Tuesday, September 15, 2015

The Tianjin Disaster

The comments in the following article talk about how the huge explosion in Tianjin are similar to a disaster that happened in Texas in the 1940's. So, while China is becoming a world power it does not have the same knowledge as a developed country. Aivars Lode

THE TIANJIN DISASTER...a friend just back from China offers a very insightful "intro" to the more specific remarks of Our Man in Beijing, Robert Blohm, arguing that the explosion is a metaphor for all that's wrong about CCP rule. 

"ANON OBSERVER":

Chris,

The main take-away for me about PRC (and that you don't understand until you've been): it's a developing country with the military and foreign policy ambitions of a far more developed country. 

There's such tremendous insecurity at every governmental level about social unrest and dislocation. It is hard to imagine a country with this level of potential social trauma being a true global power. 

Yet, at the same time, the scale at which they operate (the port of Dalian defies description- I've never seen anything so massive) makes it impossible to ignore them no matter how internally dysfunctional. 

They have Third World safety standards and you can't drink the water- but their Navy can talk seriously about deploying to the Mediterranean. It just doesn't all add up. 

It is hard for me to think they can continue on their current course without real internal instability in the coming years- there are just too many social problems and no constructive way (i.e. rule of law) to manage those tensions.

Speaking of the explosion- in the Beijing airport I grabbed an International NYT. They had removed three different pages from the paper that mentioned the explosion. Again, how can something like that be sustainable in the internet age? I think they're just trying to put a lid on a powder keg and the only question is when the lid gets blown off.


ROBERT BLOHM, on the explosion itself, and on the theme just noted:
Chris,
In answer to your query about political impact, and to make the worst case for the Party, I reckon China's Tianjin "Texas City"-scale disaster is unique: it can't be attributed to operator error or an act of nature.  It's due to dysfunctional governance-a "no go" area of public inquiry in the infallible Party State.  
     Current obsessive deployment of governing resources to spirituality in the form of thought-control, ideological rectification, cultural nationalism and Party-protection, in corresponding neglect of practical governance affecting day-to-day social and economic well-being (safety, legal, and IP protection), had a parallel in that earthshaking year of 1976.  The absence of immediate relief effort by the Cultural-Revolutionist Gang-of-Four following the July 1976 Tangshan earthquake turfed them out 2 months later, a month after Mao died, and ultimately brought Hu Yaobang, the hero of albeit-belated earthquake relief, to power and brought us Tiananmen triggered by his 1989 death. 
     This is a man-made disaster of the scale of a natural disaster, including being of wide area, besides the 2 fireball explosions' being measured on the Richter scale at 2.6 and 2.9 respectively, one of China's worst-ever industrial calamities.  And it happened in the spotlight of the most prominent, affluent of places.  Think of how this spreads, like wildfire nationwide, concern by those living near hazardous facilities.  It points to shabby governance, even criminal negligence, not just operationally but also in planning because of its wide-area footprint.  
     The culprit company is rumored to have ownership by officials, with ownership records of all locally registered companies suddenly unavailable after the accident but recently made available with the company's data appearing to be doctored with "disguise" owners.  Officials only belatedly acknowledged the storage of many tens of times the legal maximum amount of instant-death-when-moistened sodium cyanide that had been unofficially reported only hours after the accident and reported to be 70 times the legal maximum amount.  The company is rumored to be a big-time hazardous materials smuggler.  
     The elderly deterministic engineering mindset at the top of the Party is very hard pressed to understand probabilities, risk, and contingency planning.  Officials, even the military, still don't have a handle on what's there, and people can't go home.  Greenpeace has called for a wider no-go perimeter.  The scene is reminiscent of 9/11, without the dust, but with some sodium cyanide now confirmed to have polluted.  Recovery and decontamination are beginning to look like a Fukushima, at least short-term.  
     Forget about non-existent contingency planning or timely post-accident safety information. Why were so many people living so close?  Public infrastructure (a subway station) and residential high-rises (some erected by the country's top developer) are within a one-kilometer radius of the warehouse contrary to regulations, and apartments had their front room interiors and windows all blown out, with consequent human injury.  How did planners let that happen?  They evidently let slip through only recently hazmat warehousing in the area after everything else had already been located there, including one of China's two supercomputers and even public security offices, on the basis of no registered/licensed hazmat storage nearby.  There's compensation hell to pay.  
     Then the non-specific concerns about the area expressed by the local government just weeks before about summer heat, rain, toxicity, and pollution dangers.  Then the Keystone Cops sent the fire department (wet-behind-the-ears contract firefighters employed by the port operator, instead of the public fire department run by the paramilitary People's Armed Police that was only belatedly called in), clueless enough about chemicals or which kind were on fire to hose them before the explosion that was likely triggered by flammable gas catalyzed by the water and magnified by, say, enough (kiloton scale?) containerized ammonium nitrate (the bread-&-butter of explosives) to wipe out the local police contingent and fire brigades on the scene.  
Only when they called in the military who are the exclusive possessors of what needs to be known in China, did they have the wisdom to let the fires burn on, and they're still hoping it doesn't rain.  In this case it's the military's draconian anti-chemical-warfare unit that's been called in because secrecy-obsessiveness appears to deem hazmat control too strategic to be a civilian competence.  
     Chinese citizens are increasingly-demanding consumers who rock not only the boat, but also police cars.  So information control kicked in to make sure the military remain the sole possessors of what needs to be known.  No critical internet postings allowed.  Nevertheless, on the first day, views on Weibo were more numerous than the country's population.  Censorship was more than ten times the normal rate.  Hundreds of local reporters quickly at the scene were kept out of the papers and off the air, with no continuous real-time TV coverage that we would expect, because that would just make citizens more demanding, especially of an immediate explanation.  Meanwhile the paramilitary police have been cleaning up the blown-out apartments, leaving angry residents no photo opportunities to post online.
     Chinese officials' instinct after these incidents is first a long pause to get together to cover butt by getting alibis straight.  For the first day immediately following the blast only 10-minutes of anodyne news reporting at top of the hourly news by CCTV nowhere near the immediate scene of anything interesting, plus prime-time for written statements by top officials as clueless as the viewers, foremost His Serene Countenance, Chairman Xi, telling the children to go back to bed and everything will be fine because he'll root out the cause and fix it by drawing officials' attention to safety.  Local officials in days immediately following abruptly ended press conferences when unexpectedly overwhelmed by fundamental questions they couldn't answer.  As usual it took the customary visit by the cavalry, commanded by Premier Li himself, several days later to ad-hoc top-down organize the local government for action with still no single central government agency in charge.  
     The ease and absurdity of this disaster was symbolized by the post-Olympic $200 million loss in 2009 of the Millenium Hotel adjoining the new CCTV building in Beijing, both in the final stages of construction, when a single lame-brained CCTV CEO decided to hold and televise an illegal Chinese-New-Year-closing Lantern-Festival fireworks  extravaganza right above the Millenium Hotel through whose open top a few sparks could fly in and ignite the bags of flammable insulation that lined the walls on each floor waiting to be installed.  That's gang-who-can't-shoot-straight management.  
     Tianjin is much worse, and won't be leaving the radar any time soon, especially with the TV propaganda time now being given the relief effort and focused ever increasingly on hazmat detection and cleanup to allay rising public concern.  President Obama sent immediate condolences to China, not normally done after your one-off industrial accident, because we must have immediately grasped the severity. 
     The 1947 Texas City disaster, consisting of the explosion of 2300 tons of ammonium nitrate (likely in containerized abundance in Tianjin), was the deadliest industrial accident in US history and one of the largest ever non-nuclear explosions (a sixth of Hiroshima).  It triggered the first ever class-action lawsuit against the US Government.  After the Supreme Court affirmed an appeals court reversal of an award by the district court, relief was granted by Congressional legislation that paid claims altogether amounting to nearly $200 million in today's dollars.

Monday, September 14, 2015

Summer-TV Watchers Abandon Cable Shows

I know you will continue to pay. The first part of this post is interesting as it is a friends view on the cable business. Aivars Lode

We have been having this cable discussion for a year now. You will be right eventually, you are right. I believe that the proposition 12 months ago was that i could pull my cable plug then and there, like you had just done, and that i would not miss it. I countered that i was sticky due to English Premier league and other sports and until that content got distributed over another format, then i would not be changing.

Eventually i will. But only once i can get soccer somewhere else. Those year on year declines below are quite spectacular!

I do prefer watching TV and sport on a big screen TV, i cannot focus on a 20 inch screen, i have the same issue on planes. But clearly i am old school, the millennials don’t care. Neither of my sons has cable.

You will be right, eventually, but its all about the timing mate.

Jeremy Hardisty
Yes I know you want to make a bet etc however every week there is another headline how things are changing
Summer used to be cable’s time to shine, but ratings are down by double digits with competition from broadcast networks and streaming services

By Joe Flint 

The cable-TV industry has the summertime blues.
Ratings are down by double digits at many of the top cable channels as increased competition from the broadcast networks and the growing popularity of streaming services such a Netflix and Hulu have cut into their audiences.
In addition, June through August is when viewers are tapping their digital video recorders and checking out video-on-demand to sample the shows they missed during the traditional fall-to-spring television season.
“People are getting used to using summer to binge view and catch-up,” said Billie Gold, a vice president and director of programming at Dentsu Inc., an advertising and media-buying firm. That means less time spent watching new shows on cable networks.
In July, 21 of the top 30 most-watched cable channels saw significant declines in prime-time ratings, according to Nielsen. Time Warner Inc. ’s TNT, the most-watched cable channel in prime time for the month, experienced a 22% drop from July 2014. Walt Disney Co. ’s Disney Channel lost 19% of its audience, Comcast Corp. ’s Bravo was down 23% and Viacom Inc. ’s MTV fell 24%. The ratings declines were similar among the key demographic of adults age 18 to 49.
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Many programs are starting to show signs of age including TNT’s “Rizzoli & Isles” and A&E’s “Duck Dynasty.” 
FX’s “The Comedians” starring Billy Crystal and Josh Gad was canceled after one summer run, and its second-year drama “The Strain” has stumbled. AMC’s new drama “Humans” has been underwhelming and after a strong start, E!’s “I Am Cait,” about Caitlyn Jenner’s transition, has cooled.
The only network to show a big gain for the month was Discovery Communications Inc. ’s flagship Discovery Channel, which benefited from the popularity of its shark-themed programming stunts as well as its unscripted show “Naked & Afraid.”
Summer used to be cable’s time to shine. While there are typically fewer viewers watching TV in the summer than in other seasons, many cable networks found a winning strategy by launching original programming while broadcast networks hung the “gone fishing” sign.
Networks including AMC, FX and USA took advantage of the less-crowded playing field to establish many of their own original hits. “Mad Men,” “Nip/Tuck” and “Monk” all made their debuts in the summer.
In recent years, network broadcasters have become more aggressive and now program the summer with big-budget scripted shows as well as their usual slate of lower-cost reality programming. Fox’s “Wayward Pines” and CBS’s “Zoo” posted solid numbers. ABC’s “The Bachelorette” and a prime-time version of the game show “Family Feud” were big hits, and NBC’s almost 10-year old “America’s Got Talent” still has life in it.
<image003.jpg>ENLARGE 
The only network to show a big gain for July was Discovery Channel, which benefited from the popularity of its shark-themed programming. Photo: Discovery Channel 
In July, Disney’s ABC, 21st Century Fox Inc. ’s Fox and the CW, a joint-venture between Time Warner and CBS Corp. , all increased viewership, and CBS and Comcast’s NBC were only down 4% and 5%, respectively.
Keeping younger viewers has been tougher. Fox, which benefited from the Women’s World Cup, and ABC were the only networks up with adults 18 to 49. CBS was down 15% and Fox 8%, while NBC and the CW were flat.
“The bar has been raised,” said RBC Capital Markets analyst David Bank. If networks take the summer off, “you run the risk of losing more audience” when the fall season rolls around and viewers have been watching other channels with fresh content, he said.
The rise of new content in the summer comes as the number of people watching traditional media is on the decline.
“It does seem like an awful lot of new content for a relativity small audience,” said Chris Geraci, president of national broadcast investment for OMD, which buys commercial time.
So far this summer, broadcast and cable channels are averaging 94.7 million viewers in prime time. That is a 3% drop from last summer and off 6% from the summer 2013. The research firm MoffettNathanson said last week the numbers don’t necessarily mean that less content is being consumed but rather that it is being watched on platforms Nielsen isn’t factoring into its measurements yet including tablets and mobile phones.
“Part of the explanation is clearly a behavior shift away from linear-TV viewing toward non-measured forms of media,” the report said. Nielsen is in the process of enhancing its measurement to include newer platforms. 
The changing ways people watch video and what it means for traditional business models are sources of worry in the industry and for Wall Street, leading to a more than $50 billion rout in media stocks two weeks ago. The summer-ratings slump isn't seen as an aberration but rather a reflection of the changing media landscape.
‘Part of the explanation is clearly a behavior shift away from linear-TV viewing toward non-measured forms of media.’ 
—Research firm MoffettNathanson
Some network executives suggest that the rules that define success need changing. Speaking at the semiannual Television Critics Association media tour earlier this month, FX Networks Chief Executive John Landgraf said it takes two months of ratings data to really determine whether a show is clicking with viewers. He noted that the audience for “American Horror Story” went from 7 million viewers in live and three days of recorded viewing to 12.6 million after 60 days of recorded, streaming and video-on-demand consumption. FX Networks is a unit of 21st Century Fox.
Advertisers primarily pay for commercials using a formula based on the live audience plus three days of recorded viewing. The networks are having some success now selling same day plus seven days of recorded viewing. Mr. Landgraf thinks even that model is outdated and will fade in the future as targeted advertising becomes more technologically viable.
“As you can start marketing to individual people who are the appropriate people to tell about your products, you don’t care basically whether they’re watching the fourth season of ‘The Americans’ or first season of ‘The Americans,’” he said.

Credit Suisse, Barclays in Talks to Settle ‘Dark Pool’ Allegations

It fascinates me that even today there are so many ways that the financial institutions can manipulate an element of the market, then just pay a fine and find another way of doing it again. Aivars Lode

U.S. regulators could levy large fines over alleged wrongdoings
By Bradley Hope, Emily Glazer and Christopher M. Matthews 
Credit Suisse Group AG and Barclays PLC, two of the biggest operators of “dark pools,” have entered settlement negotiations with the New York attorney general and the Securities and Exchange Commission over allegations of wrongdoing in the private trading venues, said people familiar with the matter.
Credit Suisse is in talks to pay a fine in the high tens of millions, which would be the largest fine ever levied against an operator of a private trading venue, and the Barclays discussions also suggest a large fine, the people said.
Deals with the banks could come as soon as the next several weeks, though talks could still fall apart, they said.
Representatives of Credit Suisse and Barclays declined to comment.
Dark pools, which allow buyers and sellers to swap shares with greater anonymity than they can on the stock market, have come under scrutiny from regulators in the past several years, and enforcement activity has been heating up lately.
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Analysts say that while the pending settlements could lead to tighter regulation of off-exchange trading, they are unlikely to reduce the amount of dark-pool trading.
Dark pools, along with so-called internalizers who execute trades on behalf of retail brokers, account for nearly 40% of all stock trading, according to the market-research firm Tabb Group LLC.
“This may serve to finally sterilize dark pools,” said Larry Tabb, chief executive of Tabb Group, referring to the likelihood that operators disclose more information about trading activity and stay in compliance. 
The size of fines against dark-pool operators is on the rise.
Investment Technology Group Inc., a New York brokerage, said last month it had set aside $20.3 million to settle allegations of wrongdoing related to its dark pool, Posit, with the SEC. 
The largest case before that was against UBS Group AG, which in January agreed to pay $14 million to settle allegations with the SEC it created an uneven playing field inside its dark pool.
Credit Suisse operates the largest dark pool in the U.S. Called CrossFinder, it matched more than 430 million shares during the week beginning July 20, according to data from the Financial Industry Regulatory Authority.
The case against Credit Suisse includes allegations that it provided unfair advantages to some traders, violated rules against pricing of stocks and didn’t adequately disclose to investors how CrossFinder works, according to the people familiar with the matter.
Regulators also are scrutinizing Credit Suisse’s system of auctioning the right to trade against retail stock-market orders to trading firms in the dark pool.
The setup resembled a waterfall, said people familiar with the matter, in that the first firm to trade against the flow would pay one price and subsequent auctions to other traders would go down in price.
Barclays was accused by the New York attorney general in July 2014 of lying to clients about the extent of high-speed trading in its dark pool. 
In one example in the lawsuit, a Barclays executive allegedly instructed two employees to mislead a large institutional investor about how much of its trading was done in the dark pool and how often those trades were with high-frequency firms.
When one of the employees provided the accurate information to the investor anyway, the employee was fired, according to the suit.
Barclays has denied it defrauded customers and fought to have the case dismissed. The civil case, filed in New York State Supreme Court, is ongoing.
Institutions, including hedge funds and large mutual funds, use dark pools to buy and sell stock without having a large impact on the price. If a firm is trying to make a purchase of 100,000 shares, it is preferable to try to find another large institution looking to sell rather than take it directly to the stock market.
“Investors believe there is value to trading in the dark,” said Alex Green, president of the consultancy FuturePoint Advisors LLC and a former head trader at hedge funds. “The regulators are exposing some of the things that have gone on, but there will still be a demand to trade in dark pools.”
Most orders on stock exchanges, for instance, are publicly displayed to all other investors in the form of a bid or an offer. The institution’s name isn’t given, but their buying or selling intent is broadcast to others.
In a dark pool, a firm’s bid or offer also is anonymous and is only executed if another firm puts in a matching order.
However, over the years dark pools have become more complicated and included facilities for a broader swath of traders to access the venues. Regulators have been probing a range of firms on whether they adequately disclosed the rules of trading to participants and whether any traders—including high-frequency traders—were given advantages over others.
Deutsche Bank AG , Morgan Stanley and Goldman Sachs Group Inc. also have been investigated by the New York attorney general. The banks declined to comment.
—Jean Eaglesham contributed to this article.

Sunday, September 13, 2015

U.S. Oil Falls to Six-Year Low

It's funny reading these stories of oil prices reaching lows for the first time in 6 years, when identified that there was no such thing as peak oil over 5 years ago. Aivars Lode

Prices slide as yuan devaluation sparks fears of a slowdown in Chinese demand
By Georgi Kantchev and Timothy Puko 
U.S. oil fell to a six-year low Tuesday, pummeled by China’s plummeting currency and a growing conviction that global demand can’t catch up with an unrelenting supply of crude.
Oil, in tumult for more than a year, continued a summer swoon that took it below the lows it plumbed this spring. Production is still near historic highs in both the U.S. and the Organization of the Petroleum Exporting Countries, new data show. It indicates suppliers around the world are still mired in a fight for customers that ramped up output and took down prices nearly 60% from the highs of 2014.
The latest blow came from China, which devalued its tightly controlled currency Tuesday, spreading pessimism among investors about China’s economy and the possibility of a currency war. The yuan registered its biggest one-day loss in two decades following the central bank’s decision.
Congress may lift a ban on oil exports in September which could impact the economy and global oil market as oil futures continue to look bleak. WSJ’s Nicole Friedman joins Lunch Break. Photo: Getty
The plunge should make China’s imports of dollar-priced commodities such as oil more expensive, a discouraging sign for demand for the world’s second-biggest petroleum consumer, analysts said. It could also send the dollar rallying, a factor that has repeatedly pushed crude prices lower.
It “suggests that the Chinese economy is still struggling to move out of its slowing pattern and into a growth spurt,” Dominick Chirichella, analyst at the Energy Management Institute, said in a note. “Overall it continues to suggest that the main oil growth engine of the world is not going to come to the rescue of the oversupplied global oil market anytime soon.”
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Light, sweet crude for September delivery fell $1.88, or 4.2%, to settle at $43.08 a barrel on the New York Mercantile Exchange. It was the largest one-day percentage loss in more than a month and sent U.S. oil to its lowest settlement since March 11, 2009, when the U.S. economy was still reeling from the financial crisis.
Brent crude, the global benchmark, fell $1.23, or 2.4%, to $49.18 a barrel on ICE Futures Europe. It is within $3 of its six-year low set in January.
The U.S. Energy Information Administration on Tuesday lowered its price forecast for both U.S. and global spot prices by about 10%. It forecast U.S. crude at $49.62 a barrel for 2015 and Brent at $54.40.
It cut its U.S. production expectations by 1.2% to 9.4 million barrels a day, but also said U.S. production is still on track to be the highest since 1972. It increased its forecast for OPEC production by 0.5% to 37.3 million barrels a day, which cancels out those U.S. cuts and is likely to keep the world market oversupplied by more than two million barrels a day for 2015.
OPEC is responsible for more than a third of world’s oil supply, and had said earlier Tuesday that its members raised their collective output in July to the highest level in three years. OPEC’s output increased by 101,000 barrels a day to 31.5 million barrels a day last month, the oil cartel said in its monthly report.
High oil output from the U.S. and some of the world’s biggest petroleum producers, coupled with concerns about an economic slowdown in China, have hit investor sentiment in recent weeks. Oil prices plunged into a bear market last month and are off more than 50% from last year. As major global suppliers such as Saudi Arabia and Russia have pumped crude at a record pace—and with Iran likely seeing a ban on its exports ending soon—there are few signs that the global oversupply of oil will abate in the near future.
An oil tanker passes a fisherman as it enters a channel near Port Aransas, Texas, in July.The price of oil slid as the decision to devalue the Chinese currency would make China’s imports of dollar-priced commodities like oil more expensive. Photo: Associated Press 
Investors believe U.S. producers can sustain their near-record pace and global exporters also will be pushing to mitigate any declines, analysts at Credit Suisse Group AG said Tuesday. Those investors appear to have lost confidence that demand growth can keep up and have been selling off long-dated futures, leading to the recent steep decline in front-month prices, Credit Suisse said.
“That is a warning flag—a death canary if you want to go that route,” Jan Stuart, the bank’s global energy economist, said in a conference call.
Meanwhile, the U.S. Energy Information Administration is set Wednesday to release a weekly report detailing U.S. oil supplies. Analysts surveyed by The Wall Street Journal expect the report to show that crude-oil supplies fell by 2.1 million barrels last week. Analysts also expect the EIA to report that gasoline supplies fell and stocks of distillates, including heating oil and diesel fuel, rose.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the same week showed a drawdown of just 847,000 barrels in crude-oil supplies, according to sources. The group said that gasoline supplies rose by 117,000 barrels, a source said. API said U.S. distillate stocks increased by 2.16 million barrels in the week, according to the source.
“U.S. production remains near the highest level in four decades, although the commodity price is telling the U.S. shale sector to shrink, “ OPEC said in its report. The higher output is largely due to increased cost efficiencies, lower taxes and existing projects coming on stream, it added. The group said that, for example, in North Dakota, many projects can still be profitable at $24 to $41 a barrel.
OPEC forecasts U.S. output to rise this year by nearly a million barrels a day and another 320,000 barrels a day in 2016.
While many are concerned Tuesday about whether global demand can keep up, the technical aspects of how currencies affect oil prices are likely an even bigger factor in oil’s slide, said Hamza Khan, head of commodity strategy at ING Bank in Amsterdam. 
The dollar’s rise in the past year has played a big role in oil’s concurrent decline because oil is priced in dollars and becomes more expensive for holders of other currencies as the dollar appreciates. Oil usually goes down when the dollar goes up. The Wall Street Journal’s dollar index recently traded up 0.4% on the day.
“People are thinking that China’s currency [decision] could open a currency war, which could make the dollar even stronger,” Mr. Khan said.
Gasoline futures settled down 0.03 cent, or 0.02%, at $1.6937 a gallon. Diesel futures settled down 2.92 cents, or 1.8%, to $1.5629 a gallon.
—BenoĆ®t Faucon contributed to this article.