Friday, December 30, 2016

Time To Address the Coaching Issue

Jonathan McKee won Olympic medals at the 1984 and 2000 Games, and after witnessing the 2016 Olympics, he reports in Sailing World magazine that it’s time to address the coaching issue….
I had the honor of coaching our American Nacra 17 team of Bora Gulari and Louisa Chafee at the Rio Olympics. It was a great experience on many levels, but I came away feeling that the coaching aspect of the Olympics is too dominant. Today, at a typical Olympic-class event, you’ll find that each sailor competing has his or her own coach boat, typically a 16-foot RIB with a 60 hp engine.
I’m not against coaching per se, especially if it helps the sailors improve, but I’m not convinced that hands-on coaching at major events such as the Olympics is necessary or warranted. It’s gotten to the point where having so many support boats on the water detracts from the sailors’ experience.
Once upon a time, sailors had to get to and from the racecourse themselves and be self-sufficient once on the water. They had to carry their own food and water, have reasonable spares and clothing, and figure out their own tactics and strategy for each race. In other words, sailing should require and reward self-sufficiency, and today some of that is lost.
What are the alternatives to a coach boat for every sailor? I have a few ideas. Water, food and extra gear, for example, could be off-loaded to a neutral boat stationed on the racecourse. Race-committee boats could provide tows to the course if needed. Having fewer motorboats on the course would reduce wakes, distractions, and pollution.
Why not put all the coaches on one boat, as was done in some past Olympics? It works in ­college racing. A coach’s barge could be comfortable and well equipped but slightly removed from the racing area. Small communication devices, such as phones or two-way radios, could easily allow the sailors and coaches to communicate from the barge between races — or even from shore.
While it’s true that coach boats can serve as safety and support boats during training and regattas, this shouldn’t be the primary reason for their presence. The event organizers should have direct oversight of the safety fleet so they can manage it effectively.
I would support banning coach boats for all but training regattas. Certainly there is a place for coaching during training or practice regattas, to speed up learning, but when it comes to big events, let’s give the water back to the athletes and send a message that sailing is an athlete-driven sport, not a coach-driven sport.
Note: To read other reports by Jonathan McKee in Sailing World…click here.
Editor’s note: Malcolm Page, a double Olympic medalist for Australia, and the newly appointed Chief of Olympic Sailing for USA, shared a similar viewpoint in this report. It is notable to have people like McKee and Page see the escalation of this issue needing to be addressed, particularly since the coaching industry will continue to grow and may push boundaries that can impact the cost and approach to compete.

Sunday, December 25, 2016

Russia Cashes in on Oil Upswing

In a surprise development, Russia’s President Putin announced on state television that Swiss commodity trader Glencore Plc and Qatar’s sovereign wealth fund will be purchasing a 19.5% stake in Russia’s state oil company, Rosneft PJSC (MCX:ROSN), in a deal worth $11 billion. The Russian government, which owns approximately 70% of Rosneft, has been looking to reduce its stake in the company for most of the year to raise funds for its budget. (For More See: Russia Looking to Sell Stake in Rosneft)
Russia delayed the privatization of Rosneft in August 2016 because of the decline in oil prices during the summer. In October, however, Russian Economy Minister Alexei Ulyukaev said the privatization of a stake in oil major Rosneft would take place between November and December 2016. Analysts at the time estimated a 19.5% stake could fetch as much as $11.7 billion at current market valuations.

Russia’s Budget Growing

Russia’s finances are improving with the recent uptick in oil prices following OPEC’s decision to cut back oil production. According to VTB Capital, Russia’s budget is based on the assumption of oil at $40 per barrel, so prices at $55 per barrel could add about $15 billion to the state’s finances. Another Russian bank, Uralsib, said if oil prices are 15-25% higher than budgeted in 2017, the budget deficit will be reduced to 1.8% of GDP, compared to nearly 4% in 2016, as reported by Vedomosti.

Sanctions, What Sanctions?

The Rosneft sale comes at a time when both the U.S. and EU are maintaining economic and trade sanctions against some Russian companies and banks that have been in place since September 2014 in retaliation for Russia’s military incursion into Ukraine. Some economic sanctions are specifically intended to prevent Russia’s oil companies from raising financing needed to develop the country’s oil and gas sector. Technically there are no sanctions against the Russian government, but today’s deal leaves room for ambiguity depending on how the proceeds are used. Rosneft’s CEO Igor Sechin confirmed that “one of the largest European banks” will provide financing without specifying which one, according to Bloomberg. (See also: How Effective Are Russian Sanctions?)

The Bottom Line

Russia’s economy seems to be recovering with improving oil prices. The government did a good job of shoring up the country’s finances in the lean times and the central bank has effectively managed both interest rates and the country’s currency. The stake sale in one of the country’s flagship oil producer is also good public relations and shows that foreigners are still interested in investing in the country despite the challenges international sanctions present.
 
Disclaimer: Gary Ashton is an oil and gas financial consultant who writes for Investopedia. The observations he makes are his own and are not intended as investment advice.

Sunday, December 18, 2016

26 Goldman Sachs Alumni

"The first thing you need to know about Goldman Sachs," Rolling Stone's Matt Taibbi wrote in July 2009, "is that it's everywhere." Whether that makes the bank a "vampire squid," in Taibbi's now-famous phrasing, is debatable, but Goldman Sachs Group Inc.'s (GS) ubiquity is hard to deny.
The selection of Steve Mnuchin as Treasury Secretary, which he confirmed on November 30, makes the second-generation Goldman partner (his father Robert Mnuchin was also a partner) the second of the firm's alums to secure a position in Donald Trump's incoming administration: the President-elect's campaign strategist, Breitbart executive chair and one-time Goldman investment banker Steve Bannon will serve as chief strategist and senior counselor in the incoming administration (counselor to the president was a cabinet-level position until 1993). (See also, Goldman Sachs Nears All-Time High on Treasury News.)
Mnuchin may not be the last Goldman alum to join the Trump team, either. Politico reported Wednesday afternoon that Goldman's current president, Gary Cohn, may head the Office of Management and Budget.
To get a sense of just how deep Goldman's alumni network runs in global politics and policymaking – to say nothing of business – it's easiest to start in Washington, today, then work back – and out.

At Home

The Treasury
Mnuchin will be the third Treasury Secretary to emerge from Goldman in as many decades (Henry Fowler, who ran the department from 1965 to 1968, doesn't count, because he joined Goldman after leaving his government role). Hank Paulson, who headed the department from 2006 to 2009, became a partner at Goldman in 1982. Robert Rubin, Treasury Secretary from 1995 to 1999, was the bank's co-chairman from 1990 to 1992. He helped to arrange the repeal of the Glass-Steagall Act, which had separated commercial and investment banking.
Between serving as Treasury Secretary (a position he left in 2001) and director of the National Economic Council (beginning in 2009), Larry Summers increased his net worth by somewhere between $7 million and $31 million. He owes $2.7 million of that good fortune to speaking fees earned from, among other institutions, Goldman Sachs. (See also, Goldman Sachs to Gain in Trump Era.)
When Goldman was receiving bailout money in the aftermath of the financial crisis, Summers was not the only one in the Obama administration to have cashed checks from Goldman. Neel Kashkari, currently president of the Minneapolis Fed, left the bank with Paulson and stared at the Treasury the same day as his recent colleague; he served as assistant secretary of the Treasury for financial stability from October 2008 to May 2009, administering the $10 billion TARP paid to his former employer.
To round out the Treasury picture (very nearly, see Gary Gensler below), former Goldman vice-president and managing director Mark Patterson was the Treasury Secretary's chief of staff from 2009 to 2015.
The Fed
William Dudley, president of the New York Fed and vice-chair of the Federal Open Market Committee (FOMC) since 2009, hails from Goldman Sachs, where he worked as chief economist for the decade to 2007. In 2017 he will be joined on the FOMC by Kashkari and Dallas Fed president Robert Kaplan, who worked as head of Asia-Pacific investment banking, head of corporate finance and global co-head of investment banking over the course of his 23-year career at Goldman. Together the three will constitute a quarter of the FOMC's twelve votes, assuming the two currently vacant seats are filled; if they remain empty, Goldman alums will account for 30% of the votes on the Fed's rate-setting committee.
Stephen Friedman, who chaired the New York Federal Reserve Board from January 2008 to May 2009, joined Goldman in 1966 and alternated between chairman and co-chairman of the board from 1990 to 1994. He divested from Goldman in 2002 in order to serve as an economic advisor in the George W. Bush administration, but rejoined the board in 2004. He kept his seat when he took on his role at the New York Fed, later explaining that his goal had been "to provide continuity during a time of financial market instability."
When Goldman converted from an investment bank to a bank holding company in 2008 – putting it under the New York Fed's regulatory purview – Friedman was required to sell his shares in order to avoid a conflict of interest. Instead he applied for a waiver from the Fed and, while he was waiting on a decision, bought 37,000 (extremely cheap, given the circumstances) shares in Goldman. The Fed granted the waiver, and he bought an additional 15,300 shares.
Friedman left the New York Fed in May 2009, citing the "distraction" of a "mis-characterized" conflict of interest. He was already several million dollars richer due to his well-timed investment in Goldman Sachs stock. Before departing, he oversaw the hiring of a new president: his old colleague William Dudley.
Friedman's son David Benioff, apparently no stranger to intrigue, is a co-creator of the HBO series "Game of Thrones." Friedman made a brief appearance on the show, the New York Times reported in 2014 – as a peasant. (See also, The 2016 Goldman Sachs Back-to-School Reading List.)
Congress
Jim Himes, a Democrat representing Connecticut's 4th district, is the only currently-serving member of Congress to have worked for Goldman Sachs. He joined in 1995 and rose to the rank of vice-president during his 12-year stint at the bank. He was elected to the House in 2008.
Jon Corzine headed Goldman Sachs as chairman and CEO from 1994 to 1999, when he was pushed out by future Treasury secretary Hank Paulson. He consoled himself by winning a Senate seat representing New Jersey, which he held from 2001 until becoming state governor in 2006. After losing his bid for a second gubernatorial term, to Chris Christie in 2009, Corzine became chairman of MF Global Inc., which filed for Chapter 11 in October 2011 after losing $1.6 billion in clients' money (Bradley Abelow, a former Goldman executive who worked as Corzine's chief of staff from 2007 to 2008, was the firm's COO). The New York Fed, headed by Corzine's old colleague William Dudley, cut ties with the firm; the Commodity Futures Trading Commission, headed by another old colleague, Gary Gensler (see below), charged Corzine with unlawful use of customer funds in 2013.
Rahm Emanuel, who has held a litany of positions from congressman representing Illinois' 5th district to White House chief of staff to mayor of Chicago, collected checks from Goldman while he was running Bill Clinton's campaign finance operation, according to the right-wing Washington Examiner.
Miscellaneous Washington
Joshua Bolten left his position as executive director for legal and government affairs at Goldman Sachs' London office in 1999 to work as the Bush campaign's policy director. He worked as the White House's deputy chief of staff from 2001 to 2003, then headed the Office of Management and Budget (where Cohn may soon take over) from 2003 to 2006, when he took over as chief of staff for the duration of Bush's second term.
Gary Gensler was a star banker at Goldman, becoming one of the youngest partners in the bank's history at age 30. He worked in mergers and acquisitions, then currency trading. When he left the firm to become assistant secretary of the Treasury for financial markets, he was co-head of finance. He took on his Treasury role in 1997, on the cusp of the Asian financial crisis, and became under secretary of the Treasury for domestic finance in 1999. At the time he was a fierce proponent of deregulation.
When Clinton left office he helped Maryland Senator Paul Sarbanes draft the 2002 Sarbanes-Oxley Act. He took over the Commodity Futures Trading Commission (CFTC) in 2009. Despite attracting initial suspicion from many on the left – including Senator Bernie Sanders – for his Wall Street background and one-time enthusiasm for deregulation, he was by all accounts a doggedly determined regulator. He pursued a crackdown on opaque markets for swaps and other derivatives. He pursued aggressive fines for LIBOR rigging. He obsessed over the text of Dodd-Frank, passed in 2010. He charged his old co-worker Jon Corzine with misusing customer funds in June 2013; a few months later he stepped down, his term having officially expired in 2012.
Rueben Jeffery III, a former Goldman partner, served as under secretary of state for economic, business and agricultural affairs from 2007 to 2009. Evan McMullin briefly worked for Goldman Sachs' investment banking division before working as a senior adviser on national security issues for the House Committee on Foreign Affairs, a position he held from 2013 to August 2016, when he announced his independent candidacy for president.

Abroad

Central Banks
ECB head Mario Draghi worked for Goldman Sachs International as vice-chairman and managing director from 2002 to 2005. During his tenure there, the bank negotiated a deal with Greece's finance ministry involving a derivative transaction known as a cross-currency swap, which transferred €1 billion to the government to improve the appearance of its balance sheet. Petros Christodoulou, a former Goldman employee at the National Bank of Greece, served as an intermediary between Goldman and the Greek central bank to help negotiate the deal.
In the words of Risk, which first reported the story in 2003, the swap was "a completely legitimate transaction under Eurostat rules," but was also "bound to create discomfort among those who like accounts to reflect economic reality." Greek debt has since become a recurring headache that has threatened to drag the country out of the eurozone and perhaps end the single currency.
Draghi claimed to know nothing about the deal, which he said predated his time at Goldman. He served as governor of the Bank of Italy from 2005 to 2011. During his last two years in that role, he also chaired the Financial Stability Board. In 2011 he began his current job as president of the European Central Bank.
Draghi's successor as the chair of the Financial Stability Board was Mark Carney, at that time governor of the Bank of Canada, who had done a 13-year stint at Goldman. Carney left Canada in 2013 to head the Bank of England, where he is currently governor. Michael Cohrs, who started his career at Goldman Sachs in 1981, joined Carney on the Bank of England's board (or "court") of directors from 2011 to 2015; Ben Broadbent, who was Goldman's senior European economist from 2000 to 2011, continues to serve on the central bank's board.
Governments
Malcolm Turnbull, a former partner of Goldman Sachs, became the prime minister of Australia in September 2015. (See also, The Evolution of Goldman Sachs.)
According to the Telegraph, Romano Prodi, prime minister of Italy from 1996 to 1998 and 2006 to 2008, accepted consulting fees from Goldman Sachs through a company he jointly owned with his wife from 1990 to 1993. Documents suggested that Prodi, while serving as president of the government Institute for Industrial Reconstruction (IRI), helped Goldman to broker the discounted sale of a state company to Unilever through a shell-company intermediary; he denied the claim. An Italian prosecutor said in 1996 – when Prodi was prime minister – that there was sufficient evidence to press charges, but she told the Telegraph that her superiors retaliated against her and "she was exiled to Sardinia." Prodi was also implicated in an investigation related to mid-1990s Siemens-Italtel merger; in a note to Siemens, Goldman asked to be hired to assist in the deal and named Prodi as "our senior adviser in Italy." Goldman got the job.
While at the IRI, Prodi's assistant was Massimo Tononi, a five-year Goldman veteran. When Prodi's term at the IRI was up, Tononi returned to Goldman's London office and became a partner and managing director. After 11 more years at the bank, Tononi returned to work for Prodi in 2006 as Treasury undersecretary of the Ministry of Economy and Finance. He had given €100,000 to his old boss' election campaign.
Olusegun Olutoyin Aganga was managing director of Goldman Sachs International's hedge funds division in London before serving as Nigeria's minister of finance from 2010 to 2011. From 2011 to 2015 he served as minister of industry, trade and investment.

Sunday, December 11, 2016

Amazon’s new grocery store

Amazon’s new grocery store is missing one of the most important things about its business

Amazon
By now, you've probably seen the new video for Amazon Go, the e-commerce store's first physical grocery store that comes with no cashiers or check out lines.
But if you've followed Amazon closely, you've probably noticed the store is missing one of the most important parts about Amazon's retail strategy: Prime benefits.
Prime, Amazon's annual membership program, gives access to free two-day shipping and a bunch of other services, such as Prime Video and Music. Amazon has increased the number of Prime perks lately in hopes of attracting more members, as it became clear that Prime members tend to spend more on Amazon than non-Prime members.
Oddly, Amazon is not giving any privilege to its Prime members in the new grocery stores, which is easily one of the biggest retail initiatives the company has taken in years. The Amazon bookstore, which launched last year, for example, offers discount prices only to Prime members.

Internal debate

When Business Insider first reported in October that Amazon sees potential for up to 2,000 grocery stores in the US, Prime was mentioned as one of the key discussion points internally. Amazon management wrestled with the question of making the grocery stores Prime-exclusive or open to the general public because of the different cost benefits, according to documents we've seen. The WSJ previously reported that the new grocery stores would be Prime-only.
Cowen & Co.'s analyst John Blackledge suggested Amazon might add those benefits in the future, and is simply trying to first gain mindshare in the grocery space for now. There's certainly precedence: Amazon bookstores introduced the Prime-only discounts almost a year after opening.
"Amazon’s doing a lot of things to increase conversion of Prime members, so this might be a way to first expand their customer base and then over time, convert non-Prime members to Prime members," Blackledge told Business Insider.
That means Amazon may see its brick-and-mortar grocery stores as a means to expand its share of the massive $800 billion grocery market, instead of a channel to attract more Amazon Prime members. According to Blackledge, Walmart (in combination with Sam's Club) is the leader with a 21% share in the grocery market, while Amazon is outside of the top 20 with just 0.8% share, as of last year, and is expected to be 7th largest by 2021.
Screen Shot 2016 12 05 at 4.35.58 PMCowen & Co.
Perhaps what's more striking is that Amazon is indeed doubling down on its brick-and-mortar strategy. From bookstores last year to pop-up stores this year, and now a grocery store, Amazon has been aggressively expanding its presence in the physical space.
That's in stark contrast to what Amazon CEO Jeff Bezos said about retail stores just 9 years ago. In a shareholder letter published in 2007, Bezos wrote that he gets asked a lot about opening physical stores but it's an idea he's resisted.
"The potential size of a network of physical stores is exciting. However: we don’t know how to do it with low capital and high returns; physical-world retailing is a cagey and ancient business that’s already well served; and we don’t have any ideas for how to build a physical world store experience that’s meaningfully differentiated for customers," Bezos wrote at the time.
After nearly a decade, Amazon seems to have cracked the code on how to answer all those questions.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

Sunday, December 04, 2016

Students 'Easily Duped'


Students 'Easily Duped' by Misleading, Fake Info Online

The Best Laptops for College Students
Recently, PCMag's Evan Dashevsky argued that "If you fall for nonsense articles in your Facebook feed, don't blame Facebook. It's your fault for not checking sources." He might want to notify the nation's students, who are apparently easily duped by slick content dressed up as news, a new Stanford report finds.
"Many people assume that because young people are fluent in social media they are equally perceptive about what they find there," Professor Sam Wineburg, lead author of the report and founder of the Stanford History Education Group, said in a statement. "Our work shows the opposite to be true."
Between January 2015 and June 2016—before the issue of fake news started making headlines—Wineburg and his team collected data from 7,804 students in middle and high school, as well as college, who were asked to evaluate tweets, media site home pages, blog posts, and more to determine if they were legit.
It seems that while your 12-year-old niece is capable of firing off dozens of Snaps a minute, she and her digital native brethren are "easily duped" when it comes to sponsored content and have difficulty sniffing out potential conflicts of interest, the Stanford report says.
Middle school students, for example, were asked to look at the homepage of Slate.com and identify content as news or ads. "The students were able to identify a traditional ad—one with a coupon code—from a news story pretty easily. But of the 203 students surveyed, more than 80 percent believed a native ad, identified with the words 'sponsored content,' was a real news story," the report finds.
High school students, meanwhile, were asked to look at social media posts from the actual Fox News and a fake Fox News account. Only a quarter recognized that a blue checkmark signified they were looking at the real Fox News. "And over 30 percent of students argued that the fake account was more trustworthy because of some key graphic elements that it included," the report says.
High school students (in AP history, no less) were also asked to look at MinimumWage.com, which calls itself a project of the Employment Policies Institute. Only 9 percent did a little digging to discover that the site was the work of a DC lobbying firm and not an objective source of information about the topic.
College students didn't fare much better; 93 percent fell for the MinimumWage.com test.

Ontario won't stop double-ending

Ontario moves to tighten rules around real estate agents 'double-ending,' but won't ban the practice If legislation is pa...