Snap Needed Emotional Intelligence This Week but Didn't Have Any

Snap, parent corporation of social network Snapchat, has faced a number of recent leaks about the business, including a new round of layoffs. But the company’s reaction, a threat to sue or imprison employees who might talk to the press, was the second time in a week the company showed a disturbing lack of emotional intelligence.

Snap has made some bad moves in the past, like the initial fight among the co-founders. Turning down $3 billion for an acquisition by Facebook and the fall stock plunge. But the biggest problem of late has been the attitudes toward employees that management clumsily communicated.

Patience is understandably running thing. Over the last six months, Snap has faced the following:

  • Expenses raced ahead of income, increasing fiscal pressures as user growth has not kept pace with expectations. (When Fortune writes, “Its first trick was making selfies disappear. Its latest is sending gargantuan piles of cash into the ether,” you know the coverage will be ugly.)
  • The company saw two big stock drops immediately after earnings announcements in August and November.
  • The current stock price of about $14 remains far below the $17 IPO figure.
  • Layoffs this week and October after a September restructuring suggest the level of problem and money pressures Snap faces.

Snap has been like a sieve for insider news getting out to the press, which has made the company irate, as reported by Cheddar’s Alex Heath. This resulted in a harsh memo that in part said the following:

As a result, all employees must keep our information strictly confidential until disclosed by Snap. We have a zero-tolerance policy for those who leak Snap Inc. confidential information. This applies to outright leaks and any informal “off the record” conversations with reporters, as well as any confidential information you let slip to people who are not authorized to know that information.

If you leak Snap Inc. information, you will lose your job and we will pursue any and all legal remedies against you. And that’s just the start. You can face personal financial liability even if you yourself did not benefit from the leaked information. The government, our investors, and other third parties can also seek their own remedies against you for what you disclosed. The government can even put you in jail.

Not that anyone should minimize the need for a basic level of confidentiality. Leaking information from a public company, particularly if some people have a chance to trade on the insights before others do, can be a significant legal risk. But there are different ways to communicate, and Snap management opted for as heavy-handed a one as might be imagined. If they wished an effective deterrent, internal training and emphasis would have been far more effective.

Instead, this move is almost guaranteed to scare employees not into knowing compliance with right actions but further into psychological bunkers and out of the company as soon as possible.

What can you expect when a culture of secrecy reportedly makes many employees feel isolated and in danger? This is like entrepreneurs who are so intent on protecting their “brilliant” ideas that they never learn how limited or flawed the concepts are because they won’t listen. If you regularly divide employees, you miss the communication and collaboration necessary for innovation and solving problems.

And speaking of innovation, as the hammer comes down in this way, it also strikes in another. In the memo released at the time of the most recent layoffs, via Cheddar, CEO Evan Spiegel discussed the need to create a “highly scalable business model” and an “organization that scales internally.” He wrote, “This means that we must become exponentially more productive as we add additional resources and team members.”

To many, that translates as “your life should be ours.” There is only so productive people can be. They aren’t machines, and if you continually expect more and more, even with additional tools and resources (but likely not), you burn people out. That may work if you think everyone but yourself is replaceable and you want to use individuals as tools to make money — but, on second thought, no, it probably won’t. Some have pulled it off, but far more often these attitudes have limited success at most.

Then that memo ended as follows:

Lastly, I’d like to make it very clear that our team is not here to win 2nd place. The journey is long, the work is hard, but we have and we will consistently, systematically, out-innovate our competitors with substantially few resources and in far less time. And we will have a blast doing it.

Put differently: You won’t have the resources you need but you will succeed and work faster and harder because you are order to, and you will enjoy the process whether you want to or not.

The communications style of Snap in these two instances betrays a remarkable degree of emotional tone deafness. Even though the people responsible are likely sure they are motivating employees while helping select for the types of people who will do well by them, they transmit subtexts that are off-putting to many who could be of immense help but are unwilling to submerge themselves into the drive to enhance the financial well being of a tiny group.

The people at Snap could have avoided the problem with a few steps:

  • Clarify and be honest with yourself about what you really want to achieve. Have someone from the outside look at materials, interview people, and offer a disinterested observation of the situation.
  • Look at things from an employee’s viewpoint and put yourself in their shoes. Given the general atmosphere, if you heard this as an employee, how might you react?
  • Recognize that how you feel personally and what you want to accomplish may not work well together. Focus on approaches most likely to produce the needed results, not something that makes you feel vindicated.
  • Get expert help. If you pride yourself on an engineering culture, as Snap seems to, don’t assume you’re also a master of psychology and motivation. Chances are that you aren’t.

Google CEO Has No Regrets About Firing Author of Anti-Diversity Memo

Google CEO Sundar Pichai on Friday expressed no regret over the firing of James Damore, author of an infamous memo criticizing Google’s pro-diversity policies and culture.

During an appearance with YouTube CEO Susan Wojcicki, Pichai said, “I don’t regret it,” when asked about Damore’s firing by Recode head Kara Swisher. He insisted that the firing was primarily a strategic decision for Google. “The last thing we do when we make decisions like this is look at it with a political lens,” Pichai said, according to TechCrunch.

Google has been working to increase its hiring of women. Damore’s memo, which became public in August, argued in part that women might not be biologically suited for careers in engineering or technology. Many commentators felt that retaining Damore after the memo’s distribution would make Google a hostile work environment for women.

Wojcicki also described the firing as “the right decision.”

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Though Google’s priority was internal cohesion, Damore’s memo was broadly criticized by many in the tech sector and beyond, including for faulty interpretations of biological science. Damore quickly revised inaccurate representations that he had completed a Harvard PhD in biology.

At the same time, reports did indicate that Damore’s views were quietly widespread in the lower ranks of Google.

Damore earlier this month initiated a lawsuit against Google, alleging that the company discriminates against white men. That case seems difficult to make on its face, since its most recent diversity report found that the company is 69% male and 91% white or Asian, with black or Hispanic people making up only 3% and 4% of new hires, respectively.

FTC makes second request on Broadcom's bid for Qualcomm

(Reuters) – The U.S. Federal Trade Commission has made a second request for information on chipmaker Broadcom Ltd’s (AVGO.O) $103 billion hostile bid for Qualcomm Inc (QCOM.O), Broadcom said in a statement on Friday, a move that could indicate heightened antitrust scrutiny.

The FTC review is part of a process under the Hart-Scott-Rodino Act to scrutinize potentially anti-competitive mergers. The vast majority of deals reviewed by the FTC and the Department of Justice are allowed to proceed after the first preliminary review, according to the FTC’s website.

However, if a second request is issued, companies must provide more information to the FTC. As part of its defense against Broadcom, Qualcomm has argued that any deal faces a long antitrust review.

Broadcom said that it had anticipated the second request as a normal part of the regulatory approval process.

“This signifies that Broadcom is moving into the next stage of the U.S. antitrust review process,” Broadcom said in a statement.

Deals that get a second FTC request for information often do so because of their complexity and size, and a potential acquisition of Qualcomm by Broadcom could still subsequently be approved, according to sources who asked not to be named because the matter is private.

FILE PHOTO: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

Reuters reported on the second request earlier on Friday. Qualcomm declined to comment, while the FTC did not respond to a request for comment.

Broadcom said this week that a separate FTC review of its client relationships is immaterial to its operations, does not relate to its wireless business and has no impact on its proposal to acquire Qualcomm.

Broadcom has said it is very confident it can complete the Qualcomm deal within 12 months of signing an agreement, while Qualcomm has said that the regulatory review processes required around the world would take much longer.

A deal that Qualcomm has in the works, its proposed $38 billion acquisition of NXP Semiconductors (NXPI.O), was approved by EU antitrust regulators this week. Only China has yet to approve this deal, something expected in the next two weeks, according to one of the sources.

The NXP deal still faces an uncertain future because some NXP shareholders have asked for Qualcomm to raise its offer.

Broadcom has offered to pay $60 per share in cash and $10 per share of its own stock for Qualcomm. To put pressure on Qualcomm, Broadcom has put forward 11 board director nominees to replace Qualcomm’s board. Qualcomm shareholders are scheduled to vote on these directors in March.

Reporting by Greg Roumeliotis and Liana B. Baker in New York; Editing by Tom Brown and Cynthia Osterman

Canada's Hydro Quebec unable to meet demand from digital currency miners

MONTREAL (Reuters) – Canada’s largest utility, Hydro Quebec, is reviewing its commercial energy strategy after being inundated with demand from global digital currency miners rushing to the province to benefit from political stability and low energy prices.

Hydro Quebec will not have the long-term capacity to meet all the anticipated demand, a company spokesman said, after the utility’s potential mining projects more than doubled in a week to 70.

Bitcoin mining consumes large quantities of energy because it uses computers to solve complex math puzzles to validate transactions in the cryptocurrency, which are written to the blockchain, or digital ledger.

The first miner to solve the problem is rewarded in bitcoin and the transaction is added to the blockchain.

Expectations of a crackdown in China, one of the world’s biggest sources of cryptocurrency mining, on the sector has made energy-rich Quebec an attractive site for companies, and its chief executive is now receiving queries on his Linkedin profile.

Bitmain Technologies, operator of some of the largest mining farms in China, is among the companies searching for sites in Quebec. Others include Japan’s GMO Internet Inc (9449.T), but it has not yet taken a decision on whether to start operations in the province, a source familiar with the matter said. A GMO company spokeswoman declined to comment.

“We are receiving dozens of demands each day. This context is prompting us to clearly define our strategy,” said Hydro Quebec spokesman Marc-Antoine Pouliot by phone.

“We won’t be able to power all the projects that we’re receiving,” he said, while stressing that Hydro Quebec is not automatically refusing entrepreneurs. “This is evolving very rapidly so we have to be prudent.”

Hydro is also keen on attracting data centers, which generate more employment than bitcoin mines.

According to Hydro Quebec, the province estimates it will have an energy surplus equivalent to 100 terawatt hours over the next 10 years. One terawatt hour powers 60,000 homes in Quebec during a year.

A shortage of sites in Quebec with the necessary electric capacity has prompted several entrepreneurs to break down their projects into smaller investments, said Laurent Feral-Pierssens, executive director, emerging technologies at KPMG Canada.

“This is the tip of the iceberg, as only a fraction of the initiatives have reached out to Hydro Quebec yet,” said Feral-Pierssens, who works with digital currency miners that want to open operations in the province.

Reporting By Allison Lampert; Additional reporting by Hideyuki Sano in Tokyo; Editing by Denny Thomas and Susan Thomas

Twitter may notify users exposed to Russian propaganda during 2016 election

WASHINGTON (Reuters) – Twitter may notify users whether they were exposed to content generated by a suspected Russian propaganda service, a company executive told U.S. lawmakers on Wednesday.

The social media company is “working to identify and inform individually” its users who saw tweets during the 2016 U.S. presidential election produced by accounts tied to the Kremlin-linked Internet Research Army, Carlos Monje, Twitter’s director of public policy, told the U.S. Senate Commerce, Science and Transportation Committee.

A Twitter spokeswoman did not immediately respond to a request for comment about plans to notify its users.

Facebook Inc in December created a portal where its users could learn whether they had liked or followed accounts created by the Internet Research Agency.

Both companies and Alphabet’s YouTube appeared before the Senate committee on Wednesday to answer lawmaker questions about how their efforts to combat the use of their platforms by violent extremists, such as the Islamic State.

But the hearing often turned its focus to questions of Russian propaganda, a vexing issue for internet firms who spent most of the past year responding to a backlash that they did too little to deter Russians from using their services to anonymously spread divisive messages among Americans in the run-up to the 2016 U.S. elections.

U.S. intelligence agencies concluded Russia sought to interfere in the election through a variety of cyber-enabled means to sow political discord and help President Donald Trump win. Russia has repeatedly denied the allegations.

The three social media companies faced a wide array of questions related to how they police different varieties of content on their services, including extremist recruitment, gun sales, automated spam accounts, intentionally fake news stories and Russian propaganda.

Monje said Twitter had improved its ability to detect and remove “maliciously automated” accounts, and now challenged up to 4 million per week – up from 2 million per week last year.

Facebook’s head of global policy, Monika Bickert, said the company was deploying a mix of technology and human review to “disrupt false news and help (users) connect with authentic news.”

Most attempts to spread disinformation on Facebook were financially motivated, Bickert said.

The companies repeatedly touted increasing success in using algorithms and artificial intelligence to catch content not suitable for their services.

Juniper Downs, YouTube’s director of public policy, said algorithms quickly catch and remove 98 percent of videos flagged for extremism. But the company still deploys some 10,000 human reviewers to monitor videos, Downs said.

Reporting by Dustin Volz; Editing by Nick Zieminski

Science Says These Factors Determine Good Leadership

For a company to evolve and grow, entrepreneurs must develop into good leaders.

But what are the factors that determine good leadership? Do good leaders share common traits? Are there secrets to becoming a great leader?  What is the impact of gender in regards to leadership? 

The development of sound leaders is a complicated process that is both dependent on the individual, his or her team, and the industry in which they work. But working to become a good leader is essential, especially in today’s business environment, where studies have shown that over 80% of people don’t trust their boss. Eventually, employees leave jobs where they don’t respect their boss. Good leadership is imperative to employee retention and creating long-term organizational success.

There are a variety of skills that provide a solid foundation for good leadership. However, science says that some people are pre-disposed to be better leaders than others.

Inherent traits play a role in leadership potential.

Scientific studies reveal that good leaders are ambitious, curious, and sociable. By having these characteristics you have a better chance to grow within your discipline or company and become a leader. Another critical aspect of leadership is integrity. By having integrity, you can build trusting, supportive teams, with positive work cultures where people feel valued and supported. While a high IQ does have an impact on leadership potential, the correlation is extremely small, less than 5%, when compared to these broader positive traits.   

Are some people born leaders?

Personality traits and intelligence levels are impacted by genetics, which means some people are born with stronger pre-disposition to take on roles in leadership. In fact, estimates suggest that 30-60% of leadership is heritable. However, if you don’t naturally have the traits listed above – sociability, curiosity, ambition, and integrity – it doesn’t mean you won’t become a leader. Through training and coaching, it’s possible to develop the competencies necessary to stand at the helm of a project or company.

Does gender play a role in leadership?

From a leadership potential perspective, gender has little impact. In fact, data has shown that women can be extremely successful as leaders. Over an eight-year study of publicly traded companies, it was discovered that organizations with female CEO’s or female Director’s of Boards produced a better annual return when compared to male counterparts. We don’t have fewer women leaders because of a lack of female leadership potential or a propensity for business. In truth, the number of leaders is currently skewed in favor of males because of social factors such as gender biases, lack of fairness in hiring opportunities, and a history of male dominance in business.

Being in a position of leadership may not feel comfortable for everyone, and that’s okay. As individuals, we engage with the world in different ways, and we have innate strengths that should be utilized to our advantage. Specific traits may lead to a higher propensity toward taking on leadership roles, while other factors such as gender play a much smaller role.

But let me be clear. If you want to become a leader, don’t let scientific studies, your family, or any article convince you that goal is unattainable. You can learn, grow, and evolve, becoming the leader you want to be.


Lesson Learned: Don't Short A Blue Chip REIT

There seems to be more articles on Seeking Alpha in which authors recommend shorting Blue Chip REITs. A few days ago there was a short thesis on Tanger Factory Outlet (SKT) and the author explained,

“I have a hard time convincing myself that the good results will continue into the future. I personally am not comfortable with the sales per square foot metrics at these properties… the current stellar portfolio performance may possibly suddenly see itself deteriorate in the next 5 years without warning.”

I have already provided my counter to that article (HERE), and most of my followers know that I’m not a market timer who picks tops or bottoms.

Instead, I am a value investor and I have found that it’s simply better to be in the market invested in stocks that offer the highest potential returns than play the timing game.

Many of you know that I’m generally a buy-and-hold investor and that means that I like to invest in REITs that I can own for the long haul. It’s rare that I bet against securities that will fall in price… that’s like gambling that my plants will die. I prefer to plant my seeds firmly in the ground and wait for my crops to grow.

Occasionally, I run across a few plants (stocks) that seem to be deteriorating and, as a result, I seek to avoid the companies all together. I’m not a proponent of shorting REITs, that’s just RISKY!

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Why Short a REIT?

I find it amazing that some of the wealthiest REIT investors – the hedge funds – claim to have a vast knowledge and understanding as to the nature of their complex strategies, yet the funds’ overall performance often turns into Fool’s Gold.

We all know that hedge funds by nature are opportunistic as they are designed to pool people’s money to invest in a diverse range of assets. Because hedge funds are lightly regulated (and are not sold to retail investors), they typically buy riskier positions and they often employ the use of short selling and leverage.

Although it is difficult to evaluate hedge fund performance compared with other investments (because the risk/return characteristics are unique), I remain baffled as to why so many hedge fund managers cross into my sweet spot – REITs – trying to short a particular stock that is anything but distressed or even showing signs of weakness.

You can see why the $12 billion hedge fund Pershing Square took advantage of the falling value in General Growth Properties (NYSE:GGP) back in 2009. That was a wise bet for William Ackman (who runs Pershing Square) who has a history of investing in distressed real estate. But history has also shown that there is little opportunity for the short sellers who pursue high-quality blue chips.

For example, in 2009, Ackman waged a battle against Realty Income (O) on the thesis that the “monthly dividend company” had poor credit quality. Ackman argued that Realty Income was suffering from mispriced risk since the REIT was paying a dividend of around 7.5% while the private market cap rate values were closer to 10.5% – a 40% premium. Ackman was suggesting that Realty Income’s fundamentals could not support the dividend and that a cut was imminent. Boy was he wrong!

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Think about it like this, the outcome of a short sale is basically the opposite of a regular buy transaction, but the mechanics behind the short sale result in extremely volatile risks.

In fact, it’s somewhat like the law of gravity as the law of investing is inflation (instead of gravity) and that means that betting against the upward momentum is inherently risky. That means that when you bet against the momentum and you keep a short position for a long period of time, your odds get worse.

Also, when you short sell, you don’t enjoy the same infinite returns you get as a long buyer would. A short sale loses when the stock price rises and a stock is (theoretically, at least) not limited in how high it can go.

In other words, you can lose more than you initially invest, but the best you can earn is a 100% gain if a company goes out of business and the stock loses its entire value.

Finally, and the most concerning risk is leverage or margin trading. When short selling, you open a margin account, which allows you to borrow money from the brokerage firm using your investment as security. Just as when you go long on margin, it’s easy for losses to get out of hand because you must meet the minimum maintenance requirement of 25%. If your account slips below this, you’ll be subject to a margin call, and you’ll be forced to put in more cash or liquidate your position.

For all of these reasons, I’m not willing to risk hard earning capital to short a REIT. Plain and simple, it’s just way too risky and I believe that by patiently taking advantage of the margin of safety, my portfolio will hold more winners than losers.

Regardless of my risk tolerance level, the short sellers haven’t stopped betting against REITs and when that feeding frenzy becomes a catalyst, the “squeeze” ensues (as more and more of the short investors buy shares to cover their positions, share prices skyrocket).

This Blue Chip Bet Paid Off Handsomely

In May 2013, Highfields Capital decided to short shares of Digital Realty (DLR) based on the premise that shares were too expensive and should be trading for around $20.00 per share. Jonathon Jacobson stated (at the 18th Ira Sohn Investment Conference last week) that “pricing is going lower, competition is increasing, and the company (Digital) is tapping into capital markets as aggressively as they can.”

At the time, Digital was trading at $65.50 per share with a total capitalization of around $14 billion.

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Highfields claimed at the time that Digital’s fundamentals were deteriorating and that the REIT was a commodity business with no barriers-to-entry. Simply put, Highfields was speculating that the stock would fall, without any true catalyst supporting the short, other than manipulating prices for personal gain.

Simply said, Highfields is shorting Digital because they think they know something others don’t know. They are plain and simple: speculators, obsessed with dangerously manipulating prices and driving down prices for their own personal gain. In an article, I offered my “back up the truck” commentary,

“ …it’s time to jump on this cloud. Digital has a most attractive valuation of 13.6x and I consider the fundamentals sound. Driven by growing world-wide demand and a very high-quality tenant base, Digital has evolved into a best-in-class global data center platform. Digital’s “first mover advantage” has allowed the REIT to build a commanding barrier-to-entry model in which its mere scale provides access to capital and strong expertise in the global cloud supply chain.”

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Over the years, I have continued accumulating shares in Digital Realty as this Blue Chip has been one of the best picks in my Durable Income Portfolio. As evidenced below, Digital has returned an average of 16% annually since I began purchasing shares in May 2013.

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The “D” in DAVOS

Last week I provided a summary of my All-American DAVOS portfolio that consists of Digital Realty, American Tower (AMT), Ventas, Inc. (VTR), Realty Income, and Simon Property (SPG). These 5 REITs returned 9.2% since December 31, 2016, and Digital returned over 23%.

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In Q2-17, Digital announced that it was merging with DuPont Fabros in a transaction consistent with Digital’s strategy of offering a comprehensive set of data center solution from single-cabinet colocation and interconnection, all the way up to multi-megawatt deployments.

At the far end of the spectrum, this combination expands Digital’s hyperscale product offering and enhances the company’s ability to meet the rapidly growing needs of the leading cloud service providers. The DFT merger is also consistent with Digital’s stated investment criteria and mission statement:

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The DuPont transaction expanded Digital’s presence in strategic U.S. data center metros and the two portfolios are highly complementary. The transaction was expected to be roughly 2% accretive to core FFO per share of 2018 and roughly 4% accretive to 2018 AFFO per share. The combination also enhanced the overall strength of the balance sheet. DuPont Fabros portfolio consists of high-quality purpose-built data centers, as you can see below:

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The merger also bolstered Digital’s presence and expanding footprint in its product offering in three top tier metro areas, while DuPont realized significant benefits of diversification from the combination with Digital’s existing footprint in 145 properties across 33 global metropolitan areas.

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Digital closed on the acquisition of DuPont during the third quarter and the integration is well underway… but the blue chip REIT is not slowing down…

In October, Digital announced a 50/50 joint venture with Mitsubishi Corporation to enhance its ability to provide data center solutions in Japan. Digital is contributing a recently completed project in Osaka and Mitsubishi is contributing two existing data centers in Tokyo. Although the venture is non-exclusive, the expectation is that this will be both partners primary data center investment vehicle in Japan.

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According to Digital’s CEO, Bill Stein, “Japan is a highly strategic market (with) tremendous opportunity for growth over the next several years. This joint venture establishes Digital’s presence in Tokyo, which has been a longtime target market.”

In addition, Digital expects this joint venture will significantly enhance the company’s ability to serve its customers data center needs in Japan. In particular, Digital expects that Mitsubishi’s global brand recognition and local enterprise expertise will meaningfully improve the ability to penetrate local demand.

Also, in the US, Digital entered into an agreement to acquire a data center in Chicago from a private REIT for $315 million. This value add-play offers a healthy going in yield along with shell capacity that gives Digital an opportunity to boost the unleveraged return into the high single digits. This investment represents an expansion in Digital’s core market and is occupied by existing customers with whom Digital has been independently working to meet their expansion requirements.

Also, during the third quarter, Digital announced that it was breaking ground on a new 14 megawatt data center in Sydney, Australia, adjacent to an existing facility. Digital also expanded its Silicon Valley Connected Campus with a 6 megawatt facility at 3205 Alfred Street in Santa Clara, California (scheduled for delivery in the first quarter of 2018).

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The Improved Balance Sheet

In order to continue to scale its global footprint, Digital continues to demonstrate a disciplined balance sheet.

In July 2017, Digital issued two tranches of Sterling denominated bonds with a weighted average maturity of 10 years, and a blended coupon of just over 3% raising gross proceeds of approximately $780 million.

In early August, the company pre-funded a portion of the DuPont acquisition with the issuance of $1.35 billion of U.S. dollar bonds with a weighted average maturity of nine years, and a blended coupon of 3.45%. (This was only the sixth time an investment grade U.S. listed REIT has issued a $1 billion or more in a single tranche of bonds).

The transaction was well oversubscribed and priced 10 bps inside of where Digital’s existing bonds were trading on the secondary market prior to the transaction. Digital also raised $200 million of perpetual preferred equity at 5.25%, an all-time low coupon for Digital and the lowest rate ever achieved on a REIT preferred offering with a crossover rating.

In mid-September, Digital closed on the DuPont acquisition and exchanged all the outstanding DFT common shares and units for approximately 43 million shares of DLR common stock and 6 million OP units. Also, in conjunction with the DuPont acquisition, Digital exchanged the DFT 6.625% Series C Preferred for a new Digital Realty Series C Preferred with a liquidation value of $201 million.

The company also tendered for the DFT 5.875% high-yield notes due 2021, settled nearly 80% of the $600 million outstanding at closing in mid-September and redeemed the remainder within a few days post closing. After quarter-end, Digital redeemed all $250 million of the DFT 5.625% high-yield notes due 2023 and a blended 106.3% of par or a total cost of $270.5 million, including accrued interest and the make-whole premium.

When the dust settled at the end of Q3-17, Digital’s debt-to-EBITDA stood at 6x and fixed charge coverage was just under 4x, as you can see below:

After adjusting for a full-quarter contribution, the balance sheet actually improves as a result of the DuPont acquisition and debt-to-EBITDA dips down below 5x and fixed charge coverage remains above 4x, as you can see on the right-hand side of the chart.

As you can see from the left side (chart below), Digital has a clear runway with nominal debt maturities before 2020. The balance sheet remains well-positioned for growth consistent with our long-term financing strategy.

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The Fundamentals

Construction activity remains elevated across the primary data center metros, but leasing velocity remains robust and industry participants are mostly adhering to a just in time inventory management approach, helping to keep new supply largely in check.

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Demand is outpacing supply in most major markets. The near-term funnel remains healthy and demand seems to be picking up as we head into the end of the year.

In addition, vacancy rates remain tight across the board prompting Digital to bring on measured amounts of capacity to meet demand in select metro areas like Sydney, Silicon Valley and Chicago. The company has seen a flurry of recent land deals in core markets and the number of new competitors is on the rise, although Digital believes its global platform, scale and operational track record represent key competitive advantages.

As Digital’s CEO, Bill Stein, explains:

“Given the sector’s recent history, any prospect of an uptick in speculative new supply bears watching. However, we remain encouraged by the depth and breadth of demand for our scale, co-location and interconnection solutions. We expect the demand will continue to outstrip supply, while barriers to entry are beginning to grow in select metros, which we believe bodes well for long-term rent growth, as well as the enduring value of infill portfolios such as ours.”

Stein adds:

“…we are well-positioned to connect workloads to data on our global connected campus network and through our Service Exchange offering. Enterprise architectures are going through a transformation and workloads are transitioning from on-premise to a hybrid multi-cloud environment. Our comprehensive product offering is critical to capturing this shift.

Cloud demand continues to grow at a rapid clip, but future growth in the data center sector will come from artificial intelligence. The power, cooling and interconnection requirements for AI applications are drastically different than traditional workloads, and Digital Realty is well-positioned to support the unique requirements and tremendous growth potential of this next-generation technology suite.”

The Latest Results

Digital signed total bookings for the third quarter of $58 million, including an $8 million contribution from interconnection. The company signed new leases for space and power, totaling $50 million during the third quarter, including a $6 million co-location contribution. The weighted average lease term on space and power leases signed during the third quarter was nine years. Digital’s management team explains,

“Our third quarter wins showcase the strengths of our combined organization as the bulk of our activity was concentrated on our collective campuses in Ashburn, which is not only the largest and fastest growing data center market in the world, but also the combined company’s largest metro area in terms of existing capacity and ability to support our customers growth.”

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In Q3-17, Digital’s current backlog of leases signed but not yet commenced stands at $106 million. The step up from $64 million last quarter reflects the $50 million of space and power leases signed, along with the $59 million backlog inherited from the DuPont acquisition offset by $67 million of commencements. The weighted average lag between third-quarter signings and commencements improved to four months.

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Digital retained 86% of third-quarter lease expirations, and signed $66 million of renewals during the third quarter, in addition to new leases signed. The weighted average lease term on renewals was over six years, and cash rents on renewal leases rolled down 3.8%, primarily due to two sizable above market leases that were renewed during the third quarter, one on the East Coast and one in Phoenix. Digital expects cash re-leasing spreads will be positive for the fourth quarter, as well as for the full year 2017.

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As you can see from the bridge chart below, Digital’s primary driver is a full quarter with the higher share count outstanding following the close of the DFT acquisition late in the third quarter. Digital still expects to realize approximately $18 million of annualized overhead synergies and expects the transaction will be roughly 2% accretive to core FFO per share in 2018 and roughly 4% accretive to 2018 AFFO per share.

However, these synergies will not fully be realized until 2018 and the quarterly run rate is expected to spring load in the fourth quarter before bouncing back in 2018.

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As you can see below, Digital’s non-cash straight-line rental revenue has come down from a run rate of $23 million in the fourth quarter of 2013, all the way down to less than $2 million in the third quarter.

Over that same time, quarterly revenue has grown by 60% from $380 million to more than $600 million. This trend reflects several years of consistent improvement in data center market fundamentals, as well as the impact of tighter underwriting discipline, which has driven steady growth in cash flows and sustained improvement in the quality of earnings.

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Buy This Blue Chip?

First off, I am not selling this BLUE CHIP REIT. I am confident with my overweight exposure and I will continue to add more shares in price weakness. Let’s take a look at the dividend yield, compared with the peers below:

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Let’s take a closer look at Digital’s dividend history, and specifically the FFO Payout history…

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As you can see, Digital has continued to widen the margin of safety related to the Payout Ratio (helps me SWAN)…

Now, let’s examine the P/FFO multiple, compared to the peers:

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As you can see, Digital is cheaper (based on P/FFO) than the peers. Let’s examine the FFO/share growth chart below…

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As you can see, Digital is not growing as robustly as the peers; however, the company has continued to generate ~8% FFO/share growth and this powerful pattern of predictability is the primary reason I own shares in this REIT. Take a look at this FFO per share history…

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The average FFO/share growth since 2014 has been around 7.6%… now take a look at the P/AFFO/share chart below…

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This suggests that Digital is easily positioned to continue to grow its dividend by at least 5% annually, possibly a tad better in 2018.

In summary, Digital has been one of my best BLUE CHIP buys since I commenced the Durable Income Portfolio (in 2013). I consider the shares soundly valued today (nibbling); however, I would recommend buying closer to $100/share. As Ben Graham famously explained, “a stock does not become a sound investment merely because it can be bought at close to its asset value.”

Selecting securities with a significant margin of safety remains that value investor’s definitive precautionary measure. I consider Tanger Factory Outlet to be the best BLUE CHIP buy today, as any value investor knows – “it pays to wait patiently for the storm to subside, knowing that a sunnier and more plentiful time is bound, as a law of nature, to resume in due course.”

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Note: Brad Thomas is a Wall Street writer, and that means he is not always right with his predictions or recommendations. That also applies to his grammar. Please excuse any typos, and be assured that he will do his best to correct any errors if they are overlooked.

Finally, this article is free, and the sole purpose for writing it is to assist with research, while also providing a forum for second-level thinking. If you have not followed him, please take five seconds and click his name above (top of the page).

Other REITs mentioned: (COR), (QTS), (CONE), and (EQIX).

Sources: FAST Graphs and DLR Investor Presentation.


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.

I'd Buy General Electric At The Right Price Too

In a recent interview, Warren Buffett told CNBC’s Becky Quick that he would buy General Electric (GE) at the “right number”, which led to speculation that Berkshire Hathaway (BRK.A)(BRK.B) may currently be looking to get back into a GE position. Let’s remember that it was only a few short months ago that Berkshire disclosed that it sold a small GE position and build its stake in Synchrony Financial (SYF) [a 2014 spin-off from GE]. Since this announcement, GE shares are down over 20% while SYF shares are up over 30%.

Source: Nasdaq

Talk about great timing, right? After a rough 2017 (GE shares were down ~45% compared to the S&P 500 being up ~20%), the company’s stock has actually performed pretty well in the new year. So, what should investors do now? I believe that the “right number” for this industrial conglomerate depends on many factors, including your time horizon, but, in my opinion, you will not get burned if you layer into a GE position at current levels.

My 12-month Price Target

Before the recent run-up for GE shares, I am on record for saying that my 12-month price target was $19 per share. This target still holds true today, even with shares trading slightly below this mark ($18.76 as of January 12, 2018). Some may be asking why a person that is so bullish on GE long-term is standing firm with a price target of $19 but, in my opinion, it is important to note that the real tests (i.e., quarterly earnings reports and management commentary) are still yet to come.

Management already guided for adjusted EPS to be in the range of $1.00-$1.07 for full-year 2018, so, even after the 2017 blood bath, GE shares are not as cheap as what you would expect.

GE PE Ratio (Forward) data by YCharts

While I believe that Mr. Flannery low balled the 2018 guidance, which is a smart approach given the moving pieces that he will have to contend with, it is still too early to say that GE is a must own at today’s price. GE is trading below the average forward P/E ratio of its peer group but, in my opinion, GE’s management team has a lot to prove before the conglomerate can make the argument that it warrants a valuation that is in line with the likes of Honeywell (HON) or 3M (MMM).

So, at the end of the day, I am sticking with the 12-month price target of $19 for GE because there is definitely going to be concerns (i.e., cash flows metrics, growing debt balance, Power struggles) that the bears will run with in 2018. GE’s 2018 stock performance will largely depend on how management is able to fend off the bears, in my opinion. If successful, $19 per share will be way too low of a price target but it is still too early to tell.

But, on the other hand, there have definitely been some positive developments for GE over the last few months that could result in this company eventually warranting a higher price target later in the year.

Positive Developments

The backdrop for GE has improved since management provided the 2018 outlook in November 2017 but I believe that the two items mentioned below have the potential to be significant tailwinds in 2018.

(1) Oil Prices

The rise in crude oil prices has resulted in a great deal of attention for GE, and rightfully so, as this company is highly levered to the commodity.

Source: CNBC

Remember, GE merged its oil & gas business with Baker Hughes in 2017 to create Baker Hughes, a GE Company (BHGE). No one really knows what will happen with oil and/or gas prices in 2018 or 2019, but it is hard to deny that it has been a great start for these commodities in the new year. And, BHGE has been a direct beneficiary.

BHGE Market Cap data by YCharts

As shown, BHGE’s market cap has increased by over 20% since late 2016 but it has meant nothing for GE shares, as the company’s stock is down by almost the same percentage over this time period. Let’s think about this, GE still owns a majority stake in BHGE (62.5%) so the industrial conglomerate’s holding is now worth over $26B, or ~16% of GE’s current market cap, and the recent rise has had no bearing on GE’s stock price. BHGE alone is not enough to move the needle for GE, but a rising BHGE stock price will bode well for GE and its shareholders in 2018.

There are rumors that GE may look to spin-off BHGE at some point over the next few quarters (an approach that I prefer), as BHGE’a structure gives Mr. Flannery a lot of optionality, but I would not be surprised if GE retained the majority stake well into the 2020’s.

(2) Promising Policies

GE may not directly benefit from the tax reform bill, as many pundits believe to be the case (a thought that I do not necessarily agree with), but, in my opinion, the downstream impact of this business-friendly policy will have a significant impact on GE. For example, a JPMorgan analyst predicts that the new bill will be extremely positive for the companies of the S&P 500:

“The upcoming reduction of US corporate tax rates may be one of the biggest positive catalysts for US equities this cycle,” [Marko] Kolanovic, who serves as JPMorgan’s global head of quantitative and derivatives strategy, wrote in a client note. “We think that little is priced into the market and hence there is potential for market upside. Clients are not repositioning portfolios until they see the reform passed.”

The importance of tax reform to that call can be seen in the breakdown of JPMorgan’s earnings growth forecast for next year. The firm projects that half of earnings upside — or roughly $10 a share for the S&P 500 — will be due to a successful GOP tax bill.”

Joe Ciolli, JPMorgan’s quant guru says traders are waiting for tax cuts to unleash more stock market gains, Dec. 15, 2017

The tax bill has already started to have an impact, as analysts’ EPS estimates for 2018 have increased by 2.2% (to $150.12 from $146.83) from December 20, 2017 to January 11, 2018.

Source: FactSet

Full Disclosure: the 2018 bottom-up EPS estimate is an aggregation of the median 2018 EPS estimates for all of the companies in the index.

The 2.2% may not sound like much but it is the largest move over this specific period of time since FactSet began tracking this data in 1996.

Additionally, analysts are bullish on several sectors that GE operates in.

Let’s just remember that this industrial conglomerate operates in industries that are critical to the U.S. economy so GE will benefit as other industrial companies benefit from the tax bill, of course in my opinion.

And a Trump infrastructure bill in 2018 would simply be icing on the cake.


The main risk for investing in General Electric starts with management. There is no guarantee that Mr. Flannery is the right man to turn around a company that is widely viewed as a directionless, complex industrial conglomerate. Sentiment is the number one factor for GE shares being down by almost 50% in 2017 so shareholders are putting a lot of faith in a largely unproven leader, at least on this type of stage.

Another risk factor is the Power operating unit. Any additional downward pressure for this unit will not bode well for the consolidated results in 2018 or 2019. Management has big plans for Power over the next 24 months so investors should be paying close attention to the progress that is being made toward rightsizing and reshaping this unit for the future.

Bottom Line

The market is flying at (or near) all-time highs and many stocks, including GE shares, have enjoyed a nice ride so far in 2018. I believe that there is a lot to like about GE as we head into 2018 and beyond, but this company’s new management team has a lot of prove over the next 12-18 months. Therefore, investors that think that they missed the boat when shares were trading at (or below) $18 per share will likely get another opportunity at some point in the first half of 2018.

However, looking out, I believe that this industrial conglomerate is attractively valued if you are willing (and able) to hold onto shares for at least the next three-to-five years. Investor sentiment is the main culprit for the poor performance for GE shares in 2017 and I believe that shares will rocket higher if Mr. Flannery is able to sell the market on his “plans” for this industrial conglomerate. That is why I, a person that plans to hold GE for many years, will not sell my GE shares now and try to get back in under $18 because timing the market is hard to do (or should I say impossible?). As such, investors with a long-term perspective should consider layering into a position at today’s levels because, in my opinion, GE shares have the potential to be trading significantly higher in the years ahead.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Disclosure: I am/we are long GE, BHGE, BRK.B.

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.

GLD: Is 'It' Happening?


On Friday, the dollar index fell to a low not seen since late 2014. Continued weakness in the dollar will lead to inflation in all dollar-based commodities like gold, crude oil and agricultural products.

Next week, the U.S. financial markets will have a shortened holiday week. There are big political issues looming, like a potential shutdown of the U.S. government, and an ongoing battle over immigration reform. As a result, the week ahead could see continued volatility in the U.S. dollar – either up or down. These moves in the dollar will likely affect gold, crude oil and other commodities – one way or another.

Is IT Happening?

Is this the beginning of the dollar collapse? Is that why Bitcoin and other cryptocurrencies have risen so far, so fast? Does the pending yuan-based oil futures contract lead to the end of the petro-dollar? Is that why oil has risen so far, so fast? Is IT happening??

Will the U.S. government shutdown close its doors amid political posturing and theater? Will the political climate in Washington, D.C. get even worse? Will the Democrats invoke articles of impeachment on Donald Trump? Will the U.S. and its allies attack Iran?

Should I go “all in” on the SPDR Gold Trust (GLD) to profit from all of these potential events? Or will all of these storylines get resolved, and leave the gold bulls, once again, kicking air instead of a football – and landing flat on their backs?

Gold Divergence from Real Interest Rates

The price of gold has historically had a close correlation with real interest rates. Since the beginning of 2017, however, gold and real interest rates have seen increasing divergence. Is this a sign that we have entered a new era where the old correlations are no longer valid? Possibly.

For the price of gold and real rates to converge again, 5-year real rates would need to fall precipitously below zero. Or gold would need to fall below the 2016 lows. Or, some combination of the two. We can see that real interest rates have hit a peak in late December of every year since 2013 before correcting lower.

Gold is money. However, it is currently traded as a paper derivative. I can’t (and won’t attempt to) predict the day when gold will be set free from its paper chains. I view physical precious metals as a store of value and an insurance policy to protect against macro market risks.

Meanwhile, since I closely track gold and silver, I also swing trade “paper” gold and silver on a short term basis – both long and short – with an eye on several traditional and proprietary indicators.

GLD Charts

The weekly gold chart continues to look bullish, although is nearing an over-bought RSI signal. On a purely technical basis, I would expect at least a pull-back to the uptrend line and/or $124 at some point.

On the daily chart, we can see that GLD came back into a prior uptrend channel. If GLD continues upward, then in hindsight we might describe the drop below the channel as a “bullish under-throw.” GLD is over-bought on the daily RSI.

Gold COT Report

I view the gold COT to be neutral, perhaps slightly cautionary. In the week ending January 9th, the net commercial short interest increased by 23%. When price increases, the commercial banks tend to create paper gold to satisfy paper gold demand.

Peaks in net commercial short interest have almost always coincided with nearby sell-offs, and valleys in commercial short interest have almost always coincided with nearby rises in price. One should be careful when trying to “time” tops or bottoms based upon the COT report, for at least two reasons: 1) the COT report is published on Fridays with Tuesday’s data, so it is three trading days old, and 2) the bullion banks have demonstrated patience in covering their shorts, and it could take many weeks for the COT data to look meaningful in hindsight.

While the gold commercial short interest has increased rapidly from its recent low, it only recently crossed over its 3-year average. And net commercial interest is below recent highs.

Gold OPEX Price Magnet

I closely track the options market for gold, crude oil and natural gas and have created a program to calculate OPEX price magnets for these commodities. Here is a recent history of the gold futures price versus the calculated OPEX magnets.

Since June 2017, the futures and OPEX price magnets have tended to converge onr or before the options expiration date. The next option expiration date for COMEX gold is January 25th, 2018.

The OPEX price magnets that I have developed are related to the “max pain” theory. This Youtube video does a good job at describing the “max pain” theory. There are free max pain calculators online for publicly traded stocks; however, the OPEX price magnets are in my view more relevant and are calculated on futures contracts.


Rising gold prices, a weakening U.S. dollar and divergent real interest rates may provide evidence that gold is regaining its luster as a unique “safe haven” asset. Historically important correlations appear to be broken, and the dollar is setting multi-year lows. Add to this mix increasing political and geo-political risks, and we may have a formula for “IT” to happen. Gold could soon be free of its paper chains, and ETFs like GLD could continue to rise in value – and perhaps move sharply higher.

On the other hand, we might be witnessing beginning-of-the-year allocations and adjustments that become an eventual “nothing burger” for GLD and other gold-related investments. If we continue in the old paradigm, then I see reasons to be cautious for paper gold investments like GLD. GLD is over-bought on its daily RSI, and real interests rates could drag lower. Moreover, the nearby gold OPEX magnet suggests that gold could pull back before the end of January.

I wish all of you the best of luck navigating this interesting market.


This article was written for information purposes, and is not a recommendation to buy or sell any securities. I never intend to give personal financial advice in any of my articles. All my articles are subject to the disclaimer found here.

I am currently offering a two week free trial.  In addition to my daily content, I also have good input from my subscribers in the chat section.  Come and check it out.

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

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

Additional disclosure: I am always net long precious metals in various forms, and currently hold out-of-the-money GLD puts as a hedge.

Trump's 'Shithole Countries' Comment Tops This Week's Internet News

Last week Facebook decided that maybe it should make some changes to the information people see on the platform; also, a lot of people got very interested in the pay discrepancies between Mark Wahlberg and Michelle Williams. But, beyond that, it was also a week where everyone learned that a school kid could play the Cantina Band song from Star Wars with a pencil.

Yes, it was yet another strange, wonderful week on the internet. But what else happened? Here we go.

President Trump’s Unsavory Comments

What Happened: President Trump reportedly referred to Haiti, El Salvador, and some African nations as “shithole countries.” The internet responded in kind.

What Really Happened: There is absolutely no denying that Trump has had an impressively full week, declaring himself a stable genius, denying the possibility that he might be deposed as part of the Russia investigation, and avoiding Kendrick Lamar. But it was his comments reported Thursday that will likely have the longest-lasting impact.


Some were concerned about journalistic standards…

…but many more were concerned about presidential standards, instead.

Naturally, media reports came fast, furious, and horrified. As the fallout from the comments continued, perhaps the most surprising reaction was the fact that the White House didn’t even try to deny it initially.

And they weren’t the only ones failing to denounce Trump’s crude language.

Still, at least one prominent conservative was willing to correct Trump.

As some of the countries mentioned started asking for comment on the comments, Trump said this:

Well, that’s what he said publicly, at least…

The Takeaway: Twitter?

Breitbart Says Goodbye to Bannon

What Happened: Apparently, when shadow presidents fall, it happens quickly and they even lose their satellite radio shows. Sorry, Steve Bannon.

What Really Happened: As those reading Michael Wolff’s Fire and Fury book know, there is one figure that looms arguably even larger throughout the entire thing than Trump himself: self-proclaimed genius (hey, another one!) Steve Bannon. Turns out, the ego-stroking he might have gotten from the book was likely a farewell gift, considering how the rest of his week went.

Yes, Bannon has lost the Breitbart job he swiftly returned to after leaving the White House back in August, despite releasing a full-throated walk-back of his comments in the Wolff book. So, what happened?

That’d do it. Sure enough, Breitbart was tweeting about his departure.

But it wasn’t just Breitbart that dumped him, it turned out.

(Bannon lost his Sirius show because it was a Breitbart-related venture, for those wondering; it wasn’t a coincidence, just cause and effect.) As would only be expected, news of his departure was everywhere in the media, but how did the rest of the internet respond?

It wasn’t only glee at Bannon’s misfortune, of course; some were also wondering just who could replace him at the outlet. Or maybe that should be, “what.”

The Takeaway: If only there was some kind of lesson to be learned from the swift rise and fall of Steve Bannon. Maybe it’s this?

The Leak of the Week

What Happened: In a political environment consumed with the concept of leaking, a surprise release of previously secret testimony to Congress took the internet by storm.

What Really Happened: Despite what certain POTUSes might have you believe, the investigations into potential collusion between the Trump campaign and Russia are ongoing, although at least one—the one being carried out by the Senate Judiciary Committee—is running aground thanks to internal strife between Republicans and Democrats on the committee. At the start of the week, one of the topics causing the most upset was the testimony of Fusion GPS co-founder Glenn Simpson over the origins of the company’s infamous “Russian dossier.”

Simpson testified in a closed session in August, but faced new calls from Republican committee chairman Chuck Grassley last week to testify again, publicly. Simpson and co-founder Peter Fritsch, in an op-ed that appeared in the New York Times, argued that Congress should simply release the transcript of his earlier testimony. Things seemed at an impasse… and then they didn’t. What changed?

People were surprised at how hardcore the move was…

…especially after Senator Feinstein responded to questions about why she did it.

This kind of thing is, well, unusual to say the least, so of course it was everywhere almost immediately. The 312 page document was, unsurprisingly, very enlightening.

This was, in other words, a really, really big deal. Although what kind of a big deal apparently depended on which side of the ideological spectrum you were on.

Expect this one to run and run.

The Takeaway: Actually, wait, we never checked in on how Trump responded to this news. Mr. President?

She Is Spartacus

What Happened: When it looked as if a news story was going to out the creator of a secret list of crappy men, the internet took it upon itself to handle the situation first.

What Really Happened: Perhaps you heard of the “Shitty Media Men” list before last week; it was a Google spreadsheet shared and edited anonymously that listed more than 70 men who were accused of being, to some degree, abusive towards women, whether it was creepy DMs or physical and sexual abuse. Since its creation in October of last year, it’s been the topic of much speculation and discussion, not least of all because no one actually knew where and how the list got started. And then, last week, that all changed.

It all started with a thread from n+1 editor Dayne Tortorici.

There’s much more in that thread, but those are the most salient points. Tortorici’s comments prompted a response from journalist Nicole Cliffe, and follow-ups from other journalists and editors.

It turned out that the writer of the piece, Katie Roiphe, was willing to comment that she was not about name anyone involved in the list.

Maybe the creator(s) of the list wouldn’t be named, and there was no need to worry about doxing! Well, OK, that was unlikely (for reasons we’ll soon get to). But then, something wonderful happened.

Indeed, so many women came forward to claim responsibility that a hashtag was created, #IWroteTheList, to share collective responsibility:

And then, the real author stepped forward.

Donegan’s piece for The Cut had an immediate impact.

The Takeaway: Nicole Cliffe, want to wrap this one up?

The (Flagging) Power of CES

What Happened: Someone at CES 2018 took the idea of “lights out” a little too literally.

What Really Happened: What would be the most unfortunate thing to happen at a trade show where electricity is kind of important?

Yes, the 2018 Consumer Electronics Show was hit by a twohour power outage last week. Before the cause was known—apparently, it was just rain—some people had some… special theories about what was happening.

Others were just philosophical about it all.

Some were even wondering who “won” the blackout. To be fair, a couple of brands definitely tried their best to claim the crown.

Ultimately, though, the answer to who won is fairly obvious, surely.

Some people at the show really seemed to enjoy the darkness, even if they didn’t make off with any free gifts. Hell, some went to so far as to hope it wasn’t a one-off.

The Takeaway: Of course, it’s worth keeping some sense of perspective about things…

Meltdown, Spectre, Malicious Apps, and More of This Week's Security News

The fallout of the widespread Meltdown and Spectre processor vulnerabilities continued this week. WIRED took an in-depth look at the parallel sagas that caused four research teams to independently discover the bugs within months of each other. Dozens of patches are now floating around to try to defend devices against attacks that might exploit the vulnerabilities, but a significant amount of time and resources has gone into vetting and installing the patches, because they slow processors down and generally take a toll on systems in some situations.

On Thursday, Congress re-authorized warrantless surveillance initiatives under Section 702 of the 2008 FISA Amendments Act, rejecting reform proposals and instead expanding the scope of the dragnet for six years. In other secret surveillance news, a report by Human Rights Watch details legal techniques law enforcement officials use to avoid revealing some of their sketchier investigative tools.

Skype is going to start offering end-to-end encryption as an opt-in feature, which will bring the protection to the service’s 300 million users (though the security industry likely won’t be able to vet whether Skype’s encryption implementation is actually robust). But researchers found a flaw in WhatsApp, which is end-to-end encrypted by default, that would allow an attacker to join a private group chat and manipulate the notifications about their entrance so group members aren’t necessarily aware that they are an interloper.

Protests in Iran continue to be forcibly opposed by the government on numerous fronts, including through initiatives to disrupt Iranians’ internet connections and access to communication platforms like Instagram and Telegram. Researchers have developed a technique for catching spy drones in the act by analyzing their radio signals, and mobile pop-up ads are on the rise. Oh, and the Russian hacking group Fancy Bear is apparently gearing up to target the 2018 Winter Olympics, so there’s that.

And also there’s more. As always, we’ve rounded up all the news we didn’t break or cover in depth this week. Click on the headlines to read the full stories. And stay safe out there.

###Google Removes 60 Malicious Apps Downloaded Millions of Times from the Official Play StoreGoogle removed 60 supposed gaming apps from the Google Play Store on Friday after new research revealed that the apps were laced with malware designed to show pornographic ads and get users to make bogus in-app purchases. The findings from the security firm Check Point indicate that users downloaded the tainted apps three to seven million times. The malware is known as “AdultSwine,” and also has a mechanism to try to trick users into downloading phony security apps so attackers can gain even deeper access to victims’ devices and data.

The malware campaign is problematic in general, but is particularly noteworthy because it targets apps that might appeal to children, like one called “Paw Puppy Run Subway Surf.” The situation fits into a larger pattern of malicious apps sneaking into the official Google Play Store. Google has been working for years on tactics to try to catch and screen out bad apps.

FBI Reinforces Anti-Encryption Stance

FBI Director Christopher Wray renewed controversy about encryption on Tuesday when he said at a New York cybersecurity conference that the data protection protocols are an “urgent public safety issue.” Wray noted that the FBI failed to crack 7,800 devices last year that would have aided investigations. Wray said that encryption bars the FBI from extracting data in more than half the devices it tries to access. Digital data protections, namely encryption, have caused longstanding controversy about the balance between the public safety necessity of law enforcement and the separate safety issues that emerge when an encryption protocol is undermined by a government backdoor or other workaround. Echoing Wray’s remarks, FBI forensic expert Stephen Flatley said at a different New York cybersecurity event on Wednesday that people at Apple are “jerks,” and “evil geniuses” for adding strong data protection mechanisms to their products.

###Apple Patches a Small, But Glaring Bug in macOSA new bug discovered in macOS High Sierra would allow an attacker to change your App Store system preferences without knowing your account password. That doesn’t get an attacker…all that much, and the bug only exists when a device is logged into the administrator account, but it’s another misstep on the ever-growing list of security gaffes in Apple’s most recent operating system release. A fix for the bug is coming in the next High Sierra release.

###US Customs and Boarder Patrol Updates Its Electronic Device Search Policy

The United States Customs and Border Protection agency updated 2009 guidelines last week to include new protocols for searching electronic devices at the border. CBP says it searched 19,051 devices in 2016 and 30,200 devices in 2017. The new documents lay out the difference between a Basic Search, in which agents can ask anyone to submit a device for local inspection (data stored in the operating system and local apps), and an Advanced Search, in which border agents can connect a device to a special CBP analysis system that scans it and can copy data off of it. The guidelines stipulate that agents can only do Advanced Searches when they have reasonable suspicion that an individual has participated in criminal activity or is a threat to national security in some way. CBP agents are limited to devices and can’t search an individual’s cloud data. Despite these and other limitations outlined in the procedures, privacy advocates note that these CBP assessments are still warrantless searches, and the new guidelines more specifically and extensively outline what agents can do in addition to describing boundaries.

How an Apple MacBook Air Kept the ‘Star Wars: The Last Jedi’ Script Secret

Next time you look over at someone typing away on a computer at the coffee shop, you might be looking at someone creating the next big Star Wars script.

In a piece published in The Wall Street Journal on Thursday, Rian Johnson, the writer and director for last year’s blockbuster Star Wars: The Last Jedi, revealed that he wrote the entire film on Apple’s thin and lightweight notebook, the MacBook Air. But in a world overrun with security threats and people lusting after early access to a Star Wars script, Johnson needed to take some extreme measures to keep the script safe.

Johnshon explained in his Journal article that he kept the MacBook Air “air-gapped,” a term used to define a computer that never accesses the Internet. He also only used the MacBook Air for writing the script and when done, would turn it off and kept it hidden away in a safe at the studio.

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“I think my producer was constantly horrified I would leave it in a coffee shop,” he wrote.

Star Wars: The Last Jedi hit theaters to widespread fanfare in December. While the film has proven to be a blockbuster hit, it’s also been polarizing among Star Wars fans, with some loving the film’s direction and others taking issue with it. Still, with box office earnings in excess of $1 billion, the film has earned its place as one of the most popular Star Wars films ever.

And who knew the whole time it was just hiding on a MacBook Air?

Caution: Enter At Your Own Risk

By Stephen Innes

It has been a very unsettling time in the macroeconomic world since we entered 2018, but the plethora of USD destabilising headlines overnight stretching from Beijing to Washington has thrown a spanner into the works, letting the foxes run wild in the USD henhouse. It all kicked off with suspicious headlines from “people familiar with the matter” that China officials are viewing US treasuries as less attractive. But the timing of the headline is what sent the market reeling triggering a frantic knee-jerk reaction on USD and gold as it was thought China was retaliating ahead of potential trade announcements from the Trump Administration.

We have been down this road before and US treasuries are often used during the political ping-pong match when trade tensions escalate. While it’s entirely possible that China could take measure to rebalance their reserve as they have done in the past, but the markets quickly dismissed the headline first viewing it as little more than political sabre-rattling and then correctly determining it is highly improbable China will stop buying US Treasuries.

Equity Markets

The US equity markets waned in very choppy trading overnight as US yields jumped higher on the China rumours but more significantly that NAFTA speculation was suggesting that President Trump would announce the US is pulling out of the trade agreement which sent the three major US stock indexes reeling given possible negative implication on corporate earnings. However, the sell-off is likely a bit overblown, as political noise tends to exaggerate when there is a shortage of US economic data.

Oil Markets

Oil prices were buoyant, and while showing no signs of buyers’ remorse, traders did not substantially add to yesterday’s gains despite the Energy Information Administration reporting a higher draw than expected. After touching price peaks not seen since 2014 on Wednesday, the lack of follow-through from the EIA data could mean markets are getting a bit fatigued, and a healthy correction could be on the cards.

Gold Markets

Gold markets were predictably reactive to the rumour roil overnight. Nevertheless, that aside, rising oil prices and strong global growth suggest gold will remain supported as investors look for inflation protection. Also, a highly anticipated stock market correction is providing support on dips which continues to support the bullish gold narrative.


Canadian Dollar and Mexican Peso

Both currencies gapped lower on the NAFTA headlines. While we do not know the full extent of the US trade policy as of yet, there is some thought we are entering the year of US protectionism, and there is no better platform than World Economic Forum in Davos Jan 23-26 to unleash a torrent of protectionist America First policy. While uncertainty around the NAFTA agreement is swirling, the risk of its demise is elevated, wilting any Bank of Canada rate hike momentum the Canadian dollar was riding.

Japanese Yen

Asia is very much in focus this morning after the USDJPY plummeted through significant support levels like a hot knife through butter. USDJPY touched a low of 111.30 overnight after the China/Treasuries rumours triggered a wave of dollar selling, but unlike against other G-10 pairs, USDJPY has failed to recover suggesting the market remains on guard against a quicker pace of BoJ tapering. Also, while the latest move is screaming “correction,” surprisingly few are willing to take a pig in a poke at this juncture.

Asia FX

Good news is the market is not falling to pieces after the mini USDCNY squeeze. Moreover, whatever whispers have been circulating about the imminent demise of Asia FX, they indeed have not led to a dramatic transformation or a notable shift in attitude. Instead, now is the time to be patient and let the rumour-roiled markets settle.

Not to diminish the fact that rising US yields could present some significant headwinds for local currencies, but the USD is getting little support from higher US rates, suggesting FX markets are less sensitive to that specific correlation near term.

China inflation data was a bit damp, and that too has given traders cause for thought.

The Malaysian Ringgit

The Ringgit remains entrenched around the 4.00 USDMYR level awaiting the next domestic catalyst. Industrial Production is due later today, but I suspect the market remains more focused on rate hike speculation. On a positive note, high-energy prices are most helpful to Malaysia adding a welcome boost to fiscal revenue.

Rocket Internet CEO says ready to pounce with cash pile

BERLIN (Reuters) – Germany’s Rocket Internet (RKET.DE) needs to hold on to its mountain of cash so it can compete with rivals from the United States and China and pounce when investment opportunities arise, the chief executive said in an interview.

The internet investor has a cash and equity warchest of up to 3.8 billion euros ($4.6 billion), but is under pressure to return part of it to shareholders to boost a stock price that is almost half the level it listed at three years ago.

Oliver Samwer, a serial entrepreneur who has become one of Germany’s richest men through his savvy investments, said Rocket wanted to be ready to invest “several hundreds of millions” at once in 2018 or 2019.

“We believe capital is a very important instrument in the tech area. To build firms of a certain size, you need more capital than ever before,” Samwer told Reuters on Wednesday.

He said U.S. and Chinese firms had access to much more capital.

Samwer noted that two years ago investors were concerned that Rocket might run out of cash due to funding so many loss-making start ups and now they were worried it had too much cash.

Founded in Berlin in 2007, Rocket started out with a focus on ecommerce, but it made a big bet on online food in 2015, which paid off last year with the listings of its biggest investments HelloFresh (HFGG.DE) and Delivery Hero (DHER.DE).

However, that did little to help Rocket’s own share price, with its current market capitalization of 3.8 billion euros implying that the market puts no value on its assets beyond its cash and its stakes in the two listed food firms.

Samwer noted that Rocket’s share price has risen more than 10 percent since he spoke to investors in late November, but said he was still not satisfied with the stock, admitting that the company had made mistakes in the past over how it communicates.

“Rocket Internet is pursuing a complicated, perhaps also unique business model. Over time, the market will reward this because the figures of our investments are so good,” he said.

Rocket Internet CEO Oliver Samwer attends an interview with Reuters in Berlin, Germany, January 10, 2018. REUTERS/Hannibal Hanschke

He said it is not Rocket’s plan “at the moment” to consider a delisting and declined to comment on possible new share buybacks after a current 100 million euro program.


Rocket is invested in more than 100 start-ups, including in financial and property tech, logistics and travel sites, with its stakes in the five biggest of them potentially worth more than 1 billion euros to Rocket, according to Berenberg bank.

“While we understand that investors may be reluctant to accord a platform value to Rocket … we think the market is taking far too cautious an approach with this company,” said Berenberg analyst Sarah Simon, who rates the stock “buy”.

Samwer said he was currently focused on Rocket’s online furniture sites Westwing and Home24, its Jumia ecommerce business in Africa and the travel sector.

He said the idea of merging Home24 and Westwing, floated by some observers, was a “pure game of make believe”. He noted that the sites target different customers and markets.

However, he said consolidation was likely in coming years in the online food delivery sector, where Delivery Hero competes with Just Eat (JE.L), GrubHub (GRUB.N) and (TKWY.AS).

Rocket Internet has a team of about 25 staff looking for new opportunities, scanning about 200-300 companies a month.

Samwer highlighted peer-to-peer lending marketplace Funding Circle, small business financing firm Billie and British home loans agent Nested as Rocket companies to watch.

“We are planting new seedlings so we can harvest them in 2020 and beyond,” he said. “Small seedlings can suddenly grow big.”

Editing by Anna Willard

How the Government Hides Secret Surveillance Programs

In 2013, 18-year-old Tadrae McKenzie robbed a marijuana dealer for $130 worth of pot at a local Taco Bell in Tallahassee, Florida. He and two friends had used BB guns to carry out the crime, which under Florida law constituted robbery with a deadly weapon. McKenzie braced himself to serve the minimum four years in prison.

But in the end, a state judge offered McKenzie a startlingly lenient plea deal: He was ordered to serve only six months’ probation, after pleading guilty to a second-degree misdemeanor. The remarkable deal was related to evidence McKenzie’s defense team uncovered before the trial: Law enforcement had used a secret surveillance tool often called Stingray to investigate his case.

Stingrays are devices that behave like fake cellphone towers, tricking phones into believing they’re pinging genuine towers nearby. By using the device, cops can determine a suspect’s precise location, outgoing and incoming calls, and even listen-in on a call or see the content of a text message.

McKenzie’s lawyers suspected cops had used a Stingray because they knew exactly where his house was, and knew he left his home at 6 a.m. the day he was arrested. The cops had obtained a court order from a judge to authorize Verizon to hand over data about the location of Mckenzie’s phone. But cell tower data isn’t precise enough to place a device at a specific house.

The cops also said they used a database that lets law enforcement agencies locate individuals by linking them with their phone numbers. But the phone McKenzie was using was a burner, and not associated with his name. Law enforcement couldn’t adequately explain their extraordinary knowledge of his whereabouts.

The state judge in the case ordered police to show the Stingray and its data to McKenzie’s attorneys. They refused, because of a non-disclosure agreement with the FBI. The state then offered McKenzie, as well as the two other defendants, plea deals designed to make the case go away.

The cops in McKenzie’s case had ultimately failed to successfully carry out a troubling technique called “parallel construction.”

First described in government documents obtained by Reuters in 2013, parallel construction is when law enforcement originally obtains evidence through a secret surveillance program, then tries to seek it out again, via normal procedure. In essence, law enforcement creates a parallel, alternative story for how it found information. That way, it can hide surveillance techniques from public scrutiny and would-be criminals.

A new report released by Human Rights Watch Tuesday, based in part on 95 relevant cases, indicates that law enforcement is using parallel construction regularly, though it’s impossible to calculate exactly how often. It’s extremely difficult for defendants to discern when evidence has been obtained via the practice, according to the report.

“When attorneys try to find out if there’s some kind of undisclosed method that’s been used, the prosecution will basically stonewall and try not to provide a definitive yes or no answer,” says Sarah St. Vincent, the author of the report and a national security and surveillance researcher at Human Rights Watch.

In investigation reports, law enforcement will describe evidence obtained via secret surveillance programs in inscrutable terms. “We’ve seen plenty of examples where the police officers in those reports write ‘we located the suspect based on information from a confidential source;’ they use intentionally vague language,” says Nathan Freed Wessler, a staff attorney at the ACLU’s Speech, Privacy, and Technology project. “It sounds like a human informant or something else, not like a sophisticated surveillance device.”

Sometimes, when a savvy defense attorney pushes, an unbelievable plea deal is offered, or the the case is dropped entirely. If a powerful, secret surveillance program is at stake, a single case is often deemed unimportant to the government.

“Parallel construction means you never know that a case could actually be the result of some constitutionally problematic practice,” says St. Vincent. For example, the constitutionality of using a Stingray device without a warrant is still up for debate, according to the Human Rights Watch report. Some courts have ruled that the devices do violate the Fourth Amendment.

Hemisphere, a massive telephone-call gathering operation revealed by The New York Times in 2013, is one of the most well-documented surveillance programs that government officials attempt to hide when they use parallel construction. The largely secret program provides police with access to a vast database containing call records going back to 1987. Billions of calls are added daily.

In order to create the program, the government forged a lucrative partnership with AT&T, which owns three-quarters of the US’s landline switches and much of its wireless infrastructure. Even if you change your number, Hemisphere’s sophisticated algorithms can connect you to your new line by examining calling patterns. The program also allows law enforcement to have temporary access to the location where you placed or received a call.

The Justice Department billed Hemisphere as a counter-narcotics tool, but the program has been used for everything from Medicaid fraud to murder investigations, according to documentation obtained in 2016 by The Daily Beast.

“What Hemisphere’s capabilities allow it to do is to identify relationships and associations, and to build people’s social webs,” says Aaron Mackey, staff attorney at the Electronic Frontier Foundation (EFF). “It’s highly likely that innocent people who are doing completely innocent things are getting swept up into this database.”

The EFF filed Freedom of Information Act and Public Records Act requests in 2014 seeking info about Hemisphere, but the government only provided heavily redacted files. So the EFF filed a lawsuit in 2015. It’s currently waiting for a California judge to decide whether more information can be made public without impeding law enforcement’s work.

“[The government] is obscuring what we believe to be warrantless or otherwise unconstitutional surveillance techniques, and they’re also jeopardizing a defendant’s ability to obtain all the evidence that’s relevant,” says Mackey.

Parallel construction can also involve a simple event like a traffic stop. In these instances, local law enforcement follows a suspect and then pulls them over for a mundane reason, like failing to use a turn signal. While the stop is meant to look random, cops are often working on a tip they received from a federal agency like the DEA.

“Sometimes when tips come through, the federal authorities don’t even tell the local authorities what they’re looking for,” says St. Vincent. The tip could be as simple as to watch out for a car at a specific place and time.

These stops are referred to as “wall off” or “whisper” stops, according to the Human Rights Watch report. In these instances, local law enforcement has to find probable cause for pulling the suspect over to avoid disclosing the tip. The tip is then never mentioned in court, and instead the beginning of the investigation is said to be the “random” stop.

The Human Rights Watch report concludes that Congress should pass legislation forbidding the use of parallel construction because it impedes on the right to a fair trial. Some representatives, like Republican Senator Rand Paul, have also called for banning the practice.

Opponents of parallel construction believe it should be outlawed because it prevents judges from doing their jobs. “It really gives a lot of power to the executive branch,” says St. Vincent. “It cuts judges out of the role of deciding whether something was legally obtained.”

One of the most concerning aspects of the practice is it shields government surveillance technology from public scrutiny. Stingrays, the cellphone-tracking device used in the Florida robbery case, have existed for years, but they’ve only recently been disclosed to the public. Lawyers and legal scholars haven’t yet conclusively decided whether their use without a warrant violates the Fourth Amendment, in part because so little is known about them. That means many people may have been convicted using techniques that violated their rights.

In the future, if the government hides new surveillance technology like facial recognition, the public will be unable to discern if it’s biased or faulty. Unless judges and citizens understand how surveillance techniques are used, we also can’t evaluate their constitutionality.

The public needs to determine if hiding surveillance programs is something it’s comfortable with at all. On one hand, keeping certain techniques secret likely helps authorities apprehend criminals. But if we don’t know how at least the basic contours of how a program works, it’s hard to have any discussion at all.

Exiting Your Startup: The Grand Finale

Your company has finally achieved success.

You’re finally looking to cash out on the effort you invested.

Deservingly so, but you’re not done yet. The most critical stage is near-;the exit.

Founders can’t simply hand over the reins in exchange for a handsome payday. It’s more complicated, as exiting is a strategic decision-;one that founders must be aware of early on.

We have invested in over one hundred successful startups, and founded our own açai-infused vodka company, VEEV. We learned lessons the hard way, and we want to make it easier for you.

Here’s a fact that most founders overlook. You need a reason for potential buyers to actually want to buy your company.

What about taking your company public via an initial public offering (IPO)? The reality is that IPOs comprise a small percentage of total exits, so we’ll focus on more common acquisitions.

Consider how your company will be positioned for an attractive acquisition. There are many areas of your business to focus on to ensure a successful exit. Mastering any three of the following areas will greatly work in your favor:

  1. Your distribution model

  2. Your access to a particular demographic

  3. Your brand’s strength

What about revenue?

Revenue is important, but potential acquirers rarely buy a company for the added revenue. Odds are that the incremental revenue barely moves the needle for your acquirer.

While revenue-;especially revenue growth rate-;is important, the three aforementioned areas carry more weight. Let’s discuss them in further detail.

Create a nimble distribution model that an acquirer couldn’t replicate.

PetSmart’s acquisition of Chewy for $3.5B in the spring of 2017 is a great example of a purchase based on a distribution model. PetSmart, the brick and mortar retailer of pet supplies, needed Chewy, an e-commerce provider of pet supplies, for its direct-to-consumer channel.

In the end, PetSmart gains critical online access while Chewy receives the expertise and resources necessary to refine and expand its business.

A win for both parties.

Additionally, corporations realize the need to gain access to new demographics-; especially Millennials.

Consider RXBAR, the maker of simple ingredient, protein bars. Founded in 2014, the company has experienced meteoric growth, due in no small part to its support from Millennials who are attracted to RXBAR for its simplicity in both labeling and ingredients. Food manufacturer Kellogg’s-;eager to enter the space-;announced in October 2017 its intention of acquiring RXBAR.

RXBAR plans to remain an independent company within Kellogg’s all the while expanding its product, and Kellogg’s can effectively leverage the access to RXBAR’s target demographics.

Again, a win for both parties.

Finally, it’s impossible to overstate the importance of your brand image. Corporations are seeking ways to capitalize on emotion-based purchasing.

We’ve previously mentioned the increasing role that emotion is having on consumer purchasing behavior and significance of brand image here. However, it is worth reiterating the point again.


Because corporations-;not just consumers-;are looking for products with a strong brand that evokes a particular emotion. Oftentimes, this is not their area of expertise. Corporate competitive advantages traditionally lie in the form of a cost advantage.

Now, they’re looking to acquire companies with an emotional advantage.

PepsiCo’s acquisition of the sparkling probiotic drink maker KeVita is a prime example. A slogan of KeVita’s, “Revitalize from the Inside,” represents the pathos that PepsiCo was looking to capture. In a time where consumers are turning away from traditional soft drinks, PepsiCo found a perfect opportunity in the health-conscious KeVita.

The acquisition places Kevita on a larger stage, giving it increased access to new distribution channels and resources. PepsiCo now has the means to leverage KeVita’s image to ideally position itself in a time of changing consumer behavior.

Yet again, a win for both parties.

Determine early on what makes your company a threat to potential acquirers. If they need you more than you need them, you’re in a good position.

You know what to focus on.

Now you need to balance the operations of your company with the intricacies of an exit.

Now let’s address the less concrete aspects of selling your business and how to best-position yourself. Two pieces of advice come to mind:

  1. Base your exit on operational milestones, not a timeline

  2. Keep potential acquirers in the loop

A fundamental misunderstanding that many founders have is basing exits off a timeline, and not an operational milestone.

This principle can be applied in a greater context, especially when it comes to fundraising. All too often, founders seek a certain amount of capital to grant them X months or years of runway. Rather, they should seek this capital to reach a particular milestone, such as achieving a particular customer acquisition cost or breaching a given revenue threshold.

The same issue occurs with exits.

Founders are too focused on exiting in Y years, and not based off a given milestone. A major reason we sold VEEV was because we realistically could not keep growing the business. We had reached an intermediate size, and realized that we didn’t have the distribution capacity or necessary connections to expand VEEV internationally and further grow.

This telltale milestone was far more helpful than any time-based method in determining the right time to sell. Additionally, milestone-based exits are also more flexible than their time-based counterparts. They account for unpredictable macroeconomic factors that can either expedite or slow your timeline.

With that said, build relationships with potential acquirers well-before you reach your desired exit milestones. You should keep them in the loop from an early date.

It’s known that you should contact investors well before your intent to raise the next round of fundraising. The same logic applies to exits.

There a few reasons for this.

The first is simply the importance of getting your foot in the door and establishing relationships with corporate partners early on. The second-;and equally as important-;reason is that they can help you reach or tailor your operational milestones.

Essentially, your potential acquirers can outline the kind of milestone that would spark their interest in a deal.

However, be straightforward if challenges arise that may hinder the completion of a milestone. Acquirers should be willing to work with you. They will not be willing if you paint a rosy picture, only to have them later discover issues in the due diligence process.

That should go without saying, but we have seen it adversely affect many deals.

A final note is to realize that this process takes time. We may have mentioned the importance of stressing milestones over time, but it’s important to realize that a corporation moves slower than a startup. You should be in discussion with companies at least a year before any intention to sell, and know that exit deals usually take at least six months.

In the end, it’s no secret. Exiting is difficult.

Applying this advice will differentiate yourself from the competition and increase the odds of gaining the attention of an acquirer.

The earlier you start the process, the better your odds of success.

From experience, we realize that the timing is never perfect and an ideal match is rare. With that said, it’s important to always keep the exit in the back of your mind, and explore the many ways that you can capture the value of the business you created.

Now, get to work!

And if you need help to guide you along the way, find resources from people who have been there and done that. 

What's Behind This 24% Yield?

We last wrote about the popular InfraCap MLP ETF, (AMZA), in October ’17. At that point, it was trading at $8.51. We stuck a toe in the water, bought some units, collected a $.52 payout, and, as of 1/5/18 am, it was at $8.51.

Normally, you might think, “OK, it’s a breakeven on the price, no cap gain, but I’m ~ $.52 ahead from the distribution – if I sell, I’ll walk away with a 6% profit, and just owe 15%-20% on the qualified distribution”.

Not so fast pardner – there’s a problem with your calculation. If you bought those shares in a taxable account, about 80% of your $.52 distribution would have been return of capital, and would have decreased your cost basis by ~$.42.

So, your taxable short term capital gain would = $.42, plus the normal 15%-20% tax on the qualified distribution.

This problem wouldn’t have arisen, if you had bought AMZA in a tax deferred account, such as an IRA. AMZA also gets rid of K-1’s, and possible UBTI tax issues for IRA holders.

Sounds great right? But, there’s another problem, which SA contributor Trapping Value did a good job of explaining in his recent article about AMZA.

It’s about AMZA’s dividend coverage, or lack of it. The following info is from AMZA’s most recent financial statement, for year ending 10/31/17. It shows that their dividend coverage was only 60% for the last 2 fiscal years:

Here’s a quarterly breakdown, which shows the coverage increasing slightly, but only up to 62% in the most recent fiscal quarter:

(Source: Virtus site)

As the statements show, the fund made ~54% of its income on distributions from its underlying holdings, with the remaining income from writing and selling options. Looking at the funds underlying LP buys/shorts and its options sales and purchases shows a rather complex operation, to say the least, but one item stood out to us – its large position in the United States Oil ETF, (USO), and in the United States Natural Gas ETF, (UNG).

As of 10/31/17, AMZA had these positions in USO and UNG:

(Source: Virtus site)

That made us wonder if there was a correlation in price between AMZA and USO and/or UNG. It seems that AMZA and USO correlated fairly closely, especially in mid-2016 to mid -2017. This makes sense, USO is used as a proxy for the price of US oil. If oil prices crash, as they did in 2015, it eventually affects midstream companies, (especially those which have a lower % of fee-based contracts). (AMZA is the light purple line, and USO is the thicker magenta line.)

In October 2017, however, the AMZA/USO correlation fell apart, when USO headed north, and AMZA headed south, after its 10/3/17 ex-dividend date.

This made us curious, so we took a look at AMZA’s short positions. As it turns out, they had a minor short position in USO, as of 4/30/17.

(The right column is the $ value of the position, and the left column is the shorted share count):

(Source: Virtus site)

But sometime between then and 10/31/17, they entered into a much larger short position on USO. The right column is the $ value – their short position went from $5.5M as of 4/30/17, to $43.5M. as of 10/31/17.

(Source: Virtus site)

During this period, USO went from $10.19, on 4/30/17, to $10.93, as of 10/31/17, a ~7% move upward. This wasn’t a huge move, but it may explain part of the decoupling of AMZA and USO until late November 2017, when USO kept moving higher, and AMZA kept dropping. AMZA’s management was also long USO calls, which would’ve helped to mitigate losses on the short positions.

The other factor in this was also post ex-dividend trading – AMZA’s shares often tend to fall after its ex-dividend dates.

Given this trend, it makes you wonder if taxable account short term traders would be better off buying and selling AMZA in between its distribution dates, and avoid the quarterly distributions. That may sound counterintuitive, but those valleys and peaks sure look interesting, in hindsight.

As usual, though, the problem is figuring out when to buy, and not catch a falling knife, as buyers found out in 2015, when oil crashed, AMZA went south with it.


Energy Transfer Partners LP (ETP) still heads up the list – in fact its now over 20% of the fund’s holdings, as of 1/5/18. We covered ETP’s recent rejuvenation in one of our recent articles.

ETP’s GP, Energy Transfer Equity LP (ETE), is also #5 in the top 10 holdings. Management cut the distribution in half in 2017, which improved the distribution coverage.

Also on the list are Williams Partners LP (WPZ), Buckeye Partners LP (BPL), the venerable Enterprise Products Partners LP (EPD), MPLX LP (MPLX), Enbridge Energy Partners LP (EEP), EnLink Midstream LP (ENLK), Andeavor Logistics LP (ANDX), and ONEOK Inc., which replaced EQT Midstream Partners LP (EQT) in the top 10, as of 10/31/17:

As you may have heard, MLP’s are finding favor once again in the market, partially due to a more favorable tax rule – shareholders of pass-through entities, such as Energy MLPs, may now deduct 23% of the attributable income, before being subject to any taxation.

In addition, the new tax bill contains a bonus depreciation provision that allows all companies to immediately write off the full costs of capital improvements, instead of depreciating the new asset over time.

Couple the tax breaks with better oil prices, and you get a more upbeat attitude toward midstream MLP’s, which has played out in the past month. AMZA’s top 10 holdings are up anywhere from 5% to nearly 12% over the past month. Even with this recent resurgence, however, they’re mostly showing negative performance over the past year, excepting WPZ, EPD, and MPLX:

And there’s still a wide disparity between most of these LP’s unit prices and analysts’ average target prices – ETP, for example, is still 24% below its target price of $24.70, even though is has risen 11.7% in the past month:

These top 10 holdings range in yield from 5.35% to 12.05%, with an unweighted average of 7.47%. Their DCF/Distribution coverage factors run from a low of .82x for ETE, up to 1.40x for OKE, with an average of 1.11x:


EEP and ETP have the lowest Price/DCF, at 7.08 and 8.08 respectively. At the other end of the spectrum, ETE has an outlier 18.61 Price/DCF valuation. ETP and MPLX have by far the lowest Price/Book, at .80 and 1.38.

We took a look at various EPS projections for these LP’s. Although EPS isn’t the most meaningful metric for LP’s, (due to non-cash depreciation adn amortization charges knocking down net income), we wanted to get a general sense of growth projections for this group.

Yes, that 1750% growth figure is ridiculous – (we haven’t been smoking wacky tobacky) – it’s only that high because ENLK is projected to swing from a -$.02 loss to a $.33 gain). At any rate, you can see that there’s a lot of growth expected from these companies in 2018, with an average of over 25% for the group.


WPZ has the lowest leverage in the group, at 3.46x for Net Debt/EBITDA, and.72 for Debt/Equity.OKE has the best ROE and ROI, with ANDX, EPD, and BPL also showing strong figures. EPD wins the ROA race, followed by BPL, and ANDX, while ANDX and EEP have the highest Operating Margins.


AMZA’s NAV went from $25.00 at inception, down to $10.63, as of 10/31/16, and further declined to $8.37, as of 10/31/17. It was of $8.5125, as of 1/4/17.

(Source: Virtus site)


So, what to do? With all of this good news about MLP’s, you’d think that AMZA could get some support from the market in 2018, which should support its NAV. This remains to be seen, and the declining NAV, and poor distribution coverage are big concerns.

We like the concept of the fund – it does solve some problems for IRA holders, giving them very high yield exposure to the MLP universe, without K-1 and UBTI hassles. Normally, we’d be long term holders in this type of investment, in an IRA, where the ROC wouldn’t bite us if we chose to sell. But, we wonder how long the fund will continue to pay $.52/quarter, which continues to decrease its NAV.

If they do cut the distribution at all, how will the market react? There are probably investors with IRA’s who were lucky enough to have bought it for under $7.00 in early ’16 – they may be approaching a breakeven below $4.00, so they could weather a further decline in price.

For now we’ve chickened out, and sold our AMZA shares, and we’ve opted for investing directly in some of the underlying LP’s, such as ETP, which is up 6% in the 2 weeks since we wrote about it.

Alternative Ideas:

Although it doesn’t yield 24%, this covered call trade for ETP is one way to generate a higher yield. It’s on our Covered Calls Table, along with over 30 other trades.

ETP’s March $20.00 call is $1.26 out of the money, with enough headroom for potential price gains, if it gets assigned. The Static Yield is 5.4% over this ~10-week period, or 26.10% annualized. The breakeven is $17.78.

If you want to play it even more conservatively, here’s a March put-selling trade that pays $.85, and gives you a lower breakeven of $17.15. You can see more details in our Cash Secured Puts Table.

A note of clarification – We offer 2 very different investing services – our new Seeking Alpha Marketplace site, Hidden Dividend Stocks Plus, focuses on undercovered/undervalued high yield income vehicles from US and foreign markets.

Our independent legacy site,, offers options selling strategies in tandem with high yield stocks.

All tables furnished by DoubleDividendStocks, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

Disclosure: I am/we are long ETP, MPLX.

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.

8 Big Predictions for Platforms in 2018

It’s that time of year again. Last year we made 7 predictions for 2017. By our count we went 7 for 7. So with 2018 primed to be a big year for platforms, here are our 8 predictions for platform businesses in 2018.

1.     No mainstream blockchain breakthrough, but several more cryptocurrencies explode in value

The Bitcoin and blockchain hype train rolls on. Much like AR and VR a year ago, Bitcoin is getting its moment in the media spotlight This year Bitcoin peaked just shy of $20,000 before cratering back to earth. But it still ended the year up 16x over its value on January 1, 2017, when it just topped $1,000. We aren’t predicting where it will end up this time next year – truthfully, nobody knows.

So far, most of Bitcoin’s, and the blockchain’s value is speculative. Despite a massive influx of investment and speculative cash this year, they still have no proven mainstream applications. Expect that to continue for 2018. While blockchain technology remains promising, there are still a host of challenges left to solve before it’s ready for prime time. It’s still at least a couple years away.

2.     Major tech unicorns start to go public

Last year produced a solid pipeline of tech IPOs, but 2018 should be even bigger. This year should see the first wave of the mega-unicorn platform startups going public.

While Uber is likely still more than a year away – not withstanding its cultural and legal problems, the company still has to figure out a path to profitability – Airbnb and Lyft look like contenders to go public. Other outside contenders include Slack and Pinterest. Airbnb, reportedly already profitable, is our pick for this year, but expect at least two major platform startups to hit public markets in the next twelve months.

3.     IoT gains traction with machine manufacturers

The Internet of Things hype cycle has come and gone over the last few years with little to show for it in terms of mainstream success. Yet in the background, investment and enthusiasm has been building for IoT in the industrial sector. Though GE has struggled and failed to achieve its goal of becoming a modern monopoly around the Internet of Things, many other companies have been experimenting successfully.

We expect 2018 to be the year where many of these smaller investments start to pay off. Early platform players will emerge this year in this area.

While it may take a few years for the winners to emerge, the Industrial Internet of Things will start to take practical shape in 2018.

4.     Large US platform companies take cues from China and start experimenting with more financial services

In China, Alibaba’s spinoff company, Ant Financial, has sparked a revolution in financial services. In a country that has lacked for consumer investment options, Ant and Alibaba rival Tencent have built large financial services platforms on top of their payment platforms.

Platforms in the U.S., both blessed with and challenged a much more robust financial services sector, have looked at their Chinese counterparts with envy. But slowly, this gap has started to narrow. Amazon, for example, has successfully been lending to merchants on its marketplace.

Over the next year, expect to see more of the major platforms experiment with offering financial products. The potential here is massive, and many banks aren’t exactly popular with consumers. While progress will be much slower than it was in China, for the major U.S. platforms it’s too big to ignore.

5.     Walmart continues its success due to and its renewed platform approach

One of the biggest platform stories of the last year was Walmart’s newfound success. After years of failing in its efforts to combat Amazon, Walmart gained ground. Its acquisition of has paid off handsomely as Walmart has begun to win back digital customers and merchants to its marketplace as well as to Jet’s.

This stark reversal will continue in 2018, as Walmart truly emerges as the second dominant player behind Amazon for ecommerce marketplaces. As we wrote at the time, Walmart’s acquisition of Jet was an expensive price to pay for second place, but it’s a move that will prove well worth the investment.

6.     Alexa continues to explode, but competition increases

This is the first of our predictions that continue from last year. After multiple failed attempts at building development platforms, we predicted that Alexa would be a big success. And in 2017, it was. Over the last year, Alexa has gone from a voice service on a handful of niche devices to a platform present on a growing number of hardware devices – many of them not made by Amazon – and supported by a large developer ecosystem.

Alexa’s success will continue in 2018, as it has become a centerpiece of Amazon’s future growth. However, given the promise of voice as a new interface, all the major platforms will continue to pour investment into their own voice development platforms. So far Google is the largest competitor, but expect to see more in 2018 from Facebook, Microsoft and others, such as Baidu in China. For now, Alexa remains the dominant number one in voice, but by the end of the year we expect a clear challenger to emerge.

7.     Modern monopolies face more political scrutiny

This was another of our predictions from last year – that platforms would become hot-button political topics. And boy did they ever. From fake news to Uber’s legal troubles, Google’s antitrust case in the EU, and the occasional presidential rant about Amazon, platforms were never far from the media and political spotlight.

And this issue isn’t going anywhere soon. Given platforms growing economic dominance, the unresolved challenge of how they should be handled politically will gather more attention this year. So far, these discussions have resulted in a lot of opinion pieces but little actual legislation. In 2018, that will likely start to change, as governments grapple with the economic and political implications of the growth of modern monopolies.

8.     More linear players engage in platform innovation by either building or buying

Last year we predicted that more linear enterprises would look at platform startups as big acquisition targets. And 2017 saw a host of major platform acquisitions, including IKEA buying Taskrabbit, Caterpillar acquiring Yard Club and Wyndham Hotels buying Love Home Swap. Verizon also finally bought Yahoo, which includes platforms like Tumblr. Other enterprises have taken a build approach, such as Klockner, a German metals company that announced at its recent Capital Markets Day its plans to launch a marketplace in 2018.

In 2018, we will see this trend continue in a big way, as more large enterprises come under pressure from platform businesses. Those who don’t launch platforms, like Grainger in 2017, will continue to struggle. While those that embrace platform innovation like Walmart will see much greater success.

All in all, 2018 will be a major year for platform businesses. Check this space for the latest major platform news!

Nvidia partners with Uber, Volkswagen in self-driving technology

LAS VEGAS (Reuters) – Nvidia Corp will partner with Uber Technologies Inc [UBER.UL] and Volkswagen AG (VOWG_p.DE) as the graphics chipmaker’s artificial intelligence platforms make further gains in the autonomous vehicle industry.

The company, which already has partnerships in the industry with companies such as carmaker Tesla and China’s Baidu, makes computer graphics chips and has also been expanding into technology for self-driving cars.

CEO Jensen Huang told an audience at the CES technology conference in Las Vegas that Uber’s self-driving car fleet was using Nvidia technology to help its autonomous cars perceive the world and make split-second decisions.

Uber has been using Nvidia’s GPU computing technology since its first test fleet of Volvo SC90 SUVS were deployed in 2016 in Pittsburgh and Phoenix.

Uber’s autonomous driving program has been shaken this year by a lawsuit filed in San Francisco by rival Waymo alleging trade secret theft.

Nevertheless, Nvidia said development of the Uber self-driving program had gained steam, with one million autonomous miles being driven in just the past 100 days.

With Volkswagen, Nvidia said it was infusing its artificial intelligence technology into the German automakers’ future lineup, using Nvidia’s new Drive IX platform. The technology will enable so-called “intelligent co-pilot” capabilities based on processing sensor data inside and outside the car.

So far, 320 companies involved in self-driving cars – whether software developers, automakers and their suppliers, sensor and mapping companies – are using Nvidia Drive, formerly branded as the Drive PX2, the company said.

Nvidia also said its first Xavier processors would be delivered to customers this quarter. The system on a chip delivers 30 trillion operations per second using 30 watts of power.

Bets that Nvidia will become a leader in chips for driverless cars, data centers and artificial intelligence have more than doubled its stock price in the past 12 months, making the Silicon Valley company the third-strongest perfomer in the S&P 500 during that time.

Reporting By Alexandria Sage; Editing by Susan Thomas

Google Is Struggling With Friendly Neighborhood Bike Thieves

Between 100 and 250 company bicycles are stolen from Google’s campus every week, out of a fleet of around 1,100 so-called Gbikes. Or maybe ‘borrowed’ is a better word than ‘stolen’ – it’s complicated.

According to the Wall Street Journal, the bikes wind up in odd places, like schools, tavern roofs, and Burning Man. The people who take them are often residents of Mountain View, the town that’s home to Google’s headquarters. They often view the bikes as a kind of community service, even though they’re ostensibly meant for Google employees to use on the Google campus.

Google has been trying to control its losses, using roving teams to collect the bikes from around town, and recently installing GPS trackers. That’s how they learned one had made it all the way to the Burning Man festival in Nevada.

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But according to comments to the Journal from Mountain View residents, the deeper issue may be mixed feelings about the corporate giant. Some locals didn’t realize the bikes were supposed to be for Google employees only, suggesting they regard Google as a benevolent part of the community.

But others – perhaps including a man who claimed to have an entire garage full of the bikes – regard their borrowing as a kind of retributive justice against the massive company. One woman specifically cited the annoyance of Google Buses, which bring employees to work from around the San Francisco Bay, saying she borrowed the bikes to “balance it out.” The Google buses have been the target of protests in San Francisco, as a kind of proxy for income inequality and rising rents that have been blamed on the tech boom.

The bike situation is subtler and more complex, as befitting lower-key Mountain View. But it still reflects, in the words of one local speaking to the Journal, a sense among residents that “Google owes them somehow, someway.”

Amazon, Facebook, and Google to Join Legal Battle Over Net Neutrality

Internet giants Amazon, Facebook, and Google plan to throw their collective weight behind efforts to save net neutrality.

The Internet Association, the industry’s primary lobbying organization, announced Friday that it plans to join lawsuits aimed at halting the Federal Communications Commission’s December action to repeal Obama-era net neutrality rules. Those rules banned internet service providers like Comcast and Verizon from blocking or otherwise discriminating against legal content online. The association represents dozens of smaller companies in addition to titans such as Google and Facebook.

Net neutrality supporters argue that agency’s plan is illegal under federal laws that prohibit “arbitrary and capricious” changes in regulations, and that the agency didn’t gather sufficient public input on its proposal to overturn its old rules.

“The final version of Chairman Pai’s rule, as expected, dismantles popular net neutrality protections for consumers,” Internet Association President and CEO Michael Beckerman said in a statement, referring to FCC Chair Ajit Pai. “This rule defies the will of a bipartisan majority of Americans and fails to preserve a free and open internet.”

The move is significant because Facebook, Google, and other internet giants faced criticism last year for not doing enough while the FCC was considering repealing net neutrality. Most of the biggest companies participated in a “Day of Action” in July to promote awareness of the issue, but last month The New York Times pointed out that these efforts were relatively small compared to some of the industry’s past actions. For example, in 2006 Google co-founder Sergey Brin traveled to Washington, DC to make the case for net neutrality. By comparison, the internet giants were quiet last year, apart from filing comments with the FCC in support of the Obama-era rules, and placing a few notifications on their websites during the Day of Action. Apple is conspicuously missing from the group, but broke a long silence on the topic of net neutrality last year when it filed its own FCC comment in support of net neutrality.

The Internet Association does not plan to file a lawsuit itself, but will rather join legal action taken by others. The association didn’t specify a lawsuit it plans to join.

Several government officials and advocacy groups have said they plan legal action, but all have to wait until the repeal order is published in the Federal Register. The FCC Thursday published the final text of its order on its website. New York state Attorney General Eric Schneiderman promised to file suit, which attorneys general in several other states, including Illinois, Massachusetts, and Washington, promised to join the suit. Internet advocacy groups like Free Press were also quick to promise legal action.

Legal experts told WIRED last month that net neutrality advocates have a case, but it’s too early to tell how the courts will rule on the subject.

Beckerman also said the association and its member companies will push Congress to pass strong net neutrality protections.

The Internet Association advocated strong net neutrality protections in 2014, and filed a comment encouraging the agency to retain the Obama-era rules last year.

Pro-Russia Twitter Trolls Take Aim at Special Counsel Robert Mueller

The dense network of pro-Kremlin Twitter accounts tracked by the group Alliance for Securing Democracy has spent the last year spreading chaos and discord about topics as diverse as NFL players refusing to stand during the national anthem and Al Franken’s alleged sexual misconduct. It was only a matter of time, then, before the troll army set its sights on special counsel Robert Mueller.

On the website Hamilton68, the Alliance tracks some 600 Twitter accounts it says are associated with a Russia-linked influence network. According to newly released figures, in the month of December, by far the most popular articles shared by the trolls aimed to undermine Mueller and the Department of Justice’s investigation into Russian interference.

In fact, 16 percent of the articles shared by those accounts between December 9 and December 31 were related in some way to the so-called deep state, the bulk of which aimed to discredit Mueller. That’s a lot of tweets, considering the site analyzes some 20,000 tweets a day. It’s a volume of conversation that, in late November, was reserved for the right’s favorite punching bag, Hillary Clinton. The Hamilton68 team keeps its list of suspected Kremlin trolls secret, but it consists of a balance between openly pro-Russia accounts, like Sputnik and RT, as well as bot accounts run by troll factories, and other accounts that consistently amplify pro-Russia themes.

Founded by former FBI agent Clint Watts and J.M. Berger, a researcher focused on extremist propaganda, Hamilton68 has been up and running since August. But December’s onslaught represents the biggest uptick in attacks on Mueller yet. “I don’t think we’ve ever seen as much concentrated activity on that topic,” says Bret Schafer, a research analyst with the Alliance. “It’s been trending steadily upwards since we started this.”

That the Russian propaganda network would step up its battle with Mueller in December stands to reason. It coincides with a cascade of news stories about the investigation, beginning with former national security advisor Michael Flynn pleading guilty to lying to the FBI on December 1. Later that same month, news broke that two FBI agents associated with the investigation had called the President an “idiot” in a text message exchange, news Schafer says the Twitter troll network was quick to jump on.

It also happens to track almost exactly alongside another infamous Twitter troll’s recent interest in Mueller. During the month of December—during which there was a major senate race in Alabama, a new tax bill, and a holiday—the President tweeted about the Mueller investigation in some form or another 17 times. That’s up from tweeting about it just three times in November.

Schafer acknowledges there “definitely, occasionally, is a correlation,” between the President’s tweets and the Hamilton68 network. As is often the case, though, it’s difficult to tell where the ever-circulating feedback loop between the President, the press, and the trolls begins. Maybe the media arouses the President’s sudden interest in a topic, which then rallies the Twitter trolls to action. Or perhaps the sudden uptick in online noise about a given subject seeps into the media, eventually inspiring the Presidential tweets. Wherever it starts, there’s no denying the synchronous relationship between the President’s account and this broader network.

As for what, exactly, the Twitter accounts are sharing, Schafer says it’s very rarely explicitly fake news. More often, it’s articles from “hyper, hyper-partisan alt right sites,” including GatewayPundit and TruePundit. The top stories these accounts shared in December contained headlines like, “From A Legal Perspective, Mueller’s Investigation is Dead. Here’s Why” and “Another Mueller investigator comes under scrutiny: Attorney on Russia probe is revealed to have previously represented the Clinton Foundation.”

In other cases, they seem intent on spreading rumors that prove irresistible to the alt-right internet. A popular recent example: On Wednesday, January 3, the second-most shared article by the pro-Kremlin network was “Executive From Comey’s Former Hedge Fund And Family Killed In Costa Rica Plane Crash.” Now, Schafer says, it’s beginning to gain traction in the dark corners of Reddit.

“It’s taking a minor thread of a story and making that the story, usually with a headline that isn’t backed up by what’s in the text,” Schafer says.

Studied in bulk, these are transparently manufactured attempts to create a groundswell of outrage that reaches the broader public, the press, and eventually, even the President. But when the average Twitter user encounters one of these accounts, it’s not so easy to see the manipulations. The work of groups like the Alliance help the public observe the changing whims of this online collective. In a world in which online conversation shapes public opinion—and in some cases, policy—it’s more important than ever to take a closer look at who, or what, shaped that conversation to begin with.

Some Marijuana Entrepreneurs See a Silver Lining After Threat from Justice Department

Fear and paranoia ripped the cannabis industry on Thursday after news broke that U.S. Attorney Jeff Sessions rescinded Obama-era policies that allowed the recreational marijuana industry to flourish in six states. Without the policies in place, federal prosecutors can technically go after state-law abiding marijuana companies, which casts uncertainty and doubt across the industry.

In a statement released Thursday morning, Sessions announced that he rolled back the Cole Memo from 2013, which issued guidance to U.S. attorneys to not prosecute state-law abiding companies as long as they steered clear of federal priorities like not selling pot to kids and not being involved in organized crime. 

Marijuana entrepreneurs say the news was not surprising since Sessions is known for being staunchly opposed to marijuana legalization. However, since the move empowers U.S. attorneys to enforce the federal ban on cannabis, it did put entrepreneurs like Mike Ray on edge.

“It’s unnerving,” says Ray, the founder and CEO of California-based marijuana vape pen manufacturer Bloom Farms. “This is creating confusion for state-legal businesses. Some will go on with business as usual, some will be more cautious, others might walk away.”  

This new threat of a crackdown will have negative repercussions on marijuana business financing. John Hudak, deputy director of the Center for Effective Public Policy at the Brookings Institute, says it’s likely that investors will make risk assessments based on the new guidance from the Justice Department. 

“It’s hard to imagine that this won’t effect investor decisions,” says Hudak. “Capital available for cannabis companies could dry up.”  

Banks that serve the industry could also become skittish. Sally Vander Veer, the president of Medicine Man, a multi-million-dollar Colorado-based cannabis grower and dispensary chain, says the marijuana industry already has a tenuous relationship with banks. Medicine Man has solid relationships with two local banks, but she says banks and credit unions might not think it’s worth the effort or risk to serve smaller businesses in the industry. 

“This keeps me up at night,” says Vander Veer. “All this does is handcuff us from creating more jobs and generating tax revenue for our state.” 

There are industry experts who caution there’s no need for cannabis companies to panic. Henry Wykowski, a San Francisco cannabis attorney who has represented some of the largest legal marijuana companies, says state-law abiding companies should not behave any differently. Wykowski points out that the Cole Memo was not actually legally binding and contained language that stated the federal government reserves the right to prosecute any marijuana business because the drug is banned under the Controlled Substance Act.

“The Sessions memo doesn’t change anything,” says Wykowski confidently. “I told my clients that if they continue to comply with state law, they should be okay.” 

Some marijuana entrepreneurs even think there could be a silver lining. Bloom Farms’ Ray says the outpouring of support from other elected officials is promising. Since the news broke this morning, senators, governors, and U.S. attorneys from states where adult-use cannabis is legal issued statements condemning Sessions’ move. 

Senator Cory Gardner (R-Colorado), via a statement on Twitter, said Sessions “trampled on the will of the voters” in Colorado and other states where recreational marijuana is legal. 

“I am prepared to take all steps necessary, including holding DOJ nominees, until the Attorney General lives up to the commitment he made to me [to not rescind the Cole Memo] prior to his confirmation,” Gardner wrote. 

Ray says an unintended consequence of Sessions’ aggressive move is that it could finally spur a change in federal law. On Thursday, Senator Cory Booker (D-New Jersey), who introduced the Marijuana Justice Act to legalize marijuana federally in August, took to the Senate floor to speak against Sessions and urged Congress to reform marijuana laws. “The Cole Memo acted as a safety net for the industry, when we really needed something more solid,” says Ray. “What we need is Congress to remove marijuana from the Controlled Substance Act. Hopefully this will spur Congress to fix it.”

BlackBerry surges on deal with Baidu for self-driving cars

(Reuters) – BlackBerry Ltd (BB.TO) and Chinese internet search firm Baidu Inc (BIDU.O) on Wednesday signed a deal to jointly develop self-driving vehicle technology, sending BlackBerry’s Toronto-listed shares up 13 percent to a four-year high.

The deal follows similar agreements with firms including Qualcomm Inc (QCOM.O), Denso (6902.T) and Aptiv Plc (APTV.N) to develop autonomous-driving technology with BlackBerry’s QNX software, which are expected to start generating revenue in 2019.

Investors and analysts are closely watching what comes of those agreements amid expectations that QNX could become a key technology in the burgeoning self-driving vehicle industry, serving as the operating system for computer chips used to run self-driving vehicles.

QNX will be the operating system for Apollo, a platform for self-driving vehicles that Baidu announced in April and has billed as the “Android” of the autonomous driving industry.

“The opportunity is global, it’s for a very large market and I think it’s a very solid win for BlackBerry,” said CIBC Capital Markets analyst Todd Coupland.

Apollo has since signed up several major automakers, including Ford Motor Co (F.N), Hyundai Motor Group (005380.KS) and several Chinese carmakers.

QNX has long been used to run car infotainment consoles. BlackBerry has recently developed the software to run sophisticated computer chips for autos that manage multiple safety-critical systems.

BlackBerry shares rose 13 percent in Toronto to C$16.95, their sharpest one-day gain since April and highest close since March 2013.

The two companies said they will also integrate Baidu’s CarLife, a leading smartphone integration software for connected cars in China, its conversational AI system and high definition maps with BlackBerry’s infotainment platform.

Reporting by Alastair Sharp in Toronto and John Benny in Bengaluru; Editing by Jim Finkle and Sandra Maler

Navigating the Uncanny Valley of Food 

A quarter century ago, Steven Spielberg created velociraptors that were viscerally compelling enough to toe-claw tap dance straight into our nightmares. Last year, the VFX team behind Rogue One gave us a posthumously CGI-reanimated Peter Cushing as Grand Moff Tarkin, and that inspired a different and unintended kind of unease. Japanese roboticist Masahiro Mori’s famous Uncanny Valley hypothesis proposes that near-perfect human replicas elicit a specific form of revulsion—we’re simultaneously intrigued by something seemingly human enough to deserve empathy, and yet repulsed by the realization that something is off.

Now, we usually cut fake dinosaurs some slack because humanity’s social code doesn’t depend on interpreting T. rex eyebrow tics. But our finely calibrated facial lie detectors are critical when it comes to recognizing and assessing threats, rivals, allies, and potential mates. And, as it turns out, we have similar systems in place to monitor another intimate element of our survival: eating.

From birth, we are wired to seek sweetness and avoid bitterness, two points on an intricate flavor compass used by our ancestors to navigate between easy calories and potential poisons. We no longer lean heavily on flavor for life-and-death guidance, it’s true. But those instinctual flavor-tracking systems continue to operate in the background of our daily lives, even as the food landscape changes dramatically. Fervent foodie tribes who demand low-sugar, grain-free, and especially animal-free alternatives to our favorite foods are pushing food industry innovation deeper into the realm of imitation. And as this pressure mounts, food companies should be wary of stumbling into the unsettling pit of another uncanny valley.

Creating food is an intricate balancing act of battling senses. Salt, for example, suppresses bitterness and enhances sweetness, while indole, a single aroma compound, can give us either the aroma of jasmine or barnyard feces, depending on its concentration. Our ears act like amplifiers to turn up the crunchy texture of potato chips, and our eyes gobble up tasteless yellow food coloring to boost the apparent fruitiness of canary-colored banana pudding. And even our memories and moods can warp and twist flavor perception. If I share a bite of what I think is perfectly cooked and seasoned barbecue brisket with a 65-year-old Japanese winemaker, I might hear that it was too soft, undersalted, and oversmoked.

So building food from the ground up to hit a rigidly specified flavor target, it should seem obvious, is nothing short of a cosmic achievement. Especially if you hope to scale that innovation to the level of commercial food production, as companies like Hampton Creek, Ripple, and Memphis Meats have attempted in the last few years.

Like the clunky claymation effects that predated Phantom Peter Cushing, the first commercial food analogues aimed slightly lower than sensory parity. Success for the first butter substitutes and tofu-based “deli meats” was defined primarily by whether the material could be spread on toast or stacked under lettuce and tomatoes. These first steps were far enough from the uncanny valley that they were an exciting novelty for health-conscious diners or vegetarians. For the rest of us, they were a blip on the radar.

But as consumers have gotten more discerning, the ambition and investment in imitations have grown. In the past half-decade, we’ve seen millions of dollars put towards developing sophisticated, animal-free renditions of dairy, meat, poultry, eggs, and seafood, transitioning the movement out of the test kitchen and into the mainstream. Hampton Creek is making strides to expand their egg-free empire beyond mayonnaise and into our morning breakfast routine with plant-based, scramble-able eggs. Memphis Meats looks to go straight to the source, culturing animal muscles in vitro to build chicken wings and beef steaks cell by cell. The food scientists leading this charge are armed with sensitive gas chromatographs to map the volatile composition of yogurt as it ferments, texture analyzers to quantify the snappiness of a sausage casing or the gooeyness of a perfectly poached egg, and massive, searchable libraries of taste and aroma compound descriptors to aid in the architecture of new flavors.

We can now translate real food reference points into data-based flavor blueprints with better resolution than ever before. But the data is still incomplete—miniscule quantities of aroma compounds that barely register on a gas chromatograph readout can scream into our nostrils, for instance—and that can leave us with some truly unnatural eating experiences.

The Bay Area beverage company Ava Winery believes that we can use these blueprints to cobble pure ethanol and a cocktail of the right taste and aroma compounds into cheaper, ostensibly more sustainable imitations of our favorite wines. In a vacuum, Ava’s Moscato d’Asti is delicious, with more sophisticated depth and nuance than any soda you’ll find on the market. But if you’ve ever had wine before, then the Ava product tastes like it was poured through a funhouse mirror. Even a faint food memory is enough to prime our brains for nitpicking, exposing all of the details and higher-order interactions between our senses that even the best analytical equipment fails to capture.

Food analogue companies have made some staggeringly impressive leaps. But with a long, arduous road to perfection still ahead, it’s worth considering the option of avoiding Mori’s valley altogether through the creativity of chefs. Chefs are opportunistic creators: Without a set target to imitate, they are free to explore infinite variations on a flavor theme. They can nimbly veer away from potential hurdles in pursuit of freeform deliciousness. When a chef makes a miso from coffee beans or cures butternut squash in the style of parmesan, she’s not aiming for perfect re-creations of soy and dairy products; she just wants a super savory sauce base with the roasty depth of good coffee or a grateable topping to enhance a squash ravioli. By embracing the natural character of their source ingredients, chefs expand the spectrum of craveable experiences that plant foods can offer beyond mere imitation of animal products.

The food companies attempting to navigate the uncanny valley of food are striving to achieve unprecedented technological feats in the name of a more humane, sustainable future. I want them to succeed for the sake of the environment, because I’ve been lucky enough to work with some of them, and so that we can move on from simple imitation. Biochemically speaking, the abundant variety of tastes, aromas, colors, textures, and flavor-generating enzymes offered by plant foods dwarfs that which we can find in animals—so forcing plants to act like meat actually undersells their potential. The whole point of creating CGI humans in movies is so they can do amazing things normal people can’t, and I look forward to the day when we can expect that same thrill from the snacks we eat at the theater.

Ali Bouzari is a culinary scientist, author, educator, and co-founder of Pilot R&D, a culinary research and development company, and Render, a new food company that collaborates with the best restaurant chefs in the country to reinvent the way food lovers eat. As a chef with a PhD in food biochemistry, Ali has helped to lead the charge in changing the way we think about cooking by teaching and developing curriculum at top universities and collaborating with the country’s most innovative restaurants.

Blockchain Takes a Shot at Redefining the Sports Betting Experience

In 2018, hundreds of sports betting sites and apps allow bettors to gamble discretely from just about anywhere through their smartphones. This convenience has attracted more users to participate in the action.

Traditional payment services like banks and digital wallets have been wary of supporting online gambling, leaving room for specialized payments gateways to facilitate bankroll funding and payouts. There’s also no shortage of handicapper sites and services that offer paid analyses to less savvy gamblers.

Unfortunately, the involvement of these parties brings enhanced risk of fraud and failure. Gambling payment gateways are constantly under threat from cyber-criminals. Handicappers also don’t quite produce the wins that they promise to bettors. As such, there are opportunities for blockchain – a technology that promotes shared trust – to address these issues.

Several blockchain efforts have set their sights on bettors’ needs. For example, emerging digital currency Electroneum envisions its token to be used by online gambling services. BlitzPredict provides bettors trustworthy insights through its aggregation service. Platforms like HEROcoin even aim to decentralize sports betting.

Success of these efforts could all help create better betting experiences. Here are three ways how these blockchain services can accomplish that goal.

1 – Easier Funding and Payouts

Payments using blockchain can be completed quicker compared to traditional means. Tokens do not have to be routed through different financial institutions and clearing houses. Winnings can either be readily credited to the user’s bankroll or to a token wallet. Since tokens are now fungible assets, bettors also have the option to transfer tokens to exchanges and trade them for other crypto or fiat currencies.

However, crypto tokens aren’t without their quirks. For instance, it can be hard to tell how much a bet made in Bitcoin is actually worth in fiat currency. For ordinary people, it’s easier to discern the value of “$50” compared to “0.003 BTC.” Interestingly, Electroneum addresses this by limiting its token to two decimal places just like fiat currencies. This way, users could have an easier time estimating or converting mentally making use of crypto tokens for gambling more bettor friendly.

2 – Trustworthy Insights

Blockchain startup BlitzPredict aims to provide insights by aggregating sportsbooks and prediction markets much like a stock market ticker. This helps bettors determine which sportsbook provides them with the best possible outcomes for a given bet. The platform also enables bettors to use blockchain smart contracts to automatically place bets when certain conditions are met.

Alternatively, bettors can subscribe to handicapper services that could supposedly point them to better odds. However, the credibility of many of these so-called sports “experts” have been called to question. Many offer tips and promise sure wins for a fee even if they don’t have the credentials to back their “expertise” or the data to support their picks.

In order to promote quality insights, BlitzPredict also allows analytics enthusiasts to share their prediction models to other users. High-performing models are rewarded with the platform’s own token which could then be used to place bets using the platform. Such a rewards mechanism encourages bettors to make data-driven decisions rather than settle for hunches or bad advice.

3 – Transparent Betting

Sportsbooks are often set up so that the house always wins. Even the reputable ones will have to make money by taking a cut from transactions. Without aggregation and advanced analytics, bettors are not only likely to lose in the long term, but they may also have to absorb the cost of these cuts and fees for all the transactions they conduct.

Platforms such as HEROcoin challenge this system by offering decentralized peer-to-peer betting. Through smart contracts, bettors are free to define the conditions of wagers. Blockchain’s transparency lets users trace the flow of money and the terms.

Fair Wagers

Sports betting is still a growing market and the expansion of betting to other segments such as esports is bringing in new participants. In esports alone, studies predict that more than $23 billion will be wagered by 2020. New services should strive to create easier and more positive experiences for the benefit of these new bettors joining the scene.

Fortunately, blockchain startups are already bringing transparency and trust into such activities. The use of crypto tokens could help address the lengthy and costly funding and payout processes. Better analytics and aggregation could also aid discerning bettors in making effective picks. Smart contracts can provide secure mechanisms for parties to enter and execute wagers.

Sears and Kmart Didn’t Run TV Ads During the Peak Holiday Shopping Season

The free-falling Sears Holdings, parent company of Sears and Kmart, made a truly unorthodox decision this holiday season. The retailer, which generates the vast majority of its dwindling sales from in-store foot traffic, didn’t run any television advertisements for most of the crucial holiday shopping season.

According to the Wall Street Journal, no paid Sears commercials have run nationally since November 25th. No national Kmart commercials have run since November 24th.

The decision, according to the Journal, came from Sears Holdings chief Edward Lampert, over the objections of other executives. Lampert has championed a shift to digital marketing, even as Sears’ overall advertising spending has declined along with the company. In a statement to the Journal, Sears said the shift came after evaluating the effectiveness of its various marketing efforts.

Even in the digital age, abandoning TV entirely would be a highly unusual move for any large consumer business. While TV advertising expenditures have declined across the economy, they still makes up more than 1/3rd of all ad spending. Studies have also found that ads on television are still substantially more effective than those in other media.

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The decision is particularly strange in the case of Sears, whose customers tend to be older. Americans over 44 watch vastly more traditional television than younger people, with those over 65 watching nearly three times as much television as those 18-24, according to eMarketer.

Sears, a venerable U.S. institution that was once as innovative as Amazon, has been in disastrous decline for years now. For a time, that decline could be seen as a product of the shift from brick-and-mortar to online shopping.

But Sears has lagged even other legacy department stores in reacting to that transition. While department stores as a category now generate 15% to 25% of their sales online, eMarketer says that ecommerce generates just 9.3% of Sears’ revenue. Focusing on digital ads might be seen as an effort to move that needle. But it could also be seen as throwing marketing budget at a service that customers just don’t like, while ignoring what still (maybe, just barely) works.

Meanwhile, retailers from Home Depot to Target to Urban Outfitters have recently beaten analyst expectations, and rising foot traffic at outlets including WalMart is driving talk of a retail resurgence.

Sears, it seems, no longer has anyone but itself, and its leaderships’ decisions, to blame for its problems.

How to Watch the 2018 New Year’s Countdown and Ball Drop for Free

It’s New Year’s Eve 2017, and people are saying, “Out with the old and in with the new.” If you’re one of the millions who cut the cord on their cable television this past year, you might find yourself unable to watch the 2018 countdown. But you don’t need cable to watch the ball drop in New York City or to see Mariah Carey make her ‘New Year’s Rockin’ Eve’ comeback on ABC. That’s because 2017 was finally the year streaming television arrived. Here’s how to live stream the New Year’s Eve countdown and ball drop for free — for auld lang syne.

DirecTV Now

You can watch Ryan Seacrest host ‘New Year’s Rockin’ Eve’ — and a whole lot more — using DirecTV Now‘s free seven-day free trial. The service costs $35 per month for a package of at least 60 live channels after the trial ends, but that stretch can get you in on should help you through the holiday and more. DirecTV Now’s basic-level plan packs local affiliates for CBS, FOX, and NBC. But before you sign up, check your local channel availability here, because not every market includes every station.

Hulu with Live TV

FOX’s New Year’s Eve coverage is hosted by Steve Harvey this year, and you can catch it on Hulu with Live TV which also offers CBS and NBC. The service also packs a big on-demand library, which could be good if you get bored of all that confetti and kissing and you just want to binge, instead. Like DirecTV Now, Hulu with Live TV is free for a week, but it runs $39 per month after the trial is up. One nice thing about Hulu’s offering is that it has an option to add on a cloud DVR service, which might be a smart long-run investment if you want to keep the service for 2018 and beyond.

Sling TV

Depending upon which television channel you want to ring in the new year with, Sling TV might be the choice for you. The service also offers a seven-day free preview as well as Univision and FOX, but you can only get those channels in select markets and on its higher-tiered “Blue” plan, which costs $25 per month after the trial. If you want to watch CNN’s Anderson Cooper count it down, Sling’s lower tiered “Orange” plan costs just $20 per month, and offers the cable news giant, but it doesn’t have the local networks. But while Sling TV Blue does have the NFL Network, so it might be a worthwhile investment, if you’re going to watch all the games on Sunday before the festivities begin.

PlayStation Vue

If you’ve got a PlayStation 4 under your TV, PlayStation Vue might be a good choice for you. The live streaming television service offers a five-day free trial and starts at $39 per month after the promotional period ends. The base plan caters to popular live programming (other packages focus on sports and movies), so that’s probably a safe bet for streaming New Year’s programming. But like the others, channels vary by zip code, so check their availability before you sign up.

YouTube TV

Google’s YouTube TV isn’t just a portal to its popular video-hosting website. It is also a live streaming television service that offers a seven-day free trial with 40 channels and cloud DVR capability for $35 per month (once the promotion ends). YouTube TV includes all the major networks, including CBS, FOX, and NBC — where host Carson Daly does his yearly thing — but the catch the service only available in select markets (though, there are quite a few).

The Most-Read WIRED Science Stories of 2017

Back at the start of the summer, WIRED science writer Megan Molteni dropped a bomb: “The Tick That Gives People Meat Allergies Is Spreading.” The story went viral, (probably because we published the the words “meat allergies” during peak grilling season), but the piece was more than a clicky headline: Molteni dove deep into the molecular science behind what causes the adverse reaction.

That story is just one example of how the WIRED science team takes a simple concept—running a marathon, making memories, getting old—and explores the complicated science behind it in an approachable, engaging way.

And that’s why these 17 most-read WIRED science stories of 2017 will be great reads for years to come.

Meet the Young Billionaire Who’s Exposing the Truth About Bad Science

After making millions for Enron, launching his own hedge fund, and becoming a billionaire, John Arnold retired at 38. His next act? Fix terrible science.

—Sam Apple (January 22, 2017)

Humans Made the Banana Perfect–But Soon, It’ll Be Gone

The history of coffee gives us surprising insight into the future of the world’s most popular banana.

—Rob Dunn (March 14, 2017)

How a Single Gene Could Become a Volume Knob for Pain

Her skin is perpetually on fire. He can’t even feel a bone break. Together they might hold the key to ending America’s opioid epidemic.

—Erika Hayasaki (April 18, 2017)


A Rare Journey Into the Cheyenne Mountain Complex, a Super-Bunker That Can Survive Anything

Shielded by 2,500 feet of granite, people here gather and analyze data from a global surveillance system, in an attempt to (among other, undisclosed things) warn the government’s highest officials of launches and missile threats to North America.

—Sarah Scoles (May 3, 2017)

The Lone Star Tick That Gives People Meat Allergies May Be Spreading

Red meat, you might be surprised to know, isn’t totally sugar-free. It contains a few protein-linked saccharides, including one called galactose-alpha-1,3-galactose, or alpha-gal, for short. More and more people are learning this the hard way.

—Megan Molteni (June 17,2017)

Why Phoenix’s Flights Can’t Take Off in Extreme Heat

Airplanes can’t fly because it’s too hot? That’s crazy, right? No, not if you understand the science behind it.

—Rhett Allain (June 20, 2017)

The Epic Untold Story of Nike’s Two Hour Marathon Attempt

Nike’s quest to break the two-hour marathon did not go as planned. But when you’re pushing the limits of human performance, nothing ever does.

—Ed Caesar (June 29, 2017)

Metformin pills.

Will Warasila for WIRED

Forget the Blood of Teens. Metformin Promises to Extend Life for a Nickel a Pill

Metformin is a slightly modified version of a compound that was discovered in a plant, Galega officinalis. The plant, also known as French lilac and goat’s rue, is hardly the stuff of cutting-edge science. Physicians have been prescribing it as an herbal remedy for centuries.

—Sam Apple (July 1, 2017)

A Math Genius Blooms Late and Conquers His Field

June Huh thought he had no talent for math until a chance meeting with a legendary mind. A decade later, his unorthodox approach to mathematical thinking has led to major breakthroughs.

—Kevin Hartnett (July 3, 2017)

Your Brain Doesn’t Contain Memories. It Is Memories

Your brain’s ability to collect, connect, and create mosaics from milliseconds-long impressions is the basis of every memory. By extension, it is the basis of you. This isn’t just metaphysical poetics. Every sensory experience triggers changes in the molecules of your neurons, reshaping the way they connect to one another.

—Nick Stockton (July 19, 2017)

James Damore’s Google Memo Gets Science All Wrong

The memo is a species of discourse peculiar to politically polarized times: cherry-picking scientific evidence to support a preexisting point of view. It’s an exercise not in rational argument but in rhetorical point scoring. And a careful walk through the science proves it.

—Megan Molteni and Adam Rogers (August 15, 2017)

Why Men Don’t Believe the Data on Gender Bias in Science

One study evaluated postdoctoral fellowship applications in the biomedical sciences and found that the women had to be 2.5 times more productive than the men in order to be rated equally scientifically competent by the senior scientists evaluating their applications.

—Alison Coil (August 25, 2017)

Hurricane Irma: A Practically Impossible Storm

All hurricanes have a theoretical maximum intensity, a thermodynamic limit on how fast their winds can blow. Few hurricanes ever actually reach that limit. But as Irma grew and developed, it came very, very close.

—Adam Rogers (September 7, 2017)

The Impossible Burger: Inside the Strange Science of the Fake Meat That ‘Bleeds’

Impossible Foods thinks the essence of a meat lies in a compound called heme, which gives ground beef its color and vaguely metallic taste—thanks to iron in the heme molecule. In blood, heme lives in a protein called hemoglobin; in muscle, it’s in myoglobin.

—Matt Simon (September 20, 2017)

Cait Oppermann

Are We Ready for Intimacy With Androids?

Hiroshi Ishi­guro builds androids. Beautiful, realistic, uncannily convincing human replicas. Academically, he is using them to understand the mechanics of person-to-person interaction. But his true quest is to untangle the ineffable nature of connection itself.

—Alex Mar (October 17, 2017)

Grad Students Are Freaking Out About the GOP Tax Plan. They Should Be

Removing the promise of a living wage would dramatically affect people’s ability to pursue a graduate degree.

—Robbie Gonzalez (November 8, 2017)

Watch the Boston Dynamics Atlas Robot Do a Backflip. Yes, a Backflip

To be clear: Humanoids aren’t supposed to be able to do this. It’s extremely difficult to make a bipedal robot that can move effectively, much less kick off a tumbling routine.

—Matt Simon (November 16, 2017)

Serial SWAT Hoaxer Arrested in Deadly Call of Duty-Linked Police Shooting

Twenty-eight-year-old Andrew Finch was shot and killed by police in Wichita late Thursday, after a fraudulent emergency call drew police to his family’s residence with their weapons drawn. The hoax call — an instance of what’s known as “swatting” — was placed after an argument in the online game Call of Duty.

Wichita police received a 911 call on Thursday purporting to be from an armed man holding his own family hostage. When they arrived at the address, there was no hostage situation, but Finch was shot and killed after opening the door to the house and, according to police, reaching for his waistband several times. According to Finch’s family, he didn’t play video games. He was unarmed.

The swatting call was reportedly made after an online match in the wargame Call of Duty, with a bet of $1.50 on the line.

The alleged perpetrator, who responded to news about the swatting live on twitter, has been arrested in Los Angeles. Tyler Raj Barriss, 25, known online as “SWAuTistic,” has been previously arrested for making hoax calls to police, including two bomb threats in 2015. More recently, he may have been responsible for a bomb threat that disrupted the FCC’s vote to repeal net neutrality rules.

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Security researcher Brian Krebs, himself a former swatting victim, tracked down what appear to be tweets by the perpetrator of the attack. After the fatality was reported, the swatter tweeted: “I DIDNT GET ANYONE KILLED BECAUSE I DIDNT DISCHARGE A WEAPON AND BEING A SWAT MEMBER ISNT MY PROFESSION.”

Krebs also managed to briefly interview the apparent perpetrator via Twitter before Barriss’ arrest. He told Krebs that he had been paid for previous swattings. While he said he felt remorse for the death, he was “too scared” to turn himself in to police.

According to an interview with a man claiming to be the perpetrator on the YouTube channel DramaAlert before the arrest, Barriss was not involved in the inciting online match. Instead, one of the involved players contacted him and asked him to make the fake call.

The phenomenon of swatting has been on the rise in recent years, particularly among online gamers and hackers. According to Krebs, many perpetrators are minors and receive token punishments for their false reports. In some jurisdictions, filing a false police report is a misdemeanor, making it less likely that a swatter could be charged with murder for a resulting death.

Police had not disclosed the charges against Barriss as of this morning.

How Learning a New Skill Helps Your Mind Grow Stronger

As 2018 rapidly approaches, everyone is thinking about New Years’ resolutions. Some people like to make the point that resolutions can be made all-year long, and that’s totally valid. But even though we shouldn’t need a new year to work on ourselves, and even though resolutions can seem cliché, this time of year really is a great opportunity to start fresh and look forward to what we want to accomplish in the coming year.

I like to make a few resolutions each year, but there’s one that I keep every single year: Keep learning. More specifically – challenge yourself to learn a new skill every year – one that’s significant (i.e. something else other than being able to balance your fidget spinner on your nose). More importantly, I’m not just talking about my own industry. Of course, everyone should strive to keep on top of their respective industries’ trends and learn the new skills that become necessary as technology progresses. But this resolution is literally just about learning. Learning anything new.

On a physiological level, learning new things is good for your brain. According to CCSU Business & Development, practicing a new skill increases the density of your myelin, or the white matter in your brain that helps improve performance on a number of tasks. Additionally, learning new skills stimulates neurons in the brain, which forms more neural pathways and allows electrical impulses to travel faster across them. The combination of these two things helps you learn better. It can even help you stave off dementia.

Learning a new skill is pretty much how I decided what I wanted to do with my life. Growing up in Canada, ice hockey was my passion. Flying down the ice made me feel, well, like I could fly, and more than anything, it was fun.

But when I fractured my knee, I couldn’t play ice hockey anymore. If you didn’t know, the sport is pretty rough, so continuing with that was out. And with the injury, any sort of athletic activity was totally off the table. I wound up spending a lot of time in my room, on my computer, which is when I learned how to design. This led me to starting my first business in web design, and the rest is history.

Recently, I learned how to scuba dive. I had always been fascinated by new environments. The idea of being able to breathe underwater was exhilarating to me.  The course was not long, only a couple days. It covered the standard stuff – safety measures, basic skills on how to handle your equipment, and what to do in an emergency. The instructors were more focused on getting us in the water as soon as possible. There was no way to read about the mindset you needed to be in while underwater. The biggest lesson I learned was around not panicking when panic felt so natural. They intentionally make you take off your gear and mask underwater. They show you what to do when you run out of air. It’s all designed to make you feel comfortable, and to not panic and struggle – which will only use more air and make your time under the surface more and more limited. What did I take away from this? That in any line of work, there is no reason to panic. That it will only make everyone around you panic. That there is almost always a way out, even if the solution is atypical.

Acquire a New Mindset

Not only did these lessons serve as a strong reminder to an important mindset to have in business and in life, they also helped me recharge my mind. Even though we always think of recharging as synonymous with relaxation, sometimes to best way to recharge is to throw yourself into something that takes your mind off of the day to day. I didn’t go into scuba diving thinking it would make me a better problem solver, or help me overcome inhibitions in my work or anything like that. But naturally, learning something entirely new, without the pressure of it being directly correlated to my career, refreshed my mind and helped me think of things differently.

So when you’re looking forward to the new year, think about something totally amazing that you want to learn more about. Maybe you want to learn how to cook or master a new language. Whatever it is, and regardless of its direct application to your career, learning something new can only help you. New year, new skills.