Sign Of The Top? Soft Bank Raises $108 Billion For Second Vision Fund

For a minute there, it looked like the investors who had helped finance Soft Bank’s original Vision Fund were finally beginning to question the strategy of paying exorbitant sums for stakes in Silicon Valley’s most popular unicorns. But, aside from a handful of embarrassing flops, the strategy appears to have paid off: Because even though Soft Bank’s original patrons, the Saudis and Emiratis, have expressed their reservations, it appears the Japanese telecoms-giant-with-a-VC-arm has succeeded in raising its second venture fund in less than three years.

Soft Bank

According to WSJ and the FT, despite the Uber IPO’s embarrassing flop, Soft Bank (the largest single backer of Uber; it is reportedly holding on to its shares) has locked down commitments for $108 billion from Microsoft, Apple, Standard Chartered, Goldman Sachs, the sovereign wealth fund of Kazakhstan and an array of other investors – though the Saudis and Emiratis have balked, they’re reportedly still in talks with Soft Bank about a possible commitment.

Several Japanese and Taiwanese banks and insurers have also reportedly committed capital.

At $108 billion, the fund is the largest private pool of money ever assembled, and it couldn’t have come at a better time. The first Vision Fund has invested some $70 billion in more than 70 companies, but because of annual disbursements it must make to some investors, it has effectively run out of working capital. 

Deals

Soft Bank Chairman Masayoshi Son said he wants the new fund to focus on AI, which the billionaire Soft Bank founder believes will explode in usefulness as the amount of real-world data gathered by sensors, cameras and other machines would allow companies to better leverage these connections. And because of an even larger investment from his company, it’s likely that Masayoshi Son will have even more control over investment decisions.

“The power to predict the future is about to emerge,” Mr. Son said last week at a Tokyo conference SoftBank held for its corporate clients. “The amount of data will grow by a million times over the next 30 years.”

That means the Vision Fund II will be a boon for any trendy AI startups, now that they know Masayoshi Son will pay an absurd premium for a 10% stake.

But like last time, Soft Bank is also committing a large chunk of its capital. The fund will commit $38 billion to this latest fund, up from $28 billion in the first Vision Fund. To make this work, the telecoms giant will need to liquidate some of its investments. For that to happen, it would help for the Sprint-T-Mobile merger to finally go through, but the opposition by the federal government and some state AGs has left its success very much in question.

The Vision Fund was credited with single-handedly raising valuations across the unicorn space by making $100 million the new minimum check size. Suddenly, Sequoia Capital and other major VC firms had to raise multi-billion-dollar investment funds just to compete and get stakes in valuable startups.

Now, with WeWork and Slack next up on the hot IPO docket, Vision Fund II has arrived to pump up the valuations of the next round of unicorn darlings. And remember: The faster they burn cash, the larger the valuation multiple.

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Review: Once Upon a Time…in Hollywood

Once Upon a Time…in Hollywood is being marketed as “The 9th Film from Quentin Tarantino”—a shoulder-tapping reminder that the golden age of punk-savant cinema that the director inaugurated 27 years ago with Reservoir Dogs, and has since decided to limit to 10 pictures, will soon be over. Well, so he keeps saying.

Number nine is a baggy, meandering movie, but it’s leagues better than its predecessor, the constipated Hateful Eight. This one is filled with wonderful stuff—mesmerizing stretches of narrative invention and a raft of memorable performances, most notably by its stars, Leonardo DiCaprio and Brad Pitt, who’ve rarely if ever been more magnetic.

Unfortunately, there’s a lot of other stuff packed into the movie, too, none of it nearly as wonderful. The picture is long (although two hours and 40 minutes is hardly an extreme length in the Tarantinoverse), and because of the director’s unebbing obsession with movie-biz minutiae it sometimes drags. Being handed $90-million of Sony production money and set free for the first time from the old Weinstein budget brakes and runtime cautions have encouraged Tarantino’s worst instincts. But the movie is redeemed by the affection with which he recounts his audacious story, and by its unexpected, summery charm (a sunny yellow is its keynote color).

We are in 1969, the year of both Woodstock and the Manson murders (which we can feel lurking at the movie’s end). It’s a time of roiling change, not least in the movie industry, in which past-his-peak action star Rick Dalton (DiCaprio) and his longtime stunt double, driver and de-facto gofer Cliff Booth (Pitt) now find themselves rudderless. Rick had a hit western series called Bounty Law on TV a few years back (Tarantino shows us more of it than we might wish to see, and has actually talked about turning it into a real, here-and-now TV show), but he screwed that up, and now he’s a choking smoker with a heavy whisky-sour habit who gets by doing guest bad-guy cameos on other people’s shows. A friendly producer (Al Pacino) advises him to get in on the spaghetti-western boom, but Rick thinks those movies are beneath him. (You can imagine onetime TV cowboy Clint Eastwood being similarly dismissive before flying off to Rome in 1964 to start making spaghetti classics with director Sergio Leone.)

DiCaprio’s portrayal of desperate insecurity—of a man whose wilting smile reveals his terror of losing his grip on stardom, however middling—is fully fleshed out: it’s both moving and funny, especially in a terrific scene with a chirpy eight-year-old actress (the amazing Julia Butters) whose unsolicited on-set reassurance about Rick’s talent brings him to tears.

Although he contentedly functions as Rick’s aide-de-camp, Pitt’s Cliff Booth is nothing like a satellite character—this is definitely his movie, too. The actor’s stoic solidity flows naturally from the classic movie-western tradition, and he lights it up with effortless, full-voltage star power. Cliff sees nothing unjust in the fact that Rick lives in a swell house up in starry Benedict Canyon, right next to newly arrived starlet Sharon Tate (Margot Robbie) and her hot-director husband Roman Polanski (Rafal Zawierucha), while he inhabits a cramped trailer out in the Valley, right next door to—what else?—a drive-in movie lot.

Cliff’s own career has been hobbled by persistent gossip that he killed his wife and got away with it (an aspersion that Tarantino tags with a quick flashback suggesting that if it’s true, Cliff was probably justified). Like any vintage man-of-few-words, Cliff is a guy with unstated limits beyond which he won’t be pushed. We see this in a singularly funny scene in which Cliff, having secured a rare stunt gig on the Green Hornet TV series, finds himself pushing back hard against wiseass goading by one of the show’s stars, future martial arts icon Bruce Lee (a whip-crack performance by Mike Moh). And we see it again after Cliff picks up a pretty hitchhiker called Pussycat (Margaret Qualley, virtually popping off the screen with pure charisma) and takes her where she wants to go—the Spahn Movie Ranch, a location-for-hire that Cliff knows from his earlier stuntman days. Now it’s home to Pussycat and her many friends—mostly young women—who hover dead-eyed and creepy as Cliff makes his way across the decrepit property.

These are the Manson girls, of course, and with their introduction the movie begins to grow dark and foreboding. Although we eventually do get a very brief glimpse of Manson himself (Damon Herriman), it’s these feral kids, with their infantile whining and heavy graveyard vibe, who most disturbingly foreshadow the horror we know must come.

Up to this point Tarantino has allowed us only intermittent visits with Robbie’s Sharon Tate, whom he keeps tucked away in a space outside of the main story. This is an interesting decision, allowing Tate to function as an ambient sunbeam flickering freely through the picture. We see her happily partying at the Playboy Mansion with a herd of celebrities that includes Steve McQueen (Damian Lewis) and Mama Cass (Rachel Redleaf). And in the movie’s most radiant scene, we see her inside a theater watching her latest (and last) American film, The Wrecking Crew, and beaming each time the audience laughs appreciatively at her comic performance. (Despite being given so little to bite into, Robbie is enchanting here, especially in a scene at the theater box office when she tells the cashier, “I’m in the movie,” and points to a still photo—”That’s me!” Rarely has a character’s sweet spirit been so fully served-up in so few words.)

The overflow of technically precise Rick Dalton film and TV content here, while admirably “authentic,” grows numbing. (Although there’s a cute echo of Tarantino’s Inglourious Basterds in a flamethrower scene from a fictitious Dalton war movie called The 14 Fists of McCluskey.) And while the sprawling cast might have become unwieldy—it’s a large assemblage of unexpected actors both familiar (Timothy Olyphant, Dakota Fanning, the late Luke Perry) and not so much (Mikey Madison brings a real chill to the character of Manson psychopath Susan Atkins)— even the smallest roles receive maximum energy. There’s also pricey production design (Tarantino rebuilt a block of Hollywood Boulevard to restore such long-gone LA landmarks as the big Peaches record store and the Pussycat adult theater). And the director’s pop-music nerdery is once again in full effect, conveyed in an avalanche of period radio hits by Roy Head, Deep Purple, Paul Revere & the Raiders, and longtime Quentin fave Neil Diamond (whose 1969 “Brother Love’s Traveling Salvation Show,” with its sultry lyric about a “hot August night,” takes on an ominous specificity at the end). Tarantino has even managed the unlikely feat of wedging “California Dreamin'” into this uneasy film—bypassing the chiming Mamas and Papas original and going instead with the darker José Feliciano cover version.

As the movie winds on and on, you’re increasingly preoccupied with the question of how Tarantino is going to connect this basically loose and amiable story with the ferocious horror of the Manson Family murders of Sharon Tate and four other people in the early hours of August 9, 1969. His solution is an exercise in empathetic imagination, and it’s not only cleverly turned, but—and I know this is difficult to imagine—very funny, too. The movie ends in a surge of bloody designer violence, of course—although surely not the one you were expecting.

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Review: Once Upon a Time…in Hollywood

Once Upon a Time…in Hollywood is being marketed as “The 9th Film from Quentin Tarantino”—a shoulder-tapping reminder that the golden age of punk-savant cinema that the director inaugurated 27 years ago with Reservoir Dogs, and has since decided to limit to 10 pictures, will soon be over. Well, so he keeps saying.

Number nine is a baggy, meandering movie, but it’s leagues better than its predecessor, the constipated Hateful Eight. This one is filled with wonderful stuff—mesmerizing stretches of narrative invention and a raft of memorable performances, most notably by its stars, Leonardo DiCaprio and Brad Pitt, who’ve rarely if ever been more magnetic.

Unfortunately, there’s a lot of other stuff packed into the movie, too, none of it nearly as wonderful. The picture is long (although two hours and 40 minutes is hardly an extreme length in the Tarantinoverse), and because of the director’s unebbing obsession with movie-biz minutiae it sometimes drags. Being handed $90-million of Sony production money and set free for the first time from the old Weinstein budget brakes and runtime cautions have encouraged Tarantino’s worst instincts. But the movie is redeemed by the affection with which he recounts his audacious story, and by its unexpected, summery charm (a sunny yellow is its keynote color).

We are in 1969, the year of both Woodstock and the Manson murders (which we can feel lurking at the movie’s end). It’s a time of roiling change, not least in the movie industry, in which past-his-peak action star Rick Dalton (DiCaprio) and his longtime stunt double, driver and de-facto gofer Cliff Booth (Pitt) now find themselves rudderless. Rick had a hit western series called Bounty Law on TV a few years back (Tarantino shows us more of it than we might wish to see, and has actually talked about turning it into a real, here-and-now TV show), but he screwed that up, and now he’s a choking smoker with a heavy whisky-sour habit who gets by doing guest bad-guy cameos on other people’s shows. A friendly producer (Al Pacino) advises him to get in on the spaghetti-western boom, but Rick thinks those movies are beneath him. (You can imagine onetime TV cowboy Clint Eastwood being similarly dismissive before flying off to Rome in 1964 to start making spaghetti classics with director Sergio Leone.)

DiCaprio’s portrayal of desperate insecurity—of a man whose wilting smile reveals his terror of losing his grip on stardom, however middling—is fully fleshed out: it’s both moving and funny, especially in a terrific scene with a chirpy eight-year-old actress (the amazing Julia Butters) whose unsolicited on-set reassurance about Rick’s talent brings him to tears.

Although he contentedly functions as Rick’s aide-de-camp, Pitt’s Cliff Booth is nothing like a satellite character—this is definitely his movie, too. The actor’s stoic solidity flows naturally from the classic movie-western tradition, and he lights it up with effortless, full-voltage star power. Cliff sees nothing unjust in the fact that Rick lives in a swell house up in starry Benedict Canyon, right next to newly arrived starlet Sharon Tate (Margot Robbie) and her hot-director husband Roman Polanski (Rafal Zawierucha), while he inhabits a cramped trailer out in the Valley, right next door to—what else?—a drive-in movie lot.

Cliff’s own career has been hobbled by persistent gossip that he killed his wife and got away with it (an aspersion that Tarantino tags with a quick flashback suggesting that if it’s true, Cliff was probably justified). Like any vintage man-of-few-words, Cliff is a guy with unstated limits beyond which he won’t be pushed. We see this in a singularly funny scene in which Cliff, having secured a rare stunt gig on the Green Hornet TV series, finds himself pushing back hard against wiseass goading by one of the show’s stars, future martial arts icon Bruce Lee (a whip-crack performance by Mike Moh). And we see it again after Cliff picks up a pretty hitchhiker called Pussycat (Margaret Qualley, virtually popping off the screen with pure charisma) and takes her where she wants to go—the Spahn Movie Ranch, a location-for-hire that Cliff knows from his earlier stuntman days. Now it’s home to Pussycat and her many friends—mostly young women—who hover dead-eyed and creepy as Cliff makes his way across the decrepit property.

These are the Manson girls, of course, and with their introduction the movie begins to grow dark and foreboding. Although we eventually do get a very brief glimpse of Manson himself (Damon Herriman), it’s these feral kids, with their infantile whining and heavy graveyard vibe, who most disturbingly foreshadow the horror we know must come.

Up to this point Tarantino has allowed us only intermittent visits with Robbie’s Sharon Tate, whom he keeps tucked away in a space outside of the main story. This is an interesting decision, allowing Tate to function as an ambient sunbeam flickering freely through the picture. We see her happily partying at the Playboy Mansion with a herd of celebrities that includes Steve McQueen (Damian Lewis) and Mama Cass (Rachel Redleaf). And in the movie’s most radiant scene, we see her inside a theater watching her latest (and last) American film, The Wrecking Crew, and beaming each time the audience laughs appreciatively at her comic performance. (Despite being given so little to bite into, Robbie is enchanting here, especially in a scene at the theater box office when she tells the cashier, “I’m in the movie,” and points to a still photo—”That’s me!” Rarely has a character’s sweet spirit been so fully served-up in so few words.)

The overflow of technically precise Rick Dalton film and TV content here, while admirably “authentic,” grows numbing. (Although there’s a cute echo of Tarantino’s Inglourious Basterds in a flamethrower scene from a fictitious Dalton war movie called The 14 Fists of McCluskey.) And while the sprawling cast might have become unwieldy—it’s a large assemblage of unexpected actors both familiar (Timothy Olyphant, Dakota Fanning, the late Luke Perry) and not so much (Mikey Madison brings a real chill to the character of Manson psychopath Susan Atkins)— even the smallest roles receive maximum energy. There’s also pricey production design (Tarantino rebuilt a block of Hollywood Boulevard to restore such long-gone LA landmarks as the big Peaches record store and the Pussycat adult theater). And the director’s pop-music nerdery is once again in full effect, conveyed in an avalanche of period radio hits by Roy Head, Deep Purple, Paul Revere & the Raiders, and longtime Quentin fave Neil Diamond (whose 1969 “Brother Love’s Traveling Salvation Show,” with its sultry lyric about a “hot August night,” takes on an ominous specificity at the end). Tarantino has even managed the unlikely feat of wedging “California Dreamin'” into this uneasy film—bypassing the chiming Mamas and Papas original and going instead with the darker José Feliciano cover version.

As the movie winds on and on, you’re increasingly preoccupied with the question of how Tarantino is going to connect this basically loose and amiable story with the ferocious horror of the Manson Family murders of Sharon Tate and four other people in the early hours of August 9, 1969. His solution is an exercise in empathetic imagination, and it’s not only cleverly turned, but—and I know this is difficult to imagine—very funny, too. The movie ends in a surge of bloody designer violence, of course—although surely not the one you were expecting.

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Puerto Rico’s New Governor Hit With Ethics Probe One Day After Rossello’s Resignation

The hundreds of thousands of protesters who rallied across Puerto Rico (and in Puerto Rican communities across the US) will love this: On her first day as the commonwealth’s governor-in-waiting, Secretary of Justice Wanda Vazquez has become the target of an investigation by the Office of Government Ethics, which announced a “review” of her conduct as the island’s top law-enforcement official.

Many of the Puerto Ricans who rallied against Ricardo Rossello, the island’s deeply unpopular governor, who resigned in disgrace earlier this week, would welcome this investigation. Vasquez has a reputation for being a corrupt official who will carry on Rossello’s policies, and marches had been planned to demand that she also resign, and that the island allow the people to select a new leader.

Wanda Vazquez

The job would have fallen to the territory’s secretary of state, but Luis Rivera Marín had resigned earlier this month over the texting scandal, and no replacement had yet been named. It’s unclear when, exactly, that might happen: Whether Rossello plans to appoint another secretary before leaving office is an open question, Bloomberg reports.

Zulma Rosario, executive director of the OGE, directed her staff Thursday to investigate accusations that Vazquez ignored evidence of corruption in disbursing the Hurricane Maria relief funds.

“What we’re investigating is her alleged denial or refusal to investigate these claims as secretary of justice,” Rosario said, adding that she didn’t know how long the investigation would take.

Thousands celebrated in the streets on Thursday when Rossello said that he would leave office on Aug. 2, finally caving after weeks of massive protests driven by a scandal: hundreds of pages of text messages between Rossello and members of his inner circle that included rude and offensive remarks and homophobic slurs. 

The texts were the last straw for many Puerto Ricans, as the island has struggled under a string of corrupt, unpopular governors who helped drive it into bankruptcy.

But because of her links to Rossello, Vazquez isn’t what they had in mind for a replacement.

Vazquez has already survived one ethics investigation. Back in 2018, she was probed over whether she improperly intervened in a case involving a robbery at her daughter and son-in-law’s home. She temporarily stepped down because of the investigation, but was reinstated after it concluded that she had done nothing wrong.

Whether Vazquez makes it a year remains to be seen. On Thursday, BBG reported that graffiti artists were spray painting messages around San Juan: ‘Vazquez, we are coming for you next’.

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Is Boris Johnson The European Union’s Worst Nightmare?

Authored by Bill Wirtz via The American Conservative blog,

Yesterday’s vote in the British Conservative Party confirmed that Boris Johnson will become the United Kingdom’s next prime minister.

Johnson beat his opponent, Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt, by a margin of 92,153 to 46,656 among Conservative voters. Prime Minister Theresa May had stepped down after her efforts to reach a deal with the European Union regarding the UK’s exit from the bloc were repeatedly rejected in the House of Commons. May had negotiated several extensions to the official exit, which is now set for October 31. That leaves Johnson with little time to find an agreement.

The Conservative Party is currently a minority government, relying on the Northern Irish Democratic Unionist Party (DUP) to get measures passed. Since the prime minister post is not directly elected, the ruling political party’s leader automatically becomes head of government. The next general election isn’t scheduled until May 2022.

Boris Johnson is a household name in British politics. He’s the former Brussels correspondent for the Daily Telegraph, former mayor of London, and was one of the most vocal voices behind the campaign to leave the European Union in the Brexit referendum campaign of 2016. The 55-year-old has a massive vocabulary, and is known for his colorful columns and even more colorful insults. In 2013, when he was mayor, he called the London assembly “great, supine, protoplasmic, invertebrate jellies,” getting a laugh even from those who had just voted to remove him from the assembly room.

Beyond his articulate wit, Johnson is likely to be more free market than his Conservative predecessors, though exactly where he stands ideologically is hard to tell. He doesn’t seem to follow in the footsteps of the Tories’ restrictive lifestyle police, as he opposes increased sugar taxes, which have been lauded as a necessary tool for public health. And even though Johnson supports tax cuts for the middle class and increasing the higher-rate income tax threshold by more than 60 percent, he wants to avoid deficits only by increasing borrowing.

Most important however, is what he’ll do differently than his predecessor, Theresa May, to secure Britain’s departure from the European Union. Johnson first opposed the Withdrawal Agreement that May’s government negotiated with the EU, only to “reluctantly” support it on the third vote. This cost him some trust among hardline pro-Brexit supporters. Famous Brexiteer Nigel Farage doubts that Johnson can get the exit done by October 31, though newly elected European Commission president Ursula von der Leyen says she would be open to another extension of the official exit date.

Johnson’s options are limited: either he convinces the EU to make fundamental changes to the Withdrawal Agreement—which seems unlikely—or he cancels triggering Article 50 and doesn’t leave the EU at all—which would be the end of his premiership—or he risks leaving the EU without a deal. In the past, he’s made it clear that he’s open to the third option. Under a no deal scenario, the UK and the EU would fall back onto World Trade Organization rules, which would reintroduce tariffs on goods coming from the EU. Westminster has insisted it would not do this, though Brussels has not been entirely clear on its position.

This is the point of contention: if the UK and the EU re-introduce tariffs, then long lines at the border (including in Northern Ireland) could interrupt the supply chain, and cause shortages and rising prices. On the other hand, Brexiteers have assured their critics that technological improvements can make the process smooth and unseemly, and that tariffs would only come into effect if the EU were to take that step. From a UK standpoint, no border would need to be erected.

The new PM has made it clear that he wants to get a deal, but also that he is ready to steer towards no deal if necessary. This is essentially a negotiating position: if you announce prior to a negotiation that you will never walk away (which is what Theresa May did), then you can be sure that the other side will exploit you.

For the EU, Boris is the least favorable option in this sense, because he seems most secure in walking away from the negotiating table. This explains the nervous reactions across Europe yesterday afternoon. EU Health Commissioner Vytenis Andriukaitis even insinuated on the official website of the European Commission that Johnson deceived the British electorate.

  • If Johnson does not reach a deal, if he kowtows to pressure and begs for an extension, then his days as PM will be short-lived.

  • If he leaves without a deal, he will be faced with doomsday scenarios for weeks, with every bit of bad economic news blamed on his leadership.

  • If he manages to strike a good deal for the United Kingdom, he will go down in history as one of the UK’s most effective leaders.

The suspense is palpable. We will find out what happens on October 31.

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Brickbat: How Obscene

An officer with London’s Metropolitan Police Service has admitted ordering pay-TV porn while at the home of a family whose child had died. Avi Maharaj was on duty and waiting for an undertaker to arrive when he made the purchase. The Independent Office for Police Conduct found evidence he may have falsified his attendance log to hide his purchase. Maharaj has pleaded guilty to fraud. He remains employed by the police department but on restricted duty.

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Which Countries Are The EU’s Biggest ‘Takers’ (And ‘Givers’)

The question of which countries are paying more in EU contributions than they are getting out is a contentious issue for some and was also one major factor in the Brexit vote in the UK.

In the 2017 budget, there were ten EU members contributing more than they got out of the EU, at least in terms of direct monetary contributions. As Statista’s Katharina Buchholz notes, UK came in second place in the ranking, with roughly 7.5 million euros of net contributions. Germany, topping the ranking, put in 12.8 billion euros more than it got out.

Infographic: Which Countries are EU Contributors and Beneficiaries? | Statista

You will find more infographics at Statista

Poland was the biggest monetary benefactor from the EU, coming out with 8.2 billion euros earned, far ahead of Greece (3.7 billion euros) and Romania (3.4 billion euros).

But being on top of this list doesn’t have to send a country scrambling to leave the political union. In Germany, for example, support for the EU is high. While budget contributions might outweigh direct financial benefits for the country, a study by the Bertelsmann foundation suggests that the single EU market increased the average incomes of Germans by over 1,000 euros, above the EU average increase of 840 euros.

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Brickbat: How Obscene

An officer with London’s Metropolitan Police Service has admitted ordering pay-TV porn while at the home of a family whose child had died. Avi Maharaj was on duty and waiting for an undertaker to arrive when he made the purchase. The Independent Office for Police Conduct found evidence he may have falsified his attendance log to hide his purchase. Maharaj has pleaded guilty to fraud. He remains employed by the police department but on restricted duty.

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Germany Struggles On

Authored by Jeffrey Snider via Alhambra Investments,

The popular image of the German industrial machine politics is one which has Germany’s massive factories efficiently churning out goods for trade with the South of Europe (Club Med). Because of the common currency, numerous disparities starting with productivity differences had left the South highly indebted to the North just as the Global Financial Crisis would strike.

The aftermath of that crisis, particularly the second eruption in 2011, posed an economic challenge. Lack of recovery throughout Europe would mean Germany would have to seek its fortunes elsewhere around the world to find new customers in lieu of its old ones being somewhat questionable as to payment.

According to the CIA’s World Factbook, in 2018 two-thirds of all German exports still landed for purchase somewhere inside the rest of Europe. The country’s second largest trading partner is France, after all.

France, though, used be their largest. Germany’s biggest and third biggest export destinations are now the United States and China, respectively. Together, they account for more than 15% of all outbound German trade activity. Along with China, more than 18% of its exported goods ended up somewhere in Asia.

Therefore, Germany’s industrial struggles in 2019 point the finger in the direction of its external focus which we know means the US, China, and Asia.

Earlier this month, the ZEW reported renewed concerns about the state of the German economy. The institute’s sentiment index had rebounded in April to a positive number. This was the hoped-for evidence of the green shoots, the leading edge of what will be a second half rebound after the world’s “transitory” factors disappear.

Over the next several months, however, the ZEW calculates sentiment has moved lower all over again. As of last week and the reading for July, the index has matched the lows of 2018.

In terms of the current situation, the ZEW’s numbers suggest widespread weakness perhaps already turned into contraction.

The situation index this month turned negative for the first time since June 2010. Not once had it fallen into minus territory during the (declared) recession in 2012.

Together, both figures suggest Germany’s economy is in desperate shape (situation) and it doesn’t look like that will change (sentiment) anytime soon.

As if to pile on the bad tidings, IHS Markit reports today that manufacturing continues to contract as negative factors pile up rather than disperse. The manufacturing index fell to 43.1 in July 2019, the lowest in 84 months (the last recession). That number is down from 45.0 in June, the green shoot prerequisite for the second half rebound never really getting out of the contracting side.

It is dragging the entire German economy down with it. The Composite PMI, including both manufacturing and services, fell back to 51.4 in the latest update.

Without Germany’s trade engine, Europe as a whole while hanging in can manage nothing more than the bare minimum sputtering. Markit’s Composite PMI fell to 51.5 this month, down from 52.2 last month. The future does not look bright:

Overall growth of new business meanwhile slowed to near stagnation, its lowest for five months. Manufacturers reported the second-largest drop in new orders since 2012 and service sector inflows of work slipped to the second-lowest in five months.

That’s for the whole of the European economy, not just Germany’s export-bound manufacturers. In the middle of 2019, Europe has practically ground to a halt.

Isn’t that good news? For many, it seems like there is a clock on this thing. A recession or whatever downside has to show up soon or else there can’t be one. Weakness doesn’t just drag on for more than a year; plunge now or it ain’t happening.

That’s not how these things work, though. Everyone remembers the panic in 2008 and how it just came out of nowhere, devastating the world in the blink of an eye. It’s the common perception.

In truth, it took years to get to that point and then nearly a year more before it was all over. Curve inversions and bond market questions had developed in late 2006 – about two years before the final outbreak. Economic weakness had first shown up, in the US and elsewhere, in the early months of 2007.

Ben Bernanke told Congress subprime was contained in March 2007 because there were already serious questions and evident weakening.

What followed, even through the first half of what would only later be called the Great “Recession”, was similar confusion about where things stood. Economic officials and politicians saying everything would clear up, and markets increasingly in doubt. It looked bad, then it didn’t look that bad; the global economy seemed to be holding up and then it didn’t.

The NBER didn’t “officially” declare a recession until December 2008 after more than a year and a half talking about one (and innumerable official assurances it could never happen).

It therefore works the other way around; meaning, the longer the weakness lingers the more likely it is to turn toward a more serious downside. People and businesses will hang on for as long as they can, but if it looks like it will keep going and keep going the more likely they finally just throw in the towel. It is near impossible to predict when, at the same time increasingly straightforward to see the probabilities stacking up unfavorably.

As such, Germany’s woes aren’t really about Germany. They are being transmitted through that country coming from its largest marginal trading partners.

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Airbus ‘Glitch’ That Went Undetected For Years Risked Failure Of Critical In-Flight Systems

Boeing’s unprecedented stumble with the 737 MAX 8, along with President Trump’s trade war, have taken a toll on Boeing’s commercial aerospace business, as its Q2 earnings report, released earlier this week, confirmed. And although Airbus, Boeing’s greatest rival, is now the undisputed leader in building planes for commercial flight, but a scandal or setback could easily shake investors’ confidence in Airbus, and with good reason: reports about potentially dangerous software glitches like this one shouldn’t be ignored.

The Register, a British tech news website, reports that some models of Airbus’s A350 airliners, the company’s ‘workhorse’ model, still need to be rebooted after exactly 149 hours of continuous use, even after the EU’s aviation authority ordered Airbus to fix the glitch ASAP.

Now, the EU is issuing a reminder to pilots to make sure to turn their planes on and off again after 149 hours of power-on time, or risk the loss of critical systems in-flight.

In a mandatory airworthiness directive (AD) reissued earlier this week, EASA urged operators to turn their A350s off and on again to prevent “partial or total loss of some avionics systems or functions.”

The revised AD, effective from tomorrow (26 July), exempts only those new A350-941s which have had modified software pre-loaded on the production line. For all other A350-941s, operators need to completely power the airliner down before it reaches 149 hours of continuous power-on time.

Of even greater concern, the regulator and Airbus weren’t aware of the glitch until 2017, when the original AD was issued, as pilots started suffering unexplained losses of certain systems, putting them and their passengers and crew in a very risky situation.

And this glitch apparently went undetected for years. It was only after a few planes suffered in-flight systems failures that they started to look into it.

Concerningly, the original 2017 AD was brought about by “in-service events where a loss of communication occurred between some avionics systems and avionics network” (sic). The impact of the failures ranged from “redundancy loss” to “complete loss on a specific function hosted on common remote data concentrator and core processing input/output modules.”

In layman’s English, this means that prior to 2017, at least some A350s flying passengers were suffering unexplained failures of potentially flight-critical digital systems.

The glitch is similar to one of the problems that afflicted Boeing’s 787 Dreamliner, as the Register explains.

Airbus’ rival Boeing very publicly suffered from a similar time-related problem with its 787 Dreamliner: back in 2015 a memory overflow bug was discovered that caused the 787’s generators to shut themselves down after 248 days of continual power-on operation. A software counter in the generators’ firmware, it was found, would overflow after that precise length of time. The Register is aware that this is not the only software-related problem to have plagued the 787 during its earlier years.

It is common for airliners to be left powered on while parked at airport gates so maintainers can carry out routine systems checks between flights, especially if the aircraft is plugged into ground power.

The remedy for the A350-941 problem is straightforward according to the AD: install Airbus software updates for a permanent cure, or switch the aeroplane off and on again.

Airlines that own these planes and are thus subject to the order include Air France, American Airlines, Delta Air Lines and Lufthansa, Air China and Taiwan’s China Airlines.

It also shows that the problem of over-reliance on AI and other advanced software isn’t limited to Boeing: As these technologies become more advanced, and these aerospace companies start to increasingly rely on them, these issues are bound to become more widespread. So, does that make air travel safer, or more dangerous?

via ZeroHedge News https://ift.tt/32Smn03 Tyler Durden