Friday, January 19, 2018

Friday (January 19th) Links

  • Johns Hopkins study in which broccoli extract applied to the skin of nude mice prevented oxidative damage from UV light for a period of several days, even after it was washed off the skin. The absorbed sulforaphane could only act as an antioxidant for 30-60 minutes, at best a short-term effect. However, the induced upregulation of antioxidants in the skin protected the skin from UV for two days! To put it in chemistry terms: antioxidants are stoichiometric and used up quickly, whereas the endogenous antioxidant enzyme system is catalytic and long-lasting. [Getting Stronger]
  • Possibly one of the most frequent requests we get is a recommendation for the best pencil for the New York Times Sunday crossword puzzle. [link]
  • Recipes for chocolate require the addition of extra cocoa butter to cocoa liquor, leading to a cocoa solids surplus and thus a relatively cheap supply of cocoa powder. This contrasts with the earliest European usage of cocoa where, before milk and dark chocolate was popularized, cocoa powder was the primary product and cocoa butter was little more than a waste product. [Wiki]
  • With much fanfare, Starbucks introduced a light-roast espresso blend to its shops across the country on Tuesday, marking the first time in more than 40 years that the coffee behemoth has used anything other than a dark, robust blend for its espresso, whether as an individual shot or as part of lattes, cappuccinos and other drinks. [Wapo]
  • Weeds are elegant masters of adaptation and procreative success, and the Genghis Khan of weeds—the one most hellbent on total domination—is pigweed, aka Palmer amaranth. It can grow as high as 10 feet in the shape of a ponderosa pine, with a stalk the width of a corncob. A single plant can produce a million seeds, and a pigweed-infested field will spew hundreds of millions, raising the probability that a mutation of the plant will come along that can resist an herbicide. "To a farmer, pigweed"s like a staph infection resistant to every antibiotic," Heraud says. [BB]
  • Grouse moors cover at least 550,000 acres of England, with at least 300,000 of these acres owned by just 30 huge estates – a number of which are owned offshore, and most of whom rake in large public farm subsidies. This survey's far from complete, however, with many more grouse moor estates yet to be listed and mapped. [link]
  • Mother Nature embedded the Nrf2 signaling pathways in us intentionally, because she didn't want us to get cancer. She cleverly invented a molecule (sulforaphane) which could both activate Nrf2 then be incorporated into one of Nrf2's greatest weapons (glutathione). [link]
  • Mr. Hummer went out to meet Joe Buttram, 27, for drinks. As a mixed martial arts fighter, Mr. Buttram said he would fight for a couple hundred bucks, sometimes a few thousand, and worked security at a start-up, but his main hobbies were reading 4chan and buying vintage pornography, passions that exposed him to cryptocurrency. [NYT]
  • But seriously, it's way healthier than I thought. This has been in-and-out of the news a few times over the years, but I was always like, "duh," until I finally looked at the data. In some cases glucose & insulin excursions are down 20, 30, even 50%! (mostly depending on distance covered, but also speed) (but mostly distance). [Lagakos]
  • One of the great benefits of eating low-carbohydrate whole, unprocessed foods is that it reduces your hunger. In trials of low-carbohydrate diets, one thing that's been seen again and again is that people spontaneously reduce their caloric intake on this diet. That's one of the keys to the success of this diet right there. [Mangan]
  • In humans under normal conditions, I believe pro- and anti-oxidants are balanced by our own endogenous processes. If we ingest something that produces a bit too much ROS, they'll be neutralized. If we ingest something that induces antioxidant processes, they'll be used if necessary and degraded if not. In other words, as long as you're not mega-dosing beta-carotene or smoking 2 packs a day, etc., then none of this should matter. [Lagakos]
  • The city of Seattle is getting more apartments this decade than in the prior 50 years combined. For the Puget Sound region as a whole, the current construction frenzy rivals the record apartment boom from the late 1980s, which was centered in the suburbs. [link]
  • Immense vertical skyscrapers can autonomously lift these driverless rooms and their passengers hundreds of meters up, where they're slotted into position before the wall panels open to reveal other connected room modules. [link]
  • Every time miners figure out how to hash faster or cheaper, the difficulty increases. When difficulty increases, each hash becomes less valuable. Your hashrate may stay the same, but you get paid less and less. In this way, Proof of Work forces miners to constantly re-invest revenue. Miners only profit through constant spending, constant optimization, constant competition. Miners that can't compete fall off the treadmill. [link]
  • In 1865, the English economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal-use led to the increased consumption of coal in a wide range of industries. He argued that, contrary to common intuition, technological progress could not be relied upon to reduce fuel consumption. [Wiki]
  • With tinkering, syrup scientists at Japan's Hayashibara chemistry company finally figured out a novel enzymatic method to make [trehalose] on the cheap from starch. The method brought costs down to just $3 per kilogram. By 2000—just before the rise of C. diff.—the company got approval from the US Food and Drug Administration to use it as an additive in food. Approval for use in Europe came the following year. Manufacturers started pouring trehalose into a variety of foods, from pasta to ground beef to ice creams. [link]
  • Kigali, Rwanda's gleaming capital, pulses with African charm. About 23 years after the horrific genocide in Rwanda, Kigali has reclaimed its narrative and emerged as a proud and progressive city, buzzing with tech hubs, creative start-ups and cafes serving some of the best coffee in East Africa. [NYT]
  • Ms. Felstein turned to the New York Foundation for Senior Citizens, a Manhattan-based nonprofit. The group has been operating a home-sharing service since 1981, matching people who have space in their homes with those in need of affordable housing. It is one of a number of similar programs that have emerged across the country as the population of older Americans grows, as a way to help people stay in their homes. [NYT]
  • Port-au-Prince, Haiti, is one of the largest cities in the world without a central sewage system. There are no sewers connecting sinks, showers and toilets to hulking wastewater treatment plants. Most of the more than 3 million people in the metro area use outhouses, and much of that waste ends up in canals, ditches and other unsanitary dumping grounds where it can contaminate drinking water and spread disease. [NPR]
  • His primary message is that you will not achieve financial security and personal happiness by working harder to get ahead of the pack; you will find these things by carefully studying what the pack is doing and then doing the opposite. [link]
  • One of the key Principles of Mustachianism is that any and all lineups, queues, and other sardine-like collections of humans must be viewed with the squinty eyes of skepticism. Because if so many people simultaneously decide to do something that they are forced to stand or drive in a queue to do it, there’s a good chance it is something that is not worth doing. [MMM]
  • Thoren's intravenous magnesium load test for diagnosing magnesium deficiency: Provide ~360–480 mg of magnesium intravenously over 1 hour. If under 70% of the magnesium load comes out in the urine over 16 hours, this is highly suggestive of magnesium deficiency. [BMJ]
  • Brits saying that the NHS was designed for a country of hard-working laborers who died young and now is dealing with "sedentary workers who eat too much and exercise too little" and then keep living more or less indefinitely. [Greenspun]
  • I was offered a job in Denver once and have visited many times. The attraction has always been lost on me. Someone once described it as Akron with a mural. [Granola Shotgun]
  • "I am convinced we are living through a mass hysteria of the sort one would read about in Popular Delusions and the Madness of Crowds." [Sailer]
  • I'm a vodka soda guy. I get a fair amount of grief over it from my friends who are cocktail enthusiasts. The most important part is to have a fresh, supercrisp 10-ounce club soda. I have a bunch of them in the fridge at home, and it drives my wife crazy because there are all these bottles in there with two-thirds gone. [NYT]
  • The current CAPE10 is 33.33, which is 136% above its historical average. By taking out the financial crisis, the CAPE7 falls to 28.44, which is 105% above its historical average. [link]
  • "As smaller, more efficient planes flood the market," he said in an email, "new city pairs are being created almost every day, killing the case for larger aircraft." [NYT]
  • I did not enjoy all three books equally. The first, Three Body Problem, is excellent. The second, The Dark Forest, is very good. The third, Death’s End, is too dismal for words. [Dan Wang]
  • The fewer the manufacturing workers and engineers, the more removed everyone is from the particulars of industrial processes, and the more remote that knowledge becomes in each successive generation. We become think tankers and app designers and restaurant hosts, while the details of the industrial world become further and loftier abstractions. How many of our grandparents were familiar with the details of ball bearings, wire production, concrete mixing, industrial chemicals, while we are not? [Dan Wang]
  • This year, I had the chance to visit every part of the Sinosphere (or places where people are majority Chinese): I live in Hong Kong, and I've visited mainland China, Macau, Taiwan, Vancouver, and Singapore. [Dan Wang]
  • The growth of "zero-sum" activities may, however, be even more important. Look around the economy, and it’s striking how much high-talent manpower is devoted to activities that cannot possibly increase human welfare, but entail competition for the available economic pie. Such activities have become ubiquitous: legal services, policing, and prisons; cybercrime and the army of experts defending organizations against it; financial regulators trying to stop mis-selling and the growing ranks of compliance officers employed in response; the huge resources devoted to US election campaigns; real-estate services that facilitate the exchange of already-existing assets; and much financial trading. [link]
  • In just a matter of months I'll depart old age to enter deep old age — easing ever deeper daily into the redoubtable Valley of the Shadow. Right now it is astonishing to find myself still here at the end of each day. Getting into bed at night I smile and think, "I lived another day." And then it's astonishing again to awaken eight hours later and to see that it is morning of the next day and that I continue to be here. "I survived another night," which thought causes me to smile once more. I go to sleep smiling and I wake up smiling. I'm very pleased that I'm still alive. Moreover, when this happens, as it has, week after week and month after month since I began drawing Social Security, it produces the illusion that this thing is just never going to end, though of course I know that it can stop on a dime. It's something like playing a game, day in and day out, a high-stakes game that for now, even against the odds, I just keep winning. We will see how long my luck holds out. [NYT]
  • The CreditSights analysts called the structure a "SuperHoldCo PIK note", while several investors have dubbed it more simply a "super PIK". "It's definitely a sign of where we are in the cycle right now," said a manager at a US credit hedge fund. "I've never seen a 'super PIK' before." [FT]
  • In 1940, for example, when the roaring '20s had been fully liquidated, the Fed's gold backed its liabilities by 88%. There was very little credit in the dollar system, which made it a good time to own stocks. By the top of the 1960s bubble, the Fed had monetized so many government bonds that, at the pegged and London market price of $35 per ounce, gold backed the Fed's liabilities by just 12%. That was a great time to own gold (had it been legal for Americans to do so). On January 21, 1980, the spot price of gold hit a peak of $875, which meant that the gold on the Fed's balance sheet backed its liabilities by 133%—in order words, its liabilities were overbacked by 33%. That was not a good time to own gold. Today, the Fed reports it holds 8133 tonnes of gold, worth $349.4 billion at $1330 per ounce, which equals 7.9% of the Fed's reported $4.4 trillion in liabilities. [link - pdf]
  • Modern universities are insane. For the vast majority of human history universities as we conceive of them did not exist. The modern university system did not produce the Mahabharata, The Aneaid, or The Tale of Genji. The modern university system did not produce Ibn Khaldun, Thomas Aquineas, or Alexis de Tocqueville. The universities John Adams, Alexander Hamilton, and James Madison attended looked or functioned very little like Harvard, Columbia, and Princeton do today. Men like Abraham Lincoln are evidence that a deep reading and appreciation for the liberal arts do not require formal education at all. Let's not kid ourselves: the humanities existed before the modern university department was conceived; they will exist long after the modern university department has been destroyed. [link]
  • "Liquor is everything," Healy says. "The best thing you can do for a restaurant is order a vodka soda." [link]

Thursday, January 18, 2018

Review of Good Strategy / Bad Strategy by Richard Rumelt

Found out about Good Strategy / Bad Strategy from another blogger who reviewed it last year. The author Richard Rumelt was an electrical engineer who worked at JPL and then became a strategy consultant and UCLA management professor later in life. Here he is giving a talk about the book at the LSE:


As Rumelt says, "bad strategy is not the absence of strategy, it's an active force of mistaken belief". And he is right - this shows up time and time again in business and in government and anywhere else one needs a strategy.

For example, Donald Trump ran into a problem articulating a strategy last August. Watch this speech he gave about the new strategy for the war in Afghanistan. [Previously on Afghanistan: 1,2,3,4.]



Or read it:

I arrived at three fundamental conclusions about America’s core interests in Afghanistan.

First, our nation must seek an honorable and enduring outcome worthy of the tremendous sacrifices that have been made, especially the sacrifices of lives.
Oh no! The tremendous sacrifices that have been made are a sunk cost now. What are relevant are the potential costs and benefits (if any) of continued involvement in Afghanistan, starting from now, which is what should be evaluated and discussed. Poor reasoning about sunk costs is a sure way to torpedo a strategic deliberation.

Trump also did not elucidate any interests in Afghanistan that would qualify as "core interests." As Steve Sailer says,
Afghanistan is the sort of quagmire that ideally, you'd lure your greatest enemies to attempt to occupy. “Oh no, stay out of Afghanistan! It’s the strategic center of Asia, controlling all of the mountain passes. It’s a veritable Gibralter or Constantinople of strategic world locations.”
A clear understanding of the core interests would have been important for understanding what benefits could be derived from the Afghanistan activities, which could then be compared to the costs. One of the interests that Trump did put forth was that involvement in Afghanistan could somehow prevent future terrorist attacks in America and Europe.

Of course, Afghanis had nothing to do with the 9/11 attack, and for the more minor attacks (like Barcelona which Trump mentions), the best strategy would be to make America and Europe Muslim-free zones. As a CBS correspondent summarized Trump's speech,
1) How long we will be in Afghanistan, how many of us, and what we will be doing there will remain a secret, so the bad guys can’t guess what to do. He can choose among any of the options the globalists give him, and we don't need to know about it.
2) We will win*, and that will stop Muslims in America from stabbing, shooting, blowing up and running over people, because they get their orders directly from goat herders in Afghanistan who shtup little boys.
*3) Winning is undefined. He won't decide when to leave or what to do based on anything specific, because he's a problem-solver and you have to decide on the fly as things change. This way, we can stay there forever.
The result of this muddled Trumpian mess of lies and confusion is a Bad Strategy. So what would a Good Strategy look like?

Rumelt describes the structure that underlies a good strategy as a "kernel", which contains three elements:
  1. A diagnosis that defines or explains the nature of the challenge, helping to simplify the complexity of reality by identifying the most critical, salient aspects of a situation.
  2. A guiding policy for dealing with the challenge; an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis. 
  3. A set of coherent actions that are designed to carry out the guiding policy, which are coordinated with one another to work together in accomplishing the guiding policy.
Rumelt presents interesting cases where the decisionmakers seemed to follow this approach. However, see my comments from the reviews of Billion Dollar Lessons and Why Most Things Fail about possible limitations to strategic thinking.

4/5.

Tuesday, January 16, 2018

Distressed Debt Watch - January

Bankrupt

Not Yet Bankrupt
  • Iconix Brand Group (ICON, EDGAR) bond due March 2018 trading at 82 cents, YTM of 137%.
  • Bon Ton Stores (BONT, EDGAR) bond due June 2021 trading at 25 cents, YTM over 65%. Missed interest payment due December 15 and entered forbearance agreement today.
  • Egalet Corp (EGLT, EDGAR) bond due April 2020 trading at 46 cents, YTM over 47%.
  • GNC Holdings (GNC, EDGAR) bond due August 2020 trading at 49 cents, YTM of 32%.
  • Frontier Communications (FTR, EDGAR) bond due April 2022 trading at 73 cents, YTM of 17%.

EXCO Resources, Inc. Files Voluntary Petitions for Chapter 11 Reorganization to Facilitate Financial Restructuring

EXCO Resources, Inc. (NYSE: XCO.BC) (OTC Pink: XCOO) ("EXCO" or the "Company") today announced that in order to facilitate a restructuring of its balance sheet, the Company and certain of its subsidiaries have filed voluntary petitions for a court-supervised reorganization under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (“the Court”). EXCO intends to operate in the ordinary course of business during the restructuring process.

EXCO continues to engage in constructive discussions with its creditor constituencies regarding the terms of a financial restructuring plan. In conjunction with this process, EXCO will explore potential strategic alternatives to maximize value for the benefit of its stakeholders, including the marketing of the Company’s assets, which may result in a sale of certain or substantially all of its assets under Section 363 of the Bankruptcy Code or as part of the plan of reorganization.

Sunday, January 14, 2018

2018 Prediction Contest

This year we have 16 entrants in the prediction contest - not bad.

Below are the list of events and the average probability given by the group: 


Average
Happened in 2017 – Could It Happen Again?
* CMG trades below 300 at any point (not counting Jan 2nd and 3rd prices) 0.66
* A Cat 3 hurricane makes landfall in the continental U.S. 0.35
* Donald Trump is still President of the United States at the end of the year 0.91
* Bitcoin (@$15k) outperforms gold (@$1312) 0.43


Proposed for First Time in 2017 But Didn't Happen
* Buying equal dollar basket of SHLD, JWN, M, WMT outperforms Amazon 0.36
* The RMB/USD exchange rate goes over 8 at any point 0.27
* Global negative yielding debt goes under $1 trillion 0.39
* Either Buffett or Munger dies 0.27
* Someone besides Elizabeth Holmes is running Theranos at the end of year (resigns, court appointed receiver, trustee, etc) 0.35
* Another Supreme Court seat opens 0.27
* The 10 year Treasury yield falls below the July 6, 2016 low of 1.336% 0.14
* Any country leaves the Euro currency 0.14
* Another Decacorn (nonpublic company, peak valuation >$10 billion) is uncovered as a fraud 0.24
* Either VRX or SHLD enter bankruptcy 0.36
* Twitter is taken private 0.19
* The home mortgage interest deduction is eliminated from federal income tax 0.05


Didn't Happen in 2016 or 2017
* A Euro hits $1 US. (EURUSD parity) 0.19
* The 10 year Treasury yield rises above 3.5% 0.30
* Gold trades below $1000 0.18
* Hussman is up for the year including dividends (fund currently $7.13) 0.38
* Buying equal dollar basket of FB/AAPL/NFLX/GOOGL returns below 0% including dividends 0.40
* The BBB yield closes above 5% at any point 0.33
* A 2 year treasury yields more than 10 year treasury 0.36
* Gold trades above $2000 0.18
* One or more of Kim/Merkel/Saudis loses power (dies, resigns, or is deposed) 0.33
* One or more of Gross/Ackman/Miller/Hussman/Einhorn leaves the business (dies, fired, resigns, manages personal money only) 0.29
* A nuclear weapon is used in anger 0.05


New Ones – Political
* Republicans lose the Senate majority 0.44
* Republicans lose the House majority 0.43
* Joe Arpaio wins Arizona Senate Republican primary 0.35
* One or more of Donald Trump Jr or Jared Kushner is indicted 0.26
* One or more of Hillary Clinton or Huma Abedin is indicted 0.20
* Any TWO or more of the four major Trump cabinet figures (SoS, SoT, SoD, or AG) leaves position (for any reason) during the year 0.37
* More than 10,000 of the DACA people are deported 0.24
* US ends daylight savings time 0.06


New Ones – Cryptocurrency
* Cryptocurrency combined market cap on Coinmarketcap.com exceeds $1T 0.42
* The Flippening: Etherium market cap is greater than Bitcoin (core/classic) at any point during the year 0.36


New Ones – Financial Markets
* TSLA share price goes below 200 at any point 0.40
* The 90-day T-bill yield exceeds 2% 0.36
* The S&P goes below 2,500 0.50
* Any of the following countries' 10-year government bonds yield more than US: Germany, Italy, Canada. 0.44
* Total return of 1 year T-bill outperforms S&P 500, Nasdaq, and bitcoin. 0.35
* The CBOE Volatility Index ($VIX) exceeds 30 at any point during the year 0.43
* Federal Reserve raises target rate four times (in 25bps equivalents) in 2018 0.35
* Federal Reserve lowers target rate any times (in 25bps equivalents) in 2018 0.10
* The Vanguard Balanced Index Fund (VBINX) has a positive total return for the year 0.52
* Federal Reserve bank balance sheet total assets 0.40
* Worst performing S&P 500 sector over past 3 & 5 years (energy) outperforms (price) best performing (information technology). 0.54
* JPYUSD below 100 0.37
* US 30-year treasuries have a positive total return for the year; 0.45
* Crude (WTIC) ends the year above $62.58 0.60


New Ones – Happenings
* Another year with no commercial jet fatal plane incidents 0.61
* 2018 US vehicle sales are under 2017 vehicle sales (17.2 mm in '17, first decline since GFC) 0.57
* An earthquake of magnitude 7.5 or greater affects the continental United States 0.18
* A players' strike occurs in any of the four major US sports leagues (NBA, NFL, MLB, NHL) 0.13
* Philadelphia Eagles win the NFL Super Bowl 0.18
* A tropical cyclone makes the list of 10 wettest on the U.S. Mainland 0.18

It is also interesting to look at the events in the order of most likely to least likely:


Average
* Donald Trump is still President of the United States at the end of the year 0.91
* CMG trades below 300 at any point (not counting Jan 2nd and 3rd prices) 0.66
* Another year with no commercial jet fatal plane incidents 0.61
* Crude (WTIC) ends the year above $62.58 0.60
* 2018 US vehicle sales are under 2017 vehicle sales (17.2 mm in '17, first decline since GFC) 0.57
* Worst performing S&P 500 sector over past 3 & 5 years (energy) outperforms (price) best performing (information technology). 0.54
* The Vanguard Balanced Index Fund (VBINX) has a positive total return for the year 0.52
* The S&P goes below 2,500 0.50
* US 30-year treasuries have a positive total return for the year; 0.45
* Any of the following countries' 10-year government bonds yield more than US: Germany, Italy, Canada. 0.44
* Republicans lose the Senate majority 0.44
* The CBOE Volatility Index ($VIX) exceeds 30 at any point during the year 0.43
* Republicans lose the House majority 0.43
* Bitcoin (@$15k) outperforms gold (@$1312) 0.43
* Cryptocurrency combined market cap on Coinmarketcap.com exceeds $1T 0.42
* TSLA share price goes below 200 at any point 0.40
* Federal Reserve bank balance sheet total assets 0.40
* Buying equal dollar basket of FB/AAPL/NFLX/GOOGL returns below 0% including dividends 0.40
* Global negative yielding debt goes under $1 trillion 0.39
* Hussman is up for the year including dividends (fund currently $7.13) 0.38
* JPYUSD below 100 0.37
* Any TWO or more of the four major Trump cabinet figures (SoS, SoT, SoD, or AG) leaves position (for any reason) during the year 0.37
* A 2 year treasury yields more than 10 year treasury 0.36
* Buying equal dollar basket of SHLD, JWN, M, WMT outperforms Amazon 0.36
* The Flippening: Etherium market cap is greater than Bitcoin (core/classic) at any point during the year 0.36
* Either VRX or SHLD enter bankruptcy 0.36
* The 90-day T-bill yield exceeds 2% 0.36
* Someone besides Elizabeth Holmes is running Theranos at the end of year (resigns, court appointed receiver, trustee, etc) 0.35
* Joe Arpaio wins Arizona Senate Republican primary 0.35
* A Cat 3 hurricane makes landfall in the continental U.S. 0.35
* Total return of 1 year T-bill outperforms S&P 500, Nasdaq, and bitcoin. 0.35
* Federal Reserve raises target rate four times (in 25bps equivalents) in 2018 0.35
* The BBB yield closes above 5% at any point 0.33
* One or more of Kim/Merkel/Saudis loses power (dies, resigns, or is deposed) 0.33
* The 10 year Treasury yield rises above 3.5% 0.30
* One or more of Gross/Ackman/Miller/Hussman/Einhorn leaves the business (dies, fired, resigns, manages personal money only) 0.29
* The RMB/USD exchange rate goes over 8 at any point 0.27
* Either Buffett or Munger dies 0.27
* Another Supreme Court seat opens 0.27
* One or more of Donald Trump Jr or Jared Kushner is indicted 0.26
* Another Decacorn (nonpublic company, peak valuation >$10 billion) is uncovered as a fraud 0.24
* More than 10,000 of the DACA people are deported 0.24
* One or more of Hillary Clinton or Huma Abedin is indicted 0.20
* A Euro hits $1 US. (EURUSD parity) 0.19
* Twitter is taken private 0.19
* An earthquake of magnitude 7.5 or greater affects the continental United States 0.18
* Philadelphia Eagles win the NFL Super Bowl 0.18
* A tropical cyclone makes the list of 10 wettest on the U.S. Mainland 0.18
* Gold trades below $1000 0.18
* Gold trades above $2000 0.18
* Any country leaves the Euro currency 0.14
* The 10 year Treasury yield falls below the July 6, 2016 low of 1.336% 0.14
* A players' strike occurs in any of the four major US sports leagues (NBA, NFL, MLB, NHL) 0.13
* Federal Reserve lowers target rate any times (in 25bps equivalents) in 2018 0.10
* US ends daylight savings time 0.06
* The home mortgage interest deduction is eliminated from federal income tax 0.05
* A nuclear weapon is used in anger 0.05

And also from highest standard deviation among the 16 predictions (biggest disagreements) to lowest:


SD
* Cryptocurrency combined market cap on Coinmarketcap.com exceeds $1T 0.27
* Another year with no commercial jet fatal plane incidents 0.26
* A Cat 3 hurricane makes landfall in the continental U.S. 0.26
* Bitcoin (@$15k) outperforms gold (@$1312) 0.25
* Someone besides Elizabeth Holmes is running Theranos at the end of year (resigns, court appointed receiver, trustee, etc) 0.24
* Joe Arpaio wins Arizona Senate Republican primary 0.24
* A 2 year treasury yields more than 10 year treasury 0.23
* 2018 US vehicle sales are under 2017 vehicle sales (17.2 mm in '17, first decline since GFC) 0.22
* The 90-day T-bill yield exceeds 2% 0.22
* Either VRX or SHLD enter bankruptcy 0.22
* Buying equal dollar basket of FB/AAPL/NFLX/GOOGL returns below 0% including dividends 0.21
* Any TWO or more of the four major Trump cabinet figures (SoS, SoT, SoD, or AG) leaves position (for any reason) during the year 0.21
* The Flippening: Etherium market cap is greater than Bitcoin (core/classic) at any point during the year 0.21
* Buying equal dollar basket of SHLD, JWN, M, WMT outperforms Amazon 0.21
* Global negative yielding debt goes under $1 trillion 0.21
* CMG trades below 300 at any point (not counting Jan 2nd and 3rd prices) 0.21
* One or more of Kim/Merkel/Saudis loses power (dies, resigns, or is deposed) 0.20
* Worst performing S&P 500 sector over past 3 & 5 years (energy) outperforms (price) best performing (information technology). 0.20
* Federal Reserve bank balance sheet total assets 0.20
* One or more of Hillary Clinton or Huma Abedin is indicted 0.19
* Crude (WTIC) ends the year above $62.58 0.19
* Federal Reserve raises target rate four times (in 25bps equivalents) in 2018 0.19
* Another Decacorn (nonpublic company, peak valuation >$10 billion) is uncovered as a fraud 0.18
* One or more of Gross/Ackman/Miller/Hussman/Einhorn leaves the business (dies, fired, resigns, manages personal money only) 0.18
* Republicans lose the House majority 0.18
* Another Supreme Court seat opens 0.18
* An earthquake of magnitude 7.5 or greater affects the continental United States 0.18
* JPYUSD below 100 0.18
* Twitter is taken private 0.18
* More than 10,000 of the DACA people are deported 0.17
* Republicans lose the Senate majority 0.17
* A tropical cyclone makes the list of 10 wettest on the U.S. Mainland 0.17
* The RMB/USD exchange rate goes over 8 at any point 0.17
* US 30-year treasuries have a positive total return for the year; 0.17
* Total return of 1 year T-bill outperforms S&P 500, Nasdaq, and bitcoin. 0.17
* TSLA share price goes below 200 at any point 0.16
* The CBOE Volatility Index ($VIX) exceeds 30 at any point during the year 0.16
* The 10 year Treasury yield rises above 3.5% 0.16
* Philadelphia Eagles win the NFL Super Bowl 0.15
* The Vanguard Balanced Index Fund (VBINX) has a positive total return for the year 0.15
* One or more of Donald Trump Jr or Jared Kushner is indicted 0.15
* Any of the following countries' 10-year government bonds yield more than US: Germany, Italy, Canada. 0.15
* The BBB yield closes above 5% at any point 0.15
* The S&P goes below 2,500 0.15
* Any country leaves the Euro currency 0.13
* A Euro hits $1 US. (EURUSD parity) 0.13
* Hussman is up for the year including dividends (fund currently $7.13) 0.12
* Either Buffett or Munger dies 0.12
* Gold trades below $1000 0.10
* Federal Reserve lowers target rate any times (in 25bps equivalents) in 2018 0.09
* Gold trades above $2000 0.08
* A players' strike occurs in any of the four major US sports leagues (NBA, NFL, MLB, NHL) 0.08
* The 10 year Treasury yield falls below the July 6, 2016 low of 1.336% 0.07
* Donald Trump is still President of the United States at the end of the year 0.06
* US ends daylight savings time 0.05
* A nuclear weapon is used in anger 0.04
* The home mortgage interest deduction is eliminated from federal income tax 0.04

Friday, January 12, 2018

WSJ: "Bon-Ton in Talks With Debt Holders Ahead of Likely Bankruptcy Filing" $BONT

Story:

The company is working on signing a forbearance agreement with its bondholders through the end of January, the people added. There is the possibility the forbearance agreement could be extended beyond late January... A bankruptcy filing is expected as soon as February...

Friday (January 12th) Links

  • Since @ezraklein knows that the Constitution assigns black students the right to attend majority white schools, but we're running out of white children, maybe the federal government should start a White Child Conservation and Breeding Program, like with condors and whooping cranes? [Sailer]
  • Not only was the numerical presence of women celebrated at Google solely due to their gender, but the presence of Caucasians and males was mocked with "boos" during company-wide weekly meetings. This unacceptable behavior occurred at the hands of high-level managers at Google who were responsible for hundreds, if not thousands,of hiring and firing decisions during the Class Periods. [Sailer]
  • It’s 1964, and a group of Canadian scientists had sailed across the Pacific to Easter Island in order to study the health of the isolated local population. Working below the gaze of the island’s famous statues, they collected a variety of soil samples and other biological material, unaware that one of these would yield an unexpected treasure. It contained a bacterium that secreted a new antibiotic, one that proved to be a potent anti-fungal chemical. The compound was named rapamycin after the traditional name of its island source – Rapa Nui. [link]
  • Winner-take-all-ness between dominating and dominated coins used for the same application is a sure thing unless you want to bite the bullet and say that the value of all coins should fall to the marginal cost of creating them, i.e., zero. [link]
  • In Britain, Thatcher is a fairly downscale surname. In general, if your namesake had a downscale job like thatching roofs when surnames were chosen around 1300, you're probably a little downscale today. If you had a literate upscale job like clerk (Clark or Palmer), you are likely to be a little upscale today. [Sailer]
  • Maybe it's a bad idea to invest in public companies with 9+ figure enterprise values that don't yet have a product that they can sell for more than it costs to make. [CBS]
  • We found some more of the genes which cause people to use marijuana, by looking at a lot of people's genes. Combining all the genes we know, we can now make lousy (but better than guessing) predictions of how much marijuana a person will smoke just from their genes. These genes are interesting because they turn out to cause regular smoking, boozing, and mental illness as well as marijuana use. But maybe that's because the genes make one smoke marijuana and marijuana makes you crazy, which everyone has been claiming for half a century? Nope, a complicated statistical method indicates they aren't connected either way, it's just that the same genes make you both crazy and more likely to smoke weed, and this is why people who smoke weed often are crazy. [Gwern]
  • This filing is a nice illustration of how 'HR is not your friend but your enemy' - for example, going to HR does nothing useful other than alert them how they are screwing up, like when an employee asked for someone to be removed from the blacklist and HR simply made the blacklist secret (he should've just started making regular copies of it and kept quiet), or HR informs the managers of things. It's like government whistleblower programs: they aren't there to actually help whistleblowers, they're there to allow leakers to be fired as quickly as possible and maintain the coverup, and to slime successful whistleblowers like Snowden by insinuating 'why didn't they use the whistleblower programs'. [Gwern]
  • El Paso has been famous for its calm citizenry for generations. A 1971 article in Time, "The Texas Tranquilizer," attributed the low murder rate in El Paso to the high levels of lithium in its well water. [Sailer]
  • Conventional wisdom holds that credit markets are "smart institutional money" that sees problems faster than equity markets that are full of less sophisticated retail investors. I question whether that is still empirically true. Retail investors now own large portions of the credit market, including high yield. Credit markets appear to be distorted by a combination of indexation and a reach for yield. Its possible that bonds trading at par can be a false comfort signal for an equity investor looking at a highly leveraged company, because in many recent cases equity markets have been faster to react to bad news. [link]
  • The solution gaining the most traction and mention by officials and academics is called "price-level targeting," and at least three Fed officials in recent weeks have talked about it, though with varying levels of support. Currently, Fed policy calls for the Fed to hit a 2 percent inflation target over time. It continues to shoot for that inflation rate even while it continuously misses that goal. Price-level targeting would ratchet up the seriousness of the effort. It would account for those past misses and prompt the Fed to aim for a higher target in the future to make up for its prior shortcomings. The belief is that this would convince markets and consumers of the Fed's commitment, running a higher inflation rate to account for prior gaps. [link]
  • Automobile production is a decidedly unsexy industry, with massive capital outlays, high fixed costs, huge cyclicality and low returns on invested capital throughout the cycle—the technical definition of an awful business. The leading players produce millions of vehicles a year, yet trade at mid-single digit cash flow multiples, due to how awful the industry is. Why is Tesla valued like a high-tech growth stock, where investors ignore accelerating operating losses; if the best-case outcome is that it becomes a cyclical auto manufacturer with depressing returns on capital? A new technology like electronic vehicles (EV) sounds cutting edge, but so was automatic transmission, air conditioning, power steering, fuel injection, etc. All the other auto makers copied these technologies and caught up within a few years—much like what is now happening in EV. [AiC]
  • While, I suspect that TSLA's share price is much lower by January 2019, by January 2020, it will have blown through over $10 billion in additional operating losses, working capital needs and worthless cap-ex, and the shares are almost CERTAINLY much lower, though the migration from TSLA to TSLAQ probably takes another year or three. In any case, I've been adding to my position using the Jan 2020 200/100 bear put spread and this has now become a pretty large position for me (as far as options positions go). At a ~15 debit, I can't help it. Every time I come back from grabbing a coffee or a sandwich, I add a few more. Nothing on my screen at today's prices seems as attractive. [AiC]
  • In the end, Brookfield paid about $2 per share (including their warrants). TOO is now trading 15% higher than what Brookfield paid in a recap at the bottom of the cycle and it's been six months since the deal was announced. Additionally, their warrants only vest if the shares trade for over $4.00 a share. I suspect that since they were the only ones willing to bail out TOO, they only agreed to these terms because they believed that $4.00 a share was pretty certain. Why wouldn't it be, as that’s only ten times the low-end of my DCF range. [AiC]
  • To my mind, the fact that binge-drinking as few as 3.5 drinks promotes leaky gut and increases in LPS in the blood stream provides a clear mechanism as to why alcohol leads to anxiety. It's completely related to well-founded observations in biological psychiatry that bacterial LPS is elevated in people with depression and anxiety, and that fixing leaky gut can help overcome these conditions. Same in chronic fatigue syndrome. [Mangan]
  • Before New Yorker discovered a surefire path to profitability in continuously reminding readers how much smarter they are than Republicans, the magazine had space for some interesting articles. Back in 1988, for example, they published a series of long articles by John McPhee titled "The Control of Nature". Given the latest fires then flooding/mudslides in California, a good place to start is "Los Angeles against the Mountains-I". [Greenspun]
  • Today Medellin feels new-born. It helps that the setting is gorgeous. The city lies in a long valley between two Andean mountain ridges. Capital of Antioquia province, a fertile region famous for its coffee plantations and its flower farms, for its orchids and butterflies, it is known as the City of Eternal Spring for its idyllic climate. [link]
  • A Trump presidency would inevitably be followed by economic crisis, and this would be facilitated by the Federal Reserve pulling the plug on fiat life support measures which kept the illusion of recovery going for the past several years. It is important to note that the mainstream media is consistently referring to Jerome Powell as "Trump's candidate" for the Fed, or "Trump's pick" (as if the president really has much of a choice in the roster of candidates for the Fed chair). The public is being subtly conditioned to view Powell as if he is an extension of the Trump administration. [ZH]
  • During the checkout process for those paying by bitcoin, Overstock.com provides the customer a bitcoin wallet address that can be used to pay the invoice and complete the transaction. But Snyder discovered that Overstock's site just as happily accepted bitcoin cash as payment, even though bitcoin cash is currently worth only about 15 percent of the value of bitcoin. [link]
  • The President asked a vulgarly-phrased question about the quality of most of the countries sending the masses of immigrants, thus setting off a firestorm of indignation because: It's racist to demean sending countries. But it's also racist to send anyone back or even not let people in because these sending countries are so awful. This may sound paradoxical, but the Establishment's logic is simple: White Guys Bad. [Sailer]
  • The only known homeostatic regulator of fat mass is the leptin system. We hypothesized that there is a second homeostat regulating body weight with an impact on fat mass. In this study we have added and removed weight loads from experimental animals and measured the effects on the biological body weight. The results demonstrate that there is a body weight homeostat that regulates fat mass independently of leptin. As the body weight-reducing effect of increased loading was dependent on osteocytes, we propose that there is a sensor for body weight in the long bones of the lower extremities acting as "body scales." This is part of a body weight homeostat, "gravitostat," that keeps body weight and body fat mass constant. [PNAS]
  • Google now resembles an adult daycare center where mentally disturbed women terrorize the few people doing real work. Google has not don't much of anything, in terms of tech, once it gained a near monopoly of on-line advertising. The reason Susan Wojcicki can wage endless jihad at a money losing division like YouTube is it is owned by an oligopolist given a special right to skim from every internet user on earth. Google is now a tax farmer, not a tech company. [Zman]
  • A candidate running for Illinois attorney general was robbed at gunpoint while he was taking promotional photos for his campaign Thursday afternoon in the Northwest Side ward where he's also the Democratic committeeman, according to his campaign manager and authorities. Aaron Goldstein, 42, and several members of his campaign team were in the middle of taking publicity shots when the robbery happened, according to Goldstein's campaign manager. The robbery took place about 3:25 p.m. in the 4600 block of North Albany Avenue in Albany Park [link]
  • I'll never forget the day my wife and I were riding bikes and I noticed a realtor escorting buyers into a new luxury condo. Suddenly and unexpectedly, I yelled, "Don't do it, it's a bubble!" The look the realtor gave me was priceless! And my poor wife was so embarrassed, but not me. I laughed and laughed all the way back to our rental. [Cinnamon]
  • My favorite McLaren F1 story is from Ralph. About the year 2000. One of his three F1s. The car wasn’t running right, so he plugs it into the wall. The car dials McLaren. Two guys in tweed jackets come over from England, they show up at his house. They go, "Okay, give us the keys." They come back and go, "You're not shifting high enough," and fly back to England. That was it, the whole problem. That's what owning a McLaren F1 is like. [link]