Thursday, August 17, 2017

"Bitcoin Prices Fall Below $4,500 but Could Still Reach $1 Million"

Following up on June 13's "Tesla to $1000; "Bitcoin May Hit $1,000,000"; Act Now Before It's Too Late! (and potcoin)".
From Money Morning:

Bitcoin Prices Fall Below $4,500 but Could Still Reach $1 Million
On Thursday, Bitcoin prices burst through the $4,500 level for the first time before retreating slightly in the afternoon. However, any retreat in Bitcoin prices is a good opportunity for long-term investors to add more of the cryptocurrency to their portfolios, as Bitcoin prices could reach $1 million.

The market capitalization hit a staggering $73.6 billion, as crypto investors grew optimistic that more countries around the globe will begin to embrace digital payment networks. In addition, developers behind SegWit2x said that they will implement the second phase of the digital fork in November 2017.

Below is a recap of cryptocurrency prices at 3:30 p.m. EDT
Bitcoin Prices 
Bitcoin: $4,321.54, -2.34%
Ethereum: $301.23, -0.08%
Ripple: $0.156, -1.14%
Bitcoin Cash: $388.77, +30.14%
NEO:  $40.99, -13.27%

Now that we know all of today's price movements, here's what has been moving these cryptocurrencies…

Bitcoin Briefly Climbs to $4,500 but Quickly Falls
Bitcoin prices have increased by roughly $1,000 over the last nine days, as traders grow increasingly hopeful that it will become more accepted in mainstream finance. Still, there have been concerns expressed about the rise of the currency over the last few months. Goldman Sachs analyst Sheba Jafari predicted that Bitcoin was on the way to topping out at $4,827.

The analyst said that prices could then quickly be cut in half, falling as low as $2,221.
That bearish sentiment wasn't the only voice making noise on Thursday. Peter Schiff said that Bitcoin was in a "bubble."

Bitcoin Cash Prices Surge on SegWit2X Date
The Bitcoin Cash price rallied more than 30% on news that a mining pool called BitClub Network mined an 8MB block on the BCH blockchain.
This was the largest block found so far on the BCH chain.

Ethereum Prices Slightly Down on the DayThe price of Ethereum was mostly flat, trading at roughly $301.
Today, the firm Blockchain announced it had developed a wallet for users to hold Ethereum....MORE
The earlier calls for a million dollar price tag—
At Money Morning:

Why a Bitcoin Price Prediction of $1 Million Isn't Crazy
...That brings us to Wences Casares, the CEO of the Bitcoin wallet startup Xapo and a member of PayPal Holdings Inc.'s board of directors. In a May 22 speech to Coin Center, Casares repeated his Bitcoin price prediction of $1 million per Bitcoin in 10 years....
...But Bitcoin, which was worth just $0.003 shortly after its launch in January 2009, has consistently defied skeptics. Bitcoin has gained 88,999,900% since then. (That would have turned $100 into $89 million.)

To get to $1 million from the current price of about $2,300 would be a relatively easy 43,378% jump....
Roger that, relatively easy.

And at Climateer from ZeroHedge from CNBC so you know it's good, both Cramer and Blodget said something:

Jim Cramer Goes Batty: "Bitcoin May Hit $1,000,000"; Act Now Before It's Too Late!
It’s hard to know when bubbles will end but when analysis goes ape-sh*t batty, it’s easy to know the bubble exists.
Jim Cramer’s analysis of Bitcoin provides a perfect example.
CNBC reports Cramer says it’s possible bitcoin could reach $1 million one day.
The price of digital currency stockpiled by companies to pay off potential cyberthreats could reach $1 million one day, CNBC’s Jim Cramer said Wednesday.
Cramer was responding to a recent comment by Business Insider CEO Henry Blodget, who said bitcoin could go to $1 million.
“I think it could because the European banks are frantically trying to buy them so they can pay off ransomware. It’s a short-term way to be able to deal with cybersecurity. It is the way to pay off the bad guys,” Cramer said on “Squawk on the Street.”
“When you get hit and you’re not sure how to do bitcoin, these cyberattackers have customer service desks,” Cramer said.
What Blodget Really Said
Blodget also mentioned the downside: “Bitcoin could go to $1 million (or fall to $0),” said Blodget maintains the view that “ultimately, Bitcoin has no intrinsic value.”...
Hmmm.... it appears that Cramer-"quote"-of--Blodget thing may be "fāke news.
Time to check in with the GS guys.

Goldman bitcoin technical analysts conferring

"From Healthcare To Payments: Supposedly ‘Amazon-Proof’ Industries Are Turning Out To Be Vulnerable" (AMZN)

From CB Insights:
As Amazon continues eating up industries as varied as grocery, logistics, and apparel, startups and investors are looking for a place to hide. Where won’t Amazon go? What sectors are Amazon-proof?
Analysts, business leaders, and journalists are hunting for the safe spaces. But are the “safety zones” they’re spotting really as safe as analysts make them sound? When it comes to most industries, the question isn’t whether Amazon will enter or not; it’s how the internet giant will enter, and how big the impact will be.

Following a few recent reports on industries that could evade Amazon’s capture, we used intelligence from our database and our Amazon Strategy Teardown to take a critical look at whether so-called “Amazon-proof” sectors are good hiding places (or not).

According to a recent Goldman Sachs report, Amazon is not “an imminent threat to PayPal or the card networks.” But imminent isn’t the issue; in this area, Amazon is a looming threat extending into all aspects of the online payments and financial-services ecosystems.

Goldman’s analysis pits Amazon Payments against PayPal, looking at the threat entirely in terms of merchant volume (where PayPal has the upper hand). Since Amazon Payments has seen middling success to date (with just $6B processed in 2016 compared to PayPal’s $336B, according to Goldman reports), and since PayPal remains available at a reported 90% of the same places Amazon Payments is, PayPal been deemed by some as “Amazon-proof,” for now.

But that limited view discounts Amazon’s customer-first focus and larger financial services vision. Data shows that Amazon has been interested in financial services — either to reduce friction in the purchasing experience, or to own more of the payments value chain — since at least 2003, when the company applied to patent a network-based transaction processing system.

As they absorb more and more of that value chain, Amazon Payments may evolve into an integrated payments platform underneath the “Bank of Amazon.” Consider the recent launch of Amazon Cash, which allows individuals to deposit cash into their Amazon accounts by presenting a smartphone-scannable barcode at the cash register of a physical store.

That initiative, designed to welcome underbanked individuals into the Amazon ecosystem, is just one operational area in which Amazon already behaves like a bank: the company partnered with Wells Fargo in 2016 with a mind for offering student loans to Prime customers, and the Amazon Lending service has surpassed $3B in loans to small businesses since it was launched in 2011.
The company is also now offering thousands of loans to e-sellers in India, the world’s largest e-commerce market, and has also been quietly expanding its relationship with Stripe, using the unicorn online payments startup to handle a growing share of its e-commerce transactions.

Those underpinnings have “primed” the company’s payments foundation to serve individuals, not just merchants. As Amazon keeps making it easier for customers to both store and spend their money in the Amazon ecosystem, more of them will — extending the company’s infamous network-effect cycle, pictured below, further into financial services.
As sellers follow customers over to Amazon, it will put PayPal in a more precarious place than Goldman’s projections play it. (As for Amazon’s ambitions in banking and card networks generally, note the rumors that Amazon was interested in buying Capital One in Q1’17.) 

Several analysts have also recently cited pharmaceuticals as an Amazon-proof industry. On Investors Alley, for example, Tim Plaehn remarked that he doesn’t “expect Amazon to get into the drug making business anytime soon.” This seems sound: while Amazon made a few moves in Q1’17 toward serving customers’ health in diagnostic ways (for example, investing in AI-powered cancer detection start-up GRAIL and integrating WebMD with Alexa), we have yet to see them invest resources into drug discovery- or development-related efforts to date....

Still Haven't Made Eclipse Plans? Buy This Michigan Home With Attached Observatory!

From ABC7—Chicago:
Looking to watch the upcoming eclipse from the comfort of your own home?
A mansion for sale in Michigan offers an unmatched perspective from its state-of-the-art observatory and rotating telescope.

The two-story domed observatory rotates a full 360 degrees of the sky. While the home isn't located in the prime 68-mile-long stretch from Oregon to South Carolina that will get the total solar eclipse, southeastern Michigan will see the moon block over 80 percent of the sun.

The 9,025-square-foot mansion located 15 minutes outside of Ann Arbor boasts four bedrooms, seven baths and a two-story screened porch....MORE

A glimpse of life under President Zuckerberg? Facebook CEO's boffins censor awkward Q&A

From The Register:
Human cell study AMA on Reddit all cleaned up
Money can't buy you love, but it can remove criticism, at least in the hallowed world of Facebook CEO Mark Zuckerberg.

With the Zuck continuing his Definitely Not Getting Into A Presidential Race tour of the United States, carrying out a bizarre series of secret photo-ops and precision-engineered PR-friendly drop-ins on normal American folks across the nation, his strict no-criticism policy has extended to the scientific brain tank he set up with his wife.

This week, staff at the Chan-Zuckerberg Initiative did an online ask-me-anything Q&A about their plans to help with the Human Cell Atlas – a global effort to map all the cells in the human body.
Despite the suggested inherent nature of the Q&A, however, it turns out that people were not allowed to ask them anything. In fact, if they asked anything to do with the Zuck, and criticized, or even mentioned him, or censured the initiative, or said something the team didn't like, their comments were deleted from the Reddit thread.

Not that you would know now because not only have the comments been removed but most of the "comment removed" placeholders have also gone so what were, in some cases, literally dozens of deleted comments now look like just one or two.

The result is that the usually lengthy stream of Reddit comments and responses in an ask-me-anything is amazingly stunted. The sheer number of comments removed prompted people to start taking screenshots of the session as it went on....MORE

"The Next Quant Meltdown"

The quant quake was so scary Goldman's CFO started babbling stupid stuff. More after the jump.
From Institutional Investor:

Fund managers who survived the quant bloodbath of August 2007 say the strategy is safer ten years later. But with its popularity soaring to new heights, some wonder whether crowded trades — and rising leverage — will lead to another downfall.
Ten years ago, during the second week of a sultry New York August, Michael Mendelson was getting a sandwich at the Subway shop near the Greenwich, Connecticut, office of AQR Capital Management when all hell broke loose. As Mendelson glanced at his BlackBerry, out of nowhere, it seemed, AQR’s funds were in the red.

Very quickly, losses started snowballing, with AQR’s flagship fund down 13 percent during the first ten days of August before recovering all of it by month’s end. “You didn’t know how far it was going to go,” recalls Mendelson, a principal at AQR.

AQR was not alone. Some of the biggest and smartest hedge funds in the world suddenly tumbled in tandem, as their algorithmic trading systems went haywire.

As the events unfolded, other hedge fund managers scurried from their idyllic Hamptons retreats to contain the damage and lashed out at the quants, who turned out to be massively overleveraged and highly correlated — triggering an unwinding that was a preview of a collapse that would befall the financial world a year later. “‘These damn quants. They couldn’t get a date in high school, and now they f——ked my month,’” was the joke Peter Muller, who was running a secretive internal quant fund at Morgan Stanley at the time, liked to tell afterward, paraphrasing the frustrated fundamental managers.

But to everyone making high-stakes computerized investment bets, it wasn’t funny — it was shocking. “We had never seen anything like this before. . . . We were trained in statistics. For all intents and purposes this shouldn’t have happened,” says a manager of a major quant hedge fund who lived through the event, sleeping in his Wall Street office to try to contain the damage.

After a four-day quant rout, the Dow fell almost 400 points, then began to recover, with little overall effect on the market. But several funds ultimately did not survive the chaos that started that summer. Goldman Sachs Asset Management, which in 2006 ran the largest hedge fund empire in the U.S., eventually ended up shuttering two of its most prestigious funds, Global Alpha and Global Equity Opportunities, after losing billions of dollars. Tykhe Capital, whose funds had lost between 17 percent and 31 percent by August 9, also eventually shut down....MORE

For more on the quantpocalypse here's MIT's uberquant Andrew Lo via the New York Fed:
"What happened to the quants in August 2007? Evidence from factors and transactions data∗"
(77 page PDF)

From 2012's "David Viniar retiring as Goldman CFO (GS)":

.....*In August 2007 the market and in particular the funds suffered what came to be called the "Quant Quake".
As the Financial Times reported on Aug. 13, Mr. Viniar said one of the dumbest things of his life:

“We were seeing things that were 25-standard deviation moves, several days in a row” 
In March 2009 we posted "David Viniar, CFO of Goldman Sachs Blows Smoke at Journalists on AIG" which had this bit regarding the 25 Sigma comment:
Several folks, when they finally quit laughing, pointed out how blatently Mr. V was spinning.
Most however underestimated how infrequent 25SD events are, the most common guess being once in 100,000 years. Tee hee.

In a snappy little eight page paper "How Unlucky is 25 Sigma" we see that at 7 Sigma the odds are:
...The reader will note that as k gets bigger the probabilities of a k-sigma event fall
extremely rapidly:
• a 3-sigma event is to be expected about every 741 days or about 1 trading day
in every three years;

• a 4-sigma event is to be expected about every 31,560 days or about 1 trading
day in 126 years (!);

• a 5-sigma event is to be expected every 3,483,046 days or about 1 day every
13,932 years(!!)

• a 6-sigma event is to be expected every 1,009,976,678 days or about 1 day
every 4,039,906 years;

• a 7-sigma event is to be expected every 7.76e+11 days – the number of zero
digits is so large that Excel now reports the number of days using scientific
notation, and this number is to be interpreted as 7.76 days with decimal point
pushed back 11 places. This frequency corresponds to 1 day in 3,105,395,365
The authors go on to describe the problems involved in computing numbers on the cosmological scales required for 25 standard deviations. A good read, both for the statistically challenged and for pros like Viniar, a very highly paid PR guy, in addition to his CFO duties.
I was so tickled by that little paper that we posted on it a second time, the day MIT added it to their Physics arXive:
When Goldman Sachs was Really, Really Unlucky (GS)

And a third time in 2011:
"How Unlucky is 25-Sigma?" (and a huge apology) GS; C; BST; UBS; MER
We have more on Mr. V. but I'll always think of him as frozen in 2007.

Uber: Do NOT Piss Off The Federal Judge Hearing Your Case

From Bloomberg, Aug. 16: 

Waymo Jury May Be Warned Uber Lawyers Didn't `Come Clean'
  • Alphabet unit seeks punishment for missed disclosure deadline
  • ‘You misled the judge time and time again,’ judge tells lawyer
Uber Technologies Inc. may pay a price for withholding key evidence from Waymo when their trade secrets dispute goes to trial -- the judge proposed letting the jury know the ride-hailing company’s lawyers didn’t “come clean.”

“I’m inclined to let the jury know what happened here,” U.S. District Judge William Alsup said Wednesday at a hearing in San Francisco, speaking to one of Uber’s lead lawyers. “You misled the judge time and time again.”

Alsup said he agreed with Waymo that Uber didn’t turn over the evidence by court-ordered deadlines, adding that he hasn’t made up his mind about what to tell jurors about the role Uber’s lawyers played. Since the case was filed in February Alsup has repeatedly expressed frustration with lawyers at Morrison and Foerster, or MoFo, for making sweeping arguments that information sought by Waymo is protected by confidentiality provisions and out of its adversary’s reach.

Waymo continues to hunt for hard evidence that the driverless car technology it claims was downloaded by its former engineer, Anthony Levandowski, was used by Uber. Levandowski, who went on to become the head of Uber’s robocar project, has refused to testify in the case, asserting his constitutional protections against self-incrimination. Uber fired him in May.

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....

"US Farmland Prices Show Signs of Stabilising, After Three-year Retreat"

From Agrimoney, August 11:
The retreat in US farmland values is showing signs of petering out, in the Corn Belt at least, amid a slowdown in the pace of agricultural finances – although crop price weakness as raised fears of fresh "pressures".

Farmland prices in key Corn Belt corn and soybean growing states such as Illinois, Indiana and Iowa rose by 1% year on year in the April-to-June quarter, the US Federal Reserve's Chicago bank said.

"This was the first year-over-year gain in three years," the Fed said, with growth particularly strong in Iowa, the top corn-growing state, where values rose 3% year on year, their fastest since the July-to-September period of 2013.

Farmland values in the region, which dropped by roughly 7% over 2014-16, "seemed to stabilise in the first half of 2017, despite lower prices for corn and soybeans relative to a year ago", Fed senior business economist David Oppedahl said.

'Easing in the pace of deterioration'
The recovery came amid signs of an easing in the pace of deterioration in farm financial indicators, with the Fed saying that agricultural credit conditions "slowed their downward trend.

"Repayment rates for non-real-estate farm loans relative to a year ago were still down during the second quarter of 2017, but less so than in the first quarter," Mr Oppedahl said.

And ideas of some market stabilisation were supported by data from the Fed's St Louis bank, which covers more southerly Corn Belt areas, down to the Delta state of Mississippi, which showed "quality" farmland values recording "small decreases", of 0.8% year on year, in the April-to-June period.

"Ranchland and pastureland exhibited [price] increases compared with a year earlier," of 4.5%, the St Louis Fed said.

Plains decline
However, further west, in the Plains, better known for wheat growing, farmland values continued to decline, by 5% year on year, in a region including Kansas, Nebraska and Oklahoma states, covered by the Kansas City Fed....

I believe I shall purloin that "Easing in the pace of deterioration" line, it sounds so much better than "we're losing money slower now".

If interested see also:

August 11's "Foreign investors are snapping up US farms" and "Grantham Mayo Van Otterloo Is Selling Their Forestry/Agriculture Joint Venture"

And July 26 "Real Assets: Institutional Money Pulling Back From Timber, Farmland":
There ya go. These things don't turn on a dime but, to quote some guy, "This is not the end, it is not even the beginning of the end, but it is perhaps the end of the beginning."
No hurries, no worries....

Shipping: Despite $300 Million Revenue Hit From Cyber Attack Maersk Is Upbeat

First up, ZDNet;

Petya ransomware: Cyberattack costs could hit $300m for shipping giant Maersk
June's cyberattack will cost the international shipping firm hundreds of millions of dollars in lost revenue.
Falling victim to the global Petya cyberattack is set to cost Maersk, the world's largest container ship and supply vessel operator, up to $300m in lost revenues.

The Danish transport and logistics conglomerate -- which has offices in 130 countries and almost 90,000 employees -- revealed predicted losses due to the ransomware infection in its second quarter financial report.
"In the last week of the quarter we were hit by a cyber attack, which mainly impacted Maersk Line, APM Terminals and Damco. Business volumes were negatively affected for a couple of weeks in July and as a consequence, our Q3 results will be impacted. We expect that the cyber-attack will impact results negatively by USD 200-300m," said AP Moller-Maersk Group CEO Søren Skou.

Maersk was one of the first high-profile victims of the Petya malware epidemic, which originated in Ukraine but spread to bring down IT systems around the world.

The company's interim report details how it reacted to the attack by immediately shutting down infected networks to contain the malware and prevent its spread. While Maersk's three container-related businesses were taken offline, its energy and other businesses were able to continue operating as normal....MORE
And from Reuters via CNBC, Aug. 16:
Fog lifting for Maersk as CEO gives upbeat shipping forecast
  • Denmark's A.P. Moller Maersk gave an upbeat outlook for container shipping on Wednesday.
  • Maersk has been hit by low oil prices at its energy arm and sliding prices in its shipping business in recent years.
  • Maersk reported a net loss stood of $264 million, compared with expectations for a $507 million net profit.
Denmark's A.P. Moller Maersk gave an upbeat outlook for container shipping on Wednesday, lifting its shares as investors looked beyond one-off second-quarter charges.

Maersk has been hit by low oil prices at its energy arm and sliding prices in its shipping business in recent years due to lackluster global trade and a glut of available ships for hire.

But its chief executive Soren Skou, who has staked his future on Maersk as a transport business, said the container shipping industry is showing signs of recovery this year as freight rates have picked up, while overcapacity is easing as orders for new vessels fall and existing ones are scrapped.

"Container shipping fundamentals are at their best since 2010," Skou told Reuters following Maersk's results....MORE
Another example of the turnaround, Last week Chinese shipbuilder Yangzijiang said their order book had hit $4 billion (Reuters via Nasdaq):

China's Yangzijiang Q2 profit jumps, shares hit 6-yr high
* Q2 net profit 719.9 mln yuan vs yr ago 415.4 mln
* Gross profit margin drops on lower contract prices
* Shares rise as much 8 pct to 6-yr high
(Adds chairman comments from briefing, updates share movement) 
SINGAPORE, Aug 8 (Reuters) - China'sYangzijiang Shipbuilding Holdings Ltd reported a 73 percent increase in second-quarter net profit, helped by higher revenue from the construction of larger-size vessels, sending its shares to their highest in more than six years.

Yangzijiang posted a net profit 719.9 million yuan ($107.12 million) for the quarter ended June, boosted by one-off gains, compared with 415.4 million yuan in the year-ago period.

Revenue rose 27 percent, it said in a statement late on Monday. Shares of the shipbuilder, which has a market value of about $4.5 billion, pared some gains to trade 4 percent higher after touching S$1.605 - their highest since June 2011. The stock has gained about 82 percent so far this year as of Monday's close. 
Yangzijiang, which builds a range of vessels including large container ships, bulk carriers and liquefied natural gas carriers, said its order book stood at $4 billion as of June 30....

"Getting all hot and bothered about the juiciness of European junk"

From the Macro Tourist:

Yesterday, a few different readers emailed to ask my opinion about the European Junk Bond versus US Treasury yield chart that Tiho Brkan from The Atlas Investor Blog recently published.
Well, I have to give Tiho credit, his chart certainly stirred up a lot of primal urgings from investors eager to short European junk bonds. Although I am a huge Kodiak Grizzly of a bond bear, I think there are better ways to express this view than shorting European junk. Let me tell you why.

I couldn’t replicate Tiho’s chart exactly as I don’t pay for the Bank of America / Merrill Lynch bond indexes, but I found a Barclays/Bloomberg index that is close enough. So here is my version.
I also couldn’t determine Tiho’s term for the US Treasury yield in his chart, but it sure looks like the 10 year yield, so I am going with that.

So when comparing these two series, let’s start with the obvious. The current on-the-run US 10 year treasury note has a modified duration of a little less than 9 years. This compares to the European Junk bond index that comes in at under 4 years.

The sensitivity to changes in interest rates will therefore be much higher in the US treasury notes. Comparing these two assets with such different term lengths is a little misleading.
But you might say, “I don’t care - look at past yield levels for European junk! I can afford to have less duration because the credit part will skate me onside.”

And yes, if credit spreads blow out, then shorting junk is much better than sovereigns.
What do I mean by that? When an investor buys junk bonds, they are typically rewarded with an extra yield to compensate for the increased risk. The amount of this extra yield is called the option-adjust-spread, and we can chart it....

...Currently, European junk bonds only offer 2.67% over the equivalent sovereign yield. Wait! How can that be? The US year yield is 2.22% and the two series have recently converged, so that doesn’t seem to make any sense. But you have to remember that 4 year German bunds are yielding negative 42 basis points, so that means European junk bonds are trading at roughly 2.25% (267 bps more than sovereigns).

As you can see from the OAS chart, these junk bonds have often yielded considerably more than sovereigns. During the Great Financial Crisis they spiked to 20% more, and even during the 2011 European credit crisis, they got as high as 10% over.

So yeah, I understand the attraction to shorting European junk. It’s easy to look dreamily at this chart and imagine spreads doubling to 5% without batting an eye.

But there are a couple of problems with this trade....MORE

Wednesday, August 16, 2017

Ford's Billion-Dollar Artificial Intelligence Bet

From the Verge:

An inside look at Ford’s $1 billion bet on Argo AI
In the race to launch autonomous vehicles, artificial intelligence expertise is the prize
Somewhere between the 14th and 15th floors in a concrete stairwell, Bryan Salesky pauses, searching for the right words to explain his mission for the foreseeable future. He wants to give cars the eyes, ears, and brains they need to operate without humans. And he wants to do it for Ford Motor Company by 2021.

The CEO of Argo AI — a startup that appeared seemingly out of nowhere six months ago, with $1 billion in backing from Ford — is hardly alone in the pursuit to transform the automobile into a vehicle controlled by artificial intelligence. Though a fire alarm interrupted an interview in a San Francisco conference room, Salesky stays focused and collected. And if he is feeling the pressure to develop and deliver this system so Ford — its sole customer, backer, and majority shareholder — can deploy fully autonomous vehicles in just four years’ time, it doesn’t show.

Instead, he comes off as optimistic about the company he founded with Peter Rander, who, as former engineering lead at the Uber Advanced Technologies Group, helped bring the ride-hail company’s first-generation self-driving prototypes to public roads.

Yet, Argo stands out from the hundreds of companies pursuing self-driving technology due to its unique deal with Ford that has invested big in this little-known startup that is now primed to compete with Google’s Waymo, Uber, GM’s Cruise Automation, Tesla, and Aurora — a short list of heavyweights all working on a so-called “full stack solution” of self-driving cars.

Argo was literally yanked out of obscurity by the Ford deal, but there are dozens (if not more) AI / auto startups still wallowing in obscurity. “Artificial intelligence will be an essential player in autonomous vehicles of the future,” said Michelle Krebs, executive analyst with Cox Automotive’s Autotrader. “That’s why automakers like General Motors, Toyota, and Ford are snapping up companies with AI expertise.”

Argo won the lottery, essentially. (Its website is still laughably sparse.) What remains to be seen is if Ford made a wise roll of the dice. Much of exactly what Argo is doing remains unknown. 
In broad terms, Argo is developing self-driving technology that Ford can use to deploy fully autonomous Level 4-capable vehicles for commercial on-demand service. In other words: something like a self-driving taxi service. Level 4 is a designation by SAE International that means the car takes over all of the driving in certain conditions....MUCH MORE

News You Can Use: How To Storm A Castle

From Popular Mechanics:
William Gurstelle is the author of Defending Your Castle: Build Catapults, Crossbows, Moats, Bulletproof Shields, and More Defensive Devices to Fend Off the Invading Hordes.
There is a lot more to besieging a walled fortress than simply running around with ladders. 
It's castle-storming season on Game of Thrones. Daenerys Targaryen's elite Unsullied troops managed to sneak in and conquer Casterly Rock without having to climb its walls on horrible ladders. The Lannister army they'd intended to attack actually marched south and laid siege to Highgarden, though the battle happens off-screen. And while Daenerys of the very long name managed to catch the Lannister loot train out in an open field and slaughter them, she would need to mount a much-discussed attack on King's Landing and its Red Keep to remove Queen Cersei from power.

There's perhaps no military action older than castle storming. Whether you're talking about paleolithic Scotland, medieval France, or the fictional kingdoms of Westeros, the pattern appears to be the same: As soon as people had any possessions at all, other people have coveted the lands and possessions of their neighbors. And so, the people with lands and possessions built castles for protection. Siege warfare against those castles is brutal and blunt. It's a style of fighting characterized by a combination of ungodly long, boring waits punctuated by short spurts of terrifying action.
There is a lot more to besieging a walled fortress than simply running around with ladders. A lot more.

It takes more than a forbidding appearance for a castle to keep attackers at bay. The first castles were merely earthen heaps surrounded by a wooden palisade wall. But they quickly got much better. Over time, a body of castle-building knowledge arose and all good castles more or less followed the same rules.

For example, a well-designed castle is never square. The corners on a square castle are vulnerable to attack because the ninety degree angle makes it difficult to mass defenders at those points, so any good field general would concentrate his attacking forces there. To counter this, castle designers erected protruding towers at intervals, giving defenders a redoubt where they could shoot downward with a wide field of view.

In addition, those towers were built as tall as possible. When hurling machines like catapults and trebuchets are forced to shoot in high arcing trajectories, they lose much of their effectiveness. Plus, when defenders drop rocks from high elevations, they have a lot more smashing power.

Typically there was an elevated walkway just behind the top of the castle walls called a rampart. There were openings in the upper walls, accessible to the men on the ramparts, called embrasures, through which archers could shoot.

The main way into a castle, of course, was through the gate. Gates were always exceedingly well protected. Typically, large strong towers flanked both sides of the gates, and the towers were always manned with defenders. The entrance to a castle was often a steel grate called a portcullis, a walkway, and then another portcullis. Above the walkway were the "murder holes," openings through which rocks and spears could be thrust down on attackers trapped between the portcullis grates....MUCH MORE

Creepy comestibles—Insect burgers and balls: Swiss supermarket to sell bug-based food

Ah those wacky Swiss.

From Deutsche Welle:
Coop has set a date to introduce food items made from creepy crawlies to Switzerland. From bug burgers to "insect balls," food security authorities have voiced support for such food as a means for sustainable living.

Coop, Switzerland's second-largest supermarket chain, announced on Monday it will start selling insect-based food for humans later this month, making it the first grocer to do so in the Alpine nation.
The offered products are made of protein-rich meal worm produced by Swiss start-up Essento. The items will be sold in select Coop branches across Switzerland, including Geneva, Bern and Zurich.
The decision comes after Switzerland revised its food safety laws in May, paving the way for the production and distribution of insect-based food, including "insect balls" and insect burgers (pictured above).
In order to meet Swiss safety laws, the insects must be bred under strict supervision for four generations before they're ready for human consumption.

The insect balls represent a healthy culinary specialty that mixes meal worms with rice, carrots, celery, leeks and a pinch of chili, said Essento co-founder Christian Bärtsch....MORE
Insect balls in packaging (picture-alliance/KEYSTONE/W. Bieri)
The insect balls are one of two products to be offered to those doing their groceries in the Alpine nation of Switzerland
HT: Going Concern's Accounting News Roundup

What is Wrong With Former Fed Head Alan Greenspan?

It is almost as if this stuff has been deliberate.

From Lars Syll:

That’s how it goes when you prefer to read Ayn Rand 
A couple of years ago the former chairman of the Fed, Alan Greenspan, wrote in an article in the Financial Times, speaking of the continually increasing demands for stronger regulation of banks and finance:
Alan Greenspan and Ayn Rand at the White House after Greenspan was sworn in as chairman of Gerald Ford’s Council of Economic Advisers, September 1974
Since the devastating Japanese earthquake and, earlier, the global financial tsunami, governments have been pressed to guarantee their populations against virtually all the risks exposed by those extremely low probability events. But should they? Guarantees require the building up of a buffer of idle resources that are not otherwise engaged in the production of goods and services. They are employed only if, and when, the crisis emerges.
The buffer may encompass expensive building materials whose earthquake flexibility is needed for only a minute or two every century, or an extensive stock of vaccines for a feared epidemic that may never occur. Any excess bank equity capital also would constitute a buffer that is not otherwise available to finance productivity-enhancing capital investment.
That is — to say the least — astonishing. Not wanting to take genuine uncertainty or ‘fat tails’ seriously is ominous enough. Is there anything the year 2008 taught us, it is that the ‘tail risks’ are genuinely real and must be included in all financial calculations. But even worse is how someone – who surely ought to have read at least an introductory course in economics – can get the idea that demand for higher capital requirements of banks would be equivalent to building buffers of ‘idle resources.’ The claim is from an economist’s point of view absolute nonsense.

Capital requirements are about how the mix between debt and equity of banks’ balance sheets should look like. It is not a question of something having to be set aside. It is not about liquidity or reserve requirements. Capital requirements are not about pea soup in a jar that we should put on stock to have in a crisis. It’s about how much leverage we should allow banks to have.

Higher capital requirements simply mean that we demand that banks finance a larger portion of their portfolios out of equity and less out of money deposited or loans. There is nothing here about resource use, but about how banks should manage risks. And how they are distributed in an economically efficient manner.

Of course, higher capital requirements mean that banks’ risk taking decrease....MORE
I wonder if  Professor Syll isn't actually being kind with the Randian explanation rather than implying something more nefarious.
So I will.

We first mentioned Greenspan's Feb. 23, 2004 speech at the National Credit Union Association back in April 2007—note the date, something economic was approaching—where, as Chairman of the Fed., Greenspan said:
"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. "
"Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages..."
Those 5/1 and other flavors of ARMs turned out to be landmines should the economy ever tank or interest rates rise near the time of the resets.

We reiterated the oddity in January 2008—and that something economic was much closer—with "Alan Greenspan: Competent Criminal or Criminally Incompetant?".

Finally in December 2015 we trotted out the speech story once again but this time with a new intro and set to music (all it takes is a little confidence**):

Climateer Line of the Day: Perils of Prognostication Edition (or was Greenspan just a straight up con man?)

Canada's Financial Post has a column, "Why oil forecasting is a crap shoot, and free oil for the world ain’t going to happen" that includes this tidbit:
“Today’s tight natural gas markets have been a long time in coming, and futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon,”...
-Alan Greenspan, testimony to Congress, June 2003

At the time natural gas was at $6.31.
On December 18, 2015 it traded as low as $1.684 before starting this really fun run to $2.36 this morning.

I am reminded of another Greenspan pitch that we first wrote about back in April 2007 and expanded upon in January 2008.

Cue the soundtrack:

And now, a tale of how a lot of folks with adjustable rate mortgages got stung:

The Set-up
"...American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home."
-Alan Greenspan
Speech to the National Credit Union Association
February 23, 2004
The Score
The $3 Billon Payday In today’s Journal Gregory Zuckerman brings us news of the biggest one-year salary ever paid on Wall Street — that of hedge-funder John Paulson, who made somewhere between $3 billion and $4 billion last year. That’s right, between $3 billion and $4 billion. In one year. 
...Mr. Paulson made his pile by betting against the housing market at just the right time. Lots of people bet their money on a housing crash, but they were too early — his bets happened to coincide with a crash in the debt markets.
The Wall Street Journal's Wealth Report blog.
January 15, 2008
The Payoff
Greenspan joins hedge fund Paulson
Alan Greenspan, the 81 year-old former chairman of the Federal Reserve, is set to join the US hedge fund Paulson & C. as an adviser. 
Dr Greenspan will advise Paulson on the global financial markets, and under the terms of the agreement he will not advise any other hedge fund while he is working for Paulson.
Paulson manages $28bn of assets and last year earned billions of dollars when it called correctly the collapse in the sub-prime mortgage market, a collapse which was caused by Dr Greenspan who kept interest rates too low for long, according to some economic commentators....
The Telegraph
January 16, 2008
The Stinger
Anna Schwartz blames Fed for sub-prime crisis
..."There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for," she says.

...She is scornful of Greenspan's campaign to clear his name by blaming the bubble on an Asian saving glut, which purportedly created stimulus beyond the control of the Fed by driving down global bond rates. "This attempt to exculpate himself is not convincing. The Fed failed to confront something that was evident. It can't be blamed on global events," she says.
Professor Anna Schwartz, co-author with Milton Friedman of
"A Monetary History of the United States"
The Telegraph
January 14, 2008

The End

*The Sting was based on a great sketch of human nature, The Big Con: The Story of the Confidence Man by David W. Maurer.
**tag-line from the movie poster.

There's a saying in the con world: "You can't con an honest man" but I'm thinking, if you do a little cui bono analysis of the last ten years of rates and QE, it sure looks like a case of not just a Rahmian
"You never want a serious crisis to go to waste. And what I mean by that it's an opportunity to do things you think you could not do before." 
but something a bit deeper.

I'm starting to 'entertain' the idea that creating a crisis is an even more efficient way to guarantee that "opportunity" to do things...

"Tronc and Investor’s Business Daily are working together on a paid newsletter"

Coming at things from the consumer viewpoint, everything on the spectrum from low-latency machine-readable to dead trees weeklies, I should maybe do a post on news distribution business models but not today.

From Digiday, Aug. 16:
With duopoly-squeezed publishers on the hunt for more reader revenue, some have joined forces to go after it.

Tronc and Investor’s Business Daily are launching Trophy Funds, a paid newsletter product designed to give its readers advice on investing in mutual funds. IBD staffers, with some input from Tronc, will create the content, while Tronc’s consumer marketing and audience teams will handle marketing and build an audience for it. Subscriptions cost $8.99 per month, and the publishers will split the revenue; while exact details of the arrangement were not disclosed, the split is “pretty equal,” according to IBD President Jerry Ferrara.

The two publishers hail from different corners of the media landscape – Tronc’s roots are in the newspaper business, while IBD’s are in delivering a specialized, finance-focused publication – both have tried to diversify the paid products they offer to readers, and both say the partnership could be the start of a broader trend — not just at their respective companies, but across the digital publishing landscape.

“I think it’s super important, for independent publishers in particular,” Ferrara said. “If you’re not part of a giant publishing house, it’s going to get increasingly difficult to do it on your own.” 

Trophy Funds, which publishes monthly, will feature a combination of introductory articles (the first issue includes an article titled “Mutual funds 101”), lists of high-performing mutual funds, in-depth looks at specific funds and strategies for how to beat the performance of the market. Each issue is expected to run around 16 pages.

Although the price point is significantly lower than many of IBD’s products, the most expensive of which costs $1,500 per year, Ferrara said the level of sophistication is the same. “We didn’t really hold anything back,” he said. “We took the same scope we normally have.”

Trophy Funds is IBD’s first foray into finance newsletters, a market Ferrara is eager to wade into: IBD estimates the market for paid financial newsletters is easily worth hundreds of millions of dollars....MORE

The Idea Of Finance as Intermediated Scarce Private Capital Is Obsolete

From the Cornell Law Review:

The Finance Franchise
102 Cornell L. Rev. 1143 (2017)
Cornell Legal Studies Research Paper No. 16-29
77 Pages Posted: 11 Aug 2016 Last revised: 9 Aug 2017
Robert C. Hockett Cornell University - Law School

Saule T. Omarova
Cornell University - Law School
The dominant view of banks and other financial institutions is that they function primarily as intermediaries, managing flows of scarce funds from those who have accumulated them to those who have need of them and can pay for their use. This understanding pervades textbooks, scholarly writings, and policy discussions – yet it is fundamentally false as a description of how a modern financial system works. Finance today is no more primarily “intermediated” than it is pre-accumulated or scarce.

This Article challenges the outdated narrative of finance as intermediated scarce private capital and maps the basic structure and dynamics of the financial system as it actually operates. We begin by developing a three-part taxonomy of ways to model financial flows – what we call the “credit-intermediation,” “credit-multiplication,” and “credit-generation” models of finance. We show that only the last model captures the core dynamic of a complex modern financial system, and that the ultimate source of credit-generation in any such system is the sovereign public, acting primarily through its central bank and treasury. We then trace the operation of this dynamic throughout the financial system, from the banking sector, through the capital and “shadow banking” markets, all the way out to the “disruptive” frontier of peer-to-peer digital finance.

What emerges from this retracing of the financial system’s operative logic is a comprehensive view of modern finance as a public-private franchise arrangement. On this view, the sovereign public acts effectively as franchisor, licensing private financial institutions to earn rents as franchisees in dispensing a vital public resource: the public’s monetized full faith and credit. We conclude the Article by drawing out some of the potentially transformative analytic and normative implications of a paradigmatic shift from the orthodox theory of financial intermediation to the franchise view of finance.
Cornell Law Review download page
(76 page PDF
HT: Mike Norman Economics

"What the Heck’s Going On with Vintage Automobiles?"

From Wolf Street: 

The fate of asset bubbles under the new regime.

Everyone is hoping that next Friday and Saturday, at Sotheby’s auction in Monterey, California, the global asset class of collector cars will finally pull out of their ugly funk that nearly matches that during the Financial Crisis. “Hope” is the right word. Because reality has already curdled. Sotheby’s brims with hope and flair:
Every August, the collector car world gathers to the Monterey Peninsula to see the magnificent roster of best-of-category and stunning rare automobiles that RM Sotheby’s has to offer. For over 30 years, it has been the pinnacle of collector car auctions and is known for setting new auction benchmarks with outstanding sales results.
This asset class of beautiful machines – ranging in price from a 1962 Ferrari 250 GTO Berlinetta that sold for $38.1 million in 2014 to classic American muscle cars that can be bought for a few thousand dollars – is in trouble.

The index for collector car prices in the August report by Hagerty, which specializes in insuring vintage automobiles, fell 1.0 point to 157.42. The index is now down 8% year-over-year, and down 15%, or 28.4 points, from its all-time high in August 2015 (186).

Unlike stock market indices, the Hagerty Market Index is adjusted for inflation via the Consumer Price Index. So these are “real” changes in price levels.

The index has now fallen nearly 7 points below the level of August 2014. That was three years ago! In fact, the index is now at the lowest level since March 2014.

The chart below from Hagerty’s August report shows how the index surged 83% on an inflation-adjusted basis from August 2009 to its peak in September 2015, and how it has since given up one-third of those gains. This is what the inflation and deflation of an asset bubble looks like (I added the dates):
During the Financial-Crisis, the index peaked in April 2008 at 121.0, then plunged 16% (20 points) to bottom out in August 2009 at 101.39. By then, the liquidity from the Fed’s zero-interest-rate policy and QE was washing across the world, and all asset prices began to soar.....MORE

Tuesday, August 15, 2017

The Third Rate Bromance of Travis Kalanick and Anthony Levandowski (plus Elon Musk does a drive-by)

We haven't had anything on the Waymo-Uber lawsuit in a while, here's the latest.
From Business Insider:

Former Uber engineer slammed Tesla in texts to Travis Kalanick: 'We've got to start calling Elon on his s---'
  • Waymo, Google's sister company focused on self-driving-car technology, claims in a lawsuit that Uber stole intellectual property and trade secrets when it acquired a startup founded by Anthony Levandowski.
  • Levandowski was the head of Waymo's self-driving-tech team before joining Uber.
  • Levandowski slammed Tesla's approach to self-driving tech in text messages to Travis Kalanick, Uber's cofounder and former CEO. The texts were made public via a court filing.
A former Uber engineer slammed Tesla CEO Elon Musk in texts to Travis Kalanick, Uber's cofounder and former CEO, a court filing shows.

The engineer, Anthony Levandowski, is at the heart of a lawsuit filed in February by Waymo, Google's sister company focusing on self-driving-car technology. The suit claims that Levandowski, the former head of Waymo, stole intellectual property and trade secrets and used them for Uber's autonomous-vehicle efforts.

Levandowski joined Uber in August 2016 when the company acquired his self-driving-truck startup, Otto. Uber fired Levandowski in May over his refusal to cooperate in the legal case.

A court filing, first reported by IEEE Spectrum's Mark Harris on Tuesday, shows text exchanges between Levandowski and Kalanick while the two were planning the Otto acquisition.
An interesting nugget buried in the texts is a shot Levandowski took at Musk's approach to self-driving-car technology.

"We've got to start calling Elon on his s---," Levandowski wrote in a text in September. "I'm not on social media but let's start 'faketesla' and start give physics lessons about stupid s--- Elon says."
Tesla did not immediately return Business Insider's request for comment.

Levandowski's example of "stupid s--- Elon says" was the Tesla CEO's reasoning behind his decision not to use lidar, a notoriously expensive sensor that uses lasers to help self-driving cars detect obstacles.

Musk has said Tesla does not use lidar for its Autopilot technology because lidar cannot penetrate rain, fog, dust, or snow. Instead, Tesla cars are equipped with a radar sensor, which uses radio waves....MORE
I'm waiting for Mr. Musk to drop an "Anthony who?" on Levandowski.

The IEEE Spectrum piece has more detail:
....Levandowski and Kalanick’s Relationship

The two men quickly formed a strong bond, but there are challenges—and advantages—when your new best friend is the CEO of the world’s largest start-up.
3/29/2016 Levandowski: I am at the secret side door, no rush

7/23/2016 Kalanick: You hungry? .. Can get some Uber Eats steak and eggs.

At these meetings, often late at night, Levandowski would explain the mysteries of self-driving technology to the Uber founder.
4/8/2016 Kalanick: Where you teach me in depth about an autonomy topic

4/8/2016 Levandowski: Yes, we should of done it. We did a bit on lasers before but need to go deep on all the topics.

In return, Kalanick dispensed management advice, such as this just before the Otto acquisition was announced:
8/12/2016 Kalanick: Three principles

8/12/2016 Kalanick: 1) don’t tell anyone about the deal before it happens, ESPECIALLY someone you're about to fire 2) firing fast is a cultural imperative you don't want to break except in the most extreme situations 3) get creative

Both men shared the same ambition:
9/19/2016 Levandowski: We’re going to take over the world

9/19/2016 Levandowski: One robot at a time

10/7/2016 Kalanick: Down to hang this eve and mastermind some shit...MORE

Real Estate Company Replaces Agents With AI, Data And Robots

From Newsday:

Real estate tech company aims to replace agents with robots, data
A real estate technology company that aims to lower the cost of home-selling by using robots and “big data” instead of commission-based real estate agents has opened a Long Island office — its first outside of California.

REX Real Estate Exchange, which charges a selling commission of 2 percent instead of the usual 5 percent to 6 percent, launched its Long Island operation last week, when it started operating out of a co-working space at RXR Plaza in Uniondale. The Los Angeles-based company expects to start listing New York-area homes on its website,, later this week.

Traditional real estate fees “are just crazy high compared with every other industry in the United States,” said Jack Ryan, Rex’s chief executive and a former partner at Goldman Sachs. Decades ago, investment brokerages charged 12 cents a share for stock trades, but now they charge less than a penny, he said. By lowering real estate fees, he said, his company is “doing the same thing with residential real estate.”

REX, which has raised $16 million from investors, is not the only company seeking to upend the residential real estate sales model.

Another new entrant to the housing market is EasyKnock, a Sag Harbor startup that is rolling out a website designed to match sellers with buyers without the intervention of brokers.

The company, which has raised $1.2 million in venture capital and plans to go live in about a month, lowers commissions to 1.5 percent and does not list homes on the Multiple Listing Service of Long Island, said co-founder and chief executive Jarred Kessler. The MLS is a way for brokers to share information about homes for sale.

“We’re a broker-free ecosystem,” Kessler said.

Among national brokerages, Seattle-based Redfin charges sellers a 1.5 percent listing fee — or 1 percent in a few communities, including Washington, D.C. — though unlike REX and EasyKnock, it also pays a commission to the buyer’s agent.

In a typical home sale, the commission gets split between the seller’s and buyer’s brokerages. If a home sells for $300,000 and the seller pays a 6 percent commission divided equally, each brokerage receives $9,000 and pays out a portion of that to the agents.

Long Island real estate brokers expressed skepticism about the tech-focused companies’ prospects for success.

“Discount brokers have attempted to be around for many, many years, and they just fall away because it is important to provide good personal services to the seller and to the buyer,” said Joe Moshé, owner of Plainview-based Charles Rutenberg Realty.

To be sure, few home sellers choose to bypass agents. Last year and in 2015, 89 percent of home sellers used a real estate agent, the highest share since at least 1981, said Adam DeSanctis, a spokesman for the National Association of Realtors....MORE

Credit Where Credit Is Due: Trinity Asset Management's Fundamentalis blog Is Pretty Good at This S&P Earnings Thing

On Friday Bloomberg reported "Corporate America Is Having Its Best Earnings Season in 13 Years":
...Of the 454 companies in the S&P 500 that have so far reported second-quarter results, 68 percent have beaten analysts’ average estimates for revenue and 78 percent have topped per-share earnings expectations, according to data compiled by Bloomberg. Earnings rose an average of 9.8 percent, while sales have climbed 5.5 percent....
Which brought to mind this post from two months ago linking to:
Second Quarter 2017 S&P 500 Earnings Will Likely See at Least 10% – 12% Y/Y Growth
Fundementalis speaking:
...My guess at this juncture just looking from the Q2 ’17 Thomson data, is that by mid-August ’17, Q2 ’17 earnings growth for the SP 500 should be north of 10% – 12%, versus the 8.3% expected currently.

Q2 ’16 was still weak thanks to the commodity price pressure and the weak bank earnings from last year, so the easier comp will make Q2 ’17 growth look that much better...
That bolded bit is key. While most analysts thought the quarter's numbers were going to be good there were very few who thought they would be as good as we've seen.

Which explains a large part of why the market has been able to hold its own over the last two months, up 1.5% or so.
Here's what Fundamentalis is saying now:

Whatever Market’s Issues, SP 500 Earnings Are Definite Positive

The spike in the VIX this week, brought out the various market statisticians that talked about “forward returns” around the SP 500 after such a spike, and it portends favorably for the key benchmark.

That being said, if the SP 500 does run into a bigger drawdown, for whatever reason, the SP 500 earnings data is an unquestionable positive halfway through the third quarter.

Yesterday, it was written on this blog that the “forward 4-quarter” estimate is at a 5-year high. Still not over 10%, but close. Looking at the year-over-year growth of the forward estimate, for the last 5 years around mid-August, here is the trend:
  • 8/11/17: +9.87%
  • 8/12/16: +1.47%
  • 8/14/15: -1.82%
  • 8/15/14: +9.40% (just prior to the drop in crude oil from $100 to $28)
  • 8/30/13: +7.02%
At no point absent the inflated earnings growth in 2009 and early 2010 following the 2008 Financial / Mortgage / Credit Crisis has the “forward 4-quarter estimate y/y growth” remained above 10% for any length of time. We’ll see if it can get there in the next two quarters.

Frankly SP 500 earnings growth rates now lap the increase in the price of crude oil in Q3 and Q4 ’16, so the back half of 2017 might not see consistent 10% growth, but it will be close....

We followed the Fundamentalis post with June 30's "What the Market Needs now is...Earnings" which is still true.
But now positive comparisons are going to be more challenging to achieve.

"Crude Oil Prices Retreat To 3-Week Lows, Dollar Recovery Erodes Support" (and a bit of gold)

That was the point of the intro to Aug. 1's "Crude Oil- Facing heavy resistance test again!":
...Which raises the question: If oil can only hold its own in the face of a falling buck what would it do if the dollar was rising?
Ditto for gold....
As it turned out, the dollar bounced the next day;

This is just an example of the relationship, we're thinking the buck gets down to 90 or so which leads to the next point.
The interesting thing on the charts is that WTI didn't test the $52.00-$52.50 area where price had turned back last October and in May:
So, despite a bearish predisposition there's a good chance of another run back up and should that mess of prints at $54 or so be cleared the upside could be dramatic, scarily so if one is short and un-hedged.
Front futures $49.14 down 45 cents.

On to the headline story from Economic Calendar, Aug. 15:
A firmer dollar tone and expectations of firm global supplies have been instrumental in shaking out long speculative oil positions with prices declining to 3-week lows.

Oil prices continued to push higher in early US trading on Monday with WTI peaking close to $49.20 p/b.

There was, however, a swift reversal with a quick move back to below $49.0 p/b and selling pressure intensified. The stronger dollar during the session had a significant impact in undermining crude prices.

There were also further doubts surrounding Chinese oil demand, although position liquidation looked to have a more substantial impact in undermining support.

The latest US EIA report also indicated that US shale production was likely to increase in September for the 9th successive month to 6.15mn bpd which maintained expectations that there would be ample global supplies.

The dollar maintained a firm tone into the US open, although trading ranges narrowed ahead of the US retail sales data....MORE
Finally, back to that August 1 post:
...As for gold we still think we'll see $875 before the decline is over but it's been boring, $1200 to $1300 for months now, so we haven't been posting. $1279.70, up $6.30. 
The September contract got to $1292.90 on this run before turning back:

Just remember the old trader's maxim: As soon as you think you've found the key they go and change the lock.
$1276.70 down $13.70.