## Saturday, February 17, 2018

### "The random walk of cars and their collision probabilities with planets"

Initial conditions - very important. Just ask grandmother.*
From the Physics arXive at Cornell:

Astrophysics > Earth and Planetary Astrophysics

The random walk of cars and their collision probabilities with planets
On February 6th, 2018 SpaceX launched a Tesla Roadster on a Mars crossing orbit. We perform N-body simulations to determine the fate of the object over the next several million years, under the relevant perturbations acting on the orbit. The orbital evolution is initially dominated by close encounters with the Earth. The first close encounter with the Earth will occur in 2091. The repeated encounters lead to a random walk that eventually causes close encounters with other terrestrial planets and the Sun. Long-term integrations become highly sensitive to the initial conditions after several such close encounters. By running a large ensemble of simulations with slightly perturbed initial conditions, we estimate the probability of a collision with Earth and Venus over the next one million years to be 6% and 2.5%, respectively. We estimate the dynamical lifetime of the Tesla to be a few tens of millions of years.
 Comments: 5 pages, 4 figures, to be submitted to MNRAS, comments welcome Subjects: Earth and Planetary Astrophysics (astro-ph.EP) Cite as: arXiv:1802.04718 [astro-ph.EP] (or arXiv:1802.04718v1 [astro-ph.EP] for this version)

*Grand mother was last sighted/cited in Feb. 6's "Mr. Macho Market Man Says: "Parachute? We Don' Need No Stinkin' Parachute"":
Grandmother would say something like "If the initial condition given is 'The sky is falling', your course of action would be to short sky, try the eggplant"
The long version, also re: trajectories, 2013's:

The Future Price Trajectory of Copper and Aluminum and the Implications for Oil
In Which Our Hero Explains the Importance of Recent Events and Their Impact on the Cost of Day-to-Day Living
...For me it was how to approach the profit possibilities; much in the same way Grandmother would quiz: "Your initial conditions are 'The sky is falling, the sky is falling', what is your course of action?" to which I'd reply "I'm this many: ||||, four" and she'd say, "No silly, your course of action is 'Short sky'"

### Mr. Musk's Falcon Heavy is an Absurdly Low-cost Heavy Lift Rocket

From Ars Technica:

The new SpaceX rocket seriously undercuts its competitors.

Twenty-seven engines on the Falcon Heavy rocket, all burning their happy little flames.
One may criticize the Falcon Heavy rocket for having a short launch manifest, as it has only two confirmed flights in the next year or so. There just aren't that many commercial customers right now for the heavier-lift rocket when a cheaper Falcon 9 or another medium-lift class of booster will suffice. But when one considers the more extreme cases—such as big Department of Defense missions to geostationary orbit or potential human exploration plans—the Falcon Heavy shines.

Now that SpaceX's new rocket is finally flying, we can directly compare costs between this new booster and an existing rocket in its class, the Delta IV Heavy, as well as NASA's upcoming heavy lift booster, the Space Launch System. And upon direct comparison, the cost disparities are sobering, proving that commercial development of large rockets likely represents the future of the industry.

Delta IV Heavy
The Falcon Heavy rocket, with reusable side boosters, costs $90 million. For a fully expendable variant of the rocket, which can lift a theoretical maximum of 64 tons to low-Earth orbit, the price is$150 million. While it is not certified yet, SpaceX says its rocket can hit all Department of Defense reference orbits; however big and gnarly the military wants to build its satellites, and whatever crazy orbit it wants to put them into, the Falcon Heavy can do it.

Only the Delta IV Heavy rocket, manufactured by the United Launch Alliance, also has this capability today. It is more expensive, but how much more is a matter of some debate. On Twitter this week, the chief executive of the Colorado-based rocket company, Tory Bruno, said the Delta IV Heavy costs about $350 million per flight. This figure, however, is strikingly lower than what Bruno cited during a congressional hearing in 2015, when he asserted that, "A Delta IV, depending on the configuration, costs between$400 and $600 million dollars." Moreover, the costs referenced above by Bruno exclude a "launch capability contract" worth about$1 billion annually, which the US government pays exclusively to United Launch Alliance. Based upon current law, this contract payment will phase out in 2019 (for Atlas rockets) and 2020 (for Delta rockets), which should increase the costs allocated to each mission. Finally, in 2019, United Launch Alliance will make the last flight of a Delta IV Medium rocket. Once this variant is retired, all of the Delta's fixed costs will fall on the Heavy variant. This will push the per-flight cost above $600 million, and perhaps considerably higher, in the early 2020s. The bottom line is that the Falcon Heavy is a more powerful rocket than the Delta IV Heavy, and by various measures the latter will probably soon cost the US government about five times as much. Put another way, the Department of Defense may have to pay half a billion dollars more for a single launch of certain military satellites on the Delta IV Heavy versus the Falcon Heavy....MUCH MORE ### Chartology: Bonds From Hedgopia: CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned Following futures positions of non-commercials are as of February 13, 2018. 10-year note: Currently net short 296.9k, down 30.6k. If 10-year Treasury yields (2.88 percent) reach three percent – or even where they are currently – would/could that be used as an opportunity to go long bonds? Possibly – at least near term. In fact, they did tag 2.93 percent Thursday before coming under slight pressure. Yields have come a long way in a short span of time. As early as September 7 last year, they were 2.03 percent. Not surprisingly, on nearly all timeframe, they have entered – or soon will – overbought territory. On the weekly chart, there have been back-to-back long-legged dojis. The level to watch on the way down is 2.62 percent, which also represents the neckline of a reverse-head-and-shoulders pattern. Yields broke out of that resistance-turned-support a month ago. If it is a genuine breakout, in due course they could be headed toward 3.9 percent. Hence the significance of how bond vigilantes act around that level... ...MORE ### "Scientists Can’t Replicate AI Studies. That’s Bad News" We're with Popper and Feynman on the overarching premise: If what you're doing isn't falsifiable, if what you're doing isn't replicable, what you're doing isn't science. And if what you're doing was funded by the public in any way the law should consider the resulting code to be owned by the public. There, three different concerns dispensed with in two sentences. Next! From Futurism: In Brief Most AI researchers don't report the source code of the AI programs they use, or the data that AI are trained on. That means other scientists can't reproduce their results — and may make it harder to implement AI more broadly. The specter of replication The field of artificial intelligence (AI) may soon have to face a ghost that’s haunted many a scientific field lately: the specter of replication. For a research study to be considered scientifically robust, the scientific method says that it must be possible for other researchers to reproduce its results under the same conditions. Yet because most AI researchers don’t publish the source code they use to create their algorithms, it’s been largely impossible for researchers to do that. Science magazine reports that at a meeting of the Association for the Advancement of Artificial Intelligence (AAAI), computer scientist Odd Erik Gundersen shared a report that found only six percent of 400 algorithms presented at two AI conferences in the past few years included the algorithm’s code. Only one in three shared the data they used to test their program, and just half shared a summary that described the algorithm with limited detail — AKA “pseudocode.” Gundersen says that a change is going to be necessary as the field grows. “It’s not about shaming,” he told Science. “It’s just about being honest.” harmful secrecy Replication is essential to proving that the information an experiment produces can be used consistently in the real world, and that it didn’t result randomly; an AI that was only tested by its creators might not produce the same results at all when run on a different computer, or if fed different data. That wouldn’t be very helpful at all if you were asking that AI to do a specific task, whether that’s search for something on your phone or run a nuclear reactor. You want to be assured that the program you’re running will do what you want it to do....MORE ### Chartology: Close To Multiple Gap Fills Filling gaps on charts often, though not always, is akin to permission for the price to "carry on" the move that caused the gap in the first place. Filling gaps up means be alert to the up-move continuing and vice versa, if you prefer your vice, versa. From Slope of Hope: Through the Lens of Gaps The week of February 5 was devastating for the bulls. The week of February 12 was devastating for the bears. I have a feeling that the shortened week we’re approaching after Presidents’ Day will have the torch back in bear hands. Sure, we might have a little more strength, but we are so deliciously close to major gap fills, I am looking ahead to next week with anticipation (and, admittedly, some anxiety). These markets, in spite of having greatly different components, all pretty much look the same. The emerging markets: The high yield bond fund: ...MORE ### Scale: "Scant Evidence of Power Laws in Real-World Networks" Wait, what? From Quanta Magazine: A new study challenges one of the most celebrated and controversial ideas in network science. A paper posted online last month has reignited a debate about one of the oldest, most startling claims in the modern era of network science: the proposition that most complex networks in the real world — from the World Wide Web to interacting proteins in a cell — are “scale-free.” Roughly speaking, that means that a few of their nodes should have many more connections than others, following a mathematical formula called a power law, so that there’s no one scale that characterizes the network. Purely random networks do not obey power laws, so when the early proponents of the scale-free paradigm started seeing power laws in real-world networks in the late 1990s, they viewed them as evidence of a universal organizing principle underlying the formation of these diverse networks. The architecture of scale-freeness, researchers argued, could provide insight into fundamental questions such as how likely a virus is to cause an epidemic, or how easily hackers can disable a network. Over the past two decades, an avalanche of papers has asserted the scale-freeness of hundreds of real-world networks. In 2002, Albert-László Barabási — a physicist-turned-network scientist who pioneered the scale-free networks paradigm — wrote a book for a general audience, Linked, in which he asserted that power laws are ubiquitous in complex networks. “Amazingly simple and far-reaching natural laws govern the structure and evolution of all the complex networks that surround us,” wrote Barabási (who is now at Northeastern University in Boston) in Linked. He later added: “Uncovering and explaining these laws has been a fascinating roller coaster ride during which we have learned more about our complex, interconnected world than was known in the last hundred years.” But over the years, other researchers have questioned both the pervasiveness of scale-freeness and the extent to which the paradigm illuminates the structure of specific networks. Now, the new paper reports that few real-world networks show convincing evidence of scale-freeness. In a statistical analysis of nearly 1,000 networks drawn from biology, the social sciences, technology and other domains, researchers found that only about 4 percent of the networks (such as certain metabolic networks in cells) passed the paper’s strongest tests. And for 67 percent of the networks, including Facebook friendship networks, food webs and water distribution networks, the statistical tests rejected a power law as a plausible description of the network’s structure. “These results undermine the universality of scale-free networks and reveal that real-world networks exhibit a rich structural diversity that will likely require new ideas and mechanisms to explain,” wrote the study’s authors, Anna Broido and Aaron Clauset of the University of Colorado, Boulder. Network scientists agree, by and large, that the paper’s analysis is statistically sound. But when it comes to interpreting its findings, the paper seems to be functioning like a Rorschach test, in which both proponents and critics of the scale-free paradigm see what they already believed to be true. Much of the discussion has played out in vigorous Twitter debates. Supporters of the scale-free viewpoint, many of whom came to network science by way of physics, argue that scale-freeness is intended as an idealized model, not something that precisely captures the behavior of real-world networks. Many of the most important properties of scale-free networks, they say, also hold for a broader class called “heavy-tailed networks” to which many real-world networks may belong (these are networks that have significantly more highly connected hubs than a random network has, but don’t necessarily obey a strict power law). Critics object that terms like “scale-free” and “heavy-tailed” are bandied about in the network science literature in such vague and inconsistent ways as to make the subject’s central claims unfalsifiable.....MUCH MORE ### "Sunken Treasure, Death-Defying Adventure, Sibling Rivalry: How Charles and John Deane Invented Modern Deep-Sea Diving and Saved the British Empire" From Epic Magazine: Unfathomable chapter 1 On the morning of August 29, 1782, the HMS Royal George, a colossal warship of five decks and 108 guns, was anchored just off Portsmouth Harbor at Spithead, a favored rendezvous for the British fleet. It was 9 am, a blustery morning, and the deck was a flurry of activity as ships arrived from shore to provision the vessel for a voyage to the Mediterranean. Its mission was to break the French and Spanish blockade of the vital British garrison on Gibraltar. The Crown was fighting a war on two fronts, against ancient rivals in Europe and its rebellious American colonies across the Atlantic. The Royal George could prove decisive. With its speed and complement of cannons, the ship was one of the most fearsome weapons in Britain’s navy. A veteran of many wars, the Royal George rose tall among the fleet, an oak leviathan festooned with acres of sails, the ship’s brass gleaming in the daylight. In choppy waters, a delivery boat filled with casks of rum pulled alongside the Royal George. On board, wives visited husbands, children said goodbye to fathers, and merchants sold cheap trinkets and watches to the crewmen. Mingling with the sailors were “Spithead nymphs,” women who earned their living servicing men among the berths. On the gun decks, a group of sailors rolled 50 cannons to the centerline to help the vessel heel over, easing the delivery of the rum casks. But the Royal George failed to hold steady, and the heel steepened. Lieutenant Philip Charles Durham, the officer of the watch, realized that his crew had failed to shut the gunports, now submerged, and the ship was rapidly taking on water. He ordered all hands to run the guns back to their original positions, but it was too late. The sea poured in and the ship was tipped onto its side. Below decks chaos broke out. Cannons came loose from their lashings, careening down the sloping deck and crushing hundreds of sailors. Visitors and crew were trapped by torrents of chilly seawater rushing through the berths and passages. The ship’s towering masts crashed down onto the rum delivery boat, carving it in half. Those still on the top deck panicked; sailors, women, and children leaped into the water, only to be caught up in the ship’s tangled rigging. The gunwales disappeared beneath the foaming waves, followed by the top deck, then the forecastle, until the entire ship sank beneath the swell of the sea and settled upright on the seabed 80 feet below. After 10 minutes, only the mast tips remained visible, like fingers grasping for the surface. The events of that morning became one of the worst maritime disasters in British naval history, with more than 900 sailors and civilians lost. But the Royal George did not disappear from the minds of English mariners, even when settled on the seafloor. Everyone knew that the ship contained a vast fortune—the equivalent of$2.8 million worth of guns, timber, rum, and brass machinery—sitting in silt, just 80 feet from the surface. But in the era before the invention of diving technology, descending to those depths carried the risk of death. Yet the treasure that sank with the lost Royal George continued to beckon, seducing men who were desperate to change the circumstances of their lives.
chapter
2
Charles and John Deane, brothers born four years apart, grew up in a foul dockyard precinct on the edge of London. A former fishing settlement on the Thames, the area had been swallowed by Europe’s largest city. By 1800, it had become a squalid reach of maritime activity and drinking establishments overlooking a fetid waterfront. Locals called the area Deptford Green, but there was nothing green about the landscape of shipyards, slaughterhouses, and candle factories that stained the masonry black. Among the slum’s infamies was the tavern where Christopher Marlowe, one of England’s greatest playwrights, was said to have been stabbed to death in 1593.

It was ironic that the Deane family ended up living in a slum along the shores of England’s largest shipyard. A century earlier, their great-great-grandfather Sir Anthony Deane had been one of the world’s most renowned naval architects. He had spearheaded the construction of the British navy during the reign of Charles II and wrote Deane’s Doctrine of Naval Architecture, 1670, one of the earliest and most influential books on hydrodynamics. His portrait hangs in London’s National Maritime Museum. It was Sir Anthony’s navy that gave Britain unrivaled control of the seas, edging out other European powers. One of Sir Anthony’s 16 children, John, solidified the family’s fame when he was hired by Peter the Great to construct the Russian navy.

But the Deanes’ royal titles and estates had long since been squandered by the time Charles and John were born; their father toiled as a caulker, patching seams in the hulls of ships that his forebears once designed. When the brothers were boys, they were enrolled by their parents as “objects of charity” at the Royal Hospital School. They received a subsidized education, but in return they had to spend seven years as low-paid mariners. The school sought to prepare its charges for the harsh life that awaited them. The 700 students wore naval uniforms and were taught to march in unison. Charles, the older brother, shipped out in 1810 on a merchant vessel at 14 years old. Three years later, John was picked for a plum assignment as a captain’s servant. Charles and John served on many vessels, eventually sailing together to Madras, Bombay, and Macau—all difficult voyages, long months of tilting horizons while en route to distant points in the sprawling British Empire.

During the Deane brothers’ years in the merchant marine, they experienced the enormous hardships of life at sea, crammed together with hundreds of other men, poorly provisioned and tossed by waves. They survived disease and disaster; they saw men receive 300 lashes and witnessed others buried at sea. And, like many poor hands returning home to England and sailing past Portsmouth and the Royal George, they fantasized about the riches below.

In the previous decades, many daring divers had attempted to retrieve sunken treasure in a variety of contraptions—wooden containers, copper jackets, metal canisters. Some died. Others were crippled. One of the men who attempted to reach the Royal George was William Tracey, a successful ship owner who dreamed of even more wealth and constructed a formfitting diving suit out of copper with holes for his extremities and a hose to deliver air from the surface. But when he sailed into Spithead in 1782 and took his suit into the sea, he lasted only a few minutes before resurfacing. “The pressure of the water occasioned my great injury, as it was from that pressure I am now a cripple,” wrote Tracey, who lost all of his money after the misadventure and ended up in Fleet Prison, a grim debtors’ prison in London.

Yet the wreck of the Royal George remained a tantalizing prize, preserved and nearly undisturbed since the day it sank. So it was with all shipwrecks, not just in England but around the world. Since ships first sailed, countless vessels had gone to the bottom, where they remained out of reach. Throughout history, humans were limited to the surface of the sea—and feared the deep. The underwater world was regarded with superstition, a mysterious place where monsters dwelled. Every shoreline marked entry to this immense unconquered frontier, beckoning adventurous souls and, by the early 19th century, clever engineers. They were drawn by the thrill of exploration and the allure of instant fortunes—thousands of years of wealth lost beneath the waves.
chapter
After the Deane brothers fulfilled their service as merchant marines, Charles found himself back in Deptford, living just down a dirt road from his childhood home. At 29, Charles was moody, well-worn, and complicated—a loner who had trouble getting work. He struggled to provide for his three children and eventually took a lowly job patching ships’ seams alongside his father. Desperate to find a way out of poverty, he began sketching an extraordinary new device that would make him rich. Like his ancestors, Charles had a passion and talent for engineering, and he knew that the greatest danger to ships at sea was not water but fire. So he devised an “Apparatus to extinguish Fire in its origin”—a copper helmet riveted to a leather or canvas jacket and fitted with a hose that delivered fresh air from a pump. On his patent application, Charles described his helmet as a

“Machine to be Worn by Persons Entering Rooms or
other Places filled with Smoke or other Vapour,
for the Purpose of Extinguishing Fire or Extricating
Persons or Property therein.”
Charles Deane dreamed up the idea of a smoke
helmet for firefighters in 1823

The RBA's Lowe was equally circumspect on Australian dollar, which is up 2% this week. The Australian dollar has appreciated in 8 of the past ten weeks, and those two losing weeks were here in February. The Aussie has approached the 0.7990 area that houses the 61.8% retracement of recent decline. Lowe said that the trade-weighted index was manageable, and that although he would prefer a lower rather than higher exchange rate, "we are where we are."... ...MORE ### Tired of texting? Google Tests Robot to Chat With Friends As You Do Something Else From The Guardian: With its new Reply system the firm is taking the art of conversation one step forwards – or should that be backwards? Are you tired of the constant need to tap on a glass keyboard just to keep up with your friends? Do you wish a robot could free you of your constant communication obligations via WhatsApp, Facebook or text messages? Google is working on an AI-based auto-reply system to do just that. Google’s experimental product lab called Area 120 is currently testing a new system simply called Reply that will work with Google’s Hangouts and Allo, WhatsApp, Facebook Messenger, Android Messages, Skype, Twitter direct messages and Slack. Reply aims to take the smart AI-based suggested replies that are available in Google’s Gmail and Allo apps to the next level. In an email test sent to volunteers, acquired by Android Police, Area 120 says: “You probably get a lot of chat messages. And you want to be there for people, but also for people in the real world. What if replying were literally one tap away?” The system can apparently work out what people are saying to you and suggest one-tap answers, but Google says it will go further, taking your location, your calendar and other bits of information into account. One example was using your location to send and instant response to “when can you be home?” using your preferred method of transport and the time it’ll take to wherever your home is....MORE ### Cryptocurrency Micropayments: Speed, Scaling and Evangelists Alternate title: Putting the currency in cryptocurrency. First up, Inside Futures (the derivative, not 'tomorrow'): Cryptocurrencies and the Race for Speed Speed modulates the technological landscape: it converts dynamic flows into conditions of relative stasis; it overruns emerging developments with a history that has left it behind; and it transforms the clarity of steady mobilization into a series of disarticulated blurs. Speed, once again, is at the center of the competitive cryptocurrency space. Enter Lightning: Dubbed a potential game-changer, the Lightning Network is a "secondary" payment protocol that potentially allows for instantaneous micropayments in Bitcoin and other cryptocurrencies. As transactions would be grafted onto a layer above the blockchain, significantly increasing its speed while decreasing its cost, the Lightning Network may serve as a solution to Bitcoins scalability problem. Scalability is an industry-wide issue, as size and frequency limitations compromise the transactional capacities of just about every functioning cryptocurrency. With Bitcoin in a position to charge ahead with the new protocol, other cryptocurrencies are preparing to test or implement comparable versions of their own. • Litecoin, whose protocol is perhaps the most similar to Bitcoins, has been working with Lightning Labs to launch the network simultaneously with Bitcoin. • Stellar added lightning implementation to its 2018 Stellar Roadmap; Jeremy Rubin, who currently leads Stellars lightning network development, states that "It's fairly close to working to the point where the public can test with real money, but not necessarily at the point where people can operate a business on it quite yet." • Ethereum is working to implement Raiden, their own secondary payment protocol solution to scale transactions and microtransactions. • NEOs scaling solution is called Trinity (Trinity State Channels), a payment channel functionality that will increase its capacity well beyond its already exceptional velocity of 10.000 tps. • ZCash plans to introduce BOLT, a micropayment system that works in alignment with ZCash's anonymity features. • Ripple and Monero are reputed to have begun exploring similar second-level payment technologies. • And alternative solutions are also in the works, as in the case of Grin (to be launched later this year) which according to Coinbase uses clever cryptography to construct a blockchain that eats up old, unneeded data as it grows larger, so it requires much less space in the long term," and IOTA which claims to have created a blockchain-less blockchain. ...MORE Coindesk, who are fans, reminds people: "It's still in beta!" Sending Bitcoin on Lightning (The Early, Risky Way) It's like the early days of bitcoin all over again. Comprised of invite-only chat channels, alien terminology and warning signs at every turn, the nascent ecosystem springing up around Lightning Network, the scaling technology that could end up having the greatest impact yet on bitcoin's capacity, is to date, hopelessly difficult to operate. "Going to be blunt," one developer wrote, "if you don't know how to compile something, you probably will have a lot more struggles and a lot less coins." Simply put, Lightning in its current state is dangerous to interact with today. But given the network's big promises - instant transactions and fees that are next to nothing - risk isn't diminishing the appeal. Companies like Blockstream are already launching Lightning-powered stores that send stickers to bitcoin users who successfully pass funds across the network, while so-called "early Lightning adopters" are being celebrated online for their "bravery" on the blockchain. "Show the world that you were one the first people to use Lightning on mainnet for a legitimate purchase, if it works," Blockstream's website reads. It's a sentiment that, given the risks, has garnered criticism by some who feel it mistakenly encourages users to risk real money. That said, there are ways to contribute to the early network without putting your own funds at risk. This includes hanging out in the testing environment (where the majority of Lightning developers are today) or venturing onto the mainnet (where there's a budding set of best practices, even if pitfalls remain). Below, we offer our guide for early adopters who want to get their hands on the bleeding-edge tech before it's recommended....MORE Finally, here's Elizabeth Stark, Co-founder and CEO of Lightning Labs on Bloomberg TV a couple months ago. And at the Blockstack Summit last summer: ### "What’s Supporting Farmland Values?" This is the second part (of two) from Agricultural Economic Insights, January 29: In a recent article on land values, we began the discussion by examining cash rental rates and farm financial conditions. This week we look at farmland valuation Current Valuations Remain High Because of our belief that farmland prices are ultimately driven by earnings expectations and opportunity costs we frequently examine farmland valuation with the farmland price to cash rent multiple. This expresses farmland price as a multiple of current cash rents. In other words, if the multiple is 25, farmland is priced at 25 times that current cash rental rate. This valuation measure is shown in Figure 1. Figure 1. Cash Rent to Value Multiple, Average Quality Indiana Farmland, 1975-2017. According to the Purdue Farmland Value survey, the 2017 cash rent multiple for average quality Indiana farmland was 34. This meant that average quality Indiana farmland was currently being valued at 34 times the cash rent. As one can see, this is among the highest multiples seen in the data, but off slightly from recent highs. While this graph is made from Indiana data, similar multiples would be seen in the USDA data for most corn belt states. The essential point is pretty clear. Today, investors are willing to pay more for current earnings than at most times in history. There are a variety of reasons that one might be willing to pay a high multiple. First, you might expect that these current earnings will grow in the future. For instance, if you expect cash rents to grow rapidly, paying a high multiple for today’s earnings would be sensible. However, as we discussed two weeks ago, current economic conditions don’t suggest that rents will be increasing rapidly in the near future. In fact, they have been trending slightly lower. However, one must remember that conditions can change rapidly. Perhaps investors expect that earnings will increase in the future. Interest and Capitalization Rates Remain Low Another reason that people are willing to pay a high multiple for farmland is that the other options available to them are not attractive either. We often examine this by looking at interest rates on alternative investments as a proxy for opportunity costs. If the opportunity costs for capital are low, investors are often willing to accept low rates of return on farmland. This is best seen by taking the inverse of the multiple, which is commonly called the farmland capitalization rate. It is calculated by dividing cash rent by farmland prices. In figure 2 we show the capitalization rates for farmland in three different states and the interest rate on the 10-year U.S. Treasury bond. The farmland capitalization rates were calculated from USDA surveys in Indiana, Illinois, and Iowa. The chart shows that since roughly 1985, farmland capitalization rates and U.S. Treasury bond rates have fallen. Today, farmland capitalization rates are slightly higher than the interest rate on 10-year U.S. Treasury bonds. This strong relationship provides fairly strong evidence that the high multiples paid for farmland are a function of the generally declining interest rate environment of the last 2 to 3 decades. In other words, it appears that one reason capitalization rates are low (and conversely multiples are high) is the overall low interest rate environment that we are experiencing. Figure 2. Farmland Capitalization Rates and the Interest Rate on 10-Year U.S. Treasury Bonds, 1967-2017. How Might Changes Impact Farmland Values? Another way to look at the relationship between interest rates, returns, and farmland value is to examine them simultaneously. This relationship is shown in Figure 3. Here, we graph farmland value on the vertical axis. Along the horizontal axis are different cash rent values. The red, blue, and green lines farmland values under different capitalization rates. These values are found by dividing (multiplying) the cash rental income on the horizontal axis by the capitalization rate (multiple). Three capitalization rates 3% (blue), 4% (red), and 5% (green) are shown. The black lines (which are labeled) illustrate the current level of cash rent and farmland values. As one can see the current land value and cash rental rate intersect the 3% capitalization rate (6,928/$205 = 3%). One can use this graph to think about what would happen if capitalization rates or cash rental rates were to change. For example, if one were to expect higher (lower) rents and a 3% capitalization rate, land values would move up (down) the blue line....MUCH MORE Earlier: What's Supporting Farmland Values? Part 1 ## Thursday, February 15, 2018 ### Questions Americans Want Answered: "Are Black Walnuts Ready to Boom?" We've shaken this tree a few times, links below. From Civil Eats: A nuisance to many, this native Appalachian nut is showing some diligent foragers that money can grow on trees. The first car arrives over two hours before the hulling station officially opens in Jeffersonville, Kentucky. By the time that Renee Zaharie appears and starts the hulling machine, four more vehicles have pulled in and are waiting under the darkening evening sky. The steady murmur of conversation (and the occasional guffaw) hums beneath the tent protecting the machine from the elements, as walnut hullers shoot the breeze after a long day of picking. Occasionally, a plaintive mew announces the otherwise-silent arrival of one of the 40 cats that Renee and her husband, William, foster. Out front, cars zip by on the busy county road. All around, the soft chirps of crickets sing their nightly chorus. It’s the first weekend of the annual black walnut harvest that takes place each October, and the air is festive. Money That Grows on Trees Black walnuts are native to North America (including six Appalachia states) and, unlike many other tree nuts, grow in the wild. The green, tennis ball-sized nuts rain onto fields, roads, vehicles and sometimes, people, presenting a nuisance to cars parked beneath them and a danger to lawn mowers everywhere. During black walnut season in October, the tree nuts rain down everywhere. For homeowners, they present a nuisance that can damage lawn mowers. Mike Foight of South Shore, Ky. enlists his grandchildren to clear his yard (pictured here) and earn some spending money. While some may dread black walnuts for these reasons, for many others, the annual harvest is a welcome time of the year: a sign of the changing seasons, the return of a beloved baking ingredient, and, perhaps most importantly, an opportunity to earn extra cash. Black walnut harvesters gather the nuts locally—from their yards, nearby yards, roadsides and forests—and bring them to one of 238 hulling stations in 14 states across the country. There, hulling operators use specialized machinery to remove the hulls (which can make up to half of a black walnut’s weight), weigh the hulled walnuts, purchase them, and send them to Stockton, Missouri for shelling and further processing. Stockton, the unofficial black walnut capital of the world, is home to Hammons Product Company (HPC), a family-owned business that has been shelling black walnuts for the past 71 years. The company sets the price for black walnuts every year. This past October, they paid$0.15 per pound to walnut pickers, and an additional $0.05 per pound to hulling stations. Brian Hammons, the company’s president, says that they produce an average of 23 million pounds annually and are expecting a bumper crop in Appalachia this year that will push that figure upwards of 30 million. After shelling the nuts, HPC sells them raw in grocery stores and specialty retailers, as well as directly to chefs and ice cream makers (black walnut ice cream is wildly popular in certain parts of the country). There’s also an ever-increasing selection of black walnut products, like black walnut oil, and even myriad uses for the shells, which can serve as eco-friendly ingredients in sand-blasting agents, water filtration systems and even sports fields. Every part of the nut is able to be used.... ...MUCH MORE Previously: November 2012 James Grant Says Buy Black Walnuts Not exactly Pssst... "Blue Horseshoe loves Anacot Steel" but ya play the cards you're dealt.... May 2014 A Higher Yielding Alternative to Corn and Wheat: "Agriculture Investors Develop a Taste for Permanent Crops" And for insight as to what has real value, follow the crooks: November 2013 "Thieves Steal Nearly$400K In Walnuts"
May 2017
The Curious Case of the Disappearing Nuts

### Will Lebanon Be the Next Energy War?"

From the blog of F. Wiliam Engdahl:
A new geopolitical confrontation is shaping up in the Middle East, and not only between Israel and Syria or Iran. Like most conflicts there, it involves a fight for hydrocarbon resources—oil and gas. The new focus is a dispute between Israel and Lebanon over the precise demarcation of the Exclusive Economic Zone between the two countries. The prime actors at present, in addition to the governments of Israel and Lebanon include Russia, the Lebanese Hezbollah, Syria, Iran and the US in the shadows. The latest Israeli attacks on alleged Iranian bases or Hezbollah camps inside Syria are closely tied to the Israeli aim to prevent a land link from Iran through Syria to the Hezbollah home-base infrastructure in Lebanon. The whole situation has the potential to lead to an ugly wider war nobody wants, at least almost nobody . .
In 2010 the oil and gas geopolitics of the Mediterranean changed profoundly. That was when a Texas oil company, Noble Energy, discovered a huge deposit of natural gas offshore Israel in the Eastern Mediterranean, the so-called Leviathan Field, one of the world’s largest gas field discoveries in over a decade. The same Texas company later confirmed significant gas resources offshore in Cyprus waters near the Israeli Leviathan, called Aphrodite. Until recently, political paralysis inside Lebanon and the war in Syria had prevented Lebanon from actively exploring its offshore gas and oil potential. Now that’s changing. With the change, the tensions between Israel and Lebanon are escalating, and Russia is engaging in Lebanon in a bold way.

At a formal ceremony in Beirut on February 9, together with Lebanese President Michel Aoun, the heads of Total, ENI and Russia’s Novatek signed the first agreements to drill for oil and gas in the offshore sector claimed as part of Lebanon’s Exclusive Economic Zone (EEZ). The event drew a sharp attack from Israeli Defense Minister Avigdor Lieberman who called Lebanon’s exploration tender “very provocative,” declaring Lebanon had put out invitations for bids from international groups for a gas field “which is by all accounts ours.”

The energy tenders from Lebanon take place amid a backdrop of dramatic new defense relations between Russia and Lebanon, creating an entirely new political calculus in the Mediterranean region.

The Riches of Levant Basin
What’s clear at this point, after some eight years of exploration offshore in the Eastern Mediterranean, is that the region is awash with hydrocarbons, something neither Israel nor Lebanon had previously been able to find. For Lebanon, to develop its own sources of natural gas would be a literal godsend. The country has been subjected to electricity blackouts since the 1975 civil war. The country daily must experience cuts in electricity, because the peak demand exceeds production by a large margin. Lacking its own gas or oil Lebanon must import expensive diesel fuel at an annual loss to the economy of some $2.5 billion. Lebanon is one of the world’s most indebted countries with debt to GDP of some 145%. The Syrian war and internal Lebanese political stalemate have frozen its offshore energy exploration until now. A UK company, Spectrum, conducted geophysical surveys in the offshore Lebanese section of the Levant Basin in recent years, including 3D seismic, and estimated that the Lebanese waters could hold up to 25 trillion cubic feet of economically recoverable gas. Development of those gas reserves would alter the entire economy of Lebanon. Until now the war in Syria and political paralysis inside Lebanon had prevented exploitation of the offshore region. The prospects are promising enough that an international consortium led by the giant French Total, Italy’s ENI and Russia’s Novatek, a private oil company close to Vladimir Putin has stepped forward to bid for rights to drill. Consortium leader Total has announced the first well will be drilled next year in Block 4, an undisputed sector, and that a second well will be in Block 9, the block that falls partly within an area claimed by Israel. Total was quick to clarify that the Block 9 drilling would occur more than 15 miles from the disputed zone claimed by Israel. Despite this, Israel is vehemently protesting the drilling. Lebanon has an unresolved maritime border dispute with Israel over a triangular area of sea of around 330 square miles along the edge of three of its 10 blocks. Russian buffer between Hezbollah and Israel? Given the potential for conflict over the energy resources of the region, it’s no coincidence that just as Lebanon welcomes the participation of a major Russian oil company, Novatek, in development of its offshore resources, the Russian government has authorized the Russian Defense Ministry to prepare a military cooperation treaty that includes a “comprehensive framework for coordination,” with the Lebanese military. The framework reportedly includes joint military exercises and Russian usage of Lebanese ports and airfields as well. The Russian-Lebanese cooperation reportedly also includes, “exchanging information on defense means and enhancing international security capabilities; activating anti-terror cooperation; improving joint cooperation in the fields of cadre training, military exercises and armed forces building; exchanging IT expertise; establishing mechanisms for cooperation between the two countries’ armies.” In short it is major....MORE Related: Feb. 1 "It's Israel vs Lebanon And Hezbollah In Escalating Dispute Over Mediterranean Gas Field" Dec. 26 "Eastern Mediterranean may be scene of first conflict of 2018" ### "Data overload: commodity hedge funds close as computers dominate" From Reuters, Feb. 11: “Chocfinger” made his name and his money by taking bold bets on cocoa markets. But after nearly four decades of trading, sometimes winning, sometimes losing, Anthony Ward threw in the towel. Ward blames the rise of computer-driven funds and high-frequency trading for forcing him and some other well-known commodities investors to close their hedge funds and look for opportunities where machines can’t make a difference. While computerized trading is not new, Ward and others argue its steady rise has reached a tipping point that is distorting prices and creating uncertainty not only for investors, but for chocolate firms, carmakers and others who rely on commodities. It was in January 2016, after a slide in cocoa prices, that Ward decided the days of traditional commodity investors doing well from taking positions based on fundamentals such as supply and demand may be numbered. “It was just too big, too quick, too dramatic. And completely against the fundamentals,” Ward told Reuters. Commodity markets fell across the board that month after weak factory data in China raised fears of lower demand from the world’s top consumer of raw materials. Ward blamed the slide in cocoa on what he regarded as misplaced selling by computer-driven funds reacting to the Chinese data, given China has scant impact on the cocoa market. “The actual fundamentals in cocoa were extraordinarily bullish in January 2016. We were forecasting the largest harmattan in history, which is exactly what happened,” he said. His prediction that a hot, harmattan wind from the Sahara desert would hit harvests in Ivory Coast and Ghana and drive cocoa prices higher did come to pass - but not before the fund had been forced to cut its losses when the market slumped. At the end of 2017, Ward closed the CC+ hedge fund that had invested in cocoa and coffee markets for years. And at the end of January, commodity hedge fund Jamison Capital Partners run by Stephen Jamison closed. He told investors that machine learning and artificial intelligence had eliminated short-term trading opportunities, while commodities did not offer obvious benefits in the long term. Also in 2017, renowned oil trader Andrew Hall, who earned$100 million in 2008, called time on his main Astenbeck Commodities Fund II.
He had said in an earlier letter to investors that extreme volatility caused by “non-traditional investors and algorithmic trading” made it difficult to hold onto long-term positions when the market moved against them.

In 2016, Michael Farmer, founding partner of the Red Kite fund that specializes in copper, also accused high-frequency traders using super-fast computers of distorting the market and getting an unfair advantage....MUCH MORE

### Media: CJR—Billionaires gone wild

From the Columbia Journalism Review:

The American media landscape, like the rest of the country, is being reshaped by the whims of the ultra-rich
In November, Joe Ricketts, the billionaire founder of online brokerage firm TD Ameritrade, patriarch of the family that owns the Chicago Cubs, million-dollar Trump donor, and father of the governor of Nebraska, shuttered DNAinfo, the local news startup he founded, and Gothamist, the network of city blogs he’d purchased just a few months earlier, in a fit of pique, after editorial employees organized a union. Shuttering the company meant nothing to him—DNAinfo reportedly lost money and the Gothamist network was not profitable enough to make an appreciable difference to a man with a net worth estimated at over \$2 billion—but to me it meant that there was no longer a reporter assigned to cover my neighborhood in Brooklyn and its Halloween Dog Parades, community board meetings about unsafe intersections, and new tiki-bar openings.

My loss, I’m aware, is small potatoes compared to that of the reporter herself, and her dozens of suddenly jobless colleagues. But I know a little bit about how it feels when a billionaire with inexplicable power over you takes your job away out of what seems like personal spite: I was the last editor of Gawker, before it went bankrupt and ceased publication, the result of years of legal warfare secretly funded by billionaire Facebook investor Peter Thiel.

It is one thing—an infuriating thing, granted—to lose your job because of “the market.” When your factory shuts down because labor is cheaper overseas or when your magazine folds because luxury watch companies shifted their marketing budgets to Instagram influencers, you may rage and despair, but you also probably saw it coming, in industry-wide economic trends that were impossible to ignore. But when your livelihood is disrupted because of the whims of one powerful person—when the invisible hand is replaced by one very visible and shockingly capricious one—it is a much more bewildering experience. And it is one more journalists can expect to experience in the near future, as the economic power of the 0.01 percent increases and the revenue models underpinning traditional news-gathering shops break down.

It’s rote at this point to observe that many of the ways the media landscape has been transformed in the 21st century have oddly caused it to more closely resemble the media landscape of the 18th and 19th centuries, from the flourishing of a more openly partisan press to the erosion of the norms of “professionalism” that were built up in the era of post-war prosperity and supposed national consensus. Another throwback: The press baron. Not since the 19th century have so many individuals had so much power over the press.

It’s important to remember that Ricketts only had that power because no one else wanted to spend the money to do what he was doing (before he got mad and decided to stop). He thought he might eventually make money doing hyper-local reporting across the country, but he hadn’t yet, and no one else is trying on his scale. That is not meant to suggest he should be considered a heroic failure, it’s mainly to say that an industry that relies on the Joe Rickettses of the world to sustain itself is in deep trouble.

The press baron model works out so long as people want to be press barons. Generally, billionaires buy or start media outlets either for money or influence. There are ostensibly benevolent examples, of course. After personally purchasing The Washington Post, Amazon founder Jeff Bezos has received a great deal of credit for investing in serious investigative journalism and giving the paper the resources to achieve major “digital growth,” as the press releases say. I worked (oh so briefly) for eBay founder Pierre Omidyar’s First Look Media, home to lots of great journalists given the resources necessary to do important work. I know Omidyar believes strongly and sincerely in the importance of independent journalism to a free society.

But with Google and Facebook sucking up the majority of the ad money, going into publishing eventually only makes sense if you have particular things you want published. I have no doubt that Bezos and Omidyar believe in the missions of their organizations, but they are both quite upfront about not wanting to run them as charities. They both want to “save” journalism as a business. The trouble will come when the billionaires who think that way discover that, even if they once had one very good idea that made them very rich, they probably don’t have the one good idea that will “crack the code” of making it profitable to run a large and expensive news-gathering organization. Those who initially decide to fund journalism out of a sense of selfless civic virtue will get bored or get tired of losing money, leaving only those funding it for some other, probably political purpose. (The Guardian is currently engaged in a fascinating experiment to see how long a rich man’s money and the economic laws of compound interest can be used to sustain a money-losing, public-interest-serving journalism shop.)...
....MORE

### Iran’s police step in to contain foreign currency debacle

From Al-Monitor:
After two months of fluctuations in the foreign exchange market, with the US dollar rate breaking all records in Iran, the police have stepped in to prevent the further devaluation of the rial on the open market.

Over the past six months or so, the dollar has jumped from 39,000 rials to around 49,000 rials.
According to Tasnim News Agency, the police force and the Central Bank of Iran (CBI) initiated a joint operation Feb. 14 to control the foreign exchange market.

Gen. Hossein Rahimi, Tehran’s chief of police, said Feb. 14, “Following the operation, which began this morning, 10 money changers were closed down and 16 money changers were given a warning. So far, 90 middlemen have been arrested.”

He said these events occurred after “joint groups of police forces and Central Bank experts went to the exchange market to study the licenses of money changers, buyers and sellers of foreign currencies.”

Rahimi said the operation had been successful and the dollar rate had dropped by 1,000 rials.
While fluctuations in the foreign exchange market persist, parliament members are starting to protest the Hassan Rouhani administration's and the CBI’s management of the situation.

Mohammad Reza Pourebrahimi, the chairman of parliament’s economic commission, said in parliament Feb. 14, “In recent weeks, due to mismanagement of the foreign exchange market, our national currency’s value has decreased by 25%, which has a negative effect on attracting foreign investment and also has inflationary effects.”...MORE

## Wednesday, February 14, 2018

I caught some good-natured (and some not-so-good-natured) ribbing for the introduction to Feb. 7's

We've seen some analysis that within 5 years Facebook will have enough data on the human population to be in a position to offer any government in the world surveillance capabilities on a scale comparable to that of the American NSA but with more granularity.
Well since then a few stories have come out that relate to the surveillance proposition.

First up, from Hacker Noon, February 10:
… and why you should really have a look at it.

Since 2010, Facebook allows you to download an archive file of all your interactions with the network. It’s a 5-click easy process that your grandmother can do (more details below).
Inside the .zip, lies an ‘index.html’ page that acts as a portal to your personal data. Visually, it looks like an ad-free stripped down version of Facebook that’s actually quite relaxing.

As I’m trying to reduce my exposure to social networks, I decided to take a look at this info. By extrapolating the data of a single individual (me), I might be able to better apprehend the capabilities of the beast. In the end, it all comes down to what is tracked and what can be deduced from that.

We all gave up on privacy…
… we just don’t fully realise it.

Everything you expect is there: your profile, statuses, messages, friends, pokes (Tinder’s ancestor), photos, videos, comments, events. All of it in a 500mb zip file.
There’s a lot of material and you could sift it for hours. Most of the content is unsurprising but there are a few notable facts that are worth exploring.
• Limitless data storage period

Quite simply, Facebook never deletes anything. Unfriended friends, past relationships, former employers, previous names, address book: you name it.
I created my account Friday, September 14, 2007 at 10:59am and all my actions have been recorded ever since. I feel that for the first time in history, 10 years of consistent human behavior have been meticulously gathered, stored & analysed.

Whenever you post a photo to Facebook, it keeps a record of all the data that’s attached to it. That seems quite obvious but I didn’t suspect it was so detailed. Have a look: Camera Maker, Model, Orientation, Exposure, F-Stop, ISO Speed, Focal Length, Latitude, Longitude & Upload IP Address
• Abundant log-in & session data points

Every time you open Facebook, the time, location, IP address, browser & device have been recorded. If you’re part of the 1.4B people that use Facebook on a daily basis, they have enough data points to determine your everyday life patterns with great accuracy: home and work address, daily commute, wake up & bed time, travel duration & destination, etc.
• Flawless facial recognition

Apparently, Facebook has 232 examples of what I look like.
How does it know? Well, every time you tag a photo, you’re adding to an enormous, user-driven wealth of knowledge and data. Everyday, billions of people are telling an algorithm what a human face looks like, from different angles, at different ages and in different light conditions.

The result? Facebook allegedly said that its image recognition models could recognise human faces with 98% accuracy & that it could identify a person in one picture out of 800 million in less than five seconds.
• Detailed contact list
When you install Facebook’s app on your phone, you give it the right to see your contact list. Once that’s done, Facebook keeps ALL your contacts information forever.
There’s no sneaky move here: the opt-in process on your phone is actually pretty clear about that. But seeing the phone numbers, emails & addresses of everyone you know (or knew) listed on Facebook is a bit disturbing....
...MUCH MORE

And via The Next Web on Feb. 13th:
"Facebook employees are next-level paranoid the company is watching them" (FB)

So that's where we're at as of February 2018.
We have four years-and-51 weeks to hit the analysts' "Better-than-the-NSA" targets.