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The incompetent have their shorts in a knot because Standard Chartered did not honour a pretend-maturity:

Perpetuals are popular because bonds without a legal maturity date may qualify as equity according to International Financial Reporting Standards, reducing a company’s leverage in the eyes of banks and making it easier for them to get lower rates on loans. Investors buy them because they’re pretty certain they’ll be redeemed in full at the first call.

In other words, these are three- to five-year notes that pay higher yields than regular securities of a similar tenor.StanChart has now challenged that notion.

The London-based lender said in its third-quarter earnings statement Tuesday that it wouldn’t exercise the option it has in January to buy back its $750 million of 6.409 percent non-cumulative redeemable preference shares that were issued in 2006.

That makes sense, from the bank’s standpoint. After January 2017, the notes convert to paying three-month Libor plus 151 basis points. At current levels, that translates into a yield of less than 2.4 percent. StanChart’s 10.5-year 4.3 percent dollar bonds due 2027 are yielding 4.5 percent.

The fact a perpetual might not be called isn’t something most investors consider when they purchase the notes. Now, they’re having to think about what would be a fair price for a lot of the debt they hold if, when the time comes, it may be cheaper for a company not to act.

In today’s FOMC release:

The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.
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Voting against the action were: Esther L. George and Loretta J. Mester, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Some were fascinated by the word “some”:

The Fed’s use of the word “some” versus the harder-hitting “next meeting” phrasing of October 2015 to signal an approaching move was appropriate for several reasons, said Vincent Reinhart, chief economist at Standish Mellon Asset Management Co LLC in Boston, who in his former role as a Fed economist has helped draft statement language.

Investors prior to the meeting had already priced in about a 70 percent probability of Fed action next month, so there was no need to hammer home the point. The chances of a move shifted up to 80 percent following release of the FOMC statement.

PerpetualDiscounts now yield 5.13%, equivalent to 6.67% interest at the standard equivalency factor of 1.3x. Long corporates yield a smidgen under 3.8%, so the pre-tax interest-equivalent spread is now about 290bp, unchanged from the October 5 report.

Today’s top news story is that people lash out when disturbed by change:

In this western Wisconsin enclave and other pockets of the rural Midwest, Mr. Trump’s pledge to build a wall along the Mexican border and prioritize jobs for American workers has struck a chord with some whites uneasy over rapidly changing demographics. They said they are worried illegal immigrants are crowding schools and unfairly tapping public assistance, problems they believe Mr. Trump would fix.

The Journal identified the epicenter of this shift using the diversity index, a tool often used by social scientists and economists. It measures the chance that any two people in a county will have a different race or ethnicity. In 244 counties, that diversity index at least doubled between 2000 and 2015, and more than half those counties were in the cluster of five Midwestern states. The analysis excludes tiny counties that produce numeric aberrations.

Traditional immigrant gateways like Los Angeles, Miami and Queens, N.Y., draw a far greater number of Latino and other minority residents, but because they have long been melting pots, their diversity has barely changed over the past 15 years.

In 88% of the rapidly diversifying counties, Latino population growth was the main driver. In about two-thirds of counties, newcomers helped expand the overall population. In the remaining third, the population fell despite an influx of new arrivals, which magnified the shift for locals as their peers died or moved away.

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More on my speculation on small-batch craftsmanship as the future of employment:

Today, smaller plants are particularly important to job creation in factory work, said Scott Paul, president of the Alliance for American Manufacturing. “Megafactories are the exception today,” Mr. Paul said. “Small manufacturing is holding its own — and you are seeing some interesting developments in urban centers.”

Out of 252,000 manufacturing companies in the United States, only 3,700 had more than 500 workers. The vast majority employ fewer than 20

While they may not rival the scale of 1950s assembly lines, these smaller craft-type producers hold out hope for cities, Mr. Paul said, particularly as some companies look to move jobs back from overseas to be closer to customers and more nimble to supply customized, small-batch orders.

What is more, these jobs pay people more. According to the Bureau of Labor Statistics, manufacturing workers typically earn just over $26 an hour. By contrast, medical orderlies and nurse’s assistants (a growing field) earn half as much. And fast food, a mainstay for Americans with a high school diploma or less, has a median hourly wage of $9.11.

It’s also support for my other thesis: don’t bet against America! That bet’s been a losing game since 1850!

The financial services prep-school boys are hurting:

This is Wall Street’s new tech meritocracy. Financial institutions traditionally coveted graduates from Stanford and other big-name schools and people already working in Silicon Valley. But that system tends to overlook good programmers from other schools or gifted dropouts, according to recruiters. And besides, banks need to fill so many programming jobs that elite schools can’t possibly pump out enough candidates.

So the industry is looking in places it never did, turning to outside firms to evaluate prospective programmers based on objective measurements, not their pedigree. The idea is that people lacking a computer science degree — art majors, graphic designers and chemistry graduates from the University of Delaware like Furlong — can still make the leap to well-paid careers in technology. By using algorithms to spot talented coders, HackerRank and competitors with names like Codility claim they’ve essentially increased the world’s supply of developers.

There are some who think that the fixed income tide has turned:

Bonds worldwide have lost 2.9 percent in October, according to the Bloomberg Barclays Global Aggregate Index, which tracks everything from sovereign obligations to mortgage-backed debt to corporate borrowings. The last time the bond world was dealt such a blow was May 2013, when then-Federal Reserve Chairman Ben S. Bernanke signaled the central bank might slow its unprecedented bond buying.

Europe led the losses that reverberated worldwide this week as signs of accelerating inflation and economic growth spurred speculation that the European Central Bank and its major counterparts are moving closer to curbing monetary stimulus, including asset purchases. The result is that investors are abandoning one of the year’s biggest trades — a bet on higher-yielding, long-term bonds — as they wake up to the limits of central-bank demand that drove bond yields to record lows as recently as July.
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Yields on 10-year gilts reached 1.31 percent, the highest since June 23, the day of the U.K. vote to leave the European Union. Similar-maturity German bonds were set for their worst month since 2013, pushing yields to 0.217 percent, a level last seen in May. U.S. 10-year Treasury yields touched about 1.88 percent, the highest since May.

Assiduous Reader MichaelA brings to my attention a wonderful, lengthy article on practical robotics research titled Pizza, the unsung agent of the robot revolution:

It’s often been said that without the online adult entertainment industry driving innovation on the Internet, the e-commerce and video streaming platforms that we take for granted today would never have matured so rapidly.

In years to come, will we be saying the same about pizza’s role in accelerating retail delivery technologies?

Pizza and porn, driving technological progress! You see, girls, us guys really do serve a higher purpose!

I am among many people who like to ponder the future of employment amidst all the automation nowadays. Not with any apocalyptic bias – it is self-evident that the cost of everything is, ultimately, a labour cost and therefore labour income – but with what I hope is a less jaundiced eye.

I think we may be entering a new era of craftsmanship, in which we have Big Business producing commodities for the masses and small, internet-enabled businesses taking a more careful and individualistic approach. I may be biased in this, because that’s the business model of Hymas Investment Management Inc., but there’s other evidence we’re heading that way.

Consider craft beer:

But it wasn’t too long ago that American beer drinkers were largely limited to what beer buffs call MillCoorWeiser beer—the mass produced American lager most prominently sold under the Budweiser, Miller, and Coors brand names. In their 2015 article, Economists Kenneth G. Elzinga, Carol Tremblay and Victor J. Tremblay (Elzinga et al.) report that prior to 1970 over 99% of the beer consumed in the U.S. was the traditional lager beer produced by the large domestic breweries. Needless to say, it was a bland time for American beer.

Then in 1965, entrepreneur and innovator Fritz Maytag purchased the failing Anchor Brewing Company, located in San Francisco, and the revival of craft beer was under way. Maytag revived the brewery, and according to Elzinga et al. his operation inspired other entrepreneurs to join him in the craft beer renaissance.

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And in Toronto:

The number of manufacturing firms has increased in recent years. “We attribute the growth to a lot more micro-manufacturing, as well as the ‘maker movement’” of independent inventors, designers and tinkerers, as well as tech hardware companies, says [manager of entrepreneurship services for Toronto] Mr. [Chris] Rickett.

“Part of making sure manufacturing continues to exist is making sure that people know it is this very creative job opportunity. It needs rebranding, and the maker movement is really good at that.”

What’s more, he says, new tech tools are making it a lot easier to open a manufacturing business.

“It used to be if you wanted to make a product, the process of prototyping that and getting it to market was very long,” he explains. “Now you can prototype it down at the library, using their MakerBot [3-D printer], then put that prototype on Kickstarter and presell the product.”

The upshot is that the timelines and barriers to starting a manufacturing company have been drastically reduced.

Another shot has been fired in the minimum wage battles:

Just around the corner from Google’s GOOGL +0.26% main campus in Mountain View, California sits a nondescript concrete building. Inside the building, the future of fast food is being developed and refined. This is the headquarters of Zume. Founded by former Zynga Studio head Alex Garden, Zume wants to revolutionize the $9.7 billion pizza delivery world. Their plan is simple; no humans, all robots. From the production line assembly of the pizza to the eventual delivery, robots are the primary labor ingredient.

The process is not completely human free at this point, with humans adding the cheese and toppings, but it is only a matter of time before robots are able to take over that process as well. Currently the robots add sauce to the dough (the sauce robot is named “Marta”) which travels on a conveyor belt to humans who add toppings and cheese. Bruno the robot then places the pizzas in an oven. A couple of Fiats driven by humans (for now) deliver the pizzas locally.

Here’s an interesting piece on drone taxis:

Mass transit, the lifeblood of cities worldwide, is under threat from the biggest innovation in automotive technology since Henry Ford’s assembly line first flooded streets with cars.

The self-driving vehicles being pioneered by Tesla Motors Inc., Alphabet Inc.’s Google and others are poised to dramatically lower the cost of taxis, potentially making them cheaper than buses or subways, according to a joint report by Bloomberg New Energy Finance and McKinsey & Co. Having no driver to pay could reduce taxi prices to 67 cents a mile by 2025, less than a quarter of the cost in Manhattan today, the report found.

It’s a change with the potential to reshape commuting patterns, transforming urban life. As prices fall, the challenge for cities is that the cars may become too popular. Instead of complementing public transit, they may lure commuters away from buses and trains, inundating streets with drone cars.

I find it very worrisome that US tribalism is increasing:

The divisions over Peter Thiel and his support for Donald Trump are deepening in Silicon Valley.

Dismay over the billionaire venture capitalist’s stance on the Republican candidate has been showing up all across the technology landscape — from a startup founder saying he regrets taking a Trump backer’s money to a prominent diversity group refusing to work with any company associated with Thiel. In one recent case, it also throttled the flow of cash into a fledgling VC fund.

Arlan Hamilton, managing partner at Backstage Capital, said she rejected a potential investor because the person refused to disavow and sever ties with Thiel, a co-founder of PayPal and Palantir Technologies Inc. She declined to name the investor, saying the person offered to put $500,000 in her Los Angeles-based technology seed fund.

While the amount is tiny by industry standards, it is significant to Hamilton’s year-old seed fund, which has about $5 million in commitments, according to a report by Inc. The stymied deal reflects the growing divisiveness in the run up to the U.S. presidential election, which is spilling into everyday business. Hamilton took to Twitter to air her political protest.

“Because of my Peter Thiel stance, my company just lost half a million $ in new funding,” Hamilton wrote on Twitter. “Couldn’t have Thiel money flowing through our company. Hard problem. Easy decision.”

The market report will be delayed.

Update, 2016-10-26: