AT&T's Merger Creates A Buying Opportunity

Ma Bell is what many people think of when they hear AT&T (NYSE: T). The old AT&T of years ago was a boring utility until it was broken up. Years later, AT&T is attempting to diversify itself into a growth and income story. With the announcement that AT&T will be allowed to acquire Time Warner (NYSE: TWX), the company’s growth profile should change for the better. As I’m writing this, AT&T’s stock sits nearly 18% below its 52-week high. Combine a discounted share price with a roughly 6% yield, and this “boring” company could be an exciting addition to any portfolio.

Favorable Figures

At first glance, the new AT&T doesn’t seem that impressive. If we combine AT&T and Time Warner’s most recent results, you get the following:

  • Total revenue $46 bil. – down 2.3%
  • Core Payout Ratio 61%
  • Operating margin 17.2%

These numbers don’t look to exciting. However, if we dig a little below the surface, the company’s potential becomes clearer. The combined company would have net income growth of just over 16% year-over-year. In addition, the combined company would have reported $5.9 billion in core free cash flow (net income + depreciation – capex.), which represents growth of just over 9%.

If the company’s income and cash flow are growing, what about AT&T’s balance sheet? Though the Time Warner deal is a large transaction, Verizon’s (NYSE: VZ) acquisition of the remainder of Vodafone’s stake in Verizon Wireless gives us a look at what AT&T might expect.

AT&T buys Time Warner

Verizon acquires Vodafone’s stake

Total Value = $85 bil.

Total Value = $130 bil.

Cash value = $42.5 bil.

Cash value = $58.9 bil.

Stock value = $38.2 bil.

Stock value = $60.2 bil.

(Source: AT&T details and Verizon’s details)

Verizon’s acquisition occurred roughly five years ago, and the company took on more debt than AT&T is for the Time Warner deal. If we look at a few key numbers comparing 2014 to 2017 at Verizon, there is a clear improvement in the company’s cash flow, debt profile, and interest expense.




Core Free Cash Flow

$11.3 bil.

$30.3 bil.

Op. Margin



Interest as percentage of operating income



Long-Term Debt net of Cash



(Source Verizon Annual Reports: 2014 and 2017)

Now obviously Verizon’s acquisition of the remainder of an existing business isn’t the same as integrating AT&T and Time Warner. In addition, Verizon has made several other acquisitions and changes during this time frame. However, Time Warner’s business has a higher operating margin than legacy AT&T. In addition, Time Warner is expected to be free cash flow accretive.

After the acquisition, AT&T’s long-term debt profile totals roughly $180 billion versus roughly $134 billion previously. Though this sounds like a big difference, the combined company’s interest cost versus operating income shows a positive outcome for the new AT&T.


Legacy AT&T

New AT&T

Quarterly interest cost

$1.8 bil.

$2.3 bil.

Operating income

$6.3 bil.

$8.1 bil.

Interest as percent of operating income



(all numbers per quarter)

It seems clear the new debt that AT&T is taking on won’t be a significant drain on the new company’s resources.

Red or Blue who are you going to choose?

For a long time, investors have lumped Verizon and AT&T into the same group. These two companies are solid dividend choices, but they don’t exactly set the world on fire with growth. The Time Warner merger has a chance to turn some heads toward AT&T.

If investors are concerned that AT&T’s value already reflects the potential of this merger, nothing could be further from the truth. In 2016, after the merger was announced, AT&T stock was at about $38.60. Today, those shares are nearly 16% lower. In the same time, AT&T’s dividend has increased from $1.92 to $2.00 annually.

It also seems the combined company isn’t getting much respect in the growth department. Most analysts expect AT&T to grow earnings next year by a measly 1.5%. Time Warner is expected to grow earnings by less than 1%. If we compare AT&T’s prospects to Verizon (NYSE: VZ) it seems analysts think these two companies move in lockstep. Verizon is expected to grow earnings next year by just over 2%.

It is worth noting AT&T has beaten earnings estimates by an average of 6% the last four quarters. Over the last year, Time Warner has done even better than its suitor, beating estimates by an average of 17%. Given the cost savings potential, vertical integration, and potential of the Warner Bros movie lineup, AT&T will likely keep beating estimates into the future.

Let’s all go to the movies!

The old tagline “let’s all go to the movies” is the perfect comment for why AT&T wanted to acquire Time Warner. Among the movie studios, only Disney seems to have a better lineup of movies coming out in the next few years.

Warner Bros. has at least three major releases left this year. Whether the company makes money from the recently released Oceans 8, Fantastic Beasts: The Crimes of Grindelwald, or Aquaman, Warner Bros. should positively contribute for the remainder of 2018. In 2019, the studio has and enviable list of titles including: The Lego Movie 2: The Second Part, Minecraft: The Movie, Wonder Woman 2, and more.

In 2018 and 2019, Warner Bros. should add to the new AT&T’s growth profile. Between sequels we never thought we would see (Gremlins 3 anyone?), and new franchises being launched like a Joker Origin movie or Deathstroke, AT&T has the right to expect big things from it’s studio.

The bottom line

In the end, AT&T shareholders should be excited for the future. Time Warner has the potential to upgrade AT&T’s growth profile and diversify its revenue streams.

The cost synergies and new content bundles available to the combined company could be impressive. AT&T has already announced a “skinny bundle” of television programming free to its mobile customers that will be Turner content. DirecTV could have special access to movie trailers from Warner Bros. AT&T could bundle mobile, DirecTV, and HBO without having to negotiate with an outside party. Uncertainty around the stock today represents a buying opportunity. Faster growth, improved cash flow, better margins, and a 6% yield are rarely available, smart investors should take advantage.

Disclosure: I am/we are long VZ.

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.

The AT&T Time Warner Merger Provides The Single Greatest Lesson For 21st Century Business: Yes, That's Your Business

In his book, Rules of Thumb, Alan Weber provided a series of 52 rules he’d learned from life. #24 was, “If you want to change the game, change the economics of how the game is played.”

This past Tuesday Judge Richard J. Leon of the United States District Court in Washington sent a clear signal that the economics of how the game is played have changed, when he gave the go ahead for the AT&T Time Warner merger.

The short story is this. The DOJ was opposed to the AT&T Time Warner merger because it believed that it would not have been to the benefit of consumers. This is based on the simple premise that the more choices there are in a market the greater the likelihood of innovation, fair pricing, and diverse options for the consumer.

According to an article in the New York Times, Judge Leon’s opinion was that the “Justice Department had not proved that the telecom company’s acquisition of Time Warner would lead to fewer choices for consumers and higher prices for television and internet services.”

Seems simple enough, right? But there’s much more to this worth paying attention to. Because the rules that have changed aren’t the obvious ones of how AT&T and Time Warner play but a whole ‘nother set of players who are defining their own rules.

You Can’t Handle The Truth

Mark Zuckerberg’s testimony on the hill several weeks ago gave us all cause for concern  when it comes to our legislators’ knowledge of technology. I had so wished that at any of the dozen or so times he was asked, “So, exactly how does Facebook make money?” Zuck would have just said, with a straight face, “You Can’t handle the Truth!”

“But in fairness to Mr. Goldberg, at least his contraptions would normally move a pea from one side of a room to another.”

In stark contrast Judge Leon’s depth of knowledge, insight, vision, and ability to clearly articulate the massive changes at play due to technology, had me shouting hallelujah in the hallway!   

This was a massive case. The trial transcript is more than 4,300 pages long, and Judge Leon’s opinion is a whopping 172 pages. I’m convinced that it will be one of the most read cases in business school classrooms for years to come. Not because of its legal prowess, but rather its portrayal of a post-industrial era attitude towards competition.

Although it contains some of the most enlightening and entertaining commentary that you’re likely to find in any court’s opinion, including such gems as the term “Poppycock,” it also makes it clear that this case was not just a matter of legal technicalities but rather foundational differences between old and the new ways of doing business.

That was evident in my favorite of Judge Leon’s comments. He compared the antiquated and ridiculously complex financial models presented by the DOJ to a Rube Goldberg device. After which, he went on to say, “But in fairness to Mr. Goldberg, at least his contraptions would normally move a pea from one side of a room to another.”

It’s all very entertaining, however something dramatic is also at play that cuts to the very foundation of the free market. And it’s something that will undoubtedly challenge the most basic assumptions that we’ve used to define what constitutes healthy competition, how businesses operate, and what is ultimately in the best interest of the consumer. 

Going Vertical

First, it’s worth taking a moment to describe the difference between a vertical and a horizontal merger.

A horizontal merger is between competing companies that most often represent alternative options for a consumer and are therefore driven, independently, to provide the best value. Horizontal mergers are frowned upon in a free market when they significantly reduce the positive effect of competition. We all get this cornerstone of free markets. 

Vertical merges are between companies that are at different points within the same supply chain. For example, one company manufacturers products and then merges with a separate company that distributes them.

In both types of mergers, the objectives of the companies merging are to achieve higher levels of efficiency, lower costs, and greater profit. Nothing at all wrong with that. The problems set in when the merger takes the option of choice away from the consumer and/or puts the merged company in a position where they can exert monopolistic power over pricing.

The history of regulation governing mergers is fascinating. It was spurred by the industrial trusts of the late 19th Century and the later monopolies created through mergers in the early 20th Century. There were political. labor, and economic concerns over so much concentrated power. But this was mostly true for horizontal mergers. 

Vertical integration however, was eventually shunned by corporations themselves under the premise that if everyone in a supply chain could focus on their core competency overall innovation and quality would rise, and inefficiencies would be driven out.

“You here a lot about digital disruption, right? Well, this is exactly what it looks like!”

That began to makes sense when the basics of an information sharing infrastructure were put into place through telecommunications and transportation infrastructure of hte early 20th Century. And it worked exceptionally well for the first hundred years.

Interestingly, it was technology that drove and enabled the shift to vertical disintegration. In fact, a very early conversation I had with management guru Peter Drucker, I asked him what he thought was the greatest single shift in business during the 20th Century. His answer was the shift from control through ownership to control through strategy and the shift from delivering products to delivering services.  This, according to Drucker, was the result of technological advances in how we work across businesses to build common strategies. 

So, how does all this play into the AT&T Time Warner Merger? Clearly, when it comes to content Time Warner has a treasure trove of properties, including HBO, Turner, TNT, CNN, Cartoon Network, and Warner Bros. AT&T has none of that. But AT&T does have control over the fastest growing platform for content consumption, mobile networks. Combined they seem to be purely complimentary.

There’s also fair precedent for many other vertical mergers of this sort, including Comcast and NBC Universal, Oracle and Sun, Google and Double-click, and Disney and Pixar.

Why then would the DOJ oppose this particular merger? Because, they are operating under an old industrial era economic model in which companies could achieve adequate vertical integration to meet the demands of the market and to compete on a global stage.

No longer. 

You here a lot about digital disruption, right? Well, this is exactly what it looks like! Owning the network or owning the content alone isn’t enough. And the reason is fascinating.  

Today’s marketplace is wildly different and it’s creating some of the most perverse relationships between companies–what Ken Auletta calls Frenemies, in the book by the same name.

Consider that Amazon which competes with digital media companies through its in-house produced original TV content, such as The Tick, also stores the content for its competitors’ TV series on its cloud storage. That would be like buying critical product from a competitor who you are also suing because they are stealing intellectual property from you. Oh, wait, that’s what Apple and Samsung have been doing for years.

In fact, according to a New York Post article, despite handing over a half billon dollars to Apple for patent infringement, Samsung makes more off of the components it provides to Apple for iPhone X than it does from its own Galaxy S8! 

The point here is that in today’s global markets supply chains are so intertwined and inter-reliant that in many cases the formality of a merger is just that. Sort of like the difference between cohabitating with a domestic partner and being married. Set aside religion for a moment, it’s a legal construct for economic benefit and convenience.

Whoever Owns The Behavior Wins

The one aspect of the AT&T Time Warner merger that should act as wake up call (or more like a fire alarm) to virtually every industrial era company is something that I talk about a great deal in my latest book, Revealing The Invisible. Judge Leon specifically pointed out that traditional media companies are at a distinct disadvantage when it comes to the erosion of their revenue streams from advertising.

In what has to be one of the court’s most cutting observations, Leon observed that while yesterday’s advertising players were media giants, today’s are vendors of hardware, technology, email, and social networking. He went on to point out that it’s these same companies who can, through behavioral marketing, so finely target their audience that they can deliver both advertising and content that is infinitely better suited to the consumer’s preferences than any traditional media company. 

In many ways what he was saying is that the industrial era model of business, mass marketing, billboard advertising, and ultimately faceless consumerism is on life support. Whoever owns the behavioral data owns the market. It’s that simple.

But the way, I see shades of this in many other areas as well. Musk is pushing Tesla towards ever greater vertical integration. In some cases that’s overt, such as owning their car dealerships and shunning any sort of traditional marketing. In other cases its subtle, such as collocating their battery supplier manufacturing and R&D under the same roof as the rest of their manufacturing at the Tesla Giga factory. In every case Tesla is using behavioral data across a tightly vertically integrated supply chain to create what will be an incredibly personalized experience.

So, what’s all this pointing towards? Simply that the rate at which companies need to innovate today and coordinate across their supply chains is impossible without ownership and access to deep behavioral data about the customer. 

Of course, none of this is a prediction of success for the merger between AT&T and Time Warner. Whether two businesses that are both facing huge challenges can achieve the economies of scale needed to overcome those same challenges when combined is something I do not hold out much hope for over the long term. AT&T has the data from its mobile users if it can figure out what to do, and if it will be tied through regulation in what not to do with it,  are entirely separate and unanswered questions. 

To me the most valuable lesson in all of this is that we are at an inflection point between the industrial era models that served us so well to scale and meet the needs of a burgeoning market of consumers to the hyper-personalized behavioral models needed to meet the demands of an insatiable appetite for personalized innovation.

You can play by the old rules or try to figure out the new ones; all that’s sure is that the rules of the game have indeed changed.

How to get the most cloud security

One of the leading causes of data breaches is internal negligence due to poor training, according to the Ponemon Institute.

But when the staff is educated and instructed on the proper practices, the risk of cyberattacks or data leaks can be reduced. Infact, you can reduce your risk more this way than with just the use of modern cloud security software and best security practices.

Unfortunately, most companies just try to toss technology at security problems. Even when they do an amazing job locking up their cloud-based systems, they still run a high risk because staffers are now the biggest security hole, and the only way to plug that hole is through training.

Training incudes issues as rudimentary as not giving out user IDs and passwords when somebody calls or emails. Or having with policies around the storage of company data on laptops that can be easily stolen, and security policies that should be followed by all. 

If you send out simulated phishing emails, you’ll find that about 3 to 5 percent of your employees will send back sensitive security credentials, thinking that it’s a legitmate source. Evenmore will respond and provide their current credentiasl if they are sent to a fake site to “change their passwords.”

Security training is not sexy. But it’s one of those things that needs to be done; otherwise the best cloud security won’t work.

This training should be funded by IT, and not by human resources departments. If IT does not have skin in the game, not much is accomplished, and the likelihood is that the training loses steam over time. This training should be routine, consistent, and ongoing.

iPhone Exclusive: Apple's Radical Design 'Confirmed'

In May my exclusive story confirmed Apple’s new iPhone line-up and one cancellation. Now, I can reveal the designs of the most exciting models and the radical move Apple will make… 

Working in collaboration with popular accessories maker Ghostek, a partnership which previously saw me leak Samsung’s final Galaxy S9 design in December, I have obtained schematics for both the so-called ‘budget iPhone X’ and the super-sized iPhone X Plus. And while I expect the former to be the bestseller, it is the latter which will shake-up the smartphone world.

Let’s break them down.

Ghostek, Gordon Kelly

iPhone X Plus schematics show a triple rear camera

iPhone X Plus – A Triple Threat

The headline news is the schematics show iPhone X Plus will introduce triple rear camera. Huawei beat Apple to market with this technology in the excellent P20 Pro, the iPhone X Plus will be the handset to bring it to the masses.

Apple’s triple lens setup is currently unknown, but it would make sense to copy Huawei’s approach of a monochrome camera aiding the primary and telephoto modules. This produced class-leading low light photography. Low light is also an area where Apple has struggled against rivals (one in particular) over recent years.

Interestingly, I understand the second generation iPhone X will stick to two cameras so – once again – Apple will save its flagship photography for the largest (and most expensive) model.

In addition to this, the schematics show Apple has managed to cram a massive 6.5-inch display into the iPhone X Plus yet kept its footprint smaller than the 5.5-inch iPhone 8 Plus: 157.2 x 77.1 mm (6.18 x 3.03-inches) compared to 158.4 x 78.1 mm (6.24 x 3.07-inches). That said, its steel chassis means it should weigh more than the 202g aluminium iPhone 8 Plus.

‘Budget’ iPhone X – Goodbye Mini iPhone X

In my May exclusive, I revealed there would be no ‘mini-iPhone X’ and again these schematics show Apple is thinking big.

Ghostek, Gordon Kelly

‘Budget’ iPhone X schematics confirm size and a single rear camera

The budget iPhone X (which I believe will simply be called ‘iPhone’), will measure 147.12 x 71.52 mm (5.79 x 2.81-inches) which is longer and wider than the current 5.8-inch iPhone: 143.6 x 70.9 mm (5.65 x 2.79-inch).

Yes, as widely rumoured, this will be a 6.1-inch phone.

Its budget roots can be seen in the single rear camera (it will also lose 3D Touch), while you’ll note the notch looks more pronounced.

To this end, I have been told the budget iPhone X will have first generation Face ID technology while the new iPhone X and iPhone X Plus have gen two. But take that with a pinch of salt as it comes from an unproven source.

Of course, the real appeal of the budget iPhone X will be the cost with Apple expected to slash prices across the range by as much as $300 compared to last year.

Needless to say, this far out it is possible for designs to change but with mass production taking several months to ramp up there would be no time for anything other than the most minor of tweaks.

So, ladies and gentlemen, you are indeed looking at two of Apple’s most exciting iPhones in years…


Follow Gordon on Twitter, Facebook and Google+

More On Forbes

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Foxconn says investigating labor conditions at China factory used for Amazon

NEW YORK (Reuters) – Contract manufacturer Foxconn said on Sunday it is investigating a plant in China that makes devices for Inc (AMZN.O), after a U.S. watchdog group criticized what it described as harsh working conditions at the factory.

FILE PHOTO: Visitors are seen at a Foxconn booth at the World Intelligence Congress in Tianjin, China May 19, 2018. REUTERS/Stringer

A 94-page report by New York-based China Labor Watch that followed a nine-month investigation cited excessive hours, low wages, inadequate training and an overreliance on “dispatch” or temporary workers in violation of Chinese law at the Hengyang Foxconn plant in Hunan province, which makes Echo Dot smart speakers and Kindle e-readers.

“We are carrying out a full investigation of the areas raised by that report, and if found to be true, immediate actions will be taken to bring the operations into compliance with our Code of Conduct,” Foxconn Technology Group said in a statement emailed to Reuters.

Taiwan-based Foxconn, known formally as Hon Hai Precision Industry Co Ltd (2317.TW), is the world’s largest contract electronics manufacturer and employs more than a million people.

FILE PHOTO: An Inc driver stands next to an Amazon delivery truck in Los Angeles, California, U.S., May 21, 2016. REUTERS/Lucy Nicholson/File photo

Foxconn, which also makes Apple Inc (AAPL.O) iPhones, came under fire in 2010 for a spate of suicides at plants in China. Foxconn pledged to improve working conditions.

China Labor Watch said its investigation found that about 40 percent of workers at the plant were dispatch workers, far exceeding the 10 percent limit under Chinese law. Dispatch workers were paid at the same rate for regular and overtime hours, rather than time and a half as required, said China Labor Watch Program Officer Elaine Lu.

“They were underpaid,” Lu said. “That’s illegal.”

Dispatch workers earned 14.5 yuan ($2.26) per hour, the report said. Workers also put in more than 100 overtime hours per month during peak season, far more than the 36 hours allowed by law, and some worked for 14 consecutive days.

Amazon said it audited the factory in March and found overtime and use of dispatch workers were “issues of concern.”

“We immediately requested a corrective action plan from Foxconn,” Amazon said in a statement. It said it is monitoring Foxconn’s response and “compliance with our Supplier Code of Conduct. We are committed to ensuring that these issues are resolved.”

Foxconn said in an earlier statement that it “works hard to comply with all relevant laws and regulations” where it operates and conducts regular audits. “If infractions are identified, we work to immediately rectify them,” it said.

Reporting by Alwyn Scott in New York and Reuters Beijing bureau; Editing by Chris Reese and Sandra Maler

Apple Loop: Latest Leak 'Confirms' New iPhone, iOS 12 Drops Sexy For Security, WWDC Fails MacBooks

Taking a look back at another week of news from Cupertino, this week’s Apple Loop includes the latest renders of the new iPhone X for 2018, the hardware that wasn’t announced at WWDC, why iOS 12 stands for stability, the renewed focus on iPhone security, the disappointment of no new MacBooks at WWDC, and all the spoof products announced on the internet.

Apple Loop is here to remind you of a few of the very many discussions that have happened around Apple over the last seven days (and you can read my weekly digest of Android news here on Forbes).

First Renders Of The New iPhone X

As part of Apple’s push to expand the iPhone line-up (and increase sales of the iPhone family after years of declining share), the geekerati are expecting a budget version of the iPhone X (not to be confused with an update of the iPhone SE). What will it look like? Forbes’ Gordon Kelly reveals new renders of the budget iPhone X:

What Hemmerstoffer’s images and video (embedded below) show, is a 6.1-inch design which blends the chassis of the iPhone 8 and a single rear camera with the fascia of the iPhone X, complete with Face ID facial recognition module and the distinctive notch. On the flipside, this means no Touch ID fingerprint sensor.

…Hemmerstoffer notes this currently unnamed budget iPhone X (my naming bet is simply ‘iPhone’), will also pack wireless charging, stereo speakers and a new A12 chipset. So this is basically a single-camera iPhone X for over $200 less.

More here on Forbes.

OnLeaks/ MySmartPrice

Budget’ 6.1-inch iPhone and 6.5-inch iPhone X Plus (OnLeaks/ MySmartPrice)

What Wasn’t Announced At WWDC

Lots of news to come out of this week’s Worldwide Developer Conference from Apple, but before we get to what did appear, it’s important to realise what was not on show. Apple refused the opportunity to show off any new hardware. No iPads, no Macs, no MacBooks, no peripherals, and perhaps most importantly, no mid-range iPhones to replace the iPhone SE. And WWDC was the best time to announce this upcoming smartphone, as I discussed earlier this week:

Assuming Taniyama-Shimura, there are enough signs in the supply chain that an update to the iPhone SE is coming. So the question becomes not of ‘will it arrive’ but ‘when will it arrive.’

…its non-appearance at WWDC tells us a lot about the handset.  iPhone sales this year need a boost. The iPhone X has not delivered the super-cycle it promised and sales are flat to slightly down year-on-year. Market share is approaching single figures, and relying on high-end handsets with high margins may be delivering financial success… but it doesn’t provide for growth or entry into new markets. The iPhone SE 2 can help balance the equation of revenue and market share by offering a low-priced gateway into Apple’s world of smartphones.

More on why Apple hid the SE 2 here.

Twelve Stands For Stability

Almost all of the focus at WWDC was on software, and the vast majority of that focus was on iOS. There have not been any major changes or additions, Apple has focused on the stability of the code to rebuild the bulletproof perception of the iPhone’s operating system. Zach Epstein is glad the new release is just ‘meh’:

It’s no secret that iOS 11 has been a complete mess for Apple. It’s not the travesty that whiny anti-Apple bloggers would have you believe, of course, but there’s no question that Apple made some big mistakes in iOS 11. It has had more security holes, annoying bugs, and performance issues than any version of iOS from recent history, and many of those problems still exist in iOS 11.3 and iOS 11.4 now, more than 8 months after the software’s initial release.

We learned many months ago that performance and overall user experience were going to be Apple’s main points of focus in iOS 12. In fact, insider reports stated that Apple decided to delay the addition of several big new features in iOS 12 and push them back to subsequent releases, or maybe even until next year’s iOS 13 update. This way, Apple’s various iOS engineering teams could focus on improving performance in iOS and on refining the user experience, rather than on integrating complex new features.

More at BGR.

Next: Security is key, a requiem for macOS, and Conan O’Brien’s new iPhone…

On Earnings Calls, ‘Fortnite’ Is Now Mentioned More Than ‘Bitcoin’

The business world loves a good buzzword. Witness the number of big companies that have started talking about Bitcoin, ICOs, and all things crypto. But now there seems to be a term buzzing even louder than Bitcoin: Fortnite.

Corporate executives discussing their financial performance on their quarterly earnings calls used “Fortnite” a total of 54 times during the past earnings season, according to an analysis by business news site MarketWatch of transcripts collected by FactSet. That topped the 45 times executives mentioned “Bitcoin” or other cryptocurrencies in those calls.

Fortnite is a multiplayer action shooter game from Epic Games that has become wildly popular this year. The game has 14 million monthly active users around the world and, since launching on iOS in March, has often been the top-grossing game in Apple’s App Store.

Some sports teams have grown worried their star players are growing addicted to it. Many parents are feeling the same way. But the game is not only promising to bring new gamers into the market, it’s helping to mainstream streaming-video services like Amazon’s Twitch.

Some of the executive comments came from Epic Games’ rivals, who generally spun Fortnite’s success as an overall plus for the industry. “If you look back over the 20 or 30 years, the innovation that one game team has done has been going through the whole industry,” said Electronic Arts chief financial officer Blake Jorgenson. “It’s fantastic, and we welcome innovators like Fortnite.”

Others discussed the game’s impact on their families. “My son who is eight years-old loves playing that game. I played with him over the weekend,” said Snap chief strategy officer Imran Khan, assuring an analyst that Fortnite fans weren’t using Snap less. Owen Mahoney, CEO of game maker Nexof, made a similar admission: “I played Fortnite last weekend with my 14-year-old and 5 of his buddies from school.”

Companies in other industries are seeing a benefit from Fortnite’s popularity. Logitech said demand from new gamers is boosting demand for its gaming hardware. And chipmaker AMD said the trend is helping sales of its graphics processors, which are used to power many video games.

It’s rare to see a single video game have such a broad impact, but if Fortnite and other multiplayer action games continue to catch fire, the business world could be buzzing about them for some time.

How Athenahealth’s Jonathan Bush Lost to Elliott Management

Everyone who knows Jonathan Bush—Athenahealth’s CEO and co-founder, who resigned Wednesday following reports of inappropriate behavior—knows he says (and does) things public company CEOs aren’t supposed to say (or do). Still, they probably wouldn’t have cost Bush his job had it not been for Elliott Management, the activist hedge fund that a month ago made a hostile takeover bid for Athenahealth—and which has an unprecedented knack for toppling leaders, corporate and political.

I got to know Bush back in 2014 when he was facing another hedge fund manager who was publicly shorting Athenahealth’s stock. And by getting to know Bush I mean: I played drinking games with a shirtless Bush, witnessed him dress up in costume in front of his board and employees, and swam in a frigid lake with him—all in the name of reporting for my Fortune magazine profile, “Is Athenahealth CEO Jonathan Bush in a Bubble?” Then, late last year, I took a close look inside Elliott, the hedge fund run by billionaire Paul Singer, which is now by far the biggest and most powerful activist investor in the world, in the story “Whatever It Takes to Win.”

Bush’s resignation makes him at least the sixth CEO to lose his or her job in the context of an Elliott campaign, not including Samsung vice chairman Jay Y. Lee, who ended up in jail but retained his title (he was released from a South Korean prison earlier this year). And while Elliott prides itself on improving public companies by ridding them of unethical and “entitled” executives, it’s hard not to see Bush as a little bit of a victim as well.

Elliott’s attack on Athenahealth had the hallmarks of the hedge fund’s most ruthless—and successful—campaigns, and it was clear they were coming for Bush. First came the unsolicited takeover offer highlighting leadership and operational “failures.” Next came the sharply worded public letters accusing Bush and Athenahealth of failing to negotiate with Elliott.

Then, less than three days after the most recent letter, a smattering of old allegations against Bush began resurfacing in the press from London to New York—that he’d physically fought with his ex-wife more than a decade ago; that he’d made “sexually oriented remarks” at work, settling with a former female employee in 2009; that he’d “engaged in highly inappropriate conduct regarding a female employee at an awards banquet in or around early 2005.” Bloomberg further reported this week that while performing a skit at a 2017 health care conference as Will Ferrell’s titular character in the movie “Talladega Nights: The Ballad of Ricky Bobby,” Bush had said he wanted to “do inappropriate things” with a female employee.

While we don’t know whether Elliott helped point reporters to the court documents that inspired the stories (the hedge fund did not respond to a request for comment), it fits the hedge fund’s modus operandi when it goes nuclear on one of its targets: interviewing former employees; hiring private investigators to dig up dirt; combing social media and court documents for skeletons in executives’ pasts. Indeed, the Athenahealth saga evokes the playbook Elliott used when it pushed Compuware to sell itself in 2014: Jesse Cohn, the Elliott portfolio manager also leading the current Athenahealth campaign, arrived at a meeting with Compuware board members wielding a six-inch-thick dossier filled with potentially damaging details about the directors, including a highly unflattering news story featuring the daughter of former GM CEO Fritz Henderson (Henderson was on Compuware’s board at the time).

Fun and games no longer fly

Bush, who has apologized for assaulting his wife, may demonstrate how executive behavior that seemed all fun and games several years ago—and may in fact have helped attract young tech talent to Athenahealth—may be perceived as unacceptable in the era following the #MeToo revelations of sexual misconduct by the likes of Steve Wynn and Harvey Weinstein. (For more nuance on the allegations against Bush, be sure to read Fortune editor-in-chief Clifton Leaf’s excellent essay.)

For example, here’s how I described one night I spent with Bush at Athenahealth’s annual More Disruption Please conference, held specifically to source potential startup investments and partners for the company:

Moments earlier, Bush—nephew of President No. 41 and cousin to No. 43—was regaling his guests with tales of the time he nearly had sex at Camp David. Now it’s past midnight, and he should really be getting to bed, because at 7 a.m. he’ll be leading a group on a jog to a serene but bone-chillingly cold pond for a swim. Then the ATV rumbles up to the “afterparty cabin,” where a few dozen venture capitalists, investors, health care startup CEOs, and Athena execs are playing drinking games, and Bush can’t stand to miss out. The night before he had ended up shirtless while playing something called flip cup. And when a Morgan Stanley portfolio manager, Athena’s largest shareholder, joked that he was selling his stock because Bush was buying everyone beer, Bush threw his hands in the air and yelled, “Yayyyy!!!”

Likewise, the reported “Talladega Nights” incident sounds like classic Bush, who is well-known for making a doofus of himself while performing movie-inspired gags designed to get his audience excited about healthcare—and who’s not afraid to commit to his character, no matter how offensive. When I attended Athenahealth’s MDP conference, Bush was dressed as Alec Baldwin’s sleazy salesman character from the movie version of Glengarry Glen Ross; at a previous iteration of the event, he’d come as fictional talk show host Ali G., complete with exposed chest hair; another time he’d performed a (healthcare-inspired) rendition of the Saturday Night Live comedy song “Dick In A Box.” No one watching could mistake Bush’s conduct there as anything but farce.

Jonathan Bush dressed as fictional talk show host Ali G. at an Athena event in 2012

Jonathan Bush dressed as fictional talk show host Ali G. at an Athena event in 2012

Yet it’s easy to see why Bush’s employees may have felt uncomfortable around the CEO, who wasn’t shy about commenting on his sex life, whether it be recounting his romantic exploits at Camp David, or making it known that he was newly single during his divorce proceedings from his second wife (which stretched from at least 2014 to 2016).

Bush also has a favorite adjective, which he throws around in all sorts of incongruous situations: “Sexy.” In the little time I’ve spent with Bush, I heard him apply the word “sexy” to describe women, men, and healthcare startups and products. When I was trailing him for my reporting in 2014, Fortune had recently appointed Alan Murray as its editor-in-chief, and Bush at one point asked me for my impression: “The new editor, is he sexy?” (I did not interpret this question literally, nor did I answer it literally; Alan is the finest of editors, but I’ll leave it at that!)

In stepping down from the company he founded more than two decades ago, Bush seemed to concede that the renegade elements of his personality that once served his entrepreneurial aims were now a liability in his leadership, saying, “It’s easy for me to see that the very things that made me useful to the company and cause in these past 21 years, are now exactly the things that are in the way.”

Set against the backdrop of the #MeToo scandals, of course, those quirks served as fresh fodder for Bush’s enemies—say, Elliott Management—allowing them, in a way, to weaponize that social movement to support their own purposes. CEOs today should realize that the perception of their actions—by the public and by their own employees—can matter more than their intentions.

Chinese regulators launch probe into Samsung Electronics, SK Hynix, Micron

SEOUL (Reuters) – China has launched an investigation into South Korea’s Samsung Electronics Co Ltd and SK Hynix Inc as well as U.S. Micron Technology Inc.

FILE PHOTO: Memory chip parts of U.S. memory chip maker MicronTechnology are pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach/File Photo

A source with knowledge of the matter said China was probing price-fixing allegations as DRAM prices had risen sharply, the first such investigation by China.

“The investigation has kicked off in earnest,” the source said, requesting anonymity due to the sensitivity of the matter.

FILE PHOTO: SK Hynix Inc’s DRAM modules are seen in this picture illustration taken at the company’s main office building in Seoul October 24, 2012. REUTERS/Kim Hong-Ji/File Photo

All three companies confirmed that officials from China’s State Administration for Market Regulation had visited their offices.

FILE PHOTO: A man displays a DRAM chip inside a computer mall in Taipei February 16, 2009. REUTERS/Nicky Loh/File Photo

A Samsung spokesman said the company was cooperating with the Chinese authorities, but did not provide more details on the visit. A SK Hynix spokesman also declined to give further details.

The three companies are the biggest suppliers of DRAM chips used in smartphones and personal computers to store data.

“China (is) trying to protect their PC and smartphone market from rising DRAM costs. Typically, China PC and smart phones sell at lower costs/margins than those in other countries,” Stifel Nicolaus analyst Kevin Cassidy said.

The investigation also comes at a time when China is looking to promote its own chip industry to cut its heavy reliance on imports.

Chinese firms have also had a number of overseas deals to buy foreign chip companies blocked by U.S. regulators in recent years, including a bid by Tsinghua Unigroup to acquire U.S. chip group Micron Technology Inc.

Reporting by Ju-min Park in Seoul; Additional reporting by Supantha Mukherjee and Laharee Chatterjee in Bengaluru; Editing by Edwina Gibbs

Report: Online Lenders Empower Small Businesses To Create Jobs, Economic Growth


Small businesses make up 99.9 percent of all businesses in America. I quote this statistic often, and for good reason. There’s nothing small about the impact these types of businesses have on our economy. Yet they routinely report difficulty in accessing the capital they need to start, maintain and expand their operations. Only half of small firms receive the full amount of funding they request. It seems counterproductive to limit financial services to those who are the driving force of the economy, but luckily, technological transformations are changing this.

A new report on small business lending in the U.S., released this week, shows an upsurge in lending from online small business lenders, and the economic impact of this lending activity is widespread and significant.

The study was conducted by NDP Analytics and is based on data collected from 2015 to 2017 from five of the nation’s largest small business lending platforms, including OnDeck, Kabbage and Lendio. Key highlights from the report show that these online lenders:

  • Facilitated $10 billion in online loans.
  • Generated $37.7 billion in gross output.
  • Created 358,911 jobs and $12.6 billion in wages in U.S. communities.
  • Are filling a critical financing gap for small business owners across industries.

The report tells an interesting story about the role online lending plays in the country’s economic well being. I’m thrilled to see the impact these financing options are having on small businesses and beyond, but it’s still a small piece of the pie. A recent Federal Reserve report shows that 48 percent of loan applications still go to large banks and 70 percent of the micro firms that applied failed to get the amount they requested. There’s room to broaden the impact.

Money is power and small businesses need more of both

For the mom and pop repair shops, main street cafes, small manufacturing firms or independent contractors in our communities, business ownership is more than a lofty ideal. It’s a way of life. These folks know firsthand how grueling it is to survive in business. They also know how crucial it is to have access to small business loans—nearly three-quarters of small business owners seek loans to start, operate or expand.

An integral part of the fabric of our communities, small businesses provide many of our everyday goods and services and employ over half of the private-sector workers in this country. For every $1 in lending to small businesses, they create an average of $3.79 in gross output in their communities. The vitality of these businesses relies on access to capital. They need financing to get started, purchase inventory, cover operational expenses and expand, yet they are underserved by the very banks that retain their deposits. An undeniably challenging financing gap still exists for small businesses in America, and only through democratizing access to capital for these business owners can we close the gap.

Democratize credit for small businesses and everyone wins

Did Science Miss Its Best Shot at an AIDS Vaccine?

In the late 1980s, Burt Dorman was ready to get out of the vaccination game. A biophysical chemist, he’d spent years running a successful company making animal vaccines—a dozen of them, against diseases like feline leukemia and vesicular stomatitis. Now Dorman was starting a new company in a new field, aiming at disease diagnostics.

And then the AIDS epidemic hit. The first hint that a new disease was killing people had come in 1981, in a publication called the Morbidity and Mortality Weekly Report. What followed were years, decades even, of tragedy and homophobia-tainted ignorance. Still, by 1987 the first vaccine trial was underway, the World Health Organization had launched a global fight against the contagion, the playwright Larry Kramer had started the activist group ACT UP, and the first antiretroviral drug, AZT, was available.

Even so, science was still woefully short of understanding the plague or coming up with a vaccine that could prevent it. By the end of the decade, more than 100,000 people were infected in the United States. Absent treatment, the mortality rate for these patients, then as now, was effectively 100 percent. Dorman knew vaccines; he started talking to other people in the vaccinology world about being part of the fight. Don Francis, a longtime disease hunter then with the Centers for Disease Control and one of the main characters in the book And the Band Played On, got in touch—Dorman had beaten feline leukemia, and it’s caused by the same type of virus that triggers AIDS. Why not try to tackle HIV?

Dorman, 80, has been pushing to do classical vaccine research on HIV since the 1980s. “An equally diligent effort should be made to extract what we can from methods that have already been invented,” he says.

Samantha Cooper

Dorman was leery. The emerging effort looked chaotic. Dorman got his old vaccine team together for a meeting at his office; his son Sam remembers one at their house in Berkeley. “My image as a kid was of my dad feeling duty-bound, that there were people suffering and in danger, and they could do something,” Sam says.

Dorman decided to try. Today his name peeks through some of the stories of the early days of the epidemic and the hunt for a vaccine against the virus. He photobombs, metaphorically, books about the early years of the effort like Jon Cohen’s Shots in the Dark and Patricia Thomas’ Big Shot (both published in 2001). Since then, new therapies like antiretroviral drugs have made HIV infection into something it’s possible to live with rather than die from—at least, in the developed world. The search for a vaccine continues, a decadal, tidal ebb and flow of optimism followed by failure.

Burt Dorman with his son Sam at age 12, 1988.

Courtesy of Sam Dorman

Dorman, too, is still at it. But he’s pushing an approach to developing a vaccine that he argues the entire scientific edifice has largely abandoned. Dorman advocates a path that you might broadly term “classical.” It’s almost trial-and-error, a methodology that goes back to smallpox and rabies. Like early vaccinologists—Jenner, Pasteur, Salk—Dorman is a tinkerer who figures out how to grow, kill, and administer viruses in a way that sparks an immune response. It can work—and indeed often has—without a researcher knowing much, if anything, about the underlying immunology.

Because of how HIV works—how the virus infects a cell, what kinds of cells it infects, how it mutates and reproduces—and because of how vaccines get tested and developed, most scientists working on HIV immunology don’t think that such a classical approach can work. Instead, they aim to break apart and rearrange the specific pieces of the virus, like the sugars and proteins embedded in its shell, and deliver those alongside enhancing agents. These approaches, arising from recombinant DNA and protein technologies, are by their very nature more hypothesis-driven. More rational. This is the approach that garners almost all research funding from government agencies and pharmaceutical companies.

Dorman, then president of Advanced Genetics Research Institute, 1985.

Courtesy of Sam Dorman

Perfectly reasonable. And yet, in the 35 years since scientists isolated the virus that causes AIDS, 35 million people have died of the disease worldwide while waiting for a vaccine. “It’s a nice thing to argue that we will one day understand the biology well enough to do rational design of a vaccine,” Dorman says. “But an equally diligent effort should be made to extract what we can from methods that have already been invented.” That is what he has been saying for three decades. It hasn’t happened.

To the mainstream scientific community, Dorman’s quest is quixotic at best, tilting at windmills made of glycoproteins and RNA. But Dorman, now a spry 80, hasn’t given up. He’s convinced that if the rest of the scientific community had joined him decades ago, millions of lives would have been saved. They still could be. This isn’t a matter of science—at least, it’s not a matter of only science. It’s a matter of scientific culture—of a framework for making decisions about a research agenda.

The AIDS Memorial Quilt is shown for the first time on the Mall in Washington DC, 1987.

LEE SNIDER/Getty Images

AIDS memorial quilt on the National Mall lawn; 20,000 quilts are displayed, 1992.

Jeffrey Markowitz/Getty Images

That doesn’t mean Dorman is right and they’re wrong. He’ll be the first to say that he doesn’t know. But he’s also the first to point out: No one else knows, either. Not for sure.

Name just about any terrifying infectious disease, and no matter how Grand Guignol its symptoms, some people who get it also get better—that’s true for smallpox, polio, even Ebola. In a broad range of viral diseases, says Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, “the overwhelming majority of people survive, and when they do they completely eradicate the virus. And not only that, but they’re immune for the rest of their lives.”

That recovery hints that a vaccine is possible for those diseases—and many others. It’s a matter of creating a trigger that will speed up some processes that already happen in nature.

In the late 1700s, people knew that getting cowpox made you less likely to get smallpox, which in those days in Europe killed up to 400,000 people a year. Cowpox was a virus that their immune systems could fight off, and the cellular recording of that fight—the creation of a defense protocol in the immune system—would often ward off smallpox, too. This led the scientist Edward Jenner to try intentionally infecting a boy with cowpox as a prospective treatment. When the boy was subsequently found to be immune from smallpox, Jenner’s method took off, and the death toll from smallpox plummeted. The Latin name for cowpox is vaccinia, after the Latin for “cow,” so Jenner named his process “vaccination.”

Jump ahead to the mid-1950s, when 16,000 people, mostly children, got paralytic polio every year in the US. Working from the idea that a vaccine didn’t actually have to infect someone with a disease to jump-start immunity, Jonas Salk learned to kill poliovirus with formaldehyde and administer it. This “whole killed virus” vaccine worked, though people like Albert Sabin thought the formaldehyde would lead to a shorter period of immunity.

President and Mrs. Roosevelt enjoying after-luncheon conversation with polio patients of the Warm Springs Foundation in Warm Springs, Georgia.

Bettmann/Getty Images

This is classical, empirical vaccinology, 20th century style. The road wasn’t always straight. As Cohen’s book Shots in the Dark lays out, Salk tested his vaccine on children—with few if any of the permissions and safeguards a researcher would need today, like FDA approvals or signoffs from Institutional Review Boards. He just kind of … did it. It worked. Polio has been almost eliminated on Earth, and smallpox no longer exists in the wild.

The past half-century has been miraculous—something like 50 vaccines exist for humans, and hundreds for nonhuman animals we live with. The process for making almost all those drugs, essentially, involved subjecting a pathogen to every tool a laboratory can bring to bear—how to grow it in culture, how to kill or attenuate it, what chemicals to administer alongside it, how many doses to give and in what interval. Ideally in the end you hit on a combination that confers immunity. It’s a process that a tech entrepreneur like Sam Dorman would identify pretty closely with product development. Lots of iteration. An engineering problem.

But here’s the catch: Classical vaccinology might not work on HIV. “There’s no documented case of someone who got infected, truly infected, and then cleared the virus,” Fauci says. The same person can even get infected with two different strains.

Why? First of all, HIV is a retrovirus, a type of virus that rarely infects humans. This crafty bug—protein-and-sugar molecules embedded in a fatty coat around a bundle of genetic material—invades a cell and copies its genetic material, RNA, turning it into DNA and then inserting it into the nuclei of the host’s own cells. The viral DNA becomes part of the person. Today antiretroviral drugs interrupt that process—they prevent the viral RNA from becoming DNA, or keep it from integrating into the cellular genome, or stop the cell from making new virus. But take the antiretrovirals away, and the virus starts churning out again.

Maybe even more importantly, HIV attacks cells that would otherwise mediate a response to a pathogen—among them, CD4 T-cells. CD4 is a protein on the outside of certain cells critical to the human immune response; it’s also the protein that HIV latches onto and uses to break into those cells. A hybrid sugar-protein on the outside of the virus called gp120 hooks onto CD4 like a key, opening the door for other HIV proteins and allowing the virus to fuse with the cell and inject its genes.

Not only does the virus make a lot of copies of itself very, very quickly, its many different strains also mutate. The human immune system will attack any invader, but it also learns to tailor a response to specific pathogens based on proteins on that pathogen’s outer shell, waving like the livery of an enemy combatant. Studying HIV, researchers learned that it was protean. The virus’ glycoproteins change slightly from generation to generation, allowing it to evade detection. It doffs its old livery, in other words, and puts on a slightly different outfit, one that somehow evades the immune system’s surveillance tactics.

These nuances have only revealed themselves over 35 years of research. Unlike other pathogens, nothing about HIV even hinted a vaccine was possible. “We have to be better than human,” says Larry Corey, principal investigator at the HIV Vaccine Trials Network. “We’re zero out of 65 million in self-cure.”

American Public Health poster for AIDS, 1989.

Universal History Archive/Getty Images

But one issue became clear early on. As people began to look at vaccine strategies, they lost confidence in their ability to kill or fully inactivate HIV—a necessary predicate not only for a vaccine but simply to test candidates.

When people sign up for trials—much more regulated than in Salk’s day, and much more subject to the vicissitudes of liability law—those research subjects don’t know if they’re going to get a placebo or the medicine. And because AIDS is near-universally fatal, researchers and ethicists want to be able to assure them that they won’t accidentally get the disease. “We can tell them, hand on heart, you won’t get HIV from the product,” says Mitchell Warren,1 executive director of AVAC. “That’s a really important message to give people enrolling in clinical trials, and we couldn’t do that working with a whole killed vaccine.”

New York State Department of Health Public Health poster for AIDS, 1987.

Universal History Archive/Getty Images

Even into the 1990s, AIDS vaccine researchers were still ruminating on the possibilities of classical techniques. But the complexities of the virus, an evolving understanding of the human immune system’s response to it, and the fear of causing new infections all combined to lead them to reject that approach. That happened just as the tantalizing new field of genetic engineering, of recombinant DNA, offered the potential of not only an AIDS vaccine but perhaps an entirely new avenue of vaccine discovery.

Instead of the classical spadework Dorman advocates, scientists would use genetic and protein engineering techniques to build a vaccine from scratch, taking pieces of the HIV virus, bits of other viruses that the immune system kind of knows what to do with, “adjuvant” agents that boost an immune response…bits and pieces chained together into an exquisite corpse of immune-goosing biotechnology.

The approach has seen some success; it led to vaccines against hepatitis B and human papilloma virus. It takes longer, but it also allows scientists to learn more about the pathogen and immunology. And it has come to seem like the best route to an HIV vaccine.

Dorman came of age in the era of polio, when that virus was a seemingly unstoppable killer. Growing up in Pasadena, he saw community swimming pools made off limits and movie theaters closed.

He didn’t plan to go into the vaccine business; Dorman thought he’d become a researcher and a professor. “But before I finished my Cancer Society post-doc, I had a wife and four kids,” he says. Academia wasn’t going to pay enough to support a young family. So instead Dorman started what we’d now call a biotech company. Not that it was a surefire moneymaker. “There’s no such thing as a home-run product in animal health,” he says. And doing science outside the academy didn’t have the respect it does in today’s venture-capitalized hothouse. “In those days, if you left academia it felt like walking the plank,” Dorman says. But the business actually succeeded. That makes him something of an outlier in vaccinology: Burt Dorman has actually made vaccines. Most of the people working on HIV have not.

Dorman, Don Francis, and HIV researcher Nobuyoshi Shimizu, early 1990s.

Courtesy of Sam Dorman

The business wheel turned. Dorman sold the vaccine company and switched to making diagnostic technology. Then, in 1988, he wrote a proposal to work on HIV—make virus, purify it, kill it, learn to formulate it into a vaccine, figure out dosages, a hundred different variables, levers to pull and tweak—and sent it to Anthony Fauci. Give me two years and $5 million, Dorman said, and he would have a vaccine ready for human trials. “The NIH clinical study section laughed at that,” he says. “My rebuttal said, OK, we’ll take four years and $10 million, but that just pissed them off worse.” (Fauci doesn’t recall the proposal or Dorman.)

Into the 1990s, as success continued to elude the vaccine research community and governments and NGOS began to make increasingly large financial commitments to research, Dorman was still pitching. The mid-1990s brought the International AIDS Vaccine Consortium (known as IAVI), funded by foundation money from Rockefeller and Bill Gates, among others. “By then I had written so many failed proposals to NIH that the staff was pretty self-conscious,” he says. “Over the years I pitched IAVI, I pitched Gates. I pitched the Grateful Dead.” All those funders would say killed viruses wouldn’t work against HIV.

Dorman argued back. Just let us try it, he’d say. Simply testing the idea might provide new knowledge about HIV and its so-called correlates of protection in the human immune system—so other vaccine makers would know what to look for in their own research. He kept pitching. He got letters from researchers who said he might have a point. He tried to get editorials into journals, unsuccessfully.

That went on until 2000. “And then I gave up,” Dorman says. “In the process I pretty much ruined my diagnostics company.”

Science isn’t the only hard part of creating an HIV vaccine. The business of it is lousy, too. In 2010, Don Francis—the same Don Francis who recruited Dorman to the cause—laid out a depressingly plausible explanation for the lack of a vaccine in the journal Biologicals. Publicly funded science, he wrote, is very good at coming up with new knowledge and disseminating it. That’s research. But society leaves the other half of R&D—development—to industry. And industry’s main goal is profit.

From that perspective, vaccines are not great. For example, Francis wrote, it cost VaxGen $300 million to try and fail to develop an HIV vaccine in the 1990s. It cost Avirion $340 million to bring Flumist, the nasal flu vaccine, to market. (Another writer speculates it cost Sanofi Pasteur $1.4 billion to develop a recombinant, live-attenuated dengue vaccine—and it took 24 years.)

Maybe they didn’t expect to incur those costs. Maybe they believed in doing the right thing anyway. Sometimes vaccine makers also have NGO or philanthropic funding. Regardless, the incentives are all upside-down. Even if a manufacturer gets one made and approved, it’s hard to sell on an open market. Vaccines prevent rather than treat, and require just one or a few doses (flu vaccines being a notable exception).

That means the company makes only one sale, as opposed to keeping patients on the hook for a lifetime prescription. On the demand side, many people have a hard time internalizing the true risk of a disease they might someday get, maybe. And in the developing world, people are less likely to be able to pay for the product. And so on. So back-burnering vaccine development in favor of therapeutics and drugs to treat chronic conditions is just good business. Put it this way: In 2001 the entire market for all known vaccines was the same size as the market for the anticholesterol drug Lipitor.

The AIDS protest group ACT UP demonstrates in front of the White House demanding more money for AIDS research, June 1, 1987.

Bettmann/Getty Images

A few billionaires have tried to fight this garbage fire by making it rain money. Francis’ article acknowledges that donations from Warren Buffett and the Bill and Melinda Gates Foundation introduced billions of dollars into vaccine development, but foundation money and grassroots efforts tend to tilt research in the direction of single vaccines for single diseases, potentially siloing off broadly useful knowledge. “The private sector works on things that are proprietary, patentable, and profitable,” Dorman says. “Everybody is doing exactly what you would have expected and wanted them to do. I don’t have criticisms of anybody’s role at all.”

Except, well. He kind of does. Burt Dorman has been at this for three decades. He’s an old, Berkeley-looking dude now. Glasses in a jacket pocket, pad and pen in a shirt pocket, close-cropped beard. Tends to give the same examples for why he’s right more than once, in long emails—as you might expect from someone who has been advocating the same thing for decades.

But what he is outlining is a tragedy made worse by a tantalizing possibility: What if he was right? Not now, today, talking about vaccines in a Berkeley coffee shop, but back then? Thirty years and 35 million deaths ago?

What if he was right?

Dorman says he’s not particularly well read in history, but in 2008 he happened to read *Constantine’s Sword *, John Carroll’s history of the Catholic Church’s relationship with Judaism and what the Church did—and didn’t do—in response to the Holocaust. He was particularly struck by Carroll’s thesis: that history isn’t an accident. Specific people make specific choices.

He realized he had to try again. A couple years later, in 2010, after years in the world of technology and product development, Dorman’s son Sam decided to join him. Sam had noodled around with video and thought that might make a difference. “I think I just thought, maybe I can help my dad a little. He writes beautiful letters and beautiful papers, and he has a lot of faith in their ability to sway people,” Sam says. “But I thought if I could bring more modern, visual storytelling to this that it might be helpful.”

Sam Dorman, who in 2010 joined his father’s efforts to restart his vaccine research. “I thought if could bring more modern, visual storytelling to this that it might be helpful,” he says.

Samantha Cooper

So they started a website, After decades of carrying around testimonial letters from disease hunters and trying to get articles published in journals, Dorman’s arguments and those of his supporters are online videos now, laying out the case.

His timing couldn’t be worse.

This year, for the first time in, well, ever, researchers are testing a vaccine in human beings that actually seems to kind of sort of work a little.

Like all the vaccines under investigation, it goes by a lot of different names. The Thai vaccine, because of where it first showed promise, also known as RV144 And, in a way, its history is a mix of classical and hypothesis-driven vaccinology. Researchers noticed that long-term nonprogressers have what are called cellular responses that control the disease. So it’d be good to try to induce those, went the thinking.

Researchers also knew that infusions of a particular kind of antibody prevented infection from an engineered, laboratory-built simian-human immunodeficiency virus … and that antibodies and T-cell responses could protect monkeys against infection from both S-HIV and simian immunodeficiency virus. Oh, and they had a Phase III trial of a vaccine made from the HIV glycoprotein gp120 that didn’t work, but it did hint at all sorts of immunological characteristics that might.

So RV144 mixed all that in a pot—combining four injections of a recombinant canarypox vector vaccine with two booster injections of the gp120 vaccine. In 2009, public health workers from the Thai Ministry of Public Health, Thai universities, NIAID, the US military, and lots of other places reported that RV144 showed an efficacy of 31.2 percent. That is to say, about a third fewer people in the test group got infected than the control group.

That seems like not a lot. It’s also better than any other HIV vaccine has ever done. And a new formulation of it is being tested in more than 5,000 people in South Africa.

Another study getting underway uses an adenovirus as a vector, and genes from several variants of HIV—a so-called mosaic—and a booster with a different combination of ingredients, or another envelope protein from HIV called gp140. Or both. It showed some protection in monkeys and people.

And yet a third study is taking an approach that would not have been possible in the days of classical vaccinology. Those researchers are working from the knowledge that a class of immune cell called a broadly neutralizing antibody can prevent infection with a major strain of HIV. Specifically the researchers are using an antibody developed at the National Institutes of Health’s Vaccine Research Center, called VRC01, infusing it directly into men and transgender people who have sex with men to see if it provides protection. And as the name implies, it’s only the first of many potential antibodies—a “proof of concept,” says Warren of AVAC.

All those years of immunology research have given scientists the ability to more quickly understand all sorts of outcomes. Today’s would-be vaccine-makers have a whole new set of tools that let them take results from small test groups and re-engineer formulations almost on the fly. “It’s called de-risking,” Corey says. “You can put in all this engineering. It’s complicated, but it’s not a biological concept.”

Indeed, 30 years of work has transformed immunology as a whole. It’s starting to look like product development again. “We have incredible, high-resolution tools, down to the molecular level in terms of understanding antibodies and the surface of the virus to know whether we’re achieving the kind of immune response that we’re targeting,” says Mark Feinberg, president and CEO of IAVI. He says that as early as the Phase I trials designed only to test the general safety of a new drug, vaccine researchers can now get a sense of whether they’re on the right track.

Fauci, meanwhile, still says a vaccine is coming—though perhaps in combination with antiretrovirals, circumcision, prophylactic drugs, and antibody infusions, it doesn’t have to be 100 percent effective to stop the epidemic, even in the developing world. “We would settle for a 55, 60 percent effective vaccine,” he says.

Not everyone buys all this. “They’re doing various gradations of RV144—an extra booster, a different adjuvant,” Levy says. “And we don’t even know if RV144 can be reproduced.” His frustration is palpable. “You’re talking to someone who has been complaining about this for a long time. You get locked into one program and put all your resources into that, so anything innovative has to tie into that one direction.”

Like energy from nuclear fusion, an HIV vaccine is always 10 years away and always has been. But all these new directions and new studies have stirred excitement among people who have been working on vaccines for years. Again. “I would argue 2018 is the most optimistic we’ve ever been,” Warren says.

Meanwhile, someone is, finally, trying to develop a killed-virus HIV vaccine that looks, on its face, a lot like what Dorman is advocating. Chil-Yong Kang, a virologist at the University of Western Ontario, got one as far as Phase I—a test of basic safety. And a little bit more.

It wasn’t easy. First of all, Kang says, HIV isn’t easy to grow in culture, and regulators don’t like the idea of someone having a big tank of HIV. Then, once he had the virus, Kang had another obstacle: the Food and Drug Administration. “FDA says, if there is a single live virus in the vaccine, it’s one too many, right?” Kang says. As a condition of the trial, the FDA told Kang he had to show complete, total, utter killing.

So Kang killed the hell out of it. His group first genetically engineered the virus so that it couldn’t infect cells anymore but could still replicate. Then they poured on a chemical called Aldrithiol-2, a standard virus killer. And then they exposed the poisoned, mutant virus to gamma radiation to break all its genes.

When Kang went back to the FDA with his irradiated, poisoned, mutant virus, “the FDA suggested we should use HIV-positive individuals, because the main objective of a human Phase I clinical trial is safety,” he says. “So we did that.”

The study, published in 2016, looked at just 33 volunteers; of the group who actually got the vaccine, all seemed to tolerate it well. “As a side result, we could also look at immune responses,” Kang says. “If the vaccine worked properly, it should also stimulate antibody production, and that’s what we saw.” People who got the vaccine had boosted immune responses, and an increased level of the broadly neutralizing antibodies HIV researchers are so optimistic about.

Kang says he’s hoping to run Phase II trials this year—one to maximize immune responses by varying the amount of antigen and the frequency of immunization, and then, he hopes, another using HIV-negative people. (Kang’s funding comes from various federal agencies in the US and Canada and from a biotech called Sumagen.)

Dorman remains skeptical, even of this approach. “I’ve tried to explain to Dr. Kang what I thought were issues that perhaps he didn’t appreciate yet,” Dorman says. “He picked a strain of the virus because it was convenient, and a cell system that was convenient. He did a cloning procedure because he had reasons to think it might be useful. The odds that what he has gone to the clinic with will be protective are not great. That’s not a criticism of him. It’s simply an acknowledgement that we don’t know how to make these choices, and there are a lot of them to make.”

But, I say, isn’t Kang’s work at least a sign of receptiveness to your ideas? You said nobody would fund a classical approach, but here it is.

“My concern is, if and when it is shown to fail, it will discredit the concept even further. And I said that to him. Of course, that doesn’t stop him,” Dorman answers.

He got published, I say. He got funding from government agencies in two countries, and a pharma company.

Dorman insists he’s rooting for Kang, but a lot of people get funding and get published with early-stage HIV vaccines. “You can’t think your way to a vaccine. You have to experiment your way,” he says. “And that is an idea that the Tony Faucis of the world have never digested. Is that a criticism? No. They’re in a different business, and their business does a tremendous amount of good. But it doesn’t get a vaccine in short order.”

Science—the set of methods, not the institution—remains the best way humans have developed for apprehending the world. By extension, it’s also the way humans learn to change that world, to build something new.

But that doesn’t mean science and scientists are always right. Those methods are iterative; the idea is to get more right, or understand where you were wrong.

Science—the institution, not the set of methods—is made of people doing the hard work of apprehending the world and trying to change it. But those people are just as subject to social forces as any other group of humans. They are vulnerable to bias, blind spots, and groupthink. That’s not an excuse to stop believing in scientific conclusions. (Vaccines prevent disease. Life on Earth develops and continues to change through a process of evolution. Human industrial emission of carbon into the atmosphere is altering the planetary ecosystem.) It just means scientists aren’t always right.

They certainly haven’t been right about an AIDS vaccine. “We’re 30 years in and we don’t have anything. RV144, that’s it,” Levy says. “Burt has tried to get independent funding, and I think he still could, but it has to be from some pretty forward-thinking philanthropists, because you’re not going to get it from a foundation and you’re not going to get it from the government.”

Dorman thinks that the vaccine community’s resistance to classical vaccinology is an example of bias, of cleaving to a set of ideas in the absence of evidence for them. “Until fairly recently, expert opinion held that the earth was flat! Erroneous ideas sometimes are difficult to dislodge, as has been noted by many observers including Leo Tolstoy and Upton Sinclair,” he writes me in an email timestamped at 3:05 am the morning after I asked him about Kang’s research. To the email Dorman attached a PDF with quotes from Tolstoy and Sinclair. The Tolstoy was in the original Russian, with a translation.

I’d suggest that the problem here isn’t bias so much as what the philosopher Thomas Kuhn called a paradigm. Scientists establish paradigms, Kuhn wrote in a book called The Structure of Scientific Revolutions, and those sets of ideas inform and guide research until another paradigm overturns them. Those paradigm shifts are hard to predict, nearly impossible to engineer, and, when they happen, tectonic. (In some cases, literally—it took decades for geologists to accept the idea of plate tectonics.)

The dominant paradigm moved away from Burt Dorman 35 years ago. That dominant paradigm has not produced a vaccine. The fact that Dorman has never gotten to try his approach is certainly a missed opportunity. And, perhaps, a tragedy.

1 UPDATE 6/1/18 10:45 AM Corrected first name

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Metastable Helium Is Changing The Way Scientists Look At Exoplanets [Infographic]

, Opinions expressed by Forbes Contributors are their own.
Knader10 Designs

Metastable Helium formation

</div> </div>

<p><strong>To learn more please visit the WASP planets <a href="" target="_blank" data-ga-track="ExternalLink:" rel="nofollow">website.</a></strong></p> <p><strong>Go <a href="" target="_self">here</a> to learn more about WASP-107b and helium detection.</strong></p>” readability=”35.8242473556″>

Recently, a team of scientists was able to detect metastable helium in the upper atmosphere of an exoplanet. This was quite an accomplishment considering it had never been done before. The formation of metastable helium in large amounts on exoplanets was theorized a long time ago but up until now, it had never actually been detected. This discovery marks a milestone in the study of exoplanet atmospheres as it will enable scientists to study planets that are much further away than the ones we are currently looking at.

Metastable helium was detected on a planet called WASP-107b. This planet has a large amount of helium in its atmosphere. So much in fact that it has been estimated that it stretches out tens of thousands of miles into space. The helium in the upper atmosphere is being bombarded with high-energy radiation from the host star’s chromosphere. That radiation ionizes the helium by knocking out one of the two electrons in each atom. These helium ions then combine with free electrons in the planet’s atmosphere and often the new electron gets stuck in a high energy state. Having an electron stuck in this state is what makes a helium atom a metastable helium atom.

Getting an electron stuck in this state is related to a property that electrons have that is known as spin. If two electrons have their spin aligned then they cannot be at the same energy level. So when these helium ions pick up new electrons from the atmosphere they get stuck at a high energy level because the old electron is at a low level and the atoms will often pick up electrons with the same spin.

This creates the longest-lived excited state of any atom as the electron stays excited for about 2.2 hours on average. That is a long time considering that normally electrons de-excite in nanoseconds.

While in this excited state the electron can absorb a photon of infrared light and when it does it jumps to a slightly higher energy level. Afterward, it falls back down to the metastable state after a few nanoseconds. Once it does it can absorb another photon. This process goes on and on for the 2.2 hours that the atom is in the metastable state and then the atom falls back down to the regular ground helium state. Scientists are able to study this phenomenon by observing infrared light absorption.

Knader10 Designs

Metastable Helium formation

To learn more please visit the WASP planets website.

Go here to learn more about WASP-107b and helium detection.

What's Being Done To Help America Sleep?

Why is it so hard for us to get a good night’s sleep? And is there anything new being done about a health issue that the American Sleep Association (ASA) contends affects up to 70 million American adults?


Everyone agrees there’s a problem. The National Institutes of Health (NIH) says insomnia is the most common sleep problem in adults age 60 and older. The ASA says deep sleep is important for memory consolidation, yet as human beings enter into middle age, the quantity of deep (or slow wave) sleep they achieve is known to decrease significantly.

If you suffer from them, you know. Sleep troubles can be brutal. They can last for days, months and even years; and they can mean a lot more than just having trouble falling asleep. They can mean you: take a long time to fall asleep, wake up many times in the night, wake up early and are unable to get back to sleep, wake up tired, and feel sleepy during the day. The NIH just confirms what the sleep-deprived already know: Often, “being unable to sleep becomes a habit. Some people worry about not sleeping even before they get into bed.” This too may exacerbate an already exhausting situation and make it harder to fall asleep and stay asleep.

So sleep seekers try reading, meditation and prayer, darkening their rooms, and even weighted blankets. Before they know it they’re wondering bleary-eyed along the sleep aid aisle in their local pharmacy or department store for over-the-counter medications. Some finally resort to calling the doctor and stepping up their medication game to a prescription sleep aid or better yet: scheduling a sleep study.

Many people desperate for better sleep think that the method and the outcome of a sleep study are pretty straightforward—and limited. Either they have sleep apnea, and are thus prescribed a Continuous Positive Airway Pressure (CPAP) system—the leading therapy for sleep apnea—to keep them breathing during sleep, or they don’t have sleep apnea, and, well, it’s start over with the list above.

But while there are still tens of thousands of people seeking better sleep in the United States, there are also many physicians and scientists trying to help them. And they’re getting better at it all the time.

There’s information on yoga and music and meditation. There are over-the-counter pills, therapeutic oils and gadgets you stick to your nose. There are studies on causes and effects and drugs. The National Sleep Foundation even offers information on mouth exercises to help you breath better and thus sleep better at night:

  • Push the tip of your tongue against the roof of your mouth and slide the tongue backward. Repeat 20 times.
  • Suck your tongue upward so that the entire tongue lies against the roof of your mouth. Repeat 20 times.
  • Force the back of your tongue downward against the floor of your mouth while keeping the tip of your tongue in contact with your bottom front teeth.

In scientific circles, the American Academy of Sleep Medicine (AASM) recently compiled a list of the 10 most-viewed sleep research papers published in the Journal of Clinical Sleep Medicine (JCSM) in the last year. That is, articles that captured the attention of the scientific and medical communities, as well as the media and the general public. These are the papers on the JCSM website—published by AASM—that received the most pageviews. They include information on what is being done and who is doing it.

They included:

  • Guidelines for physicians for evidence-based analyses of sleep aids.
  • Guidelines and recommendations for diagnosing obstructive sleep apnea in adults.
  • Study results on the actual melatonin content of natural health products and supplements versus what is often listed on labels.
  • A new position statement from the American Academy of Sleep Medicine (AASM) on beginning the school day at 8:30 a.m. or later for middle school and high school students.
  • The first study to link binge-watching in young adults with poorer sleep quality, more fatigue and increased insomnia.
  • Updates to the AASM Scoring Manual for Scoring of Sleep and Associated Events.
  • The AASM’s position statement on the use of Home Sleep Apnea Tests (HSAT). These devices are diagnostic medical tools that help physicians provide high quality, sleep tests at home for select adult patients.
  • Information on the possibility of stronger levels of recommendations by the AASM regarding sedative-hypnotic drug use in the management of chronic insomnia.
  • Advice for the field of sleep medicine, including challenges and necessary changes and advances in sleep medicine.
  • The AASM’s Sleep and Transportation Safety Awareness Task Force response to the Federal Motor Carrier Safety Administration and Federal Railroad Administration Advance Notice of Proposed Rulemaking and request for public comments regarding the evaluation of safety-sensitive personnel for moderate-to-severe obstructive sleep apnea (OSA).

The Johns Hopkins Center for Sleep at Howard County General Hospital in Columbia, Maryland recently posted what the organization sees for the future of sleep clinical care and research, even calling this future “revolutionary.”

Gen Z Graduates Into A New World Of Work, Here Is Why You Should Care

, I research & write on longevity, generational trends & innovation. Opinions expressed by Forbes Contributors are their own.

LOS ANGELES, CA – MAY 11: Media producer Oprah Winfrey addresses The USC Annenberg School For Communication And Journalism Celebrates Commencement at The Shrine Auditorium on May 11, 2018 in Los Angeles, California. (Photo by Leon Bennett/Getty Images)

</div> </div> <p>Generation Z, the leading edge of young people born after 1997, are now 21 years old. Many of them are graduating from college and listening to the well wishes and advice of graduation speakers. After the microphones are silenced and the last diploma is awarded, Gen Z will enter the workforce.</p> <p>Today’s workplace is undergoing an unprecedented rate of change placing new demands on workers of all ages. A new <em>high velocity workplace</em> is emerging – a world of work characterized by the rapid development of new knowledge, an accelerating rate of industry disruption and advancing technology.</p> <p>Graduation speakers are asking students <em>to be daring</em>, <em>to hone personal resilience</em> and more. My personal favorite is a <a href="" target="_blank" data-ga-track="ExternalLink:" rel="nofollow">speech</a>, a mixture of practical and aspirational guidance, delivered by Oprah Winfrey to University of Southern California graduates. She advised the class of 2018 to “eat breakfast…make your bed…recycle…pay your bills on time…and to aim high.”</p> <p> </p> <p>But, in the <a href="" target="_blank" data-ga-track="ExternalLink:" rel="nofollow">words</a> of another Baby Boomer, Billy Joel, not from a podium, but in song, sometimes “just surviving is a noble fight.”</p> <p>Surviving <em>and thriving</em> in the emerging high velocity workplace will require Gen Z graduates to confront the new realities of work – realities that are changing the rules of work for all generations. Here are four.</p>

<p><strong>School Is Never Out</strong></p> <p>Sorry graduates. You thought final exams were…well, <em>final</em>. The half-life of education is perhaps shorter than any previous generation perhaps placing&nbsp;Gen Z at a higher risk for professional obsolescence in fewer years than&nbsp;even the Millennials.</p> <p>Buckminster Fuller coined the idea of <a href="" target="_blank" data-ga-track="ExternalLink:" rel="nofollow">knowledge doubling</a> which suggests that knowledge, in a given field or human endeavor, doubles at a predictable, but accelerating rate. Fuller argued that in 1900 human knowledge doubled about every 100 years and by 1950 knowledge doubled every 25 years. A 2006 IBM <a href="" target="_blank" data-ga-track="ExternalLink:" rel="nofollow">study</a> forecasted that human knowledge might be doubling every 11 hours! Today it is widely accepted that knowledge doubles, but at different rates in different fields. Medical education provides a startling example. One researcher projects that by 2020 medical knowledge might double every 73 days.</p>” readability=”50.2899262899″>

LOS ANGELES, CA – MAY 11: Media producer Oprah Winfrey addresses The USC Annenberg School For Communication And Journalism Celebrates Commencement at The Shrine Auditorium on May 11, 2018 in Los Angeles, California. (Photo by Leon Bennett/Getty Images)

Generation Z, the leading edge of young people born after 1997, are now 21 years old. Many of them are graduating from college and listening to the well wishes and advice of graduation speakers. After the microphones are silenced and the last diploma is awarded, Gen Z will enter the workforce.

Today’s workplace is undergoing an unprecedented rate of change placing new demands on workers of all ages. A new high velocity workplace is emerging – a world of work characterized by the rapid development of new knowledge, an accelerating rate of industry disruption and advancing technology.

Graduation speakers are asking students to be daring, to hone personal resilience and more. My personal favorite is a speech, a mixture of practical and aspirational guidance, delivered by Oprah Winfrey to University of Southern California graduates. She advised the class of 2018 to “eat breakfast…make your bed…recycle…pay your bills on time…and to aim high.”

But, in the words of another Baby Boomer, Billy Joel, not from a podium, but in song, sometimes “just surviving is a noble fight.”

Surviving and thriving in the emerging high velocity workplace will require Gen Z graduates to confront the new realities of work – realities that are changing the rules of work for all generations. Here are four.

School Is Never Out

Sorry graduates. You thought final exams were…well, final. The half-life of education is perhaps shorter than any previous generation perhaps placing Gen Z at a higher risk for professional obsolescence in fewer years than even the Millennials.

Buckminster Fuller coined the idea of knowledge doubling which suggests that knowledge, in a given field or human endeavor, doubles at a predictable, but accelerating rate. Fuller argued that in 1900 human knowledge doubled about every 100 years and by 1950 knowledge doubled every 25 years. A 2006 IBM study forecasted that human knowledge might be doubling every 11 hours! Today it is widely accepted that knowledge doubles, but at different rates in different fields. Medical education provides a startling example. One researcher projects that by 2020 medical knowledge might double every 73 days.

Page 1 / 3

Former Trump Campaign Aide: My Russia Ties Are Not Nefarious!

Michael Caputo’s favorite novel is Mikhail Bulgakov’s The Master and Margarita, the story of the Devil’s visit to Moscow in the 1930s and all the oddball characters who surround him. When the future Trump campaign official was living in Moscow in the 1990s, he moved to Patriarchs Pond, the novel’s setting, and scratched his apartment’s paint down to the color it was when Bulgakov wrote the novel in Stalin’s Soviet Union, and then repainted each room in the color it would have been then.

Today, Caputo thinks the book’s magical realism and interplay of greed, guilt, and politics captures the absurdity of our modern moment perfectly, and he has taken his own first-edition copy of the book into his closed-door testimonies before the House Intelligence Committee, the Senate Intelligence Committee, and, earlier this month, to meet with Special Counsel Robert Mueller’s investigators. “I figure that’ll raise its resale value,” he says. “I’ll put it on eBay someday.”

Among the odd stories surrounding the colorful cast of characters orbiting the Trump campaign and the Mueller investigation, political consultant Michael Caputo—a one-time protégé of PR dirty trickster Roger Stone and former aide to Paul Manafort—likely doesn’t even crack the top dozen. In fact, his most memorable claim to fame on the Trump campaign may be that he’s the only person to have left the campaign under totally normal circumstances, resigning after an ill-advised tweet that celebrated the firing of Corey Lewandowski. (“Ding dong the witch is dead,” he wrote, accompanying the post with a photo of a pair of legs crushed by a house.)

Caputo has attracted the attention of Congressional and Justice Department investigators, but he says he’s also wrapped up in a burgeoning Russia-gate of his own, a brewing scandal driven by left-wing bloggers in possession of leaked documents he handed over to Senate investigators, an attempt to smear his latest Russian-linked business venture, a video website he describes as filling the gap “between Netflix and YouTube.”

He spoke to WIRED in an attempt to get ahead of looming rumors about the venture, Bond.PM, which declares itself “the future of entertainment powered by Blockchain.” Given his prominence in the Trump orbit and conservative circles, he says, “I expect to get a couple kicks in the nuts.” But he’s here to tell you that claims that there’s anything untoward about his new business are baseless—and his critics are simply trying to discredit him because of general anti-Russia bias. “I’m about to be roasted,” he says. “The reason the Senate is leaking is because I’m in business with Russians.”

Caputo’s business interests in Russia stretch back to the 1990s, when he lived there working on behalf of the US Agency for International Development and later advised then-President Boris Yeltsin. He also helped run “Rock the Vote Russia.” (“When the Clinton administration asked me to go meddle in the Russian election, I jumped at the chance,” he jokes.) Though he left Russia as Vladimir Putin took office, he has remained active in the region’s politics and business, including consulting for Gazprom. But more than business, he says he’s an aficionado of Russian art and culture, a child of the Cold War who fought Soviet Communism with the Contras and with his old boss, Jack Kemp.

Bond.PM—for which Caputo is listed as chief marketing officer—isn’t some sort of Russian plot, he says. It’s a startup that just happens to involve a lot of Russians.

The startup, which hasn’t launched yet, says its streaming platform aims to “take the middlemen out of the game” and connect video creators directly with an audience, allowing for crowd-investing and decentralized ownership enabled by smart contracts and its own cryptocurrency powered by the Ethereum blockchain. “This whole blockchain thing is so compelling to me—I don’t know where it’s going, but it’s such an interesting ride,” Caputo says.

His role is hardly hidden in the new venture—the flashy website is topped by a video featuring him. (“With the internet and blockchain, everything is changed,” he says on the video. “It’s the future of content.”) Other leaders of the startup include a Russian TV executive and a one-time Moscow entertainment lawyer; the effort is backed by a Hong Kong investment banker and professor of the Russian Economic University.

While the public PowerPoint deck for the company is innocuous—and posted on Bond.PM’s website—Caputo says that the Senate Intelligence Committee leaked to liberal bloggers two non-public slides from the version he gave them that refer to the “Roseanne Effect,” the runaway popularity with Trump voters of the rebooted Roseanne sitcom this year. “Roseanne may have a domino effect on Hollywood,” the slides say, reaching the “Pro-Trump Middle America ignored by elites.”

He says he uses the slides when pitching the venture to conservative investors, who are eager for an alternative to the liberal Los Angeles elite. Caputo raised $12 million for various pro-Trump SuperPACs in 2016 and says he’s going after the same investors for his new project. “I’m taking this deck to Republican billionaires who support the president,” he says, “people who don’t like the Oscars ceremony and can’t stand the finger-wagging from Hollywood.”

Bond.PM, he says, offers a real alternative: “It completely disrupts the Hollywood business model. It’s the next step in disintermediating Hollywood.”

But, he insists, Bond.PM is not cozying up to the Kremlin. In fact, two of the filmmakers involved are decidedly not Putin fans: One of the company’s founders, Den Tolmar, was nominated for an Academy Award for his 2016 documentary Winter on Fire: Ukraine’s Fight for Freedom, about that country’s revolution in 2014—a revolution that deposed Manafort and Putin’s preferred leader. Another Bond advisor, Cyril Tuschi, made a documentary sympathetic to Putin’s most famous critic, the tycoon Mikhail Khodorkovsky.

The startup is aimed at letting fans support their favorite actors and directors without middlemen—and potentially even own a chunk of movies or TV shows themselves. As Caputo and his partners see it, the current economic model leaves a vast chasm between the low-end and the high-end. “If you don’t sell to Netflix or Amazon, you’re screwed. YouTube doesn’t make you any money anymore. There’s a great big chasm between Netflix and YouTube. That whole middle ground is untouched,” he says. “With blockchain and smart contracts, it’s a no-brainer. It’s an opportunity not just to make money, but also to transform the industry.”

The platform is meant to help empower both new content, like Tolmar’s documentaries, most recently Cries from Syria—which paints a sympathetic portrait of the victims of the Syrian civil war—as well as those out of step with the Hollywood elite. He points to Kevin Spacey’s banishment from House of Cards following sexual assault allegations last year. If the actor wanted to reprise his role as the power-hungry Frank Underwood, he could turn directly to stalwart fans online. “A franchise like that would find a home on Bond.PM. The gods of Hollywood have decided that the Kevin Spacey is never to be seen again—but his fans didn’t get a say in that,” Caputo says. “I understand he’s accused of dire things—and Kevin Spacey needs to make that right again. I believe in forgiveness. America loves a forgiveness story. America is the land of second chances. The gods of Hollywood will never give him a chance, but his fans would have the chance with Bond.PM.”

And don’t forget about Mel Gibson, who was ostricized for various outbursts deemed racist and anti-Semetic. He “was in Siberia for over a decade; he’s an incredible creator,” Caputo says. “We missed so much that he could have done. But if the gods of Hollywood were no longer in charge, if the fans were the deciders, it’d be very, very different. On Bond.PM, they don’t get to make that choice.”

The site, he says, is nearly ready for launch, which will include an initial coin offering. “Our ICO is imminent—it’ll be at the end of the month—and we expect to have the platform up and creators uploading their videos and films in June,” he says.

Bond.PM is not the only Russian-linked effort underway in Caputo’s life: He’s also helping launch an avant-garde ballet with star Russian ballerina Diana Vishneva, Sleeping Beauty Dreams, which will premiere in December in Miami before heading to New York and, then in 2019, a national tour. The ballet retells the classic fairy tale and includes what the production claims is “the first ever fusion of live contemporary dance of the ballet stars with 3D digital avatars projected on stage in real time.”

Both efforts share a common origin, Caputo says. “All of my Russian friends are from the creative arena,” he says. “There’s a huge brain drain of the creative class out of Russia. They’re gone—they now all live in Miami, New York, Los Angeles, London.”

The idea for the dance production grew out of a dinner party in Miami Beach, where he recalls he was sitting around with a group that included, in his words, the “Russian Andy Warhol, the Russian Bill Graham, and the Russian Ian Schrager.” The four of them, all dads with daughters, were drinking vodka and eating pickles. “We were all complaining about how we’re spending so much money on Frozen stuff and princesses,” Caputo says.

The conversation then turned to how to make money on princesses, rather than spend it, and to Sleeping Beauty, which has been continually reinvented by the Grimm Brothers, Tchaikovsky, and, most recently, Disney. Was there anything left to do with her? Then Rem Khass, the Russian Andy Warhol, asked a simple question: What was she dreaming for the hundred years that she was asleep? “We all reacted the same way—‘Oh my gosh,’” Caputo recalls. “We started getting really interested. The vast majority of the story took place in her head—and no one ever told us that.”

Caputo, 56, is one of the colorful, ancillary characters who have floated in and out of the year-long Mueller investigation. Three decades ago, he worked as Roger Stone’s driver and says he has known Paul Manafort almost as long. Along the way, he worked with Oliver North, supporting the Contras in Central America, first met Trump in 1988, and once entertained Vladimir Putin at a reception at his house in Russia. He got his start in public relations in the Army, and he says that the first Russian he ever saw was through binoculars at the Korean Demilitarized Zone. “I think I’m the only American who has worked for both the White House and the Kremlin,” he says. “I plead guilty to living an interesting life—lock me up. But at the end of the day, I’ve told the truth and I’ve done nothing wrong.”

He is, to put it mildly, unapologetic. “If those Twitter sleuths Louise Mensch and John Schindler are upset I’m working with the premier Russian ballerina, they’re going to have to deal with it,” he says, referring to two of the amateur online gumshoes who have turned their Russia commentaries into mass followings. “If they’re upset that I’m working with an Academy-Award nominated Del Tolmar to change the industry, they’re going to have to deal with it.”

A longtime PR consultant, Caputo was hired by Trump in 2014 to help launch an astroturf effort to aid Trump’s ultimately unsuccessful purchase of the Buffalo Bills. He went to work for the Trump campaign in December 2015 to help in the New York primary then joined the national team in April 2016 as part of the group brought in by chairman Paul Manafort. He spent only a few weeks on the job before departing following his impolitic tweet.

Despite his short tenure, his contacts with the campaign—and his manifold Russian connections—have kept him on the radar screens of the various Trump investigators for 18 months, especially since the March 20, 2017, congressional hearing where then-FBI Director James Comey testified about Russia’s interference in the election. Rep. Jackie Speier then called Caputo “Putin’s image consultant,” a charge he vehemently objects to. “I no more worked for Vladimir Putin than I did Rocky Balboa,” he says.

The investigators all grilled him on his ties to various campaign officials and Russian oligarchs. He says that while he was an “object of curiosity” to congressional investigators, Mueller’s team went at him hard. They “didn’t ask me a single question they didn’t know the answer to,” he says. “It was a colonoscopy. It felt like a proctology exam. These guys are not gentle.” (He prepared for this interview by relaxing in a Russian-style bathhouse in his hometown of Buffalo.)

None of his current work, he says, has raised the eyebrows of Mueller’s team. When he spoke to Mueller’s investigators, he says he tried to give them a copy of the Bond.PM PowerPoint too, but an investigator brushed it away, telling him, “Mr. Caputo, we don’t care about your Russian dancing.” (“It was such a drippy statement—like ‘we’re in this for serious things,’” he says.)

Throughout the investigations, he has remained a regular guest on cable news, defending Trump and condemning the investigations regularly dismissed by the president as a “witch hunt.”

Caputo says his own legal bills have topped $125,000, and that he had to cash in his childrens’ college fund to pay them. However, a GoFundMe effort this spring to defray his legal bills ended up raising $330,000 from about 6,500 donors, and earlier this week, Caputo announced he was opening up his legal defense fund to others who face mounting lawyers’ fees for their own involvement in the probe.

In a closing statement this month to the Senate Intelligence Committee that boiled over with his frustration, he called for an “investigation of the investigators,” saying he wanted to know who was leading the push against Trump: “I want to know [who] because God damn you to hell!”

He sees his two new efforts, the ballet and the video website, as a chance to restart and reorient his life. “I never want to be in politics again. This has been a terrible experience. Working for President Trump has been a terrible experience,” he says. “I never want to do another [campaign] again. It’s an opportunity to change my life and my family’s life.”

The whole inquisition, he says, has made him rethink his dismissal on TV last year of George Papadopoulos as a “coffee boy.” He apologized to Papadopoulos on Twitter this morning, lifting a sense of shame that Caputo says had led him to question whether he’s worthy of marching in this weekend’s Memorial Day parade in his hometown of East Aurora, New York. With the apology made, Caputo says, he has a clean conscience: “Now I can have a hot dog and march.”

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Garrett M. Graff (@vermontgmg) is a contributing editor for WIRED and the author of The Threat Matrix: Inside Robert Mueller’s FBI. He can be reached at [email protected]

Tesla seeks to dismiss securities fraud lawsuit: U.S. court document

SAN FRANCISCO (Reuters) – Tesla Inc on Friday asked a court to dismiss a securities fraud lawsuit by shareholders who said the electric vehicle maker gave false public statements about the progress of producing its new Model 3 sedan.

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

In a filing in federal court in San Francisco, Tesla said that its statements about the challenges the company faced with Model 3 were “frank and in plain language,” including repeated disclosures by Chief Executive Elon Musk of “production hell.”

Tesla did not seek to hide the truth, its motion to dismiss said.

The company says its Model 3 has experienced numerous “bottlenecks” from problems with Tesla’s battery module process at its Nevada Gigafactory to general assembly at its Fremont plant.

Tesla is under pressure to deliver the Model 3 to reap revenue and stem massive spending that has put Tesla’s finances in the red. The ramp of the Model 3, Tesla said in the court filing, was “the first of its kind,” with difficulties likely to crop up after it got underway.

The lawsuit filed last October seeks class action status for shareholders who bought Tesla stock between May 4, 2016 through October 6, 2017, inclusive. It said shareholders bought “artificially inflated” shares because Musk and other executives misled them with their statements.

Tesla made such statements during the lead-up to, and early production of, its Model 3 sedan and failed to disclose that the company was “woefully unprepared” for the vehicle’s production, the lawsuit said.

A hearing is scheduled for August.

The Tesla response chronicled disclosures of production bottlenecks the company faced in its third quarter of 2017 when it fell short of its targets.

Tesla’s statements that its Model 3 production was “on track” in May and August of 2017 – which plaintiffs argue were false – were made before production problems began to surface, Tesla argued.

Tesla said its “good faith belief” in the Model 3 program is reflected in everything it has done: a $4 billion investment, the build-out of its Gigafactory battery factory in Nevada and the high-volume equipment it commissioned.

Reporting By Alexandria Sage; Editing by Peter Henderson and Grant McCool

Uber shuts Arizona self-driving program two months after fatal crash

SAN FRANCISCO (Reuters) – Uber has shut down its self-driving car operation in Arizona two months after a fatal crash involving one of its vehicles, the company said on Wednesday.

Uber Technologies Inc [UBER.UL] is not shuttering its entire autonomous vehicle program and will focus on limited testing in Pittsburgh, Pennsylvania, and two cities in California, a spokeswoman said.

The ride-hailing company aims to resume self-driving operations this summer, likely with smaller routes and fewer cars, she said.

“We’re committed to self-driving technology, and we look forward to returning to public roads in the near future,” the spokeswoman said.

Arizona’s wide, flat roads, good weather and corporation-friendly regulations are considered ideal to test autonomous vehicles. Uber now faces the challenge of testing in congested, urban cities with rain, fog, snow and ice.

It must also repair its relationship with regulators in California, where it lacks a testing permit, and in Pittsburgh.

Uber has said it considers self-driving technology important to the future of its ride services, although it is not clear how it fits into the plans of new Chief Executive Dara Khosrowshahi. He has revamped the company structure and cut certain expenses as Uber prepares for an initial public offering next year.

Uber suspended its program in Arizona and elsewhere immediately after one of its SUVs operating in autonomous mode hit and killed a woman crossing the street on a March night in Tempe, marking the first fatality involving a self-driving vehicle.

Arizona Governor Doug Ducey suspended Uber’s self-driving testing – a little more than a year after giving the company a warm reception and poking fun at California’s stricter regulations.

“The governor’s focus has always been on what’s best for Arizonans and for public safety, not for any one company,” Daniel Scarpinato, a spokesman for Ducey, said on Wednesday.

FILE PHOTO: A self driving Volvo vehicle, purchased by Uber, sits in a parking lot in Phoenix, Arizona, U.S., December 1, 2017. REUTERS/Natalie Behring/File Photo

Elaine Herzberg, 49, was walking her bicycle outside the crosswalk on a four-lane road when she was struck by the Uber vehicle traveling at about 40 miles (64 km) per hour. A safety operator behind the wheel appeared to be looking down, and not at the road, moments before the crash, according to video from inside the car released by police.

The crash is under investigation by the National Transportation Safety Board. Uber will wait until the agency issues its preliminary report on the crash, expected within the next couple of weeks, before it puts its self-driving cars back on the road. The company is also undergoing a review of its autonomous car program and has hired former NTSB Chair Christopher Hart to advise on safety.

Uber’s self-driving Volvo SUVs in Arizona will be moved to other cities and employees will be offered assistance in finding another job, the company spokeswoman said.

Pittsburgh was Uber’s first city for autonomous car testing, starting in 2016. However, Pittsburgh Mayor William Peduto said in a statement Wednesday that Uber had not told him its plans to resume testing.

“I made it clear to Uber officials after the Arizona crash that a full federal investigation had to be completed, with strong rules for keeping streets safe, before I would agree with the company to begin testing on Pittsburgh streets again,” Peduto said.

The Uber spokeswoman said the company was in discussions with California regulators, the governor and city officials to operate in San Francisco and Sacramento, although it does not have a timeline.

“Sacramento stands as a willing partner,” said Louis Stewart, the city’s chief innovation officer.

Sacramento has held conversations with many autonomous vehicle developers, and is not deterred by Uber’s crash in Arizona. The city wants to work with Uber to make sure its technology is safe, but sees no need “to jump right in and regulate even more how these cars operate,” Stewart said.

Slideshow (2 Images)

Uber briefly had an autonomous car program in California in late 2016, but the state Department of Motor Vehicles shut it down after about a week because Uber had failed to obtain the necessary permits. The company had argued that state laws did not apply to its self-driving program, but its defiance was met with threats of legal action from the DMV and the state attorney general. Uber moved its cars to Arizona.

Reporting by Heather Somerville; additional reporting by David Schwartz in Phoenix and Jim Finkle in Toronto; Editing by Tom Brown and Grant McCool

Artist Frida Kahlo's popularity soars, but family struggles to manage legacy

MEXICO CITY (Reuters) – A coil of dark braids. Colorful Mexican dress. And a signature unibrow.

A Google employee maps the exterior of the childhood home of Mexican artist Frida Kahlo, now Frida Kahlo Museum, also known as “Casa Azul”, in Mexico City, Mexico May 21, 2018. Picture taken May 21, 2018. REUTERS/Gustavo Graf

Sixty-three years after her death, Mexican artist Frida Kahlo has achieved a level of fame she never reached in her lifetime, her image emblazoned on mugs, T-shirts, keychains and even underwear. But scholars and the painter’s descendants lament she has been reduced to a set of distinctive physical features that often overshadows her actual work.

The debate heated up this spring when toymaker Mattel released a Barbie in Kahlo’s image, over protests from her family.

The Barbie and other merchandise do not capture Kahlo’s complex legacy as a feminist icon, a disabled woman who channeled her pain into art, an ardent communist and an inspiration to the LGBT community, scholars say.

“Frida Kahlo is not a product or a brand…. Frida Kahlo is not a doll,” said photographer Cristina Kahlo, the artist’s great niece. “For us, it is important to maintain the image of Frida Kahlo as the painter that she was.”

This month, a new project aims to return the focus to her art. Alphabet’s Google, working in collaboration with the Kahlo family, has dedicated a portion of its Arts and Culture app to the artist’s life and work.

The search giant partnered with 33 museums to digitize Kahlo’s most famous paintings and bring new work into the public eye. The app also features rare letters, diary entries and sketches, in addition to a virtual tour of her famous blue home.

The Kahlo family played an active role. U.S. artist Alexa Meade and Mexican musician Ely Guerra collaborated on a piece of “living art” honoring Kahlo, working under her great niece’s guidance.

“These projects that are related to Frida from a cultural point of view, spreading her painting, works and story… are projects I like and feel comfortable participating in,” Cristina Kahlo said.

Cristina Kahlo, great-niece of Mexican artist Frida Kahlo, speaks during an interview with Reuters at the Frida Kahlo Museum, also known as “Casa Azul”, in Mexico City, Mexico May 21, 2018. Picture taken May 21, 2018. REUTERS/Gustavo Graf

The museums and cultural institutions that Google partnered with managed the rights. Google says no money changed hands.

Kahlo’s husband, artist Diego Rivera, established a trust supervised by the Banco de Mexico to operate museums dedicated to the couple’s work, and the trust also oversees the copyright to the works.

Kahlo’s brand and image are more contentious. In the early 2000s, one of Kahlo’s nieces, Isolda Pinedo, and her daughter, Mara Romeo, assigned rights to the Kahlo brand to a company known as the Frida Kahlo Corporation, according to court papers.

Tension boiled over in March when Mattel released a Kahlo Barbie, licensed by the Frida Kahlo Corporation.

In a case launched by family members, a Mexican civil court judge issued a preliminary injunction blocking the sale of the doll and other products licensed by the Frida Kahlo Corporation in Mexico. Mattel asked a federal court to lift the injunction, and a ruling is expected in June, a Mattel spokeswoman said.

“This Barbie doll is meant to honor Frida Kahlo’s great legacy and we hope it will be back on shelves in Mexico soon,” Mattel said in a statement.

Pablo Sangri Gil, a lawyer for Romeo, told Reuters the Barbie was an example of the Frida Kahlo Corporation operating without consulting with the family, in violation of the rights agreement.

Slideshow (9 Images)

In turn, the Frida Kahlo Corporation sued Romeo this month in a Florida federal court, alleging that she violated the contract by licensing Kahlo-branded products of her own.

Gil said he had not been formally notified of the Florida lawsuit.


The feud underscores the challenges of managing celebrity legacies, said Jonathan Faber, CEO of Luminary Group, a licensing firm.

Guitarist Jimi Hendrix’s family battled over his image, licensing dueling products. A memorial fund for Princess Diana tried to block Franklin Mint from selling dolls and other memorabilia modeled after the royal, but a U.S. court ultimately allowed the products to stay on shelves.

Kahlo, who died at age 47, gained greater prominence with the publication of a landmark biography in the early 1980s, and her popularity has only grown since.

In contrast with many famous male artists, Kahlo is better known for her appearance than her work, scholars say. They welcome a return to the art.

Kahlo “has become a Halloween costume,” said Oriana Baddeley, a professor at University of the Arts London.

There is irony in her reincarnation at the hands of Mattel, said Charlene Villasenor Black, an art history professor at the University of California, Los Angeles.

“How many other communist Barbie dolls are there?” she said.

Reporting by Julia Love; Editing by Cynthia Osterman

These Are the 5 Books Bill Gates Wants You to Read This Summer

It’s become an annual tradition. For the last several years, in mid-May, billionaire Microsoft co-founder Bill Gates has offered up a summer reading list, sharing it publicly on his Gates Notes blog.

Gates paired this year’s list with a video featuring cute puppies cavorting with his chosen titles. One dons an Abe Lincoln-style stovepipe hat for a book about Honest Abe, and another rides on a hospital gurney wearing a protective neck collar for a book about a divinity professor coping with her Stage IV colon cancer.

Gates has chosen books that can be enjoyed by readers of all professions — you don’t have to be a software genius or company founder to appreciate any of them. But in the extended summaries of each work, he’s quick to point out how each book speaks to him, and many offer lessons that are especially pertinent to entrepreneurs and businesspeople. Here’s this year’s summer reading list.

Top takeaway: Follow your sense of wonder, but don’t go overboard.

Gates has a special fondness for the brilliant inventor and artist Leonardo da Vinci — in 1994, he paid $30 million for one of Leonardo’s scientific notebooks, now known again as the Codex Leicester. (Gates declined the chance to rename the notebook after himself, noting “I thought (Codex Gates) sounded silly.”)

Gates singles out Isaacson’s biography of the Renaissance legend for breaking down just exactly how special he was.

“The attribute that stands out above all else was (Leonardo’s) sense of wonder and curiosity,” Gates explains. “When he wanted to understand something–whether it was the flow of blood through the heart or the shape of a woodpecker’s tongue–he would observe it closely, scribble down his thoughts, and then try to figure it all out.”

But this intense focus could also go too far: The book explains that in the process of creating a statue involving a horse, Leonard learned so much about horses that he ended up creating new systems for feeding them as well as designing cleaner stables. Probably great ideas, but the statue was never completed.

Top takeaway: Don’t get stuck on finding a reason — bad things do happen to good people.

Divinity professor Kate Bowler was just 35, married and mom to a young son, when she was diagnosed with Stage IV colon cancer. Before her diagnosis, Bowler had written a book about the prosperity gospel, which Gates describes as “the idea popular among some Christians that God rewards the faithful with health and wealth.” While she herself wasn’t sold on that idea completely, her diagnosis shook it out of her head for good.

In addition to having to pursue the day-to-day treatment options that could help her survive to raise her son longer, Bowler had to grapple with some big questions, namely, Why meIs this a test of my character?

Gates notes that Bowler “answers the ‘why’ question in a compelling way: by refusing to accept the premise.” And he gets unexpectedly personal, discussing his own family life with a blunt and painful story.

“All four of my grandparents were deeply devout members of a Christian sect who believed that if you got sick, it must be because you did something to deserve it,” he writes, :When one of my grandfathers became seriously ill, he struggled to figure out what he might have done wrong. He couldn’t think of anything, so he blamed his wife. He died thinking she had caused his illness by committing some unknown sin.”

Even if tragedy hasn’t touched you, Bowler discusses how those trying to support someone who may be dealing with a diagnosis should veer away from judgemental and painful statements, and includes a list of six better ways to support them.

“If I could pick one thing, it would be that everyone simmers down on the explanations for other people’s suffering, and just steps in with love,” Bowler said in a TV interview.

Top takeaway: Look carefully at the human consequences of decisions.

Think you know everything about Abraham Lincoln? The stovepipe hat, the log cabin, Ford’s Theatre, the Gettysburg Address? Think again. The only novel on Gates’ list, Lincoln in the Bardo, will shake up what you thought you knew.

The novel takes place over the course of one, long, sad night during which Abraham Lincoln visits the grave of his late son Willie, who died at just 11 of typhoid fever in 1862. Willie and his father were real, of course, but the events in the book are Saunders’ fictional take on what the grieving president might have felt and said on a visit to Willie’s tomb. More than 160 ghosts flit in, trying to convince Willie to leave the bardo, an intermediate space between life and rebirth.

“Despite being a work of fiction, it offered fresh insight that made me rethink parts of (Lincoln’s) life,” Gates writes. And it also made the Microsoft co-founder think heavily on the consequences of decisions.

“The president has a new understanding of the grief he’s creating in other families by sending their sons off to die in battle,” Gates writes. “He must make a choice. Should the war go on? If it does, how can we ensure the end result justifies the cost of such suffering?”

Top takeaway: Our world is interconnected, and it’s not too late to learn about it.

Gates and scholar David Christian, the author of Origin Story, work together on The Big History Project. It’s a program aimed at encouraging schools to use a social-studies curriculum known as Big History, and “big” is a good word for it. The course starts with the Big Bang and winds through more than 13 billion years of world history, integrating multiple perspectives in everything from chemistry to anthropology, all based on modern science.

“Origin Story is essentially the Big History course condensed into a short book,” Gates writes. The course, and the book, divide that 13 billion years into eight “thresholds,” or moments in time that mark major transition points, such as the first appearance of humans.

The course is taught in a slowly growing number of schools, and adults can join in with an online, self-guided, six-hour version. Or pick up the book, which Gates says contains “some things that are simply too new to be included in the course.”

5. Factfulness, by Hans Rosling, with Ola Rosling and Anna Rosling Ronnlund

Top takeaway: Don’t panic! At least not until you’ve broken down why you’re scared.

As part of Gates’ work with the Bill and Melinda Gates Foundation, he uses the terms “developed” and “developing” world frequently. But Factfulness, by the late Swedish global-health lecturer Hans Rosling, has taught the billionaire those terms aren’t quite accurate.

One cannot simply divide the world into rich and poor, Rosling’s book teaches. He compares it to looking down at other buildings from a skyscraper — everything looks short from your height. To more clearly understand poverty and how to think about it in a helpful way, Rosling divides the world’s population into four income groups. One billion people live at level one, sleeping on dirt and spending much of their days walking barefoot to get water. At the other end, a wealthier billion people own cars and can afford to take vacations. Understanding that framework can put poverty — and the progress made to fight it — in perspective.

The book is mostly devoted to explaining 10 instincts that help us from seeing the world “factfully.” Scaremongering headlines can frighten unnecessarily, but breaking down the innate biases that lead us to overreact can lend us a well-needed perspective.

“These instincts make us human,” Gates writes, noting that “overcoming them isn’t easy.” But he notes that Rosling refused to judge others for their misconceptions, wanting only to teach.

“If you never met Hans or watched one of his many TED talks, Factfulness will help you get a sense of why he was so special,” he says. “I wish I could tell Hans how much I liked it.”

A Guide to the Surprising Side-Hustle That Can Help You Build Long-Term Wealth

Some of the wealthiest people I know made their money in real estate

They didn’t start out big. They started by buying one small property or project, and then after the first came a second, and so on.

I personally didn’t start investing in real estate until I’d already experienced a liquidity event from my original business, Wilmar–a company that gave me plenty of experience in real estate business. We were one of the largest suppliers of plumbing, hardware, electrical and maintenance needs in the industry, to some of the biggest apartment owners in the country.

In 1997, I invested as a majority owner of a 106,000 square foot, seven-story office building in New Jersey. I still own the building today. But it wasn’t until 2008, when I entered the tax lien business through my firm, Crestar Capital, that I really got experience underwriting real estate.

Over six years, we underwrote over $3 billion in residential real estate. In 2012, we began to foreclose on a small number of unpaid tax liens. Three years later, we owned 450 homes.

It was through attempting to get financing for these properties that I realized there was a massive opportunity to create a real estate financing company for investors like myself, which today is LendingOne–acting as a lender, but driven by technology.

That’s how I’ve come to realize that real estate can be a great side-hustle for any entrepreneur–after all, we all want to build long-term wealth for ourselves. And you don’t need a liquidity event or a ton of cash to get started.

Here’s how.

Four Questions to Answer If You Want to Invest in Real Estate

Owning real estate is a key part of building wealth and diversifying your investment strategy. Start by answering these four questions:

  1. What’s more interesting to you: commercial or residential?
  2. How much capital do you have to invest?
  3. Will this be a full-time business, a part-time hobby, or a part-time interest with the intention of it becoming a full-time business?
  4. Are you looking to invest your own money, or other people’s money–and will you use debt?

The last question is arguably the most important, since debt is what will allow you to make larger purchases, faster–to either fix and flip, or hold and rent to tenants. Reason being, debt is a fundamental part of the building process.

In everyday life, the concept of debt is bad. In real estate, and in business, debt is necessary. The whole idea is to put as little of your own money down as possible, so that you can not only invest in more real estate,  but get a better return on your invested dollars.

Once you answer these questions, you can then choose how you want to approach the business of investing in residential real estate. There are three strategies for you to consider:

1. Fix and Flip

Some people like to buy up a property, fix it, and then resell it six months later. 

The pros of getting into the fix-and-flip game are the fact that there’s endless opportunity, plenty of homes that need rehabbing given the age of the U.S. home inventory, and flipping one, two, or more homes per year can make you quite a healthy profit. 

The cons, however, are that in fixing and flipping, you’re responsible for managing the work, for incurring (and managing) your costs, and for seeing the project through to completion. Some people are great at this, but others drastically underestimate the amount of work that goes into a final product.

2. Single Family Rental

Think about single family rentals in terms of accumulation over a lifetime. Again, real estate empires don’t happen overnight. Like I said, it starts with one home, leveraged to the next, to the next, and so on.

With single family rental units, you can then rent those homes out at a price that’s higher than your mortgage–which makes it pay for itself. The cons, unfortunately, entail everything from frustrating tenants to bad markets, unforeseen repairs, and vacancies–all of which influence whether your properties stay profitable.

3. Turn-Key Solutions 

There are two ways to patriciate in turn-key solutions. The first is you can be the manufacturer of the homes where you buy/fix, and then rent the property, manage it, and then sell the property to passive investors.

Many professionals that don’t have time to do the work required to buy/fix/rent, but still want to own real estate, fall into the second category. If you are someone who doesn’t have the time or expertise you can find great turn-key operators from companies like Roofstock.

Getting started building your real estate portfolio doesn’t need to be complicated. Once you buy that first property, you’ll realize it’s a process–just like anything else in life. And then you’ll be well on your way.

Retirement: Should You Buy These Beaten-Down Stocks Now?

The markets have generally been volatile since the end of January 2018. The S&P 500 has touched its 200-day moving average a few times, however, bounced back each time. It does appear that the current turbulence may well continue for some more time. However, in spite of recent uneasiness in the market, the broad indexes are only about 5% away from their all-time high achieved during the last week of January 2018.

However, it is altogether another story with some of the sectors of S&P 500. For example, one of them is Consumer Staples and Packaged Foods (Consumer Defensive Sector). Most investors are probably aware how bad the downturn is in Consumer Staples industry. Some of the well-known dividend-paying companies in the Consumer Staple sector are Procter & Gamble (PG), Colgate-Palmolive (CL), General Mills (GIS), Unilever PLC (UL), Nestlé S.A.(OTCPK:NSRGY), Kraft Heinz Co (KHC), and some others. Most of these companies are down by double-digits. Some of the reasons that have caused this downturn are:

  1. Competition from ‘House Brands’ causing stagnant or declining revenues for the brand name products.
  2. Commodity prices have been on the rise.
  3. Rising threat and challenges from e-commerce.

Some of the above fears may truly be valid. But the bigger question is if these trends are permanent or just a passing phase. Even if they are permanent, are some of these companies well positioned to challenge the status quo and come out stronger?

Here is a table that shows the performance of the above stocks since the beginning of this year. You will notice that not all have declined; actually, the European companies are doing much better than their American counterparts.


Current Price

(As on 05/11/2018)

Price on 01/02/2018

% Return

(since Jan 2nd, 2018)

























SPY (S&P 500)




Many of the above stocks have been the favorites of the DGI investors (Dividend Growth Investors). A few of them are dividend champions, meaning they have paid and raised the dividends for more than 25 years. Their dividend yields were already attractive before this downturn, but some of them are offering mouth-watering yields off late. Below are the current yields for the six stocks.


Current Price

(As on 05/11/2018)

Current Dividend


Forward Dividend Yield

























Who Should Buy Now?

Certainly, almost all of these stocks are at attractive valuation right now. However, it does not mean they can’t fall even further. They certainly can and more likely will, especially if the broader market takes a hit. However, there are other factors that need to be looked into:

  • Do you own some of them already? If so, how are they weighted in your overall portfolio? As a general rule, you should not have more than 15% in one sector, after all, there are 11 sectors of the economy. Also, you should not have more than 5% in one single stock, assuming you have a minimum of 20 stocks in your portfolio,
  • If you are already over-weighted in the sector or a stock, you should not get tempted to buy the current dip. We should remember the folks who were overweight in the financial sector just before the 2008-2009 financial-crisis and the damage it must have done to their portfolios.
  • What are your income needs? If you need high income, investing at the current yields into these generally conservative stocks would make more sense compared to someone who is in the accumulation phase and does not care about the current income.
  • Do these stocks fit your risk-profile? We would generally think these should fit even the most conservative stock investors. However, the stock market is at an all-time high, in spite of the recent turbulence. If the broader markets were to take a big hit, the above stocks would take a hit as well, irrespective of how low they may already be. However, they are likely to go down less compared to the broader market. Do you have the tolerance to see another 10% or 20% dip after you have taken a position? If your investment horizon is longer than 10 years, and you are prepared to look at the income component rather than the market price, then these may be suitable investments.
  • If you were to buy now, how much should you buy? The answer to this question is same as the point # 1. You should follow your rules regarding position-weight of any one security and any one sector. Also, you should decide if you are going to buy in one lot or in more than one lot, meaning in a deferred fashion. A deferred approach will take advantage of dollar-cost-average in case they were to dip further.

If We Are Going To Buy The Dip, Which One Is the Best?

Okay, let’s say you have taken the first decision that you would want to buy one or more of these stocks and take advantage of the lower prices and significantly higher yield compared to just a few months ago.

To help with the decision as to how these stocks rank compared to each other, we will compare them to several factors. The six companies that are being compared are:


We will compare them on the basis of following metrics:

  • Size and economic moat
  • Dividend Yield
  • Dividend growth
  • Dividend safety
  • Valuation
  • Long-term debt
  • Revenue growth
  • EPS growth
  • Future growth estimates

Note: On each of the above metrics, we will provide a relative “Rating” to each company (except KHC). Please note that the rating is un-scientific and subjective, in this case, based on our opinion. It should not be used for buy/sell decisions, rather only as a starting point for further research.

Size and Economic Moat:

All of our companies in the select-list are well known and large-cap companies, with leading positions in some of their product categories. Even though some of them are larger than others, but we will consider them on equal footing and award them the same rating under this category.

Dividend Yield:

The current yield of a company’s stock will depend upon the market price at the time of buy. So, when the market price declines, the yield will go up. Ideally, we should buy when the current yield is at least higher or equal to the stock’s 5-year average yield.

Currently, many of these companies are yielding higher than their 5-year average, because of the recent decline in prices.


Current Price

(As on 05/11/2018)

Current Dividend


Forward Dividend Yield

5-yr Trailing Yield






































**NR – Not Rated, *NA – Not Available

Dividend Growth:

For DGI investors, both the current yield and the growth of the divided are important. Obviously, as investors, we want both to be high enough. If the current yield is low, but the faster dividend growth may compensate for low current yield. Alternatively, a high current yield may compensate for low dividend growth.

In this regard, Chowder-number comes quite handy. Chowder – number is the sum-total of current yield and past 5-year dividend growth. Generally, we would want the chowder-number to be at least 8 or higher.

Below is a table that provides an idea how much time it takes for a high dividend-growth but current low yield stock to catch up (provide the same or higher dividend amount) to another stock which yields high but provides low growth.

As you can see, in terms of YOC (yield on cost), it would take company-A 14 years to surpass company-B. That too provided company-A maintains its high dividend growth rate all these years. However, if the company-A is also growing its earnings faster, it is likely that the stock price of company-A would rise faster due to higher growth.

Here is the comparison of previous 3-year and 5-year dividend growth for our selected companies:


FWD Dividend



Dividend Growth


Dividend Growth
































Dividend Safety:

Dividend safety is actually more important than either the current yield or the dividend growth. After all, what good is the yield or growth, if that gets cut after a year. Investors in General Electric (GE) have learned that lesson twice in the last decade, unfortunately.

At the same time, it is also more difficult to know the dividend-safety factor, than say dividend-growth. It is often said that safest dividend is the one that just got raised. The past growth of the dividend, especially the very recent growth tells a lot about safety. But there are other factors like cash-flow and payout-ratio that the investors need to look at very carefully. The income of a company can be dressed up to look good by crafty management, but cash-flow will provide a true picture of how well the dividend is covered.

Payout-ratio = Total dividend paid for the year/ Total cash-flow generated for the year.

So, for dividend safety, we should look for:

Previous three year or 5-year dividend growth Current Payout ratio versus past 5-years payout ratios.


FWD Dividend



Dividend Growth











































All things equal, when the stock price of a company declines, its valuation improves. For example, PG has declined roughly 20% in the recent past, if its future EPS does not decline, the company has become much cheaper. P/E (or the forward P/E) is the most common metric that is used to judge the valuation. We should also compare the current P/E with the last 5-years average P/E to judge relative valuation.

As Warren Buffett said, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” So, we should not look at the valuation alone. It is important that the fundamentals and the future prospects of the company are solid as well. That is why valuation is just one of the nine factors in our analysis.


Current P/E

Forward P/E
















































Long-term Debt:

The long-term debt of a company and its ability to service those debts are important to know. We should look at the interest expense versus the income to get an idea if the debt load is going to be too much for the company. We can also look at the credit rating of the company provided by various credit agencies.


Long-Term Debt

S&P Credit Rating (L.T.)

Debt/Equity Ratio

Debt/Total Asset ratio



$18.0 Billion






$6.5 Billion






$7.6 Billion






$19.08 Billion






$16.14 Billion






$28.3 Billion





Revenue Growth:

Revenue growth will tell us if the company is growing its top line. As you can see below, the only company that has performed much better recently is Unilever, and that shows in its share price, which has not declined much in-spite of the downward pressure.


Previous 3-yrs Growth

Previous 5-yrs Growth

Previous 10-yrs Growth
































EPS Growth:

As the earnings of a company grow, so will the share price.


Previous 3-yrs

EPS Growth

Previous 5-yrs

EPS Growth


























Future Growth Estimates:

The recent past history of EPS growth can tell a lot about how the company has been growing. But it still can’t tell about the future. However, we can use the EPS growth estimates for this purpose. Below are the EPS growth estimates from and



Growth Est.

Next 5-yrs

Growth Est.


























Overall Rating:

We summarize the category-wise ratings for the five stocks and calculate the overall ratings.






Size and economic moat






Dividend Yield






Dividend growth






Dividend safety












Long-term debt






Revenue growth






EPS growth






Future growth estimates














All the above companies that have been analyzed are relatively safe DGI companies. As you can see from our analysis that there are only marginal differences in the net rating that we have derived. Though this rating method is un-scientific and subjective to some extent, we still find it helpful.

If we are price-conscious and rather go for the cheapest company in this sector, probably PG would be our choice. However, if we want to buy a company that has been going strong in the recent years, we could buy Unilever, which is trading at a fair price (but not cheap). In terms of future prospects and growth, it is difficult to see which company will grow faster than others. The EPS growth estimates suggest higher growth for Nestle and KHC going forward, but these are only Wall-street estimates at this point and should be taken with a grain of salt.

As we stated earlier in the article, you should pay attention to the position weight to this sector. If you are already overweight the sector, you should probably skip the temptation to buy. On the other hand, if you are underweight, it will be okay to nibble on a couple of names like PG and Nestle.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. Any stock portfolio or strategy presented here is only for demonstration purposes.


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.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Regretting It Already

Last Sunday, I wrote a fun little something for this platform called “Jerome Powell May Live To Regret These Statements“, in which I flagged a series of comments the newly appointed Fed chair made at an IMF/SNB event earlier this month.

Here, for anyone who missed it, is what Powell said about the likely resilience of emerging markets (EEM) as the Fed normalizes policy:

Monetary stimulus by the Fed and other advanced economies played a relatively limited role in the surge of capital flows to (emerging market economies) in recent years.

There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs. Markets should not be surprised by our actions if the economy evolves in line with expectations.

In the first piece linked above, I gently suggested that while rising U.S. rates and the ongoing rally in the dollar (UUP) needn’t necessarily lead to a broad-based unwind in EM, past a certain point it won’t be possible to contend that the only real issues here are a recalcitrant Erdogan in Turkey and a crisis of confidence with regard to the Argentine peso.

In other words, there’s only so long you can lean on the idiosyncratic, country-specific stories excuse when the pain is spilling over to other locales amid a continual rise in U.S. rates and still more dollar strength. Although it’s really only possible to know this in hindsight, often (and this doesn’t just apply to emerging markets) we discover that what we thought were “idiosyncratic” stories were in fact coal mine canaries or, to mix metaphors, the wobbliest dominoes.

As I noted last Sunday, “what you’ve seen recently in the Brazilian real and also in Indonesia is evidence of contagion.” I started talking at length about the Indonesia story weeks ago and around the same time, BofAML’s Michael Hartnett (he’s the guy who told you to sell based on his “perfect” indicator back on January 26, a week before things got dicey), said this about the Brazilian real:

EM FX never lies and a plunge in Brazilian real toward 4 versus US dollar is likely to cause deleveraging and contagion across credit portfolios.

Well, this week, Indonesia hiked rates for the first time since 2014 and Brazil’s central bank eschewed what would have been a 13th consecutive rate cut in an effort to put the brakes on the currency pressure.

Neither effort was effective. In Indonesia’s case, the rupiah plunged to its lowest since October 2015 on Friday:


Have a look at the selloff in bonds (benchmark yields for Indonesia are up some 65 bps this quarter, that would be the largest quarterly jump since late 2016):


In short, the rate hike is not going to be enough. Capital flight is accelerating.

As for Brazil, the “hawkish” decision to forgo another rate cut similarly failed to assuage concerns and worse, it deep-sixed Brazilian equities. The real continued to fall, hitting a two-year low on Friday and I think you’ll agree that what you see in the following chart looks like trouble:


And look, if you’re in the camp that’s predisposed to suggesting none of this matters until it spills over into developed markets, do your friends who hold the popular iShares MSCI Brazil Capped ETF (EWZ) a favor and don’t feed them that line, ok? Have a heart. Empathize. Because they just had their worst week since the circuit breakers were tripping last May:


When it comes to Brazil there’s probably no need to panic just yet. There’s some electoral uncertainty, but nothing that should justify what you see in the currency.

“BRL is slightly weak but not too devalued. This is not an overshooting,” Goldman’s Alberto Ramos told Bloomberg in an e-mail, adding that this is a reflection of external shocks (think: stronger dollar and rising U.S. rates) that “are common to other EM currencies.”

He did go on to note that we could see 4.00 on the BRL, but that “would require the intensification of global EM FX pressures and more concern about the October election.”

Right. Well when it comes to “the intensification of global EM FX pressures” (i.e., when it comes to the kind of 30,000 foot view), the MSCI EM FX index has fallen for six of the past seven weeks:


It was down every day this week.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has also fallen for six of the last seven weeks:


And how about the iShares JP Morgan EM Local Government Bond UCITS ETF? Well, it’s down handily, has seen some $550 million in outflows this month alone, and as Bloomberg notes, hasn’t seen a net inflow since March:

(Heisenberg, Bloomberg)

Look at the slide in its market cap just over the past two months:


Now, let me take a moment to remind you that I have been persistently warning about Turkish President Recep Tayyip Erdoğan’s penchant for pushing a laughably unorthodox “theory” about how higher interest rates cause inflation and currency depreciation. If you follow Turkey, you know all about this. Here’s what I said in the post linked here at the outset:

In case you were under the impression that Erdoğan is going to be inclined to moderating his stance on interest rates (which, in his bizarre version of economics, cause inflation if they’re too high), he is going out of his way to ratchet up the rhetoric and disabuse you of that idea on a daily basis.

Well, do you know what he did this week? He went on Bloomberg TV and all but confirmed that once next month’s election is out of the way, he’s going to effectively commandeer monetary policy. You can watch that interview for yourself here and/or read my longer commentary here, but suffice to say it pushed the beleaguered lira to a fresh all-time low and confirmed everyone’s worst fears about what’s going to happen once he officially consolidates power:


As an amusing aside, if you’re following along on Twitter, you knew that Bloomberg interview was bound to cause trouble:

All of this played out in a week that saw 10Y yields (TLT) in the U.S. hit their highest since 2011 and 30Y yields touch 3.25%.

Oh, and remember how the dollar rally stalled last week? Yeah, well it resumed this week, rising for the fourth week in five:


What you’re seeing here is not only notable, but extremely important for what it says about how the environment is shifting as the Fed normalizes. As I’ve been keen on noting for at least a year, everything became one trade as QE drove everyone down the quality ladder in a relentless hunt for yield and as dovish forward guidance kept rates vol. anchored. That’s now reversing.

How violent that reversal will ultimately be is debatable. Some folks think it wouldn’t be the worst thing to just let emerging markets go. The following excerpts are from the latest by former trader turned Bloomberg columnist Richard Breslow:

These positions can be put to the test without necessarily having negative implications for the broader asset classes. In fact, it may represent a very positive development. A big chunk of these trades weren’t originally done because people were feeling chuffed. They were just desperately searching for yield and following the bidding of the central banks.

But if you’re fascinated by big names, then you might note that Carmen Reinhart is concerned. Here’s what she said this week about emerging markets:

The overall shape they’re in has a lot more cracks now than it did five years ago and certainly at the time of the global financial crisis. It’s both external and internal conditions. This is not gloom-and-doom, but there are a lot of internal and external vulnerabilities now that were not there during the taper tantrum.

And then there was this from El-Erian (via Twitter):

Now look, if what you want to do is pretend as though this is all immaterial for developed market investors, then by all means, but just know that this is one of those scenarios where the old adage about being “entitled to your own opinions but not your own facts” applies. As Heisenberg readers know, I generally despise old adages, but that one is apt here.

This is absolutely material for all investors and the whole point of documenting the spillover from Turkey and Argentina into other locales and charting the decline in various indices and funds is to demonstrate that rising U.S. rates and the stronger dollar are the proximate cause of the problem.

This is all a consequence of the buildup of imbalances in the QE era. It was always a matter of how smoothly the unwind of all the trades that are part and parcel of the global hunt for yield would be and the verdict from emerging markets right now is: “not smoothly”.

Trade accordingly. Or don’t. It’s up to you. But don’t say you don’t have the information you need to make an informed decision.

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.

Elon Musk brings technology charm offensive to Los Angeles tunnel plan

LOS ANGELES (Reuters) – Billionaire entrepreneur Elon Musk is bringing his technology charm offensive to an attempt at digging a tunnel beneath part of Los Angeles to test designs for a high-speed subterranean transportation network he envisions for the city.

SpaceX founder Elon Musk smiles at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Center in Cape Canaveral, Florida, U.S., February 6, 2018. REUTERS/Joe Skipper

Musk, the Silicon Valley high-tech tycoon best known for his Tesla Inc electric car manufacturer, planned to make a rare personal appearance at a public event in Los Angeles on Thursday night to answer questions from residents about his tunneling plans.

Efforts by Musk’s aptly named underground transit venture, the Boring Company, to win fast-track city approval of the proposed tunnel has drawn a court challenge from two neighborhood organizations.

The venue for his town hall-style meeting is the Leo Baeck Temple, a synagogue in the city’s affluent Bel-Air district, where Musk owns a residence, about 10 miles (16 km) north of the would-be tunnel site.

Plans call for excavating a 2.7-mile (4.4-km) passage below a stretch of the congested Sepulveda Boulevard corridor on the West Side of Los Angeles and the adjacent town of Culver City.

The Los Angeles City Council’s public works committee last month approved Boring’s request to exempt the tunnel from a lengthy environmental impact review that would otherwise be required under state law.

Boring says the tunnel would serve as an experimental proof-of-concept site to demonstrate ideas for a traffic-easing system Musk wants to build to rapidly whisk individual cars and small groups of pedestrians from place to place beneath the surface.

But two neighborhood advocacy groups have filed suit to block the excavation, arguing the project is really intended as the first segment for a much larger tunnel system planned by Musk. They say he is trying to obtain a waiver to evade environmental regulations that forbid piecemeal fast-track permitting of big-scope projects.

Musk launched his foray into public transit after complaining on Twitter in December 2016 that clogged traffic was “driving me nuts,” vowing to “build a boring machine and just start digging.”

The Boring expansion comes as Musk wrestles with production problems for the rollout of the Model 3 sedan at Tesla, his electric car and energy-storage business. He also is chief executive of rocket builder Space Exploration Technologies, or SpaceX, and the profusion of leadership roles has concerned some investors that he is spread too thin.

The West L.A. tunnel is the latest project Boring has undertaken after quietly digging a slightly shorter tunnel underneath tiny neighboring municipality of Hawthorne, where SpaceX and Boring are both headquartered.

Reporting by Steve Gorman; Editing by Peter Cooney

Why Trump Suddenly Wants to Save Jobs in China

President Donald Trump has long promised to get tough on China. So why is he so worried about saving jobs there?

Last week the Chinese telecommunications giant ZTE said it had halted its major operations after the US government moved to ban US companies from selling software or components to ZTE. On Sunday, Trump tweeted that he and Chinese President Xi Jinping were working together to save ZTE. “Too many jobs in China lost,” Trump tweeted. “Commerce Department has been instructed to get it done!”

Lifting sanctions on ZTE might help defuse a budding trade war that threatened US agriculture exports. In exchange for lifting the sanctions, China might rescind planned tariffs on products like pork and ginseng that were themselves responses to the US’s planned tariffs on Chinese steel and aluminum, the Wall Street Journal reports. Chinese tariffs on US farm goods could be a huge headache for Trump and Republicans in the midterms, since red states and rural voters could be the hardest hit.

ZTE’s plan to shut down without US-made hardware and software shows how interconnected the world’s two largest economies remain, despite mutual fears and rising tensions. Chinese companies still rely on US technology. And US tech firms make a large share of their products in China.

The ZTE sanctions could have wider ranging impacts on US-China relations. The sanctions were so excessive that they threaten to damage any trust the Chinese government might have in trade relations in the US, says Susan Shirk, chair of the 21st Century China Center at the University of California, San Diego. “Telling ZTE that it can’t buy US technology signals to China that it can be excluded from the US technology market at any time,” says Shirk, a former US trade negotiator. That just motivates China to build its own alternatives to US technology—exactly what the US would prefer it not do.

Chas Freeman, a senior fellow at Brown University’s Watson Institute, agrees. If China can’t rely on supply chains that include US components, the country will create its own supply chains, says Freeman, who served as President Richard Nixon’s interpreter during his famous 1972 visit to China.

Some critics of Trump’s move to ease the ZTE sanctions, such as Senator Marco Rubio (R-Florida), have argued that the decision will make it easier for Chinese telecommunications companies to spy on Americans. But Shirk points out that the sanctions didn’t prevent the sale of ZTE products in the US and weren’t imposed due to espionage concerns. They stemmed from ZTE’s violations of sanctions against other countries.

Last year ZTE admitted that it violated US export laws by selling phones with US-made software and hardware to countries such as Iran and North Korea. The company agreed to pay a fine of about $900 million, fire four senior employees, and discipline many others. Last month, the U.S. Department of Commerce said the company had failed to discipline some of its employees and, as a result, imposed the sanctions.

Derek Scissors of the free-market think tank American Enterprise Institute says that a deal to reduce the severity of the ZTE sanctions will lower the odds of a trade war in the short term, but could weaken the US’s position in the long term. “The ZTE sanctions were the strongest action the Trump administration has taken against China, by far,” Scissors says. “Why would China believe that the US is serious about taking difficult steps after this?”

Shirk hopes that reducing or eliminating the sanctions could help smooth over US-China relations. But Freeman isn’t so optimistic. Even if the administration can come to a deal with China over agricultural tariffs, it won’t fix the deeper rift between the two countries, he says. Freeman argues that infighting within the Trump administration has left an incoherent, at best, policy towards China. If Trump administration officials can’t agree internally on what they want, they won’t be able to negotiate deals with China.

More Great WIRED Stories

Report: Google Employees Resigning Over Controversial Pentagon Contract

A number of Google employees have resigned in protest over a contract between the tech giant and the Pentagon, according to tech news site Gizmodo.

In March, Gizmodo revealed that Google was working with the Defense Department to develop artificial intelligence for analyzing drone footage as part of an initiative known as Project Maven.

Google’s involvement sparked ethical concern and anger among employees, Gizmodo initially reported. An internal petition called on Google CEO Sundar Pichai to cancel Project Maven and “[d]raft, publicize, and enforce a clear policy stating that neither Google nor its contractors will ever build warfare technology.” The New York Times reported in April that over 3,000 Google employees signed the petition.

Now, according to Gizmodo, “about a dozen” Google employees are resigning due to Project Maven. Their reasons for leaving range from lack of transparency to ethical concerns. “Over the last couple of months, I’ve been less and less impressed with the response and the way people’s concerns are being treated and listened to,” an unidentified employee who resigned told Gizmodo.

For its part, Google says that its Pentagon contract is only a test and that it covers non-classified images.

“The technology flags images for human review, and is for non-offensive uses only,” a Google spokesperson told Gizmodo in March. “Military use of machine learning naturally raises valid concerns. We’re actively discussing this important topic internally and with others as we continue to develop policies and safeguards around the development and use of our machine learning technologies.”

Still members of the tech industry are concerned. In addition to the Google-specific internal petition, there is a broader petition targeting IBM, Microsoft, Amazon and Google, created by tech workers who “believe that tech companies should not be in the business of war.”

Researchers who are critical of Google also posted an open letter worrying about Google providing the Pentagon with “open source ‘deep learning’ technology” along with engineering expertise.

“The DoD contracts under consideration by Google, and similar contracts already in place at Microsoft and Amazon, signal a dangerous alliance between the private tech industry, currently in possession of vast quantities of sensitive personal data collected from people across the globe, and one country’s military,” the letter states. “They also signal a failure to engage with global civil society and diplomatic institutions that have already highlighted the ethical stakes of these technologies.”

In October of 2017, over 100 companies attended an industry event related to Project Maven, according to the Defense Department.

Fortune contacted Google for comment about these resignations and will update this post if it responds.

Project Maven was started in April of 2017 by then-Deputy Defense Secretary Bob Work, who started an Algorithmic Warfare Cross-Functional Team. “The project’s first task involves developing and integrating computer-vision algorithms needed to help military and civilian analysts encumbered by the sheer volume of full-motion video data that DoD collects every day in support of counterinsurgency and counterterrorism operations,” according to a Defense Department article from 2017.

With Trump Feud Still Simmering, Postal Service Announces Huge Growth in Package Delivery — And Widening Losses

The U.S. Postal Service announced its second quarter financial results on Friday, a normally ho-hum moment made a lot more significant thanks to continuing criticism of USPS’s relationship with Amazon by U.S. President Donald Trump.

USPS said that its revenue for shipping and packages shot up by 9.5%, or $445 million, since the second quarter of last year. Meanwhile, letter and other mail volume dropped by 2.1%, and mail revenue was down $181 million. Overall revenue grew 1.4%, but the USPS still lost $1.3 billion in the quarter, compared to a $562 million loss this time last year, thanks to a 5.7% increase in operating expenses. USPS said rising expenses included the cost of retiree health benefits, increased labor costs for shipping packages, and higher transportation expenses.

If that all sounds complicated, it is — and that complexity has helped enable Trump’s campaign against the USPS’s partnership with Amazon. Trump has accused Amazon of benefiting from preferential USPS rates, and last month created a task force to review USPS business practices. But a former postmaster general has said that the USPS agreement with Amazon had been profitable for the Postal Service, which must offer competitive package pricing with services like UPS and FedEx, but can’t legally price package delivery below its cost.

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That supports the idea that criticism of Amazon’s USPS payments as just one front in Trump’s larger fight with Amazon’s owner, Jeff Bezos. Bezos also owns the Washington Post, which is among Trump’s favorite targets to slam as “fake news.” Some see Trump’s claims that Amazon is cheating the USPS, then, as an indirect attack on opposition media. That would be ironic, since the founding principle of universal postal service was increased freedom of information.

USPS’s biggest losses have been fueled not by Amazon, or even by the rise of ecommerce, but by the drastic decline in first-class letters and other light mail, thanks largely to the rise of e-mail. USPS has a monopoly over letter mail which is intended to compensate for requirements that it provide universal service even to remote or less populated parts of America. But first-class mail volume has plummeted by nearly half since its peak in 2000.

In a statement, Postmaster General and CEO Megan J. Brennan blamed growing losses not only on those technological changes, but also on “an inflexible, legistlatively mandated business model that limits our ability to generate sufficient revenue and imposes costs upon us that we cannot afford.”

Brennan was referring in part to a legislative mandate that USPS pre-fund retiree benefits, a requirement not shared by most private-sector companies, or even other federal employees. Lawmakers have also stopped some proposals that would have reduced USPS operating costs, including reducing deliveries from six days a week to five.

If it were a typical business, USPS could have made those needed changes years ago. That might have left Trump less able to use the Postal Service as a weapon in his broader crusade.

Cyber Saturday—As Blockchain Week Kicks Off, Remember The DAO

Good afternoon, Cyber Saturday readers.

In honor of “blockchain week,” which is kicking off in New York City, I’ve been thinking about the security of smart contracts, self-executing computer programs designed to encode business relationships. A smart contract might codify, for example, an agreement like this: If Justify, a racehorse, wins the Kentucky Derby, pay $10 in Bitcoin to some lucky fellow’s digital wallet. The code eliminates the need for a bookie.

Now imagine a future in which such contracts automate tasks once relegated to lawyers, pencil-pushers, and other intermediary parties. Blockchain boosters dream of a day when they can route around middlemen with these sorts of self-driving computer programs, thereby making markets more efficient, so the thinking goes. There’s a snag though: Smart contracts are software applications, and software applications have bugs.

Sometimes, as with The DAO, an ill-fated, decentralized venture capital fund built on Ethereum, a popular cryptocurrency network, those bugs can be ruinous. Hackers stole $50 million in cryptocurrency from the project in 2016 thanks to a simple “reentrancy” flaw. The bug allowed an attacker, or group of attackers, to continually withdraw money from the smart contract-powered organization until its coffers had been thoroughly pilfered.

Similar flubs abound in the field of cryptocurrency. Chris Wysopal, cofounder and chief technologist at Veracode, an application security shop bought by CA Technologies for $614 million in cash last year, gave a keynote talk at Collision conference in New Orleans earlier this month in which he provided an overview of the security challenges posed by smart contracts. “The blockchain is really secure, but the things that have to interact with it, those things aren’t secure,” Wysopal told the audience. “It’s probably one of the toughest problems right now” in security, he said.

Although I did not catch Wysopal’s talk in person (you can watch it here), I chatted with him afterward at B.B. King Blues Club and Grill and in between jazz sets at various bars along Frenchman Street. He said that if he were a thief, smart contracts are where he would focus the majority of his attention and energy today. Target the youngest projects with the worst quality assurance processes, the highest valuations, and the weakest defenses. It’s a recipe for success; in this world, baddies no longer have to worry about monetizing the data they steal. They can steal (virtual) money itself.

If you happen to be in New York for blockchain week, temper your enthusiasm with that alarum. It’s what the smartest folks will do.

Have a great weekend.

Robert Hackett


[email protected]

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

Chipmaker Nvidia sees fewer crypto miners, more gamers in future

(Reuters) – Too many cryptocurrency clients and fewer cloud computing orders than expected underwhelmed Nvidia Corp (NVDA.O) investors on Thursday, although the graphics chip maker said a supply shortage that hit its core video game audience had eased.

FILE PHOTO: The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan May 30, 2017. REUTERS/Tyrone Siu/File Photo

The U.S. company best known for chips that enhance video game graphics has diversified into an array of businesses including artificial intelligence, self-driving cars and digital mining, but investors are most concerned with its inroads in the market for cloud computing.

Revenue from Nvidia’s data center business, which powers cloud-based services such as’s (AMZN.O) Amazon Web Services, Microsoft Corp’s (MSFT.O) Azure as well as Alphabet Inc’s (GOOGL.O) Google Cloud, rose 71 percent to $701 million, but missed analysts’ estimate of $703 million, according to Thomson Reuters I/B/E/S.

The Santa Clara, California company for the first time disclosed that it made $289 million in sales – about 9 percent of its overall $3.2 billion in revenue – from chips for mining cryptocurrencies.

Analysts had expected $200 million and the greater reliance on the fast-growing but volatile business contributed to shares falling 3.3 percent to $251.66 in extended trading. Nvidia shares have gained 34.4 percent this year, propelling the stock to the top of the Philadelphia Semiconductor Index .SOX. They touched a record high at $260.50 on Thursday before the announcement.

Chief Financial Officer Colette Kress said that the company expects cryptocurrency-related revenue to fall 65 percent to about $100 million in the next quarter. Retail prices for Nvidia’s gaming chips surged earlier this year as miners snapped up chips, a development Nvidia addressed by releasing mining-specific chips.

“While supply was tight earlier in the quarter, the situation is now easing,” Kress told investors on a conference call. “Gamers who had been priced out of the market last quarter” were able to get their hands on new chips a reasonable price, she said.

Analyst Kevin Cassidy from Stifel said the reliance on cryptocurrency concerned some investors. Moreover, he said, Nvidia’s earnings were mostly in line with expectations, “which may not be good enough for shares trading at 40x forward earnings.”

Data center industry sales have boomed as cloud services build out new facilities. Intel Corp (INTC.O) last month said it had posted its biggest-ever quarterly jump in its data center business. For its part, Nvidia said it doubled sales of chips used by cloud companies for so-called deep learning.

Patrick Moorhead of Moor Insights & Strategy said he was not concerned by the lower-than-expected data center revenue because the buying patterns of huge cloud customers were “lumpy.”

Revenue from Nvidia’s best-known business of gaming chips rose 68 percent to $1.72 billion, beating analysts’ average estimate of $1.65 billion.

“At the core of it, gaming is strong,” Chief Executive Jensen Huang told investors on the conference call. “The pent-up demand is quite significant and I’m expecting the gamers to be able to buy new GeForces pretty soon.”

A cryptocurrency boom has powered growth at Nvidia and rival Advanced Micro Devices Inc (AMD.O), but the sector is battling volatility caused by swings in the currency’s value.

Revenue from Nvidia’s automotive business, which includes its Drive platform used in self-driving cars, rose 4 percent to $145 million, also topping analysts’ estimate of $132 million.

Nvidia in March suspended self-driving tests across the globe, a week after an Uber Technologies Inc [UBER.UL] autonomous vehicle struck and killed a 49-year-old woman crossing a street in Arizona. But CEO Huang remained optimistic.

“I expect that driverless taxis will start going to market about 2019,” Huang told investors.

The company’s net income rose to $1.24 billion, or $1.98 per share, in the first quarter ended April 29, from $507 million, or 79 cents per share, a year earlier.

Total revenue rose to $3.21 billion from $1.94 billion.

Excluding items, Nvidia earned $2.05 per share.

Analysts on average had expected revenue of $2.91 billion, according to Thomson Reuters I/B/E/S.

Reporting by Sonam Rai in Bengaluru and Stephen Nellis in San Francisco; editing by Peter Henderson and Lisa Shumaker

Chinese gaming firm Huya prices IPO in New York at $12 per share: source

(Reuters) – The initial public offering of Chinese game-streaming platform Huya Inc on the New York Stock Exchange was priced at $12 per share, a source familiar with the matter said on Thursday, at the upper-end of the indicated price range.

Huya offered 15 million American Depository Shares (ADS), raising $180 million. The company had indicated a price range of $10-$12 each.

Following the offering, Huya’s parent company YY Inc will hold 54.9 percent voting power in the company, while a Tencent Holdings investment unit will hold 39.5 percent, Huya said in a statement.

Huya is one of China’s biggest live-streaming platforms for online gaming, covering over 2,600 different mobile, PC and console games.

China had the world’s largest video games market in terms of revenues and number of gamers in 2017, Huya said. The company had nearly 40 million average mobile monthly active users in the fourth quarter of 2017.

Huya’s revenue almost tripled to 2.18 billion yuan ($344 million) in 2017 from the year previous. It made a loss of 80.9 million yuan.

Credit Suisse, Goldman Sachs and UBS are lead underwriters to the offering.

Reporting by Diptendu Lahiri and Nikhil Subba in Bengaluru, Editing by Rosalba O’Brien

Budweiser Wants to Get You Drunk on Mars

If the human race ever makes it to Mars, the rigors of staying alive on a hostile planet with a poisonous atmosphere should keep astronauts pretty busy. But if Anheuser-Busch has its way, astronauts will be able to kill the little free time they have by drinking Budweiser.

On Friday, Anheuser-Busch, part of global brewing conglomerate ABInBev, released an un-ironic commercial declaring Budweiser’s intent to colonize the next frontier: becoming the official beer of Mars. To get there, the beer brand has partnered with Elon Musk’s SpaceX to supply the rocket and Space Tango, a Kentucky-based startup that makes “CubeLabs” that run automated experiments inside the International Space Station (ISS) laboratory.

The commercial is part of the ongoing “commitment” Anheuser-Busch made last Thanksgiving to develop the very first “micro-gravity” beer to drink on Mars. In December, the brand sent 3,500 barley seeds inside one of Space Tango’s CubeLabs aboard a SpaceX re-supply rocket. Once it arrived at the ISS, the goal was to figure out how barley grows in a microgravity environment. In April, Anheuser-Busch sent a second batch to collect more data on seed germination in space.

In the ad, set to nostalgic footage of space missions past, retired NASA astronaut Clayton Anderson asks: “How is beer essential to the mission [to Mars]?” He responds, in earnest, with another, more seemingly existential question: “Well, what’s the point in going to space if we don’t bring ourselves?”. (Ourselves, of course, being beer.)

“They [Anheuser-Busch] are balancing the line of doing unique scientific research to study the biology of germination while pushing the boundaries of leisure and recreation during space exploration,” says Gentry Barnett, Space Tango’s lab program manager.

According to Space Tango co-founder Kris Kimel, the germinated barley seeds from the April experiment are currently on their way back to Earth, and will eventually land in the ocean 200 miles off California, before being sent to Anheuser-Busch’s agricultural headquarters in Fort Collins, Colorado.

NASA did not respond to a request for comment about whether or not any astronauts have drunk beer, or any alcohol, in space.

Even if the Anheuser-Busch barley experiments are just a creative way to sell beer, it’s not a bad move. Spark & Honey, an ad agency, found that 36 percent of Americans say they are more willing to buy a product tied to space in some way. Why not sell space beer?