Wednesday, April 16, 2014

One Week Since "How's About a Thousand Dow Points (to the upside)?"

We posted that link before the open on April 9th, previous day's close DJIA 16,256.14.
Since then:
Chart forDow Jones Industrial Average (^DJI)
We've picked up a net 168.71 DJIA points, I may have a heart attack if this keeps up but:
"We're Still in a Bull Market"
DJIA 16,424.85.

Bull Market Headline of the Day: Churchill Winces Edition (CMG)

Maybe Stalin too.
CMG is Chipotle Mexican Grill.
From Risk Reversal:

Chart of the Day – CMG: A Burrito Wrapped in an Enigma
We have not been huge fans of CMG as a stock, a burrito company selling at 5.x sales and 52x trailing earnings, a freaking burrito company. Obviously we have been on the wrong side of the call, but the set up into tomorrow morning’s earnings is worth highlighting, at least visually....MORE 
The stock is up another $11.18 to $551.72.

Russian Civil Defense Ministry Warns of Possible Volcanic Eruption In U.S.

Thanks, I think.
From the Hungarian National Association of Radio Distress-Signalling and Infocommunications (RSOE):
 A warning issued today by the Ministry of the Russian Federal for Civil Defense, Emergencies and Elimination of Consequences of Natural Disasters (EMERCOM) has advised the World Organization of Volcano Observatories (WOVO) that a "Red Alert" status level for the Borah Peak Mountain in Idaho (North America/United States) may be warranted in the coming weeks due to increased volcanic-seismic activity detected by both ground and satellite observations.
This is the second such warning issued by EMERCOM this year and follows their 24 January prediction that an earthquake and ensuing tsunami are expected to strike off the southwestern coast of Sakhalin Island, to the north of the epicenter of the 2 August 2007 6.2 magnitude earthquake in the town of Nevelsk that had, likewise, been successfully predicted by Russian scientists. Important to note about EMERCOM predictions is that unlike their Western counterparts, Russian scientists suggest four new techniques for long-range prediction of earthquakes and volcanic eruptions, which are universal and can be applied to all of the regions of the earth.
This type of forecasting has no psychic aspects to it at all, and is called "phase trajectory technique." It concerns a simultaneous analysis of periodic and quasi-periodic space rhythms, which involve many factors that have a great effect on these terrible formations, including but not limited to lunar tides and solar cycles. The "Red Alert" status for Borah Peak Mountain (the largest in Idaho), this report states, means that an eruption is forecast to be imminent with significant emission of ash into the atmosphere likely.

First arousing EMERCOM concerns about Borah Peak Mountain, this report continues, was the 4.8 magnitude earthquake which struck the Yellowstone Caldera (Supervolcano) on 30 March that was the largest trembler to hit this region in nearly 30 years and was preceded by a series of small earthquakes in central Idaho and accompanied by a near simultaneous 3.1 magnitude earthquake occurring near Borah Peak Mountain on the same date. Prompting the EMERCOM warning about Borah Peak Mountain to WOVO, this report says, was yesterdays (12 April) 4.9 magnitude earthquake in central Idaho near the city of Challis, which on 28 October 1983 suffered a 6.9 magnitude earthquake which killed two children....MORE
Borah Peak is the highest mountain in Idaho and around 120 miles west of Yellowstone.

"We Read It So You Don’t Have To: 10 Beige Book Gems"

From Real Time Economics:
The Federal Reserve’s “beige book” report, out Wednesday, offers a view of economic conditions across the country from anecdotes gathered by the central bank’s 12 districts. The latest report covered mid-February through early April, and most regional banks said economic activity improved since the start of the year as the weather finally turned a corner. Retailers and transportation firms said they were still working through disruptions from the worst of the frigid temperatures. But tourism was stronger, particularly at ski resorts in some areas. And shoppers—particularly car buyers–appeared to be more confident.

Here are 10 of our favorite gems from today’s release:

1. In Washington, D.C., tourist traffic for the Cherry Blossom Festival started in March and was described as robust, even though cold weather pushed the peak bloom time to the second week of April.

2. In New York, both revenues and attendance at Broadway theaters picked up in March and were up nearly 15% from a year earlier—in part because there are more shows running now. The average ticket price has leveled off.

3. The last Saturday of March was “tremendous” in the Philadelphia area, despite rain and snow, and restaurants were packed. Auto dealers reported that sales grew at a strong pace, and said the last week of March was “about as good as it gets.” According to one large dealership, its sales force closed on 30 to 40 vehicles per salesperson in March....MORE

"As Aluminum Prices Continue to Rise, London Metal Exchange Adds New Hedging Feature"

Deripaska smiles.*
From Minyanville:
The London Metal Exchange (LME) announced a new feature, giving traders more options than ever. Specifically, the exchange will give traders the ability to hedge aluminum prices, as the commodity continues to rise due to lengthy delivery times that have thrown a wrench in a number of supply chains.

The new contract will be physically settled and will cover aluminum in North America, Western Europe, and Asia. A specific launch date for the contract has yet to be set, but it appears that a North American contract will begin trading sometime in May.

"The LME remains committed to addressing the underlying causes of queues, and does not believe that a premium hedging contract is a substitute for such action. However, given the likely timescale for queues to diminish at LME warehouses (including the potential delays arising from legal proceedings), a premium hedging contract may be of assistance to the market," said Matthew Chamberlain of the LME....MORE
*See, for example "LME halts plan to cut metals queues after court ruling -" or "Troubled Russian Aluminum Giant Stops LME Warehousing Rule Changes"

"Goldman Sachs Suggests NYTimes Sleep With One Eye Open" (GS; NYT)

From DealBreaker:
On Tuesday afternoon, an article appeared over at the Times that referred to Lloyd Blankfein as the “former” CEO of Goldman Sachs. As Blankfein is very much the current chief executive, a correction was issued....MORE

Life's a Pitch: Top London Bankers Strip For a Cause (my eyes, my eyes!)

From City AM:
It’s the video they wish we’d never seen, five top City names take part in a fundraising video for the Young Vic theatre which sees them rip open their shirts and sing at the top of their voices.

The video was never supposed to be public, it was aired for 400 guests at special screening back in October but was spotted on the Young Vic YouTube channel and laid bare for the masses, pun intended.

The clip, titled “Life’s a Pitch,” sees ICAP boss Michael Spencer, former JP Morgan bigwig Bill Winters....MORE

"What the Heck is Going on With US Treasuries In Belgium?"

From Testosterone Pit:
The tiny country of Belgium – my beloved hunting grounds for three years a while back – with a GDP of $484 billion, a country which you can cross by bicycle in a single day if you're really fit, a country that became famous to the chagrin of some people because it did just fine for a couple of years without a national government – well, that tiny speck of land is starting to grow an enormous mountain of US Treasury Securities.

In February, according to data just released by the US Treasury Department, it added $30.9 billion, taking its mountain of Treasuries to the phenomenal level of $341.2 billion, or about 70% of its GDP.

It put that speck of land with 11 million people in third place, behind export powerhouse China ($1.27 trillion) and former export powerhouse and now money-printing powerhouse Japan ($1.21 trillion), the second and third largest economies in the world.

From August last year, when an already lofty $166.8 billion in Treasuries were held in Belgium, holdings have soared by 105%! Why this sudden jump?
What the heck is going on in Belgium?

It has a vibrant export sector – right away, I can think of superb chocolates, addictive beers, and many other products. But have dollar-denominated sales multiplied umpteen times overnight in a miraculous fashion? Nope. Nothing happens quickly in Belgium. Getting even something minor through the bureaucracy, as we found out, requires superhuman patience, finely honed finesse, and a surprising amount of money....MORE

"Goat Towers: An Idea Whose Time Has Come"

Following the 2010 "Men Who Stare at Goats" spike, the general trend of goat awareness has been on a downward trajectory.
Until Q1 2013.

In that year and again in early 2014 Google reported a surge in goat-related news stories:

including our own "Goat Simulator Sets the Internet on Fire".

Being forward-thinking denizens of the interwebs we are already planning our 2015 search-engine-optimization marketing campaign. Here's a sneak preview of the Goats and Architecture series, from Modern Farmer:

A set of towers, spread across the globe, have given goats the opportunity to make good on their evolutionary heritage and farmers a chance to leave an unforgettable impression on visitors. And don't worry -- there hasn't been a single report of the goats falling.

While we might be used to seeing goats grazing on a mostly two-dimensional pasture, the animals are not strangers to heights. Moroccan goats have been seen climbing trees and the internet has gone gaga over photos of wild goats in precarious places.

Sometime in the 19th century, Fernando Guedes da Silva da Fonseca decided to give his livestock a place to make good on their heritage. He tucked his Torres das Cabras into a leafy enclave at Aveleda, a famed winery in the Vinho Verde region of Portugal....


Excluding well known goat news hotspot Botswana, Google Trends indicates the interest is currently centered on the Anglosphere which means there is basically a whole world to conquer:

Possibly related:
Male goat essence really turns the females on

"Zuckerberg Vows Facebook Will Shoot Down Google Drones" (FB; GOOG)

From the New Yorker:
MENLO PARK, CA (The Borowitz Report)—One day after Google outbid Facebook for a manufacturer of solar-powered drones, Facebook founder Mark Zuckerberg served warning that his company was prepared to blow Google’s drones out of the skies.

At a presentation for Facebook employees at the company’s headquarters in Menlo Park, Zuckerberg announced plans to build a $24 billion Facebook laser shield, a global network of satellites capable of identifying and incinerating Google drones in midair.

Zuckerberg delighted his audience with a brief animated demonstration showing a Facebook satellite locking in on a Google drone and obliterating it with a green laser.

“Unfriended, bitch,” said Zuckerberg, to a roaring ovation from his employees....MORE

"Why Nobody Can Tell Whether the World’s Biggest Quantum Computer is a Quantum Computer"

This is not Schrödinger's Cat

From Quartz:
For the past several years, a Canadian company called D-Wave Systems has been selling what it says is the largest quantum computer ever built. D-Wave’s clients include Lockheed Martin, NASA, the US National Security Agency, and Google, each of which paid somewhere between $10 million and $15 million for the thing. As a result, D-Wave has won itself millions in funding and vast amounts of press coverage—including, two months ago, the cover of Time (paywall).
These machines are of little use to consumers. They are delicate, easily disturbed, require cooling to just above absolute zero, and are ruinously expensive. But the implications are enormous for heavy number-crunching. In theory, banks could use quantum computers to calculate risk faster than their competitors, giving them an edge in the markets. Tech companies could use them to figure out if their code is bug-free. Spies could use them to crack cryptographic codes, which requires crunching through massive calculations. A fully-fledged version of such a machine could theoretically tear through calculations that the most powerful mainframes would take eons to complete.
The only problem is that scientists have been arguing for years about whether D-Wave’s device is really a quantum computer or not. (D-Wave canceled a scheduled interview and did not reschedule.) And while at some level this doesn’t matter—as far as we know, D-Wave’s clients haven’t asked for their money back—it’s an issue of importance to scientists, to hopeful manufacturers of similar machines, and to anyone curious about the ultimate limits of humankind’s ability to build artificial brains.
The processor at the heart of the controversy. D-Wave Systems

Quantum computers: a grossly oversimplified introduction
The foundation of all computing is a logic gate—a simple yes/no switch. In modern computers, one position of the switch represents 0; the other represents 1. Your laptop computer contains billions of such gates, each of which switches between 1 and 0 billions of times a second.
Nonetheless, your computer has a handicap, imposed by classical physics. At any given moment it can only be in one state—one particular combination of 1s and 0s across those billions of gates. It has to step through a sequence of such states to complete a calculation. But what if, instead, a vast number of copies of your computer could somehow exist in parallel, each representing one of these possible states, and collectively perform the entire calculation simultaneously?
Essentially, this is what quantum theory says can happen. The key is to shrink the gates small enough that quantum physics, which describes the behavior of extremely small objects, takes over from classical physics. (Some quantum gates consist of a single atom, held in place by electric and magnetic fields.) Such a tiny gate, called a “qubit,” can exist as a kind of combination—called a “superposition”—of 1 and 0. A computer made of qubits would, in some sense, exist in all the possible combinations of 1s and 0s at once.
Physicists differ in how they interpret this. Some literally believe a myriad parallel universes exist, each containing a separate copy of the computer; some have a more minimalist explanation. But the outcome is the same: In principle, it’s possible to reap the fruits of all that parallel processing to arrive at a result faster—so much faster that even the hardest calculation could become pretty much instantaneous.
(For more details in something resembling English, see this interview with MIT’s Scott Aaronson—a long-time skeptic of D-Wave—in the Washington Post, this excellent blog post by Michael Nielsen, and, thus prepared, this Reddit thread.)...

"Baa baa Schrödinger's sheep, have you any wool? 
Yes sir, no sir, three bags simultaneously full and empty"
-from last year's birthday celebration of da S-man.

The 2014 Market "Correction" As Seen Through the Lens of Various Exchange Traded Products

The "correction" is in quotation marks because:
a) it really isn't one and
b) because we are close to the point where every half-assed scribbler is going to write about the NASDAQ entering "correction" territory and then use a hundred or so words of boilerplate "typically defined as..." where no one knows who came up with that nonsense but I tell you it wasn't anyone I learned from.

Back in my day we had Panics, not this "correction" stuff.

Come to think of it, I believe we started seeing the "correction" folderol hit the mainstream after the Panic of '87. Prior to that we had bull and bear markets with the occasional corner or squeeze thrown in to get the old-timers to wake up. Correction? hah, I laugh in the face of "correction."

From VIX and More:
The Correction As Seen in the ETP Landscape
Since stocks bottomed in March 2009, I have periodically been publishing an SPX pullback table and occasionally a plot of all those pullbacks and their duration. The recent selloff in stocks, however, has been anything but an SPX pullback. I toyed with the idea of presenting comparable data for the NASDAQ Composite or NASDAQ-100 Index (NDX), but here again, the selling has been disproportionate in some areas of the NASDAQ universe, even though it has been hit harder than the SPX.

This time around I have opted instead for a chart that shows the peak-to-trough drawdown across the equity ETP universe, focusing on sector groups that I believe are among the most important to watch.
(Click to Enlarge) [source(s): Yahoo, VIX and More]
The data above cover only 2014 and indicate the maximum drawdown since the 2014 peak. While many of these maximum drawdowns are from earlier today, there are quite a few instances in which the maximum drawdown was established earlier in the year.

Note that while the NASDAQ gets most of the attention, it is the small caps (IWM) that have suffered the most among the major market index ETPs....MORE

Casinos Will Soon be Required to Divulge the Sources of their High-rollers’ Gambling Bankrolls


Casinos Weigh Compliance vs. Customer Service in FinCEN Crackdown
US casinos are balking at the news that they could soon be required to divulge the sources of their high-rollers’ gambling bankrolls. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is expected to announce that American casinos will soon be brought in line with banks and other businesses to comply with Title 31 of the Bank Secrecy Act as part of an initiative to combat money-laundering.

Casinos fear that the plans will further dent their revenue at a time when turnover is largely disappointing, and the Las Vegas Strip casinos continue to be dwarfed by the vast profits of Macau and other emerging Asian markets. Casinos rely on so-called “whales” for a portion of their profits, especially during a recession when Joe Public stays at home, and the relationship is traditionally one based on privacy and discretion. That relationship will be completely disrupted should these rules be strictly enforced.

Not If But When According to experts, however, it’s not a case of “if” but “when”. Fred Curry – a partner in Deloitte Financial Advisory Services – points out that the casinos are a decade behind other financial businesses in their compliance with Title 31.

“Casinos should be working now to get ready for the FinCEN announcement and improve their anti-money laundering programs,” Curry said.
The signs have been around for a while. FinCEN Director Jennifer Shasky Calvery recently told an audience at the Global Gaming Expo in Las Vegas that “every financial institution, casinos included, should be concerned about its reputation. Integrity goes a long way.”
Money Laundering Concerns Meanwhile, last year the Las Vegas Sands Corp was forced to settle for $47.4 million with federal authorities to avoid prosecution in relation to the activities of one of its high rollers, the Chinese-Mexican businessman Zhenli Ye Gon. Ye Gon – who apparently wagered $84 million at the Venetian – was arrested in 2007 and stands accused of international drug trafficking. LVS admitted it failed to properly scrutinize the source of Ye Gon’s funds. The casino group has since been commended by investigators for stepping up its Title 31 compliance and showing a renewed commitment to anti-money-laundering issues....MORE

Why Does It Cost So Much To Build In the U.S.?

I understand I am not going to find Italian mosaicists or terrazo guys to redo the Byzantine knockoff for a buck a day as Frick and Vanderbilt did but geez, have you ever looked at the construction industry and pricing?
They love fax machines for crying out loud!
And it only gets worse from there.

From FT Alphaville:
The remarkable productivity stagnation of the US construction sector
For the nearly half-century through 2012, annual labour productivity growth in the US construction sector averaged close to zero, and it has been negative for the past two decades.

Here’s a graph constructed last year by Paul Teicholz, a civil engineer who has been working on construction technology issues for a long time and who produced the best concise analysis of the sector’s productivity that I’ve come across:
The upward-sloping line represents the productivity of all non-farm sectors since 1964. The lines moving sideways or gently sloping downward are all measures of construction sector labour productivity, each using a different price deflator. (Knowing which deflator is appropriate isn’t obvious.)

Teicholz writes that despite some variations, “the general rate of decline is about the same: a linear trend line shows a -0.32% per year decline, while the trend for all nonfarm industries is positive 3.06% per year”.
US statistical agencies don’t break out construction sector productivity the way they do for manufacturing, though obviously they provide the raw data needed to estimate it. So if you want additional confirmation beyond Teicholz’s post, below is a chart from OECD statisticians showing the sector’s productivity growth in the decade through the financial crisis:
The actual tools and technology for building structures can’t be getting worse, obviously. Other forces are responsible for retarding progress in how the factors of production are combined in this sector....MUCH MORE

Tuesday, April 15, 2014

‘Anti-radiation Belt’ Developed by Israeli Firm for Nuclear Emergencies

Basically equivalent to lead underwear.
From RT:

The radiation belt is a new line of defense in nuclear emergencies, screenshot from Reuters video.
 The radiation belt is a new line of defense in nuclear emergencies, screenshot from Reuters video.
An Israeli company called Stemrad has developed a body belt that protects people from the worst effects of gamma radiation. Called the Stemrad 360 Gamma, the belt could be a lifesaver for the emergency services in a nuclear accident.

Oren Milstein, the co-founder of Stemrad, says it’s partially made out of lead and is designed to first and foremost protect the pelvic area, where most of the body’s renewable bone marrow is made, Reuters reports.
“It may look simplistic on the outside but the structure inside is three-dimensional and very unique. The idea here was to create a product that on the one hand protects but on the other hand is not overburdened by weight,” he said.

Nobel laureates Roger D Kornberg and Michael Levitt are on Stemrad’s scientific advisory board, as they were quickly persuaded of the belt’s merits.

“When I first told about it, I was at first skeptical,” said Kornberg.

At just over 15 kilos, the belt would be wearable for most people. A full body suit to protect all the body’s vital organs such as the liver and thyroid would weigh about 200 kilos, so most people wouldn’t be able to wear it.

The belt can protect the wearer for doses of up to 1,000 rads – a high level of radiation poisoning that can cause serious illness and even death.

Milstein says that protecting the body’s bone marrow is crucial to ensuring survival after radiation exposure.
After the Chernobyl disaster, many of the firemen and engineers who were first on the scene had to have bone marrow transplants, and even then most of them died soon afterward, so protecting the bone marrow may have made a difference.

The Stemrad 360 Gamma belt is designed to be worn around the waist to protect vulnerable bone marrow, screenshot from Reuters video.
The Stemrad 360 Gamma belt is designed to be worn around the waist to protect vulnerable bone marrow, screenshot from Reuters video.
"Conceptually, it's agreeable that the bone marrow is the most radiation sensitive tissue and that bone marrow is able to regenerate itself. So kind of like adding one plus one, we know that if we perform partial shielding on bone marrow, we get an increased survivability of the individual," said Millstein.

The gamma belt hasn’t yet been tested in real radiation environments – such as in Fukushima – but simulations using mannequins have demonstrated its effectiveness in absorbing radiation.

The belt doesn’t offer full protection or allow an unlimited stay in an irradiated area and despite still being unproven Stemrad has already got orders from Israel, Russia and Japan....MORE

Biotech Stocks (and Tesla) Take Out Key Technical Level as Plummet Continues (IBB; TSLA)

In Tesla's case it was the $193.41 level from just before the last earnings report. For the biotech story here's MoneyBeat:
The biotech sector just can’t catch a break.

Biotech stocks are taking it on the chin again on Tuesday and are dragging the broad market lower, as the selling pressure that has weighed on the sector in recent weeks  has yet to abate.

The iShares Nasdaq Biotech ETF dropped more than 2% Tuesday and fell deeper into bear-market territory. The biotech ETF has dropped 23% since peaking in late February. (Any decline of at least 20% from a recent high is considered a bear market.)
The iShares Nasdaq Biotech ETF (blue line) and its 200-day moving average (red line)
As the chart above shows, the biotech ETF dropped below its 200-day moving average on Monday for the first time since August 2011, a time when Europe was in the throes of a debt crisis and the U.S. credit rating was downgraded. Technical analysts use the 200-day moving average to gauge the market’s long-term trend. When a stock or ETF trades above that level, the long-term trajectory is positive, whereas when it trades below the 200-day, chart watchers expect tougher times ahead....MORE
I don't think that's the iShares ETF in the chart, there aren't many ETF's that trade with a four-figure price so it's probably an index.
However you get the same 200-day story with the IBB:
Chart foriShares Nasdaq Biotechnology (IBB)

Boneyard: Alang Shipbreaking Yards from Space

In last year's "Hard Core Analysis: Counting the Ships in the World's Largest Scrapyard" I mentioned one of the esoteric indicators we used to try to get an edge on the macro biz, analyzing the makeup of the ships being demolished at Alang. Here's more from qCaptain:
The following image shows the shipbreaking yards at Alang, an industrial complex north of Mumbai in the Gulf of Khambhat. Photo taken from space via Digital Globe.
alang shipbreaking yard
Satellite view of the Alang Shipbreaking Yards, Via Digital Globe, click for larger
A huge portion of the world’s merchant fleet finds itself beached at the end of its useful life at Alang, a workplace that also claims the lives of many of its workers as well. The following documentary gives a fascinating account of the business of shipbreaking....MORE
According to the Ship Scrapping blog some of the ships currently at Alang:
Ship demolitions 14/4/2014

Aashman [PA] IMO 8323719 Bulk carrier built 1984
Baltic Mariner [LR] IMO 7710903 Reefer built 1979
Commodore [CY] IMO 9035981 Container vessel built 1992 
Amonte [KN] IMO 8920490 Tanker built 1990
Ashraf [TG] IMO 7126360 Cargo vessel built 1971
Asia Star [MT] IMO 9046241 Container vessel built 1994
LNG Aries [MH] IMO 7390193 LNG carrier built 1977
Finisterre [LR] IMO 8710986 Container vessel built 1995
Msc Socotra [PA] IMO 9074004 Container vessel built 1995
Athens Trader [ ] IMO 9070175 Container vessel built 1995
Hanjin London [PA] IMO 9111383 Container vessel built 1996
Northern Delight [LR] IMO 90882374 Container vessel built 1994


A preponderance of container vessels and not so many crude oil tankers.
In early 2008 we saw few tankers as they were being used for storage. That changed after the price collapsed. Hmmm...

Projected Price Increases For Foods Affected By the California Drought

Although the article doesn't mention it Almond prices are up 20% or so over the last crop cycle but that is partly due to a lack of bees to pollinate.

From Real Time Economics:

Grocery shoppers may soon need more green in their wallets to afford their next salad.

The cost of fresh produce is poised to jump in the coming months as a three-year drought in California shows few signs of abating, according to an Arizona State University study set to be released Wednesday.
The study found a head of lettuce could increase in price as much as 62 cents to $2.44; avocado prices could rise 35 cents to $1.60 each; and tomatoes could cost 45 cents more at $2.84 per pound. (The run-up in produce prices is in line with other projections showing that overall food cost gains are expected to accelerate this year.)

The latest projections were compiled by Timothy Richards, an agribusiness professor at ASU’s W.P. Carey School of Business. He studied the drought’s effect on farmland and consumer purchasing trends to determine the eight fresh fruits and vegetables likely to see the largest price increases this spring and summer.
And the price increases may already be happening. Grocery prices rose by 0.5% for the second-straight month in March, according to the Labor Department’s consumer-price index, released Tuesday. It was the largest two-month gain in the food-at-home category since 2011. Fruit and vegetable prices rose 0.9% last month, after a 1.1% gain in February. Meat and dairy prices are also increasing. Meanwhile, overall consumer prices rose just 0.2% last month, as broader inflation in the economy remains tepid.

California is the largest domestic producer of each of the products Mr. Richards identified, ranging from grapes to peppers. And in the case of avocados, it’s the only state with a significant crop.

The drought has wiped out between 10% and 20% of California crops for the eight items, but the size of the expected price increases varies widely. Lettuce prices could jump as much as 34% and avocado prices could rise 28%, the largest projected increases.

“People are the least price-sensitive when it comes to those items, and they’re willing to pay what it takes to get them,” Mr. Richards said. “It’s hard to make a salad without lettuce.”

In basic economic terms, the drought reduces supply, which puts upward pressure on prices. But how high the price can rise is determined by consumers’ willingness to pay more against their ability to find a substitute.
Packaged salads, for example, would increase in price by only 13%, even though many of the ingredients in them are projected to increase in cost by a greater percentage. That’s because consumers view premade salads as a “luxury” good and would readily switch to lower-cost alternative if the price gets too high, Mr. Richards said....MORE

World Gold Council: "China may have 1,000 tonnes of gold tied in financing"

Following up on our (thusfar) exclusive on the gefilte fish financing scam we have another inventory deal.
From Reuters:

Estimates imply strong imports driven by trade financing deals
* Imported gold used via loans, LCs to raise low cost funds
* Total China demand to grow 25 pct over four years (Adds comments from Chinese banks, analysts)

SINGAPORE, April 15 (Reuters) - Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals, an industry report said, indicating a big slice of imports has been used to raise funds due to tight credit conditions, rather than to meet consumer demand.

The financing-related buying in the world's top gold consumer means prices could come under pressure if imports are hit by a broader crackdown on using commodities for finance.

The report - issued by the World Gold Council (WGC) on Tuesday - and other sources in China said gold was not as widely used for raising money as copper, which saw prices drop to a 3-1/2 year low in March on fears that those deals would unravel.

"Imported gold is being used via gold loans and letters of credit (LC) to raise low cost funds for business investment and speculation," the report said.

"The use of gold for purely financial operations is a form of demand that represents a small part of the much wider growth in shadow banking. It is feasible that by the end of 2013 this could have reached a cumulative 1,000 tonnes."

That accounts for almost a third of annual global production and is worth about $43 billion at current prices....MORE
So much for all those physical demand stories coming out of Shanghai.
And with gold down $33.40/ounce (you can do the yuan/gramme conversion yourself) the collateral for the gold loans is off about 2.5% this morning.
We are looking for $875 or thereabouts some time in Q3 of this year.

Monday, April 14, 2014

International Gefilte Cartel Blames "Weather" For Price Increases

The real tale is in-situ storage of the whitefish, probably related to some sort of inventory financing deal which, similar to the eventual release from bondage of LME aluminum, can only have the effect of crashing the market as the extent of the inventory hoarding scam becomes apparent.

From The Chicago Reader's Bleader column:

Gefilte fish is an endangered species this Passover 
A platter of homemade gefilte fish.
  • A platter of homemade gefilte fish.
TuesdayMonday night marks the beginning of Passover, the Jewish holiday that celebrates the exodus from Egypt with a superlong meal interspersed with responsive readings and songs and the consumption of large quantities of Manischewitz wine. The Passover menu consists of a number of symbolic foods that represent various stages of the epic journey from slavery to freedom, but in most households, the most sacred of all is gefilte fish.

Gefilte fish are actually fish balls, usually made from a mixture of ground whitefish and pike or carp, traditionally eaten cold with a garnish of horseradish. If this sounds disgusting, it's because it is, particularly if your fish comes with little globules of fish jelly clinging to it, but it's the sort of disgusting thing that is considered a delicacy, particularly if your family is descended from eastern European Jews who fled the czar, the Cossacks, and the pogroms, often with little more than the gefilte fish recipe. These recipes are sacred, held close and carefully passed from generation to generation. (My own family's comes from my maternal great-grandmother, who only relinquished it mere months before she died. Every Passover, someone marvels at what a close call we had.) They cannot be altered.

But this year, thanks to the cold, cold winter, Lake Superior is still frozen, and there's a severe shortage of whitefish. And Passover is less than a week away.

Reader senior theater critic Tony Adler attempted to place his order yesterday morning. (His ancestral recipe calls for three parts whitefish to one part
carppike.) He called Burhop's in Wilmette, from which he orders his fish every year. His request, he reports, was met with a long, hard burst of laughter.
"We should have 200 pounds," explains Burhop's manager Ademola Olurotimi. "Ten or 20 pounds is what we do have. We've been promised a few tomorrow, but that's not even guaranteed."

Even if you can get your hands on some whitefish, you'll be paying for it: prices have spiked to $18 a pound, up from the usual $12.

Most of Burhop's fish comes from Union Fisheries, a supplier on the northwest side that deals with the fishermen directly. In most years, early April, the Passover season, is their busiest time, but this year they can't even get their boats out. This is catastrophic for them, Olurotimi says, because they depend on the Passover rush to make the year's profit....MORE  
Apparently there is a seasonal pattern* to the trade:
Bnei Brak rabbi calls for gefilte fish boycott 
Rabbi Shmuel Eliezer Stern issues unusual halachic ruling in bid to prevent stores from charging exaggerated prices for carp fish ahead of Passover....
*More accurately it is a quasi-periodicity as the Holiday has arrived as early as the second-to-last week of March and as late as the last week of April due to the calendar calculations to set the lunar date.

I'm told that last week's sale of Manischewitz by Phil Falcone's hedge fund to Bain Capital is a non-story, nothing to see here.

"Tesla Tumbles Below $200" (TSLA)

$198.09 at the close, down $5.69.
Breaching $203.00 was quite serious and leaves the earnings report low, $193.41 on Feb. 19, as the last line in the sand, and then no visible means of support.

As you can see on the chart, breaking $193.41 leaves the way open to Moscow the mess of down-up-gaps from Nov.-Dec. 2013 and then back to the $100 range gaps in May 2013:
Chart forTesla Motors, Inc. (TSLA)
From MoneyBeat:
Electric car maker Tesla Motors Inc.TSLA -2.79%, a poster child of the momentum stocks that have been hit hard recently, just tumbled below another big round number.

Tesla shares dropped below $200 on Monday for the first time since February, as the momentum that fueled the stock up more than sevenfold since early last year has waned in recent weeks.

Shares recently fell 4.3% to $194.96. The stock is down 26% from its all-time high of $265 hit on Feb. 26.
Tesla has been wrapped up in the big selloff of momentum stocks over the past several weeks, a drop that gained steam last week and dragged the broad indexes lower. Shares of once-highflying biotechnology and Internet companies have slumped sharply amid concerns that they became too expensive....MORE

"Google buys Titan Aerospce and joins Facebook in the drone wars" (GOOG; FB)

Google sure does own a lot of dual use (military/civilian) stuff.
From Pando Daily:
Google has agreed to acquire the drone-maker that Facebook was reportedly courting earlier this year. The company, Titan Aerospace, will continue to operate from its New Mexico office.

Terms of the deal were not disclosed. The Wall Street Journal reports that Titan Aerospace’s drones will be used to improve Project Loon, the company’s attempt to use aerial vehicles to deliver Internet connections in far-flung corners of the world. They will also be able to take high-resolution images, offer access to voice networks, and carry other atmospheric sensors.

The acquisition comes shortly after reports that Facebook also expressed interest in Titan’s drones but ultimately chose to create a team of engineers who used to work at NASA and the Ascenta drone startup. That team provides the foundation for Connectivity Lab, a group at Facebook dedicated to connecting more people to the Internet in partnership with the Mark Zuckerberg-backed nonprofit. It intends to use drones the same way Google does....MORE

European Malting Barley: Damit ist eine Katastrophe vorprogrammiert!

(It's a recipe for disaster)

From Agrimoney:

Malting barley price 'anomaly' to disappear
The relatively cheap price of malting barley left from last year's harvest appears anomalous, despite the large stocks still left to use, Evergrain said, as it nudged higher its forecast for the 2014 harvest.

Old crop malting barley is trading - at E205 a tonne in the benchmark French export Moselle market, and at about £195 a tonne in the UK – at discounts of some E20 and £17-20 a tonne respectively to values being offered for grain from the 2014 harvest.
The gap appears a reflection of the large supplies left over from the last harvest, when EU production, at 9.33m tonnes, represented a surplus of 1.38m tonnes over demand, on Evergrain estimates.
"There is still plenty of malting barley from last year available," said Matthias Wree, managing partner at the Swiss-based malting barley trading house.
'Prices will converge'
However, this surplus may find willing buyers, thanks to its strong specifications, as well as its price discount to new crop.
"Last year's crop is of very good quality. Maltsters would prefer to use it for the next five years if they could," Mr Wree told
Indeed, they may stick with old crop supplies for a few weeks longer than normal, rather than switching to grain from the 2014 harvest with "unknown" specifications.
The result will likely be "that prices of old crop malting barley and new crop converge", he said....MORE
So the barley growers get the point the price is making, "Grow something else". They do, the giant heat belch from the coming El Niño plays havoc with the crop and prices for the 2015 harvest start rising.

Then the temperature spike recedes, Europe goes cool and wet for the 2016 crop, an ergot infestation spreads from rye to barley, the pseudo-LSD effects strike particularly hard in Bavaria and all of a sudden you have Bürgerbräu Keller, 1923 all over again.
As I said, Katastrophe.

"Live a modern life while frustrating the NSA"

From ars technica:

How to mitigate tracking risks: wrap your phone in tinfoil, quit Google
When author Julia Angwin has to post a photo of herself online, she now prefers to use a stencil image of her face in order to avoid detection by facial recognition software. Welcome to her paranoid world of trying to frustrate increasingly sophisticated snoops.
In conducting research for her impressive new book, Dragnet Nation: A Quest for Privacy Security and Freedom in a World of Relentless Surveillance, the investigative reporter delved deep into the current state of ubiquitous online surveillance and data mining by corporate and government actors. Speaking at the New America Foundation in the nation's capitol on Wednesday afternoon, Angwin described how, in the year leading up to the book’s publication, she decided to internalize the focus of her inquiry. She used her own attempts to “reclaim her privacy” as a case study for the challenges in eluding the digital dragnets.
As any number of articles from the last year may indicate, privacy in a post-Snowden culture is extremely difficult to attain. Angwin’s book describes the current dragnets as “indiscriminate” and “vast in scope,” explaining that the East German secret police, known as the Stasi—described by some as one of the most effective and repressive intelligence and secret police agencies to ever have existed—would have been in awe of the National Security Agency’s current capabilities. "The Stasi managed to generate fear with a fraction of the tools we currently have,” she explained in her talk.
But Angwin is no newcomer to the game of tracking the trackers. Prior to undertaking her personal quest to elude the dragnets, she spearheaded the Wall Street Journal’s celebrated “What they Know” series, documenting how cutting edge uses of tracking technologies work and considering what ubiquitous surveillance has meant for consumers and society.
Ground rules Early in her book, Angwin describes some limits she set for herself. First, as a self-described “technologist,” she would not live like a cave-person. As she later told National Public Radio, “I want all the benefits of the information society—all I was trying to do is mitigate some of the risks.”
Second, she would do nothing that violated the letter of the law. Yet at the talk, she argued that laws like the Computer Fraud and Abuse Act (CFAA) have resulted in what she called a “crisis for journalism.” Angwin described how, under the CFAA, an overzealous prosecutor could consider some of her research for the “What You Know” series criminally actionable. (Many believe that information activist Aaron Swartz committed suicide as a result of being prosecuted under this federal law).
Absent those limits, however, her book chronicles some of the drastic (and at times expensive) measures she took in her journey to protect herself. At the talk, she noted that she spent over $2,200 and countless hours trying to evade the dragnets and erase her digital footprint.
Lines of defense To understand how far Angwin went in her crusade to avoid detection and eliminate her tracks, some of her efforts are listed below. They included:
  • Wrapping her cell phone first in tinfoil and then in a so-called “Faraday case" that blocks electromagnetic radiation, rendering the phone useless while covered.
  • Using pre-paid “burner phones” and loading them up with privacy-protective software.
  • Creating a “fake persona” for herself named Ida Tarbell (an allusion to a well-known early 20th-century American investigative journalist) with her own Amazon and OpenTable accounts, as well as an American Express credit card.
  • Aggregating a list of 212 data brokers and trying to opt out of their services and remove her information from their lists.
  • Quitting Google search and Gmail, opting instead for a search engine that keeps no search history record, DuckDuckGo, and a small e-mail service provider, RiseUp.
  • Keeping her Facebook page but “unfriending” everyone, finding the public display of her “friend” list to be too intrusive.
  • Deleting her LinkedIn account, which made her feel as if she would never land another job.
  • Using a secure Web browser called WhiteHat Aviator. It came with built-in HTTPS Everywhere, which does not retain or sell your online activity, and it utilized a service called Disconnect to block trackers.
  • Using the Tor search engine when wanting highly secure search, noting that it’s slower than other engines because it routes your information around the world.
  • Purchasing encrypted cloud-storage services for $200.
  • Purchasing a $35 privacy filter to shield her laptop screen from would-be onlookers; and
  • Purchasing a $420 subscription to a personal portable Internet service to bypass untrustworthy connections.
Ultimately, however, Angwin concluded that the “choice” to give up one’s privacy is a false one. Even after all of her extreme measures, the author is not sure if she was successful in protecting her privacy. At the talk, Angwin explained, “I would say I probably protected myself at most 50 percent of what is possible. And that’s because I wasn’t willing to live in a cage, in a tin shed in the woods, because I wanted to live in the modern world.”...MORE

"Tesla most shorted amid Nasdaq selloff" (TSLA)

In pre-market action the stock is changing hands at $207.10 Up $3.32.
Despite trading down to $198.60 on Friday the stock rallied back and has not (yet) closed below the $203 level pointed out as a support level last week.
Any buying enthusiasm would spook at least some of these recent shorts into rethinking their life goals.
From CNBC:
Technology stocks in the U.S. have seen a spike in short-selling since the start of the year, according to financial research firm Markit, which highlighted Tesla as one blue-chip stock that has seen a surge in investors betting against it.

Short-selling is an investment tactic where a speculator borrows a financial instrument, such as a stock, and sells it in the hope of buying it back later at a lower price, thereby making a profit. Markit measures this short interest by calculating the amount of shares that are out on loan.

Its research shows that short interest in the Nasdaq Composite has risen by 10 percent year-to-date, to 2.9 percent of shares outstanding, with investors expecting some of the biggest names in the sector to fall.

"On the larger (capitalized) Nasdaq 100, Tesla has seen short interest surge by a third in the last month to 15 percent of shares outstanding," Simon Colvin, a research analyst at Markit, told CNBC via email. Tesla is now the most shorted company on the Nasdaq 100, he added, after being the fourth most shorted stock a month ago....MORE
Blue chip?

Russia Test Fires Intercontinental Ballistic Missile

It's probably nothing.

Russia's Space defence force tests launch Yars new ballistic missile 
 “The main task of the launch was to confirm the reliability of a batch of missiles manufactured at the Votkinsk plant, in Udmurtia,” the Defence Ministry’s strategic missile force spokesman says

Yars inter-continental ballistic missile (archive)
Yars inter-continental ballistic missile (archive) © ITAR-TASS/Vladimir Smirnov 
Moscow, April 14. /ITAR-TASS/. Russia’s strategic missile force and air and space defence force have test-launched an inter-continental ballistic missile RS-24 with a multiple warhead from the Plesetsk space site. The missile blasted off from a mobile launcher at 10:40 Moscow time, the Defence Ministry’s strategic missile force spokesman, Colonel Igor Yegorov has said.
“The main task of the launch was to confirm the reliability of a batch of missiles manufactured at the Votkinsk plant, in Udmurtia,” he said.

The experimental warheads arrived at the designated area at the Kura testing range, in Kamchatka Peninsula.
The objectives were achieved in full, Yegorov said.

Yars construction
RS-24 Yars was designed  by the academician of Moscow Institute of Thermal Technology Yuri Solomonov. This missile is based on scientific, technical and technological solutions implemented in a rocket complex Topol-M, which significantly reduced the time and cost to create it. Adopting RS-24 with a multiple warhead increased combat capabilities of Russia’s strategic missile force to overcome missile defense systems, thereby strengthening the nuclear deterrence potential of the Russian strategic nuclear forces. This missile replaced ICBM RS -12M Topol, RS-18 Stiletto.

"In future, the SS-24 mobile groups form the basis of the Strategic Missile Forces, which will be capable guarantee the security of the country and its allies until the middle of the XXI century," Yegorov said....

Sunday, April 13, 2014

Barry Eichengreen on Low Interest Rates

This is one of the funniest first lines I've seen this week.
From Project Syndicate:
Losing Interest
Two of the world’s most prominent economic institutions, the International Monetary Fund and Former US Treasury Secretary Larry Summers, recently warned that the global economy may be facing an extended period of low interest rates. Why is that a bad thing, and what can be done about it?

Adjusted for inflation, interest rates have been falling for three decades, and their current low level encourages investors, searching for yield, to take on additional risk. Low rates also leave central banks little room for loosening monetary policy in a slowdown, because nominal interest cannot fall below zero. And they are symptomatic of an economy that is out of sorts.

Identifying the problem, much less prescribing solutions, requires diagnosing underlying causes. And here, unfortunately, economists do not agree. Some point to an increase in global saving, attributable mainly to high-saving emerging markets. Readers will detect here echoes of the “savings glut” argument popularized nearly a decade ago by the likes of former US Federal Reserve Board Chairmen Alan Greenspan and Ben Bernanke.

There is only one problem: the data show little evidence of a savings glut. Since 1980, global savings have fluctuated between 22% and 24% of world GDP, with little tendency to trend up or down....MORE 
HT: The Big Picture

Measuring savings as a percentage of GDP may not be the most informative way to look at the number.
Anecdotal evidence that venture funding is as easy to procure as it was in 1999 would lend credence to the idea that there is a lot of money in search of a return.

It is possible that, just as efficiencies of production have reduced the total amount of resources (both labor and capital) required to make physical things, efficiencies of finance have reduced the slippage in investment so each increment can be smaller than, say, thirty years ago.

On the other hand the lack of alternatives does make the idea of professional "pre-revenue" rounds sound slightly less ludicrous.

See also Brad DeLong's "Notes and Finger Exercises on Thomas Piketty’s “Capital in the Twenty-First Century”: The Honest Broker for the Week of April 19, 2014"


From Spaceweather:

What's up in space

On April 15th there will be a total eclipse of the Moon. Got clouds? No problem. The event will be broadcast live on the web by the Coca-Cola Science Center.
2014 Lunar Eclipse Live
MOSTLY QUIET WITH A CHANCE OF FLARES: With no sunspots actively flaring, solar activity is low. However, the quiet might be short-lived. Active regions AR20032 and AR2035 have 'beta-gamma' magnetic fields that harbor energy for M-class solar flares. NOAA forecasters estimate a 35% chance of such an eruption during the next 24 hours.

China Makes a Huge Bet On Copper (GLEN.L)

From FT Alphaville:

Leaving Las Bambas
We take an unseemly level of interest in Peruvian copper mine projects on FT Alphaville. It’s a side-effect of writing for Lex.

But then so too has a consortium of highly strategic Chinese resources investors (Minmetals, Guoxin International Investment, Citic)…

They’ve bought Glencore Xstrata’s stake in Las Bambas, a very big Peruvian copper asset, for $5.8bn cash, according to a release from Baar, Switzerland on Sunday:
The Las Bambas sale is worth noting, partly as a defining moment for China, Inc. The price (the buyers also have to pay for $400m in capex on the mine so far this year) will make it one of the biggest overseas Chinese acquisitions to date. ...MORE

Saturday, April 12, 2014

"East India Company: The Original Too-Big-to-Fail Firm"

A repost fromMarch 2013:
From Bloomberg Echoes:

The East India House, 1817.
The East India House, 1817. Source: British Library
For an institution that has been defunct for almost 150 years, the East India Company still evokes powerful reactions across the world.

Last year, when the Indian government debated allowing foreign companies to open supermarkets there, protesters shouted: “This is the return of the East India Company!” In the U.K., the East India Company’s extraordinary rise and fall have uncanny parallels with the stock-market bubbles and government bailouts that have shaken the economy over the past decade.

And little wonder: At the heart of the company’s story are eternal questions about how to cope with the powers and perils of large multinational corporations.

Established by royal charter in 1600 with a monopoly on all trade with Asia, the East India Company had many incarnations in its almost 275-year run.

For the first half of its existence, it remained a commercial supplicant, exporting bullion to pay for Asia’s luxury goods: first spices, then textiles and tea. Along the way, it became an early model for today’s joint-stock corporation and pioneered new management techniques for long- distance supply chains.
It also created a series of lifestyle revolutions in 18th- century England. Daniel Defoe described in 1708 how the company’s calicoes, shipped from India, “crept into our houses, our closets, our bedchambers.” This calico boom prompted fierce resistance from Britain’s weavers, who felt threatened by a flood of cheap Asian imports. In 1720, the government responded with a ban on Indian calicoes, and it was behind this protectionist wall that the Industrial Revolution would take shape.

Asian Intrusions
One market may have closed, but the East India Company refocused its efforts on the growing demand for Chinese tea on both sides of the Atlantic.

Meanwhile, at the company’s headquarters on Leadenhall Street in London, annual general meetings had become the arena for fearsome battles between management and shareholders and between rival management cliques.

These boardroom fights intensified following the Battle of Plassey in June 1757, when the company used a combination of force and fraud to place a puppet on the throne of Bengal. The company then loaded the contents of the Bengal treasury onto a fleet of 100 boats and sent them downriver to its base in Calcutta.
In one stroke, Robert Clive, who had engineered the victory, netted 2.5 million pounds for the company and 234,000 pounds for himself. (Today, this would be equivalent to a 262 million-pound corporate windfall and a cool 25 million-pound success fee for Clive.) The flow of wealth from Europe to Asia would now be reversed, and the East India Company’s shares soared on London’s markets....MORE
And a repost from February 2012:
The World's First Stock Exchange (and first bear raid, first dividend, first equity derivatives...) 
‘This little game could bring in more money than contracting charter parties for ships bound for England’, wrote Rodrigo Dias Henriques to Manuel Levy Duarte on 1 November 1691.1 Dias Henriques was referring to the ‘game’ of trading shares of the Dutch East India Company (Verenigde Oost-Indische Compagnie, VOC, founded 1602) and its derivatives* on the Amsterdam securities market.
A marvelous piece of scholarship from the University of Amsterdam.
VOC=Vereenigde Oost-Indische Compagnie "United East India Company" was created two years after the British East India Company.

How the Amsterdam market for Dutch East India Company
shares became a modern securities market, 1602-1700

Berckheyde Gerrit Adriaensz - 'Dam Square, Amsterdam'

Dam Square, Amsterdam
Note: this view is not from the paper (231 page PDF)

The aim of this chapter is to give a general overview of the development of the secondary market for VOC shares. For that purpose, it discusses the main events that shaped the market in chronological order. Naturally, this overview starts with the subscription of 1602 and the basic rules for share transfers. Thereafter, the introduction of derivatives, the bear-trading* syndicate of Isaac le Maire, trading locations, the first dividend distributions, the relation between the company and its shareholders, the role of market
makers and brokers...
1607 – The emergence of a derivatives market
Soon after the founding of the VOC, traders also started to trade share derivatives – financial securities derived from shares, such as forwards, options and repos. These types of transactions had VOC shares as underlying assets; they allowed traders to participate in the share trade without necessarily having to pay the full value of the shares they traded....

1609-10 – Isaac le Maire
Apart from lowering transaction costs, the use of derivatives provided yet another advantage: they allowed traders to go short on shares. The VOC bookkeeper was of course not allowed to overdraft shareholders’ accounts, but derivatives bypassed the company’s capital books. On expiration of a forward short sale*, for example, there were two possibilities: either the contractors opted for money settlement, in which case the price difference between the forward price stipulated in the contract and the market price on the expiration date was paid, or they chose to actually transfer the share. In the latter case, of course, the seller had to make sure that he possessed a share to be able to transfer it to the buyer. Short selling is often associated with speculators who seek to gain from intentionally bringing the price of a security down. This is of course objectionable behavior...
...The VOC directors explained in their petition to the States of Holland that a group of share traders had conspired to sell a large number of forward contracts. They had sold many times the value of the shares actually registered on their accounts in the company’s capital books. When the agreed date of delivery approached, the sellers began to spread bad rumors about the company, thus bringing the share price down. Subsequently, this bear trading syndicate offered a small amount of stock for sale at a still lower price, thus reinforcing the downward motion of the share prices. Hence the short sellers could buy shares at far lower prices than agreed upon in the forward sales contracts and make a good profit....
The first dividends were not paid for seven years but once they started...
...Shareholders could collect their first dividend in April 1610: 75% of the nominalvalue of their share in mace.39 In November of that same year, another 50% in pepper was distributed, together with 7.5% in cash – the latter distribution was only for those shareholders who had also collected the pepper. In March 1612, a distribution of 30% in nutmeg followed.40 Shareholders who had collected all dividends in kind had received a total of 162.5% of the nominal value of their shares, but the market value of the spices proved to be significantly lower. Shareholders complained that the distributed dividends had a market value of only 125%41; the sudden abundance of spices on the market had brought the prices down....
These guys were not believers in the Modigliani-Miller Dividend Irrelevance Theorem,

If I remember correctly the company averaged 18% per year in dividends on the original subscription price over the first 110 years of its existence.
That number sticks in my head because the greatest U.S. bull market averaged 18%  per year for 18 years, 1982-2000.
I know it's an Apples and Mangosteens comparison but it gives an indication of what a wealth machine the VOC was.
Here's some financial reporting Dutch Masters style:
$64.98 (+$13.84) (+27.1%) Shares in the spice purveyor soared on word that the three sturdy galleons dispatched two years afore had been sighted off the coast of Cape Verde, returning from their dangerous voyage to the exotic Orient with their casks brimful of redolent cinnamon, cardamom, and mysteriously intoxicating curried powder.
Okay, that's actually America's Finest News Source.

The Problem With Profitless Start-ups

From NewYork Magazine:

Yesterday, I ordered lunch from a gourmet meal-delivery start-up called SpoonRocket – a takeout container of sirloin au poivre and roasted cauliflower that was shuttled to my door in exactly 11 minutes, costing me $8. I then took an UberX car to a meeting across town, paying roughly $10 for a 15-minute ride. On my way, I pulled out my phone to see about getting my broken dryer fixed through Handybook, which provides on-demand repairs in the Bay Area for less than a local handyman would charge.
There are dozens more services like these operating in and around San Francisco – Homejoy for cleaning, BloomThat for flowers, Postmates for courier service, and on and on. Most of them provide cheap, convenient amenities at the tap of a smartphone app. Few of them are profitable on a corporate level. And together, they’ve formed the backbone of a strange urban economy: one in which massive venture-capital injections allow money-losing start-ups to flourish, while providing services that no traditional, unsubsidized business can match. It’s an economy built on patience, and the hope that someday, after the land grab is over and the dust has settled, a better business model will emerge.

It’s hard to know which of today’s new start-ups are unprofitable. But in some cases, losing money is kind of the point. I have no inside information on SpoonRocket's financials, for example, but I imagine that the company books a loss of a few cents every time I click the order button. (There’s just no way, short of a supply-chain miracle, that my $8 covers the cost of preparing a gourmet lunch, driving it to my house, and paying all the drivers and cooks and engineers and assorted other costs associated with running their business.) But SpoonRocket doesn’t have to make money, because it’s just raised $10 million in venture capital expressly so it can keep its prices low. The metric its investors care about right now is user growth, not profits. And if, indeed, the company is selling meals for less than they cost to make, those investors are willing to fill the gap.

This business model is great for consumers. As a result of start-ups’ willingness to lose money for months or years at a time, I get cheap, fast services that come with an effective subsidy that can add up to thousands of dollars a year. But they're problematic for the businesses themselves. Unlike Amazon or Google (which have profitable core operations that subsidize the money-losing services elsewhere in their business), or Uber (which uses the profits from its high-margin Uber Black and Uber SUV lines to subsidize its low-margin UberX service), many of today’s start-ups have no profitable parent company pouring in money. They’re simply taking millions of dollars in venture capital with the hope of keeping prices low, pushing rivals out of the market, and eventually finding a way to turn a profit....MORE
HT: Abnormal Returns