Monday Reading

Good news for the CHK asset sale: "State-run Oil India is looking to buy stakes in U.S. gas driller Chesapeake Energy Corp.'s Mississippi Lime basin and ConocoPhillips' oil sand assets in Canada, its head of finance said on Monday."

Pricing/JCP/inefficient markets: "Gabaix and co-author David Laibson wrote a brilliant (if depressing) paper on shrouding and 'information suppression' that should be required reading for all consumers and executives considering a harebrained new pricing strategy."

The paper mentioned in the article above is "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets". Choice quote: "We show that debiased consumers prefer to give their business to firms with high shrouded prices because these sophisticated consumers end up with a cross-subsidy from myopic customers [...for example, the] 'educated' customer, [anticipates] all of the marked up add-ons and therefore avoids buying them (e.g., she eats before arriving at the hotel, she brings a cell phone instead of relying on the hotel phone, etc.). The educated consumer substitutes away from the add-ons while reaping the benefits of the loss-leader room charge." So, it's best to be a customer of a firm that has dumb customers, who subsidize you.

No wonder real estate cap rates on the West Coast are so low: "In 2011 the central bank published an estimate on its website, attributed to the Chinese Academy of Social Sciences, that up to 18,000 officials had fled the country between 1995 and 2008 with stolen assets totalling 800 billion yuan ($130 billion at today’s exchange rate)."

Another Economist article, "The great pipeline battle", with a good map of the Canada / U.S. oil pipeline network.

A choice quote from Warren Buffett's letter to publishers and editors of his new newspapers. "Technological change has caused us to lose primacy in various key areas, including national news, national sports, stock quotations and employment opportunities. So be it. Our job is to reign supreme in matters of local importance." Why technological change won't effect these "matters of local importance" is unexplained.

"The curse of dimensionality refers to various phenomena that arise when analyzing and organizing high-dimensional spaces (often with hundreds or thousands of dimensions) that do not occur in low-dimensional settings such as the physical space commonly modeled with just three dimensions."

Santander Preferreds: Are North American Grandmothers brave, ignorant or insane? "Do the holders expect the Spanish government to bail out banks at no cost to the preferred holders as per much of North America?

WSJ: "Switzerland is considering capital controls to fight a sharp rise in the Swiss franc in the event of a euro-zone collapse."

Technical analysis discredited again, in "Predictability of the Simple Technical Trading Rules: An Out-of-Sample Test", "evidence from true out-of-sample tests on the best technical trading rules from 1897-1986 indicates that testing biases are the source of their past outperformance."

LNG in Forbes: "US shale provides the perfect prize for cash-rich IOCs to capture: sign up low cost US supplies and sell then into very high value Asian markets, and do so off their own balance sheets. Sit on the acreage; aggressively lobby for LNG exports; pocket the difference. [...] Chenerie’s Sabine Pass output will be sold into South Korea at $8/MMBtu."

LNG in Forbes; not if chemical companies have anything to say about it: "[M]anufacturers such as Dow Chemical don’t want to lose those competitive advantages. If utilities that have investments in LNG receiving facilities are allowed to convert them to export facilities and sell into Asia and Europe at significantly higher prices, such rates would rise here."

What was that, Warren? "[I]ncreasing unease among the Ochs-Sulzberger clan [...] the company suspended the lucrative stock dividend that once flowed quarterly to the family’s 40-plus members, intensifying the need to solve the intractable advertising problems of the newspaper in the digital age and figure out a way to turn the family’s cash spigot back on."