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Nvidia: After The Fall

Pronounced Drop And Volatility

After radical swings in the stock price of Nvidia Corp. (NASDAQ:NVDA), which included a rapid 18% drop, investors can examine the causes of this volatility to form a view of prospects for the stock over coming months. This author believes that more growth may be expected in the price of Nvidia shares.

Investors saw a pronounced drop in Nvidia before an outstanding full-year’s earnings report. Thereafter the stock entered a very volatile range. That volatility continues and is to date more than double that of the weeks before the marked fall, and is greater than at any time in more than a year.

For example, on February 21 Nvidia fell more than $10.00 (4.00%) as the stock exemplifies high beta. To compare with its competitors, Nvidia registers a beta of 1.87, while Advanced Micro Devices, Inc. (NASDAQ:AMD) shows 1.58, and Intel Corp. (NASDAQ:INTC) has a beta of 1.41. Whenever beta becomes elevated, that is a time for investors to exercise increased vigilance as it may presage transitions, trend reversals and fake-outs.

Heightened Volatility Persists

In light of continuing volatility persisting after announcement of earnings outperformance, understanding the cause of the drop and its volatile aftermath should aid investors in reconciling these contradictions to determine the future direction of the stock.

Between January 21, 2018 and February 6, Nvidia fell precipitously by $45.27 (18.16%) to lose in just four trading days what it had taken nearly one month to gain. During such rapid market moves, valuation offers no protection. Then on February 8 the company announced that 2018 financial year profit grew by 83%, revenue climbed nearly 41%, and gross margin grew by 110 basis points. This outperformance has now taken the stock beyond previous highs, yet heightened volatility persists and may trouble holders.

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NVDA data by YCharts

The 18.16% fall in price was caused mainly by technical market factors, not fundamental considerations particular to Nvidia. Approximately 85% of the total volume of stock market trades are based on algorithmic or quant criteria, and consequently by virtue of that sheer volume of technical trading, markets often rise and fall around technical trigger points.

Market Correlations

Underscoring this prominence of technical considerations is the correlation that the fall in Nvidia stock had with the drop in both the semiconductor sector as a whole and in the entire stock market. Compare the similarity in the charts below of both the semiconductor sector and the S&P 500 with that of Nvidia above.

As regards the overall stock market, a significant technical element on this occasion was the volume of short volatility trades using instruments tied to volatility indexes like the VIX. As a result of the power of market correlation, the downdraft in the stock market as a whole depressed stock prices in the semiconductor sector and pulled Nvidia down.

Chart
SOXX data by YCharts
Chart
SPY data by YCharts

This view of the attribution of the market pullback to technical factors was also stated by fellow Seeking Alpha contributor, Mohamed El-Erien:

It is driven by technicals, not fundamentals. The ongoing market correction doesn’t reflect a worsening of economic and corporate fundamentals. Rather, it is being driven by technical factors, including the unwinding of “short-volatility” trades . . . the testing of relatively new products and a shift in investor conditioning away from the “buy-the-dip” paradigm.

Demand May Weaken

Continuing volatility in Nvidia’s stock is in significant part due to concerns in some quarters regarding Nvidia’s exposure to cryptocurrency demand, as there are factors at play which may cause that demand to weaken in the foreseeable future. Cryptos generate approximately 10% of the company’s revenue, compared to approximately 3% of revenue for rival Advanced Micro Devices, Inc. (NASDAQ:AMD).

The future evolution of cryptocurrencies, especially Ethereum, threatens to render mining less profitable as it diminishes the block reward and reduces the difficulty of algorithms. In areas characterized by high energy costs, the profitability of mining is also waning. A mooted move to proof of stake settlement would reduce the need for mining.

To be considered additionally, Nvidia’s switch from in-car entertainment systems to AI driving systems is demonstrating lower than anticipated cash flow from the automotive segment. In the fourth quarter, automotive income grew 3% year-on-year, while falling 8% sequentially. However, 1Q19 automotive revenue is projected to climb above 1Q18 levels.

First Driving Processor

This market promises much increased revenue from approximately 2020 when mass market car manufacturers are expected to launch their first wave of autonomous vehicles. Nvidia is to launch the world’s first autonomous driving processor, named Drive Xavier, constructed with more than 9 billion transistors in the first quarter of 2019. Nvidia’s road to a sizable share of the autonomous driving market will be based on its alliances with Volkswagen, Uber, Mercedes-Benz, Baidu Inc. (NASDAQ:BIDU) and China’s ZF among others.

While there are valid concerns as discussed above, it may be expected that Nvidia’s increasing revenue derived from the cloud enterprise segment with their Volta chips, with capital expenditure in this market rising annually at a rate of 20-30%, will more than compensate for any reductions in cryptocurrency or auto market revenue. To underscore this point, Nvidia’s sequential growth in data center revenue exceeds 20%. A further growth area for Nvidia promising markedly increased earnings is that of AI inference applications and the IoT as these markets, presently in their infancy, evolve exponentially.

Nvidia’s financial base is healthy and growing, forming a foundation for projecting a continuing rise in share price. Sales growth in financial year 2018 was 40.58% year-on-year. The cost of sales in the same period grew at a slower rate than sales revenue, while EBITDA in 2018 was $3.41 billion compared to $2.16 billion in 2017. Total assets rose to $11.24 billion in 2018 from $9.84 billion in 2017, and total liabilities fell from $4.08 billion to $3.77 billion in the same period.

The drag on net income of Nvidia’s transition away from in-car entertainment towards AI driving systems, with their inherent cash flow lag, has been minimal with net income rising in 2018 to $3.05 billion from $1.67 billion in 2017. Free cash flow rose in 2018 to $2.91 billion from $1.5 billion the previous year.

Conclusion

After a jolting fall in share price, which can largely be attributed to technical factors, the full year’s earnings report has led Nvidia stock into a very volatile period with heightened beta relative to its peers. However, this phase promises to resolve into a continued upward trend as a result of growing demand in the enterprise segment. Concerns about a downturn in cryptocurrency revenue or lag time in realizing a higher volume of auto revenue are unlikely to halt that uptrend.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

How to Use the Power of Your Personal Brand to Skyrocket Your Business

In his new book, The Rise of the YoupreneurChris Ducker argues that the key to building a sustainable, future-proof business lies within your own experience, interests, and personality. Ultimately, finding success boils down to unleashing the power of your personal brand (what he calls, being a “Youpreneur”).

It sounds simple, but taking the leap to becoming a “youpreneur” takes vulnerability and authenticity.

I know the tactics Ducker suggests in his new book work, because they are the same strategies I used to pivot from my career as a TV news reporter to an entrepreneur. I didn’t know it at the time, but leveraging a strong personal brand and loyal fan-base is what helped me to build a successful business, with zero experience.

Here are my top four takeaways from Ducker’s book, if you want to leverage your personal brand for business success.

1. Be Original

While it may feel like there are no new ideas in business, Ducker suggests you can avoid the copycat marketing that is so prevalent these days, by building a business centered around you.

Anybody can have the same business model, the same services, or the same pricing. But nobody has your exact personality and experiences.

While you might be able to “get by” for a while modeling your business after another, ultimately, being successful boils down to being different and memorable. The easiest way to do it? Infuse your personal brand into your business.

As Ducker says, being different from your competitors beats being “better” every time.

2. Share Stories

You don’t have to look far for the most powerful marketing tool in your business: your own stories of what you have done and what you can do for other people.

Ducker shares that in order to use your stories to attract the right people to your business (and repel the wrong ones), you need to identify your true strengths and weaknesses and use these to captivate your audience.

It makes sense. People like doing business with other people. Major brands spend millions to develop characters or spokespeople that their customers can relate to. The benefit to the “youpreneur” business model is that you already have the spokesperson (you) and the stories to go with it.

Spend time identifying which stories your audience can relate to and leverage those in your marketing.

3. Create Content

Ducker recommends taking one piece of content and re-purposing it on multiple platforms.

This is something I call the “content compound effect.” It’s where you take one piece of content, let’s say a video interview, and you turn it into a blog post, a podcast, and a media pitch. You can develop a webinar around it or offer a live workshop on the topic.

I started doing this in business out of necessity- I just didn’t have the time to create original content on a dozen different platforms. Turns out, it’s a pretty effective marketing hack. If you’re going to spend time creating content, you might as well get the most return out of it as possible. Re-purpose your content for different platforms and you’ll reach more people as a result. 

4. Be an Expert

Ducker shares how he experienced a major shift in business when he decided to put himself front and center by hosting a podcast, blogging, and doing more public speaking.

It’s easier said than done, but for those willing to do it, the rewards are significant.

I’ve worked with many entrepreneurs who are too humble or overwhelmed to take center stage as an expert in their industry. The ones that are willing to take the leap and share their expertise in media interviews, training workshops, and public speaking, benefit from reaching a larger audience and making a bigger impact. 

While Ducker lays out a full strategy to becoming a Youpreneur in his book, I don’t think  it has to be all or nothing. Pick a couple tactics and start small. Begin infusing more of your personal brand into your content or your web copy. Make some media pitches and do a couple podcast interviews. Start peeling back the layers of your business to reveal the authentic, original brand of you and you’ll begin to experience the benefits of being a Youpreneur. 

6 Keys to Attracting and Nurturing Breakthrough Innovators on Your Own Team

Breakthrough innovation is the dream of every entrepreneur, but it’s still a scarce commodity. Selecting and nurturing people who are likely to help you in this regard is an even more elusive capability, and one that every angel investor, like myself, wishes he could get a lock on.

In fact, every manager and business owner needs this skill just to survive with today’s pace of change. 

We all wish we were the next Steve Jobs, or Elon Musk, or Thomas Edison. If we’re not, then at least we would like to recognize them when they come through the door, or better yet, create a few like them in our own organization.

I wish I understood what makes some people so spectacularly innovative, producing triumph after triumph, while the rest of us merely get by.

I’ve seen a lot of speculation on this challenge over the years, but I was recently impressed with the insights in a new book, Quirky, by Melissa A. Schilling.

From her position as professor at NYU Stern, and recognition as one of the world’s leading experts on innovation, she takes a deep dive into the lives and foibles of eight well-known innovators, including the ones mentioned.

One of her encouraging conclusions is that we all have potential in this regard, which can be brought out naturally by life circumstances and special circumstances, or nurtured by the people and culture around us.

I’ll paraphrase her key recommendations for capitalizing on this potential, for use on yourself and members of your team:

1. Incentivize people to challenge norms and accepted constraints.

Everyone wants to fit in, but most of us have felt a sense of being an outsider, which needs to be nurtured rather than crushed. In business, that means never saying or implying “that’s not the way things are done around here.”

It also means giving people opportunities in areas they have interest, but no track record. Elon Musk, for example, had no experience or training as a rocket scientist when he came up with the idea of reusing rockets, and the innovative idea for SpaceX

2. Give people time to think beyond current job assignments.

When you are looking for breakthroughs, you need time to think outside the box without fear of consequences. Make it clear, as they do at Google, that you are expected to spend some “20 percent time” outside your current job assignment.

The payoff value of a person working alone on side projects, tapping into intrinsic motivation, has been the source of several of Google’s most famous products, including Gmail. 

3. Reinforce people’s belief in their ability to succeed.

One of the most powerful ways to increase creativity, at both the individual and organizational level, is to encourage people to take risks by lowering the price of failure, and even celebrating bold-but-intelligent failures.

Also, creating near-term project milestones, with plenty of opportunities to celebrate early progress, is extremely valuable to reinforce people’s belief in their ability.

4. Inspire ambitions by setting grand goals and purpose.

Driving business goals that have a social component that people can embrace as improving quality of life provides intrinsic motivation to increase creativity and effort in their activities. Steve Jobs was obsessed with revolutionizing personal expression, more than making a computer.

5. Tap into people’s natural interests and favorite activities.

In business, this is called finding the flow. It requires both self-awareness on what you like to do, and a willingness on the part of your manager to personalize work assignments. With most jobs, there are many ways to get to results, so let your employees tell you what steps and tools they prefer.

Thomas Edison loved to solve problems and he designed his own experiments. Thus he was happy to persevere, despite 10,000 of his light bulb filament material tests that didn’t work. 

6. Increase focus on technological and intellectual resources.

With today’s pervasive access to the Internet, with powerful search tools from Google, WolframAlpha, and many others, the Library of Congress is at everyone’s fingertips. They just need the inspiration, time, and training to capitalize on these tools, and the new devices that arrive every day.

Schilling and I do agree that you have to start with people who possess substantial intellect, so the conventional indicators of skill and accomplishments cannot be ignored.

In addition, it’s important to find partners and team members with a high need for achievement, a passionate idealism, and faith in their ability to overcome obstacles, often seen as a level of quirkiness.

We are talking here about finding and nurturing people who can literally help you change the world, because that’s what breakthrough innovation is all about. If your business and personal goals don’t measure up to that standard today, maybe your first focus should be on rethinking your own objectives.

The bar for staying competitive in business keeps going up.

UberEATS Driver Fatally Shoots Customer in Atlanta, Police Say

Atlanta police say a driver for UberEATS, the ride-hailing company’s food delivery service, shot and killed a customer in the city’s posh Buckhead neighborhood late Saturday night.

The victim was identified by a local NBC affiliate as 30-year-old Ryan Thornton, a recent Morehouse College graduate. According to NBC’s report, Thornton and the UberEATS driver exchanged words after the delivery was made. The driver then allegedly shot Thornton several times and fled in a white Volkswagen vehicle.

Thornton was taken to a local hospital, where he later died from his wounds. The alleged shooter was still on the run from police early this morning.

An Uber spokesperson said the company was “shocked and saddened” by the event, and are cooperating with Atlanta police in the investigation.

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One Buckhead resident told the television station that he would be more cautious about using Uber services after the shooting. Uber drivers have been implicated in violence in the past, and the company’s approach to screening its drivers has been criticized for some of its legal and public relations problems.

The most damaging case was likely that of an Indian passenger who was raped by an Uber driver in 2014. In court documents, the passenger alleged that Uber executives wrongfully obtained her medical records with apparent plans to discredit her. The driver was sentenced to life in prison, and Uber settled the civil suit brought by the victim late last year.

Last November, two women filed a class-action lawsuit against the company in the U.S., alleging that its failure to screen drivers has led to thousands of incidents of sexual harassment and even rape of female passengers. In one example, an Uber driver was arrested for the rape of a passenger last December, also in Atlanta. Just days later, an Uber driver in Lebanon confessed to murdering a British Embassy staffer there.

Under former CEO Travis Kalanick, Uber fought hard against certain driver-screening rules. In one case, Uber shut down its operations in Austin, Texas in 2016 after spending millions of dollars to defeat a background-check rule there, and failing. It returned to the city after state legislators overturned the local ordinance. Safety concerns were also among the reasons London has barred Uber from operating there.

Beware of Pranksters Crashing Apple iPhones Using Twitter

If you’re an Apple iPhone user who also enjoys Twitter, listen up.

Pranksters on the social media service have been sharing a character from the Indian Telugu language that causes iPhones to crash, according to Mashable. The offending users have been putting the character into their Twitter usernames and tweets and encouraging people to share them with their friends. If the character lands in a user’s Twitter feed, it will cause the social app to crash. The app will continue to crash after users try to boot it back up, ultimately stopping victims from accessing the service on their iPhones.

Last week, reports surfaced saying that a single Telugu character was enough to wreak havoc on iPhones. When the character is sent via any messaging or social networking app, the affected user’s app will crash. While it’s an obscure bug that only affects Apple’s iOS 11, it’s one that pranksters and those trying to cause harm are exploiting across the Internet. Worst of all, there’s no fix at the moment and unsuspecting victims needn’t do anything to be affected.

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Apple acknowledged the Telugu bug last week and has promised a fix. The company hasn’t yet delivered, though, and it’s impossible to say when it’ll be released.

According to Mashable, which tested the bug on Twitter, the only way for affected users to regain access to the app is to log in via Safari and block the person that shared the character. At that point, the character won’t show up in their feeds and Twitter will be accessible.

Here's Why You Shouldn't Pay $1.10 For A Dollar Of Investment Grade Bond Assets

I’ve received questions from prospective subscribers about the types of trade alerts that we issue to the members section of the Cambridge Income Laboratory. One type of trade is CEF arbitrage, or more specifically a pairs trade, where we simultaneously identify an overvalued CEF and an undervalued CEF in the same sector. The strategy then entails selling or selling short the overvalued fund while simultaneously buying the undervalued fund.

The advantage of a CEF pairs trade is that because both the sold and bought funds are from the same sector, we aren’t making a directional bet on the performance on the underlying assets. Instead, we’re simply relying on the powerful concept of reversion of CEF premium/discount values (see Reflections On Chemist’s CEF Report Pick Performance In 2017 for how this has worked well for us in the Chemist’s monthly CEF picks).

There are two main limitations of the CEF arbitrage strategy. The first is that the magnitude of the gains are unlikely to be very large, simply because it is by nature a hedged strategy. That’s the trade-off for the strategy being relatively low risk. The second limitation is that unless you already own the overvalued CEF identified in the pairs trade, you would have to locate shares of the overvalued CEF to sell short. With some of the smaller, less liquid CEFs, this can range from expensive to downright impossible. The most optimal set-up is therefore already owning the overvalued CEF, and then locking in profits by selling the fund and then replacing it with the undervalued CEF in the same sector.

With the introductory blurb out of the way, let’s see how this has played out for one of the more recent CEF pairs trade that we identified in the members section of the Cambridge Income Laboratory.

About 4.5 months ago (see Sell This Investment Grade Income CEF Now), we noticed the premium of Western Asset Income Fund (PAI), an investment grade bond CEF, suddenly spiking up to +10.16%. The 1-year z-score was +3.6, indicating that this fund was significantly more expensive than its recent history. My comments from the initial article are reproduced below:

I was looking through the CEF database today and noticed the Western Asset Income Fund (PAI) trading at an exceptionally high z-score of +3.6.

Its current premium of +10.16% is at a 5-year high.

(Source: CEFConnect)

A 1-year z-score of +3.6 tells us that the premium/discount is trading 3.6 standard deviations above its 1-year historical value. Statistically speaking, this would be a 0.02% probability of occurrence, assuming that the distribution of values is normally distributed (which it isn’t, but the point is that such a high z-score is a rare occurrence).

The 5-year chart above showed that the fund traded at quite substantial discounts over the past 5 years, sometimes exceeding even -10%. This makes the current premium of +10.16% even more unusual than the 1-year z-score of +3.6 would indicate.

At this juncture, I wanted to look at the entire history of the CEF since inception. Perhaps the past 5 years was just an anomaly, and that the CEF has commanded a consistent premium in the past? It turns out that was not so.

Going back to inception, only during a brief period in 2009 did the fund’s premium exceed 10%. An unusually high premium for an investment grade fund might be understood during the immediate recovery period after the financial crisis…but why now? I can’t think of a fundamental reason why someone would pay $1.10 for a dollar of investment grade debt.

(Source: CEFConnect)

I then check out the premium/discount values of the peer group. Maybe investment grade bond CEFs are for some reason on a tear thus accounting for PAI’s unusual premium? Nope, that’s not it.

The premium of PAI is 3rd-highest out of the 15 CEFs in the “investment grade” category of CEFConnect. But I don’t consider PIMCO Corporate & Income Strategy Fund (PCN) and PIMCO Corporate & Income Opportunity Fund (PTY) to be traditional investment grade income CEFs, so not counting those two funds PAI has the highest premium in the peer group.

(Source: Stanford Chemist, CEFConnect)

OK, so PAI is a pretty good sell or short candidate. What did I pair my short PAI position with?

What did I pair my short PAI position with? I chose the BlackRock Credit Allocation Income Trust (BTZ). I wanted to choose a fund with a negative z-score, but rather amazingly all 15 investment grade CEFs had z-scores 0 or greater. BTZ’s z-score of +0.8 wasn’t the lowest, but its discount of -9.04% was the widest in the peer group, as you can see from the chart above.

Next, I wanted to see compare the price and NAV returns of these two investment grade bond CEFs to check if there were signs of deteriorating portfolio values in the undervalued CEF, which might cause me to consider BTZ as the long partner in this pairs trade.

The opportunity for the pairs trade comes from the fact that PAI’s price return is significantly outpacing its NAV return, whereas that is not the case with BTZ. We can see from the chart below that PAI appears to be blowing BTZ out of the paper with a +19.29% YTD return compared to only +8.94% for BTZ.

Chart

However, their YTD NAV returns are nearly identical.

Chart

No warning signs there. That leads me to the conclusion that:

In summary, if you own PAI, now would be a great time to sell!

Let’s see how the thesis played out 4.5 months later. BTZ had a total return loss of -3.88% over this time frame. That’s bad, of course, but still relatively much better than PAI’s loss of -14.1% over the same period. In other words, BTZ outperformed PAI by 10.22 percentage points in only 4.5 months, or about 27% annualized.

Did PAI’s portfolio do much worse than BTZ’s? No, and in fact the reverse was true. PAI’s net asset value [NAV] fell by -2.10% over this time period, but BTZ’s was even worse at -3.24%.

If BTZ’s portfolio did worse than PAI’s, why was its total return (much) better? My regular readers will have already guessed at the answer: premium/discount mean reversion! Over the last 4.5 months, PAI’s premium of +10.16% has sank to a discount of -4.82%, while BTZ’s discount of -9.04% has widened slightly, to -11.9%. Therefore, the majority of the outperformance of the long BTZ/short PAI pairs trade was due to the contraction of PAI’s discount.

Chart
PAI Discount or Premium to NAV data by YCharts

Summary

This article hopefully conveys our thought process in recommending a pairs trade to our members. Anyone who owned PAI and swapped to BTZ to would have profited to the tune of ~10% in only 4.5 months (~27% annualized), which is equivalent to about 2.5 years worth of distributions from PAI!

Note that I did not need to do a deep dive analysis of either PAI or BTZ to initiate this pairs trade. This was based almost entirely on premium/discount mean reversion, or as my fellow SA author Arbitrage Trader likes to say, “simple statistics”.

Taking stock of the situation today, the long BTZ/short PAI trade has to be considered to be largely completed, as PAI is now trading with a discount of -4.82% and a 1-year z-score of -1.5, indicating that is now cheaper than its historical average. Although BTZ’s z-score of -2.5 is even lower, as is its discount (-11.9%), the gap in valuation is no longer there.

Are there any current opportunities? The following table shows the 12 CEFs in the database that currently have z-scores greater or equal to +2.5. If you own ones of these funds, if might be a good idea to seek out another fund in the same category that is trading with a more attractive valuation, particularly if the fund that you own is also trading at a premium. Don’t let mean reversion catch you out!

Name Ticker Yield Discount z-score
MS Income Securities (ICB) 2.71% -1.47% 3.9
BlackRock Science and Technolo (BST) 5.32% 3.05% 3.2
Tortoise MLP Fund (NTG) 8.61% 9.26% 3.2
ClearBridge Energy MLP (CEM) 8.85% 5.53% 3.1
Gabelli Utility Trust (GUT) 8.50% 44.95% 3.1
Templeton Emerging Mkts Income (TEI) 3.79% -8.17% 3.1
Sprott Focus Trust (FUND) 4.97% -8.86% 3.0
Nuveen S&P Dynamic Overwrite (SPXX) 5.58% 9.54% 2.9
RiverNorth Opportunities Fund (RIV) 12.09% 6.83% 2.7
Deutsche High Income Oppos (DHG) 5.42% -0.60% 2.6
First Trust New Opps MLP & En (FPL) 10.52% 6.67% 2.5

Western/Claymore Infl-Lnk Opps

(WIW) 3.79% -9.71% 2.5

(Source: CEFConnect, Stanford Chemist)

We’re currently offering a limited time only free trial for the Cambridge Income Laboratory. Prices are going up on March 1, 2018, so please join us and lock in a lower rate for life by clicking on the following link: Cambridge Income Laboratory.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long the portfolio securities.

Can Machines Save Us From the the Machines?

Is it just me or is the cyber landscape getting more scary? Even as companies and consumers get better at playing defense, a host of new cyber threats is at our doorsteps—and it’s unclear if anyone can keep them out.

My doom-and-gloom stems from the dire predictions of Aviv Ovadya, the technologist who predicted the fake news epidemic, and now fears an “information apocalypse” as the trolls turbo-charge their efforts with AI. He points to the impending arrival of “laser phishing” in which bots will perfectly impersonate people we know by scraping publicly available images and social media data. The result could be the complete demolition of an already-crumbling distinction between fact and fiction.

Meanwhile, the phenomenon of crypto-jacking—in which hackers hijack your computer to mine digital currency—has quickly morphed from a novelty to a big league threat. Last week, for instance, hackers used browser plug-ins to install malignant mining tools on a wide range of court and government websites, which in turn caused site visitors to become part of the mining effort.

The use of browser plug-ins to launch such attacks is part of a familiar strategy by hackers—treating third parties (in this case the plug-ins) as the weakest link in the security chain, and exploiting them. Recall, for instance, how hackers didn’t attack Target’s computer systems directly, but instead wormed their way in through a third party payment provider. The browser-based attacks feel more troubling, though, because they take place right on our home computers.

All of this raises the question of how we’re supposed to defend ourselves against this next generation of threats. One option is to cross our fingers that new technologies—perhaps Microsoft’s blockchain-based ID systems—will help defeat phishing and secure our browsers. But it’s also hard, in an age when our machines have run amok, to believe more machines are the answer.

For a different approach, I suggest putting down your screen for a day and picking up How to Fix the Future. It’s a new book by Andrew Keen, a deep thinker on Silicon Valley culture, that proposes reconstructing our whole approach to the Internet by putting humans back at the center of our technology. Featuring a lot of smart observations by Betaworks founder John Borthwick, the book could help us fight off Ovadya’s information apocalypse.

Have a great weekend.

Jeff John Roberts

@jeffjohnroberts

[email protected]

Welcome to the Cyber Saturday edition of Data Sheet, Fortune’s daily tech newsletter. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.

Swiss watchdog to treat some coin offerings as securities

ZURICH (Reuters) – Switzerland’s financial watchdog will regulate some digital currency fundraisers, known as initial coin offerings (ICOs), either under anti-money laundering laws or as securities, it said on Friday.

The guidelines provide more clarity on the country’s stance toward the hot fundraising method in which Switzerland has become a global leader but whose regulators had not yet weighed in significantly.

ICOs skyrocketed in 2017, reaching nearly $3 billion through September, with Switzerland attracting around a quarter of the money, according to data compiled by cryptocurrency research firm Smith + Crown.

Groups based in Switzerland have launched many of the world’s biggest ICOs.

Regulation has become a hot button issue since the U.S. Securities and Exchange Commission deemed last year that some ICOs could count as securities. Many other global authorities followed suit.

“Blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework,” Financial Market Supervisory Authority (FINMA) chief Mark Branson said in a statement.

“Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.”

FINMA said regulation would be based both on the purpose digital tokens served as well as whether the tokens were already tradeable or transferable when the ICO took place.

Fundraisers launching digital currencies intended to function as a means of payment, and which could already be transferred, would be subject to anti-money laundering regulations but would not be treated as securities, FINMA said.

Fundraisers launching digital tokens intended to provide access to an application or service would be treated as securities if they functioned as an economic investment.

Access — or “utility” — tokens that didn’t function as an investment and could already be used to access the application at the time they were issued wouldn’t be considered securities.

Fundraisers launching digital tokens that represented assets — like a share in a company, earnings or underlying physical goods — would also be regarded as securities, subject to trading laws and prospectus requirements.

Editing by Michael Shields

Hyperinflation meets tech: Cash-scarce Venezuela sees boom in payment apps

CARACAS (Reuters) – Widerven Villegas and his brother wash some 30 cars a day at a parking lot in Caracas. Despite charging less than 50 cents, nobody pays them in cash.

In tech hubs from San Francisco to Tokyo, payment is conveniently made through software on phones and watches on a routine basis. Amid a dire economic crisis in Venezuela a similar innovation is taking hold, though for very different reasons.

People from vegetable sellers to taxi drivers have registered to use mobile payment applications to attract customers who do not have enough paper money, which is in short supply due to soaring prices. The maximum daily amount Venezuelans can withdraw from cash machines is around 10,000 bolivars, around 4 cents at the black market exchange rate.

    Venezuela’s hyperinflation, one of the first of the digital era, is producing surprise winners in a tough business climate: small technology companies based in the crisis-stricken country.

    “I accept transfers. I have Tpago, Vippo and almost all the applications out there!” said Villegas, 35, as he clutched a worn-out tablet and a basic cellphone.

   “We don’t handle cash because our clients don’t have it,” he added. “With the applications I use, I’ve got their money before they’ve even left the parking lot.”

Without these apps, even simple transactions like tipping a waiter or paying for parking become nightmares. Still, banking websites and mobile apps often crash, as the outdated telecoms infrastructure cannot cope with surging demand.

‘MIRACLES’

Requests for a taxi on the Nekso application, somewhat similar to Uber, doubled last year, according to its head of strategy Leonardo Salazar, speaking at the company offices that boast a Playstation console and ping pong table.

Vippo, a Caracas-based payment app, saw a more than thirty-fold increase in the number of people registering last year. Citywallet, born as a pilot project for online parking payments at a private university, was extended to several shopping centers.

“The cash crisis is getting worse every day but is giving us the opportunity to capture more and more transactions with our solution,” said Citywallet co-founder Atilana Pinon, 29.

She and two partners set up the app which is now expanding to Chile, after winning a scholarship from its government.

Creating an app in Venezuela usually requires little capital, given low salary expectations from coders and near-free electricity and data costs.

Developers were surprised by the rapid adoption of the applications and are betting on further growth in 2018.

“There are times when the point of sale machine stops working,” said Maria Lozada, selling cleaning products at a market stall in the wealthier Caracas district of Chacao. “This is the way to solve the cash crisis,” she says, pointing to a Vippo sign.

Venezuela’s central bank inadvertently buttressed the boom by slowing cash production just as inflation was spiralling into quadruple digits.

At the end of 2017, the volume of banknotes increased by only 14 percent, less than half from a year earlier. That coincided with price rises of more than 2,500 percent, according to National Assembly figures.

Some 18 private Venezuelan banks last year launched an electronic payment app for consumers. MercadoLibre, one of the largest online commerce companies in Latin America, also offers a local payment solution.

Even leftist President Nicolas Maduro is getting in on the act, although critics blame him for the root problem.

“With the digital wallet we are going to perform miracles at all levels,” Maduro said recently, announcing a QR code to be included on the government’s social welfare identification card.

Despite some of the world’s lowest internet speeds and a significant fraction of the population without bank accounts and cellphones, cash is falling out of favor in Venezuela.

“Perhaps our economy will be cash-less before Denmark,” quipped Miguel Leon, an electronic engineer leading Vippo, in his open office featuring hammocks.

Writing by Girish Gupta; Editing by Alexandra Ulmer and Chizu Nomiyama

The No. 1 Reason Entrepreneurs Fail to Achieve Their Goals

We are officially mid-way through first quarter, 2018. How are you doing on the goals you set at the first of the year?

I can say with a reasonable amount of certainty that the average small business owner won’t complete their goals list, not even by fourth quarter. Why? Because they’re not addressing this goal-crushing problem: an environment that doesn’t support their growth.

You can’t possibly expect more of yourself if you don’t change the environment that consistently prevents you from acting on your growth plans. Things like interruptions, client demands, employee issues, and spending time in the small details may come to mind. Sure, these problems will only continue to block your growth if you don’t address them, but the real problem isn’t around you, it’s inside of you.

While the above examples may exist in your external environment, and they are a problem, it’s also very important to consider your internal environment. What about self-doubt, fear of failure, and belief systems like there’s never enough money. The truth is, money and time blocks are usually more significant in the mind than in reality. There is almost always a work-around for lack of funds and a tight schedule, but entrepreneurs fail to see it. As you address these bigger issues, solutions to the common problems will surface.

Ask this question first. 

As my clients form new goals I ask them this question: “Can you list ten things that may get in the way of achieving this goal?” Usually there aren’t ten things, but it forces them to dig deep. Typically, it’s not until number seven or eight that they reach the golden nugget: the real problem is within them, not outside of them.

Can you list ten things? Name a goal and ask yourself why you haven’t moved the needle on it. Be honest with yourself. Look at the problems on the outside, as well as the inside. If you examine your deeper thoughts, you’ll most likely become aware of the limiting beliefs that contribute to all of the other issues. Beliefs like, no one else can do these things for me, or, I have to be available to my customers and employees round the clock. Neither of which are true.

We unconsciously create excuses such as these because something deeper and more significant is in the way and we don’t know it–or don’t want to admit it. The bigger issue is usually rooted in fear. From fearing failure to lack of self-worth and not believing in one’s self.  What are the odds of getting what you want if you continue to buy into your excuses, or worse–if deep down inside, you don’t believe in yourself?  

This is not an easy exercise to do on your own, so you may wish to work with a coach or design a support system of peers with whom you have a foundation of trust.  As you unearth your blocks, don’t get down on yourself. It’s an exciting time because now you can address them, at last. Eliminating what I call the root cause of your problem will change everything.

But how?

Sometimes, the mere recognition of the problem will push an entrepreneur into action. However, most often it takes a fair amount of work to change and there’s no shame in that. Consider how long the beliefs or fears you’ve listed have been in existence. Five years? A lifetime? How can you expect to change things overnight?

The first thing to abolish is any belief that you can do it alone. Asking for help does not make you weak, it makes you human–and very smart. The most brilliant entrepreneurs surround themselves with advisors, mentors, and coaches.

Name one big step toward changing your belief system that you can take today. A commitment to journaling every day, hiring a coach, or simply taking small steps in spite of your inner beliefs and fears. Base your most immediate goals on changing how you think, rather than business-focused results. Once you do this, there will be no stopping you from building your ideal business.

UK initiative seeks Israeli digital health tech to assist NHS

TEL AVIV (Reuters) – The British embassy in Israel said on Tuesday it has launched a program designed to help incorporate Israeli digital health technology into the UK and its National Health Service (NHS).

The UK Israel Dangoor Health initiative was put together by the UK Israel Tech Hub, a team based at the British Embassy that works to incorporate Israeli technology in British industry, with IBM’s Alpha Zone accelerator program and DigitalHealth.London, which matches technology with NHS needs.

“With all this new computer power and greater understanding and the breakthrough in genetics, we are absolutely at the threshold of a healthcare revolution,” said British businessman David Dangoor, sponsor of the initiative.

Financial details were not disclosed.

The two-year program takes place within IBM’s accelerator, where each semester two to three digital health companies will be chosen by IBM and DigitalHealth.London to participate. In addition to tech support from IBM, they will receive mentorship and guidance on NHS operations and market penetration.

Reporting by Tova Cohen; Editing by Steven Scheer

France's Thales sees more cybersecurity sales after strong 2017

PARIS (Reuters) – French defense electronics group Thales (TCFP.PA) enjoyed a jump in sales at its cybersecurity business in 2017 and expects further strong growth in the coming years, said executive Laurent Maury.

Maury said the business generated about 900 million euros ($1.10 billion) in sales over 2017, up from 700 million euros a year earlier. He added it is expected to grow by about 10 percent annually in the coming years.

Governments and companies are behind a surge in demand for services and products aimed at better protecting data and information systems, in the wake of several global cyber attacks last year.

“We’re only at the dawn of a world in which this kind of risk emerges, constantly evolving with increased virulence,” Maury told reporters on Monday.

“Every additional interconnection represents a potential vulnerability,” he added.

Last December, research firm Gartner published a report which forecast that worldwide enterprise security spending would total $96.3 billion in 2018, an increase of 8 percent from 2017.

Thales has strengthened its range of cybersecurity products over the last few years.

In 2016, it bought data protection services provider Vormetric for 375 million euros ($460 million) – a deal which Maury said had enabled Thales to win a data security contract with BNP Paribas (BNPP.PA), France’s biggest bank.

Thales, led by chief executive Patrice Caine, is also expecting its 4.8 billion-euro ($5.9 billion) takeover of digital security group Gemalto (GTO.AS), due to be finalised later this year, to reinforce its cybersecurity expertise further.

On the cybersecurity front, Thales’ competitors include the likes of telecoms operator Orange (ORAN.PA), digital consulting firm Atos (ATOS.PA) and Raytheon (RTN).

($1 = 0.8151 euros)

Reporting by Mathieu RosemainEditing by Sudip Kar-Gupta

McDonald's Just Did Something So Stunningly Strange That It'll Make You Wonder What's Coming Next

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

If there’s one thing McDonald’s wants you to think right now, it’s that it isn’t, you know, McDonald’s.

Not the old McDonald’s, that is.

Not the old, slightly worn, very predictable McDonald’s where the ice-cream machines rarely seemed to work.

The burger chain is trying all sorts of peculiar things to change its image.

It’s using, gasp, fresh beef. Or even no beef at all in its McVegan Burger.

But its latest foray into the unknown has a rather charming air about it.

McDonald’s, you see, is venturing into the area of, well, pretentiousness. 

You might think it unlikely or even a touch potty when I tell you that this is an ad campaign promoting the Big Mac x Bacon Limited Edition Collaboration in Canada.

But take a look and see if you find it refreshingly winning.

Here’s the Big Mac holding up a mirror to society, which, some might say, it’s been doing for a long time. 

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And here it is celebrating its sheer greatness.

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And then there’s the sense of exalted meaning that courses through every bite of a pickle-filled Big Mac. 

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What about the sense of existential harmony that pervades your Big Mac-eating experience?

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Perhaps these ads feel faintly silly.

For me, however, they show a certain courage and a willingness to shake previous negativity and rise to something slightly better. Or, at least, different.

There’s actually nothing special about this alleged collaboration at all. Anyone can ask for bacon to be added to their Big Mac.

But the attempts at wit offer a little confidence.

What’s most important for McDonald’s now — if it wants customers to reassess what they feel about a brand that’s being constantly challenged by fresher, younger competitors — is to revamp its products to create a true sense of surprise.

The problem, of course, is that McDonald’s is a huge company. 

Making the winds of change blow across the whole McDonald’s world will take a lot of doing. 

And a serious injection of, um, greatness. 

Dunkin' Donuts Has a Stunningly Simple New Trick So You'll Get Your Coffee Faster

In New England, people love their Dunkin’ Donuts.

Heck, I was in a Dunkin’ Donuts in Massachusetts once, and a guy showed me how you could actually see two other Dunkin’ Donuts from the parking lot of the first Dunkin’ Donuts.

But for all of Dunkin’ Donuts regional ties, the company has its sights set on world domination. And as corporate leaders explained this week, they’re using some surprising tricks–some of them so simple you’ll wonder why nobody else is doing them–in order to get there.

A lot of this comes down to how fast Dunkin’ Donuts can get a cup of coffee into your hands, so it can turn around put another cup of coffee in somebody else’s hands. (Maybe an egg sandwich, too.)

The more quickly they move you through, the more customers they can serve, and the more money they make. Basic math. 

So, they’ve got a couple of short, simple words for you: “drive-thru,” and “mobile app.” 

It’s all on display now at the company’s new “next generation concept store” in Massachusetts. Pull up to the drive-thru there, and you’ve got a choice of two lanes.

There’s the regular drive through, where cars line up, order, wait their turn, and pick up their coffee and food–pretty much like every other drive-thru lane in the world.

But, there’s also an “exclusive On-the-Go drive-thru lane,” as Dunkin’ Donuts calls it in a press release, that lets you skip ahead of all the other customers, and go right to the front of the line. Think of it as first class for coffee.

What do you have to do in order to fly first class at Dunks? Join their “DD Perks” rewards program, and place your order via your phone on the Dunkin’s Mobile App.

It’s a pretty simple concept, and if you’re from New England like me, it might even strike you as “wicked smart.”

Dunkin’ Donuts certainly isn’t the first restaurant to try to push people to order via an app–but they claim to be the first national restaurant to combine it with the drive-thru.

In retrospect, it’s almost obvious, given that industry wide, between 30 and 70 percent of customers reportedly use drive-thrus. (The wide range has a lot to do with individual restaurants’ focuses, and the times of the day that customers visit.)

Now, it will probably tick some people off in the short term, at least the first few times they show up and realize that they have to wait longer than other customers because they’re paying in cash or with a credit card.

A lot of them will convert, though, because if you grab a coffee on the way to work each day, and if using the “On-the-Go” lane saves you 90 seconds each time because you’re not stuck behind somebody else putting in their order–that could add up to six hours a year.

There are some other smaller changes being tested in the new “next generation store,” (which happens to be about a mile from the original Dunkin’ Donuts location from 1950). Among them: a tap system for cold beverages, electronic order kiosks, and greater energy efficiency.

They also want to convince you that Dunks is a place to visit in the afternoon, and open hundreds more stores outside of the northeast. And they’re getting rid of their foam cups.

But I’m going to put my money on the “mobile-preferred” drive-thru ordering experiment as the smartest, simplest innovation. 

There’s some history, too: This is the company whose lineage includes the entire concept of franchising restaurants in the United States–years before McDonald’s started doing it–and leveraged it to build Dunkin’ Donuts into a national name.

Oh, right. The name. I almost forgot. They’re dropping the “Donuts” part of it soon. They should just go with Dunks, since that’s what everyone calls them in New England anyway, but apparently they want to change to just “Dunkin’.”

The *Waymo v. Uber* Settlement Marks a New Era for Self-Driving Cars: Reality

The sun had only just come up Friday, but the young self-driving car industry had already moved into a new era. From the bench, federal Judge William Alsup, recovering from a sore throat, called it: “This case is now ancient history.”

Waymo v. Uber, the first great legal fight over autonomous vehicles, ended in a peace treaty Friday morning: Uber gave Google’s sister company a 0.34 percent stake in its business (worth $245 million or $163 million, depending on how you count Uber’s worth), and pledged not to use any of Waymo’s software or hardware in its vehicles. “I want to express regret for the actions that have caused me to write this letter,” Uber CEO Dara Khosrowshahi wrote in a statement posted on the ride-hailing company’s website.

Waymo had alleged that when longtime Google engineer Anthony Levandowski resigned to start his own company, he took thousands of vital technical documents with him, including blueprints for the lidar laser sensor he had helped develop. Uber bought Levandowski’s startup a few months later for almost $600 million in equity and put Levandowski in charge of its struggling self-driving R&D effort. In Waymo’s telling, Levandowski and Uber used Waymo trade secrets to accelerate their efforts.

In large part, the lawsuit encapsulated the stakes in the early days of an industry that’s now booming. Back then, a good lidar system was so rare and coveted that it might be worth stealing. A single engineer like Levandowski, who helped found Google’s self-driving car team a decade ago, could merit a palace coup. And just two companies—Google, the progenitor of self-driving tech, and Uber, the virile challenger eager to convert its millions of human-operated cars into much more profitable robots—command nearly all the headlines and attention of anyone eager for a world where human drivers are a lol-worthy memory.

That world looks different now. More than 20 companies are currently developing lidar, making the sensor more necessary commodity than secret sauce. A pedigree like Levandowski’s loses its luster as a new generation of engineers, trained in robotics and machine learning, emerges. At least half a dozen companies not involved in this brouhaha have proven they can make cars drive about without human help. Waymo v. Uber was a fight over a once jealously guarded technology that today verges on commonplace. And now that the suit is settled, everyone can turn to the next chapter in the textbook, the one where all the companies grow up and figure out how to deploy the thing they’ve all created.

“This is evidence that the autonomous driving problem is not going to be solved by a single silver bullet,” says Shahin Farshchi, a partner at the venture capital firm Lux. “It’s a matter of building many things and getting many things to work together.”

As any good historian will tell you, a moment like the Visigoth-induced fall of Rome in 476 or Judge Alsup’s decree that “there’s nothing more for me to do here” doesn’t really trigger an epochal shift. It’s just a convenient marker. The transition from developing self-driving technology to actually deploying it happened independent of this case. Even before Waymo filed its lawsuit, others were turning a horse race into a stampede: General Motors acquired self-driving startup Cruise. The mysterious startup Zoox started testing in San Francisco. Waymo alum Bryan Salesky decamped for Argo AI and partnered with Ford. Former Google self-driving chief Chris Urmson founded Aurora and is now working with Volkswagen, Hyundai, and Chinese automaker Byton.

Of course, the settlement has tangible effects. First, Uber lives. The threat of a billion-dollar penalty or an injunction that could shut down its entire self-driving program has evaporated. As Uber co-founder and former CEO Travis Kalanick testified, the company sees autonomous vehicle tech as vital to its existence. If someone else figures out how to run a taxi service without a driver before Uber does, then Uber loses.

Uber wins that second life pretty cheaply, too. No money changes hands as part of this deal; Waymo receives a mere 0.34 percent stake in the ride-hailing company. Each party in the lawsuit will pay its own lawyers. And with that, Khosrowshahi ticks another box off his lengthy Fix Uber list, which also included a house cleaning after the company revealed it had paid off hackers following a 54-million-account security breach and an apology tour in London for safety infractions.

Waymo, meanwhile, maintains its position at the head of the self-driving pack, and shows competitors it’s willing to bleed a bit to stay there. “It was great from Waymo’s perspective to put everyone on notice: ‘We take our leadership position seriously and we will go hammer and tong after anyone who will upset that,”’ says Reilly Brennan, cofounder of the transportation-focused venture capital firm Trucks.

That goes for its own engineers, too. Pierre-Yves Droz, Waymo’s current lidar technical head, testified Thursday that, OK, yes, he had taken an outdated version of one lidar setup to Burning Man. And yes, he had taken two other versions home (with his bosses’ permission). Uber lawyers seemed prepared to argue that this wanton toting-about of self-driving tech proved that Waymo’s lidar wasn’t a trade secret after all. You have to hide stuff for it to be a secret.

So expect no more lidar shows at Burning Man, and no more carelessly protected servers. It’s time for the self-driving space, Waymo included, to grow up and be diligent about keeping their tech in-house. This is a real industry now. The money is still theoretical, but the autonomous vehicle market could be worth $7 trillion by 2050, according to a 2017 Intel report.

Protecting intellectual property means telling employees what is and what isn’t secret—especially if they’re about to leave. “The critical juncture to reinforce those expectations is in the exit interview,” says John Marsh, a lawyer with the firm Bailey Cavalieri. “The employer says, “Hey, by the way, you signed this agreement about trade secrets when you started here; if you have questions, come see me. I expect you’re going to abide by this.’”

In the abridged trial, an Uber lawyer asked Waymo hardware engineer Sasha Zbrozek whether anyone at Google looked for activity that signaled someone was downloading huge numbers of files.

“No,” Zbrozek responded. “But nobody monitors when you get water from the fridge either.”

The time for such freedom could be ending. As autonomous driving technology approaches reality—the you give someone money to ride in this thing kind of reality—expect better defined policies and lots more rules. And maybe a camera watching the water dispenser, too.

Waymo’ Autonomy

Alibaba kicks off sponsor deal in Pyeongchang

PYEONGCHANG (Reuters) – Alibaba Group Holding Ltd (BABA.N) is launching a project that will create a “smarter” and more connected athletes’ village and stadia and make all Olympics stakeholders “more money”, its executives said on Saturday.

Many of Alibaba’s plans are still concepts since it has not had enough time to implement its technology after signing a deal last year worth hundreds of millions of dollars as a cloud and e-commerce partner with the International Olympic Committee.

But IOC president Thomas Bach said some of Alibaba’s plans “can become operational pretty soon” while Alibaba founder Jack Ma said they expected to be realized at the next Winter Games in Beijing in 2022.

“We want to make the Olympic Games so everyone can make more money,” Ma said, adding that “everyone” meant groups such as host cities’ organizing committees, athletes and sponsors.

Alibaba is one of the few top Olympics sponsors signed with the IOC until 2028.

It has said it wants to upgrade the technology that keeps the Games running.

It also unveiled its “sports brain,” on Saturday, a suite of software products designed to improve the back office of how sports events are run.

Ma, who appeared onstage with Bach, said he was moved by North Korea and South Korea marching together in the opening ceremony on Friday since it reflected “peace and prosperity”.

Former NBA player Yao Ming was in the audience at the media conference, which featured an interpretive dancer and a magician pulling a bird out of a hat.

Alibaba has about 200 to 300 employees on the ground in Pyeongchang to study how the games run and help find ways to save future host countries money.

Alibaba’s Tmall and Taobao shopping platforms dominate online retail in China. But it is not well known in many parts of the world, including in the United States where Amazon.com Inc is the e-commerce leader.

It is using an international branding campaign focused on the Olympics to help introduce it to markets such as the United States and Great Britain.

Editing by Greg Stutchbury

Exclusive: China's Ant plans equity fundraising at potential $100 billion valuation – sources

HONG KONG (Reuters) – China’s Ant Financial Services Group is planning to raise up to $5 billion in fresh equity that could value the online payments giant at more than $100 billion, people familiar with the move told Reuters.

A fundraising would bring Ant, in which e-commerce firm Alibaba Group Holding Ltd is taking a one-third stake, a step closer to a hotly anticipated initial public offering by establishing a more current valuation.

Ant’s last fundraising in 2016 valued the owner of Alipay, China’s top online payment platform, at about $60 billion. The new round should start with a valuation of between $80 billion to $100 billion, the people said.

Ant is currently in talks to appoint advisers for the fundraising which is expected to be launched in the next couple of months, they added.

Ant declined to comment on its fundraising plans. All the people spoke to Reuters on the condition they not be identified due to the sensitivity of the issue.

While no timetable for an IPO has been set, nor any location yet chosen, Ant’s plans are being viewed as a pre-IPO fundraising, the people said. A pre-IPO round is an increasingly common move by sought-after Chinese companies to establish valuations and widen their investor base ahead of going public.

It was not immediately clear how the company plans to use the fresh cash.

The exact timing and size of the fundraising still depends on investor feedback but any deal will add to an already hectic pace of domestic and offshore fundraising by Chinese tech firms that are looking to expand both at home and abroad.

Chinese e-commerce firm JD.com is raising funds for its logistics unit with a target of attracting at least $2 billion, while live-video streaming start-up Kuaishou is nearing the close of a $1 billion funding round, sources have said.

Ant’s own existing investments include stakes in Paytm, the Indian mobile payment and e-commerce website, and Thai financial technology firm Ascend Money.

Last month, however, Ant suffered a setback when a U.S. government panel rejected its $1.2 billion offer for money transfer company MoneyGram International over security concerns.

At home, in addition to its core online payments business, which Ant says has 520 million yearly users, the company also offers wealth management, credit scoring, micro lending and insurance services.

Last week, Alibaba announced it would take a 33 percent stake in Ant – replacing the current system where Alibaba receives 37.5 percent of Ant’s pre-tax profit – in what was viewed as an important step ahead of any IPO.

Alibaba set up Alipay in 2004, modeling the business on PayPal, to help Chinese buyers shop online, and later controversially spun it off ahead of its own listing in 2014. Jack Ma, Alibaba’s founder, controls Ant, according to Alibaba filings with the U.S Securities and Exchange Commission.

Ant is considered by some analysts as one of the most valuable Alibaba assets due to its unique position in Chinese e-commerce.

Current shareholders in Ant include large state-owned institutions such as China Life Insurance, China Post Group – parent of Postal Savings Bank of China – and a unit of China Development Bank.

Reporting by Sumeet Chatterjee and Julie Zhu; Additional reporting by Kane Wu; Editing by Muralikumar Anantharaman and Edwina Gibbs

Feds Take Down Infraud, a $530M Cybercrime Forum That Lasted 7 Years

With the rise and fall of dark web black markets like Alphabay and the Silk Road, law enforcement officials have repeatedly warned that even anonymity tools like Tor and cryptocurrencies won’t hide criminals from the law’s long reach. But the most recent takedown of another massive cybercrime forum carries a different lesson: It’s still possible to create an online black market even outside of the dark web’s cover, grow it to a half-billion dollar operation, and get away with it for the better part of a decade.

On Wednesday, the Department of Justice unsealed an indictment against no fewer than 36 people, accused of acting variously as administrators, moderators, and sellers of illegal hacking and fraud services on a black market forum known as Infraud. A coordinated action by Homeland Security Investigations and cops in Australia, Britain, France, Italy, Kosovo and Serbia arrested 13 of those named, and took down the website itself, replacing it with a seizure notice.

The indictment accuses those dozens of defendants, located from Moldova to the Ivory Coast to Bangladesh, of trading in stolen credit card numbers, Social Security numbers, compromised accounts, and materials to create counterfeit cards. They were also allegedly involved in malware, money laundering, and so-called “bulletproof” hosting services designed to host other illegal online operations. In total, the forum’s members are accused of causing $530 million dollars in damage to companies and individuals.

“Infraud was truly the premier one-stop shop for cybercriminals worldwide,” the Justice Department’s Deputy Assistant Attorney General David Rybicki told reporters in a press conference.

But just as noteworthy as the staggering scale of that busted operation—one of the largest in history—is its relative impunity. The majority of the defendants, according to the Justice Department’s statements, seemingly remain at large. That includes Infraud’s creator, the Ukrainian Svyatoslav Bondarenko. And after seven years online, Infraud also achieved longevity that’s far greater than most online black markets. The Silk Road, for instance, despite running as a carefully anonymized Tor Hidden Service and only using the cryptocurrency Bitcoin, persisted on the dark web for two and a half years before it was seized and its administrator arrested. The more recent go-to bazaar for dark web contraband, AlphaBay, lasted just three years.

Infraud remained online well over twice as long as those fellow black markets, while at times hiding in plain sight. The forum was initially hosted as a traditional website, reachable at the URLs infraud.cc and infraud.ws, though it may have later moved to Tor or other better hidden addresses.

The administrators’ most effective tactic to evade law enforcement for so long may have been an old-fashioned one: They ran the site from a server in a country beyond US law enforcement’s reach, likely Russia, says former FBI cybercrime agent EJ Hilbert, who’s now a vice president of cybersecurity at security firm Gavin DeBecker and Associates. Hilbert speculates that the site used the same sort of “bulletproof” hosting that site’s vendors offered for sale, which keeps servers far from American and Western European cops, anonymizes their operators, and frequently moves them to stay a step ahead of investigators. “They were sitting in countries outside the jurisdiction of Western law enforcement,” says Hilbert. “That’s why something like this can remain live for an extended period of time.”

In fact, since March of 2011, less than a year after allegedly founding Infraud, Bondarenko declared that all buying and selling of contraband with Russian victims would be banned from the forum. That tactic, frequently used by Russia-based crime sites, effectively dissuades Russian law enforcement from pursuing most domestically hosted cybercrime. Berkeley computer security researcher Nick Weaver argues that form of “arbitrage”—running a crime scheme with profitable victims in one locale, while hosting in another that’s safer from prosecution—can provide more effective shielding for criminals than Tor. “You find a place where the local laws are happy and host there,” Weaver says. “A cybercrime forum that is ‘no damage to Russia’ is generally allowed in Russia, no need to use Tor.”

That geographic strategy is a well-worn one for cybercriminals, and it long predates both the dark web and Infraud. But given the scale and long life of Infraud’s criminal activity, the site shows just how effective it remains even now. And Hilbert argues that the recent decline in Russian-American relations—particularly around Russia’s own state-sponsored hacking operations—won’t help. “With our government’s animosity to the Russians, and their animosity to us, there’s no reason for them to assist on crimes that don’t impact their people,” says Hilbert.

Just how US, Australian, and European authorities did eventually shut down Infraud remains unclear, and the Justice Department declined to make any officials available to answer WIRED’s questions. As part of the indictment, the Justice Department described a complex organizational chart of Infraud’s alleged staff—from members to VIP members to moderators to super moderators to administrators—which Hilbert suggests could mean they spent years slowly flipping members to identify others in the organization, or gain more information about the site’s hosting.

Despite many of Infraud’s defendants remaining free, the Justice Department’s Rybicki emphasized that the takedown represents a win for the global fight against cybercrime. “The charges and arrests announced today are a victory for the rule of law,” he said. “Law enforcement across the globe acted swiftly to take Infraud’s cybercriminals off the Internet.”

The Infraud bust will no doubt put a serious dent in the cybercriminal underground. But if seven years counts as a “swift” operation, the next Russian black market administrators may be taking comfort in the prospect of a long career ahead of them.

The Cyber Underworld

Take-Two raises forecast on boost from 'NBA 2K18', 'Grand Theft Auto'

(Reuters) – Take-Two Interactive Software Inc lifted its full-year adjusted revenue forecast on Wednesday, as the videogame maker expects to benefit from the latest version of its popular basketball franchise and its iconic “Grand Theft Auto” series.

The company is betting on these two games after further delaying last week the launch of its highly anticipated Western action-adventure “Red Dead Redemption 2” to Oct. 26. The game was scheduled to be launched in spring 2018.

Take-Two’s basketball franchise “NBA 2K18”, launched in September, grabbed the No.2 spot on the 2017 best-selling games list, according to market research firm NPD Group.

The company’s “Grand Theft Auto V” was the No.3 selling title last year in terms of units sold, according NPD, four years after the game’s first release.

“We are expecting another record year for ‘Grand Theft Auto Online’,” Chief Executive Strauss Zelnick said on a call with analysts. “Everything is going better-than-expected and we do have pretty high expectations.”

The game’s online version has also helped in its longevity. The company launched “Doomsday Heist” for “GTA Online” during the holiday quarter.

However, Take-Two forecast current-quarter revenue largely below Wall Street’s expectations. The company said it expected adjusted revenue of $410 million to $460 million, compared with analysts’ average estimate of $442.1 million.

There is a bit of seasonality in our business. You can’t really compare quarter-to-quarter or same quarter over the prior-year quarter, Zelnick said.

Shares of the company, which more than doubled in value in 2017, fell 2.4 percent in extended trading on Wednesday.

U.S. videogame producers typically guide below market expectations but almost always beat them.

For the year ending March 31, Take-Two said it expected adjusted revenue forecast of $1.99 billion to $2.04 billion, up from $1.93 billion to $2.03 billion.

Analysts on average were expecting $2.02 billion, according to Thomson Reuters I/B/E/S.

Take-Two said it expects to deliver record adjusted revenue in excess of $2.5 billion for fiscal 2019.

The company reported net income of $25.1 million, or 21 cents per share, in third quarter ended Dec. 31, compared with a loss of $29.8 million, or 33 cents per share, a year earlier.

Take-Two said it had a net benefit of $11.9 million in the latest quarter from the overhaul of the U.S. tax code.

On an adjusted basis, the company reported revenue of $653.9 million, while analysts’ on average had expected $663.8 million.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sriraj Kalluvila

Snap Touts Snapchat Redesign as Revenue, User Growth Send Shares Soaring

Less than a year after Snapchat’s parent company went public with a flop, Snap Inc. is finally hinting at the possibility of a rosier future after posting surprising quarterly revenue- and user-growth that beat Wall Street’s expectations for the first time ever.

On Tuesday afternoon, Snap said fourth-quarter revenue jumped 72% year-over-year, to $285.7 million, along with adjusted loss of 13 cents per share, compared to analysts’ revenue forecasts of $253 million and a 16 cent per share loss. Meanwhile, ephemeral messaging service Snapchat also saw its user base grow faster than expected, adding 8.9 million daily active users to reach 187 million, the biggest quarter-to-quarter jump since the third quarter of 2016.

The positive news sent shares of Snap soaring more than 23% in after-hours trading on Tuesday to $17.32, as investors showed renewed confidence in Snapchat’s ability to add new users to help it compete with larger social media rivals like Facebook and Facebook-owned Instagram. Investors had been concerned that Snapchat’s user growth rate would continue to slow amid mounting competition from Facebook and its subsidiary, especially since Instagram’s 2016 launch of its Snapchat-copying Stories feature.

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While Snapchat has long been considered popular among younger users, the service must prove it can also appeal to users in older demographics in order to drive further growth and appease advertisers looking to reach users with more spending power. To that end, Snapchat has been teasing a redesign of its mobile app aimed at attracting older users by making it easier to use.

News of the redesign initially spooked investors, and the changes have only trickled out to small test groups, so far. But CEO Evan Spiegel offered reassurances in a letter to investors on Tuesday in which he said that tests of the redesign led to users watching more Stories from media companies and spending more time viewing ads.

“We believe that the redesign has also made our application simpler and easier to use, especially for older users,” Spiegel wrote. “Compared to the old design, core metrics around content consumption and time spent in the redesigned application are disproportionately higher for users over the age of 35, which bodes well for increasing engagement among older users as we continue to grow our business.”

While reports last month suggested that users were responding negatively to Snapchat’s redesign, Spiegel expressed confidence today that the changes will help the company continue to build on its most recent quarter of user growth, and thus boost revenue.

Capacity alone won't assure good cloud performance

Many people believe that workloads in the cloud always perform better because public clouds have access to an almost unlimited amount of resources. Although you can provision the resources you need—and even use serverless computing so the allocation of resources is done for you—the fact is that having the right amount of resources is only half the battle.

To get good cloud performance means you have to be proactive in testing for performance, not be reactive and wait for an issue to arrive in production. After all, performance depends on much more than raw capacity.

I strongly encourage testing. If you’re using devops to build and deploy your cloud application workloads, your testing for security, stability, and so on are typically done withcontinuous testing tools as part of the devops process.

But what about performance testing?

Truth be told, performance testing is often an afterthought that typically comes up only when there is a performance problem that the users see and report. Moreover, performance usually becomes an issue when the user loads surpass a certain level, which can be anywhere from 5,000 to 100,0000 concurrent sessions, depending on the application. So you discover a problem only when you’re got high usage. At which point you can’t escape the blame.

An emerging best practice is to build in performance testing into your devops or cloud migration process. This means adding performance tests to the testing mix and look at how the application workload and connected database deals with loads well beyond what you would expect.      

This means looking for a performance testing tool that is compatible with your application, the other devops tools you have, and the target cloud platform where the application is to be deployed. Of course, a “cool tool” itself is not the complete answer; you need testing engineers to design the right set of testing processes in the first place.      

Ironically, although devops itself ( as both a process and tool set) is all about being proactive in terms of testing, most devops processes that I’ve seen don’t do much performance testing, if any at all.     

Withouth that testing, you can’t answer the question “When will my cloud workload hit the performance wall?” Instead, your users find out for you, and you may discover it’s time to look for a new job.         

Seattle finds Facebook in violation of city campaign finance law

SAN FRANCISCO (Reuters) – Seattle’s election authority said on Monday that Facebook Inc is in violation of a city law that requires disclosure of who buys election ads, the first attempt of its kind to regulate U.S. political ads on the internet.

Facebook must disclose details about spending in last year’s Seattle city elections or face penalties, Wayne Barnett, executive director of the Seattle Ethics and Elections Commission, said in a statement.

The penalties could be up to $5,000 per advertising buy, Barnett said, adding that he would discuss next steps this week with Seattle’s city attorney.

It was not immediately clear how Facebook would respond if penalized. Facebook said in a statement it had sent the commission some data.

“Facebook is a strong supporter of transparency in political advertising. In response to a request from the Seattle Ethics and Elections Commission we were able to provide relevant information,” said Will Castleberry, a Facebook vice president.

Barnett said Facebook’s response “doesn’t come close to meeting their public obligation.” The company provided partial spending numbers, but not copies of ads or data about whom they targeted.

The unregulated nature of U.S. online political ads drew attention last year after Facebook said Russians using fake names bought ads on the social network to try to sway voters ahead of the 2016 presidential election. Moscow denies trying to meddle in the election.

Buying online election ads requires little more than a credit card. Federal law does not currently force online ad sellers such as Facebook or Alphabet Inc’s Google and YouTube to disclose the identity of the buyers.

Legislation is pending to extend federal rules governing political advertising on television and radio to also cover internet ads, and tech firms have announced plans to voluntarily disclose some data.

Facebook Chief Executive Mark Zuckerberg said in September that his company would “create a new standard for transparency in online political ads.”

At the center of the Seattle dispute is a 1977 law that requires companies that sell election advertising, such as radio stations, to maintain public books showing the names of who bought ads, the payments and the “exact nature and extent of the advertising services rendered.”

The law went unenforced against tech companies until a local newspaper, The Stranger, published a story in December in the wake of the Russia allegations asking why.

Seattle sent letters to Facebook and Google asking them to provide data. The sides have been in talks, and last month Facebook employees met in person with commission staff.

“We gave Facebook ample time to comply with the law,” Barnett said.

Google has asked for more time to comply, and that request is pending, Barnett said.

Legal experts said they were unaware of any similar regulation attempts by other U.S. localities or states.

“Given the negative publicity around Facebook’s failure to provide adequate transparency in the 2016 elections, I would be surprised if they tried to challenge this law,” said Brendan Fischer of the Campaign Legal Center, a nonprofit that favors campaign finance regulation.

Reporting by David Ingram; Editing by Leslie Adler and James Dalgleish

Major Banks Ban Buying Bitcoin With Your Credit Card

Most major U.S. credit card issuers have now banned the use of their cards to buy Bitcoin or other digital currencies, in a move intended to decrease both financial and legal risk.

Bank of America began blocking cryptocurrency purchases on Friday, according to Bloomberg. JPMorgan did the same on Saturday.

Citigroup also says it is halting cryptocurrency purchases on credit, and Capital One and Discover had already enacted their own bans. That means all of the top five credit card issuers have announced or implemented bans.

The moves are above all in the banks’ self-interest. As Fortune previously reported, the mania surrounding cryptocurrency late last year appears to have motivated many retail investors to use credit cards as leveraging tools, buying more cryptocurrency than they could afford. With Bitcoin down roughly 50% from December highs, many of those investors are likely underwater right now, and may not be able to pay off their initial Bitcoin purchases soon, if ever.

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Further, as Bloomberg points out, banks may be responsible for monitoring customers’ behavior to prevent money laundering after they make a credit-backed Bitcoin purchase, a tough standard for them to comply with.

The bans — or more to the point, the news of the bans — may exacerbate ongoing declines in cryptocurrency prices. After a hefty bounce Saturday morning, crypto markets broadly retreated on Sunday. Bitcoin is now trading at around $8,500 from a December high near $20,000.

In the longer term, however, tighter cryptocurrency investment controls, whether from regulators or lenders, seem likely to help mitigate the consequences of both hype and scams. For much of 2017, those threatened to overshadow the underlying promise of blockchain technology, which is still in the very early stages of evolution.

Lomography Lomo'Instant Square Review: Great For Square Photo Lovers

One of my favorite cameras ever is the original Polaroid SX-70. This marvel of engineering, chemistry, and industrial design introduced the world to fully integral instant photography—before the SX, instant photography wasn’t quite instant, requiring a peel-apart film that relied on some pretty gnarly chemicals.

The SX-70 was like the iPod of its time. With a sleek metallic and leather exterior, the device popped up, transforming a jacket-pocketable slab into a sophisticated SLR camera. It was an expensive, high-tech imaging solution the likes of which the world had never seen in the early ’70s.

Perhaps most importantly, the SX-70 was the first Polaroid camera with the iconic, instantly-recognizable square photos that define that photo format. Until recently, the only way to get that iconic square instant photo was by shooting imperfect, Dutch-made Polaroid Originals film in a compatible (vintage or modern) camera. But you Huey Lewis-types now have another photographic option: last year, Fujifilm developed a square version of its awesome Instax film. Unfortunately, Fuji then proceeded to hamper it with an expensive hybrid digital/analog camera.

Enter the Lomography Lomo’Instant Square. It’s the first analog camera to shoot square Instax film. Like the SX-70, this camera is compact, and folds up when not in use. So far, so good…

The design and build quality of this camera is impressive. Lomo didn’t always make great-feeling, tightly-assembled cameras but since the Automat series began, it’s clear that these areas have been vastly improved. My review unit was a creamy white hue with color-matched faux leather on it.

Opening the camera takes a bit of force, which means it’s unlikely it’ll spring open in your bag. That’s reassuring to me, since the camera uses rubber for a bellows assembly behind the lens, a potential point of failure if debris falls inside the camera’s body. When closed, it vaguely resembles a pair of electrobinoculars from Star Wars.

The camera also protects its own front lens, opening and closing shutters that cover the glass as it unfolds. I was annoyed by how the camera’s lens mechanism resets its focus every time the camera is closed, so you’ll need to remember to check it each time you take the camera out.

Speaking of focus, the Lomo’Instant Square has a fairly forgiving range of zones to choose from. That said, I recommend you splurge and get the combo version of this camera, since it includes a much-needed portrait attachment. Though the Lomo’Instant Square features a tiny selfie mirror, at arms’ length, you’d be hard-pressed to take a portrait that’s not out of focus. Screw the 0.5m attachment onto the camera and your selfies will look so, so, so much better.

Photo modes are plentiful since this shares its exposure system with Lomo’s other recent instant cameras. Multiple exposures, 1 stop +/- compensation, and even a bulb mode are all standard features. I’d say that’s just enough control to help steer the otherwise-automatic exposure system into giving you the results you want, and certainly enough to let you experiment.

One pain point for me was the viewfinder. Unlike the magical, complicated SLR setup inside the SX-70, the Lomo’Instant Square has an off-center viewfinder that’s far, far away from the long lens. It’s tricky to frame shots up just right, and you’ll need to mentally compensate for parallax to make sure your subject is where you want it.

There are a few things you should know before you take the plunge and pick the Square. First, it’s expensive at more than $200. For the sake of comparison, the newest Polaroid Originals-branded model, the OneStep 2 sells for about half that, and gives you true Polaroid-sized pictures.

If that doesn’t dissuade you, grab the combo option that includes the Splitzer, a must-have portrait lens attachment, and an adapter back that’ll let you use Instax Mini film. That last piece is super cool—Instax Square film isn’t cheap at around $1.30 per shot, so you’ll probably get more use out of your camera if you can also shoot the cheaper, easier-to-find Mini-sized film.

Taken on its own, I’m impressed with what Lomo’s done here. Do I love it as much as my SX-70? No. But the square prints, fabulous design, and reliable Instax chemistry make this a far more approachable experience.

The Sound of a Cyber Bubble Popping

The cryptocurrency market is in a meltdown. Bitcoin prices are down nearly 60% from their December highs, and major banks are cutting off credit card access to crypto exchanges—no surprise in the wake of a mania that saw everyone and their dog sharing hot crypto tips.

Meanwhile, the cyber-security industry is experiencing its own bubble bursting, albeit in much less dramatic fashion. As Reuters reported last month, investors are at last acknowledging the obvious: There are too many VC-bloated start-ups chasing too few clients, while unicorns are morphing into zombies struggling to find an IPO or other exit.

This situation may explain a recent flurry of press releases from cyber firms like Tenable, Cylance and Duo. The releases tout revenue growth and appear intended to assure anyone who will listen that “hey, we’re surviving the cyber shake-out just fine thank you very much.”

It’s hard to say for now which firms will be left standing at the end of 2018 but, for now, it’s clear the peak of the cyber-boom, when VCs would shower money on any company with blinky lights, is over. The investor uncertainty, though, is just one part of the cyber story. There’s also the more important question of whether all these companies have helped harden the country against hacking, and the answer appears to be yes.

Based on recent conversations with ordinary executives, I’ve found cyber-literary has shot up. While hackers are still getting through (they always will), managers and general counsels are finally attuned to the threat and doing something about it.

This change is also trickling down to more humble enterprises. I met a company this week called CyberSight, which offers free and low-cost ransomware protection to the likes of small businesses and county governments, and many of them are actually implementing it. This is a welcome change from a year ago when too many companies blew off cyber defense as an exotic affair they didn’t need.

So let’s celebrate cyber victories where we can find them. Finally, returning to crypto, don’t forget it’s tax time—if you bought or sold, here’s a plain English Q&A to get you through. Have a great weekend.

Jeff John Roberts

@jeffjohnroberts

[email protected]

Welcome to the Cyber Saturday edition of Data Sheet, Fortune’s daily tech newsletter. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.

THREATS

Bye-bye little bots: Twitter users are losing tens of thousands of followers in the wake of a searing report about a “follower factory” that let people inflate their social media popularity with the help of bots, many of which were crafted by means of identity theft. A Twitter board member was among those who lost followers in the purge.

Apple and the FBI, it’s complicated: In the wake of a 2016 terrorist attack, media outlets (including Fortune) reported on bad blood between Apple and law enforcement over the iPhone maker’s encryption polices. Today, the two sides still don’t see eye-to-eye but are in many ways more friendly than you think.

Looming specter of Spectre: Sure enough, those scary Spectre and Meltdown viruses may be coming to a chip near you. Researchers have already found 130 malware samples that appear to have been built in order to exploit the worldwide chip vulnerabilities disclosed in January.

Netflix and Phish: When you have 118 million subscribers, many of them addicted to binge-watching, your service will be a popular target for scammers. A fake Netflix subscription email is making the rounds (again), threatening to cancel Netflix customers’ accounts if they don’t supply their credit card number. One guess what happens if you click.

Hey Hawaii, good call on canning that button pusher who kept confusing drills with real life. 

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ACCESS GRANTED

The robbery caper began in a Ruby Tuesday’s restaurant in Times Square, where Meza met his victim, who had earlier disclosed he was an early investor in Ethereum. The cryptocurrency was once worth pennies but last year soared to over $1,000.

— If you’re going to rob someone at gunpoint for their crypto-currency, for heaven’s sake, don’t transfer the funds to a popular exchange in your own name. Fortune obtained exclusive details about a crazy crypto heist in New York.

ONE MORE THING

Obligatory SuperBowl tidbit: Jeopardy host Alex Trebek chided his contestants over their complete and utter ignorance of football, a topic that regularly pops up in the weeks before the gig game. The show then trolled the players with a tweet, saying “Our contestants answered as many clues in this category as the @Browns had wins this season.”

Don't Waste Your Time Trying to Hire a 'Tom Brady.' Here's a Better Way to Build a Winning Team

By Mattson Newell (@MattsonNewell), Client Relationship Partner at Partners In Leadership and expert and author on Breakthrough Communications, Global Human Resources, and Talent Development.

It’s easy to look at the dynasty that the New England Patriots have built and fall into the trap of trying to hire a Tom Brady. That surely, once you have that superstar in place, it will lead to championships, glory, and bonuses for everyone.

Not everyone remembers that before Brady was the superstar he is today, the sixth-round draft pick who was in a battle to even make the team. From there he was coached and developed. He learned to seize opportunities as they presented themselves. As they say, leaders are made, not born. The same can be said for superstars, too.

Instead of throwing your resources into hiring a superstar for your business, here’s a better way to build a winning team.

1. Develop the right people

The development trap that many leaders fall into is looking for whoever has the best results in the company and then plugging them into a leadership position or development track.

When a very successful SVP of Sales left a Fortune 500 organization, who do you think they tabbed to replace him? That’s right, the person with the highest sales numbers the year before.

You can guess what happened next. The former sales superstar who was excellent at selling and working with clients, struggled in his new SVP role working internally and overseeing the sales team. Within six months he was out the door and the leader was again looking for a new SVP.

Top producers do not always translate into our top leaders. When deciding who the right person is to develop as a leader in your organization, consider the whole person instead of just focusing on numbers and results.

2.  Develop the right plan

Many organizations only put a plan in place to develop their people when they find out a leader is headed out the door. Unfortunately, that is too late.

Succession planning and leadership development should be a constant, thriving, evolving part of your organization at all times, not just when a leader is leaving. It is important to put systems and processes in place to identify, develop, and build bench strength.

Jim Skinner, former CEO of McDonald’s, was known to tell managers: “Give me the names of two people who could succeed you.” This was one way he worked to manage succession planning.

3. Develop the right skills

In a survey conducted by Partners In Leadership, which involved more than 40,000 people from small start-ups to Fortune 50 organizations, over half of those surveyed said that their stated 2020 goal was either an aggressive stretch or a crazy stretch.

But stretch goals are attainable: the Seattle Seahawks won the Super Bowl in 2014 even though they were only two years removed from going 7-9.

What is key is that your team has the skills necessary to achieve a stretch goal. If your current players don’t have what it takes to win, set them up for success by identifying what skills they need. Then provide the right learning opportunities to develop their talent for sustainable results.

By instilling an empowered, continuous learning culture, you’ll be able to maintain a motivated, performance-oriented workforce that isn’t afraid to stretch outside their comfort zone.

Creating Results and Shaping Change

True, it is much less expensive to develop your good people than to go out and try to hire the already-established superstars. But there are more benefits to developing employees than upfront cost-savings.

Employee research consistently shows that career development opportunities are a leading indicator of employee engagement. In a recent study on employee retention, the most important aspect of a company’s reward and recognition program was employee development opportunities.

Having worked with thousands of employees in high-potential programs over the years, we have seen the impact engaged employees have on their companies–both immediately and long after their development, as they move on to significant leadership roles in their organizations.

Don’t fall into the trap of thinking that you need to hire the next ‘Tom Brady.’ Instead, look for the current ‘Tom Brady(s)’ on your team and develop them. Who knows, they might turn out to be your next superstars!

DriveNow deal paves way for BMW-Daimler alliance – source

FRANKFURT (Reuters) – Germany’s BMW has bought out partner Sixt from their joint venture DriveNow, paving the way for a broader car-sharing and robotaxi alliance with Daimler to compete against the likes of Uber and Lyft.

BMW is close to agreeing a deal to combine its car-sharing services with Daimler’s Car2Go, a person familiar with the discussions told Reuters.

The German carmakers want to build a joint business which includes car sharing, ride-hailing, electric vehicle charging, and digital parking services, a senior executive at one of the companies said.

Mercedes-Benz parent Daimler and BMW declined comment on the status of potential talks of their car-sharing business. “This is speculation, we do not comment,” BMW said.

The BMW booth displays the company logo at the North American International Auto Show in Detroit, Michigan, U.S. January 16, 2018. REUTERS/Jonathan Ernst

The senior executive, who declined to be named because the plan is not public, said: “This will create an ecosystem which can also be used for managing robotaxi fleets.”

The market for ride-hailing services currently makes up around 33 percent of the global taxi market, and could grow eightfold to $285 billion by 2030, once autonomous robotaxis are in operation, Goldman Sachs said in a recent research note.

BMW and Daimler are now working on developing autonomous cars, vehicles which could enable them to upend the market for taxi and ride-hailing services.

Sixt on Monday said it would generate an extraordinary pre-tax profit of about 200 million euros in 2018 due to the sale of the DriveNow stake for 209 million euros ($259 million).

($1 = 0.8066 euros)

Reporting by Edward Taylor and Sylwia Lasek; Editing by Maria Sheahan and Georgina Prodhan

Amazon.com opens its own rainforest in Seattle

SEATTLE (Reuters) – Amazon.com Inc on Monday opens a rainforest-like office space in Seattle that it hopes will spark new ideas for employees.

While cities across North America are seeking to host Seattle-based Amazon’s second headquarters, the world’s largest online retailer is still expanding its main campus. Company office towers and high-end eateries have taken the place of warehouses and parking lots in Seattle’s South Lake Union district. The Spheres complex, officially open to workers on Tuesday, is the pinnacle of a decade of development here.

The Spheres’ three glass domes house some 40,000 plants of 400 species. Amazon, famous for its demanding work culture, hopes the Spheres’ lush environs will let employees reflect and have chance encounters, spawning new products or plans.

The space is more like a greenhouse than a typical office. Instead of enclosed conference rooms or desks, there are walkways and unconventional meeting spaces with chairs.

Amazon has invested $3.7 billion on buildings and infrastructure in Seattle from 2010 to summer 2017, a figure that has public officials competing for its “HQ2” salivating. Amazon has said it expects to invest more than $5 billion in construction of HQ2 and to create as many as 50,000 jobs.

Earlier this month, the online retailer narrowed 238 applications for its second headquarters to 20. The finalists, from Boston and New York to Austin, Texas, largely fit the bill of being big metropolises that can attract highly educated tech talent.

Amazon started the frenzied HQ2 contest last summer and plans to pick a winner later this year.

Seattle’s mayor, the governor of Washington and Amazon’s top real estate executive were expected to speak during the Spheres’ opening ceremony. The Spheres will become part of Amazon’s guided campus tours, and members of the public can also visit an exhibit at the Spheres by appointment starting Tuesday.

Reporting By Jeffrey Dastin in Seattle, editing by Peter Henderson and Cynthia Osterman

Intel Gives You 9-10% Through 2020

Intel: Buy, Sell or Hold?

I won’t hold you in suspense. Here’s my recommendation:

Firs, the easy part. If you own Intel (INTC) then HOLD. I would not buy and I would not sell. You’re in a good place right now. I’m going to explain all of that very soon.

Next, if you’re thinking about buying, you can see that Intel’s been moving up, and it spiked up today, which I also talk about later.

So, if you’re “into” the momentum and the growth story, then you’re probably looking at something like a 12% rate of return through 2020, assuming Intel’s P/E moves to up around 15. Although, after the spike today, I’d have to revise that down to probably 10-11% per year.

If you believe that Intel is more likely to float around the 10 year average P/E that’s between 12 and 13, then your annual rate of return drops to around 6%. And really, considering the spike today, it’s more like 5%.

Let’s combine things together to come up with a worst case to best case range. You’re probably looking at something like 5% to 12% annual gains. And if I had to dial this in, it’s probably 9-10% per year through 2020. If that’s acceptable, then this becomes a BUY for you.

Is this simple? You bet! However, to help guide your thinking and to go much deeper, I put together my story for you. There’s way more to the Intel investment thesis that you need to know.

Let’s get started!

Circle of Competence

I’m not a fan of most technology stocks. However, I remember when I broke my rules back in September 2012. That’s when I first bought Intel (INTC). It hasn’t been smooth sailing, that’s for sure. I’ll come back to this point.

I’ve got a bunch of education, including some time formally learning about information systems, internet technology, programming, databases and that sort of thing. Most of that formal training was rooted in management principles and business operations.

I’ve also got real world experience, like being a webmaster, business analyst, software engineer, software manager, and human-computer interaction consultant. I won’t bother you with more details on this. You’ve just suffered enough puffery.

The key point is that despite the education and experience I still have a strong aversion to investing in technology. It moves too fast. Empires rise and fall. I’m keen on stability and predictability. I think that most investments in technology are doomed because the uncertainty is too high.

While we all think we can tolerate change and disruption, the human mind hates this chaos and willpower isn’t enough to prevent buying high and selling low. The rational mind has a difficult time preventing the subconscious mind and brain chemicals from screwing over your wealth. Greed, envy, fear are alive and well. Don’t blame me, that’s the human condition. It’s baseline.

To emphasize, despite my education and experience I still don’t like to invest in technology. However, I don’t completely hate world class industrial companies and manufacturers.

Intel Beer Goggles

I was having a conversation with a guy over a beer. He wouldn’t stop talking about so many different technologies. He was a geek, no doubt, but also an investor and business owner. He was flying from one company to the next. I started to tune out. Then he brought up Intel, and I paid attention.

He was talking about the size of Intel. He explained more details about the famous tick-tock schedule. He brought up Andy Grove. Many tumblers started to line up and unlock Intel in my brain.

Here’s a feel for that vibe:

There is much more. What you should notice is that technology was NOT my #1 consideration. In fact, I repeatedly tried to kill this investment idea. But, the size, scope and strength of INTC greatly impressed me.

Intel As A Dirty Smokestack Company

What really worked to shape my mind was this: I ignored INTC as a technology company and instead viewed it as an industrial and manufacturing company. I felt this was justified given what I knew about the company. Throw in some savvy marketing and great leadership, and you’ve got a totally different type of company. Innovation with a steady hand was obvious to me.

I don’t love industrial or manufacturing companies. They are cyclical and there’s a lot of volatility. But, the best of them are easy for me to understand and I also tolerate lumpy earnings. Two examples are Deere & Company (DE) and Cummins (CMI). I looked at INTC much like I looked at DE and CMI, looking past price volatility and earnings swings.

One thing that was especially important with INTC was how it handled cash and debt. INTC’s got an S&P Credit Rating of A+ and does a fine job with capital. It impressed me, tremendously. If you’ve got cash and the tide goes out, you’re probably going to be fine.

So, that’s a lot of the “soft” thinking that I remember. It’s what I could pull out of my old notes and a couple of emails that I sent to myself. I’m going to shift into what numbers I was looking at, and when exactly I was buying.

The Dot Com Horror

I almost decided against INTC because of this:

And, although it was a complete overreaction, I looked at how an investment in INTC in August of 2000 through September of 2012 generated a loss of over 63%, or as you can see below, a lovely (8%) annualized loss. Spooky!

Remember, that’s what I was literally looking at and thinking about. So, the charts alone included an extreme price. Plus, look at the earnings from 2000 through 2009. That’s about a decade of painful stagnation!

And, in 2012, we were really just starting to feel a little better about the economy. And, not by much, I might add.

The Truth About Dividends And Buybacks

One bright spot was that dividends were generally going up:

Of course, you already know how this was accomplished.

Since INTC’s earnings weren’t growing, this “growth” was somewhat artificial. The payout ratio in 2000 was about 5%, then 15% in 2001, then 23% in 2005, then 48% in 2009 and then around 40% in 12.

The “first order” thinking here quite obvious. INTC decided to reward shareholders with dividends.

What about share buybacks? Here’s what I was looking at, roughly speaking. You can see a lot of money pouring in; cannibals.

Chart
INTC Stock Buyback (Annual) data by YCharts

Again, the “first order” thinking here is that INTC decided to reward shareholders. I mean, that is actually true here. While we can debate the effectiveness of the buybacks, the intention and the actions seem pretty clear to me.

But, I strongly believe that something else happened between 2000 and 2012:

I was seeing a transformation at INTC: From an internet hot stock company to a mature, “smokestack”, technology blue chip.

At the time, no one was really giving INTC credit for this maturity. It was damn slow and to an impatient eye. It was easy to miss. To be very blunt, this is when any why I started to get excited.

I felt like I found some alpha! My strong desire for stability, consistency, loyalty and tenacity my investments was showing up in INTC.

It was a very pleasant surprise…

And That’s When I Started Buying

I started buying on 15-Sept-2012. Then, here’s what came next:

  • Added on 28-Sept-2012 (price unknown)
  • Added on 09-Oct-2012 (price unknown)
  • Added on 20-Nov-2012 ($19.66)

My average cost was $21.80 and I was satisfied.

Other than collecting my dividends, I didn’t do anything special with INTC. I just sat there. I kept watching and learning.

But then…

I Got An Itch

Here’s what I was looking at, from the buys I made in late 2012:

I started selling off some blocks of INTC, capturing 25-30%.

  • Sold on 23-Dec-2013 ($25.22)
  • Sold on 11-Feb-2014 ($24.48)
  • Sold on 17-Mar-2014 ($24.68)

That said, I stopped selling. I decided to hold.

You can see that from that point forward by a year or two that INTC was creeping up and up. I felt pretty good about pulling some “quick gains” off the table, and I felt pretty good about seeing INTC move steadily upward.

Where We’re at Today

Roughly speaking I’m sitting on overall gains of around 125-130% in about 5 and 1/2 years. Annualized that somewhere around 16-18% per year.

Not from genius. I created a little bit of luck. Opportunity met preparation. And look, this isn’t a 10-bagger or anything spectacular. However, it does give me confidence that:

  1. buying low and holding is quite rational
  2. taking some profits is not the end of the world
  3. dividends are important and smooth things over
  4. research and due diligence are required
  5. price doesn’t always reflect value
  6. long-term thinking can provide some “alpha”
  7. any single chart in isolation is a liar

Today (26-Jan-2018), INTC is spiking in price in a big way:

  • Q4 beats
  • data center growth
  • upside guidance

The value was there before this spike but now we see how facts intersect with the emotions of the general market.

Right now, Mr. Market is thrilled and offering up shares at higher and higher prices. When Mr. Market is so excited, I slump, grumble, and moan a little. Mostly, I walk away and ignore the cheers and celebration.

I read the news coming directly from INTC, and sip on my coffee, scrolling my way through the comments. So many cheerleaders!

Well that looks nice.

…the growth story is catching on.

$50+ soon.

Looks amazing to me. I knew altera purchase was just the beginning.

This thing is similar to MSFT 2 years ago. It can easily double in 3 years

Yeah baby. Love the bump in divvy and the outlook. Long INTC

Intel huge moat …

Love INTEL! Long time!!

Of course, you get the point.

It all smells so good, right?

Up, up, and away…

What I Am Doing With INTC Today!

Nothing.

Just holding.

No buying, no selling.

Oh, sorry, I’ve got to go. My wife is yelling at me. Time to walk the dog.

Stay frosty.

Disclosure: I am/we are long INTC,CMI,DE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.