Saturday, December 20, 2014

"The Dominant Life Form in the Cosmos Is Probably Superintelligent Robots"

From Motherboard:
If and when we finally encounter aliens, they probably won’t look like little green men, or spiny insectoids. It’s likely they won’t be biological creatures at all, but rather, advanced robots that outstrip our intelligence in every conceivable way. While scores of philosophers, scientists and futurists have prophesied the rise of artificial intelligence and the impending singularity, most have restricted their predictions to Earth. Fewer thinkers—outside the realm of science fiction, that is—have considered the notion that artificial intelligence is already out there, and has been for eons.

Susan Schneider, a professor of philosophy at the University of Connecticut, is one who has. She joins a handful of astronomers, including Seth Shostak, director of NASA’s Search for Extraterrestrial Intelligence, or SETI, program, NASA Astrobiologist Paul Davies, and Library of Congress Chair in Astrobiology Stephen Dick in espousing the view that the dominant intelligence in the cosmos is probably artificial. In her paper “Alien Minds," written for a forthcoming NASA publication, Schneider describes why alien life forms are likely to be synthetic, and how such creatures might think.

“Most people have an iconic idea of aliens as these biological creatures, but that doesn’t make any sense from a timescale argument,” Shostak told me. “I’ve bet dozens of astronomers coffee that if we pick up an alien signal, it’ll be artificial life.”

With the latest updates from NASA’s Kepler mission showing potentially habitable worlds strewn across the galaxy, it’s becoming harder and harder to assert that we’re alone in the universe. And if and when we do encounter intelligent life forms, we’ll want to communicate with them, which means we’ll need some basis for understanding their cognition. But for the vast majority of astrobiologists who study single-celled life, alien intelligence isn’t on the radar.

“If you asked me to bring together a panel of folks who have given the subject much thought, I would be hard pressed,” said Shostak. “Some think about communication strategies, of course. But few consider the nature of alien intelligence.”

Schneider’s paper is among the first to tackle the subject....MORE

California Drought Improving Dramatically with Third Storm System This Month

You probably saw the headlines: "11 trillion gallons of rain still needed to end California drought".
The geek denizens of Slashdot did the math for us: 
11 Trillion Gallons of Water Needed To End California Drought
It is about 10cm or 4 inches spread over the entire state.
There are 264 gallons per cubic meter. So 11 trillion gallons is 4.16e10 m^3. California has an area of 424,000 km^2, or 4.24e11 m^2. So divide the volume by the area, and you get the depth = 4.16e10/4.24e11 = 0.098 m or 9.8 cm or about 4 inches.
From Reuters:
California's winter storms spark hope for recovery from three-year drought

The wet weather that has soaked California for the past few weeks may be a sign that the state is beginning to pull out of its devastating three-year drought, climate experts said on Friday.

With precipitation already higher than normal for this time of year and rain in the northern part of the state on Friday, experts are "cautiously optimistic" that the dry cycle may be starting to ease, said Courtney Obergfell, a meteorologist with the National Weather Service in Sacramento.

Part of the reason is that a weather pattern that had blocked storms from reaching California since the winter of 2012-2013, dubbed the "ridiculously resilient ridge," by meteorologists, has dissipated.

"We're seeing periods where storms can make their way into California," Obergfell said.

Rain was forecast for the northern part of the state throughout the day on Friday, with showers continuing into Saturday, Obergfell said. Another storm system could bring more rain starting Christmas Eve, she said....MUCH MORE

Always remember: "California: The Last 200 Years Were The Happy Time For Weather, Get Ready For A Return to The West Without Water". 

Dec. 17
Some Improvement In the California Drought
Dec. 11
Big Storm For San Francisco Means Uber Jacks Prices to Highest Ever
Dec. 10
El Niño: "The ARkStorm Scenario Could Flood California's Central Valley like a Bathtub and Cost $725 Billion"

See also:
Straight Talk on Weather and Climate: "Will California's Drought Bring About $7 Broccoli?"
Two quick points:
1) The Great American Desert was called that for a reason. The weather of the U.S. over the last 150 years is an anomaly in the longer history.
2) The subsidization of row crops, corn in particular, is a political decision that severely distorts investment and thus nutrition outcomes....
Finally, a graphic representation from the U.S. Drought Monitor maintained by the University of Nebraska-Lincoln and the National Drought Mitigation Center:

Friday, December 19, 2014

Farmland Price Index Down For 13th Month In a Row

From Agrimoney:

Crop price weakness blamed for sliding farmland prices
The drop in land prices in Iowa, the top US corn and soybean growing state, identified by university research may be more widespread, another survey has revealed, showing drops in other major agricultural states too.
Creighton University said that a farmland price index it updates monthly had shown value falls for a 13th successive month, coming in with a figure of 38.6 for December.
While above November's 30.0 reading, it remained below the 50.0 level which indicates a flat market.
The reading reflected "much weaker crop prices", which "continue to take the air out of the bubble in agricultural land prices", said Ernie Goss, the Creighton economics professor in charge of the survey, which showed prices falling in a range of states, including Iowa, Kansas and Nebraska.
However, a few states, notably Missouri and North Dakota, had escaped the downward trend, and were showing accelerating price growth, the data showed.
'We have seen a peak'
The Creighton data followed hours after Iowa State University estimated average farm prices in the state falling by 8.9% to $7,943 an acre this year – the biggest decline since 1986.
Iowa State University also attributed the drop in state values, only the fourth annual decline since the 1982-86 US land price crash, to lower crop prices....MORE

"Natural Gas Futures Drop to Lowest Point in Over a Year"

Most active (Jan.) $3.481 down 0.161 (4.42%); low 3.464.
From the Wall Street Journal:

Booming U.S. Production Creates Surplus
Natural gas futures fell to their lowest price in over a year on Friday in the wake of data showing the U.S. is beginning to develop a surplus of the fuel thanks to soaring domestic production.

In the selloff, the market looked past forecasts for a return to more normal winter temperatures in the coming days, with a cold blast expected to settle over much of the U.S. heading into the new year. This could boost demand for natural gas to heat homes and businesses.

Natural gas for January delivery was down more than 9 cents, or 3.5%, at $3.5513 a million British thermal units, its lowest point since Nov. 14, 2013. The selloff extended Thursday’s loss and put the futures in bear market territory after losing roughly 20% in the last month.

Though the U.S. has begun to draw on natural gas supplies for fall and winter heating needs, continued booming production from shale fields is helping to replenish supplies. As a result, withdrawals have been running less than average....MORE

Natural gas: EIA Weekly Supply/Demand Report 
While some desks are betting on a cold snap around the New Year it looks as though supply has the upper hand unless there is one heck of a cold snap. $3.598 down 0.044....

Oaktree's Howard Marks: "The Lessons Of Oil"

Following up on "Oaktree's Howard Marks On Lessons From the Oil Crash, Russian Crisis".

From ValueWalk:

Howard Marks Latest Memo: The Lessons Of Oil
Howard Marks Latest Memo, which he recently mentioned he was working on. Contains a shoutout to Jeff Gundlach, behavioral finance, and all the latest good stuff.
Check it out below:
I want to provide a memo on this topic before I – and hopefully many of my readers – head out for year- end holidays. I’ll be writing not with regard to the right price for oil – about which I certainly have no unique insight – but rather, as indicated by the title, about what we can learn from recent experience.

Despite my protestations that I don’t know any more than others about future macro events – andthus that my opinions on the macro are unlikely to help anyone achieve above average .performance – people insist on asking me about the future. Over the last eighteen months (since Bernanke’s initial mention that we were likely to see some “tapering” of bond buying), most fact that their fixed income holdings have been too short in duration to allow them to benefit from the decline of interest rates. While this has nothing to do with oil, I mention it to provide a of the macro questions I’ve gotten have been about whether the Fed would move to increase interest rates, and particularly when. These are the questions that have been on everyone’s mind.

Since mid-2013, the near-unanimous consensus (with credit to DoubleLine’s Jeffrey Gundlach for vocally departing from it) has been that rates would rise. And, of course, the yield on the 10- year Treasury has fallen from roughly 3% at that time to 2.2% today. This year many investing institutions are underperforming the passive benchmarks and attributing part of the shortfall to the………….MORE

Here's a PDF version of the memo

Previously on the Oaktree channel:
Oaktree's Howard Marks On Lessons From the Oil Crash, Russian Crisis
Bull and Bear Markets, According to Oaktree’s Howard Marks
Oaktree's Howard Marks: "Dare To Look Wrong, It's Not Supposed To Be Easy"
Knowledge@Wharton Visits With Oaktree's Howard Marks

"The Conventional Wisdom On Oil Is Always Wrong"

For the record, Izabella Kaminksa at FT Alphaville was suspicious of the price signals commodities including/especially crude oil were sending, going back at least two years if not further, and I said "there's a lot of oil sloshing around" so many times I got bored with myself.

From FiveThirtyEight:
In 2008, I moved to Dallas to cover the oil industry for The Wall Street Journal. Like any reporter on a new beat, I spent months talking to as many experts as I could. They didn’t agree on much. Would oil prices — then over $100 a barrel for the first time — keep rising? Would post-Saddam Iraq ever return to the ranks of the world’s great oil producers? Would China overtake the U.S. as the world’s top consumer? A dozen experts gave me a dozen different answers.

But there was one thing pretty much everyone agreed on: U.S. oil production was in permanent, terminal decline. U.S. oil fields pumped 5 million barrels of crude a day in 2008, half as much as in 1970 and the lowest rate since the 1940s. Experts disagreed about how far and how fast production would decline, but pretty much no mainstream forecaster expected a change in direction.

That consensus turns out to have been totally, hilariously wrong. U.S. oil production has increased by more than 50 percent since 2008 and is now near a three-decade high. The U.S. is on track to surpass Saudi Arabia as the world’s top producer of crude oil; add in ethanol and other liquid fuels, and the already on top.
The standard narrative of that stunning turnaround is familiar by now: Even as Big Oil abandoned the U.S. for easier fields abroad, a few risk-taking wildcatters refused to give up on the domestic oil industry. By combining the techniques of hydraulic fracturing (“fracking”) and horizontal drilling, they figured out how to tap previously inaccessible oil reserves locked in shale rock – and in so doing sparked an unexpected energy boom.

That narrative isn’t necessarily wrong. But in my years watching the transformation up close, I took away a lesson: When it comes to energy, and especially shale, the conventional wisdom is almost always wrong.
It isn’t just that experts didn’t see the shale boom coming. It’s that they underestimated its impact at virtually every turn. First, they didn’t think natural gas could be produced from shale (it could). Then they thought production would fall quickly if natural gas prices dropped (they did, and it didn’t). They thought the techniques that worked for gas couldn’t be applied to oil (they could). They thought shale couldn’t reverse the overall decline in U.S. oil production (it did). And they thought rising U.S. oil production wouldn’t be enough to affect global oil prices (it was)....MUCH MORE
HT: Barron's Read This, Spike That column.

One lesson from the last couple years:  Life is easier if you have deliverable physical.
Then you can play all kinds of financialization and other reindeer games.

First Round Capital's 2014 Holiday Video

Following up on last week's reprise of 2012's oddly genius offering.*
From First Round Capital:

*Still Anticipating First Round Capital's 2014 Video Holiday Card So, As We Wait...

Perversity and Credit Default Swaps

Following up on "It's Time to Regulate Credit Default Swaps Using State Gambling Laws".
There's a reason you are required to have an insurable interest in a person on whom you take out a life insurance policy. Incentives and motives.
From Matt Levine at Bloomberg:
RadioShack Is Running on Credit Derivatives
A good general principle in thinking about derivatives is that real effects tend to ripple out from economic interests. This is not always true, and not always intuitive: If you and I bet on a football game, that probably won't affect the outcome of the game. But most of the time, in financial markets, it is a mistake to think of derivatives as purely zero-sum, two-party bets with no implications for the underlying thing. Those bets don't want to stay in their boxes; they want to leak out and try to make themselves come true.
Here is a Bloomberg News story about RadioShack credit derivatives that I enjoyed. The basic background of RadioShack is:
  • It is in some financial distress, having lost money in each of the last 11 quarters and having recently hired a restructuring consultant as its interim chief financial officer.
  • It is a small company, these days, and it has only $841 million of debt as of November ($325 million of bonds and the rest in three bank loans). Being in distress, those bonds trade at, oh wow, under 20 cents on the dollar.
  • For idiosyncratic reasons, having to do with indexes, there are a lot of credit default swaps outstanding on RadioShack's debt, now about $26 billion gross and $550 million net notional.
So in the near future, RadioShack either will or won't default on its debt, with the market odds implying that it will. If it does default, people who own the debt will lose money; if it doesn't, they'll make money.  Same with the credit default swaps: If RadioShack defaults, and you had previously bought CDS for like 60 points upfront -- paying $6 million for $10 million of CDS notional -- then you make a lot of money. (Like $2.5 to $4 million of profit on your $6 million investment. ) But if RadioShack doesn't default, and you had previously sold credit default swaps for $6 million, then you get to keep the $6 million when your swaps expire.
This creates incentives. Here are the incentives:
  1. If you bought a lot of CDS (long protection/short credit), then  you should try to get RadioShack to default.
  2. If you sold a lot of CDS (short protection/long credit), then you should try to get RadioShack not to default.
Thing 1 is sort of a famous thing, and often thought of as Bad. The idea is that you can buy some of RadioShack's debt (long credit), buy even more CDS (giving you a net short credit position), and then be a meanie with your debt, refusing to negotiate with the company to avoid a default because your incentives are dominated by the CDS position. So instead of being a constructive lender trying to help your borrower survive, you're an evil "empty creditor" trying to burn down the house to collect the insurance, in the more or less officially sanctioned metaphor.

But Thing 1 can also be Good. I mean, there is some debate over the goodness of the Codere trade, but I hope there's none over its beauty. It is objectively beautiful. It even made the "Daily Show." A reminder: GSO Capital Partners (the credit unit of Blackstone) and Canyon Partners owned a bunch of Codere debt, and a bunch of credit default swaps on Codere, a Spanish gaming operator. And they did in fact drive Codere into default so they could get paid out on their swaps, as Thing 1 predicts. But they didn't do it by being meanies with the debt. Quite the reverse: They agreed to refinance Codere's debt on favorable terms, in exchange for Codere agreeing to be two days late on an interest payment to trigger the CDS. GSO and Canyon made money on the CDS, and used some of that money to, in effect, subsidize the loan to Codere to keep it afloat. Everyone wins! Except the CDS sellers. Who lost. How unfair for them....MORE

35 Year Old 'Minecraft' Billionaire Buys a $70 Million House, Makes An Astute Comment

From Forbes:
'Minecraft' Billionaire Markus Persson Buys $70 Million Beverly Hills Contemporary With Car Lift
‘Minecraft’ creator Markus “Notch” Persson has just closed on a $70 million home on tony Hillcrest Drive in Beverly Hills.

The 23,000-square-foot, Contemporary-style home, with a wall of glass that provides a 280-degree view of the City of Angels and the Pacific Ocean below, triggered a bidding war between four buyers. Persson quickly decided he wanted the home, paid all cash, and closed in six days, according to the agents who sold him the property.

Persson, a 35-year-old Swedish video game designer, became a billionaire in September when he sold his company, Mojang, to Microsoft for $2.5 billion, as my colleagues Max Jedeur-Palmgren and Ryan Mac reported in September. According to postings on Reddit, Persson says that he grew up in a “relatively poor family” with a mother who was a nurse and a father who struggled with drug addiction. Persson only began to make a steady living when he became a video game programmer. He developed ‘Minecraft’ and released it in 2009, then founded Mojang in 2010.

“Once I got a decent job, I never really had to worry about money,” he wrote on Reddit last year. “Now, all of the sudden, as a result of how modern society works, I managed to somehow earn a shit-ton of money.”...MORE

Natural Gas: EIA Responds To Journal Nature, Says Nature is As Shoddy as the New York Times

The EIA refrained from saying Times publisher 'Pinch' Sulzberger dresses funny but did say:
From the EIA's perspective, the situation has an element of what Yogi Berra, the American baseball player famed for his catchy phraseology, once described as "deja vu all over again." In June 2011, the New York times (NYT), published two articles "Insiders Sound Alarm Amid a natural Gas Rush" (June 26) and "Behind Veneer, Doubt on the Future of Natural Gas" (June 27). The NYT's public editor, who acts as an ombudsman on behalf of readers, responded to these articles with two columns (July 16 and July 30, 2011) that found both the content of the articles and the reporting methods to be deeply flawed, in many instances for the same reasons that motivated this response to Nature's December 4 article....
Howard Gruenspecht
Deputy Administrator 
Energy Information Administration
From UPI:

Nature fires back at EIA shale gas critique
EIA says article reminiscent of faulty New York Times article on natural gas prospects.
WASHINGTON, Dec. 18 (UPI) -- The journal Nature stands by the accuracy of a feature questioning the longevity of the growth in U.S. shale natural gas, the features editor said Thursday. 
The U.S. Energy Information Administration took issue this week with an article published by Nature, in which Texas researchers said a detailed analysis of U.S. shale plays may be "bad news" for forecasters.
Policymakers on Capitol Hill have said the glut of natural gas means the United States should transform itself as a major exporter of liquefied natural gas, arguing such deliveries may contribute to the rise of the country as an "energy superpower."

Tad Patzek, director of petroleum engineering at the University of Texas at Austin, said in the Nature report EIA assessments of shale were setting U.S. policymakers up "for a major fiasco."
In a Dec. 15 retort, EIA countered the Nature article was filled with "inaccurate and distorting reporting." It further questioned Patzek's role in the research supporting the article, saying he had only a limited role in the actual studies.

"It might also be appropriate for the article to inform readers that Patzek is a leading figure in the peak oil community, which emphasizes concerns related to limitations on the availability of hydrocarbon resources," EIA Deputy Administrator Howard Gruenspecht said in his response.

Richard Monastersky, features editor for Nature, told UPI the journal stands by the accuracy of its reporting. Before publication, editors discussed the data and the feature itself with researchers at the University of Texas Bureau of Economic Geology as well as EIA....MORE

Nature | News Feature 
Natural gas: The fracking fallacy

BEG/UT has also responded to the article in their own letter to the editor.
Read BEG/UT response

It's Time to Regulate Credit Default Swaps Using State Gambling Laws

This is nuthin but straight up gambling, know what I'm sayin?
There is no reason to own a CDS with a greater notional value than the face value of a debt except for the purpose of gambling. Got that? There is NO OTHER REASON.
From Bloomberg:

RadioShack Kept Alive by $25 Billion of Swaps Side Bets
RadioShack Corp. (RSH) is finding an unlikely ally in its efforts to stay out of bankruptcy: credit derivatives traders who amassed more than $25 billion of trades speculating how much longer it can keep paying its bills.
After a 60 percent surge this year, the amount of credit-default swaps tied to RadioShack is 28 times its debt, more than any other U.S. company. When the retailer’s biggest shareholder arranged $585 million of funding in October to help it survive the holidays, much of the money came from hedge funds wagering on the company to avoid default, said people with knowledge of the trading. Those included DW Investment Management and Saba Capital Management, the people said.
The derivatives are amplifying the stakes on a company with less than $1 billion of debt that’s running out of cash and struggling to compete with online competitors. By injecting the 93-year-old electronics retailer with new money, swaps traders, more often blamed for pushing companies toward bankruptcy, have been preserving big payoffs if they can delay or prevent a default.
“The sellers of the protection built up quite a large war chest, and it took a relatively small amount of money to keep the company going,” said Peter Tchir, a former credit-swaps trader who is now head of macro strategy at Brean Capital LLC in New York. “They have huge incentives to keep the company alive to not trigger the swaps.”

Motivated Lenders
That provided RadioShack’s biggest shareholder, Standard General LP, a potential pool of lenders when it arranged the loans in October. The financing gave the retailer enough cash to stock up for the holiday season while negotiating with other creditors that are blocking a plan to close underperforming stores. RadioShack has struggled to keep up with a migration of sales to the Internet, losing money for 11 straight quarters.

As part of the October funding, DW Investment, run by David Warren, bought more than $100 million of a $275 million first-lien loan, the people with knowledge of the deal said this month. Saba, founded by former Deutsche Bank AG credit-trading head Boaz Weinstein, also bought a piece of the debt, they said. Both firms have swaps investments that would benefit from RadioShack’s solvency, the people said.
Representatives of DW Investment, Saba Capital, Standard General and Fort Worth, Texas-based RadioShack declined to comment.

Rare Situation
Among U.S. non-financial companies, only one has more swaps tied to its debt than RadioShack: casino operator Caesars Entertainment Corp., according to the Depository Trust & Clearing Corp. The $28.3 billion of contracts on that company’s biggest unit is 1.5 times its $18.4 billion of obligations....MORE
Side bets are a description of what bucket shops do and there are anti-bucket shop laws on the books of just about every state. Federal pre-emption you argue? Nothing a one-line tweak of the Commodity Futures Modernization Act wouldn't solve.

The ideas are not original to me. Former New York Insurance Superintendent Eric Dinallo said:
“It’s legalized gambling. It was illegal gambling. And we made it legal gambling…with absolutely no regulatory controls. Zero, as far as I can tell,”

A couple of our prior posts:
July 2010
Financial Reform: Enforce New York's 1908 Bucket Shop Law and trash the 2,319 Page Dodd-Frank Bill
It is time to dispense with this congressional foolishness and enforce the 1908 Bucket Shop law.
Throw in some state anti-gambling statutes and you would have prevented the financial meltdown....
November 2011
Are Derivatives Contracts Nothing More than Unenforceable Gambling Debts?
...Here's the U.S, Senate testimony of Eric Dinallo, then-Superintendent of the New York State Insurance Department on October 14, 2008 (8 page PDF).
...I have argued that these naked credit default swaps should not be called swaps because
there is no transfer or swap of risk. Instead, risk is created by the transaction. Indeed, you
have no risk on the outcome of the day’s third race at Belmont until you place a bet on
horse number five to win....

...“Bucket shops” arose in the late nineteenth century. Customers “bought” securities or
commodities on these unauthorized exchanges, but in reality the bucket shop was simply
booking the customer’s order without executing on an exchange. In fact, they were
simply throwing the trade ticket in the bucket, which is where the name comes from, and
tearing it up when an opposite trade came in. The bucket shop would agree to take the
other side of the customer’s “bet” on the performance of the security or commodity.
Bucket shops sometimes survived for a time by balancing their books, but were wiped
out by extreme bull or bear markets. When their books failed, the bucketeers simply
closed up shop and left town, leaving the “investors” holding worthless tickets....

Uber Competitor Lyft Phasing Out the Moustache

My takeaway from this Vox post:
Lyft says its drivers can make $35 an hour. I spent a week driving to see if that’s true.
My first day as a Lyft driver wasn't going well. After dropping off a passenger in Arlington, Virginia, I forgot to tap the "drop off" button in the Lyft app to indicate that the trip was over.
I didn't discover my mistake until 90 minutes later. As a result, the customer got a nasty surprise: a $44 bill for a ride that should have cost about $7 (a Lyft administrator corrected the charge a few hours later, after I pointed out the problem). This was bad for me too, because during those 90 minutes I couldn't pick up a new passenger.

Oh, and I had one other problem: the woman had left her keys in my car.

Lyft drivers don't have access to the full names or phone numbers of passengers, but I was able to figure out my passenger's work number based on where I had dropped her off. By the time I called her, it was 5:30 on a Monday afternoon. After four hours on the clock, I had gotten only three customers. And now, instead of picking up customers during the busy rush-hour period, I had to drive back out to Arlington in bumper-to-bumper traffic to drop off the keys.

My experience left me skeptical that drivers will be able to make anywhere close to $30 per hour
I would pick up two more passengers before finally calling it a night around 7:30 pm. All told, I spent five and a half hours on the clock and made $48. That's less than Washington DC's minimum wage — even before you subtract money for gas.

Things got better later in the week. I wound up working 50 hours, earning almost $600 in fares. And I actually made a lot more than that. Lyft paid me $1,500 (which I'll be donating to DC Central Kitchen) under a program that guaranteed drivers would make $30 per hour if they worked 50 hours. In other words, Lyft paid me more than $2 for every dollar in revenue I generated for them.

That absurdly generous compensation, funded by millions in venture capital, is part of Lyft's strategy to expand its roster of drivers in order to better compete with Uber. Obviously, these deals can't last, and my experience left me skeptical that drivers will be able to make anywhere close to $30 per hour without them....MUCH MORE
Nor did I get one of those famous Lyft mustaches for my car. My mentor told me that the giant pink mustaches on the front of the car were being phased out. He had a smaller and more tasteful pink mustache on his dashboard, but I didn't even get one of those.

UPDATED--Natural gas: EIA Weekly Supply/Demand Report

Update: "Natural Gas Futures Drop to Lowest Point in Over a Year"
Original post:
While some desks are betting on a cold snap around the New Year it looks as though supply has the upper hand unless there is one heck of a cold snap. $3.598 down 0.044.

From the Energy Information Administration:
Natural gas storage exceed year-ago levels, and production is higher
According to this morning's EIA Weekly Natural Gas Storage Report, natural gas storage levels for the Lower 48 states, as of December 12, are slightly above 2013 levels for the first time this year. Inventories totaled 3,295 billion cubic feet (Bcf) as of December 12, compared to 3,289 Bcf in the same week of 2013. Stock levels fell sharply in early 2014 because of extremely cold weather, and remained at or below the five-year minimum level up until this week.

Despite concerns raised about the storage deficit going into the 2014-15 heating season, the year-over-year gap in inventories has been continually falling since April, when it was nearly 1,000 Bcf. Storage levels are still 258 Bcf lower than the five-year (2009 – 13) average, but this gap has also narrowed substantially since April.

At the start of the heating season, the storage deficit was 238 Bcf, but a combination of strong year-over-year production growth, and relatively moderate temperatures compared to last winter, has helped erase this deficit. From November 1, 2014 through this most recent storage report (December 12), storage withdrawals averaged 6.1 Bcf per day (Bcf/d), compared to 12.4 Bcf/d over the same period in 2013.

In the past several weeks, natural gas production levels have risen to record highs, according to production data from Bentek Energy, LLC. Dry natural gas production averaged 70.8 Bcf/d since November 1, which is an increase of 4.8 Bcf/d over that same period in 2013, according to Bentek. A contributing factor to lower production levels in 2013 was production freeze-offs that occurred in December 2013. In the current Short-Term Energy Outlook (STEO), EIA forecast that production will continue to increase through 2015. 

According to Bentek data, consumption has averaged 78.1 Bcf/d since November 1, 2014, compared to 83.0 Bcf/d over the same time period last year. More moderate temperatures in 2014 are supporting the decrease in consumption; heating degree days since the start of November have been 7.2% lower in 2014 compared to 2013. EIA forecasts that natural gas consumption for the remaining months of the winter will be much lower than last year's historically cold winter, driven by closer-to-average NOAA temperature forecasts from the National Oceanic and Atmospheric Administration (NOAA)....MUCH MORE
U.S. Consumption - Gas Week: (12/10/14 - 12/17/14)

Percent change for week compared with:
last year
last week
U.S. Consumption
Total Demand
Source: BENTEK Energy LLC

Thursday, December 18, 2014

"Amazon Not as Unstoppable as It Might Appear" (AMZN)

From the New York Times' Personal Tech column:
Thanks to its ugly spat with book publishers, Amazon has lately been cast as the abominable boogeyman of American commerce.

As hundreds of authors took up arms against the giant, The New Republic declared in a cover article this fall that “Amazon Must Be Stopped,” insisting that the company’s unbounded retail ambitions would end up “cannibalizing the economy.”

But there’s another theory about Amazon’s future, one for which evidence began to mount this year: Despite fears of Amazon’s growing invincibility, the company’s eventual hegemony over American shopping is not assured. It might not even be likely.

That’s not just because investors began to question the company’s aggressive spending this year, or because its big new thing, the Fire Phone, turned out to be about as unwelcome as the flu.

Amazon may face a deeper problem. Like many of the local and big-box retailers it has displaced over the last decade and a half, Amazon could itself become increasingly vulnerable to the threat of technological upheaval.
Credit Stuart Goldenberg
The key to its vulnerability is the smartphone, a device whose scope and significance Jeff Bezos, the chief executive, has not yet managed to corral.

Phones have already radically altered both the way Americans shop and how retail goods move about the economy, but the transformation is just beginning — and it is far from guaranteed that Amazon will emerge victorious from the transition.

Phones are at the heart of the service offered by Postmates, one of several start-ups that are working with retailers and helping to change shopping experiences. “Everything that we’re doing is anti-Amazon,” said Bastian Lehmann, the co-founder of Postmates.

Postmates runs a network of couriers who, like Uber drivers, are dispatched by phones to deliver food, apparel, toothpaste and other goods from local stores in 18 American cities. The company recently announced a plan for retailers to build Postmates’ technology into their own technology systems, a way to give small stores the kind of logistical efficiencies that were previously available only to giants like Amazon.

 As local retailers adopt such mobile innovations, customers will be able to search stores’ inventories, purchase goods for same-day delivery, and navigate and search for help and reviews inside a crowded store. None of these technologies pose an existential threat to Amazon, but by giving physical stores some of the conveniences that Amazon has long had, they may limit its potential reach....MORE
HT: Value Investing World's linkfest
Also via VIW:
How levered was John Maynard Keynes' portfolio? (LINK)

"Dow Industrials Soar 300 Points as Easy Money Cheers Investors"

S&P up 30.64 at 2043.53, crude oil down a bunch, $54.95 last after getting to $59.04.
From Barron's Stocks to Watch:
Easy money has sent the Bears fleeing the rampaging Bulls.

The S&P 500 has gained 1.7% to 2,047.92 at 1:22 p.m. today, while the Dow Jones Industrial Average has risen 306.74 points, or 1.8%, to 17.663.61. If the Dow holds onto its gains, it will be the first time its gained at least 200 points in two consecutive days since Dec. 2008.

The Nasdaq Composite has advanced 1.8% to 4,728.20 and the small-company Russell 2000 is up 1.2% at 1,188.53.

Much of this has to do with yesterday’s decision by the Fed to say swap out the phrase “considerable time” and replace it with “patient.” Gluskin Sheff’s David Rosenberg calls it a “crafty” decision. He explains why:
But why did the Fed feel the need to have both “considerable time” and “patient” in the same press statement? The answer lies in what happened when the Fed removed “considerable period” back in January 2004 and replaced it with “patient”.
That day (January 28, 2004), the S&P 500 slid 1.4%, the 10-year U.S. Treasury note yield surged 11 basis points to 4.22% and the VIX spiked 9% to 17. Given everything that is happening around the world right now and the renewed market angst — in all markets — it is doubtful that this Fed was going to go out of its way to throw more fuel on the fire…
So what is important here is that “considerable time” is intact — this means no Fed rate hike for a very long time. And then when it does begin to raise rates, it is going to be patient which means that it will be a mild and truncated approach as opposed to the rapid fire tightening of cycles gone by.
So, if anything, this is a dovish press release and the equity markets have breathed a sigh of relief in the process — with everything else going on the world, at least a rate hike by the Fed as a source of concern has been taken off the table for the next several quarters, if not for all of 2015.
The Fed wasn’t the only one showing investors the easy money....MORE

Shipping: "Rates Under Pressure on Low Demand--Maersk"

A nasty factoid from FT Alphaville:
...the Baltic Dry Index ... It’s now fallen 20 days in a row.
reminded me of this story from The Maritime Executive:

Maersk container ship at port
BY MarEx 2014-12-17 09:12:30
Container shipping firm Maersk Line said a fresh attempt made on Monday to raise freight rates on main routes from ports in Asia to those in northern Europe was already under pressure due to weak demand.
Maersk Line, a unit of Danish conglomerate A.P. Moller-Maersk, controls one-fifth of all transported containers from Asia to Europe. Like other shipping lines it has been trying to curb losses on the world's busiest route where an overabundance of ships is weighing on rates.

The company hiked rates on twenty foot equivalent unit containers (TEU) by $900 on Nov. 1.

However, this level was quickly dragged down by low demand, partly due to seasonally weaker demand in end-November towards the Christmas holidays, the company's head of east and central China told Reuters on Wednesday....MORE

Energy Stocks, Energy Credit and Crude (XLE)

The XLE is the energy sector of the S&P 500 ETF.
Opening at $79.06, trading as high as $79.35 I repeat our comment from yesterday's "Big Rebound for Energy":
Brent up 4.1% at $62.46 XLE $77.43 Up 3.42 (4.62%).
Thinking we'll see it here or lower a few more times, we're not buying it....
From ZeroHedge:

Just 3 Energy Charts
... but energy stocks are surging...

And while energy credit spreads are tighter, the move in energy stocks is exuberant to say the least.

We are sure stocks are correct... they always are, right?
And there goes crude, WTI down 91 cents at $55.88, the XLE is now in the red by a penny at $77.07.

"Natural gas falls after supply data, weather forecast still supports"

January's $3.679 down 0.023.
Natural gas futures were lower on Thursday, shrugging off data showing that U.S. natural gas storage fell more-than-expected last week and forecasts for colder year-end temperatures.

On the New York Mercantile Exchange, natural gas futures for delivery in January were down 0.84% at $3.674 per million British thermal units during U.S. morning trade, from around $3.757 per million Btu ahead of the supply data.

The U.S. Energy Information Administration said in its weekly report that natural gas storage fell by 64 billion cubic feet last week, compared to expectations for a decline of 60 billion after a drop of 51 billion in the previous week.

Inventories fell by 6 billion cubic feet in the same week a year earlier, while the five-year average change is a drop of 258 billion cubic feet.

Total U.S. natural gas storage stood at 3,295 trillion cubic feet.

The home heating fuel rose to session highs earlier after after the latest weather forecasting models indicated that temperatures in the Midwest, Great Lakes and mid-Atlantic regions of the country would be lower than normal from December 27 to December 31.

Approximately 49% of U.S. households use gas for heating, according to the EIA, the statistical arm of the Energy Department.
And from the EIA:
Weekly Natural Gas Storage Report
for week ending December 12, 2014   |   Released: December 18, 2014 at 10:30 a.m.   |   Next Release: December 24, 2014 
Working Gas in Underground Storage Compared with 5-Year Range
Note: The shaded area indicates the range between the historical minimum and maximum values for the weekly series from 2009 through 2013.
Source: Form EIA-912, "Weekly Underground Natural Gas Storage Report." The dashed vertical lines indicate current and year-ago weekly periods.


"The Current Term Structure of Interest Rates"

From LearnBonds:
Over the past year, a lot of attention has been paid to the decline in longer-term bonds.  Today, I would like to look at what has happened to the term structure of interest rates during this period of decline.

Looking at just the yield on the 10-year United States Treasury note we see that in the middle of December in 2013, the yield was about 2.85 percent.

Note that I am using the actual yields on the notes, which are calculated on a stream of cash flows, and not the yield from “stripped” securities that are “bullet” investments that pay no interest payments but sell at a discount to the cash that will be paid the investor at the time the issue matures.  The yields on the “strip” securities provide a more “correct” estimate of the yield curve, but the current difference between the two measurements are so minor that I have just gone ahead and reported the yields from the regular securities.
Six months ago, in the middle of June 2014, the yield had dropped to 2.60 percent and only three months ago, this maturity was trading to yield about 2.55 percent.  A month ago, the yield was 2.35 percent, whereas one week ago it was at 2.15 percent.

This week, the yield on the 10-year US Treasury note was at 2.15 percent.  The yield on the 10-year note, therefore, dropped 70 basis points over the past year; 45 basis points over the past six months; 40 basis points over the past three months; and 20 basis points over the past month.

The yield on the 2-year note actually rose during this time from 0.32 percent one year ago and from 0.45 six months ago. Three months ago, the yield on the 2-year note was 0.59 percent, close to where it closed on Tuesday at 0.56 percent.

Consequently, there has been a substantial decline in the term structure of interest rates....MORE

How to Write In the 21st Century: Dear Russell Brand...

From Squander Two:

An open letter to Russell Brand. 
Dear Russell,

Hi. I'm Jo. You may remember me. You may even have filmed me. On Friday, you staged a publicity stunt at an RBS office, inconveniencing a hundred or so people. I was the lanky slouched guy with a lot less hair than you but (I flatter myself) a slightly better beard who complained to you that you, a multimillionaire, had caused my lunch to get cold. You started going on at me about public money and bankers' bonuses, but look, Russell, anyone who knows me will tell you that my food is important to me, and I hadn't had breakfast that morning, and I'd been standing in the freezing cold for half an hour on your whim. What mattered to me at the time wasn't bonuses; it was my lunch, so I said so.

Which is a great shame, because I'd usually be well up for a proper barney with you, and the points you made do actually deserve answers. Although not — and I really can't emphasise this enough, Russell — not as much as I deserve lunch.

Before I go any further, I should stress that I don't speak for RBS. I'm not even an RBS employee, though I do currently work for them. What follows is not any sort of official statement from RBS, or even from the wider banking industry. It is merely the voice of a man whose lunch on Friday was unfairly delayed and too damn cold.

So, firstly, for the people who weren't there, let's describe the kerfuffle. I didn't see your arrival; I just got back from buying my lunch to discover the building's doors were locked, a film crew were racing around outside trying to find a good angle to point their camera through the windows, and you were in reception, poncing around like you were Russell bleeding Brand. From what I can gather, you'd gone in and security had locked the doors to stop your film crew following you. Which left us — the people who were supposed to be in the building, who had work to do — standing around in the cold.

My first question is, what were you hoping to achieve? Did you think a pack of traders might gallop through reception, laughing maniacally as they threw burning banknotes in the air, quaffing champagne, and brutally thrashing the ornamental paupers that they keep on diamante leashes — and you, Russell, would damningly catch them in the act? ...

HT: Business Insider

Chartology: Watching the Small Caps For a Breakout (IWM; RUT)

Or a nineteenth nervous breakdown.
The IWM is the iShares Russell 2000 ETF
From FinViz:

There is a lot of congestion in the 1180-1200 range:

Oil: "Future Of Shale -- December 17, 2014"

He's been blogging the Bakken since 2009.
From The Million Dollar Way:
In a long note like this there will be factual and typographical errors. There will be opinions mixed in with facts. Consider this entire "essay" nothing more than opinion within the guidelines expressed in the "welcome/disclaimer." This has absolutely nothing to do with investing in the Bakken. The main purpose of the blog is to help me better understand the Bakken. The Bakken is what it is. I'm not doing this for any reason other than the enjoyment I get out of following it. There is no hidden agenda. The essay is not complete. I will add to it when the spirit moves me. When it is complete, I will note that. 

Preamble, Disclaimer, And All That Stuff

Rigzone's look at the future of shale in light of the oil glut and depressed oil prices.

I don't think I will post any excerpts of the linked article above. I have it saved elsewhere; most of these articles eventually "disappear," requiring a subscription later on to access them (a word to the wise).

I scanned the article linked above but I didn't read every word. I think there is a huge story line that was mentioned in another Rigzone article but not in this most recent one.

Looking at that previous Rigzone article and then at this most recent one (linked above), I think we will see an essay soon at Rigzone or elsewhere about another lesson learned with regard to US shale which I am trying to express in the rambling notes below. Developing an unconventional oil play is entirely different than what has gone on before.

What follows is personal opinion; what looks like facts may in fact be wrong; I'm not looking up staff to confirm (I discuss this in my "welcome/disclaimer" pages).

If any of this information is important to you, go to linked sources throughout the blog; don't take my word for it; I make a lot of factual and typographical errors.

Initial Thoughts

There are three unconventional plays that account for about half of all unconventional oil right now: the Permian, the Eagle Ford, and the Bakken.

Of the three unconventional plays (remember, the Permian has both conventional and unconventional aspects) the Bakken is the most mature in terms of development and understanding of the geology.

Within the Bakken, the middle Bakken is well delineated. This is not true for the other payzones within the Bakken pool. A lot of work has been done on the upper bench of the Three Forks, the Sanish, and the Pronghorn Sand(s), but even those formations are not delineated as well as the middle Bakken.

The lower benches of the Three Forks are hardly delineated at all; that delineation was just beginning when the slump in oil prices began. And, of course, we know almost nothing about the Tyler or the Lodgepole (not the reefs) formations.

The Bakken is 90 - 96% oil across the Basin.

The Eagle Ford is still in the early stages of being delineated; I have no idea how many pay zones there might be in the Eagle Ford, just as we did not know how many pay zones there would be in the Bakken until several years into the boom. The Eagle Ford has areas that are predominantly oily and other areas that are heavier in condensate. The general areas are known but the Eagle Ford came in later than the Bakken and delineation is probably less clear than the middle Bakken.

The Permian is even less delineated with regard to its unconventional plays.

Then across the US there are several other unconventional plays; perhaps the Niobrara is #4. Then a half dozen others.

All figures below are 2014 US dollars. 

At $150 oil, operators will explore every shale play and every area within every shale play.

At $100 oil, operators will still explore the better shale plays but start to concentrate on development of delineated fields.

At $75 oil, operators will pretty much discontinue exploration in even the best plays and emphasize development and infill wells.

Somewhere between $80 and $65 oil operators will start to circle the wagons, not only discontinuing exploration in the newer shale plays but will discontinue exploratory drilling in the three big US shale plays.

At $50, the circling of the wagons will become obvious to even the most casual observer. It's possible oil could get so low that all drilling in all US shale might stop but that seems incredibly unlikely.
$80 Oil 

Below $80, shale operators will start to demonstrate just how flexible they can become.

I don't now enough about the Permian or the Eagle Ford to comment, but I bet they are similar to the Bakken.

First, behind the scenes, the Bakken operators are going to extract savings from the oil service operators. Earlier I posted an example of where Sanjel was providing almost a 50% discount for some services. Sand and ceramic will come down in price (more on that later)....

"Russia worries keep heat in wheat price rally"

March futures 663'2 +14'6
That kind of verticallity just begs to be shorted. High for the day: 677'0.
From Agrimoney Dec. 17, 19:14GMT:

Wheat prices soared again, hitting a fresh seven-month high in Paris and their highest for six months in Chicago, amid continued concerns of a squeeze on Russian exports of the grain.

The rouble, whose weakness has been one source of concern for wheat buyers, actually rallied more than 10% against the dollar, after the Russian finance ministry announced it would support the domestic currency by selling foreign ones.
Nonetheless, with rouble still down more than 20% against the dollar over the past month, fears remained that Russian farmers would hoard crops as a dollar-denominated hedge.
"Producers are using wheat as their currency," Don Roose, president of Iowa-based broker US Commodities told, adding that Russian wheat export prices had been driven up to the equivalent of about $12 a bushel in Black Sea ports.
There are also concerns of official moves to clampdown on exports, to ensure sufficient supplies for domestic use, with talk of restrictions, introduced on quality grounds, on shipments to countries beyond a handful of favoured importers.
'People lost millions'
At Minnesota-based Benson Quinn Commodities, Brian Henry said: "I think people are not prepared to go short on wheat in the current circumstances.
"Memories are pretty fresh of 2010," when a Russian export ban sent prices soaring, and denied importers access to grain they had acquired.
"People lost millions on that," Mr Henry said....MORE
And this morning:
Wheat prices soar anew, despite 'sceptics'. Corn, soy up too

Wednesday, December 17, 2014

"How the perfectly legal heists of a racehorse-trainer and former seminarian made him the bane of the bookies"

From The Economist:

Only fools and horses
INDUS VALLEY is an unremarkable horse, or so punters thought when it ran in the 4.25 at Kempton Park, a racetrack on the outskirts of London, on January 22nd 2014. Given that it had been beaten by an aggregate of 104 lengths in its previous four outings—and had not competed at all for two years—odds of 25-to-1 seemed generous. Indus Valley won. Two earlier, minor races at other English tracks that Wednesday had featured unlikely comebacks by mounts that had been out of action for months. The 6.25 at Kempton Park delivered a final surprise. Low Key—an aptly named horse given its lack of pedigree, more so since it was running its first race since being castrated—finished well ahead of the pack. Obscure midwinter horse-racing is often unpredictable; still, what were the odds of four horses who had not won a race between them since 2010 all triumphing on the same day?

The answer, as bookmakers soon discovered, was 9,000-to-1. Wagering just £112 ($184) on all four was enough to yield £1m. And thousands of pounds had indeed been wagered on two, three or all four no-hopers. Even before Low Key romped home with a length to spare, the writing was on the wall: the bookies had been hustled. And it wasn’t hard to guess the culprit: Barney Curley, a 75-year-old Northern Irishman, former aspiring Jesuit priest, low-grade horse trainer and professional gambler, had once owned three of the four winners. Their current trainers were former employees of his Newmarket yard or otherwise associated with him. Betting on horses blessed with a sudden improvement in form was as much a Curley trademark as the beige fedora on his bald pate.

Bookies denounced a “weapons-grade coup”. One, Paddy Power, said it had lost nearly £1m; pundits speculated about losses of £15m for the industry overall, though the true figure was probably nearer £2m (bookmakers exaggerate such hits to play up punters’ chances). Yet as in previous Curley plots—and there have been four decades’ worth of them—none found a reason not to pay up. Part of the ingenuity of the schemes, part of the chutzpah, is the way they mix subterfuge with respect for the letter of the law. This was a heist, but a perfectly legal one.

Play it again, Sam
When it comes to landing wagers on unlikely horses, Mr Curley has form (“Schemes, coups, call them what you like,” he says, amused by the mystique that surrounds him). The template is simple. A horse with proven ability is purchased, often from overseas. It disappears for months or years, perhaps recovering from injury. When it finally competes, its performance is appalling. Because, in most low-quality races, faster horses are given additional weight to “handicap” them, losing badly can help a horse in future events by lowering its rating. On its next outing, the bookmakers (having never heard of the obscure horse) lure punters with prices of 20-to-1 or higher. Lo and behold, the nag rediscovers its form, beats a field of weighted-down stragglers and enriches its backers—ie, Mr Curley....MORE

"Big Rebound for Energy"

Brent up 4.1% at $62.46XLE $77.43 Up 3.42 (4.62%).
Thinking we'll see it here or lower a few more times, we're not buying it.
From Crossing Wall Street:
It’s too early to call this a trend, but energy is bouncing back today. The S&P 500 is currently up 21 points, or 1.08%. The Energy Sector ETF ($XLE) is up more than 4.5%.

Oil Bear Markets Since 1983

A repost from Nov. 7, 2013.
Brent futures on the ICE dropped $1.78, or 1.7%, to $103.46 a barrel while WTI settled at $94.20 down 60 cents.
From Bespoke Investment Group:

With oil currently down nearly 15% since its high on September 6th, it's getting close to the 20% threshold for a new bear market.  (A bear market is a 20%+ decline that was preceded by a 20%+ rally.)  For those interested, below is a snapshot of all oil bear markets going back to 1983.

There have been 31 oil bear markets since 1983, with the last one occurring from February 24th, 2012 through April 28th, 2012.  The average oil bear market has lasted just 108 days, and the average bear market decline has been 33.73%.

To reach official bear market territory, oil needs to fall $6 from here down to $88.40. 

Sony Hackers Threaten Terror Attacks On People Seeing Movie "The Interview", Carmike Pulls Movie From Theaters

First up, The Verge, yesterday:

Sony hackers threaten terror attacks against people who see The Interview in theaters
The Sony hackers are threatening an attack on people who go out to see The Interview, writing in a message that they "recommend you to keep yourself distant" from movie theaters and other screening locations. The hackers previously promised to deliver a "Christmas gift," and while that originally sounded like another trove of leaked data, they are now implying that it may be an attack. "Warning[.] We will clearly show it to you at the very time and places 'The Interview' be shown, including the premiere, how bitter fate those who seek fun in terror should be doomed to," the note says. The hackers also reference 9/11 in making the threat.
The full note reads:
We will clearly show it to you at the very time and places "The Interview" be shown, including the premiere, how bitter fate those who seek fun in terror should be doomed to.
Soon all the world will see what an awful movie Sony Pictures Entertainment has made.
The world will be full of fear.
Remember the 11th of September 2001.
We recommend you to keep yourself distant from the places at that time.
(If your house is nearby, you’d better leave.)
Whatever comes in the coming days is called by the greed of Sony Pictures Entertainment.
All the world will denounce the SONY.
The threat was included alongside the release of another set of emails, this time said to be those of Sony Entertainment CEO Michael Lynton. Because the hackers post this information anonymously and are contacting reporters through reusable email addresses, it is possible that a separate party is behind this threat. However, that seems unlikely. The communications have been consistent, and it should be clear soon whether the leaked emails are genuine, confirming the authenticity of this note....MORE
And from the Hollywood Reporter today:

Sony Hack: Carmike Cinemas Drops 'The Interview'
Carmike Cinemas will not show the Sony comedy The Interview, a source tells The Hollywood Reporter. 
The decision followed new threats from hackers issued Tuesday. During discussions with theater owners during the course of the day, Sony Pictures told exhibitors who had booked The Interview that it planned to move forward with the movie's release, but that they were free to decide not to show the film, and that the studio would support them in whatever decision they made.

Carmike's headquarters are in Columbus, Ga. It operates 278 theaters and 2,917 screens in 41 states.

The situation throughout the day was very fluid: Neither the National Association of Theatre Owners nor the individual national theaters chains have yet publicly spoken about the situation. But according to some insiders, exhibitors are wary of becoming liable if they show the movie and any violence occurs.

The discussions have also involved requests from theater owners that Sony provide heavy security if they do go ahead and play the film. At the same time, some exhibitors felt that Sony was throwing the decision about whether or not to show the movie into their laps when the studio itself should be making that call. However, Sony insisted it is not abandoning plans to release the movie, although it remains to be seen how wide a theatrical release the film will now have. Sony representatives did not respond to requests for comment....

Goldman Sachs on Today's Federal Reserve Open Market Committee Meeting

From ZeroHedge:
Goldman's Sven Jari Stehn answers the 11 most critical questions regarding to day's "most-important-FOMC-meeting-ever."

Q: Will "considerable time" be dropped?
A: Yes, we believe the "considerable time" language will be dropped.

December has for some time looked like the most natural meeting for modifying the guidance given the leadership’s expectations for liftoff in mid-2015, the typical translation of “considerable time” into about six months, and the absence of a press conference in January. Speeches by Fed Vice Chairman Fischer and New York Fed President Dudley two weeks ago confirmed that we are getting closer to the date when "considerable time" will be removed. Since then we have seen a strong employment report and a bounce-back in University of Michigan long-tem inflation expectations, which reinforce the expectation that the guidance will be modified.

We do not, however, think that a change in guidance is a done deal. First, while a number of Fed officials have explicitly or implicitly voiced support for switching the forward guidance towards “patience,” others including San Francisco Fed President Williams are comfortable with “considerable time.” Second, the October minutes suggest that some participants were worried that the removal of considerable time might be seen as a shift in the stance of monetary policy and therefore tighten financial conditions. The continued decline in oil prices and market-implied inflation expectations, as well as the recent turmoil abroad, might well reinforce these existing concerns.

Q: How will "considerable time" be modified?
A: Recent Fed communication has focused on two themes: the word “patient” has shown up frequently and Fed officials have continued to stress that policy is data dependent.

One possibility to combine these themes would be to follow Boston Fed President Rosengren’s formulation and state that the "committee expects to be patient in beginning the normalization of the target range for the federal funds rate until it is clear that the economy is on the path to achieving both the 2 percent inflation target and maximum sustainable employment.”

The leading alternatives, in our view, would be either to keep "considerable time" or adopt "patient" without the data dependence. The former would increase the likelihood of the first hike occurring in September of next year. The latter would raise the parallel with 2004--when "considerable period" gave way to "patient" in January and the FOMC hiked in June--and thereby increase the chance of a rate hike in June or even earlier....MORE

Bookmakers Suspend Betting on Whether the Queen Will Announce Her Abdication in Her Christmas Day Broadcast

Was Charles trading on material non-public information?
From City AM:

Betting suspended on Queen abdicating during her Christmas broadcast after "unusual" bets placed at Coral
Bookmakers Coral has suspended betting on whether the Queen will announce her abdication in her Christmas Day broadcast after a couple of “unusual” bets were placed today. 
A spokesman told City A.M two different bets had been made within half an hour of each other – prompting the team to question whether there had been a leak from Buckingham Palace. 
Coral had been offering 10-1 odds on the Queen announcing her abdication during the Christmas Day speech, but given how obscure and specific the market was, the bookie had not received any bets on it “for months” he said.  
“It's a big coincidence to have two people within half an hour.”
He noted that there had been a similar pattern to betting around the Duchess of Cambridge – nee Kate Middleton's - first and second pregnancies. “Betting on the Royal Family is very popular, but they do have their leaks.”...MORE

Some Improvement In the California Drought

I won't go into detail (now) on this type of measurement versus the rolling average/moving average measurement approach except to say this is one of the simpler and more straightforward ways to present the information.

From the Climate Prediction Center via Mike Smith Enterprises:
California Drought Improvement 
Drought in California improving due to recent rains.

Here is the National Weather Service's map showing how much rain (in addition to normal) needed to break the drought in California and surrounding areas as of December 13 at 7am.
For comparison, the December 6 map:
And, here is what the situation looked like on November 29:

Although the two storms were not "droughtbreakers" there are signs that for the first time in three years the winter rains will approach average seasonal amounts.

Russia and the Ruble: Analysts Weigh In

From MoneyBeat 5:56 am ET Dec 17, 2014:
Ruble Gyrates as Panic Spreads 
Russia isn’t getting any better.
Analysts say capital controls are moving into sharper focus. The chief Europe economist at the Institute of International Finance says Russia’s central bank has ‘just hours or days’ to get its currency crisis under control. Global banks are curtailing the flow of cash to Russian entities. Apple’s halted sales in the country, saying the fluctuations in the ruble makes it too difficult to price products.

All the while the ruble continues its sharpest selloff since the 1998 financial crisis. It rose as markets opened, but remained volatile.

Here’s what investors and analysts are saying now:

Steven Barrow, strategist at Standard Bank: “What has become a lot scarier in the last few days is the possibility that economically unrelated countries could see similar freefalling markets as risk aversion soars.  There is also the possibility of liquidity shortages which could occur as funding access diminishes for borrowers or because the depth of some asset markets proves to be far shallower than investors expect.”

Luis Saenz, trader at BCS Group: “The central bank is unwilling to support the ruble through interventions or via introduction of administrative controls which basically means that the currency is poised to take the major hit from the oil plunge. With Brent trading $55-60 a barrel we see current fair value for the ruble at 60 against the dollar and a market target of 63 to 65.”

Anthony Peters, strategist at SwissInvest: “The situation in Russia might be critical but the lack of liquidity makes it nigh on impossible to relate the economic and political realities to where markets are supposedly valuing both the ruble and Russian assets. There are plenty of sellers and no buyers. That said, we did see some bold privateers stepping out and taking small punts in some ruble-denominated paper yesterday. If they get it right, they could well have doubled their money within three months. I’m not sure they have.” ...MORE