There are 1,480 living species of cacti, all but one indigenous to the Americas. The journal Nature Plants recently studied the level of danger to almost every species on earth––the largest study of any plant taxon––and the alarming result was 31 percent are threatened, the fifth most of any taxonomic group, just behind amphibians and corals. Loss of habitat to humans and the clumsy plodding of livestock factored highly. No surprise. But what shocked the report’s author was that the largest extinction threat comes from horticulture, specifically the illegal collection and trade of cacti. ... Last October, Chinese and German customs agents busted a smuggling ring and seized 1,250 plants, some rare and endangered cacti. As might be expected, there are few scholarly reports investigating the cactus black market. One such report, called “Prickly Trade” (the cactus world is full of egregious puns), estimated that in one three-year period people illegally plucked about 100,000 cacti out of the Texas wild or smuggled them over the Mexican border. That was in 2003. Then Internet commerce arrived. A report from 2012 monitored just 24 online cacti sellers for 1,000 purchases. These were not just any 1,000 cacti. Each was listed as an “Appendix I” specie by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which are plants threatened with extinction. To trade any of these, a seller needs a permit. Of the 1,000 cacti researchers monitored, the report found at least 90 percent had traded hands illegally.
As we have observed in the past, financial markets appear to solely focus on one major risk/return catalyst at any given time, before, like a bored teenager, turning attention to the “next new thing.” Over the past year and a half, we have seen primary market focus transition from the dramatic decline in oil prices, to economic stresses in China, and most recently to the forthcoming referendum in the United Kingdom and the possibility of “Brexit.” We are not for a moment suggesting that these factors are unimportant, as indeed they are all critical parts to a broader puzzle, but we would suggest that stepping back to apprehend the full image on the puzzle is vital when too many market participants are overly focused on one part of it. In fact, we think that such an overly limited focus in a world of complex market crosscurrents may be part of what leads many to underperform. To that end, we seek to take a broader view with our market outlook. ... In this edition of the outlook we begin by sorting through and evaluating some partial market myths that have recently been promulgated to explain market volatility. These include exaggerated concerns that the volatility is due to bond market illiquidity, or overdone assertions that markets are being driven higher and lower primarily on the back of oil price movements. Rather, we think that secular structural changes involving demographic trends and profound technological innovations are much more important considerations when judging those forces that are truly impacting economic and asset valuation dispersions. Further, we believe these secular challenges should also be the focus of the risk factors that represent the major fault lines in markets today, or the locations of potentially serious left tail risks.
- Also: Project Syndicate - The Fear Factor in Global Markets < 5min
- Also: Financial Times - Central banks prove Einstein’s theory < 5min
- Also: Wall Street Journal - The High Consequences of Low Interest Rates < 5min
- Also: CFA Institute - Policy Divergence and Investor Implications 5-15min
- Also: Bloomberg - Japan Negative Rates Alchemy Beats Australia's Highest AAA Yield < 5min
To traders at the famous Royal FloraHolland flower market near Amsterdam, Vincenzo Crupi was just another businessman helping to make the Netherlands the largest exporter of cut flowers in the world. ... To the police, Crupi was a mafia suspect allegedly concealing drugs worth millions of dollars alongside fragrant bouquets he trucked to Italy. By last year they were hot on his scent. So they bugged his offices at the flower market. ... In conversations recorded by hidden microphones and cameras, the 52-year-old Italian was heard speaking at length about mafia affairs, according to previously unpublished details of the investigation contained in 1,700 pages of Italian court documents reviewed by Reuters. ... Crupi was heard allegedly discussing drug deals, arms shipments and a lethal power struggle between mafia members in Canada. ... Police and prosecutors say the case sheds new light on the ‘Ndrangheta – the Calabrian mafia – and the way it has spread its tentacles from southern Italy into dozens of countries across five continents. ... For much of the last century, the Calabrian mafia made its money from extortion and kidnappings. Then in the late 1980s and early 1990s the group, which consists of about 160 patriarchal clans, bet big on the cocaine trade. ... Its success at drug smuggling catapulted the ‘Ndrangheta past its more storied Sicilian rival, the Cosa Nostra, in both wealth and power. Italian authorities now consider the ‘Ndrangheta to be Europe’s single biggest importer of cocaine.
My point is a simple one: Innovations are rarely life-changing events nowadays. Almost as important, at least from a macro-economic point of view, they are not likely to have nearly the same impact on productivity as the car had on the productivity of my parents, or the washing machine had on my grandmother’s ability to free up precious time. Productivity enhancements simply get more and more marginal, even if we think that all these new gadgets are wonderful. ... I am aware that there are people out there who would disagree with that statement; they don’t think the marginal impact of innovations is diminishing at all, but the macro-economic data suggests otherwise. ... at the most fundamental level, the change in economic output is equal to the sum of the change in the number of hours worked and the change in the output per hour. ... The workforce will fall nearly 1% per year in Japan and Korea between now and 2050; it will fall almost 0.5% per year in the Eurozone but only marginally in the UK, whereas it will rise almost 0.5% per year in the U.S. Significant regional differences in economic growth are therefore to be expected, but economic growth will be weak everywhere, at least when compared to what we got used to between the early 1980s and the Global Financial Crisis (‘GFC’). Those who argue that GDP growth will be disappointingly low for many years to come are on very solid ground. ... Some dynamics behave in the New Normal no different from the way they used to, but many don’t. In the following, I will review some of the outliers, and I will explain why (and how) that is an opportunity for investors, as long as the investment strategy is adjusted accordingly. Only the most naïve would expect an investment strategy that worked well in the great bull market to deliver similar, spectacular results in the years to come.
The past five years have been challenging for long-term value-based asset allocation. We do not believe this constitutes a paradigm shift, dooming such strategies in the future. The basic driver for long-term value working historically has been the excessive volatility of asset prices relative to their underlying fundamental cash flows, and recent history does not show any evidence of that changing. Outperforming the markets given that pattern requires either betting that the excessive swings will reverse over time or accurately predicting what those excessive swings will be. The former strategy amounts to long-term value-based investing, while the latter requires outpredicting others as to both what surprises will hit the markets and how the markets will react to them. Our strong preference is to focus on long-term value, despite the inevitable periods of tough performance that strategy will entail. ... The volatility of U.S. stocks since 1881 has been a little over 17% per year. The volatility of the underlying fair value of the market has been a little over 1% per year. Well over 90% of the volatility of the stock market cannot be explained as a rational response to the changing value of the stream of dividends it embodies. This means that the volatility is due to some combination of changing discount rates applied to those cash flows, and changes to expectations of future dividends that turned out to be incorrect. It is difficult to determine exactly which has been the driver at any given time, but there doesn’t seem to be a lot of evidence for changing discount rates having been a major force. Even in the most extreme overvaluation in U.S. stock market history, the 1999-2000 internet bubble, none of the investors we heard explaining why the stock market was rational to have risen to such giddy heights explained it on the basis that future returns should be lower than history.
Since banks charge transaction fees and bake in markups to exchange rates, the duo’s frequent currency transfers were costing them a small fortune. One year Käärmann thought HSBC had lost some of his Christmas bonus because 500 euros less than expected arrived in his account. ... The Estonian software engineers devised a simple solution: Hinrikus would transfer euros from his Estonian bank account into Käärmann’s Estonian account, while Käärmann would transfer pounds from his British HSBC account to Hinrikus’ at Lloyds. This would save them on international transfer fees, as well as on currency drag since they used the real exchange rate, known as the midmarket rate. Soon they had a Skype chat going with other Estonians who wanted to exchange money this way. Eventually this Skype-linked money exchange forum morphed into TransferWise. ... TransferWise uses a system not unlike the ones big financial institutions use to “cross-trade” securities, without incurring costs or commissions, by internally matching buyers and sellers. In this case the official midmarket price offers clarity–neither side is speculating–so it’s simply a balancing process, as TransferWise’s computers simultaneously verify that both sides have the money ready to swap. Indeed, its matching system means funds rarely cross international borders. ... The company is now producing roughly $5 million in revenue a month versus about $1 million per month a year ago. ... Of the $150 trillion in currency-transfer volume annually, the consumer portion amounts to an estimated $3 trillion. ... Still, that’s a decent-size market, with the revenue generated from it exceeding $45 billion.
All we know at this point in time is that Brexit will (probably) happen at some point over the next 2-3 years, but we still have no idea what the actual implications will be. ... In that context I note that it has taken Canada ten years to negotiate their free trade agreement with the EU, and that was prioritised by the EU negotiators. The EU have already declared that the UK will not be prioritised. On top of that, the UK will now have to negotiate trade agreements with pretty much every country around the world that it does business with – a monumental task, and the legal resources to do that job do not exist, according to a government official. ... As events unfolded, it would probably be fair to say that the vote wasn’t really about what it was supposed to be about; that got lost along the way. No, it turned into a referendum for or against immigration and a protest vote against Brussels and London. The amount of bitterness in large parts of the country – and in particular in the North – is such that many saw the referendum as an opportunity to give Brussels and London (or at least the elite in those cities) a slap in the face. ... Now, a couple of weeks after the referendum, we are admittedly in a bit of a dilemma – almost akin to a prisoner’s dilemma. The more financial markets puke over the next few months, the more likely lawmakers on both sides are to forget past disagreements and insults, and work on a solution that would keep the UK in the EU. On the other hand, if financial markets get a whiff of something about to happen - a possible compromise solution – financial markets will perform better, and thus make it less likely to happen.
All we know at this point in time is that Brexit will (probably) happen at some point over the next 2-3 years, but we still have no idea what the actual implications will be. It all depends on the forthcoming negotiations between the UK and the EU (and the rest of the world), and David Cameron and Boris Johnson probably both did the wise thing and chickened out, because that isn’t going to be much fun. ... In that context I note that it has taken Canada ten years to negotiate their free trade agreement with the EU, and that was prioritised by the EU negotiators. The EU have already declared that the UK will not be prioritised. On top of that, the UK will now have to negotiate trade agreements with pretty much every country around the world that it does business with – a monumental task, and the legal resources to do that job do not exist, according to a government official. ... As events unfolded, it would probably be fair to say that the vote wasn’t really about what it was supposed to be about; that got lost along the way. No, it turned into a referendum for or against immigration and a protest vote against Brussels and London. The amount of bitterness in large parts of the country – and in particular in the North – is such that many saw the referendum as an opportunity to give Brussels and London (or at least the elite in those cities) a slap in the face.
I believe my lack of business education was an asset because it encouraged me to ask a lot of questions and to think from first principles. I recall going to an equity research morning call and hearing the utility industry analyst suggest the slow-growing companies under his coverage deserved price-earnings (P/E) multiples in the high teens and the tobacco industry analyst imply that his fast-growing companies should trade at P/E’s in the mid-teens. How does that make sense? I was dropped into a world of rules-of-thumb, old wives’ tales, and intuitions. ... My first breakthrough occurred when a classmate in my training program handed me a copy of Creating Shareholder Value by Alfred Rappaport.3 Reading that book was a professional epiphany. Rappaport made three points that immediately comprised the centerpiece of my thinking. The first is that the ability of accounting numbers to represent economic value is severely limited. Next, he emphasized that competitive strategy analysis and valuation should be joined at the hip. The litmus test of a successful strategy is that it creates value, and you can’t properly value a company without a thoughtful assessment of its competitive position. ... The final point is that stock prices reflect a set of expectations for future financial performance. A company’s stock doesn’t generate excess returns solely by the company creating value. The company’s results have to exceed the expectations embedded in the stock market.
1. Be numerate (and understand accounting).
2. Understand value (the present value of free cash flow).
3. Properly assess strategy (or how a business makes money).
4. Compare effectively (expectations versus fundamentals).
5. Think probabilistically (there are few sure things).
6. Update your views effectively (beliefs are hypotheses to be tested, not treasures to be protected).
7. Beware of behavioral biases (minimizing constraints to good thinking).
8. Know the difference between information and influence.
9. Position sizing (maximizing the payoff from edge).
10. Read (and keep an open mind).
Following 17 months of mostly negative equity returns in Europe, very recently, I have noticed an inclination amongst European investors to increase the risk profile in their portfolios. They may not exactly be going for broke (yet), but the willingness to take more risk is clearly on the rise. The rising appetite for risk could be driven by one of two factors. Investors could either be turning more optimistic, or it could be the result of less benign factors, such as a need to generate higher returns, whether they really believe in such an outcome or not. ... In short, I suspect investors are chasing returns that (I think) are unrealistic, and it is not the first time that happens. When investors are under extreme pressure, as I think many are now, they sometimes behave quite irrationally. They do things they would have sworn only a short while earlier they would never do. ... Is there anything else investors could do to raise the overall return level and, in particular, to generate more income without necessarily taking more risk?
Scientists are beginning to understand why these ‘mini Wall Streets’ work so well at forecasting election results — and how they sometimes fail. ... Experiments such as this are a testament to the power of prediction markets to turn individuals’ guesses into forecasts of sometimes startling accuracy. That uncanny ability ensures that during every US presidential election, voters avidly follow the standings for their favoured candidates on exchanges such as Betfair and the Iowa Electronic Markets (IEM). But prediction markets are increasingly being used to make forecasts of all kinds, on everything from the outcomes of sporting events to the results of business decisions. Advocates maintain that they allow people to aggregate information without the biases that plague traditional forecasting methods, such as polls or expert analysis. ... sceptics point out that prediction markets are far from infallible. ... prediction-market supporters argue that even imperfect forecasts can be helpful. ... People have been betting on future events for as long as they have played sports and raced horses. But in the latter half of the nineteenth century, US efforts to set betting odds through marketplace supply and demand became centralized on Wall Street, where wealthy New York City businessmen and entertainers were using informal markets to bet on US elections as far back as 1868. ... Friedrich Hayek. He argued that markets in general could be viewed as mechanisms for collecting vast amounts of information held by individuals and synthesizing it into a useful data point — namely the price that people are willing to pay for goods or services.
If water is not managed better, today’s crisis will become a catastrophe. By the middle of the century more than half of the planet will live in areas of “water stress”, where supplies cannot sustainably meet demand. ... Where water is available, when and in what condition matters hugely. About 97% of the water on earth is salty; the rest is replenished through seasonal rainfall or is stored in underground wells known as aquifers. Humans, who once settled where water was plentiful, are now inclined to shift around to places that are less well endowed, pulled by other economic forces. ... As people get richer, they use more water. They also “consume” more of it, which means using it in such a way that it is not quickly returned to the source from which it was extracted. ... To make matters worse, few places price water properly. Usually, it is artificially cheap, because politicians are scared to charge much for something essential that falls from the sky. This means that consumers have little incentive to conserve it and investors have little incentive to build pipes and other infrastructure to bring it to where it is needed most. ... around a fifth of the world’s aquifers are over-exploited. This jeopardises future use by causing contamination. It also damages the layers of sand and clay that make up aquifers, thereby reducing their capacity to be replenished. ... People do not drink much water—only a few litres a day. But putting food on their tables requires floods of the stuff. Growing 1kg of wheat takes 1,250 litres of water; fattening a cow to produce the same weight of beef involves 12 times more. Overall, agriculture accounts for more than 70% of global freshwater withdrawals. ... estimated that agricultural production will have to rise by 60% to fill the world’s bellies. This will put water supplies under huge strain. ... Hydrologists expect that a warming climate will see the cycle of evaporation, condensation and precipitation speed up. ... There is no single solution for the world’s water crisis. But cutting back on use, improving the efficiency of that use and sharing out water more effectively would all help.
Sustainable value creation has two dimensions: the magnitude of the spread between a company’s return on invested capital and the cost of capital and how long it can maintain a positive spread. Both dimensions are of prime interest to investors and corporate executives. ... Sustainable value creation as the result solely of managerial skill is rare. Competitive forces and endogenous variance drive returns toward the cost of capital. Investors should be careful about how much they pay for future value creation. ... Economic moats are almost never stable. Because of competition, they are getting a little bit wider or narrower every day. This report develops a systematic framework to determine the size of a company’s moat.
It was in an earlier work, 1759’s The Theory of Moral Sentiments, that Smith put his finger on the social and psychological impulses that push people to accumulate objects and gadgets. People, he observed, were stuffing their pockets with “little conveniences,” and then buying coats with more pockets to carry even more. By themselves, tweezer cases, elaborate snuff boxes, and other “baubles” might not have much use. But, Smith pointed out, what mattered was that people looked at them as “means of happiness." It was in people’s imagination that these objects became part of a harmonious system and made the pleasures of wealth “grand and beautiful and noble." ... This moral assessment was a giant step towards a more sophisticated understanding of consumption, for it challenged the dominant negative mindset that went back to the ancients. ... Rather than being passive, the consumer is now celebrated for actively adding value and meaning to media and products. ... there have been many prophecies and headlines that predict “peak stuff” and the end of consumerism. ... Such forecasts sound nice but they fail to stand up to the evidence. After all, a lot of consumption in the past was also driven by experiences, such as the delights of pleasure gardens, bazaars, and amusement parks. In the world economy today, services might be growing faster than goods, but that does not mean the number of containers is declining—far from it.
It’s been six years since we first wrote about the coming G-Zero world—a world with no global leader. The underlying shifts in the geopolitical environment have been clear: a US with less interest in assuming leadership responsibilities; US allies, particularly in Europe, that are weaker and looking to hedge bets on US intentions; and two frenemies, Russia and China, seeking to assert themselves as (limited) alternatives to the US—Russia primarily on the security front in its extended backyard, and China primarily on the economic front regionally, and, increasingly, globally. ... These trends have accelerated with the populist revolt against “globalism”—first in the Middle East, then in Europe, and now in the US. Through 2016, you could see the G-Zero picking up speed ... with the shock election of Donald Trump as president of the US, the G-Zero world is now fully upon us.
1. Independent America: Trump rejects the comparative weakness of the presidency, and he wants to more directly project American power in service of US national interests
2. China overreacts: Xi will be extremely sensitive to external challenges to his country’s interests at a time when all eyes are on his leadership
3. A weaker Merkel: Could the Europeans have resolved their financial crises without the Germans forcing a solution?
4. No reform: The reform needle won’t move in 2017. Save for a few bright spots, money won’t know where to flow
5. Technology and the Middle East: Technology, a force for economic growth and efficiency, also exacerbates political instability
6. Central banks get political: In the US, there’s risk of an open conflict between the Federal Reserve and the White House
7. The White House versus Silicon Valley: Technology leaders from California, the major state that voted in largest numbers against Trump in the election, have a bone to pick with the new president
8. Turkey: Ever-fewer checks on executive power will leave the private sector vulnerable to political whims
9. North Korea: It’s making consistent progress on an intercontinental ballistic missile capability that would allow it to hit the West Coast of the US with a nuclear weapon
10. South Africa: South Africa’s political infighting will undermine the country’s traditional role as a force for regional security
Red Herrings: US domestic policy, India versus Pakistan, Brazil
1. Still brooding about his loss of the popular vote, Donald Trump vows to win over those who oppose him by 2020. ...
2. The combination of tax cuts on corporations and individuals, more constructive trade agreements, dismantling regulation of financial and energy companies, and infrastructure tax incentives pushes the 2017 real growth rate above 3% for the U.S. economy. Productivity improves for the first time since 2014.
3. The Standard & Poor’s 500 operating earnings are $130 in 2017 and the index rises to 2500 as investors become convinced the U.S. economy is back on a long-term growth path. ...
4. Macro investors make a killing on currency fluctuations. ...
5. Increased economic growth, inflation moving toward 3%, and renewed demand for capital push interest rates higher across the board. The 10-year U.S. Treasury yield approaches 4%.
6. Populism spreads over Europe affecting the elections in France and Germany. ...
7. Reducing regulations in the energy industry leads to a surge in production in the United States. Iran and Iraq also step up their output. ...
8. Donald Trump realizes he has been all wrong about China. Its currency is overvalued, not undervalued, and depreciates to eight to the dollar. Its economy flourishes on consumer spending on goods produced at home and greater exports. Trump avoids punitive tariffs to prevent a trade war and develops a more cooperative relationship with the world’s second largest economy.
9. Benefiting from stronger growth in China and the United States, real growth in Japan exceeds 2% for the first time in decades and its stock market leads other developed countries in appreciation for the year.
10. The Middle East cools down. ...
As you may recall from previous years, the January letter is always about the mine field laid out in front of us. What could cause 2017 to be a year to remember? What could possibly go horribly wrong? At this point in time, I see many potential problems. I have some concerns about the US. I see dark clouds gathering over Europe, and I see very slippery conditions in many emerging markets (‘EM’). In other words, lots of markets around the world appear to be accident prone but for very different reasons ... The secret to being a good investor is to focus on risk management and to be well prepared for bad news. ... Stagnating economic growth and low – or even negative – real wage growth has created a deep level of dissatisfaction that the electorate chose to use politically ... EM non-financial corporates have continued to accumulate debt as if there is no tomorrow ... USD 890 billion of EM bonds and syndicated loans (an all-time high) are coming due in 2017 with almost 30% of that denominated in US dollars ... I usually focus on the negative aspects when investing; hence my writing also has a negative bias. That is not the same as saying that I am always bearish, and I am most definitely not particularly bearish going into 2017.
The opinions of experts concerning the future are accorded great weight ... but they’re still just opinions. Experts may be right more often than the rest of us, but they’re unlikely to be right all the time, or anything close to it. ... A lot of people's lives would be more tranquil and more productive if they accepted that what the media says about an upcoming event - and whether you watch of not - won't have any impact on the outcome. ... Today many analysts seem preoccupied with central bank behavior, government actions, trends in interest rates and currencies, and the movement of markets, as opposed to the fortunes of individual companies. … Most people don’t want to tempt fate by saying things will go well forever, and in fact they know they won’t. It’s just that they can’t decide what it is that will go wrong. The truth is that while I can enumerate them, the obvious candidates (changes in oil prices, interest rates, exchange rates, etc.) are likely to already be anticipated and largely priced in. It’s the surprises no one can anticipate that would more markets most if they were to happen. But (a) most people can’t imagine them and (b) most of the time they don’t happen. That’s why they’re called surprises. ... People began to ask me what inning we’re in during the financial crisis of 2008, and they’ve continued ever since.
Investors are shifting their investment allocations from active to passive management. This trend has accelerated in recent years. The investors who are shifting from active to passive are less informed than those who stay. This is equivalent to the weak players leaving the poker table. Since the winners need losers, this can make the market even more efficient, and hence less attractive, for those who remain. If you can’t identify the patsy, or weak player, it’s probably you. ... Passive management has lower costs than active management and hence delivers higher returns per dollar invested than active management does in the aggregate. However, passive management introduces the possibility of market distortions, including crowding and illiquidity. Exchange-traded funds, in particular, are worth watching closely because of their explosive growth and high trading volume. ... Four drivers have led to the development of the mutual fund industry and, more recently, to the shift toward passive investing. These include regulation, the market environment, technology, and the balance between informed and uninformed investors.
A mathematical prodigy, he worked out how to “beat the dealer” at blackjack while a postdoctoral student at MIT. After he published a book in 1962 revealing how to count cards, he became so famous that casinos banned him from playing — he says one even resorted to drugging him. Many changed their rules to thwart people using his counting system. ... Next came an attempt to beat roulette, using a contraption tied to his foot that is now described as the world’s first wearable computer; after that, an expedition into Wall Street that netted hundreds of millions of dollars. ... Thorp’s then revolutionary use of mathematics, options-pricing and computers gave him a huge advantage. ... “Adam Smith’s market is a whole lot different from our markets. He imagined a market with lots of buyers and sellers of things, nobody had market dominance or could impose things on the market, and there was a lot of competition. The market we have now is nothing like that. The players are so big that they control the levers of financial policy.” ... “One of the things that’s served me very well in life is having an extraordinary bullsh*t detector.”
His time among the horses and chickens—outside the money management industry—may even have helped him return to the top of his game. Slimmed down and fighting fit, he’s been winning big on a series of short bets against Canadian companies since he made his comeback. ... Cohodes says he’s committed to exposing companies that he believes may be ripping off ordinary, unwary investors—“Joe Six-pack,” as he puts it. ... he’ll go to great lengths to chase them down: dumpster-diving to find clues of wrongdoing, lambasting enemies on Twitter (where his rambunctious character is on full display) ... Short-biased funds managed only $5.5 billion in assets as of the end of September, a tiny fraction of the roughly $3 trillion the hedge fund industry oversees, according to Hedge Fund Research. The number of short-biased funds had fallen to 18 at that time, from 50 in 2009. Cohodes wants to make sure the “old-school” craft gets passed along to a new generation of people with—he jokes—that “genetic defect” that makes them want to take on all of Wall Street.
For decades, poultry had been volatile in a frustratingly predictable way: When times started getting good, companies flooded the market with chicken, causing prices to crash. ... At first the transformation puzzled industry watchers. Some speculated that a merger spree during the 1980s and 1990s was responsible—with fewer decision-makers in charge and fewer competitors, the remaining companies could more easily survey and predict the landscape. But Sanderson’s conference call suggested another source for the shift: Agri Stats, a private service that gathers data from poultry processors, produces confidential weekly reports, and disseminates them back to companies that pay for subscriptions. ... Many industries, such as health care and retail, make use of information-sharing services, but Agri Stats provides chicken producers with a rare level of detail, in uncommonly timely fashion. ... Agri Stats has for years maintained that its reports don’t violate antitrust laws, in part because the information provided is historical. A typical report doesn’t say how much a company plans to charge for a cut of meat, only what it charged last month or last week. ... In 2013, according to SEC filings, Eli Lilly purchased Agri Stats for an undisclosed sum and folded it into its farm animal drug division. ... Illegal collusion occurs when companies plan with one another to cut production ahead of time with the specific intent of raising prices.
For more than a decade, Wiseguy was the biggest name in ticket scalping. The company fundamentally broke Ticketmaster, using one of the first ever automated "ticket bots" to buy and flip millions of tickets between 1999 and Lowson's eventual arrest on wire fraud charges in 2010. ... The scourge of ticket bots and the immorality of the shady ticket scalpers using them is conventional wisdom that's so ingrained in the public consciousness and so politically safe that a law to ban ticket bots passed both houses of Congress unanimously late last year, in part thanks to a high-profile public relations campaign spearheaded by Hamilton creator Lin-Manuel Miranda. ... But no one actually involved in the ticket scalping industry thinks that banning bots will do much to slow down the secondary market. ... Between 2001 and 2010, the company bought and resold roughly 1.5 million tickets, amassing more than $25 million in profits overall
During the 2003–15 commodity supercycle, spending on resources including oil, natural gas, thermal coal, iron ore, and copper rose above 6 percent of global GDP for only the second time in a century before abruptly reversing course. Less noticed than these price gyrations have been fundamental changes in supply and demand for resources brought about by expected macroeconomic trends and less predictable technological innovation. Our analysis shows that these developments will have major effects on resource production and consumption over the next two decades, potentially delivering significant benefits to the global economy and bringing change to the resource sector.
-Rapid advances in automation technologies such as artificial intelligence, robotics, analytics, and the Internet of Things are beginning to transform the way resources are produced and consumed.
-Scenarios we modeled show that adoption of these technologies could unlock cost savings of between $900 billion and $1.6 trillion in 2035, equivalent to the GDP of Indonesia or, at the upper end, Canada. Total primary energy demand growth will slow or peak by 2035, despite growing GDP, according to our analysis.
-The price correlation that was evident during the supercycle is unraveling, and a divergence in prospects between growth commodities and declining ones may become more significant.
-Policy makers could capture the productivity benefits of this resource revolution by embracing technological change and allowing a nation’s energy mix to shift freely, even as they address the disruptive effects of the transition on employment and demand.
-For resource companies, particularly incumbents, navigating a future with more uncertainty and fewer sources of growth will require a focus on agility.
The challenge of normalizing policy will be to undo bad habits that have developed in how monetary policy is explained and understood. ... To re-establish a shared understanding, we will need to reassess both the imperatives that justified the extraordinary actions and the imperatives about monetary policy that were claimed. This will require candidly acknowledging the uncertainty associated with the transmission mechanism and the challenge of decision-making in conditions of uncertainty. ... It appears to me that the Fed and other central banks have avoided being candid about the uncertainty in order to maintain their credibility. I think this is backwards. Central banks cannot and will not regain their credibility unless they are candid about the uncertainty and how they confront that uncertainty.
- Also: Financial Times - US Treasuries: On the cusp of a reversal < 5min
- Also: FiveThirtyEight - The Fed’s Favorite Inflation Predictors Aren’t Very Predictive < 5min
- Also: Absolute Return Partners - A Note on Inflation: Is it here or isn’t it? 5-15min
- Also: Janus - Show Me The Money < 5min
- Also: Financial Times - Three ways the economic and financial cycle could end < 5min