Craig Venter Wants to Solve the World’s Energy Crisis - By Thomas Goetz

Found via The Big Picture.

There is one version of Craig Venter’s life story where he would’ve been a dutiful scientist at the National Institutes of Health, a respected yet anonymous researcher in genetics, perhaps. Thankfully, Venter saw that story line developing—and set about making sure it never happened.

Instead, in 1992 Venter left the NIH to head the nonprofit Institute for Genomic Research. Six years later he founded Celera Genomics, a brash rival to the NIH project that aimed to sequence the full code of the human genome. Venter had come up with a better technique—known as shotgun sequencing—to get the job done, and it changed the way we translate genetics from proteins into code. Not incidentally, it also served as a model for today’s Big Data explosion in science and research. In 2001 Celera officially “tied” the NIH to the genome finish line, though the company’s sequence was more than a bit further along. (Celera’s model genome, it just so happened, included Venter’s own DNA.)

In the decade since, Venter has been on a tear of invention and exploration. In 2004 he sailed around the world, discovering thousands of new species and sequencing millions of new genes. In 2007 he unveiled his own genome, unexpurgated (it revealed a predisposition for risk-taking, among other things). And in 2010 he announced the first successful synthesis of life—a unique critter borne from two distinct organisms, thus proving for the first time that it is indeed possible to create new organisms for specific purposes and functions. He is, in every respect, the epitome of an icon—a figure who has pushed science forward, sometimes by sheer force of will.

I spoke recently with Venter in San Francisco, at an event hosted by City Arts & Lectures and the California Academy of Sciences. What follows is an edited version of that conversation.

HBS: Sheryl Sandberg Addresses the Class of 2012

Thanks to Will for passing this along.


Link

Japan's Topix hits 28-year low

A 28-year low seemed worth mentioning.

TOKYO, June 4 (Reuters) - Japan's shares fell sharply on Monday, with the broader Topix index hitting a 28-year low, as investors rushed to sell riskier assets on disappointing U.S. jobs data, deepening debt woes for the euro zone and slowing Chinese growth.

The more tech-heavy Nikkei index also slid and has now dropped 19 percent from a one-year high marked on March 27, flirting with a fall into bear market territory, often defined as a slide of 20 percent within two months.

The broader Topix index lost as much as 2.4 percent to 692.18, a level not seen since late 1983. Last week, it fell for a ninth straight week, marking its longest such run since 1975.

Ray Dalio on diversification

From Chapter 1 of The Alpha Masters by Maneet Ahuja:

Dalio estimates that if the firm can make money on 60 to 65 percent of its bets in any given year, the odds are very high that the fund will meet its return targets. In 2010, as the D-process continued to unfold, about 80 percent of Dalio’s bets made money. 

Bridgewater sees endless opportunities to do this because spreads are uncorrelated. In doing this, the most important rule is not to compare the correlations against each other in a quantitative sense, but according to their drivers. 

“But the truth is, as you get to 15 or 20 you start to reach diminishing returns,” says Dalio. “So the issue is, ‘Do you really know what you’re doing? Can you be confident it’s good?’ I used the word good. I didn’t use excellent. Can I be confident it’s good?” 

Dalio thinks the best mix of assets is an amalgam of things, and advises to derive your top alpha generators from a combination of currencies, bonds, commodities, stocks, and so on, and calibrate them properly against each other, in terms of their size.

FT video: Uber-bear sees value in Europe

May 24 2012 - Europe is becoming a long-term buy, according to Russell Napier, author of "Anatomy of the Bear". Mr Napier also outlines to investment editor James Mackintosh what will signal the buying opportunity in Europe and the fears he has for the US when China starts selling Treasuries.  (6m 36sec)

Hussman Weekly Market Comment: Run of the Mill

My Views in a Nutshell:

We remain strongly defensive here, which will ideally be resolved by a sharp improvement in valuations followed by early improvement in market action, but we'll respond to shifts in the evidence however conditions change. I doubt that we'll be as defensive as we've been recently for a great while longer, but that's another way of saying that I expect significant market events in fairly short order.

We will respond to any further round of QE to the extent that we observe improvement in our measures of market internals, absent other hostile syndromes of market conditions. We do not share the market's blind faith in a "Bernanke put."

Valuations have improved marginally, but the market remains dramatically higher than levels typically associated with run-of-the-mill bear market lows, not to mention secular ones.

I expect that the U.S. economy is presently entering a recession, which is global in nature. It is unlikely to respond meaningfully to monetary stimulus, which has already gone well past the point of diminishing returns, and on to the point of recklessness.

At present yields, a further round of QE would essentially amount to fiscal policy, subsidizing bond market speculators and banks, and ultimately producing near-certain losses for the Fed, after interest, and at public expense.

Stocks remain overvalued on the basis of normalized earnings, and only appear reasonably priced on the basis of  "forward earnings" because forward earnings estimates implicitly reflect assumed profit margins that are 50-70% above historical norms.

Present elevated profit margins are a direct result of massive deficit spending coupled with low savings rates, allowing corporate revenues to outstrip depressed labor expenses. This reflects an accounting identity (see Too Little to Lock In). Without huge deficits and depressed savings, labor income would only be able to support much more limited corporate revenues. The argument that profit margins will contract does not require labor costs to rise - it merely recognizes that massive Federal deficits and weak personal savings rates cannot be sustained over the long-term.

The problems in Europe reflect the impossibility of having a currency union without having a fiscal union, and even 94% agreement among European countries on Eurobonds or other approaches is not sufficient if the 6% holdout happens to be Germany, which is being called on to finance endless transfers and allow money to be permanently printed in order subsidize debt-strapped neighbors.

Investors should expect no easy solutions to the fiscal and global challenges ahead. They should instead expect market valuations that adequately reflect the fact that there are no easy solutions. In my view, those valuations remain miles below present market levels.

John Mauldin: First Deflation, Then Inflation. But the Timing…?

One of the more frequent questions I am asked in meetings or after a speech is whether I think we will have inflation or deflation. My ready answer is, “Yes.” Then I stop, which I must admit is rather fun, as the person who asked tries to digest the answer. And while my answer is flippant, it’s also the truth, as I do expect both outcomes. So the follow-up question (after the obligatory chuckle from the rest of the group) is for a few more specifics. And the answer is that I expect we will first see deflation and then inflation, but the key is the timing. Today we will examine that question in more detail, as we look at how interest rates could actually be negative (!!!) this week in German and Swiss bonds and why the US ten-year has dipped below 1.5%. The very poor May employment number needs some analysis, too, and we’ll check the prospects of a synchronized global slowdown. Rarely have I come to a Friday with so much data that simply begs for a more thorough look, but we will try to hit at least the most important topics.

The Amazon Effect

Found via ‏@farnamstreet.

From the start, Jeff Bezos wanted to “get big fast.” He was never a “small is beautiful” kind of guy. The Brobdingnagian numbers tell much of the story. In 1994, four years after the first Internet browser was created, Bezos stumbled upon a startling statistic: the Internet had been growing at the rate of 2,300 percent annually. In 1995, the year Bezos, then 31, started Amazon, just 16 million people used the Internet. A year later, the number was 36 million, a figure that would multiply at a furious rate. Today, more than 1.7 billion people, or almost one out of every four humans on the planet, are online. Bezos understood two things. One was the way the Internet made it possible to banish geography, enabling anyone with an Internet connection and a computer to browse a seemingly limitless universe of goods with a precision never previously known and then buy them directly from the comfort of their homes. The second was how the Internet allowed merchants to gather vast amounts of personal information on individual customers.

The Internet permitted a kind of bespoke selling. James Marcus, who was hired by Bezos in 1996 and would work at Amazon for five years, later published a revealing memoir of his time as Employee #55. He recalls Bezos insisting that the Internet, with “its bottomless capacity for data collection,” would “allow you to sort through entire populations with a fine-tooth comb. Affinity would call out to affinity: your likes and dislikes—from Beethoven to barbecue sauce, shampoo to shoe polish to Laverne & Shirley—were as distinctive as your DNA, and would make it a snap to match you up with your 9,999 cousins.” This prospect, Marcus felt, “was either a utopian daydream or a targeted-marketing nightmare.”

Whichever one it was, Bezos didn’t much care. “You know, things just don’t grow that fast,” he observed. “It’s highly unusual, and that started me thinking, ‘What kind of business plan might make sense in the context of that growth?’” Bezos decided selling books would be the best way to get big fast on the Internet. This was not immediately obvious: bookselling in the United States had always been less of a business than a calling. Profit margins were notoriously thin, and most independent stores depended on low rents. Walk-in traffic was often sporadic, the public’s taste fickle; reliance on a steady stream of bestsellers to keep the landlord at bay was not exactly a sure-fire strategy for remaining solvent.

Halfords Group plc

Friends,

I’m looking for reasons NOT to buy shares of Halfords Group plc (LSE:HFD). Anyone have any?  

With the stock around 2.40 GBP, the dividend yield just north of 9%, strong free cash flows and a good competitive position, it seems pretty attractive. So for those in the UK or Ireland that are familiar with the stores, or for anyone who may have spent a lot of time looking at the company, I’d love to hear your thoughts. Email me at: valueinvestingworld@gmail.com. For those wanting to check it out, the company’s IR page is HERE. Thanks.

Disclosure: Neither I nor any investment product I co-manage at Chanticleer have an investment in Halfords Group plc at the time of posting. This is not a recommendation to buy or sell a security. Please do your own research before making an investment decision.

Banks’ Hyper-Hedging Adds to Risk of a Market Meltdown – By Roger Lowenstein

Thanks to Phil for passing this along.

JPMorgan (JPM) Chase & Co.’s lost billions remind us that modern finance has changed the world, and not in ways that we should celebrate. Nothing demonstrates this more than the use of hedging.

It is debatable whether hedging makes individual banks such as JPMorgan “safer,” and very debatable whether it makes them, on balance, more profitable over time. But even supposing that hedging does, or can, assist individual firms, their trading has an unseen and pernicious effect on markets overall. Just as football players armed with kryptonite-strength helmets hit more aggressively, leading to more concussions, hypertrading by firms -- each thinking of their own preservation -- has exposed markets to meltdowns and routs.

Market participants themselves are mostly unaware of their effect on the group because they have grown up in a culture that celebrates trading -- hedging, in particular. The attitudinal change, fostered by technology, has been gradual but vast, and only visible if one steps back and remembers how things were.