge of how Flex works.

When Amazon selects one of its facilities—what drivers refer to as a Fulfillment Center* (FC)— for participation in Flex, it blankets Craigslist and other sites with local ads describing Flex as “a great opportunity to be your own boss,” sometimes as many as twelve ads a day. Each FC is distinguished by three letters and a number—DLA5, for instance, refers to Riverside, California—and many of the over 50 cities Flex operates in have more than one.

An interested driver goes through a preliminary screening online and finishes their application through the app, passes a background check allegedly administered by a company called Accurate Background. Accurate Background did not respond to multiple requests for comment and Amazon declined to comment on which companies or services it uses for this purpose, but claimed the check pulls from, among other signals, court records, the sex offender registry, and data analysis from US and global organizations. One driver told Gizmodo he was approved in under four hours. Others wait over a month. According to a Flex contract furnished to Gizmodo, the only requirements to entry are modest: be 21 or older, pass Accurate Background’s vetting, own a smartphone with Flex installed, and have access to a car, bike, or public transportation. No company cars. No uniforms. Just a non-photo ID badge.....MUCH MORE
Related at recode:
Amazon has privately blamed the U.S. Postal Service for grocery delivery issues that led to Amazon Fresh changes

And last week:
Sure, Come On In: "Amazon Key Flaw Could Let Rogue Deliverymen Disable Your Camera" (AMZN)

ConocoPhillips Won't Invest In New Projects Unless Profitable at $50/Bbl

From OilPrice:

ConocoPhillips Sets Price Ceiling For New Projects
ConocoPhillips will only invest in new projects that can be profitable at an oil price of below US$50 a barrel, CEO Ryan Lance told the FT, adding that the company will continue to focus increasingly on U.S. shale despite skepticism about its growth potential among analysts.

Conoco believes that in addition to operational efficiencies that have been improving in the shale patch over the last few years, shale is more resilient to oil price swings than other segments of the industry. That’s despite the inability of a lot of shale boomers to cover their drilling costs and expand without taking on more debt.

Conoco, which recently reported it had returned to black in the third quarter of the year, posting a profit that beat analyst estimates, will now focus more on shareholder returns than on growth. The company has already started buying back shares it issued during the crash to keep going and will keep the buyback program in place until 2020. The program will cost it US$7.5 billion.

Investment-wise, the US$50 per-barrel ceiling is not even the most ambitious profitability level for new projects. Said Lance, “You don’t even get through the door unless you are below $50 cost of supply, and you don’t really get to the table in the capital allocation fight unless you are $40 a barrel or below.”...MORE

"Apple’s Cash Pile is Approaching $300 Billion"

From MoneyBeat:
Apple pile of cash could soon be worth more than the economy of Vietnam.

A report released Monday by Moody’s Investors Service estimates that Apple’s cash hoard will top $285 billion by the end of 2017, up 16% from a year earlier. That’s more than the annual gross-domestic product of nations including Vietnam and Chile, according to International Monetary Fund data, and twice the market value of McDonald's

Apple already has the largest cash pile of any non-financial company in history, but strong quarterly results and a recent bond sale are expected to boost its cash holdings further when the company next reports its results.

Multinationals like Apple have been building overseas cash piles for years to avoid the 35% U.S. tax rate. Offshore cash reserves are expected to rise 8% to a record $1.4 trillion by the end of 2017, according to Moody’s. A group of five tech giants–Apple, Microsoft, Cisco Systems, Alphabet and Oracle–are expected to account for more than 40% of that amount....MORE

Monday, November 20, 2017

"Goldman Sachs Downgrades Surging Walmart Stock Because Nobody Understands Walmart More Than Goldman Sachs"

The headline is cute, funny and wrong (remind you of anyone?)

WMT is running because their online operation is making them look like geniuses for picking up for only $3.3 billion last year.

WMT Wal-Mart Stores, Inc. daily Stock Chart

In regular trade the stock was up a penny at $97.48, after-hours off three cents.

From DealBreaker:
Despite the much-reported “Death of Retail,” stock in Walmart has been on something of a little tear over the last year.

In fact, while Amazon has put the biblical “Fear of Bezos” into the rest of the retail sector, WMT has put on about $30 in new weight. The run was been a low-key surprise for many, and as a result Walmart has become the most unlikely thing that Walmart can be; a sexy pick.

The whole affair has also given rise to a fun little parlor game of watching finance types on the coasts misread the potency of Walmart. Bentonville has beaten Wall Street consensus estimates the last four quarters....MORE

"Tractor-trailer carrying elephants to winter retreat catches fire"

Elephants evacuated, as did the arriving  fire fighters.
Thanks to a reader.


The Chattanooga Fire Department says a tractor-trailer carrying three African elephants caught fire on I-24 near the Georgia state line at about 2 a.m.

Chattanooga Firefighters and deputies with the Dade County Sheriff's Department, both responded. Dispatchers warned fire crews to cut their sirens before they got to scene, saying "I really don’t want to spook these things.”...MORE, including an update on the pachyderms.
Chattanooga Fire Department Facebook page.

"Timeline: How ‘Salvator Mundi’ Went From £45 to $450 Million in 59 Years"

From ArtNet:

The painting, marketed as the last Leonardo da Vinci in private hands, has a history fit for a feature film.
Leonardo da Vinci‘s Salvator Mundi just sold at Christie’s for $450.3 million, becoming the most expensive work of art ever sold. But not so long ago, an eagle-eyed buyer purchased it at auction for a mere £45. How did we get from there to here? We’ve compiled a handy timeline of the painting’s history below. You really can’t make this stuff up.

• 1500 – Around this time, Leonardo da Vinci paints Salvator Mundi, likely for King Louis XII of France and Anne of Brittany, shortly after the conquests of Milan and Genoa.

• 1625 – Believed to have been commissioned by the French Royal Family, the painting accompanies Queen Henrietta to England when she marries King Charles I.

• 1651 – King Charles I dies in 1649, and shortly thereafter the canvas is used to settle part of his massive debt. It covers a whopping £30 worth.

• 1763 – After remaining in the Royal family’s collection for years, the painting goes missing—and doesn’t surface again for 150 years.

• Late 19th century – The painting enters the collection of the Virginia-based Sir Frederick Cook.

• 1958 – Salvator Mundi pops up at a Sotheby’s London auction on June 25, 1958. Attributed to Boltraffio, who worked in da Vinci’s studio, it sells for £45 to someone named “Kuntz.”

Nov. 17
Felix Salmon Talks Da Vinci: "Notes on $450,312,500 "
Nov. 16
ICYMI: Leonardo da Vinci’s ‘Salvator Mundi’ Sells for Record-breaking $450.3 Million

Factor Investing: Factors Hated and Loved

From Validea's Guru Investor blog:

The Most Hated (And Most Loved) Investing Factor
Factor investing requires a lot of patience. Despite the fact that research shows that many factors can produce outperformance over long periods of time, all of them will struggle at times in the short-term. And those struggles are typically long and difficult enough that most investors will abandon underperforming strategies in favor of what is working now. When that happens, that typically signals a bottom for the factor is near.

At Validea, we track several hundred factors in our guru-based models that run the gamut from value to growth to momentum. Our historical testing shows that mean reversion in factors, particularly value factors, can be a very powerful force. The longer and more a factor is out of favor, the stronger its performance tends to be when things reverse.

So I thought it would be interesting to take a look across the factors we follow to see what is the cheapest right now.

Value stocks have been underperforming for a decade now, so it’s no surprise that nearly all the cheapest factors are value related. The cheapest one, however, also has the distinction of being the most loved factor, and the most unloved factor, all at the same time, which makes the discussion of its future prospects an interesting one.

The Price/Book ratio is probably the most commonly used factor in value. When Fama and French published their three factor model in the early 90s, they found that a low Price/Book ratio was positively correlated with future stock returns. That led to a huge uptick in money following it.

Price/Book has more money following it than any other factor. It is the primary factor Russell uses when it build its value indices, which have a lot of capital invested in them. It is also the value factor used by Dimensional Fund Advisors, which manages over $500 billion, for its funds.
That huge pool of money following Price/Book makes it the most loved value factor in terms of the assets following it.

With that amount of capital following the factor, you would expect its effectiveness to be reduced. And data indicates that may be exactly what has happened. Since January of 1995, the Russell 3000 Value Index has returned 9.99% annually, while the Russell 3000 Index has returned 10.12%. So adopting a value tilt using Price/Book has not produced the outperformance predicted in the academic research for the last 20+ years.

There are a couple of arguments as to why this has happened. First, as previously mentioned, when you put a huge amount of capital behind a factor, and when that capital tends to be permanent (sticking with the factor through ups and downs), that factor should lose some or all of its effectiveness. Second, share buybacks have become more common as time has gone by. When a company buys back shares, it reduces both its market capitalization (by reducing shares outstanding) and its book value (since either cash is subtracted to buy the shares or debt is added). The net result of this is a higher Price/Book ratio.  This can have the effect of making a company look less attractive from a valuation standpoint, even though it is engaging in behavior that is beneficial to shareholders.

This combination of significant permanent capital tied to the Price/Book and the accounting basis for the reduction in its effectiveness has led to a transition. The best and most thoughtful minds in the quantitative investment business now almost universally hate the factor. They tend to prefer more advanced ratios like Enterprise Value to Operating Earnings or even different more common metrics like the Price to Earnings ratio. And those factors have all worked better in recent years. So despite being the most loved value factor in terms of money following it, the Price/Book has become the most hated one in the active management community....MORE

HT: Alpha Ideas, Nov. 17

Dear Elon, Batteries May Not Be the Answer For Trucks (TSLA)

From Inverse, Nov. 10:

Never Mind Electric Cars: Why Electric Roads are the Real Key to the Future
“Breathe in that smog and feel lucky that only in L.A. will you glimpse a green sun or a brown moon. Forget the propaganda you’ve heard about clean air; demand oxygen you can see in all its glorious discoloration.”
As is often the case, cult film director John Waters captured it more colorfully than anyone when he wrote about Los Angeles’s pollution in his book Crackpot. The smog of L.A. is as iconic as the Hollywood sign or the surf of Santa Monica.

There’s no single reason the haze of pollution defines Los Angeles more than any other American city. The second-largest city in the nation has been allowed to sprawl and stretch in a way New Yorkers could only dream of. Its location in a basin surrounded by mountains serves to trap more toxic air particles than might otherwise be the case.

But mostly, it’s the cars. No, scratch that: The millions of cars are a problem. The trucks are the problem. Nothing is responsible for more smog-causing emissions in southern California than the trucks that haul freight between the region’s cities and ports. And these trucks may just be too big to realistically run on electric batteries like the passenger cars built by Tesla and others.

One possible answer? Don’t electrify the trucks, electrify the roads. That process actually was revealed this week on a mile’s stretch of highway in Carson; located between the heart of Los Angeles and the main port of Long Beach. It’s called an eHighway, and its creators at Siemens, the electrification, automation and digitalization multinational, tell Inverse it can considerably lessen highway emissions.
“We know there’s so much noise and pollution in this area,” says Andreas Thon whose title is “head of Turnkey Projects & Electrification” in North America.
Thon oversees highway electrification projects for the power and industrial technology company Siemens, which is building the road in Carson and has tested similar highways in Germany and Sweden. 

“The advantages of this system is, first, it’s zero-emission,” Thons says. “So the noise level is really reduced. And furthermore you have economic benefits because the electric drive requires less energy than the diesel one.”

The road’s setup will be familiar to anyone who has seen a trolley or streetcar trundle through a city. Specially designed trucks run underneath electric lines, each equipped with an instrument called a pantograph that makes connection to the lines and draws power to propel the vehicle. Currently, three trucks — a battery-electric, natural gas and electric hybrid, and a diesel hybrid — are testing out the mile-long road, which cost $13.5 million to build.

That may sound like a lot, but Thon says the future cost should be closer to $5 million. That price would make it competitive with building more railroads, which are the only other option for the kind of heavy freight shipping that trucks can provide....MORE
Siemens Is Building Germany's First Electrictrified Highway

China Energy Investment signs MOU for $83.7 billion in West Virginia projects

Memorandums are not money but still, this seems like a big deal.
From Reuters, Nov. 8:
China Energy Investment Corp, the world’s largest power company by asset value, has signed a memorandum of understanding (MOU) to invest $83.7 billion in shale gas, power and chemical projects in West Virginia, the U.S state said on Thursday.

The agreement was the biggest among a slew of deals signed during U.S. President Donald Trump’s state visit to Beijing. The total value of the deals done during Trump’s trip could be as much as $250 billion. 

The gas and power agreement marks the first overseas investment for newly founded China Energy, which formed from a merger of China Shenhua Group [SHGRP.UL], the country’s largest coal producer and China Guodian Corp [CNGUO.UL], one of its top five utilities. 

Beijing is supporting and encouraging its power companies to expand globally, and the agreement underscores China Energy’s ambition to diversify into natural gas and the refining sector. 

The touted investment would extend over a 20-year period, covering projects for power generation, chemical manufacturing and the underground storage of liquefied natural gas (LNG), West Virginia’s Department of Commerce said in its announcement....MORE

Mag Maven Tina Brown Is Pissed At Google and Facebook (GOOG; FB)

We're trying out a bit of tabloid style in the headline, it doesn't seem to work for us.
Additionally, just thinking of a "style" in that context (rather than, say, doin' it Tina Brown style) I think of this gruesome story from a few years ago: "4 Copy Editors Killed In Ongoing AP Style, Chicago Manual of Style Gang Violence".

On to recode:

Why magazine mogul Tina Brown is 'angry and upset' at Google and Facebook
It’s time for the most powerful companies in digital media to stop playing dumb, Brown says.
Starting in her 20s as the editor of Tatler Magazine in London, Tina Brown rode a wave of print magazines to become one of the most influential people in the media. She tells a good portion of that story in her new no-holds-barred memoir, “The Vanity Fair Diaries: 1983 - 1992.”

But after editing Vanity Fair, the New Yorker and the short-lived Talk magazine (which was financed by Harvey Weinstein), Brown moved her editing online, founding the Daily Beast in 2008. On the latest episode of Recode Decode, hosted by Kara Swisher, she explained why she left that publication after six years, and why the new power players in media — tech companies like Google and Facebook — have left her feeling frustrated.

“I am very angry and upset about the way advertising revenue has been essentially pirated by the Facebook-Google world, without nearly enough giveback — no giveback, really — to the people who create those brilliant pieces that are posted all over their platforms,” Brown said. “It’s high time they gave back to journalism.”

She proposed the creation of a “huge journalism fund” for local media, even though she doubts that that would ever happen.

“They have no interest, I realize that,” Brown said. “It’s like, ‘Oh, we’re not a media company, we’re a platform.’ Okay, well, guess what? When you don’t have human beings who have judgment, who have taste, who have a sense of responsibility, you can have any old Russian hacker dishing it out to the American public.”

“Opinion-forming, influential content, it’s very hard to find and support and have an impact with,” she added. “People don’t know what’s important or where to find it. So it doesn’t wash to say, ‘There’s so many transactions, everybody can find it.’ It’s a needle in a haystack for so many people....MUCH MORE, including podcast.