DNC Lawsuit Against Russia Reveals New Details About 2016 Hack

The Democratic National Committee Friday filed a lawsuit against a broad slate of people and entities allegedly responsible for the 2016 hack of its email, phone calls, and more. But while the suit claims involvement from a host of headliners—Wikileaks, Julian Assange, Donald Trump, Jr., and Russia among them—its immediate importance lies in the previously unreported timeline it lays out.

While a rough outline of the DNC hack that rocked the 2016 election had previously been established, the 66-page lawsuit, first reported by The Washington Post gives exact dates for the first time. It also asserts coordination among a web of characters affiliated with the Trump campaign, Russia’s GRU intelligence service, and WikiLeaks.

“No one is above the law,” the suit begins. “In the run-up to the 2016 election, Russia mounted a brazen attack on American Democracy.”

The details of when and how that attack occurred, though, are more clear than ever—and may indicate that Russia’s plan to interfere in the US election predated its DNC intrusion.

According to the DNC lawsuit, Russian intelligence group Cozy Bear—the GRU-affiliated hacker group, also known as APT29—infiltrated the DNC network as far back as July 27, 2015, nearly a year before the leaks of the pilfered material began. The suit says that a second Russian group—Fancy Bear, the outfit that has recently tormented the International Olympic Committee as well—hacked the DNC’s systems on April 18, 2016. The DNC wouldn’t notice the presence of either until April 28, 2016, at which point it called in security firm CrowdStrike to help analyze and mitigate the damage.

The remedy was costly. The suit details the necessary fixes; the DNC had to “decommission more than 140 servers, remove and reinstall all software, including the operating systems, for more than 180 computers, and rebuild least 11 servers.” Between repairing and replacing equipment and hiring experts to manage the fallout, the bill came out to over a million dollars.

By then, of course, the worst damage had already been done. The DNC had been devastatingly compromised. The Russians had gained access not only to email systems but also to backup servers, VOIP calls, and chats. They were prepared to make off with “several gigabytes of data,” the suit says, a little over a week before the DNC even knew they were there.

The timeline from there has been a matter of public record. On June 14, the DNC first disclosed the hack. The following day, a persona going by Guccifer 2.0—only recently confirmed to be a Russian intelligence agent—claimed responsibility, leaking a 237-page opposition research report on Donald Trump in the process.

The leaks continued steadily from there, as the suit details. Guccifer 2.0 struck again on June 27, June 30, and July 6. On July 22, WikiLeaks took the wheel, releasing nearly 20,000 internal DNC emails. The following day, according to the suit, multiple DNC employees received an email that said: “I hope your children get raped and murdered. I hope your family knows nothing but suffering, torture, and death.”

The rest of the suit rehashes the connections that have played out in the press over the last several months, alleging Roger Stone, Paul Manafort, George Papadopoulos, and a host of Russians as ingredients in a collusive soup. But for close observers of Russia’s hacking efforts against the US in 2015 and beyond, it’s the timeline that provides the most valuable information.

That’s in part because of how it aligns with two incidents not mentioned in the suit. Many of the early leaks appeared on a site called DCLeaks, which went live in June 2016 but was registered on April 19, which the suit confirms was a day after Fancy Bear broke into the DNC. But the same group that registered DCLeaks had attempted but failed to register ElectionLeaks.com on April 12, nearly a week before the Fancy Bear hack.

The timeline strongly implies that Russia’s aim was to disrupt the election from the start, rather than a reconnaissance mission that rapidly escalated.

“They had already carried out the Podesta intrusion in March, and carried out a pretty large scale attempt to target the campaigns,” says John Hultquist, director of threat intelligence at security firm FireEye, referring to the emails of Hillary Clinton campaign chairman John Podesta, which were ultimately leaked a month before the 2016 election. That, combined with registering ElectionLeaks before the Fancy Bear break-in, “suggests they had this plan prior to even compromising the organization.”

It’s unclear how likely the DNC lawsuit is to succeed, especially in its efforts to hold Russia accountable in a US court. But its revelations shed light on one of the most impactful hacks of recent memory—and maybe the intentions of the country behind it.

Russian Hacks

3 Reasons Why Subscription Businesses Like Blue Apron and Trendy Butler Will Beat out Retail

The earliest subscription services such as newspapers and milk cartons have existed for decades without much attention. However, In the past five years, we have seen an explosion of innovative startups using the subscription business model to dominate their niche, beating out incumbents in the traditional retail sector.

This disruption is happening across a wide variety of industries, with over 2,000 business entities that operate under the subscription model in the United States alone. Meal kit subscription service Blue Apron went public earlier this year at a company valuation of nearly $2 billion. Birchbox, the New York-based startup that sells monthly boxes of beauty samples, is now valued at over $500 million. And Dollar Shave Club, the eccentric shaving brand, was acquired for over $1 billion, just to name a few success storiees.

Success achieved by early players in the industry has inspired a fresh wave of entrepreneurs to apply the subscription box model to new areas. Many of these hot startups are proving you can leverage big data and machine learning models to create extremely lucrative steady sources of recurring revenue.

One example of this is Trendy Butler, which offers a $65/month subscription box that comes with a combination of designer clothing (t-shirts, jackets, pants, etc.). The company, like many of today’s subscription services, uses an algorithm that collects your personal tastes and preferences (like sizes, styles, colors, etc.) to craft the perfect mix of outfits. It’s like Spotify, but for your clothing.

In analyzing the success of startups like Trendy Butler, I dug into why the subscription service model is likely to beat out conventional brick and mortar retail long term. Here are 3 reasons why:

1. Personalization at scale.

The assumption that entrepreneurs must operate under is that their customers are inherently trying to maximize their personal value while doing as little work as possible. In the case of shopping for clothing, we all want to look good, but many of us do not want, have the time, or frankly the talent to pick out the best outfits.

That’s what fueled Trendy Butler’s founders into realizing that we can use technology to completely rethink the way a shopping “experience” is delivered. Rather than randomly recommend products, predictive machine learning algorithms are used that take in a large data set (100+ points) of personalized information. As you expand the scope of the inputs to the algorithm, it gets smarter.

As recommendations are able to improve and become more personalized, the traditional brick and mortar way of doing business will simply not be able to keep up.

2. Predictable revenue sources.

Subscription business models also bring a sense of predictability that the retail industry has been lacking for decades. Since many stores cannot accurately forecast demand, there is often lots of waste, saturated product and overhead costs. These inefficiencies can often mean the difference between success and failure for many retailers.

Subscription companies circumvent these costs by doing much of the work behind the scenes. Additionally, most of if not all of their customers are paying monthly in exchange for a routine service/product. This is an extremely secure source of revenue that companies can develop over time

3. Establishing relationships with customers.

There is something special about opening your door to a new package even just once or twice a month. I personally love it when I receive a shipment from BarkBox and get to see my puppy light up with joy. The surprise in every subscription box is a unique opportunity for a company to delight their customers and provide a unique and memorable experience.

These touch points, which are rare in most other industries, develop customer loyalty. Over time, subscription box businesses tend to develop relationships with their customers because of the recurring nature of the interactions.

Retail is far more transactional as most of the instances are one time exchanges. With subscriptions, there is a constant need to interface with customers and continue the relationship.

As more and more companies infiltrate different industries, the only true competitive advantage startups will have will be in their ability to establish a strong and loyal community of backers. Building defensible relationships with customers is a great method of doing just that.

The OURSA Security Conference Calls Out Lack of Inclusion

On Tuesday, about 250 people gathered in the event space of Cloudflare’s San Francisco headquarters for an unusual security conference—or, perhaps more accurately, one that aimed to modernize the longstanding tradition in security of creating alternative, transgressive gatherings. The one-day Our Security Advocates event offered a counterpoint to the monolithic approach of large, prominent security conferences, by offering a diverse agenda and set of speakers to promote inclusive representation in privacy and security fields.

Even the name served as commentary, playing off of the corporate-focused RSA conference that’s also taking place in San Francisco this week. In fact, OURSA emerged less than two months ago in part as a response to the announcement of the RSA 2018 speaker lineup. Of the 20 keynote speeches, only one was slated to be delivered by a woman.

Critics flooded Twitter, including Facebook chief security officer Alex Stamos, who started batting around suggestions for female speakers. Others quickly joined in. After less than five days, that discussion had evolved into OURSA, which garnered nearly 100 talk proposals, and sold out within 12 hours. At the conference on Tuesday, every single speaker was from a background that is typically underrepresented in privacy and security.

“The goal was just to make a statement,” Parisa Tabriz, one of the conference organizers and director of engineering at Google, said on Tuesday. “We hope that OURSA will help other conference organizers recognize that finding speakers with diverse voices is not this insurmountable task. And we’re tired, frankly, of hearing the same old excuses.”

OURSA emphasized that it wasn’t simply about calling out RSA, but rather to raise awareness of problems related to underrepresentation that pervade the industry. Attendees watched speakers and panels in the main space, milled around with popcorn and LaCroix, or met for lunch on the roof, as they would have at any conference. But the diversity of the speakers, organizers, and attendees created a noticeably different environment. OURSA’s livestream drew about 1,500 total viewers during the event.

“I only want to go to conferences that are inclusive,” said attendee Alyssa Pratt, a content manager focused on security at LinkedIn. “Some feel more like a cattle call—it’s hard to make connections and have real conversations. OURSA is much more valuable. The best thing about it is how accessible it is.”

OURSA also wasn’t just a stunt; it was a rigorous conference in its own right. One set of speakers grappled with the privacy and security implications and ethics of emerging technologies, presenting on everything from security and right-to-repair issues in precision farming to the realities of government surveillance and the risk that human assumptions and biases will be hard-coded into every generation of technology. Another group addressed the question of how to create tech tools that support the privacy and security of high-risk users, given that every user circumstance and type of risk is different. And speakers delved into machine learning, DDoS threats, and the complicated challenges of email security.

“Normal conferences are scary,” said Carly Schneider, a security researcher who attended OURSA. As a young woman beginning her career in security, she noted how intimidating and exhausting it can be to attend most industry events. And Schneider emphasized the need for multiple types of conferences that prioritize representation, so some can be more deeply technical and others, like OURSA, can focus on robust discussions about privacy and security policies, concepts, and consequences.

The conference served as an assertion that professionals can advocate for change and a more inclusive industry by coming together to discuss the work they do each day. “OURSA is not just a group of people complaining, they’re very substantive topics for security,” says Ellison Anne Williams, cofounder of the data security firm Enveil, whose whole career has been in male-dominated fields—from completing a math PhD to working at the NSA. “I think one of the most powerful things women in security can do is stand up for the substance of it and not be a token female in the room. Nobody is looking to be the fill-in-the-blank stereotype on the panel. These are folks of real substance.”

Over drinks on the roof at the end of the event, speakers and attendees noted that seeing such extensive and diverse representation in panel after panel was heartening. As Window Snyder, the chief security officer at the cloud infrastructure company Fastly had put it, “The industry changes when we change it.”

OURSA’s organizers hope that it has left its mark—and shown how doable it is to accurately represent the diversity that exists within the security industry—all while creating a substantive event where speakers share their professional findings. Though much more work remains to achieve fully balanced representation, a homogenous speaker slate belies just how many unique voices already exist within the community. And though OURSA doesn’t intend to become an annual event, it was a model for the types of safe spaces in which people can break new ground.

“I can give a cybersecurity talk off the cuff,” Jeanette Manfra, the chief cybersecurity official for the Department of Homeland Security said in the final presentation of the day. “But I decided that I wanted to give a speech about being a woman. You’ll have to forgive me because I’ve actually never done that before.”

Time Warner CEO says AT&T merger needed to compete with internet titans

WASHINGTON (Reuters) – Time Warner (TWX.N) Chief Executive Jeff Bewkes on Wednesday defended his company’s planned merger with telecoms firm AT&T (T.N) as necessary to compete effectively for advertising with internet giants like Google and Facebook.

FILE PHOTO: Time Warner CEO Jeff Bewkes arrives ahead of arguments in the trial to determine if AT&T’s merger with Time Warner is legal under antitrust law at U.S. District Court in Washington, U.S., March 22, 2018. REUTERS/Aaron P. Bernstein

Bewkes told Judge Richard Leon, who will decide if the $84.5 billion deal may go forward, that the U.S. Justice Department was wrong to say that AT&T would be reluctant to license Time Warner’s TV and movie content to rivals, causing blackouts, in order to win over new customers to AT&T subsidiary DirecTV.

“I think it’s ridiculous,” said Bewkes, who has been CEO for more than 10 years. “If our channels are not in distribution we lose lots of money (from lost subscriptions and advertising).”

He said that “one percent, less than one percent, maybe two percent” of subscribers would drop their pay TV subscription because of a blackout, far below the 12 percent estimated by an economist for the government who testified earlier in the trial.

Bewkes argued it was in Time Warner’s best interest financially to license its television channels, which range from movies to CNN to sports, broadly online.

He said Time Warner had been hampered in innovating and advertising because it does not have the granular information about viewers held by pay TV and internet companies.

With digital advertising, Chevrolet, for example, can target car ads at people looking to actually buy a car, he said.

AT&T has said a key benefit of owning Time Warner is that it can take data about its 141 million U.S. wireless subscribers and 25 million video subscribers and marry it with Time Warner’s programming to enable advertisers to target TV ads.

Targeted TV ads, also known as addressable TV, have yet to go mainstream because they involve renegotiating carriage deals with programmers and distributors, said Brian Wieser, an analyst at Pivotal Research.

Targeted TV could represent more than $100 billion in revenue by 2030 for companies that offer it, according to an April Credit Suisse report, which called it “a largely overlooked benefit of the AT&T/Time Warner transaction.” The ads can be sold at triple the price of regular ads.

“The Google/Facebook duopoly has such a strong hold on the market, I think it’s important that there is healthy competition and that we aren’t just forced to invest in two places,” said Tim Villanueva, head of media strategy for Fetch, an ad agency focused on mobile, whose clients include eBay and Lululemon. He said he was interested in using the new platform.

Advertisers’ spending on TV ads in 2018 is expected to be around $70 billion, a 1.45 percent increase from three years ago, according to research firm eMarketer.

ALREADY INNOVATING?

In cross examination, Justice Department lawyer Claude Scott pointed to efforts that Time Warner was already making to move into targeted advertising and online distribution, including contracting with tech companies, an apparent attempt to call into question the need for the megamerger.

Scott referred to Bewkes’ compensation package, noting that he would be leaving the company when the deal closed and that he owned more than 2 million Time Warner shares. AT&T’s deal for Time Warner is about a 35 percent premium over the market price.

The trial has seen a parade of witnesses testifying about how the merger would affect them. Executives from smaller pay TV companies talked about how important it was to have access to Time Warner’s movies and television shows.

The trial, which began in mid-March in U.S. District Court in Washington, is expected to wrap up this month.

Reporting by Diane Bartz; Additional reporting by Jessica Toonkel; Editing by Bernadette Baum and Rosalba O’Brien

Electric Scooter Startups in Battle with San Francisco 

This is a guest post by Applico CTO and Principal Tri Tran. Prior to joining Applico, Tri was the co-founder and CEO of Munchery. 

After years of public battles with Uber, San Francisco has learned some valuable lessons. 

This time around, three electric scooter rental companies – Bird, Lime and Spin – are trying to roll out their service in downtown San Francisco. But the city is fighting back. As I happen to live in San Francisco and work in downtown, I’ve been able to witness this battle first hand.

Fast Rollout

As a startup entrepreneur, I quickly recognized the strategies that these three companies have taken to maximize business traction in as short a time as possible:

  • Flood a certain limited geography (such as downtown San Francisco) with a lot of scooters.
  • Get as many people as possible using them, very quickly. Once certain critical mass is reached, perhaps leverage them and their loyalty to fight off any regulations.
  • The default is seeking forgiveness afterward instead of seeking permission prior to operating. Let the city take any actions it needs to, assuming it’s historically very slow to react anyway.

I would not be surprised if these three companies also employ “fake” users and have them ride the scooters around town to create buzz, and thus word of mouth referral.

The City Fights Back

To my surprise, the city worked quickly and City Attorney Dennis Herrera issued cease-and-desist orders to all three companies.

The city wants the scooter companies to take actions to:

  1. Keep users from riding scooters on sidewalks
  2. Keep scooters from blocking sidewalks when parked
  3. Ensure that riders use helmets

It’s all in the name of public safety. Until then, the city will impound these scooters and may issues fines of a minimum of $125 for each violation. That is unless the companies can abate the problem within 30 days or prevail in an appeal hearing.

What Will Happen Next

It is not clear what these companies would do next, but here’s my take:

  • These three companies don’t have the operations to meet the city’s demand for the above described points
  • Limiting riders from sidewalks and ensuring unused scooters not block sidewalks is too tall of an order

Technically, it’s entirely possible to track riders on where they ride and whether they had left the scooters on sidewalks. They can even issue fines to riders who disobey such rules. But these rules would be a direct conflict to the convenience of ride-wherever and park-wherever, and thus would greatly reduce the attractiveness of using their scooters in the first place.

So what should they do? San Francisco has clearly established that it can move fast to regulate AND has created a repeatable process to impound these scooters.

Not complying will simply be too costly. More importantly, San Francisco also provides a model for all other cities to copy if/whenever the service rolls out to their cities. That’s bad news for Bird, Lime and Spin.

Ultimately, the service that these scooter companies provide is convenient, but not nearly as convenient as Uber was when it first arrived and replaced the painful taxi experience.

Additionally, the immediate public disruption of a horde of unfamiliar vehicles taking over sidewalks is much more apparent. Scootering on the streets has its own dangers as well when mixed with automobile traffic. The bike accident rate in San Francisco hasn’t changed much in the past few years. Relatively few people will brave their lives for that convenience.

Thus, these scooter companies will not have similar leverage nor political power from their small user bases to what Uber had when it fought against regulation attempts.

Based on the above, my prediction is that this service will go down into history as a fail, at least in major U.S. cities. It’s not necessarily a bad thing as these entrepreneurs will have learned a lot from the experience. They may find better, more sustainable businesses as a result. Cities are still grappling with what the future of transportation looks like, as are entrepreneurs. Scooters may not be it.

Lawmakers publish evidence that Cambridge Analytica work helped Brexit group

LONDON (Reuters) – British lawmakers on Monday published evidence that Brexit campaign group Leave.EU benefited from work by Cambridge Analytica, a political consultancy at the center of a recent storm over use of Facebook data.

FILE PHOTO: A person is seen inside the building which houses the offices of Cambridge Analytica as investigators from Britain’s Information Commissioners Office entered, following the granting of a search warrant by a High Court judge, in London, Britain March 23, 2018. REUTERS/Henry Nicholls/File Photo

Nigel Oakes, founder of SCL Group, the parent company of Cambridge Analytica, said the consultancy was lined up to do work with Leave.EU in the event that it was designated as the official campaign to leave the European Union, according to transcripts of interviews published by a parliamentary committee.

Oakes said that “there was no contract and no money” but that they did do work to demonstrate their capabilities. A transcript of another interview with Leave.EU official Andy Wigmore says the campaign group copied Cambridge Analytica’s methods.

“Leave.EU benefited from their work with Cambridge Analytica before the decision was made on which Leave campaign would receive the official designation for the referendum,” Damian Collins, chair of the Digital, Culture, Media and Sport Committee, said in a statement.

Cambridge Analytica lies at the center of a storm for using data obtained from millions of Facebook users without their permission after it was hired by Donald Trump for his 2016 U.S. presidential election campaign.

The analytics firm is also under scrutiny over campaigning for the 2016 referendum when Britons voted to leave the European Union, a move seen by critics as a colossal historical mistake but by admirers as a vital reassertion of British sovereignty.

Oakes said Wigmore’s claim to have copied Cambridge Analytica’s techniques raised “more questions about how Leave.EU developed their database to do this, and whether consumer data from other companies they had a relationship was used to support their campaign.”

The interview transcripts were submitted by Emma Briant, an academic who interviewed figures from SCL Group, Cambridge Analytica and Leave.EU.

In the event, “Vote Leave” beat Leave.EU to become the officially designated campaign to leave the EU ahead of Britain’s referendum, though Leave.EU continued to campaign for Brexit.

Leave.EU founder Arron Banks has said that because it did not win the designation and due to concerns about the consultancy, it did no work with Cambridge Analytica, and received no benefit in kind.

Former Cambridge Analytica CEO Alexander Nix told the committee in February that the firm did not work with Leave.EU, but he has been recalled for a new hearing, which will take place on Wednesday.

The lawmakers were also critical of Wigmore and Oakes for speaking in admiring terms about Nazi propaganda techniques, and said there were also questions about Cambridge Analytica’s closeness with Wikileaks founder Julian Assange.

“The propaganda machine of the Nazis, for instance – you take away all the hideous horror and that kind of stuff – it was very clever, the way they managed to do what they did,” Wigmore said, according to one interview transcript.

Collins said that the “extreme messaging” around immigration during the campaign meant “these statements will raise concerns that data analytics was used to target voters who were concerned about this issue, and to frighten them with messaging designed to create ‘an artificial enemy’ for them to act against.”

Reporting by Alistair Smout, Editing by William Maclean

Safe Preferred Stock Yields 10.4%, Opportunistic Buy, 25% Return Potential

This research report was jointly produced by High Dividend Opportunities research team and Seeking Alpha author Julian Lin.

CBL & Associates Properties (CBL) is the most experienced operator of B mall properties. As their common share price continues to struggle, they have also seen their preferred stock drop considerably. Preferred dividends must be paid before those of the common, making their distributions inherently safer. In spite of tremendous cash flow coverage, their preferred shares nonetheless trade at a very opportunistic 10.4% yield. Shares have 25% upside, including dividends. The following are the two Preferred Shares of CBL:

  1. CBL & Associates Properties, 7.375% Series D Cumulative Redeemable Preferred (CBL-D) – Last price $17.80 (Annual Dividend $1.84375, Yield 10.36%).
  2. CBL & Associates Properties, 6.625% Series E Cumulative Redeemable Preferred (CBL-E) – Last Price $16.60 (Annual Dividend $1.65625, Yield 9.98%)

Note that your investment broker may list the preferred stock as CBL-PD and CBL-PE instead of CBL-D and CBL-E. Some other brokers such as IB list them as (CBL PRD) and (CBL PRE).

https://static.seekingalpha.com/uploads/2018/4/10/16392-15233592227347343.png

Business Overview: A Story Of Stability And Transformation

CBL owns 119 properties including 63 malls in the United States:
https://static.seekingalpha.com/uploads/2018/4/7/16392-15231070206341395.png

This is a portfolio which has undergone an impressive transformation. After the 2008 recession, management has reduced debt to EBITDA from 8.5 times to 6.7 times. Since 2013, CBL has disposed of 20 underperforming properties, increasing their net operating income (‘NOI’) exposure to Tier 1 & Tier 2 malls from 78% to 86%. This has also led to increases of tenant sales per square foot:

https://static.seekingalpha.com/uploads/2018/4/7/16392-15231070223152802.png

In spite of the headlines that malls are dying, CBL has maintained very stable mall occupancy rates, indicating the strong demand for leasing space in B malls:

https://static.seekingalpha.com/uploads/2018/4/7/16392-15231070238920171.png

CBL has managed to dramatically improve their balance sheet, notably reducing leverage and borrowing costs:
https://static.seekingalpha.com/uploads/2018/4/7/16392-15231070257576435.png

This shows that strong management matters in this tough retail environment. It is not enough to have the best properties – only the strong operators will survive. This is a management team that endured the 2008 recession and adapted by cleaning up the balance sheet.

Valuation

With their common stock trading at around $4.40 per share, this is a multiple of 2.5 times 2018 funds from operations (‘FFO’) and an 18% dividend yield, which is dirt cheap. With such a low valuation, future rent concessions appear to have been more or less priced in. We are reiterating our strong buy rating for the CBL common shares. This article, however, focuses on the preferred stock issues, which are also attractive, recently yielding 10.4%. These preferred shares have fallen considerably after trading near par for quite some time:
https://static.seekingalpha.com/uploads/2018/4/7/16392-1523107027130035.png

(Yahoo Finance)

Preferred stock, in comparison to their common counterparts, is usually less volatile due to their more secured dividend payouts. This is a unique opportunity to take advantage of unexpected volatility.

Free Cash Flow Coverage

Using the midpoint of 2018 guidance, CBL will have approximately $350 million in funds from operations and $167 million in common dividends. CBL has guided for $75-125 million of annual redevelopment spending along with $90 million of annual capital expenditures and $50 million of annual debt principal repayment. As we can see, the majority of redevelopment spending is likely to be internally funded.

Using FFO, the $44.9 million in total preferred dividends are handily covered at 7.8 times. After recurring capital expenditures (including amortization), the preferred dividends are covered 4.68 times. This is also known as “free cash flow” coverage.

And finally, even after accounting for redevelopment expense, they are still covered at ~2 times. We can see the cash flow coverage laid out below:
https://lh4.googleusercontent.com/XqkYrd4e77uq7a593Mx1eiSwOYb8D9oyDMxeJX_fCtWV_20SOLe29kHWJzZbg6XmLTbCVXZ3IUKvHKWx8hzjoPkBbgIBhSewzlB8_MjSCUR4pg1TYasqc5YEG8uxr1EAd4UroQx7

(Chart by Author)

Anyway you put it, the preferred stock dividends are very well covered and appear to be very safe.

The main threat would be violation of any of their debt covenants, but even here CBL is still very strong:

https://static.seekingalpha.com/uploads/2018/4/7/16392-15231070291720068.png

Impact of Moody’s and S&P Downgrade

In February 2018, Moody’s downgraded CBL’s unsecured credit rating to Ba1, down from Baa3. This comes after S&P had downgraded the corporate credit rating (note the distinction) to BB+ from BBB-. They did maintain their BBB- unsecured credit rating. As stated in their 2017 10-K, CBL has elected to use their unsecured credit rating to determine the interest rates on three unsecured credit facilities and two unsecured term loans. As of December 31, 2017, the “three unsecured credit facilities bear interest at LIBOR plus 120 basis points and our unsecured term loans bear interest at LIBOR plus 135 and 150 basis points, respectively.” If they were to receive a downgrade from Standard and Poor’s (S&P) on their unsecured credit rating, then the unsecured credit facilities “would bear interest at LIBOR plus 155 basis points and the interest rate on our two unsecured term loans would bear interest at LIBOR plus 175 basis points and 200 basis points, respectively.”

The approximate impact to interest expense related to these unsecured credit facilities and unsecured term loans is shown below. Again, S&P has not yet downgraded the unsecured credit rating, thus, this is only a projected impact (in 000’s, only showing credit-rating sensitive loans):

https://static.seekingalpha.com/uploads/2018/4/7/16392-1523107017796898.png

(Chart by Author, data from 2017 10-K)

As we can see, the net near-term impact to interest expense would be just over $4 million, which is not very significant considering the approximately $350 million in funds from operations. Further, we anticipate that CBL will be able to regain their investment grade rating from Moody’s as their redevelopments begin to bear fruit.

Which Preferred Issue Is Better?
CBL has two preferred issues, as seen below:

https://lh6.googleusercontent.com/eOZbEpWNdV6SfBEY09YZ9JC3rfbZXgZZkjIUBj8Jkm3XxR9sMVWaXSrrkQXEGfetqoF4I8xvZ2frFcmKltEzgIlqT_c2JCL2wd83sAr8C81dzWJ951VOFxQ-Nj2z6V6OMC9mZhoB

(Chart by Author)

Both issues are cumulative, meaning any unpaid preferred dividends would accumulate until they are paid in full in the future. Both issues also are currently callable. Preferred shares have a natural cap on the upside around call value (or par value) of $25/share. For example, in general, investors do not like to buy preferred stocks at above par their value of $25/share plus accrued interest. A trade-off is that the preferred D shares have significantly greater liquidity, with 1.815 million shares outstanding versus 0.69 million outstanding E shares. Both issues are strong buys at the current prices.

Comparison With Peers

Mall REIT peers Washington Prime Group (WPG) and Pennsylvania Real Estate Investment Trust (PEI) both also have preferred stock, but these are yielding around 8.5%, considerably lower than what is seen at CBL. We believe that this discount is undeserved as in comparison with these two peers, CBL will be able to fund the majority of their redevelopment expense with cash flow alone. The tremendous cash flow coverage of the CBL preferred shares also makes them comparably less risky than those from these two peers.

Price Target

Our short-term price target is $20.50 per CBL-D share or $18.40 per CBL-E share for a 9% yield. Including dividends, this would be a 25% total return in a period of 12 months. We believe that both issues have more upside potential if held for longer than 1 year.

Risks

The biggest risk to the preferred issues is if CBL suffers a liquidity crisis and would need to dilute preferred shareholders in order to redeem debt maturities. This, however, does not seem likely due to the currently low leverage of their balance sheet. These also have a significant cash flow cushion and the common dividend must be cut first before any suspension to the preferred dividend. This does look to be a distorted risk to the reward proposition.

Bottom Line

CBL is investing heavily into redeveloping their mall properties. The market is not giving them any credit for their ability to internally fund these value-enhancing capital expenditures, and this pessimism has reached their preferred stock. The CBL preferred stocks are not only safe but too cheap to pass up at 10.4% yields. These have the greatest cash flow coverage compared to peers and are unlikely to remain this cheap for long.

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.

Note: All images/tables above were extracted from the Company’s website unless otherwise stated.

Disclosure: I am/we are long CBL, WPG.

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.

U.S. Stock Market: Happy Days Are Here Again? Not So Fast…

By Pater Tenebrarum

A “Typical” Correction? A Narrative Fail May Be in Store

Obviously, assorted crash analogs have by now gone out of the window – we already noted that the market was late if it was to continue to mimic them, as the decline would have had to accelerate in the last week of March to remain in compliance with the “official time table”. Of course crashes are always very low probability events – but there are occasions when they have a higher probability than otherwise, and we will certainly point those out when we see them. Anyway, something else is evidently happening. Here is a chart of the SPX that shows the important trend line which was so far successfully defended:

According to the “keep it simple” chart, this was just a run-of-the-mill correction, very similar to every other correction seen since the 2009 low. But is that really the case?

The rebound from the trend line is accompanied by an overarching narrative. We are not referring to the news items that are supposedly responsible for jerking the market this way and that on a day-to-day basis (these consist mainly of Trump tweets on trade and military interventions, which he seems to use as part of his negotiating strategy, and the responses of his opponents to the moves he makes in this Twitter war).

These explanations for market moves never make a lick of sense anyway: Donald Trump didn’t just become “unpredictable” this year. The Middle East didn’t turn into a proxy war battlefield brimming with betrayals and disinformation this week. The threat that trade barriers might be erected didn’t just fall unannounced from the sky either. It was a major part of Trump’s policies, frequently stressed during his campaign, reflecting views he has demonstrably held since at least the 1980s, if not longer.

We are actually referring to something else, namely the upcoming earnings season. It is widely held that it will be business as usual, which is to say that nearly every important big cap index constituent will reliably manage to “beat expectations”, which will be followed by the usual gap-up moves into the blue yonder the day after. Hence it will be off to the races for the cap-weighted indexes again. Mind, superficially this isn’t even an unreasonable notion, given that it has worked umpteen times in recent years (i.e., basically every quarter – that’s how one can calculate the precise number represented by the variable “umpteen”).

There may be a problem though this time – in order for expectations to be beat, one first has to have sufficiently low expectations. That becomes increasingly difficult as valuations expand, since the expansion in valuations by itself indicates that expectations are ratcheted up. There is an additional new wrinkle this time around that was apparently introduced by the tax cut. Wall Street earnings estimates have been wildly over-optimistic year after year, but this has now become insanely over-optimistic. Here is a Bloomberg chart illustrating the jump in 2018 estimates. Bloomberg’s chart keepers noticed that analysts upped their estimates sharply just before the beginning of the last bear market:

Wall Street earnings estimates and the SPX – the annotations above are by Bloomberg. We actually wanted to point to a specific aspect of the chart: namely the sheer size of the most recent jump in estimates, which is probably the biggest surge in earnings estimates ever.

We are actually not saying that just because something happened last time, it should happen again this time. We are mainly focused on the size of the jump in estimates this year, which is unprecedented as far as we know. In other words, this is an excellent set-up for disappointment, which may well end up derailing the above-mentioned narrative.

Will it happen this quarter already? We cannot be certain, but we certainly do know that the divergent DJIA-NDX peaks in January to March and the accompanying record overbought and bullish sentiment readings would make suitable material for a long-term market peak that will not be seen again for many years.

GBEB Death Watch Continues – Meet the Fear-Stricken Grizzlies

What about the various indicators we focus on? The SPX NH-NL percentage index currently stands at +2, which is no longer a “sell”, but not really an all clear either – at best we would call it neutral. The important thing in this context remains that it never even came close to getting oversold, which it did in every other major correction (particularly in 2011, 2015 and early 2016, which are the only comparable corrections since the 2009 low in terms of speed and size). It is one of the things that makes us think we should not believe in the most recent turnaround just yet.

SPX NH-NL percentage index – it never became oversold

The relative strength of Russell 2000 (a result of intra-market rotation) currently looks medium term market positive, but we are focused on its directional changes in the short term. It gave a short-term positive signal at the end of last week and again on Monday, when the market closed right on the trend line discussed above, but has just issued another short-term negative signal again. It continues to work well as a short-term indicator (positive when it is up on a down day, negative when it is down on an up day).

What continues to strike us as astonishing in light of the sharp increase in day-to-day volatility is the nonchalance of option traders and by now almost comical fear of bears that they will get mauled again. The fifteen remaining bears (we probably know most of them personally) seem to be the only group of traders in this market that is genuinely worried. Mind, we are not talking about people who say they are bearish. We are talking about people who are actually betting on a decline in prices with their money.

Here is an update of the CBOE equity put-call volume ratio. All previous corrections since 2009 – both major and minor ones – generated a modicum of fear, a scrambling for hedges and some downside speculation. In 2018 option traders behaved as though absolutely nothing was happening:

In early February, the ratio came close to “fear territory”, but fell again before actually getting there.

While we see the action in options more as a sign of bullish overconfidence, Rydex asset levels are mainly indicative of bearish fear and complacency. Amazingly, Rydex bear assets simply failed to get off the mat even in the slightest in the recent correction – a sign that many holders used the minor bounce in bearish funds as an opportunity to get out of their positions. They have never been comparably demoralized in the entire history of these funds (note: despite the small amount of AUM, this fund family continues to provide a representative snapshot of overall market sentiment).

The pure Rydex bull-bear ratio remaining at a level of over 26 after the recent shakeout is best adjectivized with “insane”, but we find the level of bear assets even more impressive as signals go. It is not even a hair above the all-time low of late January. Clearly, bears are the only group of traders that is actually scared. We are not sure what to compare this to, it simply has never happened to this extent in comparable situations. If one looks at the 2006-2007 time period, back then they massively reduced their exposure at just the wrong moment after first increasing it at the wrong moment in 2002-2003. When the crash finally arrived in 2008, they had already cut their exposure by more than 60%, so their recent reluctance to push their bets should actually worry bulls greatly.

SentimenTrader publishes a variant of the Rydex ratio that focuses exclusively on SPX and NDX funds. It shows bull fund allocations as a percentage of total bull and bear fund allocations. It is not just in “excessive optimism” territory, but it has in the meantime crossed over into the Negative Zone and is reportedly searching for the recently disappeared Mr. Fantastic. Or if you’re more of a Batman person, it is now in Arkham Asylum to prove to the Joker that there are things out there in this world that are actually crazier than he is.

After initially responding to the sell-off, this SPX-NDX focused Rydex ratio is right back near its all-time high.

Bears in 2018: they’re not what they used to be.

SMI Plunge

Readers are probably aware of the so-called “smart money” index. The theory behind the index holds that the “dumb money” primarily trades early in the trading day, while the “smart money” makes decisions close to the end of the trading day. Rallies early in the day (first half hour) are accordingly given a negative value, and so are late day (last half hour) sell-offs. The opposite actions are given positive values, and at the end of each trading day, they are summed up and the result is charted. Here is what the chart looks like at the moment:

The SMI displays well-developed counter-cyclical behavior. Recently the rise from the August 2015 mini-crash low to the US presidential election and the subsequent – lately accelerating – collapse were quite noteworthy.

We are not really sure whether the theory behind the SMI is really sound, but we cannot deny its pronounced counter-cyclical trends, which suggest that the “buy low-sell high” faction really does dominate trading late in the day. We would note that there has never been a comparably sharp and swift collapse in the SMI than the one that started in late 2017, in parallel with the final blow-off move in the market. It has not reversed on account of the downturn after January 26, which contrasts with what happened in August 2015.

Conclusion

It looks as though it’s not the bears who should be scared.

Charts by: StockCharts, Bloomberg, SentimenTrader

How the March For Science Became a Movement

In January 2017, what started as a subreddit thread about the new White House scrubbing all mention of climate change from its official government website became, just three months later, the single biggest pro-science demonstration in the history of humankind. On April 22, more than a million people across all seven continents took to the streets (and dirt roads and snowfields) to declare themselves, not dispassionately, for the fundamental political value of science.

The idea that the rules that govern society should be based on evidence, not partisan caprice, is an assertion seemingly so noncontroversial that before last year’s inaugural March for Science, most people had never even thought about raising a latex glove-covered fist in the air to defend it. According to a (non-peer-reviewed) survey, 90 percent of people who showed up that day considered the March for Science their first science-related public demonstration. But for many, it wouldn’t be their last.

That’s because in the intervening 12 months, the March for Science has evolved from a collection of defiant Facebook event pages into a national, decentralized network of individuals and organizations fighting for science in their home communities. Which is why MFS organizers aren’t worried about trying to match last year’s turnout at the more than 230 marches scheduled around the world for this Saturday. Every day, people are already turning out in less visible, but more impactful, ways.

Valorie Aquino was only trying to distract herself from her archaeology PhD one night last January when she came across a Facebook group that had just been formed that day, called the March for Science. But a week later she was signed on as one of three national co-chairs, and less than three months after that she was leading 100,000 people down the National Mall in the rain, pausing only to take a selfie with Bill Nye. After the march, she flew back to Albuquerque and resumed her life as a student at the University of New Mexico.

Mostly. On the side she was still helping the March for Science figure out its next moves. That summer, she and other members of the MFS national organizing committee wrote a foundation document stating the organization’s principles and long-term goals of supporting science in policymaking for the public good. They formalized a framework for connecting with their satellite partners and a grant program to support them. They began planning a summit, to teach science communication and organizing skills to groups from rural areas and underrepresented communities. They formed a board of directors; Aquino joined on as one of them. But it wasn’t until the fall that she got to see the power of the movement actually materialize in her own backyard.

In September, New Mexico’s Public Education Department unveiled a new set of draft standards for science, technology, engineering, and math education throughout the state. They resembled the Next Generation Science Standards, a highly regarded model for teaching STEM that had already been adopted by 18 states and the District of Columbia. The previous April, New Mexico had actually been slated to approve the NGSS, but then its Republican governor vetoed it and had the education department go back to the drawing board.

What it came up with instead scrapped all references to human activity as the primary cause of climate change. The newly proposed curricula downplayed evolution and the importance of lab work in research. It even erased the scientifically agreed-upon age of Earth (about 4.6-billion years old). Science educators were upset. Parents were upset. Aquino dove back into the network of organizers who had pulled together Albuquerque’s satellite March for Science and together they came up with a plan to implement the stronger Next Generation Science Standards.

The University of New Mexico’s group for advancing women in science submitted a letter signed by more than 100 STEM professors supporting the NGSS. Local papers were flooded with letters to the editor. And on the day the Public Education Department held an open hearing—a Monday, at 9am, in Santa Fe—so many people attended that not everyone could fit in the room. A few weeks later the state’s education department overturned its own proposal, and agreed to adopt the version of science standards that New Mexicans had wanted in the first place.

“It took a village, but using the network we had built we could really mobilize people to show up for this issue,” says Aquino. “In this case the pressure worked. More than that it gives us a playbook and tools to share through the network for other people trying to tackle the issues unique to their communities.”

In fact, the MFS satellite in Idaho has already used it to score a victory there. When the state’s House Education Committee voted to strip its STEM teaching standards of references to anthropogenic climate change in February, the March for Science network mobilized to rally against it, signing petitions and sending people to public meetings. The state Senate overruled the House and kept climate change in the science curriculum.

And there are other success stories too. After the GOP proposed a tax bill that would eliminate a long-standing exemption for graduate student tuition waivers, March for Science organizers worked with their neighboring universities to stage walkouts, send letters to Congress, and contact their local representatives. Weeks later the provision was struck from the bill.

This year, Albuquerque won’t be hosting a march. Its streets won’t ring with chants of “Science not Silence,” and “What do we want? Evidence-based change! When do we want it? After peer review!” Instead, the local MFS organizers are devoting their resources to increasing voter turnout for the midterm elections. With every state legislature seat and a governorship up for grabs, Aquino says there’s a real opportunity to create a more lasting political statement than standing in the street with a sign. “In 2017 we marched for science,” she says. “In 2018 we vote for science.”

More March for Science

What Hearings? Advertisers Still Love Facebook

After 10 hours of verbal flogging by an incensed Congress, Facebook CEO Mark Zuckerberg seemed like a leader whose pedestal had cracked. Over and over during his testimony this week, he apologized for lapses in his company’s handling of user data. He emerged from the hearings with months’ worth of homework for him and his team.

But life’s not so bad for Zuckerberg. His exhaustive, highly publicized grilling appears to have had minimal impact on the one thing that ultimately gives Facebook its power: its popularity among advertisers.

“There’s still a very positive outlook from the industry overall and the belief that Facebook will continue to be a trustworthy partner,” says Angela Seits, director of social media and influencer marketing at the advertising agency PMG.

Not only do they see the platform as principled, “a couple of my clients have actually shifted more money towards Facebook,” says Shuman Sahu, director of performance media at ad agency Nina Hale.

With advertisers still eager to use Facebook’s services, the company’s business model stays intact and its dominance as a social network and an advertising behemoth remains assured. The few brands that have abandoned Facebook recently—Pep Boys, Mozilla, Sonos (for a week)—are just making a statement, says Brian Wieser, a senior analyst at Pivotal Research Group. “They’re thinking, here’s a good opportunity to say something about our values.”

Of course, Facebook is appealing to marketers only as long as people keep using the platform, which for the most part they are. A survey of Facebook users by Cowen Equity Research published Thursday found that people spent, on average, 53 minutes per day on the platform in the first quarter of 2018, down from 58 minutes a year earlier. Though the decline is significant, the report’s authors note that no other social platform comes close. Cowen’s data put Snapchat in second place with users spending 33 minutes per day on it, followed closely by Facebook-owned Instagram with 32 minutes.

“The vast majority of people on Facebook have very little knowledge,” of the company’s expansive data collection habits, says Steve Buors, cofounder and CEO of Reshift Media, a digital marketing company. “We’re talking about it, people in the industry are talking about it. But if you look at the average person, they are not talking about it nearly enough.” Though the #deleteFacebook movement gained enough momentum to attract celebrities like Steve Wozniak, Cher and Elon Musk, it hasn’t hit mainstream culture, a strong signal that the social network’s brand remains untarnished among the constituencies advertisers care about.

A big reason is most people never dig into—or care about—how Facebook makes money. It does so not only by collecting users’ actions and likes on the platform but by tracking their activity across the web. If a person clicks on a Facebook ad for a certain shop and later buys an item at that brand’s brick-and-mortar store, Facebook will likely find out. Users of its Messenger app will have their texts and phone call histories stowed away in the social network’s massive data centers.

All that data serves an overarching purpose: to connect people the world over, sure—but also to help advertisers place their ads in front of receptive audiences. The fees Facebook charges for the service fuels its unparalleled engine of prosperity. In 2017, Facebook amassed $40.6 billion in revenue, almost all of it from advertising, and analysts predict it will score approximately $55 billion this year.

Still, the backlash against Facebook and its peers over their privacy missteps is causing the tech giants to change how they handle users’ data. The EU’s General Data Protection Regulation, which goes into effect on May 25, has pushed Facebook to modify its rules around advertising in ways that will likely diminish its effectiveness in the short term. Among the changes, Facebook has promised to remove some options for targeting ads to specific groups, such as by age or race, to prohibit discrimination. Investigations by ProPublica found marketers could choose to only show housing ads to white users or exclude older people from seeing job ads.

Another change will hit a product called Custom Audiences, a tool wielded expertly by President Trump’s digital campaign. Marketers had long enjoyed the ability to plug an email list into Facebook’s advertising dashboard and produce a pool of Facebook users similar to the people on the email list, a useful way to target potential customers. Soon the rules will become stricter, requiring marketers to get explicit consent to use those email addresses. Many advertisers will have to shorten their email lists as a result, causing the pool of so-called lookalikes to shrink significantly. But even with these changes, Buors says, “They are so far ahead of other platforms in their tools and their specificity that they are still the best option.” “It’s the two billion users,” says Sahu. No other platform has the reach and the variety of ad formats that Facebook can offer, he says. Facebook and Google combined will account for more than 65 percent of digital ad revenue in 2018, estimates research firm eMarketer. Sahu likens the current moment to a milder version of YouTube’s image crisis a year ago, when companies boycotted the platform after their products showed up alongside hate speech and extremist content. But the downturn in advertising was soon reversed, and marketers today are once again happy to spend a significant chunk of their budgets on the video site. “Essentially, these platforms are too big to fail.”

That pedestal Zuckerberg occupies? Its cracks are healing as you read.

More Money, More Problems

Alaska Air Group's Hidden Asset

Warren Buffett changed his mind in 2016 about the airline industry, so this is a data point that should be taken seriously. The dynamics of the industry have changed through consolidation over the past two decades. Roughly 80% of the capacity is now controlled by the four major airlines. I even had a negative bias toward them as they were capital-intensive with one major operating cost that is volatile (fuel cost). The narrative and operations have changed though, making the industry more attractive. One airline in particular that I’m interested in, as it has moat-like characteristics, is Alaska Air Group (ALK).

Alaska Air price has roughly dropped 37% from its high of $97 per share in March 2017. That’s a big swing in one year indicating that an opportunity could be present. It appears much of the negativity has already been ingrained into the valuation of the business, from my perspective.

What makes Alaska Air special?

Well first off, I don’t think there will be any new major airlines created in the U.S. market anytime soon. Barriers to entry appear to be extremely high. Not only is the amount of capital it would take to just start an airline a barrier, but getting rights to service any major cities would be impossible as major carriers have created monopoly-like characteristics in certain areas. In addition, major airplane manufacturers like Boeing (BA) are still working through backlog orders, so getting any planes would be difficult. All of these external factors allow the industry as a whole to benefit from very unlikely new competition coming into the space.

Alaska Air has created an attractive culture, competitive on pricing and has the historical results to prove their model is working. Return on invested capital has been much higher than its weighted average cost of capital over the years. Running at (>15%) over the last four years shows economic profits are being captured.

Exhibit 1: Historical ROIC (Millions)

Source: Gurufocus, Author’s Work

As these high returns are occurring, is there any way new competition can come in and eat away at it? I think not for reasons stated above. Some investors might think, well what about fuel cost? Yes, this is a commodity that could change operating cost a bit, and as value investors we don’t like unpredictable costs being a line item on the profit and loss statement. I would argue, though, just by using some basic analysis it’s not as unpredictable as it might seem. We can get a good base rate for a bear case scenario if oil costs do increase.

Exhibit 2: Fuel Cost Analysis (Millions)

Source: Company Reports, Author’s Work, Statista

Back in 2014, fuel costs were 32% of operating expense – still the company had a 21% ROIC. It appears investors can expect fuel cost to range from 20% to 35% of total operating expenses for Alaska Air, and maintain attractive profitability.

Hidden Gem

Not much is ever highlighted on the customer loyalty programs, basically the airline credit cards that customers use for travel miles. This program is becoming a meaningful part of doing business, and is what attracted me to this industry in the first place. As airline customers have been the driving factor behind card usage (consumers love to rack up travel miles), airlines have used their leverage to negotiate better contract terms in receiving a larger share of the fees. Alaska Air’s partnership is with Bank of America (NYSE:BAC). It is estimated this revenue stream generates 40-50% margins. In addition, the segment isn’t tied to the airline economy, providing downside protection as the credit-card revenue streams are generated on everyday purchasing habits of the cardholder. This business is much more valuable than the capital-intensive nature of the airline operations. Separating the two doesn’t make sense, though, as they both rely on each other. That doesn’t mean valuing this segment should be the same as the airline operations.

Exhibit 3: Frequent flyer Revenues (Millions)

Source: Company Reports

Alaska Air credit-card revenue stream has compounded at 20%, with a high profitability profile. This segment sounds very valuable to me. Assuming multiple scenarios of valuing this segment, I don’t see how this part of the business doesn’t make up at least 90% of the market cap. Yes, the multiple could be considered high, but this is a stable business collecting fees on credit card transactions similar to Visa (V).

Exhibit 4: Fair Value Estimate of the credit card business (Millions)

Source: Author’s Work

Basically, investors get the airline operation for free at the current valuation of ALK. When backing out the mid-point valuation above, the airline operations would have generated $588 million in profit for 2017. Using a reasonable multiple of 8x, gives another $4.7 billion in fair value.

Exhibit 5: Total Fair Value Estimate

Source: Company Reports, Author’s Work

Concluding Thoughts

With major drawdowns this past year in the airline industry, an opportunity has come to be. Investors still appear to give no credit to the quality of the credit business. Along with that, consolidation over the years has made industry dynamics much better. Share count has been reduced by 11% over the years. Tons of positive data points.

The one aspect that I don’t like is Alaska Air doesn’t have the option to really spin off the credit card business. This segment is so entangled with the airline operations, I don’t see how it could be a separate organization. This option would have provided optionality for a catalyst to drive the value. Greater disclosures could be an alternative to this, but information has been scarce for a while. There is clear value in Alaska Air, what is unclear is what will be the catalyst to bring out that value.

To read more research on stock spin-offs, micro-mid cap companies, and special situations please consider following me (by clicking the “Follow” button at the top of this article next to my name) to receive notification when I publish research next.

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

Additional disclosure: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned.

Cloud, containers and hybrid IT flagged as top technology investments by UK IT professionals

Cloud and hybrid IT investments remain a top priority for UK IT professionals, which in turn is fuelling enterprise interest in container technologies, suggests research by IT management software supplier SolarWinds.

The firm’s annual state of the global technology industry report suggests enterprise demand for cloud and hybrid IT-enabling infrastructure deployments are holding firm in the face of the growing hype surrounding machine learning and artificial intelligence (AI) technologies.

The global report is based on responses from more than 800 IT professionals from North America, Australia, Germany, Hong Kong, and Singapore, of which 142 are from the UK.  

The UK version of the report claims investing in cloud computing and hybrid IT deployments will remain a top investment priority for IT professionals over the next five years, with many seeing it as the gateway to adopting emerging technologies, such as machine learning and AI.

As such, 95% of IT professionals name-checked cloud and hybrid IT as being among the top five most important technologies to feature in their organisation’s wider IT strategy, while AI just scraped into the top five technologies they consider critical to their five-year digital transformation efforts.

“The narrative in today’s IT industry revolves around transformative technologies like AI, machine learning, blockchain and more,” said SolarWinds executive vice-president and global chief technology officer Joe Kim.

“These technologies are unquestionably important, but the results of this year’s study reveal IT professionals are still prioritising investments in technologies that help run day-to-day operations and choosing initiatives that deliver more immediate value.”

A vote on what participants considered to be their most important technology investment priorities over the next five years saw cloud and hybrid IT emerge on top, while container technologies also scored highly with participants.

According to SolarWinds, this interest is being driven by organisations seeing the potential for the technology to ease some of the application management issues IT professionals encounter during the move to a hybrid IT setup.

This, in turn, contributed to 49% of respondents citing containers as being their most pressing technology investment priority today, while 44% said they expect them to become a top IT investment priority over the next three-to-five years.

The interest in containers could also be interpreted as a push by UK enterprises to improve the optimisation of their IT environments, which 42% of respondents flagged as an area of concern in the poll.

A lack of skills and training was flagged as a barrier to achieving adequate system optimisation by 42% of respondents, along with poor organisational strategy (43%).

Zuckerberg faces Senate hearing but little hope for action

WASHINGTON (Reuters) – Facebook (FB.O) Chief Executive Mark Zuckerberg’s No. 1 mission during his appearance before U.S. lawmakers on Tuesday and Wednesday will be to defend against calls to regulate internet-based companies.

Facebook CEO Mark Zuckerberg arrives for a meeting with Senator Bill Nelson (D-FL) on Capitol Hill in Washington, U.S., April 9, 2018. REUTERS/Leah Millis

The prospect of new laws that restrict Facebook and other internet companies, however, is extremely unlikely not only because of a lack of political will and the effective lobbying of technology companies but because few lawmakers want to grapple with the sheer complexity of the technical issues involved.

Zuckerberg is scheduled to testify before a joint hearing of the Senate Commerce and Judiciary Committees.

He is confronting combined outrage over how Russia used Facebook to spread divisive political propaganda during the 2016 U.S. presidential election and how Facebook seemed unaware that a political consultancy, Cambridge Analytica, improperly harvested personal data of about 87 million Facebook users, most of them Americans.

Senator Bill Nelson, the top Democrat on the Senate Commerce Committee, said on Monday that while he believed new regulation was needed in the face of Facebook’s twin scandals, he did not expect anything substantive to happen.

He attributed that in part to the format for Tuesday’s joint hearing before the Senate’s Commerce and Judiciary committees that will give Zuckerberg an advantage, saying it would favor spectacle over thoughtful dialogue.

“How in the world can you have 44 senators do a hearing that has a lot of substance when each senator only has four minutes?” Nelson asked reporters on Monday.

Senator Dianne Feinstein, the top Democrat on the Judiciary Committee, told reporters after speaking with 33-year-old Zuckerberg, that he “was a very nice young man” who “obviously knows what he’s doing and has a very pleasant personality.”

Facebook CEO Mark Zuckerberg walks to a meeting with Senator John Thune (R-SD) on Capitol Hill in Washington, U.S., April 9, 2018. REUTERS/Leah Millis

PRIVACY ADVOCATES OUTNUMBERED

White House Press Secretary Sarah Sanders declined to say on Monday if new regulations were needed. “I don’t have a specific policy announcement on that front, but I think we’re all looking forward to that testimony.”

Republicans are generally against more corporate regulation and they are not persuaded that tech companies need more of it.  “I don’t want to hurt Facebook. I don’t want to regulate them half to death,” said Republican Senator John Kennedy of Louisiana, a member of the Judiciary Committee “But we have a problem. Our promised digital utopia has minefields in it.” 

Companies that have been victimized by computer hacks have been accused by lawmakers of failing to take adequate security measures to protect their customers’ personal information.

Senior executives from a host of companies including Target Corp (TGT.N), Alphabet’s Google (GOOGL.O), United Airlines [UALCO.UL] and Equifax (EFX.N), have testified before Congress on a variety of issues including network security and walked away with little more than a scolding and a temporary dip in stock price.

Powerful lobbying forces assemble against any effort to convert public and political outrage into regulation, privacy advocates have said. Facebook spent $1.35 million on lobbying in 2011 and six years later spent $11.5 million, according to data maintained by the Center for Responsive Politics.

“People have this idea that we are going to pass omnibus privacy legislation and it is going to be a silver bullet,” said Alvaro Bedoya, a former congressional aide who worked on privacy issues for former Senator Al Franken. “The reality is lobbyists outnumber consumer privacy advocates in Washington 20 to 1 or 30 to 1.”

Instead of major regulatory changes, lawmakers in Congress have offered narrowly focused legislation.

The Honest Ads Act, for instance, aims to address concerns about foreign nationals covertly purchasing ads on social media to influence American politics. It would require political ads on the internet to reveal who paid for them, much the same as ads on television and radio. It legislation has been stalled since its introduction last October, although Facebook endorsed it on Friday.

Congress did pass legislation last month that chipped away at the 1996 Communications Decency Act, which for decades has guarded internet-based companies from liability for what users post on their platforms.

The legislation, which is expected to be signed into law this week by U.S. President Donald Trump, was aimed at penalizing operators of websites that facilitate online sex trafficking. Internet companies have expressed worry that it could be the first step toward dismantling decades of a hands-off regulatory approach by Washington.

Technology industry officials said they also expected Zuckerberg’s testimony to be long on political point scoring and short on legislative ideas.

“They don’t understand ad targeting and they will probably ask him a bunch of unrelated questions that play to their respective political bases,” said one technology industry source, who spoke on condition on anonymity because his company had not authorized him to speak on the matter for the record.

“So Democrats will ask about monopolies and Republicans will ask about anti-conservative bias in Silicon Valley.”

Reporting by Dustin Volz in Washington; Additional reporting by David Ingram, David Shepardson and Amanda Becker

Mexico data protection body to investigate possible links to Cambridge Analytica

MEXICO CITY (Reuters) – Mexico’s data protection body said on Monday it had opened an investigation into whether companies possibly linked to political consultancy Cambridge Analytica broke the country’s data protection laws.

The nameplate of political consultancy, Cambridge Analytica, is seen in central London, Britain March 21, 2018. REUTERS/Henry Nicholls

INAI, the transparency and data protection regulator, said it was looking at Mexican companies that worked with cellphone app Pig.gi, which gives users free top-ups in exchange for receiving ads and completing surveys.

The app cut ties with Cambridge Analytica in Mexico after the British company was accused by a whistleblower of improperly accessing data to target U.S. and British voters in recent elections.

Pig.gi, which has 1 million downloads in Mexico and Colombia combined, said it had shared results of two election polls of Mexican users with the consultancy and other partners.

Cambridge Analytica has denied Facebook data was used to help to build profiles on American voters and build support for Donald Trump in the 2016 U.S. presidential election.

Reporting by Christine Murray and Lizbeth Diaz; Editing by Michael Perry

Tech group urges U.S. to recruit allies to take on China, not tariffs

WASHINGTON (Reuters) – A trade group representing top technology companies on Monday told U.S. Treasury Secretary Steven Mnuchin that it opposes the Trump administration’s focus on tariffs to try to change China’s unfair trade practices.

U.S. Treasury Secretary Steven Mnuchin speaks during a news conference at the G20 Meeting of Finance Ministers in Buenos Aires, Argentina, March 20, 2018. REUTERS/Marcos Brindicci

The Information Technology Industry Council said in a letter to Mnuchin that it supports the Trump administration’s “Section 301” investigation into China’s abuses of intellectual property, but instead of tariffs, it advocates a U.S.-led international coalition to put pressure on Beijing.

“Our opposition to tariffs is pragmatic. Tariffs do not work,” wrote ITIC President and CEO Dean Garfield.

“Instead of tariffs, we strongly encourage the administration to build an international coalition that can challenge China at the World Trade Organization and beyond,” Garfield added.

“Numerous countries share the United States’ concerns about China and its unfair trade practices. The United States is uniquely well-situated to lead that coalition.”

Garfield called for such a coalition of allies to quickly travel to China to negotiate terms for a “balanced, fair, and reciprocal trade relationship.”

The group, which counts information technology hardware, software, services and social media companies from Apple Inc (AAPL.O) to Twitter Inc (TWTR.N), did not make any reference to the Treasury’s forthcoming investment restrictions on Chinese acquisitions of U.S. technology firms.

The restrictions are part of the remedies proposed under the U.S. Trade Representative’s Section 301 investigation, which alleges that China has misappropriated U.S. intellectual property through joint venture requirements that effectively force technology transfer, the use of state funds to acquire U.S. technology companies and other means.

President Donald Trump on Sunday predicted that China would take down its trade barriers, expressing optimism despite the escalating tariff threats between the world’s two largest economies that have roiled global markets.

ITIC said that it believed China had abused the privileges of its membership in the WTO.

“China has promised open and fair trade, but has instead promulgated rules, regulations, and practices aimed at encumbering non-Chinese companies,” Garfield wrote.

“This current approach cannot be sustained.”

Reporting by David Lawder; Editing by Robert Birsel

Groups Allege YouTube Is Violating Law That Protects Kids

A coalition of more than 20 child-health, privacy, and consumer groups is asking the Federal Trade Commission to investigate whether YouTube is violating a federal law designed to protect children on the internet.

The groups are expected to file a complaint with the FTC on Monday. The relevant federal law, the Children’s Online Privacy Protection Act, or COPPA, requires website operators to obtain parents’ permission when collecting personal data about children younger than 13.

The complaint claims that a significant portion of popular content on YouTube is designed for kids, whose personal information—including IP address, geolocation, and persistent identifiers used to track users across sites—is unlawfully collected by Google and then used to target ads.

The complaint follows reports that some YouTube creators are targeting kids with disturbing videos, including some of kids in abusive situations. On Friday, BuzzFeed reported that the company will offer a safer, human-curated option for YouTube Kids, a version of the site for users under 13.

But the complaint to the FTC argues that most children aren’t watching YouTube Kids, which launched in 2015. They’re watching the same YouTube as the rest of us — and the company is aware of that, says Josh Golin, executive director of the Center of a Commercial Free Childhood, a nonprofit behind the complaint. The company could have moved popular children’s content like Peppa Pig or Sesame Street to YouTube Kids, says Golin, rather than leave videos where “kids are going to be exposed to data collection practices and be one click away from really disturbing content for children.” Human curation may be a good first step, “but changes to the YouTube Kids app do not absolve Google of its responsibilities to the millions of children that use the main YouTube site,” Golin says.

An ad for Barbie appearing on a child-directed video on YouTube’s mobile app from October 2017.

YouTube

A 2017 survey conducted by a market research firm specializing in children and families called YouTube “the most powerful brand in kids’ lives,” with 80 percent of American kids ages 6 to 12 using YouTube daily. A survey from October by Common Sense, another nonprofit group that signed the complaint, found that 71 percent of parents said their children watched YouTube’s website or app, whereas only 24 percent used the YouTube Kids app.

In a statement, a spokesperson for YouTube said, “While we haven’t received the complaint, protecting kids and families has always been a top priority for us. We will read the complaint thoroughly and evaluate if there are things we can do to improve. Because YouTube is not for children, we’ve invested significantly in the creation of the YouTube Kids app to offer an alternative specifically designed for children.”

YouTube’s terms tell kids under 13 years old not to use the service, so Google could argue that kids are watching with their parents and permission is implied. However anyone can watch videos on YouTube without an account. The complaint points out that kids often watch on a mobile device, likely by themselves. In 2015, the company said it launched YouTube Kids as a mobile app “because of this reality – that we’re all familiar with – 75 percent of kids between birth and the age of 8 have access to a mobile device and more than half of kids prefer to watch content videos on a mobile device or a tablet.” COPPA applies to websites that have “actual knowledge” that they are collecting or maintaining kids’ personal information, even if the collection is unintentional.

The complaint claims that YouTube’s advertising practices suggest that executives know children are watching. For example, Google Preferred, a premium service that helps advertisers place their ads in top videos on YouTube’s main site, includes the category “Parenting & Family,” which features channels like ChuChuTV Nursery Rhymes & Kids Song, which has more than 15 million subscribers.

Targeting kids can be lucrative. The complaint points to a popular YouTube channel called Ryan ToysReview, in which a 6 year old reviews toys. The site, which has more than 20 billion views, generated $11 million in revenue last year, according to Forbes.

Targeting Kids

  • After criticism about advertising to kids, YouTube Kids launched an ad-free version, available to parents, for a monthly subscription.
  • Facebook followed YouTube’s lead, launching an ad-free messaging app for kids as young as 6 years old.
  • Most of the experts who vetted Messenger Kids were paid by Facebook

Buy This Oversold Blue-Chip Bank With A 5.4% Dividend

On April 4th, Bloomberg reported that HSBC (HSBC) is considering an exit or sale from smaller consumer operations such as Bermuda, Malta, and Uruguay. In addition, the bank plans to expand its asset management division and is currently looking at a potential merger with a rival.

In our view, the news confirms that the group’s management will remain committed to transforming HSBC into a more focused and more efficient banking institution. More importantly, even though HSBC’s operations in Bermuda, Malta, and Uruguay are small compared to the group’s total assets, we believe a potential sale of these units would have a positive impact on the bank’s capital position, supporting stock buybacks and special dividends.

The recent rise in LIBOR should support HSBC’s NIM

LIBOR has grown by more than 130bps since the beginning of the year. Such a notable increase is currently among the most widely discussed topics. Several analysts suggest that this is an early indicator of a bear market or even a severe financial crisis. In our view, the increase has been driven by idiosyncratic reasons, in particular, higher supply of short-term Treasuries and lower demand from corporates due to the US tax reform.

Source: Bloomberg

With that being said, despite the reasons of the rise in LIBOR, HSBC should benefit from higher short-term rates. As shown below, the bank discloses its NII (net interest income) sensitivity to a shift in yield curves. However, this analysis is based on a parallel shift, while yield curves in most global economies continue to flatten.

Source: Company data

What is important here is that HSBC has a variable-rate loan book. More importantly, a significant part of its credit portfolio is priced off short-term rates. This suggests to us that the rise in LIBOR should be a positive for the bank’s asset yields and its NIM.

Source: Company data

One may argue that higher short-term rates will also affect HSBC’s funding costs, especially given that wholesale sources and corporate deposits are generally tied to the short-end of the yield curve. The caveat here is that HSBC has a unique funding position. As shown below, the bank has one of the lowest LtD (loans-to-deposits) ratios among European banks. In other words, HSBC does not need expensive deposits in order to fund its loan growth. HSBC had been struggling from abundant liquidity for many years as a low interest rate environment has virtually crippled its NIM. Given that rates have started rising, the bank’s excessive liquidity is gradually turning into a positive that will protect HSBC’s NIM in a rising interest rate environment.

European banks: Loans-to-deposits ratio

Source: Bloomberg, Renaissance Research

Saudi Aramco’s IPO

Saudi Aramco (Private:ARMCO) has appointed HSBC as an adviser on its much-awaited IPO. JPMorgan (JPM) and Morgan Stanley (MS) will also act as consultants. As such, HSBC is the only non-US bank that will have a crucial role in Aramco’s IPO.

Anecdotal evidence suggests that while many US and UK investors are skeptical on Saudi Aramco’s IPO, as state-owned oil companies have been underperforming their private peers for quite a while now, Chinese investors would be interested in Aramco’s shares. Hong Kong Exchanges and Clearing (OTCPK:HKXCF) (OTCPK:HKXCY) plans to introduce the so-called Primary Connect program, which would allow mainland Chinese investors to participate in initial public offerings on the HKEX.

We believe Aramco’s IPO would strengthen HSBC’s position in the region. In our view, it would also underpin the fact that HSBC is a global banking group with unique access to Chinese investors.

Buybacks and dividends

HSBC pays a $0.51 dividend per ordinary share or $2.55 per ADR. That corresponds to a 5.4% dividend yield, based on the current ADR price. We believe that a 5.4% dividend from a global blue-chip bank with a strong presence on Asian markets looks very attractive.

Additionally, it is also worth noting that the bank has temporarily suspended its buyback program due to technical reasons related to the issuance of additional Tier 1 capital. We expect HSBC to announce a new buyback in the second half of 2018.

Final thoughts

The shares have fallen by almost 15% since January, and we believe this sell-off represents a great opportunity to buy a global bank with an attractive dividend yield. HSBC has excess capital, thanks to its US unit, and, as a result, we expect the bank to announce a new buyback program in the second half of the year.

If you would like to receive our articles as soon as they are published, consider following us by clicking the “Follow” button beside our name at the top of the page. Thank you for reading.

Disclosure: I am/we are long HSBC, JPM.

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.

California proposes new rules for self-driving cars to pick up passengers

SAN FRANCISCO (Reuters) – California’s public utility regulator on Friday signaled it would allow self-driving car companies to transport passengers without a backup driver in the vehicle, a step forward for autonomous car developers just as the industry faces heightened scrutiny over safety concerns.

FILE PHOTO: A Waymo self-driving vehicle is parked outside the Alphabet company’s offices where its been testing autonomous vehicles in Chandler, Arizona, U.S., March 21, 2018. REUTERS/Heather Somerville

The California Public Utilities Commission, the body that regulates utilities including transportation companies such as ride-hailing apps, issued a proposal that could clear the way for companies such as Alphabet Inc’s (GOOGL.O) Waymo and General Motors Co (GM.N) to give members of the public a ride in a self-driving car without any backup driver present, which has been the practice of most companies so far.

FILE PHOTO: The GM logo is seen at the General Motors Warren Transmission Operations Plant in Warren, Michigan, U.S., October 26, 2015. REUTERS/Rebecca Cook/File Photo

The California Department of Motor Vehicles had already issued rules allowing for autonomous vehicle testing without drivers, which took effect this week. The commission said its proposed rules complement the existing DMV rules but provide additional protections for passengers.

The proposal, which is set to be voted on at the commission’s meeting next month, would clear the way for autonomous vehicle companies to do more testing and get the public more closely acquainted with driverless cars in a state that has closely regulated the industry. It also comes as regulators across the country are taking a harder look at self-driving cars in the aftermath of a crash in Arizona that killed a pedestrian.

Last month, an Uber SUV operating in self-driving mode struck and killed a 49-year-old woman in the first known fatality caused by a driverless car. Uber [UBER.UL] suspended its self-driving car operations, and the crash remains under investigation by federal safety officials.

The proposed California rules require that companies hold an autonomous vehicle testing permit from the DMV for at least 90 days before picking up passengers. The service must be free – companies are not allowed to accept payment from passengers – passengers must be 18 years or older and no airport trips are allowed.

The proposal also mandates that companies file regular reports to regulators including the number of miles their self-driving vehicles travel, rides they complete and disabled passengers they are serving.

Reporting by Heather Somerville; Editing by James Dalgleish

SSD Raid 101: The essentials of flash storage and Raid

A fundamental keystone of data protection, Raid (redundant array of independent disks) has been around for decades.

The building blocks are very simple. Multiple disk drives allow data to be distributed via striping and mirroring, or sets of parity data allow a failing unit to be rebuilt by reference to data on healthy media.

But what has been the impact of solid-state media on the use of Raid?

We’ll look in detail at the Raid options available from the main flash array makers below.

Broadly speaking, however, when an all-flash array is a legacy product that’s been retrofitted with flash capacity then you find Raid levels that span the possible combinations of mirroring, striping and parity are available (ie, 1, 10, 5, 6), as they would have been in the HDD-equipped product.

Meanwhile, options are more limited on many of the newer startups’ all-flash arrays and some of the big six suppliers’ newer arrays, and seem to major on parity-based Raid levels (5 and 6) – sometimes their own flavour with branding to suit – and even in the case of NetApp, its own triple parity Raid.

But that’s a broad sweep. Let’s recap on the basics of Raid

Raid fundamentals

While Raid is implemented in many variants, it is all built on combinations of possible characteristics based around striping (which aids speed of access more than data protection), mirroring and parity.

So, for example, Raid 1 mirrors data between disks while Raid 10 stripes data across mirrored pairs, and these provide good read and write performance.

Meanwhile Raid 5 is based on parity for data protection/rebuilds and maximises capacity, but delivers less well on write input/output (I/O). Raid 6 boosts data protection over Raid 5, due to the extra parity data it stores.

Stripe set size is the number of disks that data is written to. With a bigger stripe set size, data is written to more drives and you’ll get better I/O performance.

Be aware, however, that large stripe sets can result in disk rebuild issues due to unrecoverable read errors.

And, of course, Raid rebuild times increase significantly as drive capacities grow.

Raid has continued to evolve and we have seen new protection methods that use the essential components of Raid, but that distribute data and parity information in new ways.

So is Raid relevant to the world of flash drives?

Well, yes. Despite their differences with spinning disk HDDs, flash drives do fail.

There is always a risk of component failure and eventually a flash drive will fail because they have limited write I/O capacity.

This means some protection is required to cater for failure scenarios, and suppliers that sell flash have implemented Raid in ways that vary from the standard levels to their own proprietary formats.

Raid in flash array products

Dell EMC offers all-flash and hybrid flash VMAX, Unity and SC series arrays. These all use standard Raid levels, with 5 and 6 in VMAX in configurations that include 7+1 parity disk, as well as 3+1, 6+2 and 14+2. Unity and SC series arrays offer Raid 5 and 6 plus Raid 10, or Raid 1/0 as Dell EMC calls it. The all-flash-only XtremIO uses its own XDP, which stands for Xtremio Data Protection, a so-called “modified diagonal parity Raid-6 variant”.

Fujitsu’s block-access Eternus all-flash arrays come as the small and medium sized enterprise-targeted AF250S2 that scales to 737TB and the enterprise-class AF650S2 that goes to nearly 3PB. Raid levels available are 0, 1, 10, 5 and the parity/striping Raid 50.

Hewlett Packard Enterprises (HPE) high-end 3PAR StoreServ SAN platforms come in three models that scale up to several petabytes in capacity. They can all be configured as all-flash or hybrid (as well as all-HDD) and offer Raid 1, Raid 5 and Raid 6 data protection. Early in 2017, HPE acquired all-flash startup Nimble Storage. Those arrays come in three sizes that range from a few TB of capacity to several hundred and have Nimble’s triple-parity Raid with claimed six nines availability.

Hitachi Vantara’s F-series all-flash arrays in its virtual storage product line come in four models that go up to capacities of around 2,300 drives. They support Raid 10, Raid 5 and Raid 6.

NetApp – NetApp’s all-flash AAF (All-Flash FAS) arrays provide for Raid DP (its implementation of Raid 6) or Raid TEC, which stands for Triple Erasure Coding. This is a feature of NetApp’s Data ONTAP 9 operating environment that provides for a third parity disk to ensure the safety and speed of disk rebuilds. Meanwhile, NetApp’s SolidFire arrays use their own Helix “Raid-less” data protection in which two copies of data are distributed through nodes in the cluster. Finally, NetApp’s EF series flash arrays use Raid levels 0, 1, 5, 6 and 10. E-Series arrays date back to NetApp’s acquisition of Engenio in 2011, whose arrays were designed for spinning disk.

IBM offers the all-flash FlashSystem and Storwize all-flash arrays, as well as the DS8880F products. The FlashSystem V900 offers between a few tens of TB and nearly 2PB with Raid 5. The FlashSystem 900 comes with 3D TLC NAND and Raid 5.

IBM adds so-called “variable stripe Raid”, which provides for bad data planes in the NAND chip to have their data shipped to healthy ones. Adding this feature to system-level Raid 5 is called Two Dimensional Raid by IBM.

IBM’s StorWize F-suffixed all-flash arrays come with Raid levels 0, 1, 5, 6 and 10. The V7000F supports 760 drives of up to 15TB (3,040 in a cluster) while the V5030F supports up to 1,520 in a cluster.

The DS8880F series all-flash arrays come with Raid levels 5, 6 and 10 with capacities that go over 1PB.

Kaminario offers the K2 all-flash array, which comes in capacity units of K-blocks that can take it up to around 4PB. Kaminario also favours dual parity in its K-Raid scheme.

Pure Storage’s FlashArray//M arrays come in a number of sizes from a few tens of TB to over 1PB. Raid HA is Pure’s take on things and is a dual-parity Raid scheme, so like Raid 6.

Western Digital-owned Tegile’s IntelliFlash arrays offer block and file access in nodes that range from a few hundred TB to nearly 2PB. The company’s datasheets aren’t too forthcoming but speak of “multiple Raid/mirroring options” that include dual-parity and two- and three-way mirroring.

Tintri’s key all-flash offerings are the EC series that range from tens of TB to tens of PB. Its T1000 offers all-flash for remote office/branch office locations. Dual parity Raid 6 is the only option in Tintri

Only newer systems will get Intel firmware updates for Spectre chip flaw

Intel has said it will not issue patches to fix the Spectre vulnerability on 16 of its older processors.

Its decision is unlikely to affect mainstream systems, but users running older hardware or those using the non-patched processors in embedded hardware may find their systems remain open to attack.

In an update to its Microcode revision guidance document, published on 3 April, the company said: “After a comprehensive investigation of the microarchitectures and microcode capabilities for these products, Intel has determined not to release microcode updates for these products.”

Affected processors include Bloomfield Core i7 and Xeon chips, Clarksfield i7, Gulftown i7 and Xeon chips, the Penryn family and Harpentown Xeon server chips.

The company said the microarchitectural characteristics of some of these processors preclude the practical implementation of a patch.

It claimed some of the processors were not commercially supported by system software. “Based on customer inputs, most of these products are implemented as ‘closed systems’ and therefore are expected to have a lower likelihood of exposure to these vulnerabilities,” said Intel.

Ondrej Kubovic, security awareness specialist at ESET, said Intel’s decision should only affect processors that are more than five years old. “We can only hope this will give Intel more space to concentrate on patching systems that are still widely used, and that only isolated and sparsely used systems will be left out of the patching loop.

But just because a processor is considered old by the manufacturer, it may still be operational and running business-critical applications. The Windows operating system is limited to modern processors, but the Linux kernel can be compiled to run on older processor architectures. The availability of older Linux distributions means it is easy to run such systems, particularly for legacy applications.

Kubovic added: “These [processor] flaws enable attackers to harvest information, not to modify them. Therefore, if the system contains no personal or sensitive data, or is used for other purposes but not for browsing, it should be relatively secure. Also, users can improve their security by applying Meltdown and Spectre patches issued by the operating system, browser and other software developers.

“Of course, the safest thing to do is to replace the vulnerable hardware for newer non-vulnerable components. In case hardware replacement or patching is not possible, users can also airgap their system to stay out of an attacker’s reach.”

Processor firmware patching has been far from satisfactory. Intel released, then withdrew, patches and Microsoft’s patch opened up more vulnerabilities, according to security researcher Ulf Frisk. In a post on 27 March describing Total Metdown, an exploit he discovered in the Microsoft patch for Windows 7 and Windows Server 2008, Frisk wrote: “It stopped Meltdown but opened up a vulnerability way worse. It allowed any process to read the complete memory contents at gigabytes per second, oh – it was possible to write to arbitrary memory as well.”

Allan Liska, senior solutions architect at Recorded Future, said: “Total Meltdown, as it is being called, is a serious bug in Windows 7 and Windows 2008 that was introduced when Microsoft rushed to patch the Spectre and Meltdown vulnerabilities. The vulnerability gives any user on a system read/write access to all processes running on that system, irrespective of who the process owner is. This is an unfortunate side-effect of rushing to issue patches for complex software systems – the potential to introduce new vulnerabilities.”

While Intel, Microsoft and hardware manufacturers are obliged to continue to patch supported products, Intel’s decision not to patch legacy processors leaves older systems vulnerable to attack. Such systems may not be running in business systems or home computers, but embedded in the internet of things (IoT) devices.

Oded Comay, chief technology officer at ForeScout, said: “Even when a known vulnerability exists in a component, it can’t be fixed easily due to other considerations. In fact, a CPU vulnerability typically requires hardware changes to be fixed completely.

“We need to think differently about mitigating the risk these vulnerabilities pose to the organisation. Network segmentation comes to mind as a major technology that can help reduce the risk in many situations involving network attached devices.”

The challenge for the industry is that IoT devices with non-patched processors may be deployed across smart cities to control street lighting or traffic, embedded in industrial control systems or within smart devices in people’s homes, or even inside their home Wi-Fi router.

Some may run on dedicated networks, but many will use the public internet for low-cost connectivity. As such, securing the network may not be entirely feasible and replacement of the devices will often be impractical.

Tesla says produced 2,020 Model 3 sedans last week

(Reuters) – Tesla Inc sought to squash any speculation it might need to raise more capital this year on Tuesday, driving the company’s battered shares higher as it announced it built 2,020 of its cheaper Model 3 sedans in the last seven days.

The company’s reassurance that it does not need extra cash sent a wave of relief through investors who sold shares of the electric carmaker through a week of bad news about its credit rating and semi-autonomous driving technology.

In early trade on Tuesday, Tesla shares jumped as much as 6.9 percent, recouping a third of the past week’s losses. They were up 3.2 percent at $260 in midday trade.

Musk’s $50-billion dollar venture said it would also churn out 2,000 of the Model 3 cars next week and promised output would climb rapidly through the second quarter.

“Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow,” the company said in a filing.

“As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.”

Jefferies analysts had estimated that Tesla needed $2.5 billion to $3 billion of fresh equity to fund the Model 3 rampup and several other Wall Street brokerages have predicted the company would need more funds this year.

Some analysts said there were signs that the company might have prioritized the cheaper car, seen as crucial to its profitability, over its Model X SUV and more-established and expensive Model S sedan.

Tesla said first-quarter deliveries totaled 29,980 vehicles, out of which 11,730 were Model S and 10,070 were Model X.

Both were lower from the previous quarter and the first quarter a year ago.

“Maybe Elon Musk switched staff from Model S and X to Model 3 to get better production numbers for Model 3,” said analyst Frank Schwope from NORD/LB.

Musk himself has taken direct control of Model 3 production and the company says it already has about 500,000 advance reservations from customers for the car.

FILE PHOTO: A Tesla Model 3 sedan, its first car aimed at the mass market, is displayed during its launch in Hawthorne, California, U.S. March 31, 2016. REUTERS/Joe White/File Photo

The Model 3 is the most affordable of Tesla’s cars to date and is the only one capable of transforming the niche automaker into a mass producer amid a sea of rivals entering the nascent electric vehicle market.

Tesla’s consistent failure to meet its production targets – it had promised 2,500 Model 3s would roll off its assembly lines per week by the end of March – has made Wall Street broadly more skeptical about Musk’s promises.

Several criticized as “tone deaf” an April Fool’s tweet from the billionaire that joked his company, which has $10 billion in debt, was “totally bankrupt”.

Tesla shares peaked at $389 last September and have been declining steadily since.

Analysts, however, are giving the company the benefit of the doubt as a big bet on the future of high-tech electric and self-driving vehicles.

The production numbers, while short of Tesla’s own target, are far above the 793 Model 3s built in the final week of last year.

“The company appears to be near the point of turning the corner on meeting guidance and production performance,” said William Selesky from Argus Research.

FILE PHOTO: A Tesla dealership is seen in West Drayton, just outside London, Britain, February 7, 2018. REUTERS/Hannah McKay/File Photo

(Corrects to show production was for last seven days, not last seven days of March, in paragraph one)

Reporting By Alexandria Sage and Sonam Rai; Additional reporting by Munsif Vengattil; Editing by Patrick Graham, Bernard Orr

Spotify's record-setting direct listing makes it a $30 billion company

LONDON/NEW YORK (Reuters) – Spotify Technology SA (SPOT.N) shares surged following the largest-ever direct listing on Tuesday, giving the world’s leading streaming music service a market value of nearly $30 billion.

Shares opened at $165.90, up nearly 26 percent from a reference price of $132 a share set by the on the New York Stock Exchange late on Monday.

Spotify’s unusual route to publicly trading its shares via a direct listing rather than a more usual initial public offering will likely be watched by other companies tempted to list without selling new shares, and by bankers that could lose out on millions of dollars in future underwriting fees.

Some 14 million shares had changed hands within an hour after trading began on Tuesday. Nearly 91 percent of Spotify’s 178 million shares were tradable, a much higher percentage than typical in a traditional IPO.

Some market-watchers cautioned investors not to read too much into the first-day pop, given the mixed performance of recent tech IPOs.

Spotify’s debut came on the heels of a steep U.S. equity selloff led by tech stocks, although the market had found firmer footing at midday on Tuesday.

“It’s a fair market price. It’s not manipulated or set by any puts and takes by banks or institutional investors,” said Chi-Hua Chien, an early investor in Spotify who is now at San Mateo, California-based Goodwater Capital.

Spotify shares were last at $160.32, up 21 percent.

The NYSE had set Spotify’s reference price late on Monday, giving an early estimate of the level at which supply and demand could be balanced.

That was in line with informal trading on Monday, with shares changing hands at about $132, which would value the company at more than $23 billion.

Slideshow (5 Images)

Since launching its streaming music service a decade ago, the Stockholm-founded company has overcome heavy resistance from big record labels and some major music artists to transform how the industry makes money.

Spotify offers access to vast libraries of music rather than making users pay for CDs or downloads of individual albums or tracks.

The company has structured the listing to allow existing investors to sell directly to the public while offering no new shares of its own.

Analysts had flagged concerns that forgoing hiring investment banks as underwriters or holding traditional promotional events with institutional investors could mean volatility in Spotify shares once formal trading kicked off.

Spotify’s opening public price was determined by buy and sell orders collected by the NYSE from broker-dealers.

Based on those orders, the price was set based on a designated market maker’s determination of where buy orders could be matched with sell orders.

While Chief Executive Daniel Ek skipped NYSE rituals such as opening bell-ringing and trading floor interviews to tout the stock, the front of the 115-year-old Greek Revival exchange building was draped in a vast green-and-black Spotify banner.

Additional reporting by Helena Soderpalm in Stockholm, Joshua Franklin in New York and Stephen Nellis and Salvador Rodriguez in San Francisco; Editing by Meredith Mazzilli and Bill Rigby

Walmart opens first small high-tech supermarket in China

BEIJING/NEW YORK (Reuters) – Walmart Inc has opened its first small high-tech supermarket in China, where smartphones can be used to pay for items that are mostly available on the U.S. retailer’s store on Chinese online marketplace JD.com, it said on Monday.

FILE PHOTO: Pedestrians walk past a signboard of Wal-Mart at its branch store in Beijing, China, October 15, 2015. REUTERS/Kim Kyung-Hoon/File Photo

The world’s largest retailer, known for its hypermarkets, is expanding in China as shopping with mobile devices gains popularity in the country, and as retailers and technology companies such as Alibaba Group Holding Ltd and Tencent Holdings Ltd cut deals to integrate online and offline shopping.

Walmart is also targeting more online shoppers, who spend twice as much in the United States when buying on its website.

Walmart had run smaller Walmart Express stores in the United States, with 12,000 to 15,000 square feet, compared with about 105,000 square feet for its typical supermarket. But the concept did not take off and the retailer was forced to shut them down in 2016.

Walmart did not specify the size of the China store, in the southern city of Shenzhen. The company did not immediately respond to a request for comment.

The outlet will stock more than 8,000 items ranging from stir-fried clams to fresh fruit, 90 percent of which will be available online, it said in a statement. Items can be delivered within a 2 kilometer (1.2 mile) radius as quickly as 29 minutes, said Walmart, which owns a stake in JD.com.

Customers can opt to pay with their smartphone using a program on Tencent Holding Ltd’s WeChat messaging.

In March, Walmart said it would expand its grocery home deliveries in key markets to reach more than 40 percent of U.S. households, or 100 metro areas from six currently.

Reporting by Pei Li and Brenda Goh in Beijing and Nandita Bose in New York; Editing by Muralikumar Anantharaman and Richard Chang

Best Fitness Trackers (2018): Fitbit, Suunto, Garmin, Nokia, Apple Watch

This stark, minimalist device is a hybrid between an analog watch and a smart one. It looks like an elegant fashion accessory, but connects to the Nokia Health app on your phone to show stats like your heart rate, steps, and distance traveled. It’s simple and slim, with a velvety silicone band, and can transition from surfing to a wedding brunch without skipping a beat. And, at $180, it is one of the most affordable fitness trackers out there.

Saks, Lord & Taylor hit by payment card data breach

NEW YORK (Reuters) – Hudson’s Bay Co said on Sunday that data from card payments in some of its Saks and Lord & Taylor stores in North America had been compromised.

The Lord & Taylor flagship store building is seen along Fifth Avenue in the Manhattan borough of New York City, U.S., October 24, 2017. REUTERS/Shannon Stapleton

The Canadian retail company said it had identified the issue and taken steps to contain it, adding that “there is no indication” so far that the issue had affected the company’s e-commerce or other digital platforms.

Customers will not be liable for fraudulent charges that may result from the issue, the company said.

The stores involved include Saks Fifth Avenue, Saks OFF 5TH and Lord & Taylor, the company said.

Reporting by David Henry in New York; Editing by Bill Rigby

LinkedIn Just Launched Native Video Ads. Here's What it Means for Marketers

At least three users are suing Facebook over data collection. The reputation of the social media giant has taken a hit as the depths of the data collection missteps are now being fully revealed. All of this has left users angry and many advertisers a little wary about spending their money on the platform. 

But where can they turn to as an alternative choice for their advertising dollars?

LinkedIn made a move yesterday that could make it an attractive choice. LinkedIn announced that brands can now post a native video to their Company Pages and then run targeted ad campaigns.

The significance of this product release should not be underestimated, especially for B2B brands. Here’s why.

LinkedIn finally launched native video for individual users last August (they were the last major social platform to do so). It was a move that many experts at the time were saying came too late in the game. 

However, with many users having tremendous success with the reach and engagement on their videos on the platform; nobody is questioning the move now. 

The rollout of video advertising for brands couldn’t come at a better time. 

Brands will be able to post videos to either their Company Page or Showcase page. Using LinkedIn’s Campaign Manager enables audience targeting via job title, industry, company name and more.

However, using LinkedIn’s Matched Audiences allows brands to take their targeting to the account level. You can create a list by uploading emails from current accounts if you want to target existing customers.

To target new accounts with your video ads, just upload a list of emails from the company CRM from prospects that are in the lead development stage. 

Then, track the results with LinkedIn’s built-in conversion tracking.

Like with any new LinkedIn product, it will be a tiered rollout with businesses gaining access over the coming weeks.

RSS Readers Are Due for a Comeback: Feedly, The Old Reader, Inoreader

The modern web contains no shortage of horrors, from ubiquitous ad trackers to all-consuming platforms to YouTube comments, generally. Unfortunately, there’s no panacea for what ails this internet we’ve built. But anyone weary of black-box algorithms controlling what you see online at least has a respite, one that’s been there all along but has often gone ignored. Tired of Twitter? Facebook fatigued? It’s time to head back to RSS.

For many of you, that means finding a replacement for Digg Reader, which went the way of the ghost this month. Or maybe you haven’t used RSS since five years ago, when Google Reader, the beloved firehose of news headlines got the axe. For others, it means figuring out what the heck an RSS feed is in the first place—we’ll get to that in just a minute. And some of you have already moved on to the next article in your Feedly queue.

No matter what your current disposition, though, in this age of algorithmic overreach there’s something deeply satisfying about finding stories beyond what your loudest Twitter follows shared, or that Facebook’s News Feed optimized into your life. And lots of tools that can get you there.

Cue RSS

RSS stands for Really Simple Syndication, and it was first stitched into the tapestry of the open web around the turn of the millennium. Its aim is straightforward: to make it easy to track updates to the content of a given website in a standardized format.

In practice, and for your purposes, that means it can give you a comprehensive, regularly updated look at all of the content your favorite sites publish throughout the day. Think of it as the ultimate aggregator; every morsel from every source you care about, fed directly to you. Or, more commonly, fed to you through an intermediary known as an RSS feed reader, software that helps you wrangle all of those disparate headlines into something remotely manageable.

The difference between getting news from an RSS reader and getting it from Facebook or Twitter or Nuzzel or Apple News is a bit like the difference between a Vegas buffet and an a la carte menu. In either case, you decide what you actually want to consume. But the buffet gives you a whole world of options you otherwise might never have seen.

“There are multiple approaches to connecting to news. Social felt pretty interesting at first, but when you mix social and algorithmic, you can easily get into these noise bubbles, or areas where you don’t necessarily feel 100 percent in control of the algorithm,” says Edwin Khodabakchian, cofounder and CEO of popular RSS reader Feedly. “A tool like Feedly gives you a more transparent and controllable way to connect to the information you need.”

With 14 million users, Feedly is the largest RSS reader on the market. And it’s easy to see why; it’s as feature-full as one could hope for, and has been around since 2008. (It also inherited a sizeable chunk of Google Reader’s jilted audience.) It’s far from your only option, though.

All RSS readers function within the same basic outline. You tell them what RSS feeds you’d like to follow—The New York Times, say, or WIRED—and they collect every new headline those sites churn out, offering anything from a snippet of information to the full story, depending on how much the publisher allows. Each puts a slightly different spin on the process from there.

Feedly, for instance, has for the last two years gravitated toward being a tool for research rather than passive entertainment. That’s partly in response to platforms eating the open web. “If you go after entertainment, you’re not competing against other reader news tools. You’re really competing with Instagram and other things people do to kill time,” says Khodabakchian. “On the other hand, if you think of this as an intelligence tool, or research assistant, we see a huge and increasing demand for that.”

Still, Feedly has plenty to offer casual users. It has a clean user interface, and the free version of its service lets you follow 100 sources, categorized into up to three feeds—think News, Sports, Humor, or wherever your interests lie. It also shows how popular each story is, both on Feedly and across various social networks, to give you a sense of what people are reading without letting that information dictate what you see. Paid accounts—of which Feedly has about 100,000—get you more feeds and integrations, faster updates, and better tools for teams.

For more of a throwback feel, you might try The Old Reader, which strips down the RSS reader experience while still emphasizing a social component.

“In terms of evolution, we’re coming from a different perspective,” says Ben Wolf, whose Levee Labs acquired The Old Reader in 2013. “We’re trying to keep things as they were.”

For the million or so Old Reader users, that means not many bells and whistles. Even the mechanism to add new feeds feels just a touch more onerous than you’ll find elsewhere. But once you do get properly organized, it’s a fast and light experience, and if you can convince some friends to join, its social features will help you cut through the clutter. Most of all, there’s not much to get in the way of the headlines, which is what you came for in the first place.

Power users, meanwhile, might try Inoreader, which offers for free many of the features—unlimited feeds and tags, and some key integrations—Feedly reserves for paid accounts. “I would say that at the moment Feedly is ahead of us in terms of mass appeal design look and UX, which is something we will try to tackle with our upcoming redesign,” says Victor Stankov, Inoreader’s business development manager. “Hardcore nerds love us way more than Feedly.”

And those are just three options of many. The point being: In 2018, it’s easy to find an RSS reader out there that suits your needs. Which, in hindsight, is no small miracle.

Throwback

Five years ago, when Wolf took over The Old Reader, he offered a prescient insight: “How long will it be before your Facebook stream is so full of promoted content, bizarre algorithmic decisions, and tracking cookie based shopping cart reminders that you won’t be getting any valuable information,” Wolf wrote. “For as little as $60, a business can promote a page to Facebook users. It won’t be long before your news feed is worthless.”

Which, well, here we are. Not only that, but two-thirds of Americans get at least some of their news from social media, according to a recent Pew Research Center study, leaving traditional sources behind.

The platformization of the web has claimed many victims, RSS readers included. Google Reader’s 2013 demise was a major blow; the company offed it in favor of “products to address each user’s interest with the right information at the right time via the most appropriate means,” as it Google executive Richard Gingras put it at the time. In other words, letting Google Now decide what you want. And the popular Digg Reader, which was born in response to that shuttering, closed its doors this week after a nearly four-year run.

Despite those setbacks, though, RSS has persisted. “I can’t really explain it, I would have thought given all the abuse it’s taken over the years that it would be stumbling a lot worse,” says programmer Dave Winer, who helped create RSS.

It owes that resilience in part thanks to social media burnout. Stankov says search traffic to Inoreader has nearly doubled since 2015, all organically. “RSS readers have not only survived in the era of social media, but are driving more and more attention back to themselves, as people are realizing the pitfalls” of relying too much on Facebook and others, Stankov says.

RSS readers obviously have their own shortcomings as well. The firehose approach can easily overwhelm, especially when multiple outlets all publish the same news at the same time. There are various solutions to this; Stankov points to filtering tools that help you skip the things you don’t care about, while Wolf says The Old Reader has experimented with tools to help highlight just one story when there are dozens of near-identicals.

Different publishers also offer RSS feeds of varyingly helpful degrees. The New York Times and The Ringer, for instance, offer granular choices to help focus on the topics you care about, while others offer either only one big jumble or oddly sparse updates. Sites that publish infrequently can easily get lost in the mix. And multimedia elements sometimes don’t cross the transom; FiveThirtyEight recently ran a fun, interactive trade war game that RSS couldn’t parse.

The readers all have settings to help cope with these issues to varying degrees, where possible; it’s just a matter of how many hours you want to spend shaping your RSS bonsai.

“Social media has mass appeal because it is simple to understand and use, with little to no challenges involved for the user,” says Stankov. “RSS is whole different game, where the main goal is for the end user to research and find valuable information sources, as well as periodically clean up the news feed from irrelevant noise.” (Those who want a truly passive experience outside of Facebook and Twitter might look instead to aggregators like Apple News or Flipboard, or even Texture, which for $10 a month gives you full issues of dozens of magazine titles to flip through.)

Even with minimal tweaking, though, returning to RSS this week offered up a few fun surprises I never would have seen otherwise: the Yankees getting in trouble for player beer-foam art; an American contending for the world chess championship; the latest on Ben Affleck’s hilariously oversized back tattoo. These aren’t the stories everyone is reading. But they’re the ones I want to read.

RSS Evolution

While RSS readers offer a sanctuary from the algorithmic approach, they’re also not opposed to using algorithms of their own, as they continue to evolve and regain relevance. That’s not quite the conflict it might seem.

“Machines can have a big role in helping understand the information, so algorithms can be very useful, but for that they have to be transparent and the user has to feel in control,” says Khodabakchian. “What’s missing today with the black-box algorithms is where they look over your shoulder, and don’t trust you to be able to tell what’s right.”

With its focus on professional users, Feedly hopes AI can better connect users with niche experts. Wolf, too, touts AI as a way to better flag standout stories. “I think algorithms are great,” Wolf says. “I think the problem is when the algorithms are run by advertising companies.”

And despite Digg Reader’s demise, new RSS tools continue to come online. Even Winer has re-entered the fray, this week introducing feedbase, a database of feeds that makes it easy to see what others subscribe to, ideally prompting discovery and an even more open approach. “I thought it might be a good time to try to add an important feature to RSS that was always part of the vision, dynamic subscription lists,” Winer says.

Still, the lasting appeal of RSS remains the parts that haven’t changed: the unfiltered view of the open web, and the chance to make your own decisions about what you find there.

“The most amazing thing to me about RSS is that no one really went away from it,” says Wolf. “It still exists. Somehow through all of this. It’s crazy, in a way, that when you go away from RSS and then come back to it, it’s all still there.”

Ocean Acidification Could Be a Net Positive for Some Fish

One of the consequences of pumping more and more carbon dioxide into the atmosphere is the changing chemistry of the world’s oceans. Until now, the ocean has acted as a big sponge, soaking up about one-third of the CO2 released by human activities.

But now, scientists are watching a vast experiment unfold. All that carbon dioxide is triggering chemical reactions that is turning the oceans more acidic, which in turn is making life tough for lots of marine organisms. Oysters and other shellfish have been hit by die-offs in the Pacific Northwest and Gulf of Maine, while tropical reefs are dissolving faster than they can rebuild, according to a recent study in the journal Science.

Some researchers are seriously considering geoengineering to reverse the slow acidification of the ocean. Dissolving minerals like olivine or limestone into seawater would increase its alkalinity. (Remember the pH strip in your 10 gallon fish tank? Blue=alkaline, red=acidic.) Not only would that make it easier on marine life, but it would also allow the ocean-sponge to soak up more carbon dioxide from the atmosphere. Two British scientists proposed this idea last year in a paper in the journal Reviews of Geophysics, predicting that with a bit more research (and money) it may be possible to capture hundreds of billions to trillions of tons of carbon without messing up the marine ecosystem.

Rita Erven/GEOMAR

But this kind of massive planetary experiment needs lots of small-scale work in the laboratory before it’s ready. So in the meantime, marine scientists are trying to find which species will come out on top in a more acidic ocean.

In Sweden, a group of researchers tested survival in an artificially acidic ocean. In a fjord, they built an enclosed, floating test tube they called a “mesocosm” and filled it with phytotoplankton, zooplankton, and tiny herring larvae. Then they turned up the dissolved carbon dioxide, tracking herring survival over time as the acidity increased.

A similar lab experiment with codfish, another important Northern European food fish, killed off the fish. “Our surprise is that we didn’t find that,” said Catriona Clemmesen-Bockelmen, a marine ecologist from the GEOMAR Helmoltz Center for Ocean Research in Kiel, Germany, and a co-author on the study in Nature Ecology and Evolution. “Instead, we had a higher survival rate.” The herring, it seemed, liked the extra acidity.

Why? Two things. First, the higher dissolved CO2 led to a bloom in plankton—food for the fish. Second, it turns out that herring spawn mostly near the ocean bottom, where CO2 levels are already naturally high. That means they are better adapted to ocean acidification than other species like the cod that spawn near the surface.

Does that mean the herring come out on top in an acidic ocean? It depends. Clemmesen-Bockelmen says that ocean temperature is also a big factor for fish larvae. Fish could swim north to find cooler waters, but they wouldn’t necessary find the right food in a new ecosystem. “There will be winners or losers depending on adaptation and biology, but there also could be shifts in the species,” she says. Codfish that live in the eastern Baltic Sea, for example, have already adapted to a habitat with changing pH (because of the region’s notoriously poor water quality), while its cousins in the North Atlantic are in a more stable environment and more sensitive to shifts in pH.

At New Jersey’s Rutgers University, marine ecologist Grace Saba wants to know more about the ecological winners and losers on this side of the Atlantic Ocean. Next month, she is preparing to launch one of the first ocean acidity sensors on an underwater drone that will dive into cold pool of bottom water that sits on the US continental shelf, stretching from Virginia to the tip of Long Island and about 30 to 130 miles offshore. This region is home to commercially important fishes, as well as wild stocks of quahogs, scallops, and surf clams that can’t swim away from growing acidic waters.

“They are just stuck there,” Saba says. The drone sensor will give her and colleagues data on changing water chemistry more quickly than the current ocean acidification testing conducted every four years by NOAA oceanographic vessels. “For me it was an eye opener that we need to get out there and sample,” she says.

From Baltic cod to New England scallops, the ocean ecosystem is changing as we pump more greenhouse gases into the atmosphere. Scientists realize that the ocean doesn’t behave like a chemistry equation, or an algorithm, and they will continue to uncover unintended consequences. Ecological winners will emerge and thrive, “losers” will migrate or die. But by then it may be too late to reverse this global experiment.

Our Warming Climate

  • Predicting the degree of global warming the Earth will see has always been a matter of probabilities, but scientists think they’ve reduced the uncertainty of their models.
  • Is Cape Town thirsty enough to drink seawater? Desalinated seawater, that is.
  • How engineering earth’s climate could imperil life

UK information commissioner welcomes Facebook move to cut ties to data brokers

LONDON (Reuters) – Britain’s Information Commissioner welcomed Facebook’s decision to end its partnerships with several large data brokers who help advertisers target people on the social network.

FILE PHOTO: A 3D-printed Facebook logo are seen in front of displayed binary digits in this illustration taken, March 18, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

Facebook made the move after a scandal over how it handles personal information knocked billions of dollars off of its share price.

“I welcome Facebook’s announcement that it will be shutting down its partner category service, using third party data to inform targeted advertising,” said Information Commissioner Elizabeth Denham in a statement on Thursday.

“I have been examining this service in the context of my wider investigation into the use of personal data for political purposes and had raised it with Facebook as a significant area of concern,” she added.

Reporting by Alistair Smout and Kate Holton; editing by Stephen Addison

Mideast ride-hailing app Careem resumes Ramallah services

DUBAI (Reuters) – Middle East ride-hailing app Careem said on Wednesday it had resumed services in the Palestinian city of Ramallah in the Israeli-occupied West Bank after striking a deal with Palestinian transport authorities.

FILE PHOTO: An employee shows the logo of ride-hailing company Careem on his mobile in his office in the West Bank city of Ramallah July 17, 2017. REUTERS/Mohamad Torokman

Dubai-based Careem suspended services in Ramallah last November, four months after launching there, at the request of the Palestinian Authority, which exercises limited self-rule in the West Bank.

Careem said in a statement it had agreed with the Palestinian transport ministry for its fares to be the same as metered taxis. It has resumed services only with licensed taxi drivers but plans to later add private cars.

Careem believes its services will remain competitive even with fares the same as for regular taxis. It said the taxi booking and payment services on its app were convenient compared with hailing a cab on the street.

Ride-hailing apps have faced opposition in many markets around the world by making inroads into the traditional taxi industry.

Careem said it had signed up hundreds of drivers in the West Bank, where the Palestinian unemployment rate is high.

The ride-hailing company has raised over $500 million and expanded to over 90 cities across 13 countries predominantly in the Middle East since launching in 2012.

Careem started services in the West Bank city of Nablus and in Gaza City this year and said it would continue looking at adding more cities in the tiny Palestinian-ruled enclave.

Careem is a Middle East rival to U.S. company Uber Technologies [UBER.UL], which does not operate in the Palestinian territories.

Reporting by Alexander Cornwell; Editing by Mark Heinrich