Thursday, April 30, 2015

"Dow Tumbles Back Into The Red For 2015"

From ZeroHedge:
Dow joins Trannies in the red year-to-date...

Triggered by Iran headlines...

"Creative destruction: Newspaper ad revenue continued its precipitous free fall in 2014, and it’s likely to continue"

During the Great Nastiness of aught-eight I would refer to Professor Perry as "the Happy Economist" because he relentlessly focused on the green shoots.
Today, not so much, at least for the information gate-keepers/toll-takers.

From Carpe Diem:
For the last several years, I’ve been regularly posting charts like the one above showing the history of US newspaper advertising revenue back to 1950, based on data from the Newspaper Association of America. Those charts have been noteworthy for several reasons.

First, more than any of the hundreds of charts and graphs that I’ve created and posted on Carpe Diem over the last seven years, the newspaper ad revenue charts have received the most attention by far. Those charts have been featured on so many other blogs and websites that a recent Reuters article referred to a recent version as a “much-reproduced chart.” If you do a Google image search for “newspaper ad revenue,” you’ll see many versions of the CD chart above. I hope this is a testament to how powerful and compelling the graphical representation of data can be!

Second, it’s possible that the attention the ad revenue charts were generating on the Internet may have contributed to the decision by the Newspaper Association of America (NAA) in 2013 to suddenly stop its long-standing practice of reporting quarterly advertising revenue data, and switch to releasing only annual data (not yet available from NAA for 2014, but available here from BIA/Kelsey). In a 2013 interview, NAA CEO Caroline Little was quoted as saying that she and the organization’s board decided it was “time to stop beating themselves up four times a year with the negative numbers.”

The updated chart above shows annual data from 1950 to 2014 in inflation-adjusted (2014) dollars. The blue line represents total annual print newspaper advertising revenue (for the three categories national, retail, and classified), and appear in the chart as billions of constant 2014 dollars....MORE

Climateer Line of the Day: Uh Oh Andreessen Edition

From a very interesting piece at FT Alphaville:

...Bitcoins are like “tulips you can send anywhere in the world in arbitrary quantities”.
-Andreessen Horowitz partner Balaji Srinivasan

Mr.Srinivasan may not be aware that, since ca. 1637 or so, tulips have not had the best connotation in the world of finance.

From FT Alphaville:
The Manhattan Project-type secrecy surrounding a company called 21 Inc — hitherto known as 21e6 — has been stupendous, even by Silicon Valley standards.

Not that this has stopped cryptocurrency friendly journalists like Michael J. Casey at the WSJ (co-author of the Age of Cryptocurrency) and Coindesk’s Pete Rizzo from propagating 21 Inc’s claims about bitcoin being bigger than Google.

All we do know is that the company, headed by Matthew Pauker, has raised more than $116m worth of venture funding, a record for the sector, and claims to be developing technology that they believe will help to mainstream bitcoin.

Leading investors include Andreessen Horowitz, RRE Ventures, a Chinese PE firm called Yuan Capital and Qualcomm. But, Casey reports, the wider investor list includes everyone from PayPal co-founders Peter Thiel and Max Levchin, to eBay co-founder Jeff Skoll and Dropbox Inc CEO Drew Houston, to Expedia Inc. CEO Dara Khosrowshahi and Zynga Inc co-founder Mark Pincus.

To date, the only worthwhile snippets of info as to what 21 Inc might actually do have come by way of Balaji Srinivasan, Andreessen Horowitz partner and 21′s chairman. At a recent event Srinivasan claimed things like … “payments are now packets. Bitcoin is here to stay” and that Bitcoins are like “tulips you can send anywhere in the world in arbitrary quantities”....MUCH MORE

Putin to Have Superhuman Mind-Controlled Exoskeletons in 5 Years

From the Fiscal Times via Yahoo Finance:

Yikes! Putin Will Soon Have Superhuman Robo-Soldiers!
It may not be sharks with frickin’ laser beams attached to their heads, but for a leader bent on expanding his global sphere of influence, an army of soldiers equipped with mind-controlled robotic exoskeletons may be the next best thing. According to Russian media, that’s just what President Vladimir Putin’s army has in the pipeline. 

On Wednesday, the headline on the government-run Sputnik News website was, “Lock and Load: Russian Hybrid Robo-Soldiers Could Be Just Five Years Away.” Russia Today, the equally servile outlet aimed at English speakers led with “Iron Man mass production? Russian army may get combat exoskeletons by 2020.” Even the more independent Moscow Times trumpeted, Russian Army May Have Superhuman Mind-Controlled Exoskeletons in 5 Years. 

None of this, of course, means that a Russian army of Terminator-like super-soldiers is around the corner. But that wasn’t stopping speculation.
“The Russian Army is set to receive mind-controlled exoskeletons,” Sputnik reported. “The wearable robots will be controlled by brain waves and will increase the strength and endurance of the serviceman wearing it by several times.” 

Russian soldiers equipped with the new gear, according to Sputnik, would be able to carry more than 600 pounds of gear. Their endurance, it added, would also be greatly increased....MORE

Updated: "The impossible just happened: American wages are rising"

Update below.
Original post:

It is factoids like this that have kept us bullish on the overall market even as a major component of the indices, energy, got whacked.
From Quartz:
This might be the best economic news Americans have had in a good long while.
New claims for unemployment benefits continued to plummet, tumbling to their lowest level since 2000.

And what’s more, there are even signs of life in nominal wages, which were up 2.6% in the first quarter, year-on-year.

This is precisely why we told you to ignore the weak first-quarter GDP data produced yesterday....
Update- ZeroHedge takes a different view:

No Growth In Personal Income Pushes Savings Rate To Lowest In 2015; Spending Misses Expectations

"Lessons In Oil Price Forecasting"

From Forbes:
When I published a working paper in 1992 at MIT called “The Fog of Commerce: The Failure of Long-Term Oil Market Forecasting,” many thought the lesson was that forecasting the long-term price of oil couldn’t be done. My actual point had been that bad theories and bad models lead to bad forecasts, specifically the belief that resource economics proved that fossil fuel prices had to rise exponentially.

Recently, I opened a talk with a slide showing the early-2014 survey of long-term oil price forecasts published by the Department of Energy, in which my forecast of $50 a barrel was far below all the others. But in the next slide, previous forecasts in which I had called for lower prices for the past ten years were included, in part, because I don’t want to cherry-pick my record (the way some peak oil advocates do), but also to focus the discussion on pertinent lessons from forecasting, not just the accuracy of any given prediction.

This is important because too many of late have been drawing superficial conclusions about forecasting, whether it is that it can’t be done (as many do) or Al Gore’s triumphant note that predictions of the failure of renewables have proved wrong, therefore the energy transition is under way. (Technology predictions will be addressed in a later post.)

The lesson to be drawn from the many oil company “Titans” that were convinced lower prices were unlikely or incredible is that they tend to let wishful thinking dominate their expectations, an all too human failing. T. Boone Pickens, claiming “…because I know more about it than they do,” shows that he hasn’t learned from the ancient Greeks about hybris, or pride, to say nothing of his own mistakes. Anyone who has been in the business of predicting oil markets should be pretty humble, because we’ve all gotten it wrong many times, sometimes spectacularly....MORE

"Christopher Hitchens And George Orwell’s Ironclad Rules for Making a Good Cup of Tea"

From Open Culture:

It’s not that I don’t appreciate good coffee—I consider it a delicacy. But at the end and the beginning of the day, coffee mostly functions as a caffeine delivery system. But not tea. Tea must be savored, and it must be good. Americans’ enthusiasm for tea does not come naturally. What passes for tea in the U.S. is best described by Christopher Hitchens as “a cup or pot of water, well off the boil, with the tea bags lying on an adjacent cold plate.” (See his January 2011 piece in Slate called “How to Make a Decent Cup of Tea.”) If this doesn’t sound wrong, he elaborates, setting up his endorsement of George Orwell’s methodical instructions for proper tea:
Then comes the ridiculous business of pouring the tepid water, dunking the bag until some change in color occurs, and eventually finding some way of disposing of the resulting and dispiriting tampon surrogate. The drink itself is then best thrown away, though if swallowed it will have about the same effect on morale as a reading of the memoirs of President James Earl Carter.
I like Jimmy Carter. I haven’t read his memoirs, and this does indeed sound awful. And before I had learned anything at all about drinking tea, it was all I knew. I tried. I cribbed a few notes here and there, wrote in tea shops, read the rough-hewn formalism of Sen no Rikyu, and looked to the East. I did not look to Britain and her former Commonwealth.

Perhaps I should. George Orwell would probably say so. Hitchens as well, though they don’t perfectly agree with each other. “Tea,” wrote Orwell in his famous 1946 essay “A Nice Cup of Tea,” “is one of the mainstays of civilization in this country, as well as in Eire, Australia and New Zealand, but… the manner of making it is the subject of violent disputes.” The only disagreement Hitchens musters against Orwell is that some of his rules, “(always use Indian or Ceylonese—i.e. Sri Lankan—tea; make tea only in small quantities; avoid silverware pots) may be considered optional or outmoded.”

Many old restraints may be loosened. But make no mistake, for Hitchens, as for Orwell, making a good cup of tea is not about mindfulness, patience, impermanence, or meditation. It is about rules. Orwell had 11. The “essential ones are easily committed to memory, and they are simple to put into practice.” What are they? Hitchens has his own succinct paraphrase, which you can read over at Slate. Orwell’s rather baroque list we reprint, in part, below for your edification. Read the complete essay here. Hitchens recommends you straighten out your next barista on some tea essentials. Imagine, however, presenting such an unfortunate person with this list of demands:...MORE

Wednesday, April 29, 2015

"Byron Wien on Population Growth and Stocks"

From Barron's Wall Street's Best Minds column:

The Wall Street vet analyzes how big changes in population and productivity will affect investments.
We were all lucky to be born at the right time. Over the past fifty years, world gross domestic product growth has been averaging 3.6%, driven by employment increases and productivity improvements in roughly equal proportions. An exhaustive and important study by the McKinsey Global Institute concludes that over the next 50 years population growth will decline to 0.3% annually. If productivity continues to contribute 1.8%, overall growth will decline to 2.1%, a rate 40% less than during the past half-century. The implications of this slowdown on global changes in the standard of living and investment opportunities could be enormous. 

The developing world can improve its growth potential by adopting operational practices and technology used by the advanced countries (that is, by catching up), but the United States, Europe and Japan will continue to depend heavily on innovation to approach anything like their historical rate of growth. Those subscribing to Mohamed El-Erian’s concept of “the new normal” or Harvard Professor Alvin Hansen’s “secular stagnation” may turn out to be right, but for reasons somewhat different than they originally thought. I have been worried about a lack of demand causing a slowdown in growth. I had not thought that the main problem might be that there aren’t enough people out there to do the buying. 

The global economy grew sixfold in the past 50 years. Taking into account the projections above, it is only expected to grow threefold in the next 50. Population growth rose because of high fertility rates, declining infant mortality and longer life expectancy. Also, the number of people of working age (15-64) grew from 58% of the population in 1964 to 68% in 2014. The productivity improvement resulted from a shift from agriculture to manufacturing and services. Technology obviously played an important role. According to the McKinsey study, the average world employee today generates 2.4 times the output of his counterpart in 1964. Because Europe and the United States were relatively efficient in 1964, their productivity only rose 1.5% and 1.9% annually respectively, while South Korea and Japan rose 4.6% and 2.8% respectively. As expected, China’s productivity grew at 5.7% annually, but Mexico and Saudi Arabia experienced less than 1% annual productivity growth. The study notes that the productivity gap between the developed and the developing economies remains wide, at almost five times, providing a significant opportunity for emerging markets going forward.

The big change in the future will be the slow growth in population. Fertility rates are declining, and the average age of the population in Europe, China and Japan is rising. China’s peak employment is expected to occur in 2024. The working age population in the G19 countries plus Nigeria is expected to decline from 68% to 61% over the next 50 years. By 2064 India’s employment could expand by 54%, while China’s could shrink by 20%. The number of employees in the United States is expected to continue to rise, but at a slower rate than in the past. By employing more women and encouraging people to stay at their jobs beyond age 64, the expected 0.3% rate of working population growth could double, but that would still be well below the pace of the last 50 years. 

The McKinsey estimates of annual population growth seem low to me, but the concept of slower growth in the number of people in the world appears sound. A somewhat less pessimistic study of population growth was prepared for me by Dick Hokenson, the demographic analyst at Evercore ISI. He points out that the G19 plus Nigeria universe includes Germany, Russia, Japan, China and South Korea, all of which will experience overall declines in their populations and labor forces over the next fifty years....MUCH MORE
 Wien is vice chairman of Blackstone Advisory Partners LP, where he acts as a senior advisor to both Blackstone and its clients in analyzing economic, social and political trends.
 Byron Wien on Population Growth and Stocks

"A Rare Win for Economic Forecasting: The Atlanta Fed Almost Nails Its First-Quarter Growth Estimate"

Why do scientists make predictions?

To judge whether their theories are based in reality.

If someone purporting to practice a science says they don't make predictions they aren't doing science but rather something faith-based i.e. more akin to a religion.

From Real Time Economics:
The U.S. economy’s sharp slowdown in the first three months of the year may have caught almost all Wall Street forecasters off guard. But it didn’t surprise the Federal Reserve Bank of Atlanta.

The regional Fed bank’s frequently updated GDPNow forecast proved to be one of the most reliable indications of where first-quarter growth would stand. The Commerce Department reported Wednesday that the economy grew at a mere 0.2% annual rate, against Wall Street expectations of a 1% gain. When most private sector forecasters were overestimating growth, the Atlanta Fed gauge, last updated on Friday, had growth in gross domestic product pegged at 0.1% for the quarter.

The GDPNow gauge has been warning of weakness in the first quarter for some time. That notion was not by itself controversial, as most forecasters and Fed officials saw a weak 2015 kickoff. But the Atlanta Fed proved to be standout when it came to accurately quantifying how much trouble the economy had on its hands.

The Atlanta Fed “certainly nailed it this time,” said J.P. Morgan Chase chief U.S. economist Michael Feroli....MORE

Guy Who Wanted To Split California In Six Pieces Launches Contest To Keep It Together

The linked story in our July 2014 post, "Silicon Valley: Venture Capitalist Tim Draper Has a Cringworthy YouTube Channel" began:
This is a post about Tim Draper. Tim Draper is a billionaire tech investor of no particular importance who has decided that he wants to disrupt geography....
Here's the latest from the Mercury-News' tech blog, SiliconBeat:
Tim Draper launches a contest for fixing California
He tried and failed to divide California into six states.

Now Tim Draper, the venture capitalist, is at it again trying to upend state government. This time he has launched a contest on inviting others to submit their ideas for fixing the state. He announced it on YouTube:...

...“My idea was six Californias,” he says. “What’s yours?”

The site works somewhat like Product Hunt, which I wrote about earlier this year, with ideas voted up or down. A panel of judges will decide the best ideas based on criteria such as “transformation,” “representation” and “accountability,” according to the site.

As for winners? They “receive the opportunity to seek financial and strategic support from a select group of ‘investors’ for the purpose of proposing and enacting the proposal as law, by the enactment of legislation or by the initiative process.,”  says Innovate Your State, the non-profit behind the endeavor....MORE

Dec. 2013's "Venture Capitalist Tim Draper Wants To Split California Into Pieces And Turn Silicon Valley Into Its Own State"

Mr. Draper is also the recipient of the prestigious Climateer Line of the Day Award:

Climateer Line of the Day: Mammary Edition

...Detroit has “lived off this automotive tit long enough.”
-Draper, Fisher, Jurvetson's Tim Draper
as quoted by Forbes' Eric Savitz.

Hey Gang, Want To Participate In Britain's Back-to-the-Future "We Burn Wood" Energy Program? (EVA)

I know, programme.
Following up on last week's Back to the Future: "UK’s Renewable Energy Targets Drive Increases in U.S. Wood Pellet Exports", it looks like Carlyle wants to cash out.
From peHUB:

PE-backed Enviva Partners goes public
Enviva Partners LP, a wood pellets provider to large power generations, has raised $200 million for its IPO after pricing its 10 million shares at $20 per share. The stock began trading Wednesday on the NYSE under the ticker symbol “EVA.” Barclays Capital Inc, Goldman, Sachs & Co, RBC Capital Markets LLC and Citigroup Global Markets Inc are the lead underwriters. Enviva Partners is backed by Riverstone/Carlyle Renewable Energy Partners.

BETHESDA, Md.–(BUSINESS WIRE)–Enviva Partners, LP (“Enviva Partners” or the “Partnership”) today announced the pricing of its initial public offering of 10,000,000 common units representing limited partner interests at $20.00 per common unit. The common units are expected to begin trading on the New York Stock Exchange on April 29, 2015 under the ticker symbol “EVA.” In addition, the Partnership has granted the underwriters a 30-day option to purchase up to an additional 1,500,000 common units at the initial public offering price. The offering is expected to close on May 4, 2015, subject to customary closing conditions.

Upon the consummation of the offering, the public will own common units representing a 42.0% limited partner interest in the Partnership (or 48.3% if the underwriters exercise in full their option to purchase additional common units). Enviva Holdings, LP (the “Sponsor”) will own common units and subordinated units representing a 58.0% limited partner interest in the Partnership (or 51.7% if the underwriters exercise in full their option to purchase additional common units).

The Partnership intends to use the net proceeds from the offering to pay, together with borrowings under its new term loan facility, a distribution to the Sponsor, to repay intercompany indebtedness related to the acquisition of the Partnership’s Cottondale wood pellet production plant and for general partnership purposes....MORE
A quick look at the risk factors shows the gigantic (3960 MW) Drax power plant as one of Enviva's three customers:
Our contracts with Drax, GDF and E.ON represented substantially all of our sales for 2014.

Although probably not for long, Drax Biomass is an up-and-comer.
Here are Enviva's SEC filings.

If interested, see also:

Aug. 2014
"What's Replacing Coal In Europe? Imported Wood"

May 2013
Bonfire of the Subsidies: Europe Returns to Early Stone Age Fuel as Putin Mocks
Mocking Europe's Energy Policy: "Putin invites Europeans to Siberia for firewood"

"Crude Spikes After First Cushing Inventory Draw Since November"

June WTI $58.09 up $1.03, high for the day (and year) $58.19.
From ZeroHedge:
For the first time since November 2014, Cushing saw an inventory decline (-514k) last week. This has promopted a spike up to yesterday's highs in WTI Crude. The total inventgory build was 1.9mm bbl (less than the expected 3.2mm bbl) but continues the record streak to 16 weeks.

Cushing "Draw"...
But total inventories rose for the 16th week in a row...
WTI shot up to run yesterday's stops near $58...

Charts: Bloomberg

The Guardian Newspaper Is Not A Contrary Indicator On Hydrocarbon Divestment Timing

The Guardian has gone into full "Do as I say" mode.

On Monday FT Alphaville (very) bravely dipped a toe into the muck that is the 2°/stranded asset/divestment argument in the run up to the Paris climate shindig later this year. One of these days I'll get around to the story of how was 2° chosen. And maybe tell the tale of what happened when the pressure groups went to the SEC.

From FT Alphaville:
The Guardian as contrarian indicator
You’ve got to hand it to Alan Rusbridger: he’s a great contrarian indicator. The editor of The Guardian launched his valedictory campaign to demand divestment from fossil fuels with a wrap-around promotion and the paper’s full moral force.

This was terribly nice of Mr Rusbridger. Investors, he explained, should sell their shares in oil, coal and others digging up nasty carbon-based fuels, because they weren’t really worth as much as everyone thought; they would never be allowed to use all their reserves, because it would cause the end of the world (or serious global warming, anyway).

The usually left-wing Guardian was going out of its way to help the plutocrats make money, a job usually reserved for us here at the FT.
By supporting these companies, investors not only continue to fund unsustainable business models that are bound to make climate change worse, but they also risk their financial assets becoming worthless if international agreements on climate change are met.
Investors should have listened, thanked Mr Rusbridger, and done the exact opposite. It turned out he was a perfect contrarian indicator. He picked a six-year bottom in the US benchmark oil price, West Texas Intermediate. He lit a carbon-based bonfire under crude prices: WTI’s now up 30 per cent, the biggest rally over such a short period since 2009 (and before that, 2002)....MUCH MORE
As it turns out, The  Guardian itself has not divested any hydrocarbons from its pension plans and has in all probability been adding to the position (as a function of re-balancing). Here's a Guardian podcast transcript via MyTranscriptBox:

Source: The Guardian
Date: 27/03/2015
Event: The Biggest Story: Episode 3: The Targets
Credit: The Guardian
Also see:


  • Alex Breuer: Creative Director, the Guardian
  • Aleks Krotoski: Broadcaster, presenter of Guardian podcast Tech Weekly
  • Bill McKibben: Environmentalist, author and journalist
  • Amanda Michel: Open editor, the Guardian US
  • James Randerson: Assistant national news edior, the Guardian
  • Alan Rusbridger: Editor-in-chief, the Guardian
  • Adam Vaughan: Editor, the Guardian environment site
"...Amanda Michel: You know, there are big questions about asking people to do something that we ourselves have not done.

Aleks Krotoski: What Amanda is talking about is sorting out the Guardian's own pots of money, their investments.

Amanda Michel: It will seem like hypocrisy.

Alan Rusbridger: We have about £600 million invested at the moment, and I don't think our fund managers could say exactly how much was invested in fossil fuel. But it is there, we haven't said that it shouldn't be, so we have got money invested. And so, if we're going to be calling on people to divest, people are bound to ask "Well, is that what the Guardian's going to do?"..."
The above is good for a tee-hee but that's about all.
Whether or not any of this makes any difference to the earth is the question, and the question that should be asked to separate out actions that will actually make a difference from those that are just posturing is:
"How much will this policy prescription lower the temperature of the planet?"
In degrees, please.

(not so) Smart Beta ETFs

From Alpha Architect:

How Smart are “Smart Beta” ETFs?
Many consider smart beta to be a revolution in the asset management industry. For example, Bloomberg ran an article, “Funds Run by Robots Now Accounts for $400 Billion,” which caught our attention. According to this article, “Smart beta,” is one of the fastest growing segments of ETFs, accounting for nearly 20% of all assets in domestic ETFs as of the end of 2014.

The “secret sauce” of smart beta is its use of alternative weighting schemes to capture premiums associated with factors such as size, value, momentum, low volatility, and so on.

Unfortunately, academic researchers are having difficulty finding the secret sauce associated with smart beta. For us, this finding is unsurprising, since other researchers have already highlighted that many so-called factors are likely false. Nonetheless, we highlight a new research paper by Denys Glushkov, which dives deep into the data and concludes that the benefits of smart beta are questionable.
A quote from Denys:
Using a comprehensive sample of 164 domestic equity Smart Beta (SB) ETFs during 2003-2014 period…I find no evidence that SB ETFs significantly outperform their risk-adjusted passive benchmarks.

How Smart are “Smart Beta” ETFs?
Denys Glushkov conducts a comprehensive analysis of relative performance and factor timing of “Smart Beta” ETFs. A version of the paper can be found here.

In order to see how smart “Smart Beta” really is, this paper uses 164 domestic equity “Smart Beta” ETFs from 2003 to 2014 as the test sample. It categorizes each ETF into 15 category portfolios based on common factors, and then compares them with passive index benchmarks.
This paper use 3 types of benchmarks:
  1. Self-declared benchmark by the ETF provider;
  2. Risk-adjusted version of the self-declared benchmark;
  3. A blended benchmark constructed as an annually rebalanced combination of passive existing funds representing the broad stock market and various factor exposures (size and value).

Finding 1: Performance isn’t great

  • 60% of “Smart Beta” categories (9 out of 15) outperformed their raw declared benchmarks from 2003 to 2014.
  • Only one category (Value) significantly outperformed its risk-adjusted benchmark as measured by Jensen’s alpha.
  • None of the “Smart Beta” categories significantly outperformed the blended benchmark.
  • One of the most popular categories, dividend-oriented ETFs, significantly underperformed the benchmark by an annualized -3.81% (t=1.73)

Housing Prices Begin To Feed Into Official Inflation Figures

Official, not Shadowstats.
From Calafia Beach Pundit:

Rising home prices are contributing to inflation
The housing market recovery continues, and the ongoing rise in home prices is going to be adding to official inflation statistics over the next year or two.

As the chart above shows, nationwide housing prices are only about 8% below their 2006-2007 highs, and prices are up 4-5% over the past year. It won't be long before housing prices reach new nominal highs.

Housing prices feed into the CPI via "Owner's Equivalent Rent," which is the BLS's estimate of how much homeowners would be paying to rent the house they own. Rents don't always track home prices, of course, but over time there is a strong tendency for rents to track prices. As the chart above shows, prices have outpaced rents since 1987 by about 30%. With prices rising 4-5% a year, it's a good bet that rents are going to keep rising, and probably at a faster pace than we've seen in recent years....MORE
Feb. 2015
The Rent Is (Going to Be) Too Damn High
August 2014 
Owner-Equivalent-Rent Inflation is Probably Not a Blip

Tuesday, April 28, 2015

Jobs the Robots Won't Do: Central Banker

From Real Time Economics:

Could Machines Put Central Bankers Out of a Job? 
Federal Reserve Chairwoman Janet Yellen, second from left, at a welding demonstration at Chicago’s Daley 
College in March 2014.
The fast-changing technological infrastructure of financial transactions, including nonbank finance, digital currencies, peer-to-peer lending and crowd-funding present a challenge to the monetary policies of the Federal Reserve and other top central banks, says Randall Kroszner, a former Fed board governor.
In a paper presented at the Atlanta Fed’s 20th annual conference on financial markets, Mr. Kroszner explores the implications of technological shifts for commercial banks, whose lending-on-deposits model underpins the ability of interest-rate policy to be transmitted to the real economy.

“From a macroeconomic perspective, commercial banks–and possibly central banks–face the potential for disruptive competition in the payments system that could affect the traditional channels of monetary policy transmission,” writes Mr. Kroszner, who was a Fed governor from 2006 through 2009, through the worst of the financial crisis.

For years, the Fed has loosened or tightened credit by adjusting the amount of banks’ excess reserves, the money they park at the central bank. When the Fed added reserves to the system, interest rates fell, encouraging borrowing and spurring economic activity. When the Fed removed reserves, rates rose and the economy cooled. But now, Mr. Kroszner says, new funding sources could reduce the Fed’s control of the supply of money, rates and inflation.

“Digital currencies, mobile-phone banking, crowd-funding, peer-to-peer lending could diminish the role that traditional commercial banks play in the standard ‘money multiplier’ process through which changes in bank reserve affect the money supply and the price level,” says Mr. Kroszner, a professor at the University of Chicago Booth School of Business.

If lending is taking place increasingly outside the traditional banking system, then the Fed and other central banks would have a harder time influencing the economy....MORE
Jobs That Robots Won't Do: Clown Shortage
A Job the Robots Won't Take: Become a Financial Charlatan
Jobs the Robots Will Do: Foreign Exchange Traders Facing Extinction as Computers Replace Humans 
Robot Lobbyists Say Robots Good, Create Jobs--UPDATE
Automation Steals Jobs: Röböts Playing Motörhead

Google Plays Nice, Hooks Up With Eight European News Orgs, Contributes €150m to Venture (GOOG; EVIL)

From The Guardian:
Google is to admit to making mistakes in working with news organisations as it announces a new digital partnership with eight European publishers.

The Digital News Initiative is likely to be seen as an attempt by the company to improve its image after being accused of distorting internet search results and acting anti-competitively by European regulators two weeks ago.

The European Union is investigating whether Google has abused its 90% market share in search to illegally promote its other products and services. News is not directly affected by this investigation. However, publishers have complained for years about the impact of Google’s use of their content.

In the new partnership with eight publishers, including the Guardian, Google is to establish a working group to focus on product development as well as providing a €150m (£107m) innovation fund over three years, alongside additional training and research. Publishers are keenest to explore the product development which Google promises will aim to “increase revenue, traffic and audience engagement”.

In a speech in London on Tuesday morning, Carlo D’Asaro Biondo, head of Google’s strategic relationships in Europe, is expected to say: “We recognise that technology companies and news organisations are part of the same information ecosystem and we want to play our part in the common fight to find more sustainable models for news.

“We firmly believe Google has always aimed to be friend and partner to the news industry, but we also accept we’ve made some mistakes along the way.

“We are determined to play our part in ongoing dialogue and business partnership with the aim of building something more sustainable.”

Company insiders downplayed the suggestion that the exercise was an attempt at garnering good publicity soon after the announcement of the anti-trust probe. Talks with the publishers – which include the Financial Times, Les Echos in France, NRC Media in the Netherlands, El Pais in Spain and La Stampa in Italy, Faz and Die Zeit in Germany as well as the Guardian – started as long ago as last summer....MORE

Want to Know Where the Cameras Everywhere Culture Is Heading?

Me too.
The problem is, nobody knows, although there are clues.
From the Los Angeles Times:

In a cameras-everywhere culture, science fiction becomes reality
Science fiction writer David Brin calls it "a tsunami of lights" — a future where tiny cameras are everywhere, lighting up everything we do, and even predicting what we'll do next.

Unlike George Orwell's novel "1984," where only Big Brother controlled the cameras, in 2015, cheap, mobile technology has turned everyone into a watcher.

A snowboarder with a GoPro can post a YouTube video of a friend's 540-degree McTwist in the halfpipe. But also — as happened recently — a Penn State fraternity can upload Facebook photos of partially naked, sleeping college women.

A San Jose homeowner cowers behind a locked door while she watches an intruder stroll through her home on a surveillance video. A man launches a drone to spy on his neighbor tanning by her pool. Pet owners monitor their dogs.

With each technological advance, more of our lives — from the humdrum to the hyper-dramatic — is being caught on camera.

That includes the police, whose actions can be recorded by anyone with a camera phone. In South Carolina, a cellphone video released last week showed a police officer firing eight shots at a fleeing man's back. In San Bernardino County, news choppers captured footage of deputies punching and kicking a man as he lay face-down on the ground with his hands behind his back.

"Painting a picture that cameras are everywhere and anywhere is pretty provocative," said Ryan Martin, a technology analyst at 451 Research, but it can also present opportunities to increase accountability and improve safety.

There are 245 million surveillance cameras installed worldwide, according to research firm IHS, and the number increases by 15% a year.

Surveillance technologies are evolving in fascinating ways. Google researchers are developing a camera small enough to fit on a contact lens.

That may be years off, but other cutting-edge ideas are hitting the market now.

ParaShoot is selling a $199 HD camera that's light enough to wear on a necklace or stick to a wall or car dashboard. "Never miss the meaningful moments again," the company touts.

Another company, Bounce Imaging, is manufacturing a throwable camera shaped like a ball, with police departments as the target customer. The omni-directional cameras can literally take pictures on the fly and instantly transmit pictures to a smartphone.

"You can throw a security camera into it and as it flies through the air it's taking pictures," said Bounce chief executive Francisco Aguilar. It's like "a bunch of security cameras facing all directions in the room."

It's the size of a softball, but the company is working on shrinking it to golf-ball dimensions. The ball can also be mounted inconspicuously atop a pole for 360-degree surveillance.

A company called Axiom is making body cameras for police. In the near future, says general manager Marcus Womack,videos could be instantly uploaded to the Internet over Wi-Fi or cellular networks for live streaming.

The camera is the easy part, he said. "It's dependent on mobile networks being able to support the streaming media."

As surveillance spreads, huge volumes of video data are growing beyond the ability of humans to sift through it all. Technologists are turning to artificial intelligence to take over the grunt work....MORE
You can go with anti-facial recognition makeup as highlighted in 2013's "How to Hide From Cameras":


but this raises its own set of problems, not the least of which is taking a half hour to apply just so you can go down to the lobby.

See also:
"Imagining a Drone-Proof City in the Age of Surveillance"
"Live a modern life while frustrating the NSA"

Climateer Line of the Day: Clayton Christensen Cringes Edition

A little alliteration in the headline.
Today's CLoD occurs in a Paul Murphy production starring David Keohane:
"Here’s the plan, we’re going to disrupt the sex toy AND the undertaking business in one fell swoop."
-FT Alphaville's Further Reading post.

Continuing along the alliterative path, a quick Google search for Climateer, Clayton, Christensen turns up:

Clayton Christensen: The Next Industry Headed Toward Disruption--Consulting
Harvard's Clayton Christensen: The World's Most Influential Business Thinker (and what he's investing in)
The Guy Who Wrote the Only Business Book Steve Jobs Ever Bothered to Read Talks Academia and Big Data
"Disruption guru: Why Apple, Tesla, VCs and Academia May Die" (AAPL; TSLA)
UPDATED--Point-Counterpoint: "Disruptive" is Silicon Valley's Most Pernicious Cliché
Institutional Investor: "Controversy In the Land of Disruptive Innovation"
Professor Christensen's paper "The Process of  Theory Building" is available from him at
We have links to Christensen's thinking.

Siezed Ship Was In Iranian Waters, Wasn't U.S.-flagged Vessel No Americans on Board,

Following up on this hot mess: "Iranian force seizes US cargo ship, directs it to Iranian port: Al Arabiya" which got almost every detail wrong.
Regret the error.

"Uber is bringing its food delivery service to New York City and Chicago"

From the Verge:
This week Uber is launching its food delivery service, UberEats, in New York City and Chicago. The company has already piloted the program in Los Angeles and Barcelona. UberEats will be accessible from within Uber's existing app, although the food option only shows up when consumers are in the coverage area. The service promises dishes from "popular, iconic restaurants" delivered curbside — not to your door — "faster than it takes to boil water."

An Uber representative told The Verge that UberEats has its own dedicated drivers. Lunch options will range from $9 to $12, while dinner options will range from $10 to $15. The Uber rep said meals come with a $3 delivery fee ($4 in New York City), regardless of the number of meals you order.

In a blog post about the expansion, Uber says it plans to "curate" menus, which will change daily, just like any other artisanal app experience....MORE

"Iranian force seizes US cargo ship, directs it to Iranian port: Al Arabiya"

From Reuters via Lebanon's Daily Star:
Reuters DUBAI: Saudi-owned Al Arabiya television said an Iranian "force" seized a U.S. cargo ship in the Gulf on Tuesday and directed it to the Iranian port of Bandar Abbas.

The channel said the force had "opened fire" on the U.S. ship, which had 34 U.S. sailors aboard. It gave no further details. The U.S. Fifth Fleet in the Gulf Arab kingdom of Bahrain had no immediate comment on the report.

"Craigslist is the unsung hero of the on-demand economy"

First Craigslist destroyed the newspaper industry by upending the classified ad business that had sustained the biz and then they made the "gig" economy a thing, and now this.
Pretty impressive.

From Fusion:
The stars of Silicon Valley’s on-demand economy—Uber, Lyft, Postmates, and their ilk—are known for sleek apps designed with extreme attention to detail, and focused on creating a seamless experience for their customers. But these companies wouldn’t exist—at least not in the forms we know them today—without the existence of a janky, hard-to-use 20-year-old classifieds site that looks like it was last updated in the MS-DOS era.

I’m talking, of course, about Craigslist. The Web 1.0 clearinghouse for jobs, goods, and services has been critical to the growth of companies like Uber and Lyft, which use it to recruit drivers at the staggering rate needed to keep up with passenger demand. Without Craigslist, on-demand companies would have to pound the pavement looking for more people to provide their services. And there’s no guarantee they would find them.
Screenshot 2015-03-27 00.19.44
Yesterday, Zen99, a company that provides information for so-called “1099 workers,” released a study of Craigslist’s effects on the on-demand economy (and vice versa). The study scraped Craigslist for listings posted by the largest on-demand companies in Silicon Valley on a random day in March, in 10 major U.S. cities including New York, Los Angeles, and San Francisco. The findings were staggering.

According to Zen99’s estimates, Uber, Lyft, Instacart, and Postmates will spend a combined $8 million annually just on Craigslist ads. (Most Craigslist postings are free, but the site charges companies $25 per listing for jobs posted in major U.S. cities.) On March 15 alone, Zen99 estimates that Uber spent $7,225 to place driver ads on Craigslist—which isn’t surprising, considering how many listings a cursory search of San Francisco’s site turned up.
Screenshot 2015-03-27 00.23.37
Despite trouncing other on-demand companies when it comes to money in the bank, Uber actually wasn’t the biggest spender in the study. That was Postmates, the deliver-anything app, which spent $5,325 on Craigslist ads in San Francisco, and $8,375 in the ten-city group. On an annual basis, that adds up to more than $3 million spent just to recruit delivery couriers on a single site. (One explanation may be that, since Uber is far better-known than Postmates, more of its recruiting happens by word-of-mouth, or through its referral program.)

In addition to studying Craigslist data, Zen99 measured the change in cost of Google AdWords ads for certain popular search terms like “delivery driver” and “uber driver job.” Most of the keyword searches had gotten at least 50 percent more expensive since March of last year; one search, “part time jobs sf,” had increased in price by 250 percent in a year, indicating that many more companies are trying to advertise against those terms....MORE

Audi Is Making Diesel Fuel From Water And Carbon Dioxide

Not a new technology (South Africa is still producing liquid fuels from coal using F-T) but definitely interesting in the use of CO2 as the carbon feedstock.
From IFL Science:
It’s the holy grail in energy production: produce a fuel that is both carbon neutral and can be poured directly into our current cars without the need to retrofit. There are scores of companies out there trying to do just that using vegetable oil, algae, and even the microbes found in panda poop to turn bamboo into fuel.

This week, German car manufacturer Audi has declared that they have been able to create an "e-diesel," or diesel containing ethanol, by using renewable energy to produce a liquid fuel from nothing more than water and carbon dioxide. After a commissioning phase of just four months, the plant in Dresden operated by clean tech company Sunfire has managed to produce its first batch of what they’re calling “blue crude.” The product liquid is composed of long-chain hydrocarbon compounds, similar to fossil fuels, but free from sulfur and aromatics and therefore burns soot-free.

The first step in the process involves harnessing renewable energy through solar, wind or hydropower. This energy is then used to heat water to temperatures in excess of 800oC (1472oF). The steam is then broken down into oxygen and hydrogen through high temperature electrolysis, a process where an electric current is passed through a solution.

The hydrogen is then removed and mixed with carbon monoxide under high heat and pressure, creating a hydrocarbon product they’re calling "blue crude." Sunfire claim that the synthetic fuel is not only more environmentally friendly than fossil fuel, but that the efficiency of the overall process—from renewable power to liquid hydrocarbon—is very high at around 70%. The e-diesel can then be either mixed with regular diesel, or used as a fuel in its own right.

But all may not be as it seems. The process used by Audi is actually called the Fischer-Tropsch process and has been known by scientists since the 1920s. It was even used by the Germans to turn coal into diesel during the Second World War when fuel supplies ran short. The process is currently used by many different companies all around the world, especially in countries where reserves of oil are low but reserves of other fossils fuels, such as gas and coal, are high....MORE

A Look At A Second Water Focused Hedge Fund

Before we get to the story about Water Asset Management at I'll repeat the introduction to our 2014 post on Summit Global Management "A Look at the World's First Water-focused Hedge Fund":
Since the first Earth Day in April 1970 and more importantly since the establishment of the EPA in December of that year, folks have been trying to make money out of water in the U.S..
Put simply, the returns have not been market-beating.

Because so much of the opportunity was my-little-crony stuff, at the whim of politicians, there was no consistency of growth at a time when other portfolio investments offered very competitive comparisons.
The alternative was to own the cash flow, private equity style, but unless one felt a passion for grit chambers and sludge pans it was pretty pedestrian, utility type ROI.

In fact the most reliable water investment in the U.S. has probably been York Water Company of York PA.
They've been paying dividends for 199 consecutive years and just announced their 575th divi.
The announcement carries the boilerplate "This release contains forward-looking statements"....
From Barron's:

Water Asset Management: Hunting Liquid Assets
Water Asset Management managers Disque Deane Jr., Matt Diserio, and Marc Robert are betting that water prices will float higher still.

Water wasn’t an obvious investment theme when Matt Diserio and Disque Deane Jr. launched their hedge fund 10 years ago. Now, every day brings news of a water shortage or drought. So have the water stocks targeted by their Manhattan-based Water Asset Management enjoyed a panicky rerating?
Not yet. Drought-parched headlines still get upstaged by the latest dot-com initial public offering, so water remains mispriced by consumers and investors. That’s good for the half-billion dollars that Water Asset has in an equity hedge fund and a newer long-only fund focused on regulated water services, water resources, and the suppliers of pipes, meters, and treatment technologies. Upside remains.
“It is an old industry,” says Diserio, who manages the firm’s stock portfolio, “but it is just becoming a recognized asset class.”
Water investing’s upside is ensured by the urgency of our water needs and the fact that this resource remains very cheap in an absolute sense—compared with natural resources like timber or farmland, oil or gold. The average American family’s water bill is under $40 a month, notes Deane, giving the industry room to charge more to cover hundreds of billions of dollars in deferred maintenance and upgrading.
There’s no shortage of dire news. California just imposed the first statewide water restrictions in its history. Brazil’s megacity São Paulo may run dry this year. At Davos, the World Economic Forum declared that water crises will be the decade’s biggest social and economic risks. Yet, the two money managers believe that the world’s water problems are solvable. “There is no reason why any place in the world should not have water and wastewater services,” says Diserio. “The technology is there. The capital will be there. It is just a question of being implemented.”
Diserio, 55, ran portfolios at several long/short hedge funds before starting WAM in 2005 with college chum Deane, also 55, who had spent a couple of decades working and investing in water businesses. As they launched their long/short fund, they were joined by WAM’s Chief Operating Officer Marc Robert, who had run equity research sales at Morgan Stanley. Now they’ve got a crew of analysts and advisors with expertise in water-utility operation, resources, regulation, economics, and technology.
While dowsing for long and short opportunities in water stocks, WAM has acquired water rights directly, waged activist campaigns, and even taken private a water utility. From the long/short fund’s start in 2006 though 2014, it averaged a compounded 7.79% annual return (after fees)—a bit less than the 7.98% of the Standard & Poor’s 500 but ahead of the MSCI All Country World Index’s 5.63%. The fund’s shorts let it outperform those benchmarks in down markets but have been a drag as markets have hit new highs. Hence the new long-only fund, where WAM hopes to extend the performance of its long portfolio, which averaged an 11.61% return from 2006 through 2014, comfortably ahead of benchmarks, such as the 9.49% of the S&P Global Water Index. The long/short fund has a traditional “2% and 20%” fee structure, while the long-only fund’s investors can choose to pay a 1.25% management fee and nothing for performance.
Sustainable water investments squarely fit within mandates for environmental, social, and governance investing. A supply of clean water prevents the spread of disease and frees women from the burden of water carrying. “The first rung to social stability,” says Robert, “is the ability to have access to clean water and sanitation.”
Some of the greatest need for infrastructure spending is, ironically, in developed places like Spain, Italy, and parts of the U.S., where water has been priced too cheaply and capital investment deferred on systems that are 50 to 100 years old.
AMONG THE SEVERAL DOZEN long holdings in WAM’s portfolios, one of their favorites is the global water utility Suez Environnement (ticker: SEV.France). The company provides drinking water and wastewater treatment in France, Spain, and a bunch of other countries including the U.S., where its United Water subsidiary is growing by striking deals to manage municipally-owned water plants, such as a recent one to run the sewage treatment plants of Nassau County, on New York’s Long Island.

Diserio notes that at the current price of 17.82 euros ($19.30), Suez trades at about 10 times free cash flow and has a 4% dividend yield. He and his colleagues think that Suez is worth €20. “They are an example of a company that is well positioned to generate returns in the wave of privatization activity that is unfolding,” says Diserio.
Another utility with predictable earnings growth is Aqua America (WTR), a company with service territories and assets in states like Pennsylvania and New Jersey, where governments are interested in upgrading water infrastructure and have authorized the company to earn returns on equity between 9% and 10%. Recent regulatory proceedings will allow Aqua to raise its rates....MORE

Saturday, April 25, 2015

Arrivistes: “Do you realize,” he sneered, “that I could charter a helicopter right now, and we could be having dinner in Napa?”

As Churchill's detective/bodyguard was reputed to have commented on meeting a certain American "He has the whiff of the parvenu about him".
From Pacific Standard:

Dispatches From the Russian River: Pioneers and Profiteers
Like the '49ers before them, modern-day techies arrive with a dream and feel as if they deserve to realize it.
San Francisco harbor during the Gold Rush. (Photo: Public Domain)

San Francisco harbor during the Gold Rush. (Photo: Public Domain)

The man-child standing before me in the coffee shop was wearing a faded Facebook hoodie, which means something very specific in San Francisco. He wanted people to know that he was an early employee of Facebook, and that in 2012, when the company went public, he became a millionaire. He looked to be in his late 20s, and since it was 11 o’clock in the morning on a Tuesday, it was clear that employment was optional. He could do as he pleased, and being told “no” wasn’t to his liking.

When I first moved to San Francisco from New York, I hadn’t been aware of these kinds of men. Wall Street frat guy? Neurotic comedian? Nathaniel P. Brooklyn writer? Of course. But these guys are different. I had to learn that I wasn’t just turning down his offer of coffee; I was embodying B.M. (Before Money), his personal dark age. It’s a period he would rather forget, and from which he, like so many young men like him, seemed permanently scarred.

“Do you realize that I could charter a helicopter right now, and we could be having dinner in Napa?”

I knew all this, so I went out of my way to thank him kindly, and with a sweeping gesture, pointed to my reasons: My own cup of coffee was filled to the brim, still too hot to drink. I was guest teaching, and had stacks of student’s papers piled up in front of me. I was holding a red pen. I excused myself and turned back to my work, which is when I saw his fingers drumming on my table, as if I had acted out in his classroom.

“Do you realize,” he sneered, “that I could charter a helicopter right now, and we could be having dinner in Napa?”

The techies are only the most recent wave of newly wealthy men with big appetites and a fathomless sense of privilege; their kind has been around since my beloved state’s inception. San Francisco’s modern day techies have more in common with the '49ers than just their demographic profile, which is overwhelmingly young, single, and male: They arrive with a dream, and they feel as if they deserve to realize that dream—very quickly. Mining, panning, and coding are hard work, but no one intends to do it for a long time. A flash in the pan, a gold nugget in a sluice, or a successful iPhone app is all they need to expand or cash out and move on. That’s the pioneer spirit.

Women have always been a hot commodity in San Francisco. There were 50 men to a single woman in San Francisco in the 1850s, and that lopsided ratio grew as wide as 300 to one in Gold Country. Early settler Mary Jane Megquier wrote that women put on “aprons full of gold” when they arrived, enjoying the rare opportunity to make money and, by extension, gain some freedom. They were laundresses, teachers, prostitutes, cooks, merchants, and entertainers....MORE

Sterling, The Dollar and The Euro

From Marc to Market:

The US dollar finished the week on seemingly fragile footing. The question investors are asking is if the steady drum beat of disappointing US economic data turns the dollar's bull case on it head.  The Europe and Japanese side of the divergence have not changed, but the US side has.  
On the other hand, the minus 20 bp deposit rate is not the floor for short-term rates in the euro area.  A resolution of the Greek issues continues to prove elusive.  The outcome of the UK election on May 7 also poses substantial risk.  We suspect there can be a dramatic response if the US Congress fails to grant the President trade promotion authority (fast-track).   The US April employment report on May 8 will be more important than usual, especially after the disappointing March report.
The euro, sterling, and the yen haven largely range-bound for at least the past month.  Our reading of the technicals suggests there is more room before the dollar's lower bound is met.  For the euro, that is found in the $1.1000-50 area.  Against the yen, the lower end of the dollar's range is near JPY118.00, but there is technical support in the JPY118.30-50 area.  
Sterling is the most interesting of the three from a technical perspective.  Leveraged accounts reportedly have begun positioning for a post-election sterling recovery, and this appears to have help push cable to its 100-day average ($1.5185) for the first time since late February, when it was turned back from that average.  It has not been above its 100-day average since last August.  A break above it would target the $1.5250 area immediately and bring the top of this year's range (~$1.5500-50) into view.  
The upside momentum carried sterling past the top of its Bollinger Band (~$1.5120), as stops were triggered.  The market is stretched, and some near-term consolidation is likely.  The risk is that it is short-lived and that the market uses a constructive Q1 GDP report on Tuesday (expected 0.5% quarter over quarter) to extend sterling's gains.  However, we will be attentive for a reversal pattern the on daily charts, and more inclined to see this rally as a better selling opportunity....

The Act of Thinking Can Accelerate Brain Tumor Growth

Yikes. Shut it down, shut it down,  Ōm shanti shanti shanti, Ōm.

From NPR:
 A color-enhanced cerebral MRI showing a glioma tumor.

"Thoughts Can Fuel Some Deadly Brain Cancers"
The simple act of thinking can accelerate the growth of many brain tumors.

That's the conclusion of a paper in Cell published Thursday that showed how activity in the cerebral cortex affected high-grade gliomas, which represent about 80 percent of all malignant brain tumors in people.
"This tumor is utilizing the core function of the brain, thinking, to promote its own growth," says Michelle Monje, a researcher and neurologist at Stanford who is the paper's senior author.

In theory, doctors could slow the growth of these tumors by using sedatives or other drugs to reduce mental activity, Monje says. But that's not a viable option because it wouldn't eliminate the tumor and "we don't want to stop people with brain tumors from thinking or learning or being active."

Even so, the discovery suggests other ways to slow down some of the most difficult brain tumors, says Tracy Batchelor, who directs the neuro-oncology program at Massachusetts General Hospital and was not involved in the research.

"We really don't have any curative treatments for high-grade gliomas," Batchelor says. The discovery of a link between tumor growth and brain activity "has opened up a window into potential therapeutic interventions," he says.

The discovery came from a team of scientists who studied human glioma tumors implanted in mouse brains. The scientists used a technique called optogenetics, which uses light to control brain cells, to increase the activity of cells near the tumors.

The team wanted to know whether this high level of activity would make the glioma grow more quickly. "And it turns out that it did,"...MORE

New York Fed: "Credit Supply and the Housing Boom"

From the Federal Reserve Bank of New York's Liberty Street Economics blog:

There is no consensus among economists as to what drove the rise of U.S. house prices and household debt in the period leading up to the recent financial crisis. In this post, we argue that the fundamental factor behind that boom was an increase in the supply of mortgage credit, which was brought about by securitization and shadow banking, along with a surge in capital inflows from abroad. This argument is based on the interpretation of four macroeconomic developments between 2000 and 2006 provided by a general equilibrium model of housing and credit.

The financial crisis precipitated the worst recession since the Great Depression. The spectacular rise in house prices and household debt during the first half of the 2000s, which is illustrated in the first two charts, was a crucial factor behind these events. Yet, economists disagree on the fundamental causes of this credit and housing boom.

Real House Prices

Household Mortgages-to-GDP Ratio
A common narrative attributes the surge in debt and house prices to a loosening of collateral requirements for mortgages, associated with higher initial loan-to-value (LTV) ratios, multiple mortgages on the same property, and expansive home equity lines of credit....MORE

"Private Equity Courts The Well-to-Do"

In our little corner of the investing universe there is too much money chasing too few energy deals.
In everything from solar yieldcos to oil & gas to midstream, there's an awful lot of money sloshing around.
From Barron's Penta:
Blackstone Group, the giant private-equity fund manager, is increasingly targeting wealthy individuals to invest in its ­offerings. Big institutional investors still provide the vast ­majority of capital for these alternative investments, but their commitments haven’t kept pace with fund-raising needs. That has prompted firms like Blackstone to go after well-heeled ­investors and their financial advisors to help fill the gap.

The shortfall has opened an opportunity for wealthy investors interested in diversifying their portfolios to include buyout, ­venture-capital, real estate, and various hedge funds. Account minimums have come down considerably to accommodate individuals, though the fees still make the funds pricey investments.

Blackstone’s (ticker: BX) efforts already are bearing fruit. The company says that roughly 12% of its $310 billion in assets under management comes from high-net worth investors, more than twice the 5% they provided in 2008. Carlyle Group (CG) and KKR & Co. (KKR) also are hunting for individuals’ money.

Overall, high-net-worth investors made up 10% of the money raised for private-equity funds closed between 2012 and 2014, versus 3% in 2009 to 2011, according to private-equity tracker Preqin. In contrast, public pension funds’ total contributions dropped from 28% to 22%. “I ­expect you’ll see a lot more coming in from individual investors,” said David Rubenstein, co-founder of Carlyle Group, on a recent conference call.

Blackstone reportedly raised a hefty $14.5 billion from institutional investors in less than four months for a popular real estate fund. But it also wants to sell an additional $1.3 billion of the fund to high-net-worth investors. It’s just the latest example of Blackstone’s efforts. Last year, it raised a total of $57 billion, with $11 billion coming from high-net-worth investors.

The strategy of reaching out to the wealthy began during the financial crisis when private equity stumbled, losing an estimated 30% to 40% in certain categories. Money raised for private-equity funds industrywide fell 57% between 2008 and 2010, according to Preqin. Even last year’s $539 billion in funds raised fell well short of the precrisis high of $688 billion....MORE