Month: March 2018

Authored by Dmitri Speck via Acting-Man.com,

Anatomy of Waterfall Declines

In an article published in these pages in early March, I have discussed the similarities between the current chart pattern in the S&P 500 Index compared to the patterns that formed ahead of the crashes of 1929 and 1987, as well as the crash-like plunge in the Nikkei 225 Index in 1990.

The following five similarities were decisive features of these crash patterns:

– a rally along a clearly discernible trendline on a linear chart

– an accelerated move toward a peak at the end of the advance

– an initial decline testing the trendline

– a counter-trend rebound

– a break of the trendline

After the trendline was broken, waterfall declines began in the three antecedents of 1929, 1987 and the Nikkei in 1990. In early March, I pointed out that the decisive development was the break of the trendline on the second test. What has happened since then?

A Waterfall Decline Threatens After the Trendline Break

This time the rebound from the initial test was a comparatively lengthy affair. However, prices ultimately retreated again and last Friday, March 23, the broad US stock market indeed broke through the trendline. Below is an updated three year daily chart of the S&P 500 Index with the trendline.

S&P 500 Index: On Friday the trendline was broken (it was briefly regained on Monday, see  closing remarks on that point).

 

Obvious Similarities to 1929, 1987 and Japan in 1990

As a reminder, here are charts of the three antecedents for comparison (i.e., DJIA 1986-1987, 1928-1929 and Nikkei 1987-1990).

DJIA with trendline, 1986 – 1987: after the break of the trendline, prices declined rapidly.

DJIA 1928 – 1929: once again the market crashed after the second test of the trendline failed.

 

Nikkei 1987-1990: strong decline in prices after the trendline break

 

The similarities are astonishing: prices rise along the trendline, then the advance accelerates and peaks, the trendline survives an initial test and a rebound commences. A second test of the trendline fails, and after the indexes break through, a water-fall decline begins.

Trendline Break Approximately 50 Days After the Peak

With the break of the trendline last Friday the table showing the temporal distance between decisive turning points can be updated as well. The table shows the time between these points in calendar days after the respective market tops.

 The row designated “initial trend line test” shows the number of days that passed between the top and the first test of the trendline. 30 calendar days passed e.g. in 1929, in the current chart pattern only 13 days (market peak on January 26 2018, initial test of the trend line on February 8).

The next row, “peak of rebound”, shows the number of days that passed between the market peak until the end of the rebound following the first trendline test. This time there were two peaks, one after 31 days and another after 42 days, with the second peak slightly higher than the first. The rebound peaks were grouped closely together in all cases, as they were put in 37 – 42 days after the top.

The last row shows the day on which the break of the trendline took place. In the previous cases it happened 44 to 53 calendar days after the market had topped. With the break last Friday we are looking at 56 days in the current pattern. Once again the trendline breaks are grouped closely together in all cases.

 

Initial Target for the S&P 500 Index: 1,900

Another conspicuous feature of the three antecedents 1929, 1987 and Nikkei 1990 was also the similarity in the extent of the declines. In the first major wave down, prices fell to the starting points of the respective trendlines. Should a comparable waterfall decline once again be in the offing, the initial target for the S&P 500 Index would be 1,900 points, equivalent to a 34% loss from the top.

Thereafter, prices embarked on very different paths in the previous cases:

– after the crash of 1929, prices declined by almost 90% over the next 2.8 years

– in 1987, after a spectacular one-day loss of 22.61%, the market had put the worst behind it

– after the rapid decline of 1990, Japan’s stock market remained mired in a lengthy secular bear market that eventually bottomed after having lost 82 percent – almost 30 years after the top.

South Seas Bubble

In addition I wanted to show what happened in the famous South Seas Bubble of the early 18th century. While it is in many ways quite different from the modern-day examples discussed above, one can quite clearly discern a few interesting similarities: the rise along a trendline, an accelerated rally into the peak, followed by a waterfall plunge after the trendline was broken.

British stock prices 1719 – 1721 (an index constructed from three major stocks): after the break of the trendline, prices fell back all the way to the starting point of the bull market.

 

Elevated Crash Danger

With the recent trendline break, the pattern of the US stock market continues to look similar to that of the three crash antecedents. Other factors are of crucial importance for the stock market as well, such as its extreme fundamental overvaluation, rising interest rates and tensions over global trade.

Of course a crash is by no means certain or preordained, particularly the strong counter-trend move of Monday March 26 (which regained the trendline) does give us pause. However, since the initial rebound ended with a kind of double-top this time, perhaps there will also be two trendline breaks in close succession. Overall, there is now clearly an elevated probability that a waterfall decline lies ahead.

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The beachside town of Santa Cruz, California (pop. 64,465) is grappling with a very sick pension program – despite several measures aimed at keeping it solvent. 

As a flood of retiring city workers began put significant strain on already-rising pension liabilities, Santa Cruz followed the recommendation of the League of Cities and other authorities – issuing a bond to try and ease their own fiscal sinkhole, along with increasing demands from the California Public Employees Retirement System (CalPERS). 

Santa Cruz, just a 20 minute drive over Highway 17 from, Silicon Valley, also shifted some employees into lower-benefit pension plans and hiked employee contributions into the plan. 

In other words, not what city employees signed up for… 

And yet – the city’s pension system is now on life support, declaring a fiscal emergency in February – which will just ease the pain, as the city prepares to place a quarter-cent sales tax increase on the June ballot. 

City Finance Director Marcus Pimentel said that increased sales tax revenue from the proposed ballot measure will not eliminate projected city general fund deficits slated to reach as high as $23 million by 2022, but rather serve to reduce them. Pimentel cited the following causes for the projected deficit: a drop in tax revenue, state pension investment shortfalls, increases to core city costs and infrastructure decay. –Santa Cruz Sentinel

“…our biggest challenge is the skyrocketing increases in health and retirement costs,” says City Manager Martin Bernal. “These costs have gone from 28 percent of general fund salary in 2004 to 43 percent of salary in 2015, to an anticipated 58 percent of salary in 2020.”

Despite the generally upbeat economy and Santa Cruz home prices hitting all-time highs, city operating costs continuing to outpace revenues – particularly for pensions, city officials projected budget deficits ballooning to over $20 million per year in less than two years. 

Of course, absurd retirements such as Santa Cruz City Manager Dick Wilson’s $217,056 annual pension doesn’t help either… But hey, that’s the utopia known as California, which is headed towards becoming the “great while it lasted” state.

Meanwhile, Santa Cruz isn’t alone when it comes to California cities in financial peril. Throughout the state, city governments are facing budget shortfalls, while CalPERS has been hiking mandatory contributions to try and make up for it’s $100 billion shortfall created during the Great Recession – and which has not fully recovered. In fact, CalPERS needs to double in value to meet its funding obligations after an 8.25% projected return failed to materialize.

“We’re in a brave new world of public finance and our community values its municipal services and we do want to be able to fulfill those expectations,” said Santa Cruz Councilwoman Cynthia Mathews during the declaration of the city’s fiscal emergency.

That’s nice – but the city’s meager ballot measure will still only generate $3 million per year – coming nowhere near the additional $9 – $11 million the city says it’s paying to cover CalPERS shortfalls, and just 15% of what’s needed of the city’s $20 million projected annual deficit. 

And this is during the “good times”… What happens when the tide really turns?

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Authored by Mac Slavo via SHTFplan.com,

Although most of the Tiangong-1, the Chinese space station erratically flying through space toward the Earth, will burn up in the atmosphere, there’s a chance part of it will survive and make an impact.

But scientists still don’t know who could be near the impact zone.

China’s prototype space station, Tiangong-1 or “heavenly place”, could re-enter the atmosphere as soon as this week.

Scientists say that most of the eight-tonne spacecraft is expected to burn up as it plummets through the atmosphere, there is a chance some of it will survive all the way down to the surface.

While most of it will burn up during re-entry, around 10 to 40 percent of the satellite is expected to survive as debris, and some parts may contain dangerous hydrazine. However, due to changing conditions in space, it is not possible to accurately predict where the module will land. “It is only in the final week or so that we are going to be able to start speaking about it with more confidence,” said Dr. McDowell. “I would guess that a few pieces will survive re-entry. But we will only know where they are going to land after after the fact. –SHTFPlan, March 8, 2018

According to the Guardian, there’s no cause for alarm. In terms of size, Tiangong-1 is only the 50th largest spacecraft to come down, and there have been no recorded deaths or injuries from people being struck by debris from any of them. The largest uncontrolled entry was SkyLab, the 77-tonne United States space station, which disintegrated over Western Australia. It didn’t injure anyone but large parts of it were later collected.

The other concern is the highly toxic waste on board the space station.  A toxic chemical known as hydrazine is being carried by Tiangong-1. Hydrazine is an inorganic chemical compound. It is a colorless volatile alkaline liquid with powerful reducing properties, used in chemical synthesis and in some kinds of rocket fuels. Hydrazine is highly toxic and dangerously unstable unless handled in solution.

The changes of the spacecraft hitting anywhere populated are slim to none, but the toxic chemical hydrazine could still be damaging regardless of the place of impact.

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As post-graduate millennials struggle to earn enough money to pay off their student loans, start families and perhaps even start saving for retirement, the “generation of renters” (not including parental basement-dwellers) spends nearly $100,000 on rent by the age of 30 according to a study by Rent Café – around 45% of their income. 

Key findings: 

• Millennials pay a whopping $92,600 in total rent by the time they turn 30. Although they earn more compared to previous generations, they also have to spend more on rent.  
• By the time Millennials might be thinking about buying a home or starting a family, they are struggling with rent and student loan debt instead. Compared to Baby Boomers (36%) and Generation X (41%), Millennials have to cope with a 45% rent burden in their 20s. 
• Because of the ever-increasing rents, discrepancies appeared within the same generation as well. With a rent burden of 47%, younger Millennials (20 – 29) surpass older Millennials who spent about 44% of their income on rent between the ages of 22 and 30. 
• If this trend continues, Gen Z-ers are expected to pay something in the vicinity of $102,000 while in their 20’s just to put a rented roof over their head.

With a rent burden of 45%, Millennials pay $92,600 in total rent

Millennials – whose baby boomer parents seem clueless as to why it’s so difficult for their children and grandchildren to get ahead, pay a whopping $92,600 in total rent by the time they turn 30, more than what their Baby Boomer parents paid by the time they hit the same age. It seems that Millennials do put a massive amount of money into renting, but the numbers also show that their total median income is the highest among generations, earning about $206,600 in 8 years.

The difference, however, is that Boomers were able to get away with spending far less of their income on rent vs. the generations which came after – as inflation has significantly eroded purchasing power while wages have struggled to keep up. 

To that end, Rent Cafe notes that millennials spend 45% of this income on rent between the ages of 22 and 30, which is more than the recommended 30%. In fact, none of the two previous generations managed to keep the rent burden under 30% with Gen Xers witnessing a rent burden of 41% and Baby Boomers of 36%.

Both Gen Xers and Baby Boomers made less money than Millennials but they also spent less on rent. Gen Xers spent a total of $82,200 on rent when they were in their 20s, and they earned about $202,100. The same is true for Baby Boomers as they earned $195,700 while $71,000 of that went towards rent.

Besides the heavy rent burden, there are several other reasons why Millennials witness such big financial challenges. One of them is the ever-increasing student loan debt, which many economists blame as the reason Millennials aren’t able to buy homes. Millennials do make more money than any other generation before them, but they’re also said to be spending more on things that are not necessarily essential, like Uber rides, pricey coffee or eating out. At the same time, spending habits depend very much on where they live, and as many Millennials prefer urban areas and big cities, this can only result in higher costs.

Millennials earn and spend more on rent than any previous generation

With a total of $92,600 spent on rent before hitting 30, Millennials pay a striking $21,600 more than what Baby Boomers paid during the same 8-year period. At the same time, Millennials boast a total income of $206,600, almost $10,900 more than the $195,700 that Baby Boomers earned between the ages of 22 and 30. It’s worth noting that the rent difference between Millennials and Baby Boomers is twice as big as the income difference.

What about Gen Xers? They had an income of $202,100, about $4,500 lower than that of Millennials. Some might say that compared to Gen Xers, Millennials have had it easier so far. Given the fact that Gen Xers were in their 30s and 40s when the U.S. housing market crashed in 2008, most of them witnessed the full force of the aftermath. As a result, many were no longer able to buy and were forced to turn to renting. However, if we compare the rental amounts paid by Gen Xers and Millennials between the age of 22 and 30, we’ll notice that the latter paid $10,400 more on rent. An explanation for this could be the average rents that have gone up since the housing crisis.

Younger Millennials pay more rent than older Millennials

Our analysis also found that younger Millennials, now aged between 22 and 29 years old, have had to pay a larger amount of money on rent than older Millennials, now aged 30 to 40. Younger Millennials are paying a median rent of $97,400 before turning 30, while older Millennials paid about $90,500, almost $7,000 less than younger Millennials. The two demographics were impacted by both the recession and social factors in a way that pushed them to rent longer than any other previous generation.

As far as the rent burden goes, there’s a visible difference between younger Millennials and older Millennials. With a rent burden of 47% between the ages of 22 and 30, younger Millennials surpass older Millennials who spent about 44% of their income on rent during the same period of time. The high rent burden carried by younger Millennials is mostly due to the increase in the median rent paid. While it’s true that their income was $3,400 higher than that of older Millennials, they also paid $6,900 more in rent.

As Gen Zers are starting to look for their very first apartments, they are bound to bring about some changes in the housing market. We’re talking about a highly visual cohort, which was born and grew up in the internet era. Although not very different from Millennials, Gen Zers are more tech savvy and highly reliant on technology. As a result, their future homes will have to meet their technological needs. Expected to be a more sedentary generation, industry experts say that they will no longer require amenities like swimming pools or fitness centers but computer labs and game rooms. Technological updates are likely to drive monthly rents further up, therefore Gen Zers should expect to pay more in order to get more.

Given their overwhelming student loan debt, younger Millennials may carry on renting, simply because the prospect of buying is not yet attainable. On the other hand, older Millennials are starting to slowly shift towards home ownership. As they are finally catching up with the American Dream, this will surely drive demand for homes for sale. Their lifestyle patterns so far show that Millennials need affordable homes with attractive amenities. As they’re starting to form families, they’ll soon be ready to put their hard-earned money into their own home.

Methodology:

• RENTCafé is a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States.
• Using the most recent Census data, our research team analyzed the rents and incomes across the United States during certain time periods. Relevant income data was available starting with 1974 while rent data was available starting with 1940. The income amounts represent the median gross income per capita and the rental amounts represent the historical median gross rents. The data was adjusted to 2017 prices, using a cumulative rate of inflation for each year.
• We based the total income on the following age brackets provided by Census: ages 15 to 24 and ages 25 to 34.
• We used the following year-of-birth ranges for each generation: Baby-Boomers – born between 1946 and 1964, Gen Xers – born between 1965 and 1976, Millennials – born between 1977 and 1995 and the Gen Z generation – born starting with 1996.
• We added up the data from an 8-year period for each generation (for the years they were aged 22 to and including 29), we calculated the median amount of money that each generation spent on rent and the median income they earned during the same period. The final data presented in this study was obtained by rounding up the numbers to the nearest hundred.
• The study refers only to single people paying the average monthly rent on their own.

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Authored by Jan Bauer via SafeHaven.com,

As its rivals enjoy strong gains in a burgeoning Chinese auto market, Ford Motor Co. is failing because it was late to this game. 

Ford’s sales in China, the world’s biggest auto market, plunged nearly 30 percent in the first two months of this year–a decline that came despite an overall rise of vehicle sales in China.

Ford sold 75,990 vehicles in China in January, at a time when the wider Chinese auto market was up 11.6 percent.

(Click to enlarge)

Source: Ford

(Click to enlarge)

Source: Marketrealist

Over the same period, Toyota Motor Corp saw a 24.5 percent rise. General Motors has seen gains, as well, with the auto giant and its joint ventures delivering more than 367,000 vehicles in January for a 14.5-percent jump over the year before.

Cadillac set a new monthly sales record in China, and Chevrolet recorded its highest monthly growth in almost three years.

Ford’s management is blaming low February sales in part on a short working month thanks to the late Chinese New Year holiday. But experts cite a number of other reasons for the record underachievement.

The most glaring problem is that Ford got to China late, only seriously ramping up its operations there in 2012, after its rivals already had a solid footprint in the market. And since then, it’s relationships with its partners—Changan Automobile Group and Jiangling Motors Group (JMC)–have been rocky.

Those relationships, which Ford is now trying to repair, are mired in distrust and have had a negative impact on sales. The most recent distrust largely stems from an effort by Ford to streamline the partners, brands and distribution networks.

From Changan-Ford’s perspective, Ford “often tries to intrude far into our territory; they’re interventionist and are most aggressive among global automakers at trying to have their say on how we run our day-to-day activities”, media cited one Changan official as saying.

The fast-paced nature of the Chinese market has also tripped up Ford, some say. According to Reuters, Ford’s core products are dated, and new models won’t be on the market until the first quarter of 2019. Competition is stiff in this market, and Ford is playing catch-up on three wheels.

The American auto giant is hoping that its China 2025 plan will help it get things in order. The newly announced overhaul includes new products, increased local production and improved relations with its partners.

By 2025, Ford plans to boost its China revenue by 50 percent from 2017 levels, largely by launching new or redesigned products. To do that, it plans to introduce more than 50 new vehicles in China by 2025, including eight all-new SUVs and at least 15 electric vehicles from Ford and Lincoln. 

And China has never been more important. U.S. sales are slowing and share prices have been beleaguered at best.

On 1 March, Ford released U.S. sales data showing a 6.9-percent drop in February sales to 194,132 vehicles, with fleet sales down 3.8 percent.

(Click to enlarge)

Source: Marketwatch

It was the second month in a row to see a sales drop. January sales showed a 6.6-percent year-on-year decline.

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This might not surprise you at the very least, but a new financial audit of how Baltimore City manages millions of dollar in federal and state grants has found top senior officials cannot account for how those dollars were spent.

The Baltimore Sun reports city auditors have unearthed some very troubling mismanagement concerns when it comes to Baltimore’s finances: “Grant money coming into government coffers is not balancing out with what city agencies are spending.”

“The city is not able to establish accurate balances of grant accounts,” Deputy City Auditor Audrey Askew, CPA told Baltimore’s spending panel last week.

In a shocking response, Askew warned the spending panel: “The city could lose its much-needed [grant] funding,” because of its reckless accounting practices.

According to the Baltimore Sun, the city “receives nearly $448 million in grants or about 16 percent of its $2.8 billion budget.” In other words, Baltimore City risks losing almost a half-billion dollars in critical funding, during a turbulent environment for the city, as total population has hit a 100-year low and violent crime has surged to the highest levels in decades.

City Council President Bernard C. “Jack” Young expressed outrage over the findings, arguing that grant management problems should have been fixed a long time ago.

“I don’t understand how we can have a problem with grants,” said Young, a member of the spending board. “That has to really stop. If the grants don’t add up … the federal government is going to come and they’re going to want their money. We’re going to owe thousands, maybe millions of dollars.”

Finance Director Henry Raymond told the Board of Estimates that he has “appointed employees to oversee grant management and that the problem would not be repeated next year.”

Raymond said, “the unbalanced grant ledgers in the last fiscal year are an accounting issue — not the result of waste or abuse.”

“We’re training agencies on how to properly use budget account numbers,” Raymond added. “Staff at the agencies are using outdated or incorrect grant account numbers.”

Askew also told the spending panel her team’s audit discovered a “lack of communication” between organizations that receive grants and the city’s department of finance office.

“A lack of formal accounting processes made it impossible to confirm whether grants were being spent for their intended purposes,” Askew revealed to the spending panel.

Young said it does not “take a rocket scientist” to develop a new system of accountability in administering grant money to organizations throughout the city.

“This is serious business,” he told Raymond. “I do not take excuses.”

Young then uttered the unthinkable — dropping a bombshell that made the liberal leaders of the collapsing city cringe; he suggested “holding back money from city agencies until they get their grant accounting in order.”

Even Mayor Catherine Pugh told Raymond “there really does need to be a closer checking.”

Baltimore’s financial mismanagement problem of tracking grant money has existed for years. The Baltimore Sun adds,

“Several previous examinations have found that city officials have failed to properly account for millions of dollars in grant funds. Each time finance officials have pledged to fix the issues, as they did on Wednesday.”

In 2014, city auditors found local agencies could not account for $40 million in grants from federal, state, and other various sources. The financial audit “blamed poor budgeting and oversight, outdated policies and inconsistent accounting procedures,” said the Baltimore Sun.

Coincidentally, Mayor Catherine Pugh did not have an issue supplying more than 60 taxpayer-funded buses for 3,000 kids to the March For Our Lives rally in Washington, D.C last weekend. Here is what we said:

“Kevin Rector, a crime reporter for the Baltimore Sun Newspaper, recorded Baltimore Mayor Catherine Pugh on Tuesday outside City Hall, shouting through a bullhorn to several hundred zombified students, of how she wants to provide 60 taxpayer-funded buses – to send more than 3,000 students to the March For Our Lives rally in Washington, D.C., scheduled for March 24.”

Here is how social media reacted to the audit: 

One Twitter user said, “Hmm, strange how Baltimore found the money to bus 1000s of students to a gun control march.”

Hmm, strange how Baltimore found the money to bus 1000s of students to a gun control march https://t.co/IEoJBzOxIJ

— #JeSuisMireille Cameron Gray (@Cameron_Gray) March 22, 2018

Another said, “Lost millions… Bussed 1000’s of kids to DC protests…”

Lost millions…
Bussed 1000’s of kids to DC protests…
My face when…
😶👌#LiberalismIsAMentalDisorder#Midterms2018 @TheDemocrats https://t.co/GIhEdReX2I

— ̤♰Donny♰ (@sixbennetts) March 22, 2018

“At least they found enough money to bus all of those kids to the gun control rally,” said a concerned American.

At least they found enough money to bus all of those kids to the gun control rally. #priorities

— GunDad (@gundad790) March 22, 2018

Investigative Reporter WBAL said, “Baltimore’s annual audit of city spending/revenue shows in plain view how public safety, mostly policing, dwarfs all other spending. It is that very tall column on the left.”

Baltimore’s annual audit of city spending/revenue shows in plain view how public safety, mostly policing, dwarfs all other spending. It is that very tall column on the left pic.twitter.com/aF1ybHQOAk

— Jayne Miller (@jemillerwbal) March 21, 2018

We are going to leave you with a dialogue below from Ernest Hemingway’s 1926 novel, The Sun Also Rises; as it is an excellent description of the current environment in Baltimore City. 

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

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Authored by Mark Jeftovich via EasyDNS.com,

In 1994, Wired magazine ran a short story entitled “Hack the spew” . This was back when Wired was actually cutting edge and not the insufferable Silicon Valley stroke job it became after Conde Naste acquired it. In it our antihero “Stark” finds himself inexplicably recruited as a kind of data scout, looking for viable consumer trends emerging from the fully immersive, all encompassing data field known as “The Spew”.

“When a schmo buys something on the I-way it goes into his Profile, and if it happens to be something that he recently saw advertised there, we call that interesting, and when he uses the I-way to phone his friends and family, we Profile Auditors can navigate his social web out to a gazillion fractal iterations, the friends of his friends of his friends of his friends, what they buy and what they watch and if there’s a correlation.”

The Spew of course, was the near future analogy of where the internet was headed, and when I went looking to link to it for this post, the piece turned out to be written by none other than Neal Stephenson. That means I read “Hack The Spew” and it made an impression on me before I even knew who Stephenson was or perhaps was on his way to becoming. Few would argue that Stephenson has a gift for seeing the general ambience of our oncoming future. Cryptonomiconuncannily anticipated the impetus toward crypto-currencies; the current systemic dysfunction of national sovereignty worldwide was foretold in Snow Crash; so it follows that all this will likely culminate in something that resembles The Diamond Age.

Today, “The Spew” is not equivalent to the Internet itself, but it is more accurately analogous to say the social media platforms like Facebook, Twitter, especially when combined with the twin monopolies of Google and Amazon, collectively are: The Spew.

It is like a global garbage pile of digital flotsam and jetsam, over which peasants scurry around and scour, looking for some morsel here, a crumb there, which can be monetized. If a trend or a trait is detected, even better. Those can be aggregated, syndicated, federated, even rehypothecated and at scale that can yield staggering financial payoffs and perhaps, even steer the course the history.

At least that’s the narrative since the Cambridge Analytica scandal blew up in Facebook’s …face. After a long string of successive privacy fails (a.k.a a pattern of abuse?) this time feels different, as if the chickens are finally coming home to roost for Facebook.

Cambridge Analytica is not unique

Ever heard of Kareem Serageldin? Probably not.

To date, he is the only banker to have been sent to prison in connection with the 2008–2009 Global Financial Crisis for his role in issuing fraudulent mortgage-backed securities (at least outside of Iceland). To be sure, he was a fall guy, a token sacrifice to demonstrate contrition for what was a systemic, institutionalized effort to inflate a bubble whose implosion nearly crashed the entire global financial system.

In this case while Facebook attempted to throw water on this crisis by ceremonially banishing Cambridge Analytica from its system, the longstanding pattern of abuse remains, and is perhaps now, finally, awareness of that is reaching critical mass with the public:

• Facebook scraped your call data from Android phones for years (iPhone’s are also vulnerable to privacy intrusions, see below).

• Facebook enables features such as “racial profiling” to advertisers

• Election rigging? Facebook approached major Australian political partiesto micro target voters in 2016 election (the Liberals turned them down, Labour took them up)

• And while there were key differences in the way data was used, (not to mention more informed consent) the 2012 Obama re-election campaign used the same data mining features and accessed the same data as the Cambridge Analytica app

• In fact it may be veritably baked into their ecosystem to such a degree that it is almost impossible to develop and create an app on Facebook thatdoesn’t harvest your data

Mark Zuckerberg has issued yet another “Mea Culpa” on CNN, and Facebook will take out full page ads in newspapers to apologize to the public. Yet, by now, “Groveling Zuckerberg apologies” are just part of the Facebook playbook, as Liz Gannes observed back in 2011, after Facebook had just settled with the US Federal Trade Commission over still more privacy violations:

“At this point, Facebook CEO Mark Zuckerberg’s pattern on privacy is clear. Launch new stuff that pushes the boundaries of what people consider comfortable. Apologize and assure users that they control their information, but rarely pull back entirely, and usually reintroduce similar features at a later date when people seem more ready for it.”

It becomes clear, as Futurist (and easyDNS member) Jesse Hirsh made this point on Steve Pakin’s “The Agenda” over the weekend: “Facebook ships with all privacy enhanced settings disabled” — further, my personal findings are that they use obfuscation to make it harder to disable data sharing settings. You have to jump through hoops to do it.

Should you #deleteFacebook?

WhatsApp founder Brian Acton, who became a billionaire when Facebook bought his company hasn’t let that dissuade him from telling the world what he thinks of all this:

Should you? Should easyDNS? Here’s my take on it:

If you are a business: keep your page but don’t be reliant on it

There is a difference between a business who uses Facebook as an antennae to provide additional ways to stay in touch with customers and those whose business model is completely dependent on Facebook. We started our Facebook page when we were pulled into the Wikileaks Crisis as a way to stay in touch with our customers while that entire fiasco played out. We maintain it today for the same reason, and people do frequently contact us through that page looking for support.

But some businesses are completely reliant on Facebook to survive. I subscribe to James Schramko’s Superfast Business Podcast. A recent episode had the founder of Dogtington Post on it, a site I frequented myself in my early days of being a dog owner (our family Husky).

You have to credit the guy with dominating his niche but I couldn’t help wondering what would happen to his business if something substantial changed at Facebook, or if some of his readers would feel “used” if they understood some of the myriad tactics some of these sites routinely use, via Facebook, to drive their own affiliate revenues.

It brings to mind 2 things:

1. My late friend and one of the original easyDNS customers Atul Chitniswho was among the first to observe “if you’re not paying for the product, you are the product”

2. My own maxim, which I introduced in the Guerrilla Capitalism Overviewthat there are two kinds of companies, those that feed on customer ignorance compared to those who prosper via customer savvy . I think it is obvious to all, at least now, that Facebook needs customer ignorance to survive.

(Or as Zuck eloquently observed it back in his dormroom days)

YMMV on your personal pages

I read a long time ago “don’t put anything on the internet that you wouldn’t want to read in the newspapers the next day”, and that has served me well as a guide over the years.

My basic assumption is that everything I post to Facebook, including “private” messages are wide open, being harvested, data mined, aggregated, used to target and retarget ads to me, build a profile and otherwise compile a comprehensive dossier, even stuff I’ve “deleted”. (If you’ve ever watched “Terms and Conditions May Apply” you’ll know that Facebook actually keeps the stuff you “delete”).

So I never say anything on Facebook or put anything on there that is remotely confidential or proprietary. It’s strictly a water cooler. I like it because it enabled me to reconnect with various groups of my friends and peers over the years, from the kids I grew up and went to high school with in Galt, Ontario to the misfits from the London underground music scene in college, to the tech entrepreneurs from the mid-90’s on.

Would I use it to send anything to anybody that I found myself hoping that it’s never going to leak or be used against me? Uh, no. That would be terribly naive.

So to that end, I’ll probably keep my personal Facebook page, even though I sometimes catch myself spending too much time arguing stupid pointless crap (like politics) with people I’d otherwise never associate with. But that’s a self-discipline issue, not a data soveriengty issue (although it is now also common knowledge that Facebook deliberately codes the platform itself to be as addictive as possible)

All that said…

At least #deleteFacebook from your mobile devices

Facebook harvests your contact lists from your mobile devices (don’t believe me, go here)
There are people in that list that I do not know. There are phone numbers from people who work for my competitors in there. My daughter’s (age 11) cell phone number is in there.

You can “delete” all this here: (but as you know Facebook never actually deletes anything).

Then when you go to “delete” all your contacts you get a message

“We won’t be able to tell you when your friends start using Messenger if you delete all your uploaded contact info.”

They say that like it’s a bad thing. But there is also this curious sentence:

“If you have Continuous Uploading turned on in the Messenger app, your contact info will be uploaded again the next time the app syncs with Facebook servers.”

I had deleted the Facebook mobile app from my phone a long time ago. I kept messenger installed because sometimes customers would contact easyDNS or Zoneedit via our Facebook pages for support.

But Writing this I wanted to turn off “continuous uploading” in the app. Despite this Facebook help article not explaining how to do it, while this third party article from 2016 did.

It turned out I had already disabled continuous uploading but I was surprised to find that the messenger app had defaulted permission to access my phone’s microphone.

After this exercise I simply deleted the Messenger app from my phone as well.

Personal Data Sovereignty is an idea who’s time has come

I think it would be safe to assume, that barring some widespread public pushback (such as the one happening right now), this is The New Normal.

People who may have been complacently oblivious to the fact that their social network was pimping them as mere data points are realizing that they don’t like it as they have their faces rubbed in one data breach and privacy violation after another.

Given the outrages of Equifax, Facebook et al, we may have arrived at the crossroads and we may only get this choice once.

Do we push back and say “NO”, I own my own data, I control who gets it and what happens with it. ?

Or, do we calm down after a few days, or weeks and then it’s business as usual. Next year Zuck will apologize for some other new breach of trust ahead of his 2020 presidential bid, while us “shmoes” go ahead and vote for him.

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Despite the flu season finally winding down and overall cases declining, the CDC reports that infections of the less common “Influenza B” strain are on the rise, surpassing “Influenza A” in their most recent weekly Influenza Surveillance Report. This season’s strains are a mixture of the H3N2 and H1N1 “A” strains and the now-resurgent “B” strain, which can be particularly severe on young children. 

The March 23 release shows that cases of the B-strain comprised nearly 60% of new cases across the country – as reported during the week of March 17.

“We know that illness associated with influenza B can be just as severe as illness associated with influenza A,” said CDC spokesperson Kristen Nordlund via CNN. “We also know that influenza B tends to be more severe for younger children.”

This year there have been 26,694 hospitalizations for flu-related symptoms, nearly 80% of which have been Influenza A – however the late-season resurgence of Influenza B should be of particular concern to parents of younger children as well as caretakers. 

“We often see a wave of influenza B during seasons when influenza A H3N2 was the predominant virus earlier in the season. Unfortunately, we don’t know what the influenza B wave will look like,” said Norland, who adds that it’s possible to get sick with multiple strains of the flu within the same season. 

133 children have died so far from flu-related illnesses during the 2017-2018 season. Among adults, 7.8% of deaths reported for the week were flu related – noting a two week delay in the data. The CDC had estimated a threshold of 7.4%.

Other notable trends via the CDC update: 

During week 11 (March 11-17, 2018), influenza activity decreased in the United States.

• Viral Surveillance: Overall, influenza A(H3) viruses have predominated this season. However, in recent weeks the proportion of influenza A viruses has declined, and during week 11, influenza B viruses were more frequently reported than influenza A viruses. The percentage of respiratory specimens testing positive for influenza in clinical laboratories decreased.
• Pneumonia and Influenza Mortality: The proportion of deaths attributed to pneumonia and influenza (P&I) was above the system-specific epidemic threshold in the National Center for Health Statistics (NCHS) Mortality Surveillance System.
• Influenza-associated Pediatric Deaths: Five influenza-associated pediatric deaths were reported.
• Influenza-associated Hospitalizations: A cumulative rate of 93.5 laboratory-confirmed influenza-associated hospitalizations per 100,000 population was reported.
• Outpatient Illness Surveillance: The proportion of outpatient visits for influenza-like illness (ILI) was 2.7%, which is above the national baseline of 2.2%. Nine of 10 regions reported ILI at or above region-specific baseline levels. Six states experienced high ILI activity; nine states experienced moderate ILI activity; New York City, Puerto Rico, the District of Columbia, and 17 states experienced low ILI activity; and 18 states experienced minimal ILI activity.
• Geographic Spread of Influenza: The geographic spread of influenza in 17 states was reported as widespread; Guam, Puerto Rico and 26 states reported regional activity; the District of Columbia and five states reported local activity; and the U.S. Virgin Islands and two states reported sporadic activity.

To prevent the flu, the CDC recommends: 

1. Avoid close contact.

Avoid close contact with people who are sick. When you are sick, keep your distance from others to protect them from getting sick too.

2. Stay home when you are sick.

If possible, stay home from work, school, and errands when you are sick. This will help prevent spreading your illness to others.

3. Cover your mouth and nose.

Cover your mouth and nose with a tissue when coughing or sneezing. It may prevent those around you from getting sick.

4. Clean your hands.

Washing your hands often will help protect you from germs. If soap and water are not available, use an alcohol-based hand rub.

5. Avoid touching your eyes, nose or mouth.

Germs are often spread when a person touches something that is contaminated with germs and then touches his or her eyes, nose, or mouth.

6. Practice other good health habits.

Clean and disinfect frequently touched surfaces at home, work or school, especially when someone is ill. Get plenty of sleep, be physically active, manage your stress, drink plenty of fluids, and eat nutritious food.

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Authored by Damir Kaletovic via SafeHaven.com,

The U.S. has led the world in technology for a long time, and while it’s still the definitive leader in the artificial intelligence space, China has stepped onto this stage determined to overtake its American rival. Whoever manages to dominate this ultimate technological end game will, in the words of Vladimir Putin, rule the world.

For now, China lags in every area of AI development, including hardware for autonomous AI, or robots, and self-driving cars. It also lacks experienced AI researchers and is behind in terms of fundamental innovation in algorithms.

According to a report by Oxford’s Future of Humanity Institute, China scores 17 in its overall capacity for developing technologies, compared to a score of  33 for the U.S.

But there is at least one critical advantage China has in this race…

While it comes up lacking on a number of AI levels, one important shortfall is actually a formidable strength: China lacks serious laws governing data protection.

This gives China what amounts to total freedom to develop AI technology and give it the space to become huge, according to Dong Tao, vice chairman for Great China at Credit Suisse Private Banking Asia Pacific.

China is winning the big data war, even if it’s not the AI leader – yet…

The past decade has been one of enormous growth for Chinese tech darlings. Look no further than tech giants such as Tencent, whose market capitalization jumped from around $13 billion in 2007 to over $500 billion in 2018. 

“America is at a disadvantage because we are No. 1, because of complacency that goes with that,” says Chris Nicholson, CEO of Skymind – a Tencent investment. “The U.S. is still No. 1 in research but China is catching up quick. They believe it’s their race to win. And I think it’s our race to lose.”

Of the one million foreign nationals enrolled at U.S. schools, about one-third are from China, which is double the number of any other country. Chinese students are awarded 10% of all doctorates in the U.S.–and most of them are in science and engineering.

In many ways, the U.S. advantage right now is bolstered by Chinese minds. There are more Chinese engineers working on AI at U.S. tech companies than in all of China. That’s why Trump’s administration is now considering restrictions on the number of Chinese citizens enrolled at U.S. colleges and universities—but will that harm America’s AI advantage?

China also rules the world in terms of internet users, 750 million out of 1.4 billion people online.

And while harnessing data is no challenge for China, data alone won’t win it the AI arms race.

China knows this, and that’s why the Chinese State Council has set itself the goal of matching the U.S. in AI by 2020, eyeing a $150-billion industry. By 2030, it plans to become the key AI “innovation center” for the world.

China’s tech leaders are confident they will come out on top, too. While they recognize that China is behind, they believe that not only will they catch up, but that China’s big data prowess will ensure them the top position. Size matters.

“China has the most internet users. And the Chinese government’s determination to push the application of AI forward is unmatched …” China’s SCMP media quoted Liu Qingfeng, chairman of iFlyTek, as saying.

And Chinese billionaires are betting big on AI. Chinese tech magnate Robin Li is hoping to play a game-changing role in what he’s sure will be Beijing’s dominance in this sector.

The force behind the “Chinese Google”, Baidu, committed $2 billion to AI-related research and development last year, and this year expects to boost that significantly.

For China, AI is a national priority – and its billionaires are definitively on board. It’s a unity of purpose that the West will find hard to compete with.

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Under the direction of CEO and founder Mark Zuckerberg, Facebook built tools to help the world’s largest brands target ads to consumers with data-enhanced precision.

Then the company stood idly by as scammers hijacked those tools and used them to sell sham products and services to gullible consumers.

Shortly before news broke this morning that Zuckerberg would testify before at least two Congressional committees – while shunning lawmakers in the UK, Bloomberg published a detailed feature about the world of scammers, charlatans and hucksters who use Facebook’s marketing tools to sucker unsuspecting Facebook users into buying their shoddy wares.

Thanks to the social network’s influence, a lucrative cottage industry has been created to help connect sellers of sham goods – everything from “miracle” diet pills to “male enhancers” – to buyers. In addition to the manufacturers, there now exists a layer of so-called affiliate marketers: Middlemen who by online ad space in bulk then offer to create and place advertisements for companies in exchange for sales commissions.

To be sure, these mercenary marketers work for legitimate companies, too – eBay and Amazon are two notable companies that hire affiliate marketers. But by far the largest profit margins can be obtained by working with sellers of dietary supplements and other extremely high-margin goods.

The top affiliates—virtually all of them young men—assemble a few times a year to learn the latest schemes and trade tips about gaming the rules set by social networks and search platforms. They think of themselves as kin to the surfers-slash-bank-robbers of the 1991 movie Point Break, just more materialistic, jetting from nightclub to Lamborghini race while staying a step ahead of the authorities. One San Diego crew took in $179 million before getting busted last year by the Federal Trade Commission for violating three laws governing online conduct.

Bloomberg’s story begins with a trip to the aptly named “Stack That Money” conference, described as the “Davos for digital hucksters” – a conference in Berlin for affiliate marketers hosted by a popular web forum. But as Bloomberg points out, visitors could be forgiven for thinking Facebook organized the conference.

The Berlin conference was hosted by an online forum called Stack That Money, but a newcomer could be forgiven for wondering if it was somehow sponsored by Facebook Inc. Saleswomen from the company held court onstage, introducing speakers and moderating panel discussions. After the show, Facebook representatives flew to Ibiza on a plane rented by Stack That Money to party with some of the top affiliates.

It was hard to believe that Facebook would cozy up to disreputable advertisers in mid-2017 as it was under intense scrutiny from lawmakers and the media over revelations that Russian trolls had used the platform to influence the 2016 presidential election. Officially, the Berlin conference was for aboveboard marketing, but the attendees I spoke to dropped that pretense after the mildest questioning. Some even walked around wearing hats that said “farmin’,” promoting a service that sells fake Facebook accounts.

But while the conference was ostensibly organized on behalf of legitimate marketers, attendees dropped their cover at the slightest provocation, speaking freely about the tools and strategies they use to evade protections on platforms like Facebook that filter out spammers and scammers.

Facebook, they explained, had revolutionized the world of digital scamming. The key to the whole puzzle is an indispensable software program called Voluum which allows the affiliate marketers to manage their “campaigns.”

The program was invented by a man named Robert Gryn. With an estimated net worth of $180 million, he’s one of the richest men in Poland.

Granted anonymity, affiliates were happy to detail their tricks. They told me that Facebook had revolutionized scamming. The company built tools with its trove of user data that made it the go-to platform for big brands. Affiliates hijacked them. Facebook’s targeting algorithm is so powerful, they said, they don’t need to identify suckers themselves—Facebook does it automatically. And they boasted that Russia’s dezinformatsiya agents were using tactics their community had pioneered.

When I asked who was at the heart of this game, someone who could explain how the pieces fit together, the affiliates kept nominating the same person. He was a Pole who’d started out as an affiliate himself, they said, before creating a software program called Voluum—an indispensable tool they all use to track their campaigns, defeat the ad networks’ token defenses, and make their fortunes. His name was Robert Gryn.

Gryn strutted into Station Berlin like a celebrity, wearing a trim gray suit, a shiny gold watch, and gold-rimmed mirrored sunglasses. He was trailed by a personal videographer, and men he didn’t recognize ran up to him for bro hugs.

Only a few years ago, Gryn was just another user posting on Stack That Money. Now, at 31, he’s one of the wealthiest men in Poland, with a net worth estimated by Forbes at $180 million. On Instagram, he posts pictures of himself flying on private jets, spearfishing, flexing his abs, and thinking deep thoughts. Last year he posed for the cover of Puls Biznesu, a Polish financial newspaper, with his face, neck, and ears painted gold. Gryn’s prominent cheekbones, toned biceps and forearms, perfectly gelled pompadour, and practiced smile lend him a resemblance to his favorite movie character: Patrick Bateman, the murderous investment banker played by Christian Bale in American Psycho.

During their conversation, Gryn explained how the industry works.

The basic process isn’t complicated. For example: A maker of bogus diet pills wants to sell them for $100 a month and doesn’t care how it’s done. The pill vendor approaches a broker, called an affiliate network, and offers to pay a $60 commission per sign-up. The network spreads the word to affiliates, who design ads and pay to place them on Facebook and other places in hopes of earning the commissions. The affiliate takes a risk, paying to run ads without knowing if they’ll work, but if even a small percentage of the people who see them become buyers, the profits can be huge.

And he also explained how Facebook has made the grunt work of affiliate marketing much, much easier. Furthermore, the company has only recently taken serious steps toward combating these advertisers.

Ben Dowling, one of only three such employees when he was hired in 2012, says Facebook was focused on checking whether ads followed policies about things such as the percentage of text and images, and not on catching people with bad intentions.

Affiliates once had to guess what kind of person might fall for their unsophisticated cons, targeting ads by age, geography, or interests. Now Facebook does that work for them. The social network tracks who clicks on the ad and who buys the pills, then starts targeting others whom its algorithm thinks are likely to buy. Affiliates describe watching their ad campaigns lose money for a few days as Facebook gathers data through trial and error, then seeing the sales take off exponentially. “They go out and find the morons for me,” I was told by an affiliate who sells deceptively priced skin-care creams with fake endorsements from Chelsea Clinton.

Most of the efforts undertaken by Facebook to guard against the practice could be easily circumvented using Gryn’s software. And yet, Gryn appears to have a cordial relationship with Facebook – even visiting the company’s London offices to meet with top executives.

The company hired a few dozen reviewers in Austin and Hyderabad, India, to look over ads that users or algorithms had flagged as questionable and ban accounts that broke the rules. But affiliates evaded them using a subterfuge they call “cloaking.” It was easy, especially if you were running Voluum.

Gryn’s software allows affiliates to tailor the content they deliver according to a number of factors, including the location or IP address associated with a user. The feature is useful for ad targeting—for example, showing Spanish speakers a message in their native language. But it’s also a simple matter to identify the addresses of Facebook’s ad reviewers and program campaigns to show them, and only them, harmless content.

Those who were caught and banned found that this was only a minor setback—they just opened new Facebook accounts under different names. Some affiliates would buy clean profiles from “farmers,” spending as much as $1,000 per. Others would rent accounts from strangers or cut deals with underhanded advertising agencies to find other solutions.

Even after banning the accounts of unscrupulous marketers, Facebook salespeople would still come to industry meetups.

Affiliates say Facebook has sent mixed signals over the years. Their accounts would get banned, but company salespeople would also come to their meetups and parties and encourage them to buy more ads. Two former Facebook employees who worked in the Toronto sales office said it was common knowledge there that some of their best clients were affiliates who used deception. Still, the sources said, salespeople were instructed to push them to spend more, and the rep who handled the dirtiest accounts had a quota of tens of millions of dollars per quarter. (He left Facebook last year.)

Considering the speed with which Bloomberg published this rather lengthy feature, we imagine it won’t be the last story about the company’s shady business practices we see before the furor dies down. The initial stories about Cambridge Analytica opened Pandora’s Box. Now, it’s open season on Facebook: And America’s media companies – who have long suffered at the hands of the revenue-siphoning social media behemoth – have been waiting for an opportunity to exact their revenge.

 

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