IBM Highlights 5 Technologies It Hopes To Pioneer In 5 Years

We tend to think of innovation as being about ideas. A lone genius working in a secret lab somewhere screams “Eureka!” and the world is instantly changed. But that’s not how the real world works. In truth, innovation is about solving problems and it starts with identifying useful problems to solve.

It is with that in mind that IBM comes out with its annual list of five technologies that it expects to impact the world in five years. Clearly, each year’s list is somewhat speculative, but it also gives us a look at the problems that the company considers to be important and that its scientists are actively working on solving.

This year’s list focuses on two aspects of digital technology that are particularly important for businesses today. The first is how we can use digital technology to provide a greater impact on the physical world in which we all live and work. The second, which is becoming increasingly crucial, is how we can make those technologies more secure.

1. AI Powered Microscopes At Nanoscale

In the late 17th century a middle-aged draper named Antonie van Leeuwenhoek became interested in the magnifying glasses he used to inspect fabric. From those humble beginnings arose the new age of microscopy which has helped produce countless major discoveries over the last 450 years.

Today, IBM hopes to spur a similar revolution with nanoscale microscopes powered by AI. Unlike Leeuwenhoek’s version, these will not use optical lenses, but optical chips like the ones in your cell phone, except shrunk down small enough to observe microscopic cells in their natural environment and use AI to analyze and interpret what it sees.

As Simone Bianco and Tom Zimmerman, both researchers at the company, explained in their popular TED Talk, these devices can help us to better understand how plankton in the world’s oceans behave in reaction to stimuli and help mitigate the effects of global warming.

It is also partnering with the National Science Foundation (NSF) to transform our body’s cells into microscopic sensors. With a greater understanding of what’s going on in both normal and abnormal conditions, scientists will be able to better diagnose disease and come up with new cures. It may even help power science for the next 450 years.

2. Combining Crypto-Anchors And Blockchain To Secure The World’s Supply Chains

In 1999, a young assistant brand manager at Procter and Gamble named Kevin Ashton realized that an obscure technology that used radio waves to power small, passive devices could revolutionize supply chain management. Today, RFID chips are everywhere, helping us to track and manage inventory across the globe.

However, although RFID helps to increase efficiency, it can do little about security, which is has become a massive problem for two reasons. First, counterfeiting costs businesses hundreds of billions dollars a year and helps finance criminal gangs and terrorists. Second, in the case of things like food and medicine, insecure supply chains are a major health hazard.

IBM sees a solution to the problem of counterfeit goods through combining tamper-proof digital fingerprints it calls “crypto-anchors” with blockchain technology to secure supply chains at a cost low enough to spur wide adoption. It is also unveiling the world’s smallest computer this week. Costing less than 10 cents to make and smaller than a grain of salt, it can be used to analyze products such as wines and medicine and verify provenance.

As a first step to securing supply chains, the company has formed a joint venture with the global logistics firm Maersk to implement blockchain technology throughout the world. For businesses, this will mean a supply chain that is more efficient, reliable and secure.

3. Super-Secure Lattice Cryptography

2017 was a great year for cyber attackers, but not so good for the the rest of us. Major breaches at Equifax, Uber and in a database containing over 200 million voter records were just the highlights of a banner year for hackers. These attacks highlight a critical vulnerability for both our financial systems and the integrity of our democracy.

Part of the problem is that conventional cryptography methods are designed to be incredibly cumbersome — even for supercomputers — so information needs to be decrypted in order to be analyzed. When hackers get into a system, they can often take whatever they want.

IBM is working on a form of security called lattice-based cryptography. Unlike traditional methods, which use impossibly large prime numbers as a key, these use complex algebraic problems called “lattices” to secure information — even from quantum computers many years from now. A related technology, called Fully Homomorphic Encryption (FHE) will allow systems to analyze data without decryption.

So, for example, a hacker breaking into a customer or voter database will free to calculate how much tax is owed on a purchase or how many Millennials reliably vote for Democrats, but identities will remain secret. Businesses may also be able to analyze data they never could before, because they won’t actually need to be given decrypted access.

4. Rooting Out Data Bias For Reliable And Trustworthy Artificial Intelligence

As Cathy O’Neil explains in Weapons of Math Destruction data bias has become a massive problem. One famous example of this kind of bias is Microsoft Tay, an AI powered agent that was let loose on Twitter. Exposed to Internet trolls, it was transformed from a friendly and casual bot (“humans are super cool”) to downright scary, (“Hitler was right and I hate Jews”).

Even more serious are the real world impacts of data bias. Today’s algorithms often determine what college we attend, if we get hired for a job and even who goes to prison and for how long. However, these systems are often “black boxes” whose judgments are rarely questioned. They just show up on a computer screen and fates are determined.

IBM is now working with MIT to embed human values and principles in autonomic decision-making and to devise methods to test, audit and prevent bias in the data that AI systems use to augment human judgments. With numerous questions being raised about the ethics of AI, the ability to oversee the algorithms that affect our lives is becoming essential.

5. Quantum Computing Goes Mainstream

Quantum computing is a technology that IBM has been working on for decades. Still, until relatively recently, it was mostly a science project, with little practical value or obvious commercial applications. Today, however, the field is advancing quickly and many firms, including Google, Microsoft and Intel, are investing heavily into the technology.

Over the next five years the company sees quantum computing becoming a mainstream technology and has unveiled several initiatives to help make that happen.

  • Q Experience is a real working quantum computer that anyone who wants to can access through the cloud and learn to work with the new technology
  • QISkit, is a set of tools that helps people program quantum computers using the popular Python language
  • Q Network a group of organizations exploring practical application of quantum computers.

The effort to design new computing architectures, which includes neuromorphic chips as well as quantum computers, is becoming increasingly important as Moore’s law winds down and theoretical limits soon make further advances in transistor-based computers impossible.

Like the other initiatives in IBM’s 5 for 5, taking quantum computer mainstream within five years stretches the bounds of the possible, but that’s very much the point. Identifying a meaningful problem and setting a goal to solve it are the first steps in transforming an idea into reality.

How China's ride-hailing giant Didi plans to challenge Uber in Mexico

MEXICO CITY/SAN FRANCISCO (Reuters) – Working quietly from a shared office space in one of Mexico City’s trendiest neighborhoods, China’s ride-hailing giant Didi Chuxing is planning to hit its archrival Uber where it hurts.

A man walks by under an Uber logo in Mexico City, Mexico February 6, 2018. Picture taken on February 6, 2018. REUTERS/Carlos Jasso

Mexico is one of Uber Technologies Inc’s [UBER.UL] most prized and profitable markets. The San Francisco firm boasts a near monopoly here, with seven million users in more than three dozen cities. Which is precisely why Didi wants to knock Uber from that comfortable perch.

To learn how to conquer Uber, the Chinese firm is going straight to the source. It is poaching Uber employees for its Mexico management team. Didi employees are riding incognito with Uber drivers and chatting up passengers to pinpoint weaknesses, according to people familiar with its strategy. And Didi is thinking bigger than Uber, with ambitions for bike-sharing, scooters and motorcycles in Mexico, the people say.

The Chinese firm has deep pockets, thanks to blue-chip global investors that include Apple Inc and Japan’s SoftBank Group Corp [9984.T]. In the past year alone, it has pulled in nearly $10 billion to help fund global expansion.

“I would not want to go to war with Didi,” said Beijing-based investor and adviser Jeffrey Towson. “They don’t lose.”

But whether Didi can beat its nemesis here is far from certain. Mexico is the Chinese firm’s first attempt at building an operation from scratch outside of Asia – a costly gambit.

What is clear is that Didi is under pressure to keep growing to justify its $56 billion valuation. Latin America is the newest battleground for the old rivals, and Didi will be in enemy territory.

“It’s fundamentally different when you’re jumping across an ocean,” said IHS Markit analyst Jeremy Carlson.


Didi Chuxing Technology Co is the world’s largest ride-hailing firm by number of rides, thanks to its commanding market share in China, where it has 450 million users. It completed more than 7.4 billion rides last year, not quite double Uber’s count.

Uber learned the hard way about Didi’s brawn. After waging an expensive campaign to crack the Chinese market, Uber in 2016 sold its operation to Didi in exchange for a 17.5 percent stake in the Chinese firm, which also made a $1 billion investment in Uber.

The titans continue to butt heads as they race to carve up the rest of the globe. Uber is the top dog in Latin America, where Brazil and Mexico rank among its largest markets outside the United States. In Mexico, Uber held an 87 percent market share as of August, according to Dalia Research, a Berlin-based consumer research firm.

(For a graphic on Uber’s market share in Latin America, see:

Didi wants to change that. Reuters was first to report that Didi had designs on Mexico, where it began recruiting employees last year.

The company declined to talk openly about its plans, but details of its strategy are emerging.

Nestled on the ninth floor of a WeWork shared office building in the capital’s Juarez neighborhood, Didi is building an operation from the ground up. In foreign markets such as India and the Middle East, it purchased stakes in existing companies. But Uber is so dominant in Mexico that there is no clear investment opportunity in a local competitor, according to people familiar with Didi’s thinking.

Hungry for experienced talent, Didi is aggressively recruiting current and former Uber employees, offering to nearly double their salaries in some cases, two people with knowledge of the matter said.

At the helm of Didi’s Mexico operation is Uber veteran Lin Ma, who helped launch Uber’s ill-fated venture in China. Now Didi’s director of international operations, Ma also worked on operations at 99, the Brazilian ride-hailing startup that Didi purchased at the end of last year, according to his LinkedIn profile.

Ma and others at Didi have so far poached at least five Uber managers and specialists in Mexico who have experience in operations, logistics, strategy, marketing and driver training, a review of LinkedIn profiles shows.

Ma declined to comment.

An Uber logo is seen outside an Uber car in Mexico City, Mexico February 6, 2018. Picture taken on February 6, 2018. REUTERS/Carlos Jasso

The company has yet to recruit drivers, and it is not clear which cities it will enter first, according to a person familiar with Didi’s strategy.

Rather than compete solely on price, the person said, Didi plans to promote safe drivers and fast response times; the company has built an algorithm to help it predict 15 minutes in advance where it should dispatch vehicles.

Didi is also considering offering bike-sharing, scooters and motorcycles in Mexico, while Uber so far has stuck to ride-hailing. A broad array of transport options helped Didi prevail in China.

But the biggest difference may come down to cash. To protect drivers, the person said, Didi will not handle cash fares in Mexico.

Uber, meanwhile, has pushed Mexican lawmakers hard for the right to accept cash in a region where tens of millions lack bank accounts. The move has generated business, along with controversy.

In Brazil, Uber saw a surge of robberies and murders of its drivers after the company began accepting cash there, according to a 2017 Reuters analysis. Uber says it has added tools to authenticate riders’ identities, better protecting drivers.

An Uber driver checks the route on a mobile phone inside his car in Mexico City, Mexico February 6, 2018. Picture taken on February 6, 2018. REUTERS/Carlos Jasso

Mexico has not seen a similar wave of attacks so far. Nevertheless, Uber’s position puts it at odds with regulators in some Mexican states.

While Didi appears to be sidestepping that obstacle, it faces cultural hurdles in Latin America, according to Daisy Wu, head of international business at Yeahmobi, which helps Chinese startups go global.

Latin American consumers generally prefer U.S. brands to Chinese brands, she said, and Chinese business culture can be off-putting to local employees.

“Most of the Chinese companies that have gone to Latin America are still trying to be successful,” Wu said.

Didi, for example, bewildered Mexico job candidates by trying to schedule interviews the week of Christmas.

“I was very surprised … I was thinking, should I cancel my vacation?” one applicant told Reuters.


Uber’s lead in Latin America, meanwhile, has taken on heightened importance as it prepares for a potential initial public offering next year.

The company, which lost $4.5 billion last year, is facing fierce competition at home and in Asia, and a regulatory crackdown in Europe. It is also recovering from a year of scandals that saw co-founder Travis Kalanick forced out as chief executive in June amid multiple federal criminal probes and a workplace marred by sexual harassment allegations.

Andrew Macdonald, Uber’s vice president of operations for Latin America and Asia Pacific, said Uber is prepared to do what it takes to remain dominant in Mexico, a profitable market amid a sea of losses.

“Whether that’s more spending on customer acquisition or more deeply engaging with our existing customers, that will continue to be our focus,” he said.

Uber is committed to maintaining cheap fares for its basic service to keep its Mexican customers loyal, Macdonald said. But he said the company is considering adding more ride options such as upscale cars that would boost revenue.

If Uber is nervous about Didi stealing its lead in Mexico, it is not showing it. Macdonald said the learning curve is steep, something its rival is about to find out.

“Didi has significant bankroll,” Macdonald said. “But there are significant local complexities.”

Reporting by Julia Love in Mexico City and Heather Somerville in San Francisco; additional reporting by Noe Torres in Mexico City.; Editing by Marla Dickerson

Green Energy Stock Yields 10%, Opportunistic Buy With 50% Return Potential

This research report was jointly produced with Seeking Alpha Author Long Player.

Pattern Energy (PEGI) is a renewable energy company that generates a fair amount of cash and is growing. The stock recently traded at $17.2/share and its most recent dividend was $0.422 which provides an annualized yield of 9.8%.

Understanding the Business

PEGI is in the business of owning and operating renewable energy projects. So far, these projects are dominantly wind farms. This involves a number of advanced wind turbines located in a desirable area to harvest wind energy. The projects all have long-term Power Supply Agreements (PSAs) – typically with local utilities. The counterparties to such agreements have, in almost every case, very solid credit ratings. There is, thus, very little market risk or price risk associated with the projects. The main variables are the wind itself and downtime due to malfunction or other factors. The relatively low level of risk provides a strong basis for a yield-oriented investment.

PEGI operates its projects (some of which are partially owned by other companies) as somewhat independent entities. Each project is a separate limited liability corporation (‘LLC’), and has substantial debt financing but almost all of the debt is non-recourse (some of it is partial recourse). Thus, the impact of a failure at any one project is limited. PEGI’s 25 existing consolidated projects are in the United States, Canada, Chile, and Japan. PEGI’s PSA contracts average a term of 14+ years with 90% using Siemens and GE equipment. Its fleet of wind turbines is relatively young and has an average age of less than four years. Counterparties to PSA agreements include utilities like PG&E (NYSE:PCG), SDG&E, and Westar (NYSE:WR) and non-utility entities like Morgan Stanley (NYSE:MS), Citigroup Energy, and Amazon (NASDAQ:AMZN).

A Defensive Stock

PEGI provides electricity, which is a basic necessity. Therefore, the company is unlikely to be affected by economic cycles. As an alternative or “green” electric producer, that company stands out for its profitability as well as the growth of that profitability. PEGI is also part of a group of companies that is trying to bring more “green” electricity to the world. As costs for this technology continue to drop, they may succeed with this wind technology far more than many would have foreseen.

Source: PEGI December 2017 Presentation

The company has invested in countries that are relatively stable and value renewable energy sources. As such, political upheaval is generally not a concern. Successful ventures in Japan could yield some long-term competitive advantages. Japan tends to be a notoriously hard market to penetrate. Therefore, the information shown above is a big deal. Japan would like to avoid importing oil and gas to some extent. Wind technology promises the hope of reducing the energy import bills.

Above all, this technology is not dangerous should a volcano erupt or a major earthquake hit the area. A few years back a major earthquake caused all kinds of problems with a nuclear reactor. The cleanup from that earthquake continues. The nuclear reactor may never go back into service. Wind technology has no such issues. In some ways, wind technology to generate electricity is a blessing in a land where mother nature is very active.

A Beaten Down Stock

The stock has tanked recently for two main reasons:

  1. Investors’ fears that U.S. Tax Credits for renewable energy will expire in a few years.
  2. The stock got beaten down some more (down by another 10%) after the company declared that its quarterly dividend will not increase. As a reminder, PEGI had hiked its distribution every quarter for the past 16 quarters prior to this announcement.

Based on 2018 “Cash Available for Distribution” (or CAFD) guidance, PEGI’s is currently trading at just 10 times CAFD (using midpoint CAFD guidance of $166 million and 95.1 million shares outstanding). The yield is now close to 10%. These valuations are bargains for a growing cash flow and distribution. Mr. Market appears to have tossed away everything but a select group of companies. Companies not in that select group keep getting cheaper.

Interestingly, the company is far larger now and has a better yield than at the time of its initial public offering in September 2013 when the stock was trading at $22/share.

Today, the stock is trading at $17.2/share and the distributions have grown by 35% since the IPO, making it a very attractive investment.

Yet, Mr. Market couldn’t care less. Mr. Market is busy sending the stock to new lows. Sooner or later the growth should outweigh the market disdain. The investor is being paid nearly a 10% distribution to wait for that attitude change.

Source: PEGI December, 2017 Presentation

As long as management continues to make only accretive acquisitions, this company should continue to be an attractive investment.

Risks of ‘tax credit’ expiration are overblown

The finalization of the tax bill last December brought greater clarity to Pattern Energy’s future as it has preserved the critical credits for wind and solar for the time being. Still, this did not calm investors’ fear that tax incentives remain at risk in the longer term. Here is our take on this:

  1. A great deal of PEGI’s planned expansion is outside the US and will be completely unaffected by any potential future change in tax benefits.
  2. Within the United States, should tax credits expire, the effects would be primarily on the development side of the business rather than on existing facilities on the operational side. PEGI is primarily an operating company although it has now some participation on the development side. The point to note here is that the profitability of the existing facilities of PEGI in the United States should not be impacted.
  3. In the U.S.A., most states now have renewable portfolio requirements (and in some cases targets) for their utilities which require that certain percentages of power be generated by renewable sources by certain deadlines. So with or without subsidies, wind farms have to be built. They will just cost more to the end user, but they will still have to be built and to operate to meet the minimum required targets.
  4. Renewable energy is growing rapidly, and the cost of producing wind and solar technology is dropping every year. So in a few years, renewable energy operators will be able to compete with other forms of energy without the need of any subsidies.

2018 Guidance

While PEGI did not raise its distribution in the last quarter, a very important aspect is the analysis of next year’s guidance that management has provided:

  • PEGI is expecting a very strong year in 2018 with “Cash Available for Distribution” (or CAFD) to be in the range of $151 million to $181 million, or 14% higher than the 2017 CAFD using the midpoint of the range.
  • During the year 2017, PEGI agreed to acquire 206 MW of owned capacity in 5 Japanese projects which represent the company’s entry into one of the most robust renewable markets in the world. PEGI is now expanding internationally and the income from these projects will kick in during the year 2018.
  • The 2018 guidance includes 24 projects expected to be operating and contributing during 2018, including 4 new projects in Japan and Canada which were not operational during the year 2017. This is encouraging, as we have been saying all along that the growth in PEGI’s earnings will come from outside of the United States.

Price Target

As of March 11, 2018, there are 15 banks and analysts who cover the stock with a consensus rating of “Overweight” on the stock, and an average consensus price target of $24.67, suggesting a ~43% potential upside from the current price (source:

At $24.67/share, this would put the valuation of PEGI at 14 times cash flow, which is very reasonable. We should note that PEGI traded well above $24.67/share in September 2017, just a few months ago.


The shares of this company are in the bargain bin. With a solid outlook and cash flow growth for 2018, combined with a very low valuation, PEGI is set to greatly outperform within the next 12 months. With a 9.8% yield and +40% upside potential, PEGI could very well generate returns of over 50% in the next 12 months. The pullback provides a unique buying opportunity.

If you enjoyed this article and wish to receive updates on our latest research, click “Follow” next to my name at the top of this article.

Disclosure: I am/we are long PEGI.

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.

Facebook critics want regulation, investigation after data misuse

SAN FRANCISCO (Reuters) – Facebook Inc faced new calls for regulation from within U.S. Congress and was hit with questions about personal data safeguards on Saturday after reports a political consultant gained inappropriate access to 50 million users’ data starting in 2014.

FILE PHOTO: Facebook logo is seen at a start-up companies gathering at Paris’ Station F in Paris, France on January 17, 2017. REUTERS/Philippe Wojazer/File Photo

Facebook disclosed the issue in a blog post on Friday, hours before media reports that conservative-leaning Cambridge Analytica, a data company known for its work on Donald Trump’s 2016 presidential campaign, was given access to the data and may not have deleted it.

The scrutiny presented a new threat to Facebook’s reputation, which was already under attack over Russians’ alleged use of Facebook tools to sway American voters before and after the 2016 U.S. elections.

“It’s clear these platforms can’t police themselves,” Democratic U.S. Senator Amy Klobuchar tweeted.

“They say ‘trust us.’ Mark Zuckerberg needs to testify before Senate Judiciary,” she added, referring to Facebook’s CEO and a committee she sits on.

Facebook said the root of the problem was that researchers and Cambridge Analytica lied to it and abused its policies, but critics on Saturday threw blame at Facebook as well, demanding answers on behalf of users and calling for new regulation.

Facebook insisted the data was misused but not stolen, because users gave permission, sparking a debate about what constitutes a hack that must be disclosed to customers.

“The lid is being opened on the black box of Facebook’s data practices, and the picture is not pretty,” said Frank Pasquale, a University of Maryland law professor who has written about Silicon Valley’s use of data.

Pasquale said Facebook’s response that data had not technically been stolen seemed to obfuscate the central issue that data was apparently used in a way contrary to the expectations of users.

“It amazes me that they are trying to make this about nomenclature. I guess that’s all they have left,” he said.

Democratic U.S. Senator Mark Warner said the episode bolstered the need for new regulations about internet advertising, describing the industry as the “Wild West.”

“Whether it’s allowing Russians to purchase political ads, or extensive micro-targeting based on ill-gotten user data, it’s clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency,” he said.

With Republicans controlling the Senate’s majority, though, it was not clear if Klobuchar and Warner would prevail.

The New York Times and London’s Observer reported on Saturday that private information from more than 50 million Facebook users improperly ended up in the hands of Cambridge Analytica, and the information has not been deleted despite Facebook’s demands beginning in 2015.

Some 270,000 people allowed use of their data by a researcher, who scraped the data of all their friends as well, a move allowed by Facebook until 2015. The researcher sold the data to Cambridge, which was against Facebook rules, the newspapers said.

Cambridge Analytica worked on Trump’s 2016 campaign. A Trump campaign official said, though, that it used Republican data sources, not Cambridge Analytica, for its voter information.

Facebook, in a series of written statements beginning late on Friday, said its policies had been broken by Cambridge Analytica and researchers and that it was exploring legal action.

Cambridge Analytica in turn said it had deleted all the data and that the company supplying it had been responsible for obtaining it.

Andrew Bosworth, a Facebook vice president, hinted the company could make more changes to demonstrate it values privacy. “We must do better and will,” he wrote on Twitter, adding that “our business depends on it at every level.”

Facebook said it asked for the data to be deleted in 2015 and then relied on written certifications by those involved that they had complied.

Nuala O’Connor, president of the Center for Democracy & Technology, an advocacy group in Washington, D.C., said Facebook was relying on the good will of decent people rather than preparing for intentional misuse.

Moreover, she found it puzzling that Facebook knew about the abuse in 2015 but did not disclose it until Friday. “That’s a long time,” she said.

Britain’s data protection authority and the Massachusetts attorney general on Saturday said they were launching investigations into the use of Facebook data.

“It is important that the public are fully aware of how information is used and shared in modern political campaigns and the potential impact on their privacy,” UK Information Commissioner Elizabeth Denham said in a statement.

Massachusetts Attorney General Maura Healey’s office said she wants to understand how the data was used, what policies if any were violated and what the legal implications are.

Reporting by David Ingram; Editing by Peter Henderson and Chris Reese

Hacker Adrian Lamo Has Died at 37

Hacker Adrian Lamo died at the age of 37, according a Facebook post from his father. “With great sadness and a broken heart I have to let know all of Adrian’s friends and acquaintances that he is dead. A bright mind and compassionate soul is gone, he was my beloved son,” Mario Lamo wrote in a post to the 2600: The Hacker Quarterly Facebook Group. The cause of death is not yet known, but a coroner in Sedgwick County, Kansas confirmed the news to ZDNet.

Lamo was born in Boston, Massachusetts in 1981. In the mid 1990s, he volunteered for PlanetOut, a public media company that catered to the LGBTQ community. In 1998, he was appointed to the Lesbian, Gay, Bisexual, Transgender, Queer and Questioning Youth Task Force by the San Francisco Board of Supervisors.

Lamo first gained notoriety online in the early 2000s for hacking companies like Yahoo! and AOL, as well as The New York Times. In 2004, after accepting a plea bargain, Lamo was sentenced for hacking the newspaper, where he had added his name to an internal list of op-ed writers and racked up $300,000 in charges using the organization’s subscription to Lexis-Nexis, a pay-per-use search tool.

He was also known for tipping US government authorities about the actions of whistleblower Chelsea Manning, who was later sentenced to 35 years in prison for providing Wikileaks with 750,000 classified military cables. (President Barack Obama commuted Manning’s sentence in 2017.) In a 2013 interview with the Guardian, Lamo explained his decision to report Manning.

“There was no option to interdict just the documents and put him merely in touch with counseling. There was no way to be both kind to [Chelsea] and mindful of the potential for harm to people I had never known and would never know which the situation posed. The reader might think there was some more moderate choice that I overlooked but I looked closely, and no such choice existed,” Lamo said in the interview.

In a 2002 profile of Lamo, former WIRED editor Noah Shachtman detailed how the hacker lived out of a backpack, and accessed the internet using university libraries and Kinko’s laptop stations. The Colombian-American moved around frequently as a child. The extensive travel provided him a love of adventure. “If I didn’t have computers, I’d be exploring storm drains or mountain caves. Hell, I do, when I don’t have a line to the Net,” Lamo wrote in a Usenet group around 2002. “There have been times my laptop has been the only dry thing I owned.”

Shachtman’s 2002 profile closes with an apt moment:

“I’ve had a long day, a long month, and a long year,” he said at the end of a pre-dawn chat.

He follows that with an instant message: “Dream of a warm and safe place.”

YouTube Will Link Directly to Wikipedia to Fight Conspiracy Theories

After the mass shooting in Parkland, Florida, in February, the top trending video on YouTube wasn’t a news clip about the tragedy but a conspiracy theory video suggesting survivor David Hogg was an actor. The video garnered 200,000 views before YouTube removed it from its platform. Until now, the company hasn’t said much about how it plans to handle the spread of that sort of misinformation moving forward. On Tuesday, however, YouTube CEO Susan Wojcicki detailed a potential solution. YouTube will now begin displaying links to fact-based content alongside conspiracy theory videos.

Wojcicki announced the new feature, which she called “information cues,” during a talk with WIRED editor-in-chief Nicholas Thompson at the South by Southwest conference in Austin, Texas. Here’s how it will work: If you search and click on a conspiracy theory video about, say, chemtrails, YouTube will now link to a Wikipedia page that debunks the hoax alongside the video. Here’s another example: A video calling into question whether humans have ever landed on the moon might be accompanied by the official Wikipedia page about the Apollo Moon landing in 1969. Wojcicki says the feature will only include conspiracy theories right now that have “significant debate” on the platform.


“Our goal is to start with a list of internet conspiracies listed on the internet where there is a lot of active discussion on YouTube,” Wojcicki said at SXSW.

The decision to include links to other websites represents a dramatic shift for YouTube, which has historically existed as a mostly contained ecosystem. It’s also notable that YouTube chose to link out to text-based sites, rather than rearrange its own search algorithm to further favor content from truthful creators and video journalists. One reason for the decision might be that YouTube wants to avoid the perception that it’s rigging its platform to favor certain creators, a criticism it has faced in the past. It also prevents YouTube from having to censor content outright, serving as the ultimate arbiter of truth.

“People can still watch the videos, but then they have access to additional information,” said Wojcicki.

Merely placing links to factual information alongside videos won’t solve the company’s moderation problems wholesale. For one, as Zeynep Tufekci at The New York Times and others have pointed out, YouTube’s recommendation algorithm is often how users end up seeing conspiracy theories in the first place. Wikipedia in particular can also be edited by anyone, and its own reliability issues of misinformation.

The problem with the recommendation algorithm is that it feeds users ever-more extreme content, sometimes straying from what they searched for in the first place. For example, if you search for a video about the Holocaust, YouTube might recommend that you then watch one about how the tragedy was a hoax. The recommendation system isn’t designed to ensure you’re informed; its main objective is to keep you consuming YouTube videos for as long as possible. What that entails has mostly been an afterthought. Even if every conspiracy video is served up with a Wikipedia article contradicting the information that it presents, there’s no guarantee that users will choose to read it over the video they’ve already clicked on.

Take, for example, what happens when you search conspiracy theorist Alex Jones’ videos about the Parkland shooting. After watching one, YouTube recommends you then watch another of Jones’ videos, this time about how the Sandy Hook shooting was a hoax. It doesn’t suggest that you watch factual clip about Parkland or Sandy Hook at all. YouTube’s algorithm system serves to radicalize users, and until that’s fixed, the company will likely continue to suffer from scandals related to misinformation.

YouTube has also still yet to decide and implement clear rules for when uploading conspiracy theory content violates its Community Guidelines. Nothing in the rules explicitly prevents creators from publishing videos featuring conspiracy theories or misleading information, but lately YouTube has been cracking down on accounts that spread hoaxes anyway.

In the wake of the Parkland shooting for example, YouTube reportedly issued a “strike” against Jones for uploading a video accusing Hogg of being an actor (this video was separate from the one that trended on the platform). But Jones and his organization InfoWars have been uploading videos to YouTube prompting lies, hate speech, and false conspiracy theories for years, leaving YouTube’s users and creators to guess what’s actually permitted. Often it seems the platform reacts primarily in response to public outcry, which makes its moderation decisions inconsistent. Until YouTube has outlined a clear policy for how it wants to regulate misinformation, its new efforts to introduce text-based links won’t entirely be effective.

Merely serving up factual information has also not been a cure-all for other platforms that have suffered from scandals associated with misinformation, like YouTube’s parent company Google and Facebook. Both Google News and Facebook’s trending bar have surfaced conspiracy theories during breaking news events in the past, despite having plenty of links to more reputable news sites on their platforms. It’s remarkable, too, that an enormous platform, equipped with a flow of advertising cash, has chosen to address its misinformation problem primarily using the work of a donation-funded volunteer encyclopedia.

Another obvious question here is whether Wikipedia and YouTube will be able to keep up with with breaking news events that quickly fall prey to conspiracy theories. For example, the Parkland shooting survivors were accused of being actors within hours of the tragedy. It’s unclear how quickly YouTube will be able to add links to the thousands of misinformation videos that are uploaded every time a major news event occurs.

Still though, YouTube should be applauded for doing something to try to fight conspiracy, especially since adding links elsewhere will do nothing to immediately aid its bottom line.

YouTube Blues

Dropbox IPO price range puts valuation nearly a third below peak

(Reuters) – Dropbox Inc (DBX.O) on Monday offered a price range for shares in its initial public offering that would value it at up to $7.1 billion, nearly a third below the valuation it commanded in 2014, a clear sign of how overheated the private tech market became a few years back.

Cloud storage company Dropbox is the largest tech IPO after a protracted dry spell, and investors are carefully watching it for signs of how other highly valued tech companies will be received by the public markets. If Dropbox is a barometer for public market sentiment, it appears that investors will not endorse the valuations that many billion-dollar-plus startups now command.

The spring calendar for technology offerings is relatively busy, including cyber security company Zscaler’s planned debut later this week and music company Spotify’s expected listing early next month.

San Francisco-based Dropbox set a price range of $16 to $18 per share, which would raise up to $648 million in the highly anticipated public offering planned for Friday. The range serves as guidance, and the company will set a final price, based on investor feedback, on the eve of the IPO.

The pricing is about a 30 percent drop from the $10 billion valuation Dropbox earned in early 2014 after a financing round led by BlackRock Inc (BLK.N). The company, which started as a free service to share and store photos, music and other large files, has raised more than $600 million from private investors.

New investors ranging from mutual funds to hedge funds began piling into startups a few years ago in hopes of earning better returns than the public markets offered, driving a spike in investments beginning in 2014 that came with outsized valuations.

Now, Dropbox’s valuation cut suggests other companies that similarly raised a lot of money at high valuations but remain unprofitable, such as Uber Technologies Inc, may face a valuation decrease when they, too, go public.

“Dropbox is still loss-making and its revenue is not enough to justify a market value of $10 billion,” said Phil Davis, chief executive of Phil’s Stock World, an investment advisory service.“The price had to come down to lure in the investors.”

While venture financing remains high, startup valuations have mostly stabilized in the United States.

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Dropbox competes with much larger companies such as Alphabet Inc’s (GOOGL.O) Google, Microsoft Corp (MSFT.O) and Inc (AMZN.O) as well as main rival Box Inc (BOX.N). It long struggled to monetize a product that many of its larger rivals offer for free and moved to offer more products for businesses, such as file synch and group collaboration tools.

The efforts appear to have paid off. Revenues grew by 31 percent to $1.1 billion in 2017 over the prior year, and losses narrowed by almost half to $112 million. Last year, it had positive free cash flow of $305 million, more than double the previous year.

By comparison, revenue at Box, which started two years before Dropbox, is expected to increase 25 percent to about $506 million this fiscal year from a year earlier. Box, which also is not profitable, went public in 2015.

Dropbox’s $7.07 billion valuation, based on the high end of its IPO price range, is two-and-a-half times that of Box’s $2.85 billion market capitalization.

Despite its progress and four years of growth, Dropbox’s financial performance still does not justify its 2014 valuation, some investors say.

Eric Schiffer, chairman and chief executive of the Patriarch Organization, a private equity firm, said Wall Street had rational figures for“grossly overvalued unicorns,” using the term for startup companies valued at $1 billion or more.

“The IPO is a slap in the face to investors of the 2014 round” of Dropbox, he added. Dropbox, co-founded in 2007 by Andrew Houston and Arash Ferdowsi, has 500 million users across 180 countries. But most use the free service – about 11 million are paying customers.

Upon completion of the public offering, Dropbox will sell $100 million worth of common stock at the IPO price to the venture capital arm of Inc (CRM.N) in a separate private placement, the company said.

Houston is the largest shareholder and will retain 24 percent of Dropbox after selling 2.3 million shares in the offering. Sequoia Capital is the largest shareholder among outside investors, with about a 25 percent stake.

Reporting by Heather Somerville in San Francisco and Diptendu Lahiri in Bangaluru; Additional reporting by Supantha Mukherjee in Bengaluru; Editing by Peter Henderson and Leslie Adler

President Trump stops Broadcom takeover of Qualcomm

(Reuters) – U.S. President Donald Trump issued an order on Monday prohibiting semiconductor maker Broadcom Ltd’s (AVGO.O) proposed takeover of Qualcomm Inc(QCOM.O) on grounds of national security, bringing an end to what would have been the technology industry’s biggest deal ever.

FILE PHOTO: A sign to the campus offices of chip maker Broadcom Ltd, who announced on Monday an unsolicited bid to buy peer Qualcomm Inc for $103 billion, is shown in Irvine, California, U.S., November 6, 2017. REUTERS/Mike Blake/File photo

Qualcomm had rebuffed Broadcom’s $117 billion takeover bid, which was under investigation by the U.S. Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the U.S. Treasury Department that reviews the national security implications of acquisitions of U.S. corporations by foreign companies.

“The proposed takeover of Qualcomm by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited,” the presidential order released on Monday said.

The order issued by the White House cited“credible evidence” that led Trump to believe that Broadcom taking control of Qualcomm“might take action that threatens to impair the national security of the United States.”

This is the fifth time ever a U.S. President has blocked a deal based on CFIUS objections and the second deal Trump has stopped since assuming office.

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Trump’s move accelerated a decision that appeared likely after CFIUS told Broadcom in a letter on Sunday that its investigation“so far confirmed the national security concerns.”

The U.S. Treasury Department letter was“obviously a poison pill,” Jim Lewis, a CFIUS expert at the Center for Strategic and International Studies, said before the Trump order. He described the CFIUS communication to Broadcom as“unprecedented.”

The semiconductor industry is racing to develop chips that power so-called 5G wireless technology, allowing the transmission of data at faster speeds.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies vying for market share in the sector, such as Huawei Technologies Co, making it a prized asset.

A source familiar with CFIUS’ thinking had said that if the deal was completed, the U.S. military was concerned that within 10 years,“there would essentially be a dominant player in all of these technologies and that’s essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment).”

Broadcom had struggled to complete its proposed deal to buy Qualcomm which had cited several concerns including the price offered and potential antitrust hurdles.

Reporting by Diane Bartz and Chris Sanders in Washington; Supantha Mukherjee and Pushkala Aripaka in Bengaluru; Greg Roumeliotis in New York; Editing by Peter Henderson

Elon Musk Says SpaceX’s Mars Rocket Could Launch in Early 2019

SpaceX CEO Elon Musk said a rocket that’s intended to put humans on Mars could launch in early 2019.

“We are building the first ship, the first Mars or interplanetary ship, right now,” Musk told screenwriter Jonathan Nolan on stage at the South By Southwest conference in Austin Sunday. “I think we’ll be able to do short flights, short up and down flights, sometime in the first half of next year.”

That timeline is surprisingly aggressive, and Musk admits that “historically people have told me my timelines have been optimistic.” The Falcon Heavy’s first launch was pushed back several times, and the Mars rocket is several times larger and more complex. The most that the public has seen of the rocket at this point is a design concept and a massive carbon-fiber fuel tank.

The rocket is currently code named BFR, of which Musk said: “It’s a bit of a Rorschach test in acronym form. [But] it is very big.”

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However optimistic the timeline, the BFR’s first test flights would just be a preview of an actual crewed trip to Mars. SpaceX’s most recent plan has humans actually heading to Mars in 2022.

Musk predicts that the first flights of the ship will unleash a flood of energy from other shipbuilders. “Once we have it, we’ll have a sort of point of proof, something that other countries and companies will go and do.” Musk says that he expects those other entities to eventually build interplanetary transport vehicles of their own.

Musk also reiterated that he sees SpaceX’s role as simply creating the pathway to Mars, and that he hopes entrepreneurs will build much of the infrastructure of a future Mars colony, including everything from “iron foundries to pizza joints to nightclubs.” He also speculated that “most likely, the form of government on Mars would be somewhat of a direct democracy,” in which residents would vote directly on particular issues.

How YouTube Pushes Viewers Towards Extremism

Search for a political topic on YouTube, and you’re likely to be nudged to watch increasingly extreme, misleading, or outright false content on that topic. If your interest is in left-wing topics, the site’s algorithm will point you towards corresponding left-wing conspiracy theories. The reverse goes for searches on conservative-leaning topics.

That, at least, was the conclusion of communications researcher Zeynep Tufecki after an informal experiment described Saturday in the New York Times. Tufecki’s exercise was unscientific, and she writes that Google doesn’t like sharing hard data with researchers. But a Wall Street Journal investigation came to similar conclusions last month, with the help of a former YouTube engineer.

Similar to recent research showing that fake news spreads faster than facts on Twitter, these findings about YouTube’s algorithm can’t be blamed on any nefarious plot to destabilize the world. Instead, the problem seems inherent to the intersection of human nature and YouTube’s business model.

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Just like Facebook, Twitter, and good old television, YouTube makes money from ads — and therefore, from audiences’ attention. Over time, Tufecki writes, YouTube’s “algorithm seems to have concluded that people are drawn to content that is more extreme than what they started with — or to incendiary content in general.” But YouTube, which like Facebook and Twitter would rather be seen as neutral “platforms” rather than publishers, doesn’t take the same kind of responsibility for its content that a television broadcaster is required to.

If that’s true, even stricter enforcement action on individual videos — such as YouTube’s recent decision to reprimand conspiracy theorist Alex Jones — amounts to little more than a game of whack-a-mole.

As the Journal pointed out in its report last month, it clearly doesn’t have to be this way. YouTube parent company Google weighs the trustworthiness of content when returning web search results, giving priority to mainstream news sites. YouTube has chosen not to implement anything so straightforward. YouTube told the Journal that it had a harder task than Google because of the smaller selection of videos about breaking news events, as compared to written stories.

And of course, YouTube didn’t create political divisiveness. To claim so would be to ignore longer-term trends, including extreme gerrymandering and the rise of political dark money that make elected officials more likely to appeal to extremes.

But YouTube and other digital platforms may very well be making those problems worse, and fast.

MoviePass Wants to Gather a Whole Lot of Data About Its Users

MoviePass CEO Mitch Lowe thinks his service’s rapid growth will continue, projecting earlier this month that MoviePass will have 5 million subscribers by the end of 2018, and account for around 20% of all movie ticket purchases. But some of those future subscribers might be concerned about his company’s tactics, which Lowe recently said includes tracking users’ location before and after a trip to the movies.

Lowe’s comments, originally reported by Media Play News, were made at the Entertainment Finance Forum on March 2 in Hollywood. They came during a panel titled “Data is the New Oil: How Will MoviePass Monetize It?”

Lowe’s answer to that question, in part, was that “our bigger vision is to build a night at the movies,” including by guiding users to a meal before or after seeing a film.

Lowe said that was possible because “we get an enormous amount of information. Since we mail you the card, we know your home address . . . we know the makeup of that household, the kids, the age groups, the income. It’s all based on where you live. It’s not that we ask that. You can extrapolate that.

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“Then,” Lowe continued, “Because you are being tracked in your GPS by the phone . . . we watch how you drive from home to the movies. We watch where you go afterwards, and so we know the movies you watch. We know all about you. We don’t sell that data. What we do is we use that data to market film.”

In a followup statement to the press, a MoviePass spokesperson said the company was “exploring utilizing location based marketing as a way to help enhance the overall experience,” including by using data “to better inform how to market potential customer benefits including discounts on transportation, coupons for nearby restaurants, and other similar opportunities.” Most importantly, the spokesperson reiterated Lowe’s claim that MoviePass won’t sell user data to third parties.

MoviePass has said from the beginning that data would be a major part of how it made its subscription service both affordable for users and profitable for the company. But Lowe’s disclosure of just how much data is involved triggered anxiety about the erosion of user privacy. TechCrunch argued that the kind of tracking Lowe discussed wasn’t allowed under the app’s privacy policy, while Engadget ushered Lowe into the “National Association of Data Mining App Psychopaths (not a real thing . . . we hope)”.

MoviePass has responded to the backlash by removing some data collection capabilities it isn’t currently using, and says “our members will always have the option to choose the location-based services that are right for them today and in the future.”

Showing some reticence about data gathering is smart in the short term. But for better or worse, there’s not much reason to believe users will be that upset about it in the long run, as long as it offers something useful in return. Just witness the billions of people still willing to share details of their personal lives with Facebook.

After a Century of Daylight Saving Time, Its Benefits Are Still Unclear

Some tonight, you will either manually set your clocks ahead an hour, or (more likely) your various smartphones, tablets, and computing devices will adjust themselves for you. Those devices will be carrying forward a practice that dates to March of 1918, when the U.S. — following Germany and Great Britain – implemented a plan for Daylight Saving Time.

The initial justification for the policy, implemented by Woodrow Wilson, was that it would save energy that could go towards helping fight World War I. The same rationale would be used for the expansion of Daylight Saving in later decades, including its national formalization in the 1960s.

Following World War I, though, a different rationale surfaced. According to Smithsonian Magazine, department store owners pushed for the policy to continue, since more people shopped after work when it was light out later. The policy has also benefited sports like golf.

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Those motives haven’t proven entirely durable. One study found that Daylight Savings actually increased home energy consumption and emissions, though a conflicting Department of Energy study found a small but significant decline. More damning was a 2016 J.P. Morgan study finding that, while there’s some boost to spending when Daylight Savings Time goes into effect, it’s offset by a substantial drop when clocks are switched back.

And Daylight Saving does not, contrary to widespread myth, particularly benefit farmers. In fact, farmers lobbied against it for decades.

So the commercial motives for Daylight Saving Time may not be all they’re cracked up to be. Some subtler positive effects have been measured, including declines in robberies – but so have increases in heart attacks and workplace accidents, thanks to the effects of sleep disruption.

On balance, the objective evidence against Daylight Saving Time seems to outweigh arguments in its favor. But groups lobbying to eliminate it have an uphill battle – polls in recent years show a majority of Americans still support the policy, even if it costs them sleep once a year.

How WhatsApp Could Worsen Brazil’s Yellow Fever Outbreak

In remote areas of Brazil’s Amazon basin, yellow fever used to be a rare, if regular visitor. Every six to ten years, during the hot season, mosquitoes would pick it up from infected monkeys and spread it to a few loggers, hunters, and farmers at the forests’ edges in the northwestern part of the country. But in 2016, perhaps driven by climate change or deforestation or both, the deadly virus broke its pattern.

Yellow fever began expanding south, even through the winter months, infecting more than 1,500 people and killing nearly 500. The mosquito-borne virus attacks the liver, causing its signature jaundice and internal hemorrhaging (the Mayans called it xekik, or “blood vomit”). Today, that pestilence is racing toward Rio de Janeiro and Sao Paolo at the rate of more than a mile a day, turning Brazil’s coastal megacities into mega-ticking-timebombs. The only thing spreading faster is misinformation about the dangers of a yellow fever vaccine—the very thing that could halt the virus’s advance. And nowhere is it happening faster than on WhatsApp.

In recent weeks, rumors of fatal vaccine reactions, mercury preservatives, and government conspiracies have surfaced with alarming speed on the Facebook-owned encrypted messaging service, which is used by 120 million of Brazil’s roughly 200 million residents. The platform has long incubated and proliferated fake news, in Brazil in particular. With its modest data requirements, WhatsApp is especially popular among middle and lower income individuals there, many of whom rely on it as their primary news consumption platform. But as the country’s health authorities scramble to contain the worst outbreak in decades, WhatsApp’s misinformation trade threatens to go from destabilizing to deadly.

On January 25, Brazilian health officials launched a mass campaign to vaccinate 95 percent of residents in the 69 municipalities directly in the disease’s path—a total of 23 million people. A yellow fever vaccine has been mandatory since 2002 for any Brazilian born in regions where the virus is endemic. But in the last two years the disease has pushed beyond its normal range into territories where fewer than a quarter of people are immune, including the urban areas of Rio and Sao Paulo.

By the time of the announcement, the fake news cycle was already underway. Earlier in the month an audio message from a woman claiming to be a doctor at a well-known research institute began circulating on WhatsApp, warning that the vaccine is dangerous. (The institute denied that the recording came from any of its employees). A few weeks later it was a story linking the death of a university student to the vaccine. (That too proved to be a false report). In February, Igor Sacramento’s mother-in-law messaged him a pair of videos suggesting that the yellow fever vaccine was actually a scam aimed at reducing the world population. A health communication researcher at Fiocruz, one of Brazil’s largest scientific institutions, Sacramento recognized a scam when he saw one. And no, it wasn’t a global illuminati plot to kill off his countrymen. But he could understand why people would be taken in by it.

“These videos are very sophisticated, with good editing, testimonials from experts, and personal experiences,” Sacramento says. It’s the same journalistic format people see on TV, so it bears the shape of truth. And when people share these videos or news stories within their social networks as personal messages, it changes the calculus of trust. “We are transitioning from a society that experienced truth based on facts to a society based on its experience of truth in intimacy, in emotion, in closeness,” says Sacramento.

People are more likely to believe rumours from family and friends. There’s no algorithm mediating the experience. And when that misinformation comes in the form of forwarded texts and videos—which look the same as personal messages in WhatsApp—they’re lent another layer of legitimacy. Then you get the network compounding effect; if you’re in multiple group chats that all receive the fake news, the repetition makes them more believable still.

Of course, these are all just theories. Because of WhatsApp’s end-to-end encryption and the closed nature of its networks, it’s nearly impossible to study how misinformation moves through it. For users in countries with a history of state-sponsored violence, like Brazil, that secrecy is a feature. But it’s a bug for anyone trying to study them. “I think WhatsApp hoaxes and disinformation campaigns are a bit more pernicious [than Facebook] because their diffusion cannot be monitored,” says Pablo Ortellado, a fake news researcher and professor of public policy at the University of Sao Paulo. Misinformation on WhatsApp can only be identified when it jumps to other social media sites or bleeds into the real world.

In Brazil, it’s starting to do both. One of the videos Sacramento received from his mother-in-law is still up on YouTube, where it’s been viewed over a million times. Other stories circulated on WhatsApp are now being shared in Facebook groups with thousands of users, mostly worried mothers exchanging stories and fears. And in the streets of Rio and Sao Paulo, some people are staying away from the health workers in white coats. As of February 27, only 5.5 million people had received the shot, though it’s difficult to say how much of the slow start is due to fake news as opposed to logistical delays. A spokeswoman for the Brazilian Ministry of Health said in an email that the agency has seen an uptick in concern from residents regarding post-vaccination adverse events since the start of the year and acknowledged that the spread of false news through social media can interfere with vaccination coverage, but did not comment on its specific impact on this latest campaign.

While the Ministry has engaged in a very active pro-vaccine education operation—publishing weekly newsletters, posting on social media, and getting people on the ground at churches, temples, trade unions, and clinics—health communication researchers like Sacramento say health officials made one glaring mistake. They didn’t pay close enough attention to language.

You see, on top of all this, there’s a global yellow fever vaccine shortage going on at the moment. The vaccine is available at a limited number of clinics in the US, but it’s only used here as a travel shot. So far this year, the Centers for Disease Control and Prevention has registered no cases of the virus within US borders, though in light of the outbreak it did issue a Level 2 travel notice in January, urging all Americans traveling to the affected states in Brazil to get vaccinated first.

Because it’s endemic in the country, Brazil makes its own vaccine, and is currently ramping up production from 5 million to 10 million doses per month by June. But in the interim, authorities are administering smaller doses of what they have on hand, known as a “fractional dose.” It’s a well-demonstrated emergency maneuver, which staved off a yellow fever outbreak in the Democratic Republic of the Congo in 2016. According to the WHO, it’s “the best way to stretch vaccine supplies and protect against as many people as possible.” But a partial dose, one that’s guaranteed for only 12 months, has been met by mistrust in Brazil, where a single vaccination had always been good for a lifetime of protection.

“The population in general understood the wording of ‘fractionated’ to mean weak,” says Sacramento. Although technically correct, the word took on a more sinister meaning as it spread through social media circles. Some videos even claimed the fractionated vaccine could cause renal failure. And while they may be unscientific, they’re not completely wrong.

Like any medicine, the yellow fever vaccine can cause side effects. Between 2 and 4 percent of people experience mild headaches, low-grade fevers, or pain at the site of injection. But there have also been rare reports of life-threatening allergic reactions and damage to the nervous system and other internal organs. According to the Health Ministry, six people died in 2017 on account of an adverse reaction to the vaccine. The agency estimates that one in 76,000 will have an anaphylactic reaction, one in 125,000 will experience a severe nervous system reaction, and one in 250,000 will suffer a life-threatening illness with organ failure. Which means that if 5 million people get vaccinated, you’ll wind up with about 20 organ failures, 50 nervous system issues, and 70 allergic shocks. Of course, if yellow fever infected 5 million people, 333,000 people could die.

Not every fake news story is 100 percent false. But they are out of proportion with reality. That’s the thing about social media. It can amplify real but statistically unlikely things just as much as it spreads totally made up stuff. What you wind up with is a murky mix of information that has just enough truth to be credible.

And that makes it a whole lot harder to fight. You can’t just start by shouting it all down. Sacramento says too often health officials opt to frame these rumors as a dichotomy: “Is this true or is this a myth?” That alienates people from the science. Instead, the institution where he works has begun to produce social media-specific videos that start a dialogue about the importance of vaccines, while remaining open to people’s fears. “Brazil is a country full of social inequalities and contradictions,” he says. “The only way to understand what is happening is to talk to people who are different from you.” Unfortunately, that’s the one thing WhatsApp is designed not to let you do.

Viral Falsehoods

  • WhatsApp isn’t the only closed social network where online rumors can lead to real-world consequences. Here’s how China’s WeChat helped elect President Trump.

  • It’s not just elections that bring out the bots. Last month, Twitter was flooded with them following the Parkland shooting.](

  • Want to see how all this misinformation gets made? Take a look inside Leves, Macedonia, the fake news factory for the world.

‘Black Panther’ Should Become Marvel’s Latest Billion-Dollar Movie This Weekend

Black Panther is already the biggest movie of 2018, and now the latest superhero blockbuster from Marvel and Walt Disney is on the precipice of cracking $1 billion in worldwide box-office revenue.

Entering its fourth weekend in movie theaters, the movie still has its claws dug into the top spot at the box office as it debuts in China, the world’s second-largest movie market, for this first time. Black Panther should climb past the $1 billion mark this weekend, having reached $940 million in global grosses during the week, including $22.7 million in its opening-day haul in China on Friday. That gave Black Panther the best opening day gross in China for a Marvel movie since 2016’s Captain America: Civil War, which took in over $30 million on its first day in Chinese theaters on its way to grossing a whopping $180 million in that country overall.

Black Panther would also be the first Marvel movie to reach $1 billion since Civil War cleared $1.15 billion two years ago, and the fifth so far from Disney’s Marvel Cinematic Universe. The movie is already the second highest-grossing Marvel film domestically, with its $520 million haul in North America trailing only 2012’s The Avengers, at $623 million domestically ($1.5 billion worldwide), according to Box Office Mojo.

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Black Panther only needs roughly $60 million worldwide at this weekend’s box office to reach $1 billion after pulling in roughly $122 million globally last weekend. Barring a larger-than-expected drop-off, the film should coast past that milestone.

However, Black Panther could still lose its box-office crown this weekend to newcomer (and fellow Disney film) A Wrinkle in Time. Director Ava DuVernay‘s adaptation of the popular young-adult novel of the same name has been highly-anticipated since Disney made her the first-ever black woman to direct a movie with a budget over $100 million. Disney has been promoting the film heavily for months, though its recent mixed reviews from critics could dampen A Wrinkle in Time‘s opening weekend box-office performance. Variety reports that the film is forecasted to gross roughly $35 million domestically this weekend, which may not quite be enough to stop Black Panther from a fourth weekend of dominance.

raceAhead: New Research From Accenture For A More Equitable Workplace

To prime your mind, sorry, your soul, for International Women’s Day 2018, I thought I’d flag some research we’ll be discussing tomorrow at Accenture’s IWD Event.

In Getting to Equal, Accenture surveyed more than 22,000 working people with a university education in 34 countries to better understand how they feel about their company’s culture.

As a result, they’ve found 40 distinct factors that they say are statistically shown to lead to happier employees who are more likely to stick around, and where marginalized groups are more likely to reach parity.

Since 40 is a lot for a breezy newsletter, here are 14 of the practices their research suggests are statistically likely to be most meaningful.


  • Gender diversity is a priority for management.
  • A diversity target or goal is shared outside the organization.
  • The organization clearly states gender pay-gap goals and ambitions.


  • Progress has been made in attracting, retaining and progressing women.
  • The company has a women’s network.
  • The company has a women’s network open to men.
  • Men are encouraged to take parental leave.


  • Employees have never been asked to change their appearance to conform to company culture.
  • Employees have the freedom to be creative and innovative.
  • Virtual/remote working is widely available and is common practice.
  • The organization provides training to keep its employees’ skills relevant.
  • Employees can avoid overseas or long-distance travel via virtual meetings.
  • Employees can work from home on a day when they have a personal commitment.
  • Employees are comfortable reporting sex discrimination/sexual harassment incident(s) to the company.

Now, none of these sound groundbreaking until you realize how few companies do any of them with real transparency, accountability or commitment, and how much of an impact these changes can have.

According to Ellyn Shook, Accenture’s human resources chief, female employees of companies who take this stuff seriously are four times as likely to reach senior manager and director levels, and see an average pay increase of 51%.

In a world where women have to have two degrees to get the same salary as a man with one, this would be a pretty big boost.

Says Shook, the commitment must come from the top, but the work falls to everyone. “When we commit as individuals to make change, collectively we lift each other up, paving the way for workplace equality.”

A Former Apple Security Engineer’s Company Will Unlock Your iPhone X—for $15,000

A new company has emerged that claims to be able to unlock any iPhone. And this one might be run by a former Apple security engineer.

The company, called Grayshift, has released marketing materials to police and forensics organizations promising to unlock iPhones with its GrayKey tool, according to Forbes, which obtained a copy of those materials. GrayKey will cost law enforcement $15,000 for 300 uses. Those that want to be able to unlock iPhones an unlimited number of times will need to pay $30,000.

After receiving the documents, Forbes dug into the people behind Grayshift. Although it was difficult to arrive at conclusions, since the company has remained silent and its employees kept as secretive as possible, the publication believes that at least one former Apple security engineer works at the company. In fact, two former security engineers are listed as principals at Grayshift—a title often used to describe owners.

Shadowy companies are standard fare in the security world, where hacking—for both good and bad purposes—requires significant behind-the-scenes work. Apple’s iPhones are notoriously difficult to crack and have become a source of complication and concern for law enforcement agencies attempting to investigate a case.

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Since a user’s iPhone data is safeguarded by a variety of protections and encryption, law enforcement will often need the subject of an investigation to cooperate and give them access to his or her data. When that doesn’t happen, law enforcement can often times be left in the dark if officials don’t have a way to break into an iPhone to spy on data. Law enforcement officials have decried the security protections in iPhones and other handsets, but Apple and rights advocates argue every individual has a right to privacy.

Companies that can crack iPhones and sell their techniques to law enforcement, however, stand to make a significant sum. If Grayshift has indeed found a way to unlock iPhones, the company could stand to generate significant revenue selling the exploit to law enforcement.

According to Forbes‘ investigation, Grayshift has designed ads that promise to unlock iPhones running iOS 10 and iOS 11, the latest two mobile Apple operating systems. The company is promising to be able to crack iPhones running iOS 9 in the near future. On the hardware front, Grayshift said that its GrayKey technology will work on every major iPhone release, including the iPhone 8 and iPhone X Apple released last year. The publication’s unidentified source also said that he or she had seen GrayKey in action and was able to unlock a locked iPhone X.

The revelation comes just days after another security company, Cellebrite, announced that it could unlock the latest Apple handsets, including iPhone X.

Apple did not immediately respond to a Fortune request for comment on the report.

Qualcomm-Broadcom Merger Battle Grows Angrier

The ugly rhetorical war between semiconductor companies Broadcom and Qualcomm got even uglier on Monday.

Broadcom wants to take over Qualcomm, most recently offering $79 per share, or $117 billion in total, and putting up a slate of candidates for election to Qualcomm’s board. The offer was cut from $82 a share, or $121 billion, after Qualcomm raised its bid for NXP Semiconductors. Qualcomm has so far resisted the unsolicited bid as too low and fraught with regulatory challenges.

Over the weekend, regulators did get involved. The government’s national security merger review body, called the Committee on Foreign Investment in the U.S., asked Qualcomm to delay its scheduled shareholder elections this week so the committee could continue reviewing the possible merger. The committee is charged with ensuring that technologies or other resources critical to national security don’t fall under the control of adversaries.

That prompted a fusillade from Broadcom, with an equally accusatory response from Qualcomm.

Broadcom said it would cooperate with the CFIUS review but added that it had just learned that the investigation was due to a secret, voluntary request from Qualcomm in January.

“This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom’s independent director nominees,” Broadcom said in a statement. “It is critical that Qualcomm stockholders know that Qualcomm did not once mention submitting a voluntary notice to CFIUS in any of its interactions with Broadcom to date.”

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Later on Monday, Qualcomm fired back, saying Broadcom’s response was part of “its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues.”

Qualcomm went on to challenge an assertion that wasn’t exactly what Broadcom had asserted. “Broadcom’s claims that the CFIUS inquiry was a surprise to them has no basis in fact,” Qualcomm wrote. “Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS.”

Broadcom had not claimed that it was surprised by the CFIUS investigation, but that it had not known that Qualcomm’s voluntary request was behind the probe.

Shares of Qualcomm (qcom) lost almost 2% to hit $63.71 in midday trading on Monday and remain well below Broadcom’s offer price. Broadcom’s (avgo) shares also dropped less than 1% to $249.63.

Analyst Stacy Rasgon at Bernstein Research doesn’t see much likelihood that the CFIUS national security review would find grounds to block a merger. Broadcom is the middle of moving its legal domicile back to the United States from Singapore, which should be completed in the next few months. The company already is run from the United States, has many U.S. employees, and owns critical semiconductor operations and technologies, Rasgon noted.

“Nevertheless, politics can and does have a life of its own, and the early investigation (warranted or not) is proceeding,” he wrote.

The entire CFIUS review could be moot once Broadcom moves its legal headquarters back to the United States, analyst Angelo Zino at CFRA Research, noted. Broadcom “expects to complete its redomiciliation process to the U.S. by May 6, at which point the proposed acquisition will not be a CFIUS covered transaction,” Zino wrote in a report on Monday.

Weighing The Week Ahead: Will The U.S. Launch A Trade War?

The economic calendar is normal but featuring the monthly employment report. Usually that would be the focus, and it might become so by week’s end. Until the situation is clarified, the paramount question will be:

Has the US ignited a trade war?

Last Week Recap

My last full edition of WTWA, two weeks ago, asked whether the coast was clear. Good question, and I guess we got the answer. Last week’s indicator update post pointed to a discussion of an infrastructure bill. In the wake of other events that got no attention at all.

I did cite an escalation of trade rhetoric as among my worries, but it went from worry to major impact much faster than anyone expected. It took only a few minutes!

The Story in One Chart

I always start my personal review of the week by looking at a great chart. The version of the S&P futures shows the action while the stock market is closed. The interactive version also lets you specify your choice of both time and intervals. Finally, there is a tag for significant news at various key points.

The decline this week included a 5% trading range, continuing the recent record of higher volatility. I summarize actual and implied volatility each week in the Indicator Snapshot.

Personal Note

Spring vacation is coming, even though Spring has not yet arrived. I will be off the week after next, including the weekend before and afterward. I will try to post an indicator update, especially if there are important changes.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

The economic news was mixed. Once again, the market reaction had little to do with the news flow.

The Good

  • Consumer confidence registered the highest reading since 2000 and the Michigan index is more than 16% above the long-term average. Jill Mislinski has excellent updates on both. Her chart of the Conference Board measure is an example of what you will see in her post.

  • Personal income increased 0.4%, beating most expectations of 0.3%. Steven Hansen takes his typical deep dive into the report, showing each of the elements as well as historical context.
  • Corporate earnings recorded a great quarter and estimates continue to rise. John Butters compares this to the usual estimate declines at this point of the quarter. Brian Gilmartin has repeatedly noted this same trend. The forward earnings skeptics should pay attention!

  • Initial jobless claims continue the amazing improvement. Bespoke calls it “ludicrous mode.”

The Bad

  • Housing data
    • New home sales declined to an annual rate of 593K and a decrease of 1% year over year. Calculated Risk suggests that we be cautious until we have February and March data. This may help determine whether tax law changes are part of the cause.
    • Pending home sales declined 4.7% for the month and 3.8% year-over-year. (Calculated Risk).
  • Durable goods orders declined 3.7%, worse than the 2.0% expected.
  • Auto sales declined 2.4% in February. A combination of reduced incentives (and therefore higher prices), higher interest rates, and tougher credit conditions led to a tough sales market. (WSJ). Bespoke tracks the F150 sales which remained strong. Some treat this as a reflection of small business and construction demand. Perhaps reduced auto sales will not spill into the general economy.

  • Powell testimony spooked the market, which saw indications of a more hawkish Fed. The market has consistently been less bullish on the economy than the Fed, expecting a slow pace of rate increases. Eddy Elfenbein notes that the futures market moved the chance of a fourth hike this year to 33.5%. He is skeptical. Prof. Tim Duy, our go-to expert on the Fed, focused more on the precise language, particularly the concern about an overheated economy.

My focus fell on this in the written testimony:

In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis.

This is a crucial sentence that marks a change in focus. Compare this with the previous version of this testimony, delivered by former Federal Reserve Chair Janet Yellen in July of last year:

The Committee continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time to achieve and maintain maximum employment and stable prices.

In a follow up post, Prof. Tim analyzes the increased concern with inflationary pressures.

[Jeff] The Fed has typically waited too long to hike rates and been unable to stop incipient inflation. Financial markets can handle a gradual increase in rates. Transparency about Fed intentions and criteria is helpful.

  • The steel and aluminum tariff announcement was a surprise to most, including those in the Administration. The swift reaction showed that this is a market-unfriendly step, although it was a temporary positive for a handful of steel stocks.

The Ugly

Nuclear escalation. Putin announces new nukes, designed to avoid US defense systems. Some suggest that this is linked to recently-proposed US weapons modernization and expansion. Others see it as political posturing.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

We have a normal economic calendar with an emphasis on employment. (The survey week for the BLS reports ended only two weeks ago. Occasionally the calendar pushes this report to the second Friday of the month). ISM Services is also of some interest.

Like it or not, the Washington circus may well dominate the news – once again. has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

A screenshot of a cell phone Description generated with very high confidence

Next Week’s Theme

The economic calendar is normal but features the report markets find most interesting – the employment situation. That topic may be of great interest by week’s end, but only if there is clarification on the tariff proposals. I expect many to be asking:

Has the US launched a trade war?

To explore the key question, I will do my typical list of alternatives followed by my own analysis. But first, I want to emphasize an important distinction, the difference between policy analysis and politics.

I often emphasize that people should separate their investment decisions from their political viewpoints. Deciding to sell all your stocks because you do not like an election result is a costly investment mistake. It is important to understand current public policy whether you agree with it or not. President George W. Bush’s tax cuts, President Obama’s Affordable Care Act, and President Trump’s tax policy changes are all good examples. You should not judge policy based upon whether you agree with the decision. Those who objected to the distributive effects of GOP tax cuts could do so as citizens but should not have ignored the economic effects. Whether or not they liked Obamacare, astute investors joined me in buying health insurance stocks.

That is what it means to separate investing and politics. In the last year, this distinction has become more difficult to make. Merely mentioning the name of the President seems to bring an end to careful analysis. That is not effective. Making good investments does not mean you must ignore hot-button issues. Estimating the chances for increased gun control, for example, is a subject for objective analysis. If your analysis is accurate, you may find some stocks to buy or to sell. Your personal policy preference is irrelevant to your investment decision.

This type of analysis can help us with the trade war issue. Here are the things that might happen. As usual, someone is making an argument for each possibility.

  • The tariff announcement was just the start. Get ready for all out war, which the President views as “good and easy to win.” (WSJ)
  • Expect a withdrawal from NAFTA to be next.
  • Even without action on NAFTA, this will have a chilling effect on the current negotiations.
  • Expect affected countries to retaliate against the US. (Politico)
  • The Administration may walk this back, at least partially, in the face of widespread discontent among key constituencies.
  • A reason may be found to treat this as a warning – a negotiating ploy.
  • A change of policy may be softened with some other kind of help for steel companies.

As usual, I’ll suggest my own interpretations in today’s Final Thought.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

Short-term trading conditions improved slightly this week. This is a good illustration of why you need objective indicators to follow rather than merely your impressions about events. We continue to monitor the technical health measures on a daily basis.

The long-term fundamentals and outlook have been unchanged through the recent bout of volatility.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

Doug Short: Regular updating of an array of indicators. Great charts and analysis.

Georg Vrba: Business cycle indicator and market timing tools. None of Georg’s indicators signal recession. His business cycle index, which we use in the Indicator Snapshot, is no longer “on the peg” at 100, but does not indicate a recession.


Ed Yardeni, whom I frequently cite, has accurately forecast and monitored the economic effects on stocks. Some dislike corporate earnings reports because of reporting “shenanigans.” Revenue, much more difficult for companies to engineer, tells a similar story.

Insight for Traders

Our discussion of trading ideas has moved to the weekly Stock Exchange post. The coverage is bigger and better than ever. We combine links to trading articles, topical themes, and ideas from our trading models. Each week we explore a topic of current interest, drawing upon trading experts. This week we asked, “Do you trade the 50-day moving average?” This is a timely topic since so many indexes are close to those levels and the method is so popular. We also described how our trading models reacted, and updated the ratings lists for Felix and Oscar, this week featuring the Russell 2000. Blue Harbinger has taken the lead role on this post, using information both from me and from the models. He is doing a great job, presenting a wealth of new ideas and information each week.

While my intent is to focus on traders, long-term investors may benefit from a better understanding of what the issues are for traders.

Insight for Investors

Investors should have a long-term horizon. They can often exploit trading volatility! I remind investors of this each week, but now is the time to pay attention.

Best of the Week

If I had to pick a single most important source for investors to read this week it would naturally be Warren Buffett’s annual letter. You should take the time to read the whole thing, but I want to highlight a key point:

Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.

By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long-term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond that Protégé and I sold.

I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates.

It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.

Stock Ideas

Housing stocks have room to run (Lawrence C. Strauss, Barron’s).

Given strong demand, insufficient inventory, and modest annual price gains, many industry experts see the recovery continuing for several years—unless mortgage rates unexpectedly spike, spoiling what has been a tame but enjoyable party.

“You have a lot of buyers chasing very few houses,” says John Kendig, a long-time associate broker in the Richmond, Va., area. He says his clients recently missed out on an 1,800-square-foot brick colonial near the city even though the couple offered about $25,000 over the list price of $425,000.

“Housing is in the third or fourth inning of a nine-inning game,” says Bill Smead, lead portfolio manager of the $1.3 billion Smead Value fund, which holds shares of two home builders, Lennar (ticker: LEN) and NVR (NVR), in a 28-stock portfolio. “This is a normally cyclical business in a secular growth trend.”

[Jeff] These are exactly the factors I have been citing for more than a year. Many housing reporters complain if prices are too high (unaffordable) or too low (bad market). They complain if there is too much inventory or too little. If interest rates go too low, potential buyers are just waiting. If they move higher, the buyers are suddenly priced out. I continue to like the sector.

My colleague at Seeking Alpha, Eric Basmajian, disagrees. Look at his analysis to see the other side.

Chuck Carnevale has sold Walmart (WMT). In his comprehensive and careful analysis, he explains why. He also includes a video lesson. His post sparked a lot of dissent. Our colleague Jae Jun offers his own conclusion – a strong hold.

David Fish has an update on dividend champions for March. He tabulates recent statistics, notes the important changes, and takes a deeper look at Prudential (PRU).

Hale Stewart smiles on Home Depot (HD).

Blue Harbinger analyzes recent selling in the REIT market and identifies some attractive ideas.

Morningstar likes Motorola Solutions (MSI). William Fitzsimmons sees a profitable niche and an economic moat.

Personal Finance

Seeking Alpha Senior Editor Gil Weinreich continues his excellent series. While theoretically aimed at advisors, there are many themes of interest for individual investors, especially this week! I especially enjoyed his advice on sources to follow. They are all good choices as Gil continues to build his list. I was delighted to be part of the first group he selected and welcome the new members (whom I have already been following and citing). Check out the post for descriptions of their background and some good example articles.

Abnormal Returns has a special Wednesday focus for individual investors. There are a variety of ideas, and nearly always something you will find useful. I especially liked David Merkel’s admonition about monitoring your financial accounts regularly. My runner-up was Ron Lieber’s (LONG) list of financial documents you should keep. This is great advice and will help me in conversations with Mrs. OldProf who thinks I should be more ruthless in discarding things.


Stock pickers are doing better. (WSJ).

Might active management be more important in a down market? Morningstar has some evidence.

Watch out for

Super-high dividend yields (Barron’s).

In any market, the highest dividend payout ratios often appear at businesses with sputtering profits or debt-burdened balance sheets. Since rates have steepened, investors prefer companies with ample reserves of cash.

Many of the top-performing stocks lately have been those with high levels of cash as a percentage of their assets, notes Mezrich. Income investors might chase cash dividends, but lately that hasn’t been a formula for stock price appreciation.

Mispricing of high-yield bonds. (Barron’s). A leading expert notes a surprising variation from the historical relationships. A problem? The lack of trading leaves few similar bonds for comparison pricing.

Oil stocks. Alison Sider (WSJ) suggests that they are caught in “the Trump-Tariff Crossfire.” China buys a lot of crude oil and oil companies use a lot of steel. Hmm.

Final Thoughts

The trade issue is a serious matter for investors. Thursday night I interrupted my regular agenda to write an analysis of Presidential powers on trade and the probable implications. I was disappointed that this work did not get much attention. The analysis in mainstream media was also weak, with the story treated just like the soap opera White House issues. Editors do not see the importance. Staff changes may be easier for most to understand, but they are much less important than trade policy.

Please read my post on this subject, which reflects my “final thoughts” for today. Undoing free-trade policies would also undo much of the foundation for economic growth over the last twenty years. The support for these policies is nearly universal among economists, business people, and most of the GOP. For example, see this opinion piece from Larry Kudlow, Arthur Laffer, and Stephen Moore. The authors accept that Trump honestly believes in the benefits of these policies, but that he is mistaken.

I base my analysis on those foundations, as well as the record of history. This policy could lead both to inflation and to lower economic growth, a nasty combination. Unlike many other elements of the “headline risk” we always see, this is something which has direct implications for corporate earnings.

I’m more worried about:

  • Trade issues. The Commerce Department is recommending increased tariffs on steel and aluminum. Opinion within the Administration itself if mixed, with trade war warnings. Jonathan Swan (Axios) provides good coverage.
  • North Korea. Just when it seemed like the Olympics might be helping, we have escalated rhetoric – North Korean threats over U.S. military drills. (Reuters). We can only hope that the small, Olympic-sparked window leads to some constructive talks.

I’m less worried about:

  • The Fed. I was not troubled by Powell’s testimony. The major policy thrust seems to follow a gradual path.
  • Consumers and stocks. Those following markets forget that most consumers do not have large stock positions and do not follow them closely. The result? The punditry overestimates the effect of stock volatility on the economy.

[Do the economic challenges seem complicated and threatening? You might find help in my paper on the top investor pitfalls, or my suggestions about managing risk. Just write for our free information on these topics. While they describe what I am doing, the do-it-yourself investor can apply the same principles. These are available for free from main at newarc dot com].

Disclosure: I am/we are long LEN, PHM.

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

Oil Supply To Remain Muted

Investment Thesis

Oil prices have increased substantially in the last six months, but this is just the beginning. After a seasonal swoon in the winter, I expect oil prices to continue upward in 2Q18 into the summer driving season.

Recent Performance

Brent crude oil prices have fluctuated in recent weeks following a substantial rise in the second half of last year:

$65 Was Not Enough To Boost Supply

Despite substantially higher oil prices in recent months, the global oil supply has remained below global oil demand, causing a strong imbalance, which has led to continued inventory draws across the world. The International Energy Agency included the following paragraph in its latest Oil Market Report:

OECD commercial stocks fell in December by 55.6 mb, the steepest drop since February 2011, to reach 2 851 mb. Stocks drew by 154 mb (420 kb/d) during 2017 and ended the year 52 mb above the five-year average. In 4Q17, stocks fell sharply by 1.3 mb/d across the OECD.

Global oil inventories have declined at a fast pace, dragging prices higher, but the global oil production still has not reacted. Today, we received yet another indication of near future constraints in global oil supply:

The above table from Baker Hughes shows that, although the U.S. rig count had surged from the year-ago period, which has led to rising U.S. oil production in 4Q17, the rig count has recently been muted. This trend is also confirmed by the DI Drilling Index, which has been flat throughout the last several weeks:

Furthermore, the Baker Hughes table above shows that the international rig count still remains below 1,000, near all-time lows.

Bottom Line

I keep a close eye on U.S. oil production, because it is expected to be the growth engine of the global oil supply this year.

I do not see it, at least not yet. Despite the fact that the U.S. oil production has increased in the fourth quarter of last year, global inventories plunged. This fact points to a significant imbalance between global oil demand and supply, despite rising domestic oil production.

Without a surge in U.S. oil rig count, which is absent in both sets of data, I do not expect U.S. oil production growth to derail the bull thesis in the coming months. I will continue to keep my finger on the pulse of this data for my followers and subscribers.

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.

Dialog expects to supply chips to Apple through 2020: CEO in paper

FRANKFURT (Reuters) – Dialog Semiconductor (DLGS.DE) expects Apple (AAPL.O), its top customer, to use its chips for a significant proportion of its devices in 2019 and 2020, Chief Executive Jalal Bagherli told a German newspaper.

FILE PHOTO: Dialog semiconductor logo is pictured at a company building in Germering near Munich, Germany August 15, 2016. REUTERS/Michaela Rehle/File Photo

“Apple at the start of the year commissioned us with the design of chips for many devices for 2019 and 2020,” weekly Euro am Sonntag quoted Bagherli as saying in an interview published on Saturday, without providing details.

Dialog’s stock has lost more than half of its value over the past year on investor concerns that Apple is working on its own battery-saving chips for iPhones.

Analysts reckon Dialog derives more than half its revenue from supplying Apple with power management integrated circuits (PMICs).

Dialog in December acknowledged that Apple could develop its own power chips. It said at the time there was no risk to its existing supply deals in 2018 and that it was in the advanced stages of working with Apple on designing“2019-type products” that could lead to commercial contracts by this month.

“Negotiations over that chip are still ongoing. But we expect to deliver a chip design for testing in the customer’s system in the second half of the year,” Bagherli told Euro am Sonntag.

He also said that he saw no need for Dialog to develop a defense against possible hostile takeover attempts following the drop in its market value.

“A defense, including an anchor shareholder or poison pills to scare off bidders, are not in the interest of a stock-listed company,” he said.

Almost 89 percent of shares in Dialog are freely traded, according to Thomson Reuters data.

Its biggest single shareholder is Tsinghua Unigroup, China’s top state silicon chipmaker, which holds about nine percent of voting rights in the group.

Reporting by Maria Sheahan; Editing by Stephen Powell

6 Things Smart People Do to Have Really Interesting Conversations

Next time you go to a traditional ‘networking’ event, a cocktail party or dinner, do us all a favor: lose the elevator pitch. That approach is quickly losing relevancy in making authentic connections that could open up doors for you.

Instead, your first order of priority is to take the attention off of yourself and put it squarely on the other person sitting or standing across from you. You start by asking the right questions and listening more than you speak (more on that below). And, of course, always be conscious of having open and positive body language.

Try any of these useful tactics to keep you on track to having exceptional conversations. Now you’re off to the races. 

1. Become genuinely interested in the other person. 

George Mason University psychologist Todd Kashdan, author of Curious? determined that being interested in others is more important than being interesting yourself. “It’s the secret juice of relationships,” stated Kashdan. So, whatever you do, talk in terms of the other person’s interest. You’ll be surprised by the outcome.

2. Show those pearly whites.  

According to Psychology Today, research has determined that smiling can make us appear more attractive to others. It also lifts our mood as well as the moods of those around us. Most of us aren’t fully aware of when we’re not smiling. Make a habit of it and start smiling.

3. Give the gift of a ‘five-minute favor.’

Five-minute favors are selfless giving acts, without asking for anything in return from the person whom you’re offering help. Examples of five-minute favors include: sharing knowledge; making an introduction; serving as a reference for a person, product, or service; or recommending someone on LinkedIn, Yelp, or another social place.

4. Listen more. Speak less. 

Want to create a great first impression? Let the other person speak without interruption. Yes, I’m talking about parking your thoughts and avoiding jumping in and finishing the other person’s sentence or waiting impatiently for your chance to respond. When you actively listen, it will draw the other person to you with equal or greater interest. So go ahead, give the other person your full attention. What you’re communicating is “I am interested in what you have to say.” 

5. Make the other person feel important–and do it sincerely.

The best conversations with someone you just met are initiated by wanting to learn about the other person: What they do, how they do it, and why they do it. This goes back to having a high curiosity quotient. By wanting to learn from someone — even someone younger and less experienced than you — you will garner an immediate and positive first impression.

6. Tell a good story.

So now that you’ve captivated their attention, they probably want to know about you, so it’s your turn to shine. Rather than boring them with work or business related lingo (that will come later), it’s good to have a few go-to stories you can pull out of your hat to keep the momentum going. Have stories you can share that have been tested with other audiences and found to be reliably funny, entertaining, informative, or engaging. Scott Adams, author of How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Lifesuggests putting your focus on stories about other people, rather than things, because most of us find human behavior fascinating.

Closing thought.

If you haven’t caught on yet, the key for your new social approach is this: you take the initiative and make the conversation about the other person. People love to talk about themselves–if they have something worth talking about that adds value to the conversation. Once they know you’re not a wacko, by asking a genuine question first (try “what’s your story?”), they’ll appreciate your showing interest. This selfless act of putting the spotlight on someone else makes you the more interesting person in the room.

Did GE Just Bottom?


General Electric (GE) dipped below $14 this week, seemingly for the first time since 2009/2010, a time when the company was just beginning to climb out of the messy financial crisis. I think it’s noteworthy to mention that back then there was a freeze-up in the financial system that threatened to prevent the flow of liquidity to GE. This scenario would have essentially resulted in a bankruptcy for the company if credit was not made available immediately. Aside from this moment in history, you would have to trace GE’s price back all the way to early 1996 to see the company trading at a comparable price. So, is GE in as dire shape as it was amid the financial collapse? Or is the stock finally trying to put in a bottom as it tests the nearly decade-low $14 level?


Although it is difficult to point to an exact price when the stock may hit a long-term bottom, I am convinced that this point is not far from the current price. GE has extremely valuable businesses, and the current crisis the company is experiencing is one of confidence, perpetuated by years of mismanagement. Much of the negative news is now baked into GE’s share price, and any shift in news flow to a more positive tone should result in a higher share price for the company. Moreover, there is a price point at which prominent investors will begin to recognize significant value in the company, and could begin to acquire substantial stakes in the company. Furthermore, a valuation breakdown of GE suggests the stock is trading at a significant discount to the underlying value of GE’s businesses.

So, How Bad of Shape is GE in?

There is no denying it, GE has seen much brighter days. The company is going through a period of decreased profitability, which has forced GE to cut its sought-after dividend. Moreover, the recent insurance unit debacle had resulted in a massive charge of $6.2 billion, and will require another $15 billion to recapitalize the unit in the upcoming years. If that weren’t bad enough, the company’s pension obligations are underfunded by roughly $31 billion, the greatest shortfall out of any U.S. company. And then there is the recent announcement of the SEC investigation. GE seems to be under a relentless barrage of negative news coverage and the stock is getting hammered perpetually.

However, most of these developments have been known about for months, and are no surprise to investors by now. Thus, the following issues should be largely factored into the ultra-low share price as is. Also, the SEC investigation should have a very limited effect on the company long term. If any irregularities are found and that is a big if, GE is likely to be let off the hook with a slap on the wrist, a relatively benign fine most likely. The pension liabilities are also likely to get resolved over a prolonged period of time, and should have a limited effect on overall future profitability.

As to the question which shoe will GE drop next? Perhaps there are no more shoes to drop. What if these are the last significant skeletons GE has in its closet? There don’t appear to be any fundamental/structural issues at GE. The issues at hand are largely transient in nature, are likely to get resolved over the next few years, and should not significantly impact GE’s performance over the long term. In the meantime, the stock has hit what appear to be generational lows while GE’s businesses still hold significant value.

GE’s Value

It is said that the market is always right, and an argument can be made that this statement is true. However, at certain times, due to significant shifts in sentiment, the market can cause prices to become drastically disconnected from fundamentals. We saw this occur in the dotcom boom, with mortgage-backed securities, and this often occurs at a time of extreme sell-offs. Sometimes panic and extreme pessimism cause stocks to get sold off and become extremely cheap relative to their “true value.” I am not saying that GE is necessarily at this drastically oversold level now, and the stock could slide further, but a breakdown of its businesses does suggest that the company’s “business value” is worth significantly more than the market is currently giving the company credit for.

GE’s Businesses: The Good, The Bad, and The Ugly

GE’s current enterprise value is roughly $192 billion. However, the value of GE’s businesses appears to be significantly higher if the units are valued independently. For instance, GE’s top enterprises, the Aviation and the Healthcare segment, could be valued at roughly $200 billion alone. If we look at GE’s 2017 full-year financial results we can see that certain segments performed extremely well, but the predominant destructive force, the troubled Capital segment, weighed down the entire company dramatically.


GE Enterprise Value data by YCharts

The Good

Let’s start with GE’s crown jewel, its coveted Aviation business. This segment generated $27.38 billion in revenues last year, illustrated revenue growth of 4%, a healthy profit margin of 24.3%, and brought in an impressive $6.64 billion in profit. If we apply a relatively modest valuation of 19.5 times trailing earnings we can value this unit at roughly $130 billion. Comparatively, United Technologies (UTX) trades at 23.25 time trailing P/E.

The Healthcare segment, another top performer at GE generated revenues of $19.12 billion last year. The unit showed yoy revenue growth of 5%, demonstrated a very healthy 19.7% profit margin, and brought in $3.45 billion in profits. If we apply a trailing multiple of 22 times earnings, roughly consistent with the industry’s average, we arrive at an approximate value of $75 billion for this segment. Competitors such as Boston Scientific (BSX), Medtronic (MDT), and others have significantly higher trailing P/E ratios upwards of 30.

GE’s Renewable Energy segment may be one of the more underestimated units. It showed significant revenue growth of 14% last year. Moreover, as the world moves towards increased use of renewable forms of energy, this segment is likely to perform extremely well going forward. Renewable Energy brought in revenues of $10.3 billion, showed a profit margin of 7.1%, and delivered a profit of $727 million. Using a valuation of 25 times trailing earnings, we arrive at a value of $18 billion for this unit.


GE’s Oil and Gas segment also appears to be an underestimated property. Oil has increased in value significantly over the past few years and is likely to continue going higher due to increased inflationary pressures and growing demand. Therefore, this segment should continue to do well going forward, and is likely to increase in value significantly down the line. Moreover, despite the volatile oil prices of last year, GE’s oil and gas segment performed relatively well, suggesting that future returns could be much better than many analysts envision.

Last year the oil and gas segment brought in revenues of $17.22 billion, had an impressive revenue growth of 34%, a profit margin of 5.2%, and showed a profit of $900 million. If we apply a trailing earnings multiple of 22 to this segment, the approximate value of this unit comes to $20 billion. Most competitors like Halliburton (HAL), Schlumberger (SLB), and other competitors can’t show P/E ratios for last year due to mounting losses because of wildly fluctuating oil prices, operational difficulties, and other setbacks.

The Bad

Now that we’re done with the good, let’s move on to the bad, GE Power. Although the Power segment’s revenue of $36 billion appears impressive, the rest of the unit’s metrics, not so much. Revenue growth in the Power business was negative, at -2%, profit margin was just 7.7%, profit came in at $2.78 billion in 2017, down by 45% on a yoy basis. The drastic drop in profits is likely a transient phenomenon due to a reshuffle in the company’s power and lighting segments. Therefore, it is not likely the start of a long-term trend. However, given the circumstances, it is difficult to assign a trailing P/E of higher than 12 to this segment, which gives it a value of roughly $34 billion. Nevertheless, I do think that this unit can regain some of its value if GE improves its profitability position. For instance, if we value the unit according to 2016’s earnings, at a 12 multiple the segment would be worth over $60 billion. This could be a low point for EPS in the power segment, therefore the unit’s value could expand going forward.

Another struggling segment, GE’s Transportation unit experienced a revenue drop of 11% to $4.18 billion on a yoy basis. However, the unit is quite profitable with a healthy 19.7% profit margin, and a profit of $824 million. An 11 trailing P/E multiple provides a value of roughly $9 billion for the transportation unit.

GE Lighting showed revenues of $2 billion, but experienced a sharp drop of 60% in revenues last year. A profit margin of just 4.1% appears a bit soft, and the unit brought in a profit of just $93 million. If we put a 10 times trailing P/E multiple on this segment, a value of around $1 billion is derived.

The Ugly

Now the ugly, GE Capital. This unit clocked in a loss of $7.6 billion last year. Moreover, GE is now on the hook to recapitalize the unit’s insurance segment to the tune of $15 billion. Therefore, this segment can be valued at a negative number, – $15 billion. GE Capital is an enormously troubled unit that has apparently been mismanaged worse than any other GE asset. The component is responsible for numerous losses at GE, including a $6.2-billion charge last quarter, and the $15-billion insurance related unfunded liability. The Capital unit is one of the prime sources for trouble at GE.

GE’s Combined Value

  • Aviation: $130B
  • Healthcare: $75B
  • Renewable Energy: $18B
  • Oil and Gas: $20B
  • Power: $34B
  • Transportation: $9B
  • Lighting: $1B
  • Capital: – $15B
  • Total Value: $272B
  • Enterprise Value: $192B
  • Apparent Disconnect: $80B

GE’s Problem is One of Management

GE’s biggest problem is one of management. However, a turnaround effort appears to be in the works. The days of Jeff Immelt’s double jet travels are over. If there was a time GE’s plundering management could operate in relative opaqueness, that time has probably come to an end. The company’s management is going to be under a microscope for the foreseeable future. Shareholders, newly appointed board members, regulators, pundits, and other market forces are closely observing GE with a few crucial factors in mind. Is the company reforming its culture? Is management effectively cutting costs? Can the company do a better job managing its various businesses? etc., etc. The bottom line is that with so much pressure and scrutiny stacked up against GE, the company’s management may have no choice but to get its house in order.


Shift in News Flow

Another element that is likely to play a favorable role going forward is a possible change in news flow. There has been a continuous and overwhelming drumbeat of negative news flow surrounding GE for the better part of a year now. The stock has cratered by more than 50%, as about $150B worth of value has been erased from GE’s market cap in that time. However, at some point the news flow will change to a more positive tone, and it’s likely to occur sooner than later. Some positive developments are already starting to materialize. GE recently appointed three new board members. A shakeup at the board suggests a constructive step towards better governance. Management is continuing to work on spin-off efforts, and news of asset sales should be perceived as a positive element.

Institutional Buyers

Big institutional buyers and activist investors could be warming up to GE at current levels. Even Warren Buffett recently commented that GE has some great businesses that he understands, adding that he would seriously look at GE “at the right price.” Buffett has experience investing in GE at distressed levels, as he became a large shareholder during the days of the financial crisis. Also, Mr. Buffett has about $116B in cash at Berkshire (NYSE:BRK.A) (NYSE:BRK.B) to spend, and a great industrial business, with an iconic name like GE, which he understands, could make a lot of sense around these levels.

Technical View

Technically GE is bouncing around $14 support. This level may not hold in the short term, especially if the overall market continues its slide. However, at these already depressed levels, unless the stock market falls through recent correction lows GE’s downside is likely to be very limited here. Moreover, the RSI and CCI are showing that the stock has been in relative oversold territory for about 6 weeks now. A possible reversal in momentum from negative to positive seems likely, especially if some favorable fundamental elements begin to materialize.


Bottom Line

GE’s stock has been battered over the past year, and for good reason. The company’s performance has declined noticeably, the dividend got cut in half, and some alarming skeletons have been exposed. However, things are clearly changing at GE. Management appears to be making some difficult decisions, and the company’s corporate structure is under the scrupulous eye of various market participants pressing for reform. Furthermore, a shift to a more favorable tone in news flow could change investor sentiment, and certain activist and institutional investors may start looking to enter the stock or acquire parts of the company.

Ultimately, it appears that the badly battered GE company is already significantly undervalued. The $80B disconnect between the company’s $192B enterprise value and the $272B assessed value of its businesses suggests that the stock’s fair value is roughly 42% higher from current levels, which would put GE’s share price at around $20. Once the price stabilizes, market participants could bid the stock up aggressively into year’s end, especially once favorable fundamental developments begin to emerge. Therefore, my year-end price target range for GE is $19-21.50.

Disclaimer: This article expresses solely my opinions, is produced for informational purposes only, and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please always conduct your own research and consider your investment decisions very carefully.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GE over 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.

Colt DCS ramps up renewable power use across European datacentre estate

Colt Data Centre Services (DCS) has confirmed that nine out of 17 of its European carrier neutral colocation facilities now run exclusively on renewable power, as the firm pushes ahead with its efforts to improve the environmental friendliness of its datacentre portfolio.

The company says the initiative is focused on cutting down the carbon emissions generated by its datacentre activities, as well as improving the overall energy efficiency of its operations.

To this end, Colt said it is committed to using renewable energy sources to power its datacentres “wherever possible”, but concedes there are some territories where it is prevented from doing so at the moment.

“In France, the country’s reliance on nuclear power and an energy generation shortfall makes it impossible for any datacentre provider to guarantee 100% renewable power, although it is hoped that planned developments for renewable energy will meet the shortfall by 2023,” the company said in a statement.

The datacentre industry’s energy consumption habits, including its use of renewable power, remains under tight scrutiny at the moment, as concerns about how sustainable its growth is from an environmental perspective continue to mount.

In response, a number of the hyperscale cloud giants – including Amazon Web Services (AWS), Google and Microsoft, have all pledged to ramp up their use of renewable energy to ensure the growth of their operations does not come at the expense of the environment.

Meanwhile, cross-party think tank, Policy Connect, published a research paper on 20 February, for example, looking into the environmental impact of the UK’s increasingly digital economy, from both an energy cost and carbon emissions perspective.

In particular, it calls on policymakers to start taking stock of how much energy is used to power internet-connected devices, data transmission networks and the datacentres.

“To date, the energy cost and carbon impact of the digital economy has not increased to the epic proportions once predicted. High energy bills, new efficient ICT technologies and regulations have kept the proportion of electricity used by ICT products and services in check,” the report states.

“However, there is a risk that with a growing dependence on connected devices and digital technologies, energy efficiency gains may slow or even stall.”

For this reason, Colt DCS CEO Detlef Spang, said it is time for the technology industry to “face up to its global responsibilities” on energy consumption and use of renewables.

“Colt DCS believes our industry has a moral and ethical duty to go far beyond the minimum requirements for sustainability, and to deploy techniques and new infrastructure technology that will have a major and measurable effect on the resources we use,” he said.

“This will require major investment, but by adopting the latest technologies and best practices, we will deliver lower lifetime costs for our customers while also ensuring we leave the smallest possible ecological footprint in the territories where we operate around the world.”

This Tech Mogul Got $12 Billion Richer Just By Relocating His Company

Why be content with almost $2 billion when your net worth can be multiples more simply by moving your company from one stock exchange to another?

Zhou Hongyi did just that, relocating his online security firm to China and merging it into a shell company, which soared as much as 550% since he announced the plan in November. Qihoo 360 Technology Co. delisted from the New York Stock Exchange in July 2016 and began trading Wednesday in Shanghai as 360 Security Technology Inc. The move boosted Zhou’s net worth to $13.6 billion, making him China’s 12th-richest person, according to the Bloomberg Billionaires Index.

Zhou, 47, told reporters in November that aligning himself with China’s national interest was among the reasons he moved the listing to his homeland, where the Communist Party has been tightening the country’s “cybersecurity sovereignty.”

The first day back was rocky. The shares swung between gains and losses on Wednesday — opening 3.8% higher before declining 10% as of the close in Shanghai. The benchmark Shanghai Composite Index dropped 1%.

Still, China’s richer tech valuations may have been a draw, said Sun Mengqi, an analyst at BOCOM International Holdings Co. “There could be a substantial valuation gap between the U.S. and China.”

Antivirus Products

Zhou owns a 23% stake in 360 Security, directly and through holding companies Tianjin Qixin Zhicheng Technology Ltd. and Tianjin Zhongxin Investment LP, according to an acquisition proposal last month. Yue Jing, a company spokeswoman, declined to comment on Zhou’s net worth.

The firm posted 2016 revenue of 9.9 billion yuan ($1.6 billion), up from 9.4 billion yuan a year earlier. Most of its sales come from online ads, many which are pushed to users of its antivirus products.

Zhou isn’t the first tech mogul to take the back door to China. Billionaire Jason Jiang’s Focus Media went private in a $3.7 billion buyout in 2013 after coming under pressure from short-seller Carson Block, relisting two years later in Shenzhen. The company’s market value has swelled to $29 billion since then.

Zhou did a stint as the head of Yahoo China in the 2000s after selling a search engine startup to the U.S. firm and, in 2006, co-founded Qihoo 360 with fellow billionaire Qi Xiangdong.

Crypto 'noobs' learn to cope with wild swings in digital coins

NEW YORK (Reuters) – After researching digital currencies for work last year, personal finance writer J.R. Duren hopped on his own crypto-rollercoaster.

Duren bought $5 worth of litecoin in November, and eventually purchased $400 more, mostly with his credit card. In just a few months, he experienced a rally, a crash and a recovery, with the adrenaline highs and lows that come along.

“At first, I was freaking out,” Duren said about watching his portfolio plunge 40 percent at one point. “The precipitous drop came as a shock.”

The 39-year-old Floridian is part of the new class of crypto-investors who do not necessarily think bitcoin will replace the U.S. dollar, or that blockchain will revolutionize modern finance or that dentists should have their own currency.

Dubbed by longtime crypto-investors as “the noobs”– online lingo for “newbies” – they are ordinary investors hopping onto the latest trend, often with little understanding of how cryptocurrencies work or why they exist.

“There has been a big shift in the type of investors we have seen in crypto over the past year,” said Angela Walch, a fellow at the UCL Centre for Blockchain Technologies. “It’s shifted from a small group of techies to average Joes. I overhear conversations about cryptocurrencies everywhere, in coffee shops and airports.”

Walch and other experts cited parallels to the late-1990s, when retail investors jumped into stocks like, a short-lived online seller of pet supplies, only to watch their wealth evaporate when the dot-com bubble burst.

Bitcoin is the best-known virtual currency but there are now more than 1,500 to choose from, according to market data website CoinMarketCap, ranging from popular coins like ether and ripple to obscure coins like dentacoin, the one intended for dentists.

Exactly how many “noobs” bought into the craze last year is unclear because each transaction is pseudonymous, meaning it is linked to a unique digital address, and few exchanges collect or share detailed information about their users.

A variety of consumer-friendly websites have made investing much easier, and online forums are now filled with posts from ordinary retail investors who were rarely spotted on the cryptocurrency pages of social news hub Reddit before.

Reuters interviewed eight people who recently made their first foray into digital currency investing. Many were motivated by a fear of missing out on profits during what seemed like a never-ending rally last year.

One bitcoin was worth almost $20,000 in December, up around 1,900 percent from the start of 2017. As of Friday afternoon it was worth about $10,000 after having fallen as much as 70 percent from its peak. Other coins made even bigger gains and experienced equally dizzying drops over that time frame.

“There was that two-month period last year where all the virtual currencies kept going and up and I had a couple of friends that had invested and they had made five-figure returns,” said Michael Brown, a research analyst in New Jersey, who said he bought around $1,000 worth of ether in December.

“I got swept by the media frenzy,” he said. “You never hear stories of people losing money.”

In the weeks after Brown invested, his holdings soared as much as 75 percent and tumbled as much as 59 percent.


Investors who got into bitcoin before its 2013 crash like to refer to themselves as “OGs,” short for “original gangsters.” They tend to shrug off the recent downturn, arguing that cryptocurrencies will be worth much more in the future.

“As crashes go, this is one of the biggest,” said Xavier Levenfiche, who first invested in cryptocurrencies in 2011. “But, in the grand scheme of things, it’s a hiccup on the road to greatness.”

Spooked by the sudden fall but not willing to book a loss, many investors are embracing a mantra known as “HODL.” The term stems from a misspelled post on an online forum during the cryptocurrency crash in 2013, when a user wrote he was “hodling” his bitcoin, instead of “holding.”

Mike Gnitecki, for instance, bought one bitcoin at around $18,000 in December and was sitting on a 43 percent decline as of Friday, waiting for a recovery.

“I view it as having been a fun side investment similar to a gamble,” said Gnitecki, a paramedic from Texas. “Clearly I lost some money on this particular gamble.”

Duren, the personal finance writer, is also holding onto his litecoin for now, though he regrets having spent $33 on credit card and exchange fees for a $405 investment.

Some retail investors who went big into cryptocurrencies for the first time during the rally last year remain positive.

Didi Taihuttu announced in October that he and his family had sold everything they owned — including their business, home, cars and toys — to move to a “digital nomad” camp in Thailand.

In an interview, Taihuttu said he has no regrets. The crypto-day-trader’s portfolio is in the black, and he predicts one bitcoin will be worth between $30,000 and $50,000 by year-end.

His backup plan is to write a book and perhaps make a movie about his family’s experience.

“We are not it in it to become bitcoin millionaires,” Taihuttu said.

Reporting by Anna Irrera; Editing by Steve Orlofsky; Editing by Lauren Tara LaCapra

America's Most-Hated CEO Got Buff in Prison, and People Actually Like Him There. (Here's What Happened)

Maybe you remember Martin Shkreli, who first became famous as the so-called “Pharma Bro” back in 2015 (and then, the “most hated CEO in America.”

This was after his company increased the the cost of a drug used to treat malaria, cancer, and AIDS by 5,455 percent (from $13.50 to $750 a tablet).

Then, he started a PR and social media campaign to suggest that anyone who didn’t like what he did was stupid. 

It explains the explosion of schadenfreude when he was later indicted and found guilty in a completely unrelated stock fraud case.

And it also explains the metaphorical gasp that was heard across the Internet when Shkreli’s bail was revoked, and he was sent to the Brooklyn federal detention center in September. 

It’s a rough place, and a lot of people wondered whether a skinny, young, rich guy like Shkreli, who seems to have a really hard time keeping his mouth shut, might also have a really hard time not getting pushed around–or worse.

Heck, even one of his good friends out here in the free world told a newspaper she was worried for his safety in jail, because “he’s not a popular person. “People threaten him on the Internet every day.”

But it turns out, they needn’t have worried. Shkreli apparently has turned on the charm–and also reportedly hit the gym.

Shkreli was back in court, where the federal government is trying to get him sentenced to a lengthy prison term, and also convince a judge to make him forfeit $7.3 million in assets. 

There was no decision from the judge–he’ll be sentenced in March and faces a possible 20 years. But the New York Post reports Shkreli has “bulked up in prison” and is getting along fine.

There are no photos, only courtroom sketches, but at least according to the Post, Shkreli looked a lot harder and stronger under his blue jail uniform. 

“He’s got his prison muscles, the Post quotes a “source close to the defense” as saying. “They like him in there. … They don’t put their arms around him and say ‘Give me your money’ like they do to other new prisoners… they like him.”

Shkreli’s real danger might stem from how the judge in his case calculates the amount of money (if any) that his victims lost as a result of his fraud and conspiracy convictions.

Shkreli’s lawyers claims they didn’t actually lose anything–the government contends it’s between $9 million and $20 million, and possibly more. The distinction could mean the difference between a sentence of 16 months or less, or else one that could potentially last decades, according to CNBC.

In addition to Shkreli’s appearance in court, we’ve had a few other insights over the past few months into how he’s been faring behind bars.

For one thing, he’s still posting on Facebook occasionally–or at least, a friend with access to his account is apparently doing so on his behalf. 

There are also two letters that he’s sent which have been made public–one to a friend named Lisa Whisnant, and the other to a Brooklyn-based media company called The Tab. He seemed like he was doing okay in both letters.

“Jail has some redeeming qualities,” he wrote to The Tab. “It’s probably the most social environment I’ve been in. … [T]here is camaraderie akin to a military setting. You learn just how lucky you are, you help others out, learn cool slang, watch BET all day. Great times!”

Separately, he wrote Whisnant, “Things are not THAT awful here. … There are some bright sides. I am teaching these prisoners some new things and hopefully some ways to change their lives.”

As part of that effort, Shkreli was looking for books–including a dozen copies of Spencer Johnson’s Who Moved My Cheese. Self-help books like that are a coveted commodity behind bars, the Post reported.

In case you’d like to get to know the so-called world’s most-hated CEO, or else just do something nice for a few thousand men confined at the federal detention center in Brooklyn (or, if you’re just curious), here’s the list of books Shrekli apparently wanted.

You’ll also need the federal website where you can look him up to send mail or packages from direct-mail retailers.

Gadget Lab Podcast: A Deep Dive on Apple's HomePod

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.

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.

SOXX data by YCharts
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.


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.