THE CREEPING CREEPINESS. THE RAMPING UP OF RANDOMNESS. WALLOWING IN WIERDNESS. BUT FIRST...

THE MINNESOTA MIRACLE

The Author Rob’s favorite NFL team, the Minnesota Vikings, are a hard luck post-season bunch. They’ve lost four Superbowls, lost a host of playoff games over the years, and lost two conference championships due to unforced errors in the most unlikely of circumstances.

But the 2017 Vikings are a dominating team with a league leading defense and a potent offense quarterbacked by an unknown, undrafted, and formerly unloved journeyman quarterback named Case Keenum. (You have to know that this post is going somewhere else.) So it was sort of expected that the Vikings would choke again in 2018.

In the early 1970s, the Minnesota state government pulled off what was called the Minnesota “Miracle,” a revamping of school funding that equalized funding levels across all schools. To this day, the Minnesota school system is one of the finest and best performing in America.

Then the Vikings pulled this off. And within just a few hours, Minnesota had a new "Miracle."

The Vikings advance to the Conference Championship game against the Philadelphia Eagles, the penultimate game on the road to the 2018 Superbowl. And in another potential improbability, the 2018 Superbowl will be played in the Vikings Home Stadium.  So if the Vikings get to the Superbowl, they will be playing in their home stadium.

THE NONINVETIBILITY OF RANDMONESS

The Author Rob has written on the topic of the “Simulation Hypothesis” before. The Simulation Hypothesis, a favorite meme of Silicon Valley moguls, is that we are not living in a natural world but a computer simulation.  The concept goes back at least as far back as 2003 when Oxford philosopher Nick Bostrum proposed it. The idea is that an advanced civilization with almost unimaginable amounts of computer power could create a reality that would appear to its electronic inhabitants to be a real world. It would be like the simulacrum that was the ostensible world in the 1999 Sci-Fi classic “The Matrix.”

Bostrum believes that there is a fifty-percent chance that the earth is a simulation.  Theoretical physicists have reportedly demonstrated that we cannot be in simulation, but that conclusion has been challenged.

SIMULATE THIS

One iteration of the Simulation concept is that it can be almost infinitely iterated. Just as scientists run experiments with different variables, advanced civilizations could run Simulations to test various hypotheses.  Or test anything they wished to test. But could the Simulation be on tilt? Could the Simulation joysticks been handed over to adolescent idiots like Beavis and Butt-Head?

2016 and 2017 were strange years. In February, the New England Patriots came back to win the Superbowl in stunning and rather unbelievable fashion. A pass that came within an inch of hitting the field and being incomplete was revealed to be complete and keep the game winning drive alive. The wrong winner of the Oscar for Best Picture was announced and then withdrawn at the Oscars ceremony. The Chicago Cubs won the World Series in October, their first win since the scores were kept on papyrus schools (1908).  And then Donald Trump was elected to the most powerful position in the Simulation. An unlikely candidate for a major party and a more unlikely winner.  Can it get more weird?

Maybe. In October of 2017 the first object from outside of our solar system was discovered. An object called A/2017 U1 came within 15 million miles of earth. The object was scanned to determine if any alien life was present, but none was found.

Potentially groundbreaking news on the UFO (now called UAE-Unexplained Aerial Phenomenon) was released in 2017. It was revealed that the US government conducted a program from 2007 to 2011 called Advanced Aerospace Threat IdentificationProgram (AATIP). It is reported that this program, or a successor to this program, is still operating.  

Other recent disclosures include a video of a UAE encountered by Navy pilots in 2004. 

WHY NOW? OR AS FRED WILLIARD MIGHT SAY,  “WAH HAPPENED?”

The air force began an official investigation in 1947 and was officially concluded as “Project Blue Book” in 1969.  The results of the study found only a handful of unexplainable incidents. And on a related note, there is a 1956 semi-documentary movie called “UFO.” It includes footage from two UAE films from the 1950s. It is worth watching. TCM shows it occasionally. 

Three main findings flowed from Project Blue Book:

1. No UFO reported, investigated and evaluated by the Air Force was ever an indication of threat to our national security;
2. There was no evidence submitted to or discovered by the Air Force that sightings categorized as "unidentified" represented technological developments or principles beyond the range of modern scientific knowledge; and
3. There was no evidence indicating that sightings categorized as "unidentified" were extraterrestrial vehicles.  

But the larger question, as raised by legitimate UAE researchers, is why release this information now?  

As stated in the space.com article, “Why release this information now? Some see it as a trial balloon to take the pulse of citizens' reactions. Is the public being set up for the really big news about alien visitors?” 

The Author Rob does not have much to offer on this topic. * On a flippant note, the X-Files are back on TV this year. But to hazard a guess, look for evidence that the number of web searches and postings are ramping up dramatically in the next year or so.  

But if this is a Simulation, the Simulators will be banging the sticks hard for more UAE citing’s.

UAEs have Safe Passage in the Desert of the Real!

* He did see a cigar-shaped UAE in New Mexico about ten years ago. It was over 500 feet long and performed in a manner that man-made aircraft cannot operate.

NEUTERING THE NET BY ENDING NET NEUTRALITY

In twenty years or so, the Internet has moved from office computer work tool and entertainment center to utter ubiquity.  Mobile apps and network connections are everywhere. Your networked refrigerator can text your smart phone and remind you that you are out of ice cream. It won’t be long before your cat can send you a popup empty bowl gif rather than rubbing your leg and meowing obnoxiously. Important news about community events come in through texts and posting.

So when something about as important as the blood stream is changed in a fundamental way, people should pay attention.  This is an economics, finance and investment blog, so a thorough discussion of the issue is beyond our scope. But if you do not want to see the Internet turn in to cable television with tier pricing, limited options and lack of the information that YOU want to use, keep reading.

MOVING TO PAY TO PLAY. AND WE KNOW WHO WILL HAVE TO PAY 

In 2015 the Federal Communications Commission (FCC) defined the Internet as a “common carrier.” This treated the Internet as a “common carrier,” and effectively requires that Internet Service Providers (ISP) treat all content them same. They cannot block content nor charge more for certain content. 

So under a Net Neutrality model, content providers compete based upon the content they provide, rather than paying bounties to ISPs for faster service delivery.

So a new video streaming service will have the same opportunity for failure or success as a service owned by an ISP.  By way of example, in 2005 YouTube was startup company in competition with Google Video. Under Net Neutrality principles, Google Video was not permitted to pay ISPs for faster downloads and less latency. This allowed YouTube to succeed in the market based upon consumer desires.

THE DECEMBER DECISION

The 2015 rule defining the Internet as a common carrier provided Net Neutrality. But in December of last year, the FCC voted, by a 3-2, party line vote, to end Net Neutrality.  They did this by changing the legal definition of the Internet from a common carrier to that of an “Information Service” and weakening content protection. The chairman of the FCC, a Trump appointee, was formerly counsel for Verizon, led the effort to repeal Net Neutrality.

Several states Attorney Generals have sued the FCC to overturn the rules.

THE LONG GAME

           

Very little will change in the near term. But unless Net Neutrality is reinstated, the Internet may soon resemble Cable TV. 400 Channels and nothing worth watching.

YOUR HIGHTLIGHTS FROM THE DESERT OF THE REAL!

JANUARY 2018 DESERT OF THE REAL ECONOMICS INVESTMENT NEWSLETTER

JANUARY 2018 DESERT OF THE REAL ECONOMICS INVESTMENT NEWSLETTER

This newsletter will look at a few fossil fuel issues that may affect the long-term trend of the global economy.  And this newsletter will announce the much heralded launch of upcoming Desert of the Real Economics Strategic Investment Strategy Products.

WILL THE WORLD RUN OUT OF OIL OR WILL THE WORLD RUN OUT OF THE NEED FOR OIL?

For years, experts have warned of “peak oil,” a time when imputed demand for oil will outstrip the supply.  I use the term imputed because we know that demand will adjust as available oil supply decreases. And the price of oil will continue to rise at increasing rates. (Of course we know that supply and demand will reach an equilibrium price. What the Authors are referring to are junctures when demand for oil price it to a point where it becomes "practically too expensive.")

At least since the oil supply shocks of the 1970s, politicos and economists have worried about “peak oil” and its implications.  Inflation, political tensions, societal unrest that could descend into local and potentially global conflicts. A world with over ten billion people with the power disconnected.

Of course the world will never run completely out of oil or natural gas. The price would increase to a point that some residual amount would be worth more than any possible utility. No one will ever bother to pay a thousand dollars for a gallon for gas.

That was the narrative, and it was a reasonably objective presentation of the future in the 1990s.  The foundations of this prediction had its roots in 1970.  That is the year that the United States reached domestic “peak oil.” Domestic peak oil is when the oil output of a nation falls behind its demand. In other words, a country starts demanding more than it can supply domestically and the nation then becomes a net oil importer. (1)

PUTTING OUT THE CAMPFIRES

Oil, natural gas, coal, and firewood, create energy through combustion. Some initial heat and/or pressure is applied and they release great amounts of energy.  They fuel the furnaces, the cars, the locomotives and other engines that run the world. There are finite supplies of these sources and the combustion of these sources produce pollution and global warming CO2. So the petro-party will end. But when?  

For example, the World Energy Council’s earliest forecasts, in a report conducted in collaboration with Accenture Strategy, were for peak oil demand to take place around 2030 at between 94 million barrels and 103 million barrels of oil per day.  Supply would then fall inexorably below demand, prices would increase and substitutes would develop.

PEAK OIL DEMAND…

In the last few years, energy production has moved inexorably to renewables such as wind and solar. Electrical vehicles are moving into the mainstream. Some nations are placing an outright ban on internal combustion vehicles. For example, England will no longer allow the purchase or sale of gasoline vehicles after 2045.  And auto giant General Motors has announced that its future is with electric vehicles and not gasoline engines.  Part of what prompt’s GM’s decision is developing and maintaining leadership in foreign markets that will demand only electrical vehicles.

So we may be no longer talking about peak oil demand in terms of being outstripped by supply. We are talking about the world demanding less oil so supply exceeds demand.  Or in other words, the supply of renewalbles and alternatives will permit humans to leave the carbon in the ground.

“SMARTER” BY HALF

Two-wheeled vehicles are also diverting fossil fuel demand. Worldwide, scooter, bicycles and mopeds are becoming greener. American firms are also looking at the expanding American environmentally friendly urban market. For example, URB-E, a start-up in Pasedena, CA is building foldable electric scooters for the urban landscape. 

OIL DAY-TO-DAY

Below are the 15 countries that exported the highest dollar value worth of crude oil during 2016:

1. Saudi Arabia: US$136.2 billion (20.1% of total crude oil exports)
2. Russia: $73.7 billion (10.9%)
3. Iraq: $46.3 billion (6.8%)
4. Canada: $39.5 billion (5.8%)
5. United Arab Emirates: $38.9 billion (5.7%)
6. Kuwait: $30.7 billion (4.5%)
7. Iran: $29.1 billion (4.3%)
8. Nigeria: $27 billion (4%)
9. Angola: $25.2 billion (3.7%)
10. Norway: $22.6 billion (3.3%)
11. Venezuela: $20.4 billion (3%)
12. Kazakhstan: $19.4 billion (2.9%)
13. Mexico: $15.5 billion (2.3%)
14. Qatar: $14.6 billion (2.2%)
15. United Kingdom: $13.3 billion (2%)

All of the above international traders posted declines in the value of their crude oil exports from 2012 to 2016, ranging from -32.5% for Iraq to -72.8% for Nigeria. Other fast-declining crude oil exporters were: Venezuela (down -70.4%), Mexico (down -66.9%), Kazakhstan (down -65.7%) and Angola (down -63.4%).

The listed 15 countries accounted for 81.4% of all crude oil exports in 2016 (by value). 

The United States is 20^th on the list, exporting $8.3 billion, or 1.5% of world usage.

2018 “INVESTING OPPORTUNITIES” 

Probably the two top investing stories of 2017 were the record stock market closes and Bitcoin. Bitcoin has made stratospheric gains since it was launched in 2009 and there are many competing cryptocurrencies, such as Litecoin, Etherium and Zcash. 

Recently, however, Bitcoin has stalled and new ETFs which allow investors to take long and short positions in Bitcoin may rationalize and restrain its bubble-like moves.

In the December 2017 Newsletter, the Author Rob discussed the lack of attractive non-equity investments and the specious products appearing on the market. Such products included:

• A painting (which may be fake) sold for $450 million.
• Bitcoin (which may be worthless) soared nearly 700% from $952 to ~$8000. (Now up to over $11,000.)
• US corporations sold a record $1.75 trillion in bonds.
•Argentina, a serial defaulter, sold 100-year bonds in an oversubscribed offer.
• Illinois, hopelessly insolvent, sold 3.75% bonds to bondholders fighting for allocations.
• The market cap of the FANGs increased by more than $1 trillion.
• Money-losing Tesla Inc. sold 5% bonds with no covenants as it burned $4+ billion in cash and produced very few cars.  (Hmmm… when did we last hear the term "burn rate"? 2000, the Author Rob recalls.) 

THE 2018 LAUNCH OF DESERT OF THE REAL ECONOMICS STRATEGIC INVESTMENT STRATEGIES

The Authors announce the launch of a series of investment products to compete in this NIRP/ZIRP (2) market.  We will launch one or two a month. They are best enjoyed if you read them while playing the Jimmie Fallon Show “Note Writing” pianomusic. 

New-Life Lotto-This environmentally friendly “Green” ETP seeks to develop superior returns in the recyling and repurposing arena. New-Life Lotto will invest in discarded lottery tickets under the assumption that intoxicated, illiterate and really stupid people occasionally throw away winning lottery tickets. Advanced environmentally friendly “mining” techniques will include digging through liquor store, tavern and convenience store dumpsters searching for discarded tickets. Tickets will be “recycled” by rechecking them for winning combinations and redisposing of the losing tickets at recycling centers around the nation.

Bitchcoin-This new cryptocurrency will service the American prison inmate community. As we know, America imprisons more people than any other nation on earth.  Because of this, the market is very large and should continue to expand, especially given Attorney General Jeff Session’s pledge to step up enforcement of the draconian federal marijuana laws. Bitchcoin will use the emerging prison blockchain techonology to store and transact bitchoin transactions. This prison blockchain will reside on the networks of illicit cellphones inside prisons. Bitchoins may be used as a cryptocurrency to buy and sell illicit drugs, commissary items, discounted prison pay-phone call time, shankings, and as the name implies, “bitches.” (3)


OFF AS ALWAYS TO A GREAT NEW YEAR IN THE DESERT OF THE REAL

(1) Because of new supply and fracking techniques, the US is once again a net oil exporter and may one day again become a net importer. But maybe not.  Great Britain has moved from net importer to net exporter with North Sea Oil, back to net importer, and now back to net exporter.

(2) NIRP is an acronym for Negative Interest Rate Policy and ZIRP is an acronym for Zero Interest Rate Policy. 

(3) Although it should not be need to be said, the Desert of the Real Investment Products are shared only for the purposes of satire, parody and farce. It is hoped that State Security Commissioners and the Securities and Exchange Commission appreciate this humor.