Saturday, October 21, 2017

Waymo v. Uber: "Meet the judge who codes — and decides tech’s biggest cases"

Judge Alsup actually has tech-nerd fanbois and fangrrrls.
From The Verge, October 19:

The Judge’s Code
On May 18th, 2012, attorneys for Oracle and Google were battling over nine lines of code in a hearing before Judge William H. Alsup of the northern district of California. The first jury trial in Oracle v. Google, the fight over whether Google had hijacked code from Oracle for its Android system, was wrapping up.

The argument centered on a function called rangeCheck. Of all the lines of code that Oracle had tested — 15 million in total — these were the only ones that were “literally” copied. Every keystroke, a perfect duplicate. It was in Oracle’s interest to play up the significance of rangeCheck as much as possible, and David Boies, Oracle’s lawyer, began to argue that Google had copied rangeCheck so that it could take Android to market more quickly. Judge Alsup was not buying it. 

“I couldn't have told you the first thing about Java before this trial,” said the judge. “But, I have done and still do a lot of programming myself in other languages. I have written blocks of code like rangeCheck a hundred times or more. I could do it. You could do it. It is so simple.” 

https://cdn.vox-cdn.com/thumbor/WdR4P4Fc-ikqXGhhdULVcEQ23hQ=/800x0/filters:no_upscale()/cdn.vox-cdn.com/uploads/chorus_asset/file/9493995/alsupruling.png
 As counsel for Oracle tried to continue speaking, the judge only became more and more indignant.
It was an offhand comment that would snowball out of control, much to Alsup’s chagrin. It was first repeated among lawyers and legal wonks, then by tech publications. With every repetition, Alsup’s skill grew, until eventually he became “the judge who learned Java” — Alsup the programmer, the black-robed nerd hero, the 10x judge, the “master of the court and of Java.” 

Judge Alsup would like everyone to know that he doesn’t know Java. 

Not very well, anyway. He can, however, definitely code. He’s been coding in BASIC for decades, actually, writing programs for the fun of it: a program to play Bridge, written as a gift for his wife; an automatic solution for the board game Mastermind, which he is immensely fond of; and most ambitiously, a sprawling multifunctional program with a graphical interface that helps him with yet another of his many hobbies, ham radio.

His interests have served him well on the judicial bench, informing his outlook on the multibillion-dollar intellectual property cases that come to him. The fortunes of tech companies can rise or fall depending on his rulings. Oracle v. Google has wide repercussions for big companies and smaller developers alike, to say nothing of the $9 billion at stake. The yet-to-be-totaled billions Alphabet is seeking from Uber in the ongoing Waymo v. Uber suit could make or break Uber as a player in the nascent self-driving car market. 

By sheer coincidence, these major cases have wound up in the docket of maybe the one judge in America capable of understanding their technical details: a judge who can code. Alsup’s long-cherished hobby illuminated issues at the very heart of Oracle v. Google, and his off-hours tinkering with photography, lenses, and the science of light will inform him in Waymo v. Uber, a case involving LIDAR, a laser-based technology for self-driving car navigation.

The tech industry has long despaired of the law’s inability to comprehend it, making much of the legal system’s struggle to keep up with the rapid pace of progress. The belief that the law will never “catch up” to technology is borne in part of tech exceptionalism, a libertarian elitism that derides any kind of legal or regulatory impediment as Luddism. But it’s also fueled by genuine frustration with the state of law. The patent office is perceived to be rubber-stamping obvious technologies. Supreme Court justices appear befuddled by the basic process of coding. And attorneys stack juries with non-technical jurors who return massive verdicts for patents on online shopping carts.
In this landscape, Alsup is an outlier — a mystifying exception to the accepted wisdom that the law cannot make sense of the fast-changing tech industry. Alsup’s secret is simple: he’s a lifelong geek.

Alsup is notorious among San Francisco’s attorneys for the early hours he keeps (and forces upon the lawyers who appear before him). At 9AM, most of the judges’ chambers at the federal courthouse were still dark, and doors were closed. But when I got to Alsup’s chambers, the door was flung open and the bustle inside suggested that everyone had already been at work for hours. 

A white-haired man with rectangular wire-frame glasses and a soft Southern accent, Alsup is of normal stature, but his imposing presence leaves you with the impression that he towers over you.
Alsup’s chambers have many of the classic aesthetics of the legal profession: the shelves upon shelves of leather-bound books, the stained wood paneling, a small black-and-white portrait of Abraham Lincoln hanging over an intimidatingly large desk. Off to the side sits a sofa strewn with dog toys. Alsup’s Jack Russell Terrier, who he often brings to work, was not at the office that day.
The judge sat me down on the sofa and walked me through his programs on a 2011 court-issued Dell laptop. He couldn’t run the same programs on his desktop computer, he said with some irritation, so the Dell was here to stay. “It’s the last one that will support QuickBASIC, which is kind of a shame, because it’s the only language I really know.”

The judge is not a hardware fanatic. He uses computers and whatever smartphone the court has provided him with. He has a court-issued iPhone, but if the Northern District of California issued him an Android, he’d use an Android, he said. 

I asked him if I could put his code on GitHub, and he asked me what GitHub was. In lieu of that, he handed me printouts of his computer programs, three stacks of paper that had been neatly stapled at the corners. The one on the top, he apologized, had several dependencies that he hadn’t had the time to print out. Long before he became the judge presiding over Silicon Valley, Alsup had been a hobbyist operating in isolation; he’s a geek, but he’s a geek from another era....MUCH MORE
Previously: 

  
...MoFo lawyer Arturo Gonzalez told Alsup that complying with court orders to turn over information to Waymo, protecting Uber’s confidentiality, and not stepping on Levandowski’s rights is akin to navigating a “minefield.” Gonzalez noted that Levandowski -- but not Uber -- appealed Alsup’s ruling requiring Uber to turn over a report containing key evidence in the case....MORE 

MoFo lawyer?

This is the third time the mofo's have dissed Judge Alsup:

May 12
Uber Suffers Legal Setbacks In Europe, U.S.
In the Waymo case Uber's bid to make their arguments in private was turned down by the judge overseeing the action but even worse for Levandowski, hizzoner is using his Federal Judgeship powers.*
April 1
Uber: Judge Says He May Grant Waymo's Request For An Injunction Against Uber's Self Driving Efforts
I was going to put something together on Anthony Levandowski's use of the 5th amendment in a civil matter and some of the implications of doing so but didn't get to it. In the meantime here is a look at some high-buck lawyering and tactics of litigators...
I was thinking more along the lines of inferring guilt--in a criminal proceeding an inference from the assertion of the 5th amendment right is strictly verboten and judges so instruct the jury, whereas in most state courts (California being a notable exception) and U.S. federal court,  a civil pleading of the 5th may be assumed to be an admission of guilt.

But yeah, another implication is: if you piss off a tech savvy* federal judge you've got a problem....
And many more. Use the search blog box, keyword Waymo, if interested. 

Guy Gets On Stage To Play Drums With The Foo Fighters, Crushes It

Okay, this is not on the same level as Milly the cloakroom girl standing in for the ailing world famous soprano at Wigmore Hall last August but is still impressive in its own way.

From Barstool:

This Kid Has Got BALLS To Request To Play Drums For The Foo Fighters On A Song That Isn't Theirs...And He Absolutely CRUSHES It
First thing’s first: Dave Grohl is the fucking man. The fact he even lets a kid on stage at all to mess around with is awesome. But how about the confident canola’s on this chap? The dude has the audacity to ask and shake Taylor Hawkins out of his seat…but for a song that isn’t even the Foo’s? I know the Foo Fighters often whip out Under Pressure and other great jams, but still. That’s a bit intrusive on someone else’s turf. Then he jumps right into the damn thing without Grohl’s cue like Miles Teller at the end of Whiplash. The outright BALLS on this little shit....MORE
 
HT: Digg

The Case of the Mafia and the Stolen Caravaggio

From Garage:

Charley Hill, the art world's preeminent sleuth, relates his ongoing search for a missing masterpiece, a mission that so far has taken him to a Sicilian town that's "wall-to-wall gangsters." 
Meet Charley Hill, the legendary bloodhound who has retrieved stolen masterpieces the world over. Most notably, Edvard Munch's The Scream, taken from the National Gallery of Norway in 1994 and rescued by Charley from the basement of a summer house in Oslo Fjord. "The art world enables me to see the worst in everyone—myself and others. I often think that in those early days of humankind, grave robbery was the first human profession, not prostitution—although that may be a close call." And so long as humans are humans, expensive things will be stolen. Here, Charley takes us on the trail of his latest lead . . .
https://video-images.vice.com/_uncategorized/1508428662276-GettyImages-464443259.jpeg?resize=1050:*

Caravaggio
On October 18, 1969, Caravaggio's The Adoration was stolen from the Oratorio di San Lorenzo in Palermo, Sicily. It's a nativity scene in which Caravaggio placed St. Laurence, and more importantly St. Francis, along with Jesus, Mary, and Joseph, a shepherd, an angel and a young man. It's a huge painting with quite a history. It was stolen by mafiosi at about the same time they tried to steal Caravaggio's Burial of Santa Lucia from Syracuse. There have been theories galore about what happened to The Adoration. I think that the mafia chief nicknamed Diabolik who is on the run has control over it. It represents his power in Sicily. The intellectual historian Peter Watson wrote a book on Caravaggio, concluding it had been destroyed by an earthquake in Naples, or so he had been told. But who knows?

I became involved in Sicily in 2003 when an eminent Northern European art dealer came to me saying he had some valuable stolen jewels, and wanted to know if I would return them to their owner. The stones were taken from a pre-iconoclastic icon that the Pope had given to Count Roger, before Count Roger, a Norman knight, became King of Sicily in the 11th century.

I flew to Catania, rather than Palermo, because I thought that Catania security would be less inclined to search my bag, which was full of the precious stones. It worked. Off I drove to a lovely Baroque cathedral, Piazza Armerina, and took those jewels he gave me back to the church. The rector, Padre Filippo, was delighted. Then I promised the Bishop of Piazza Armerina, now the Archbishop of Monreale, that I would do everything I could to get back the Caravaggio and other Church property. I've tried to keep my word to him for the past fifteen years.

In August 2017, an old contact, William Veres—quite a character, an Anglo-Hungarian reminiscent of Peter Lorre's character in Casablanca—said it was about time we spoke. He told me he knew a man who wanted to see me; there had been movement back in Sicily on the Caravaggio, and Veres had told him I was still interested. For Veres it's reputational, and also financial. He doesn't think the Catholic Church is going to put money in his pocket. But, he thinks, if he plays his cards right, the Holy Father will be pleased.

I then met a gangster from Riesi— a Sicilian town that's wall-to-wall gangsters—who told me that my theory on the Caravaggio was right, and he thought something could be done. They're thinking about what and how much; I'm probably many times removed from the picture. He's active with other people who are active, and they will be the people talking about this, and doing the heavy lifting.

So they're hard-work types, but police authorities are tough as well....MORE
HT: ARTnews

"Silicon Valley Is Not Your Friend"

From the New York Times, October 13:

We are beginning to understand that tech companies don’t have our best interests at heart. Did they ever?
LATE last month, Mark Zuckerberg wrote a brief post on Facebook at the conclusion of Yom Kippur, asking his friends for forgiveness not just for his personal failures but also for his professional ones, especially “the ways my work was used to divide people rather than bring us together.” He was heeding the call of the Jewish Day of Atonement to take stock of the year just passed as he pledged that he would “work to do better.”
Such a somber, self-critical statement hasn’t been typical for the usually sunny Mr. Zuckerberg, who once exhorted his employees at Facebook to “move fast and break things.” In the past, why would Mr. Zuckerberg, or any of his peers, have felt the need to atone for what they did at the office? For making incredibly cool sites that seamlessly connect billions of people to their friends as well as to a global storehouse of knowledge?

Lately, however, the sins of Silicon Valley-led disruption have become impossible to ignore.

Facebook has endured a drip, drip of revelations concerning Russian operatives who used its platform to influence the 2016 presidential election by stirring up racist anger. Google had a similar role in carrying targeted, inflammatory messages during the election, and this summer, it appeared to play the heavy when an important liberal think tank, New America, cut ties with a prominent scholar who is critical of the power of digital monopolies. Some within the organization questioned whether he was dismissed to appease Google and its executive chairman, Eric Schmidt, both longstanding donors, though New America’s executive president and a Google representative denied a connection.
Meanwhile, Amazon, with its purchase of the Whole Foods supermarket chain and the construction of brick-and-mortar stores, pursues the breathtakingly lucrative strategy of parlaying a monopoly position online into an offline one, too.

These menacing turns of events have been quite bewildering to the public, running counter to everything Silicon Valley had preached about itself. Google, for example, says its purpose is “to organize the world’s information, making it universally accessible and useful,” a quest that could describe your local library as much as a Fortune 500 company. Similarly, Facebook aims to “give people the power to build community and bring the world closer together.” Even Amazon looked outside itself for fulfillment by seeking to become, in the words of its founder, Jeff Bezos, “the most customer-obsessed company to ever occupy planet Earth.”

Almost from its inception, the World Wide Web produced public anxiety — your computer was joined to a network that was beyond your ken and could send worms, viruses and trackers your way — but we nonetheless were inclined to give these earnest innovators the benefit of the doubt. They were on our side in making the web safe and useful, and thus it became easy to interpret each misstep as an unfortunate accident on the path to digital utopia rather than as subterfuge meant to ensure world domination.

Now that Google, Facebook, Amazon have become world dominators, the questions of the hour are, can the public be convinced to see Silicon Valley as the wrecking ball that it is? And do we still have the regulatory tools and social cohesion to restrain the monopolists before they smash the foundations of our society?

By all accounts, these programmers turned entrepreneurs believed their lofty words and were at first indifferent to getting rich from their ideas. A 1998 paper by Sergey Brin and Larry Page, then computer-science graduate students at Stanford, stressed the social benefits of their new search engine, Google, which would be open to the scrutiny of other researchers and wouldn’t be advertising-driven. The public needed to be assured that searches were uncorrupted, that no one had put his finger on the scale for business reasons.
To illustrate their point, Mr. Brin and Mr. Page boasted of the purity of their search engine’s results for the query “cellular phone”; near the top was a study explaining the danger of driving while on the phone. The Google prototype was still ad-free, but what about the others, which took ads? Mr. Brin and Mr. Page had their doubts: “We expect that advertising-funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.”

There was a crucial need for “a competitive search engine that is transparent and in the academic realm,” and Google was set to be that ivory tower internet tool. Until, that is, Mr. Brin and Mr. Page were swept up by the entrepreneurism pervasive to Stanford — a meeting with a professor led to a meeting with an investor, who wrote a $100,000 check before Google was even a company. In 1999, Google announced a $25 million investment of venture capital while insisting nothing had changed. When Mr. Brin was asked by reporters how Google planned to make money, he replied, “Our goal is to maximize the search experience, not maximize the revenues from search.”...MORE
HT: FT Alphaville's Further Reading post, Oct. 16

Friday, October 20, 2017

Gaming: "Steam Boss Gabe Newell Is One of America’s 100 Richest People According to Forbes"

We've been reluctant to link to this site, they are banned from a couple sub reddits for failure to disclose/link to original sources and/or fake news but some months ago that seemed to change for the better. This is a test on our part with this heads-up:
WCCFTech has sort of been considered "nerd clickbait", posting all sorts of rumors and unconfirmed information about unreleased hardware. My question is, how frequently have they been accurate? How frequently have they been wrong?
I see all these leaks but I have no clue whether I should believe them.
Here's the PC Gaming subreddit and their website blacklist of banned domains.
And here is the Hardware subreddit thread.

From WCCFTech:
http://cdn.wccftech.com/wp-content/uploads/2017/10/WCCFgabenewell.jpg
How much does being the Pope of PC Gaming pay, exactly? Valve co-founder Gabe Newell maintains a fairly humble public image, but the guy gets a cut of every game sold on Steam, so he has to be doing pretty well for himself. Turns out that’s a massive understatement.

According to Forbes, Newell is now one of the 100 richest people in America, with approximately $5.5 billion in his coffers. That’s enough to put him in a 10-way tie for 97th place. It also makes ol’ Gaben the 43rd richest tech billionaire in America, and the 427th richest person in the world. Newell’s ranking should continue to rise over the coming years – according to Forbes’ estimates, he was only worth 4.1 billion in 2016. Steam isn’t going anywhere, and neither is Newell’s Uncle Scrooge-like flow of cash.

For the sake of comparison, Gabe Newell is currently worth more than Uber founder Travis Kalanick (115th), George Lucas (118th), Marvel Entertainment CEO Isaac Perlmutter (179th), and Steven Spielberg (206th). He still lags well behind tech giants like Elon Musk (21st), Mark Zuckerberg (4th), and the big dog, Bill Gates. Come on everybody, buy more loot boxes! Re-buy Portal! Maybe if Newell makes a few more billion he’ll finally be able to buy some new polo shirts....MORE
The creator of Minecraft, Markus Persson is probably more famous but trails in the billionaire stakes at $1.4 bil.
There are a half-dozen folks from Asia ahead of both Persson and Newell. 

Marketers Want to—Literally—Get Inside Your Head

From Futurity:

To predict crowdfunding, scan consumers’ brains
Brain activity can predict consumer choices more accurately than what consumers say they want in questionnaires, a new study of people’s decisions to back crowdfunding campaign suggests.
Surveys and self-reports are a time-honored way of trying to predict consumer behavior, but they have limitations. People often give socially desirable answers or they simply don’t know or remember things clearly.

The study suggests neural activity can not only be a better predictor of individual choices, but also can help forecast aggregate outcomes in the marketplace.

The researchers literally got inside people’s heads using functional magnetic resonance imaging (fMRI) to scan test participants during a decision-making task. Marketers could eventually use the findings to better predict a product’s success.

“Surveys and behavioral reporting can work for a lot of things, but they’re not great for everything,” says Carolyn Yoon, a professor of marketing at the University of Michigan. “So much consumer behavior happens at the implicit level, and traditional tools often fall short of capturing what’s unobservable.”

Yoon and colleagues measured people’s neural activity with fMRI scans while they performed a task selecting which documentary films to support on the popular crowdfunding site Kickstarter. They then asked them questions on what they thought about particular pitches.

The researchers subsequently tracked which projects achieved funding on Kickstarter. In the first study, 18 of the 36 selected projects were funded, and in the second 14 were eventually funded.

When they evaluated both the fMRI scans and responses to the questionnaires, they found that greater activity in a specific part of the brain (the nucleus accumbens) during the decision task predicted the success of a project being funded more reliably than the questionnaires....MORE
The nucleus accumbens is a critical component of the brain's reward/pleasure circuitry; modulated by our old pals dopamine and serotonin.
See, if interested, the very accessible:
Reward Deficiency Syndrome
(14 page PDF)

"In Kuroda's face - researchers find ways to predict central bank changes"

From Reuters:
For decades, economists have tried to guess central bank policy direction by studying subtle changes in official language -- now, researchers are finding new clues on policy, not in the words of central banker but in their faces.

In Japan, two artificial intelligence researchers, one from Nomura Securities and the other from Microsoft, are using software to analyze split-second changes in the facial expressions of Bank of Japan Governor Haruhiko Kuroda at his post-meeting press conferences. 

Their study found that Kuroda showed fleeting signs of “anger” and “disgust” at news conferences that preceded two recent major policy changes -- the January 2016 introduction of negative interest rates and the adoption of the so-called “yield curve control” policy September last year. 

The implication is that Kuroda was beginning to sense the constraints of existing policies about six or seven weeks before the central bank’s board actually decided to change them, the researchers concluded. The research was presented last weekend to a subcommittee meeting of the Japanese Society for Artificial Intelligence (JSAI)....MUCH MORE
HT: ZeroHedge's Frontrunning post

"A history of employer-approved drinking on the job—or, as it’s put here, 'Intoxication as compensation.'"

From Lapham's Quarterly:
https://www.laphamsquarterly.org/sites/default/files/images/charts_graphs/drinkingonthejob.jpg
...MORE

Also at LQ's Charts and Graphs:
Gross Domestic Consumption
User and pushers from around the world.

See also Lapham's Roundtable:
Dancing girls, ancient lentils, and Sylvia Plath goes to college.

HT to, and headline from ARTnews

"Russia, Saudis Team Up To Boost Fracking Tech"

From OilPrice, Oct. 18:
While Saudi Arabia and Russia are leading the production cut pact between OPEC and 11 non-OPEC oil producers, Russian oil company Gazprom Neft will cooperate with Saudi Aramco on ways to boost production, including in fracking technology and hard-to-recover oil, Gazprom Neft’s CEO Alexander Dyukov said on Wednesday.

The two companies have identified six areas for cooperation, and will have to find the format of cooperation and financing, Dyukov told reporters, as quoted by Reuters.

Earlier this month, Gazprom Neft and Saudi Aramco signed a memorandum of cooperation during the visit of Saudi King Salman bin Abdulaziz Al-Saud to Russia.

Cooperation would include “drilling and well workover technologies, improvements to pumping systems, and the development of large-scale non-metal pipes. The parties also plan to discuss perspectives for collaboration in research and development and experimental engineering works, as well as options for applying innovative solutions to a wide range of technological challenges,” Gazprom Neft said.

“Given the ongoing macroeconomic uncertainties, it is of paramount importance that major oil producers coordinate their activities to improve the stability of the global oil and gas market,” Dyukov noted.

Apart from Gazprom Neft, Aramco signed deals in Russia with Gazprom on gas cooperation, with the Russian Direct Investment Fund on investment in energy services and manufacturing, with LUKOIL’s trading arm Litasco on collaboration in trading, and with Russian Direct Investment Fund and SIBUR on strategic marketing for petrochemicals....MORE

Trading the Yield Curve and Listening to the Market

From the Macro Tourist:

https://www.themacrotourist.com/img/posts/05/20171018-fight.png

[Climateer note: the story is also told abut U.S. Marine pilots]
Back to Macro Tourist:
Lately, one of my biggest duds of a call has been for the yield curve to steepen. Sure, I have all sorts of fancy reasons why it should steepen, but reality glares back at me in black and white on my P&L run. Sometimes fighting with the market is an exercise in futility.

Now I know many of your eyes glaze over when I start talking about different parts of the yield curve flattening or steepening, but I urge you to stick with me, as the fate of the curve might end up being central to the next financial crisis. Yield curve talk is usually only exciting to propeller twirling bond geeks, yet there well might come a day when the 2-30 year Treasury yield spread is plastered across the front page of USA Today.

And it’s not just me that thinks yield curve steepening trades are the next little-noticed-financial-time bomb in-the-making. Business Insider has recently reported that the discreet monster macro hedge fund run by Alan Howard is launching a new fund set up to bet on a steepening yield curve.
The fund, called the Brevan Howard CMS Curve Cap Master Fund, will be led by senior trader Rishi Shah, who has been with the firm since 2010 in Geneva and New York, according to documents seen by Business Insider.
The new fund will use what are called constant maturity swap curve caps to bet on both a steepening of the US yield curve and an increase in curve volatility.
In simple terms, the yield curve shows the difference between yields on short term government debt and long term government debt. The smaller the difference, the flatter the curve.
Interest rate policy and government bond buying have combined to both flatten the curve and reduce volatility.
Brevan Howard is betting that’s going to reverse as central banks start to shrink their balance sheets and uncertainty over the leadership of the Fed circulates.
Until I read about this fund, I had not heard of any hedge funds setting up single purpose vehicles to bet on a steepening of the yield curve. Sure over the past couple of years, there were plenty of guys warning about a repeat of the 2008 credit crisis. Whether it was Carl Icahn’s Danger Ahead, or any one of the hedge fund monthly letters to investors, there were no shortage of end-of-the-world deflationary collapse calls (and the corresponding funds to profit from this “inevitability”.) Yet there were precious few warning about inflation. Whereas most hedgies were advocating hiding in long-dated sovereign paper, Brevan Howard seems to be taking the exact opposite tack. All I can say is, come ‘on in - the water’s warm!

And here is a question for you. Do you think the best bet for the next financial crisis is a repeat of the last one? Or could it be that the little-talked-about more obscure risk that just a handle of smarter guys are setting up for is a better candidate? Well for me it’s no contest. Slick youtube presentations warning about Danger Ahead (that looks exactly like the Danger Behind!) are like an investor in 2007 warning about tech stocks because the 2000 DotCom crash was still ringing in their head. Sure, tech stocks went down in the Great Financial Crisis, but they weren’t the center of the problem like the previous time. So, all I can say is sold to them. I am going to go with smart shrewd guys like Brevan Howard that are willing to think about the next problem instead of focusing on the last problem.

But let’s face it, so far the yield curve steepening prediction has proved to be nothing but a world of pain.

Ever since the 2010’s scare that quantitative easing would cause run-away-inflation dissipated, the yield curve has been steadily flattening. US 5 year yields have been rising, while the 30-year yield has been declining.

Yet what does this mean? Economic bears often use the flattening of the yield curve as a sign that the economy is about to collapse. But I must to admit to getting a chuckle from a recent twitter exchange between Bloomberg reporter Luke Kawa and George Pearkes from Bespoke Investments:
Yup, George is correct. Yield curves flatten as the Fed raises rates. If you think about it logically, it makes complete sense. Barring default, what’s a sovereign bond investor’s worst nightmare? Inflation. If the Central Bank raises rates, does that make inflation more or less likely? And given that, as the Fed raises rates, why should we be surprised when the long end outperforms?
Here is a chart of the 5-30 year US treasury yield spread over the last forty years....MUCH MORE
Great minds and all that. I happened to mention the curve in the post on Bluetooth-enabled buttplugs:
There go the dreams of a teledildonics empire, I guess it's back to a real perversion, treasury curve flatteners.
The British pilot story - actually a variant - may go all the way back to the '60's with a WWII ref:
The British pilot of a jetliner who was having trouble finding a particular gate at Frankfurt airport. The Air Traffic Controller got frustrated and said "Ach! Haven't you been to Frankfurt before??" And the British captain said: "Twice, actually. But it was dark both times and we didn't land." 

"Tax Prospects Lift Rates and Dollar Ahead of Weekend"

From Marc to Market:
The US Senate approved a budget resolution that is a necessary step toward using a parliamentary maneuver that prevents the Democrats to block tax reform by filibuster. This has helped spur dollar gains against all the major currencies and nearly all the emerging market currencies. The US 10-year yield is extending this week's rise. It was up four basis points on the week coming into today, and it is up another four basis points today, to once again approach the upper end of its six-month range.

While parliamentary maneuvering by the minority party was a threat, since the attempt(s) to repeal and replace the Affordable Care Act, the biggest challenge lies in the differences within the majority party. The Senate vote and the House agreement to vote on that bill as well shows greater coordination. We caution that there are many moving parts and many details that have yet to be worked out and time is of the essence for the debt ceiling and spending measures.

Politico initially reported that Trump was leaning toward Powell to succeed Yellen at the Fed's helm. Bloomberg is reporting that Trump's advisers were encouraging Powell or Taylor. Previously, reports indicated than Treasury Secretary Mnuchin favored Powell. PredictIt has Powell drawing ahead at a little better than a 2:1 favorite. Yellen is second at about one-in-six chance. Taylor has slipped to a one-in-seven chance.

The notable move this week regarding Fed expectations was not just who will get the nod, but terms of the trajectory of Fed policy. The implied yield on the December 2017 Fed funds futures contract rose a single basis point this week to 1.27%. Our work suggests fair value, assuming no chance of a hike in November and fully discounting a December hike, is 1.295%. The more significant change took place in the December 2018 contract. Its' implied yield rose six basis points to 1.68%. This means that one hike next year is fully discounted. The Fed's forecasts suggest that three hikes may be appropriate.

The market has also been confident of a Bank of England rate hike next month. We have been less convinced on the grounds that this is not the first time or even the second time that Governor Carney and the MPC have sounded as if they were prepared to hike and then pulled back, and that the price cycle is peaking as the economy is slowing. Now, MPC member Cunliffe has joined Ramsden injecting a little more doubt in the market's mind about the timing of the move. The yield of the December short sterling futures contract did test a two-week lower today was have recovered and is now down one basis point on the week.

Germany's Merkel provided UK Prime Minister May with a glimmer of hope. Merkel's comments were among the most positive from officials that progress is being made and hold out the possibility (likelihood?) that sufficient progress will be made to take talks to the next stage. It appears that a greater financial commitment from the UK could get the ball rolling....MORE

Thursday, October 19, 2017

Bali's Mount Agung Doesn't Erupt But Is Starting to Steam

It's time to put the livecam on the blog but first a beautiful still pic.
From The Daily Express, I believe this was last week:

https://cdn.images.express.co.uk/img/dynamic/78/590x/secondary/Bali-volcano-update-Mount-Agung-steam-rising-eruption-threat-photos-1099707.jpg

By way of Coconuts, (Bali edition):


Click for live view, the mini-earthquakes are coming every two - to - three minutes now.

"Will Short Volatility Trigger the Next Black Monday?"

From MoneyBeat:
Market watchers are increasingly eyeing the popular bet against volatility as ground zero for the next financial crisis.

More than $2 trillion has flowed into the “global short volatility trade,” says Artemis Capital Management founder Christopher Cole. Those wagers both influence and are influenced by stock market turbulence. They also could backfire, threatening the eight-year-old bull market.

The tactics include options selling strategies by the largest pension funds and asset managers alongside exchange-traded products tracking the CBOE Volatility Index, or VIX, and VIX futures. Exchange-traded products betting on a pickup in volatility are some of the riskiest, and some investors could see extreme losses if the VIX jumps, Mr. Cole wrote in an Oct. 18 note.
Among the other strategies are ones that utilize volatility to make investing decisions, such as so-called risk parity strategies, that tend to bank on assets like stocks and bonds moving in different directions. If stocks and bonds rise and fall at the same time, it could hurt the billions of dollars in investments that rely on this relationship, he said.

“The danger is that the multi-trillion dollar short volatility trade, in all its forms, will contribute to a violent feedback loop of higher volatility resulting in a hyper-crash,” wrote Mr. Cole.

If that happens, there is no limit to how high volatility could go, Mr. Cole wrote, a moment markets experienced 30 years ago to the day. The Dow Jones Industrial Average plummeted 22.6% on Black Monday, fueled by many of the drivers that markets are experiencing right now, he said.

Artemis is not alone in flagging these risks. The International Monetary Fund recently warned in its Global Financial Stability Report that low volatility can heighten how sensitive a financial system is to risks because when things are calm, investors ramp up exposure to financial assets. Investors also use more leverage, which can amplify any swings when they do happen.

Ironically, so-called volatility-targeting investment strategies, meant to keep portfolio fluctuations at a certain level, can lead to market disruptions and heavy selling when market jitters pick up...MORE
Here's Mr. Cole's Artemis Capital Management:

Volatility and the Alchemy of Risk 
Reflexivity in the Shadows of Black Monday 1987

Volatility and the Alchemy of Risk 
The Ouroboros , a Greek word meaning ‘tail devourer’, is the ancient symbol of a snake consuming its own body in perfect symmetry. The imagery of the Ouroboros evokes the infinite nature of creation from destruction . The sign appears across cultures and is an important icon in the esoteric tradition of Alchemy. Egyptian mystics first derived the symbol from a real phenomenon in nature. In extreme heat a snake, unable to self - regulate its body temperature, will experience an out - of - control spike in its metabolism. In a state of mania, the snake is unable to differentiate its own tail from its prey, and will attack itself, self - cannibalizing until it perishes. In nature and markets, when randomness self - organizes into too perfect symmetry, order becomes the source of chaos (1) .

The Ouroboros is a metaphor for the financial alchemy driving the modern Bear Market in Fear. Volatility across asset classes is at multi - generational lows. A dangerous feedback loop now exists between ultra - low interest rates, debt expansion, asset volatility, and financial engineering that allocates risk based on that volatility. In this self - reflexive loop volatility can reinforce itself both lower and higher. In a market where stocks and bonds are both overvalued, financial alchemy is the only way to feed our global hunger for yield, until it kills the very system it is nourishing .

The Global Short Volatility trade now represents an estimated $2 + trillion in financial engineering strategies that simultaneously exert influence over, and are influenced by, stock market volatility (2). We broadly define the short volatility trade as any financial strategy that relies on the assumption of market stability to generate returns, while using volatility itself as an input for risk taking. Many popular institutional investment strategies, even if they are not explicitly shorting derivatives, generate excess returns from the same implicit risk factors as a portfolio of short optionality, and contain hidden fragility.

Volatility is now an input for risk taking and the source of excess returns in the absence of value. Lower volatility is feeding into even lower volatility, in a self - perpetuating cycle, pushing variance to the zero bound. To the uninitiated this appears to be a magical formula to transmute ether into gold... volatility into riches... however financial alchemy is deceptive. Like a snake blind to the fact it is devouring its own body, the same factors that appear stabilizing can reverse into chaos. The danger is that the multi - trillion - dollar short volatility trade, in all its forms, will contribute to a violent feedback loop of higher volatility resulting in a hyper - crash. At that point the snake will die and there is no theoretical limit to how high volatility could go.

Thirty years ago to the day we experienced that moment. On October 19th, 1987 markets around the world crashed at record speed, including a - 20% loss in the S&P 500 Index, and a spike to over 150% in volatility. Many forget that Black Monday occurred during a booming stock market, economic expansion, and rising interest rates. In retrospect, we blame portfolio insurance for creating a feedback loop that amplified losses. In this paper we will argue that rising inflation was the spark that ignited 1987 fire, while computer trading served as explosive nitroglycerin that amplified a normal fire into a cataclysmic conflagration. The multi - trillion - dollar short volatility trade, broadly defined in all its forms, can play a similar role today if inflation forces central banks to raise rates into any financial stress. Black Monday was the first modern crash driven by machine feedback loops, and it will not be the last....MUCH MORE (19 page PDF)
Previously from Mr. Cole:
"Volatility and the Prisoners Dilemma"—CBOE Risk Management Conference Asia, December 1, 2015

And many more, use the search blog box keywords 'Cole, Artemis' if interested.
(just using 'Artemis' will get you a hundred posts on reinsurance and cat bonds, worthy but not related, directly) 

Baby Got Black (Swan)
(With apologies to Sir Mix-a-Lot)
I like… fat… tails and I cannot lie
You vol sellers can’t deny
When a hot trend breaks with a well-timed stop
and a great big black swan pop you get
Paid… P&L year gets made
‘Cause you noticed that trade was packed
Buncha mean reversion suckers got jacked

Oh baby I wanna get lumpy
Long gamma for when it gets bumpy
Central banks tried to haze me,
But those carry trades just don’t faze me!...MORE
Genius or madman? 

"Google’s A.I. Has Made Some Pretty Huge Leaps This Week" (GOOG; NVDA)

The writier, Christina Bonnington gets it. This is a big deal.

One example of what this implies: the advantage Facebook had - their enormous cache of captioned pictures used for training their A.I. - is no longer as valuable as it was a month ago.

Another example: Google did this with their own chips, not AMD or Intel or NVIDIA.
The Tensor Processing Units are not as versatile as the offerings from the chip-makers but in this application seem to be at least equal if not superior.
As they say, ya snooze, ya lose.

From Slate:
When DeepMind’s AlphaGo artificial intelligence defeated Lee Sedol, the Korean Go champion, for the first time last year, it stunned the world. Many, including Sedol himself, didn’t expect an AI to have mastered the complicated board game, but it won four out of five matches—proving it could compete with the best human players. More than a year has passed, and today’s AlphaGo makes last year’s version seem positively quaint.
Google’s latest AI efforts push beyond the limitations of their human developers. Its artificial intelligence algorithms are teaching themselves how to code and how to play the intricate, yet easy-to-learn ancient board game Go.

This has been quite the week for the company. On Monday, researchers announced that Google’s project AutoML had successfully taught itself to program machine learning software on its own. While it’s limited to basic programming tasks, the code AutoML created was, in some cases, better than the code written by its human counterparts. In a program designed to identify objects in a picture, the AI-created algorithm achieved a 43 percent success rate at the task. The human-developed code, by comparison, only scored 39 percent on the task.

On Wednesday, in a paper published in the journal Nature, DeepMind researchers revealed another remarkable achievement. The newest version of its Go-playing algorithm, dubbed AlphaGo Zero, was not only better than the original AlphaGo, which defeated the world’s best human player in May. This version had taught itself how to play the game. All on its own, given only the basic rules of the game. (The original, by comparison, learned from a database of 100,000 Go games.) According to Google’s researchers, AlphaGo Zero has achieved superhuman-level performance: It won 100–0 against its champion predecessor, AlphaGo.

But DeepMind’s developments go beyond just playing a board game exceedingly well. There are important implications that could positively impact AI in the near future.
“By not using human data—by not using human expertise in any fashion—we’ve actually removed the constraints of human knowledge,” AlphaGo Zero’s lead programmer, David Silver, said at a press conference.

Until now, modern AIs have largely relied on learning from vast data sets. The bigger the data set, the better. What AlphaGo Zero and AutoML prove is that a successful AI doesn’t necessarily need those human-supplied data sets—it can teach itself.

This could be important in the face of our current consumer-facing AI mess. Written by human programmers and taught on human-supplied data, algorithms (such as the ones Google and Facebook use to suggest articles you should read) are subject to the same defects as their human overlords. Without that human interference and influence, future AI’s could be far superior to what we’re seeing employed in the wild today. A dataset can be flawed or skewed—for example, a facial recognition algorithm that has trouble with black faces because their white programmers didn’t feed it a diverse enough set of images. AI, teaching itself, wouldn’t inherently be sexist or racist, or suffer from those kinds of unconscious biases.
In the case of AlphaGo Zero, its reinforcement-based learning is also good news for the computational power of advanced AI networks. Early AlphaGo versions operated on 48 Google-built TPUs. AlphaGo Zero works on only four. It’s far more efficient and practical than its predecessors. Paired with AutoML’s ability to develop its own machine learning algorithms, this could seriously speed up the pace of DeepMind’s AI-related discoveries....MORE
Previously:
May 2016
Machine Learning: JP Morgan Compares Google's New Chip With NVIDIA's (GOOG; NVDA)
April 2017 
Watch Out NVIDIA: "Google Details Tensor Chip Powers" (GOOG; NVDA)
We've said NVIDIA probably has a couple year head start but this bears watching, so to speak....

"Alphabet just announced a $1 billion bet on Lyft — despite being an investor in Uber"

From CNBC:
There's yet another complication in Alphabet's relationship with start-up giant Uber.

CapitalG, an investment arm within Google-parent Alphabet, will lead a $1 billion funding round for Lyft, the companies said on Thursday. CapitalG Partner David Lawee will join Lyft's board.

Alphabet's self-driving car unit, Waymo, confirmed earlier this year it would partner with Lyft on a self-driving car project. Lyft noted in a statement that its service is now available to 95 percent of the U.S. population — up from 54 percent at the beginning of the year.

The funding round comes as a chummy relationship between Uber and Google has soured, in part due to a lawsuit between Waymo and Uber. Waymo alleges that Uber is using one of Waymo's trade secrets for its autonomous vehicle sensors....MORE

Autonomous Vehicles: The King of LiDAR

A first rate piece on the backstory or the future.
From The Verge:

The billion-dollar widget steering the driverless car industry
No matter what it took, David Hall was going to kill that clown. He maneuvered Drillzilla for another ramming run. The robot was squat and heavy, with serrated blades coming off one end and a sharp drill whirling on the other. Across the arena, Conquering Clown awaited. It had the face of a goofy jokester, but its hands were a pair of smashing hammers and its body was equipped with a pair of circular saws.

Drillzilla managed to flank the clown, then ram it, sneaking blades under its body and lifting it up off its wheels. Its opponent was helpless, and Drillzilla pushed it onto a waiting geyser of flames. As the audience cheered, the clown’s grinning face melted away. “We were in there to make great TV,” recalls Hall with a chuckle, “and damn it, we were successful.”

The year was 2001, and this was the third round of the Robot Wars Annihilator Challenge. The show pitted homemade gladiators against one another. Hall, an eccentric inventor, was best known as the creator of a high-end subwoofer. His company, Velodyne, had around 60 employees and a few million dollars in annual sales. But Hall had grown bored with the audio industry, and was trying his hand at building robots. Perhaps, he thought, Velodyne could find a new product to manufacture. At the very least he could have some fun. 

Hall admits he “bent the rules a little” to win the competition — he camouflaged the robot’s wheels as “legs” — and, after other teams complained, the judges banned Hall’s approach for future seasons. He took that as a sign to move on. But he was eager to continue his work on vehicles in the public eye.

He got his chance in 2004, when the US Army’s research division, DARPA, held its first Grand Challenge. Teams were asked to design an automobile that could autonomously navigate its way through a 150-mile course. Hall took a bunch of the motor controls and code from his robots and got to work on a self-driving truck. 

There were 15 vehicles in that first race, all competing for a $1 million prize. Not a single one finished the course. Hall used stereo cameras to see the road and avoid obstacles. “I could see some of the road all the time, and all the road some of the time,” he says now. But the vehicles were constantly confused. “There was all kinds of weird artifacts. It would see a fence five feet in front of it and throw on the brakes.”

A few of the teams were using a technology called LIDAR, which uses laser beams to sense objects and measure their range. “I didn’t know what a LIDAR was,” admits Hall, “but Jim McBride from Ford kept bending my ear about how LIDAR was the solution for all his problems. I kinda made a mental note — maybe I’ll look into it when I’m bored. A few months later, I started looking into it, and the more I did, the more intrigued I was.”

Hall returned the next year with a custom LIDAR unit he had designed and built. Instead of putting a laser scanner on the front of his car, as most teams had done, he put it on the roof. And instead of looking forward, it scanned in all directions at once. It was a radically different approach to the technology. 

He didn’t win the race, but his design impressed competitors, and the DARPA challenge convinced a number of the participants that driverless cars were no longer an unattainable fantasy. The teams from Stanford and CMU would go on to help found the self-driving projects at Google and Uber. And as those massive corporations built out their self-driving ambitions, they turned to Velodyne for LIDAR.

At age 66, Hall finds himself in an enviable position. LIDAR has eclipsed Velodyne’s audio business; the company now has over 400 full-time employees people and generates hundreds of millions in annual revenue. Velodyne’s most recent round of funding made Hall a billionaire. And earlier this year, the company announced it was on the verge of rolling out a new kind of LIDAR, one that would make the technology radically cheaper, allowing it to move from expensive test vehicles to a standard piece of an affordable consumer sedan.

After four decades of inventing, five product categories, and a lot of wrong turns, Hall has stumbled onto a high-tech widget that is poised to become an essential piece of a trillion-dollar self-driving auto industry. Setting aside Steve Jobs’ return to Apple, it might be Silicon Valley’s greatest second act.

There are many ways of seeing the world. Humans rely on our eyes, which interpret incoming rays of light. On a sunny day, they allow us to see a richly nuanced view of the world. In total darkness, they aren’t much use. Some animals, like bats, use echolocation. While hunting small insects at night, they emit high-pitched noises, then interpret the sound waves that bounce back to get a picture of the world. 

Humans have created technologies that mimic echolocation. Sonar, used by submarines, emits a pulse of sound, then reads the waves that bounce back. Radar does the same thing, using radio waves instead. It’s found countless applications, from spotting incoming missiles to catching drivers who break the speed limit. LIDAR, short for “light detection and ranging,” adopts Radar’s approach, but uses lasers in place of radio waves. Scientists at Hughes Research Lab demonstrated the first functioning lasers in 1960, and LIDAR attempts quickly followed. Early on, it was used by government research agencies to map and measure the natural world, from cloud formations to sea floors to the surface of the Moon. 

By the late 1980s, LIDAR had found its way into autonomous cars. Researchers at Carnegie Mellon University’s Navlab used a laser scanner to help detect obstacles and determine their range back in 1989, but it was not their primary sensor. “We would see, with our scanning lasers, these very grainy updates every half second,” says Dean Pomerleau, a Navlab researcher. “A kid on a bicycle would just look like a blob.” The lab used LIDAR primarily because it was good at detecting reflective materials, like lane markings and road signs. In the late ‘90s, Mitsubishi actually tried LIDAR in its driver assistance system, but its high cost made it prohibitive. As the 21st century arrived, the auto industry moved to radar and cameras, which were much cheaper....MUCH MORE

Nobel Laureate Richard H. Thaler on the End of Behavioral Finance

From the CFA Institute's Enterprising Investor blog, Oct. 9:
Richard H. Thaler, the US economist who elevated the word “nudge” from transitive verb to political catchphrase, can now add “Nobel laureate” to his impressive biography.

On Monday, the Royal Swedish Academy of Sciences in Stockholm announced that Thaler, who teaches at the Booth School of Business at the University of Chicago, had won the 2017 prize in economics “for his contributions to behavioral economics.”

In a statement, the Royal Swedish Academy said that Thaler “has incorporated psychologically realistic assumptions into analyses of economic decision-making. By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes.”

Thaler is perhaps best-known for his popular book about choices: Nudge: Improving Decisions about Health, Wealth, and Happiness — how we make them and what we can do to improve how we make them. His “nudge” theory is also credited with inspiring former UK prime minister David Cameron’s Behavioural Insights Team (BIT) — or “Nudge Unit.” Thaler reportedly “visited Britain in 2008 to promote his theory, met Cameron, and made such an impression that for a time he acted as unpaid adviser to the Tory leader.”

Former US president Barack Obama also officially adopted the “nudge” approach when he created the Social and Behavioral Science Team (SBST), which sought to integrate behavioral science research into policy making.

Shortly after the announcement from Sweden, fellow economist Tyler Cowen wrote:


Cowen also noted that “perhaps unknown to many, Thaler’s most heavily cited piece is on whether the stock market overreacts for psychological reasons.”

Perhaps also unknown to many is that Thaler spoke at the 70th CFA Institute Annual Conference in Philadelphia this past May.

My colleague, Shreenivas Kunte, CFA, wrote a recap of the session, entitled “Richard Thaler: To Intervene or Not to Intervene.” Another colleague, Ron Rimkus, CFA, conducted a 13-minute interview with Thaler.

Thaler has also contributed to the CFA Institute Financial Analysts Journal®, among other CFA Institute publications over the years.

In his prescient conclusion to the 1999 piece, “The End of Behavioral Finance,” he wrote:...
...MUCH MORE

Columbia Law School: "Risks of Classifying Employees as Independent Contractors"

We'll probably be referring back to this piece.
From the CLS Blue Sky Blog:

Weil Discusses Risks of Classifying Employees as Independent Contractors
This post comes to us from Weil, Gotshal & Manges LLP. It is based on the firm’s client alert, “The Dangers of Misclassifying Employees as Independent Contractors,” dated September 2017, and available here.
Recently, we have seen a rise in class actions filed against employers for improperly classifying their employees as independent contractors. While misclassification issues are nothing new, the proliferation of nontraditional jobs grows every year—especially with the advancement of technology and the ability of service providers to work remotely from anywhere in the world. In this brave new world, employers may struggle with how to define their workforce. Current labor laws recognize workers providing services can be categorized as either an independent contractor or an employee, and employees are generally protected by more employment rights. On one hand, classifying service providers as independent contractors can be more efficient and cost-effective for a company. On the other hand, misclassifying service providers can have dire consequences, leaving a company exposed to expensive class actions for wage, hour, and other Labor Code violations— not to mention staggering governmental fines and penalties.

In this article, we outline the current legal landscape governing classification of service providers and give guidance for employers on how to properly classify their work force.

Classification Standards

Both the federal government and various individual state governments have their own individual independent tests to determine whether a service provider is an employee or an independent contractor. To make things even more complicated, various departments within the federal and state governments may also have their own differing tests. However, at their common core, all these tests are primarily focused on the degree of control a company exerts over the service provider and the independence of the provider. By way of example, we highlight below the standards used by two federal departments most often interested in provider classification—i.e., the United States Department of Labor and the United States Internal Revenue Service—as well as by a state agency.

United States Department of Labor

The Department of Labor (“DOL”) is tasked with overseeing compliance with the Fair Labor Standards Act (“FLSA”)1. The FLSA2 includes minimum wage and overtime pay requirements for nonexempt employees.3 The DOL generally relies on the six elements identified by the U.S. Supreme Court4 and subsequent case law to determine whether to apply the FLSA.5 While the factors considered can vary and no one set of factors is exclusive, these are the following six elements generally considered when determining whether an employment relationship exists under the FLSA:
  1. The extent to which the work performed is an integral part of the employer’s business. If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer and less likely that the worker is in business for himself or herself.
  2. Whether the worker’s managerial skills affect his or her opportunity for profit and loss. Analysis of this factor focuses on whether the worker exercises managerial skills and, if so, whether those skills affect that worker’s opportunity for both profit and loss.
  3. The relative investments in facilities and equipment by the worker and the The worker must make some investment compared to the employer’s investment, and bear some risk for a loss, in order for there to be an indication that he/ she is an independent contractor in business for himself or herself.
  4. The worker’s skill and initiative. To indicate possible independent contractor status, the worker’s skills should demonstrate that he or she exercises independent business judgment. Further, the fact that a worker is in open market competition with others would suggest independent contractor status.
  5. The permanency of the worker’s relationship with the Permanency or indefiniteness in the worker’s relationship with the employer suggests that the worker is an employee, as opposed to an independent contractor.
  6. The nature and degree of control by the Analysis of this factor includes who sets pay amounts and work hours and who determines how the work is performed, as well as whether the worker is free to work for others and hire helper.

United States Internal Revenue Service

The Internal Revenue Service (“IRS”) administers federal payroll taxes, including social security, Medicare, federal unemployment insurance, and federal income tax withholding, and ensures that employers pay taxes, make the appropriate withholdings, and obtain certain insurance coverage on behalf of their employees. To determine whether a service provider is an employee or an independent contractor, the IRS utilizes a test different from the DOL’s six-element test. Historically, the IRS utilized a 20-Factor Test, but the IRS has recently grouped the 20 factors into three primary categories of evidence to support the level of control and independence.6

The first category—“Behavioral”— refers to facts showing whether a company has a right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. Within this category, the IRS examines four subcategories:...
...MUCH MORE 

Wednesday, October 18, 2017

Questions America Wants Answered: "Is Piketty’s Data Reliable?"

From Marginal Revolution:
When Thomas Piketty’s Capital in the Twenty-First Century first appeared many economists demurred on the theory but heaped praise on the empirical work. “Even if none of Piketty’s theories stands up,” Larry Summers argued, his “deeply grounded” and “painstaking empirical research” was “a Nobel Prize-worthy contribution”.
Theory is easier to evaluate than empirical work, however, and Phillip Magness and Robert Murphy were among the few authors to actually take a close look at Piketty’s data and they came to a different conclusion:
We find evidence of pervasive errors of historical fact, opaque methodological choices, and the cherry-picking of sources to construct favorable patterns from ambiguous data.
Magness and Murphy, however, could be dismissed as economic history outsiders with an ax to grind. Moreover, their paper was published in an obscure libertarian-oriented journal. (Chris Giles and Ferdinando Giugliano writing in the FT also pointed to errors but they could be dismissed as journalists.) The Magness and Murphy conclusions, however, have now been verified (and then some) by a respected figure in economic history, Richard Sutch.

I have never read an abstract quite like the one to Sutch’s paper...
...MORE

Apparently Bluetooth Enabled Buttplugs Are Not As Secure As One Would Hope

Can be hacked and used as tracking devices.
Tracking?
What on earth are people doing?

Here are some of the headlines, NSFW, or anywhere actually:

SiliconRepublic: "The hidden security loophole in Bluetooth-connected sex toys"
NewsWeek: "Hacked Butt Plug Can Be Controlled 'From Anywhere'"
The Register: "Dildon'ts of Bluetooth: Pen test boffins sniff out Berlin's smart butt plugs"
Daily Mail: "Hackers are able to remotely control electronic butt plugs, IT security expert warns"
BitsOnline: "Bluetooth Vulnerability Turns High-End Sex Toys Into Tracking Devices"

There go the dreams of a teledildonics empire, I guess it's back to a real perversion, treasury curve flatteners.

If interested here's the Amazon page, with the usual question:
What do customers buy after viewing this item?

"California wildfires could cost re/insurers $4.6bn & rising: Moody’s"

It's going to be much more than that.
6000+ structures at even $100k average per gets you to $6 bil.

A couple days ago Artemis named the biggest exposures:
Farmers Insurance, State Farm, Liberty, Allstate, Travelers, Nationwide Mutual, Chubb, AIG, Tokio Marine, National General, Allianz and QBE, are all among the top property insurers in the state of California, so likely to share the bulk of these losses....
Here's the latest from Artemis, October 18:
The Northern California wildfires that started on Sunday, October 8th, could drive insurance industry losses of $4.6 billion or higher, adding further pressure to the profitability of the property & casualty (P&C) industry following an active third-quarter, says Moody’s.

The fires broke out on October 8th, and spread rapidly with the help of high winds, low humidity, high temperatures and dry conditions, claiming 40 lives as it tore through Northern parts of the state, as of Saturday.

The number of structures reportedly damaged and historical fire data suggests the insured loss total for the California wildfires will be in the billions of dollars, says Moody’s, providing an initial loss estimate of around $4.6 billion, which it feels could rise.

The figure is based on reports from the California Department of Forestry and Fire Protection (CAL FIRE) that 5,700 homes and commercial structures had been destroyed by the fires, as of Saturday, to which Moody’s then applies an average insured loss per structure of $802,000 (which is based on historical Cali wildfire loss estimates).

Moody’s says that using the above estimations and data, suggests “losses would be close to $4.6 billion and growing as the fire continues.”

For the re/insurance and possibly insurance-linked securities (ILS) markets the wildfires will likely drive additional pressure to 2017 profits, after extremely costly events in the third-quarter, namely hurricanes Harvey, Irma, Maria, and the Mexico earthquakes, drove increased catastrophe losses for companies....

...MUCH MORE

"The Bank of Japan’s Stealth Taper Is Back"

From Real Time Economics:
The Federal Reserve is raising interest rates and the European Central Bank is considering buying fewer bonds, but the Bank of Japan will stick to its easing guns forever, right?

Wrong. In fact, Japan’s central bank’s latest moves make it seem like it is tightening policy, too.
The BOJ bought just ¥7.7 trillion ($68.8 billion) worth of Japanese government bonds in September, according to J.P. Morgan. The figure represents its smallest monthly amount of outright buying, which doesn’t account for maturing bonds, since October 2014.
That looks a lot like tapering.

Since the rollout of the BOJ’s “yield curve control” policy last year, the central bank has been able to buy as many or as few bonds as it needs to keep its 10-year government-bond yield near zero, which investors have interpreted as a range between negative 0.1% and 0.1%. So when the 10-year yield doesn’t move dramatically, the central bank doesn’t have to buy as many bonds

That’s what happened last month, according to Noriko Miyoshi, head of fixed income at Simplex Asset Management in Tokyo. “The market has understood the intention of the BOJ,” she said.

While the BOJ has slowed its bond buys this year, its leader has been quick to dispel any chatter about a shift in policy. Gov. Haruhiko Kuroda said Sunday that aggressive easing will remain in place as Japan’s inflation rate is still a long way from reaching the central bank’s 2% target.

The numbers, however, tell a different story. The central bank is currently on pace to buy some ¥60 trillion worth of bonds this year after adjusting for about ¥40 trillion worth of maturing JGBs, according to J.P. Morgan. Officially, though, the Bank of Japan continues to pledge it will buy government bonds at an annual rate of ¥80 trillion....MORE

Media: "How Many Palm Beach Mansions Does a Wall Street Tycoon Need?"

From The Nation. September 22, 2017:

As many as destroying America’s hometown newspapers can buy him.
https://www.thenation.com/wp-content/uploads/2017/09/Reynolds-Juhasz_img.jpg
In 2013, a reclusive New York tycoon and his wife began buying up expensive Palm Beach real estate—lots of it. First they bought seven mansions for a total of $23 million. Then another four “moderately priced” homes for $8.4 million. Then five more for $23 million. None of them were purchased in the tycoon’s name. They weren’t purchased in his wife’s name, either. Instead, the homes were deeded to limited-liability companies, including L. Jakes LLC and 124 Coconut Row LLC. Think of those luxury homes as the shuttered offices and fired workers of hometown newspapers across the United States, because gutting those newspapers helped make spending $57.2 million on 16 Palm Beach mansions a trifling expense for the tycoon.

His spending spree began after the tycoon acquired two firms, the Journal-Register and MediaNews Group, which would merge into one of America’s largest newspaper chains, Digital First Media. It continued under the veil of yet more limited-liability companies that likewise owned luxury homes. The only thing linking all these purchases was the same postal address in Manhattan’s glamorous Lipstick Building. There, within the tycoon’s privately held investment firm, his personal real-estate deals were commingled with the sales of scores of newsrooms, printing plants, and office buildings that previously belonged to small hometown newspapers across the United States.

The tycoon continued to finance his lavish lifestyle by purchasing and then destroying newspapers. His henchmen—young executives in expensive suits with no experience in the news business—laid off hundreds of journalists and other news workers. They ultimately closed or radically downsized such venerable papers as the Oakland Tribune, the San Jose Mercury News, the St. Paul Pioneer Press, and The Denver Post. At the Mercury News, the newspaper’s printing press was literally dismantled and carted away, which one staff reporter likened to “watching a heart being ripped out.”
The tycoon behind all this private profit and public destruction is Randall D. Smith, a seasoned Wall Street operator in his mid-70s who shuns publicity. Smith is the founder and chief of investments at Alden Global Capital, which manages $2 billion worth of assets. He has no experience with actually managing a newspaper, and his professional history reflects no interest in journalism beyond profiteering. Rather, he is what is known on Wall Street as a “vulture capitalist.” Or, as he prefers to phrase it in one of the company’s brochures, Smith invests in “distress.”

“Distress” is an apt word for the current state of America’s newspapers, and Smith isn’t the only financial mogul gobbling them up. On September 4, the New York Daily News was purchased by Tronc, the media conglomerate whose majority shareholder is Michael W. Ferro, the business magnate who founded the investment firm Merrick Ventures.
The shrinking and disappearing of hometown newspapers has done incalculable damage to Americans’ knowledge of the world around them. Democratic self-governance presumes an informed public, but the -hollowing-out of America’s newspapers, in both their online and print versions, leaves citizens increasingly ignorant of vital public matters. It also undermines the press’s ability to hold elected officials and powerful interests to account. When vulture capitalism eliminates reporters and closes hometown papers, where can citizens turn for in-depth local news? Who will cover City Council meetings, school-board decisions, election campaigns, and other staples of civic life? And who will call out corruption and incompetence on the part of local officials or private companies?
The most commonly cited culprit for the decline of America’s newspapers is the Internet and the assumption that no one needs to pay for news anymore. But simple capitalist greed is also to blame. Since 2004, speculators have bought and sucked dry an estimated 679 hometown newspapers that reached a combined audience of 12.8 million people.

Unlike large corporate owners in the past, the stated goal of the investment firms is not to keep struggling newspapers alive; it is to siphon off the assets and profits, then dispose of what little remains. Under this strategy, America’s newsrooms shriveled from 46,700 full-time journalists in 2009 to 32,900 in 2015—a loss of roughly one journalist out of every three. The American Society of Newspaper Editors stopped trying to estimate the number of working journalists in 2016 because “layoffs, buyouts, and restructuring are a norm.”...
...MUCH MORE

Intel and Facebook Are Collaborating on Artificial Intelligence Technology (INTC; FB; NVDA)

Facebook is already kinda spooky with the NVIDIA-powered deep learning stuff they've been using the last couple years.
Who knows what features the new Intel chips have that convinced FB it was time to look further afield.
This follows on reports Tesla was doing something similar with AMD.

From Fortune, Oct. 17:
Intel is ready to ship its long awaited computer chip used to power artificial intelligence projects by the end of the year.

Intel CEO Brian Krzanich explained the chip-maker’s foray into the red-hot field of artificial intelligence Tuesday and said that Facebook (FB, +0.89%) has assisted the company in prelude to its new chip’s debut.

“We are thrilled to have Facebook in close collaboration sharing its technical insights as we bring this new generation of AI hardware to market,” Krzanich wrote. An Intel spokesperson wrote to Fortune in an email that while the two companies are collaborating, they do not have a formal partnership.

The genesis of the Intel Nervana Neural Network Processor comes from Intel’s acquisition of the chip startup Nervana Systems in 2016. That acquisition was intended to help Intel create its own semiconductor technology tailored for tasks like deep learning that require a lot of heavy computer processing to create software that can spot and react to patterns in enormous quantities of data.
In the absence of AI-optimized chips, companies like Walmart looking to power deep learning tasks in their internal data centers have been turning to rival chip makers like Nvidia (NVDA, +0.32%) that build graphical processing units (GPUs).

With so much hype around artificial intelligence and its potential to become a big business, Intel’s new chip represents a key moment for the company that has missed out on previous technology trends like mobile computing.

“A company like Intel doesn’t announce a new class of products very often,” said Intel’s leader of the new chip project Naveen Rao. “This is really a historical point in the history of computation.”...MORE
NVIDIA is still the class of the field but going forward it is not going to be as easy as it has been.
There is just too much money involved.

Possibly also of interest:

Way back in 2014, before Intel bought 'em:
"Deep Learning is VC Worthy: Nervana Raises Second Round This Year, as Silicon Valley Bets Big on Deep Learning"

See also:
Competition For NVIDIA: The Nervana Systems Chip That Will Let Intel Advance Its Deep Learning (INTC; NVDA)
"Nvidia Welcomes Intel Into AI Era: Fancy a Benchmark Deathmatch?" (NVDA; INTC) 
Artificial Intelligence: What Could Derail NVIDIA? A Lab in Shenzhen; A Basement in Moscow; An Office in Bristol (NVDA)
NVIDIA Partner Tesla Reportedly Developing Chip With AMD (TSLA; NVDA; AMD)
"The Natural Evolution of Artificial Intelligence"
Watch Out NVIDIA: "Google Details Tensor Chip Powers" (GOOG; NVDA)

And on 'ol creeypypants:
Facebook Is Creepy: The 'People You May Know' Feature (FB)

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