Cryptocurrency industry faces insurance hurdle to mainstream ambitions

HONG KONG (Reuters) – Cryptocurrency exchanges and traders in Asia are struggling to insure themselves against the risk of hacks and theft, a factor they claim is deterring large fund managers from investing in a nascent market yet to be embraced by regulators.

FILE PHOTO: Broken representations of the Bitcoin virtual currency, placed on a monitor that displays binary digits, are seen in this illustration picture, December 8, 2017. REUTERS/Dado Ruvic/Illustration

Getting the buy-in from insurers would mark an important step in crypto industry efforts to show that it has solved the problem of storing digital assets safely following the reputational damage of a series of thefts, and allow it to attract investment from mainstream asset managers.

“Most institutionally minded crypto firms want to buy proper insurance, and in many cases, getting adequate insurance coverage is a regulatory or legal requirement,” said Henri Arslanian, PwC fintech & crypto leader for Asia.

“However, getting such coverage is almost impossible despite their best efforts.”

Many asset managers are interested in digital assets. A Greenwich Associates survey, published in September, said 72 percent of institutional investors who responded to the research firm believe crypto has a place in the future.

Last month, Mohamed El-Erian, Allianz’s chief economic adviser said that cryptocurrencies would gain wider acceptance as institutions began to invest in the space.

Most have held off investing so far however, citing regulatory uncertainty and a lack of faith in existing market infrastructure for storing and trading digital assets following a series of hacks, as well the plunge in prices.

The total market capitalization of crypto currencies is currently estimated at approximately $120 billion compared to over $800 billion at its peak in January.

“Institutional investors who are interested in investing in crypto will have various requirements, including reliable custody and risk management arrangements,” said Hoi Tak Leung, a senior lawyer in Ashurst’s digital economy practice.

“Insufficient insurance coverage, particularly in a volatile industry such as crypto, will be a significant impediment to greater ‘institutionalization’ of crypto investments.”

Regulatory uncertainty is another problem for large asset managers. While crypto currencies raise a number of concerns for regulators, including money laundering risks, few have set out clear frameworks for how cryptocurrencies should be traded, and by whom.

Insurance might allay some of the regulators’ concerns around cyber security. Hong Kong’s Securities and Futures Commission recently said it was exploring regulating crypto exchanges, and signaled that the vast majority of the virtual assets held by a regulated exchange would need insurance cover.

CUSTODY CHALLENGE

Keeping crypto assets secure involves storing a 64 character alphanumeric private key. If the key is lost, the assets are effectively lost too.

Assets can be stored online, in so-called hot wallets, which are convenient to trade though vulnerable to being hacked, or in ‘cold’ offline storage solutions, safe from hacks, but often inconvenient to access frequently.

Over $800 million worth of crypto currencies were stolen in the first half of this year according to data from Autonomous NEXT, a financial research firm.

Some institutions have started working to solve this problem, and may provide fierce competition to the incumbent players.

This year, Fidelity, and a group including Japanese investment bank Nomura (9716.T) have launched platforms that will offer custody services for digital assets.

Despite the industry’s complaints, insurers say that they do offer cover. Risk advisor Aon, received some two dozen inquiries this year from exchanges and crypto vaults seeking insurance, according to Thomas Cain, regional director, commercial risk solutions, at Aon’s Asian financial services and professions group.

“It is not difficult to insure companies that hold large amounts of crypto assets, but given the newness of the asset class and the publicity some of the crypto breaches have received, applicants need to make an effort to distinguish themselves,” Cain said.

The industry also says it is getting closer to solving the custody problem.

“This year there have been a number of developments, and some providers have developed custody solutions suitable for institutional clients’ needs,” said Tony Gravanis, managing director investments at blockchain investment firm Kenetic Capital.  

“Players at the top end of the market have also been able to get insurance,” he said.

But this is not the case for all.

One cryptocurrency broker, declining to be named because of the subject’s sensitivity, said insurers struggled to understand the new technology and its implications, and that even those who were prepared to provide insurance would only offer limited cover.

“We’ve not yet found an insurer who will offer coverage of a meaningful enough size to make it worthwhile,” he said.

Reporting by Alun John, editing by Jennifer Hughes and Shri Navaratnam

An online battle for 900 million hearts and minds: India braces for election

JAIPUR/TONK, India (Reuters) – When India votes in a general election next year, it will be the world’s largest democratic exercise, and the biggest ever test of the role of social media in an election.

Volunteers of India’s main opposition Congress party monitor TV news channels and social media inside their war room which was setup for a state assembly election, in Jaipur in the desert state of Rajasthan, December 3, 2018. REUTERS/Aditya Kalra

As the ruling Bharatiya Janata Party (BJP) readies for battle with the newly energized Congress party-led opposition in the election that must be held by May, the role of Facebook, Twitter and WhatsApp could be crucial in deciding who wins.

India already has close to 900 million eligible voters, and an estimated half-a-billion have access to the Internet. The country has 300 million Facebook (FB.O) users and 200 million on Facebook’s WhatsApp messaging service – more than any other democracy. Millions use Twitter (TWTR.N).

“Social media and data analytics will be the main actors in the upcoming India elections. Their use would be unprecedented as both parties now use social media,” said Usha M. Rodrigues, a communications professor at Deakin University in Melbourne, Australia, whose research has focused on social media and Indian politics.

The potential for abuse is also immense, with incendiary news and videos capable of fanning violence in the sprawling multi-religious and multi-ethnic nation.

Fake news and messages circulated on social media have led to more than 30 deaths since last year, data portal IndiaSpend says, mostly rumors about child kidnapping gangs.

Political differences have in the past been no less deadly.

“Social media discourse, already bitter, will turn bilious,” Milan Vaishnav, a senior research fellow at the Carnegie Endowment for International Peace in Washington, said of the coming campaign for the general election.

“It will be no-holds barred on social media given that the opposition smells blood and the ruling party has its back against the wall.”

Both the main parties accuse each other of propagating fake news while denying they do so themselves.

Nevertheless, the battlelines between them are clearly drawn. Congress has attacked Prime Minister Narendra Modi’s economic policies and his party’s Hindu nationalist ideology, while the BJP dismisses the Congress as incompetent liberals out of touch with the people.

This month, Congress won elections in three major states that have been the bastion of the BJP, setting the stage for a tight contest in 2019. Helping the opposition party was a revamped social media strategy.

WAR ROOMS

At the last election in 2014, Congress was crushed by the techno-savvy Modi and his array of social media weapons, including a flurry of Tweets from his personal account, a BJP campaign on Facebook and holographic displays of Modi in remote villages.

Congress leader Rahul Gandhi got a Twitter account only in 2015. But the opposition party is catching up and the playing field has gotten a lot bigger.

India now has 450 million smartphone owners against 155 million at the last election in 2014, according to Counterpoint Research. That’s more than the entire population of the United States, the crucible for election campaigns on social media.

Reuters visited one of the hubs of Congress’s online operations in Rajasthan, one of the three states it won this month – a drab three-bedroom apartment up a dimly lit staircase in the city of Jaipur.

Inside, party workers tracked news channels and social media posts on a wall of television screens. A three-member team of audio, video and graphic experts designed campaign material that was posted to public websites, while other volunteers used WhatsApp to send instructions to party workers.

“We were kids back then, but we are going to outmaneuver them now,” said Manish Sood, 45, who runs his own social media marketing business and was managing the Congress volunteers at the Jaipur war room.

Still, fighting Modi online isn’t easy. With 43 million followers on Facebook and 45 million on Twitter globally, he is among the world’s most followed politicians. Congress’s Gandhi still only has 8.1 million followers on Twitter and 2.2 million on Facebook.

A request by Reuters to visit the BJP’s social media center in Jaipur was declined, but a member of the party’s Rajasthan state IT unit, Mayank Jain, said it ran similar social media operations from two city apartments.

“Congress understands social media a bit now, but they do not have the volunteer manpower,” Jain said in an interview, showing dozens of BJP WhatsApp groups on his phone, one of which was named “BJP RAJASTHAN’S Warriors”.

RISE OF WHATSAPP

While Twitter and Facebook were embraced by Indian politicians – mainly in the BJP – in 2014, it’s WhatsApp that has now become the social media tool of choice.

In Jaipur city and the nearby rural town of Tonk, where traditional methods like public speeches and poster campaigns were widely used during the state poll, Congress and BJP party workers showed a Reuters reporter dozens of WhatsApp groups they were part of and used for campaigning.

Congress said its volunteers managed 90,000 WhatsApp groups in Rajasthan, while the BJP said it controlled 15,000 WhatsApp groups directly, with its workers campaigning through roughly another 100,000 groups.

But WhatsApp has been at the center of controversy. After the false child kidnap messages were spread on the platform in India, it was flooded with falsehoods and conspiracy theories ahead of the October election in Brazil.

WhatsApp’s end-to-end encryption allows groups of hundreds of users to exchange texts, photos and video beyond the purview of authorities, independent fact checkers or even the platform itself.

“WhatsApp is the biggest challenge for us right now on the social media front,” said Nitin Deep Blaggan, a senior police officer in charge of monitoring online content in Jaipur.

WhatsApp has limited the number of messages a user can forward in one go to 20 but in India specifically the ceiling was fixed at five. The company blocked “hundreds of thousands” of accounts in Brazil during the election period, and the same was expected ahead of India polls, a source aware of the company’s thinking said this month.

“We have engaged with political organizers to inform them that we will take action against accounts that are sending automated unwanted messages,” Carl Woog, WhatsApp’s head of communications, told Reuters in a statement. He did not name any parties.

A Facebook spokeswoman said the company was “committed to maintaining elections integrity” and making efforts to “weed out false news”. Twitter said it had made efforts to protect the electoral process and better detect and stop malicious activity.

During the Rajasthan election, police ran a 10-man social media monitoring unit, tracking tweets and Facebook posts related to the state polls. Inside the monitoring room, the posts were shown on wall-mounted screens and automatically filtered into neutral, positive or negative sections.

The negative posts received special attention – they were manually checked and, sometimes flagged to senior police officers for further investigation and action.

An officer looks at computer screens inside a police war room setup to monitor social media posts in Jaipur in the desert state of Rajasthan, December 3, 2018. REUTERS/Aditya Kalra

The sole aim, members of the monitoring team said, was to ensure that no online post spilled into violence.

One of the posts flagged by police when Reuters visited was a video from a Congress leader’s rally where people appeared to be shouting slogans in favor of Pakistan, India’s old enemy.

Congress’ nearby war room had already debunked the video they said was doctored. Within hours, party workers posted what they said was an “original” video, that showed that nobody shouted such slogans at the rally.

Reporting by Aditya Kalra in Jaipur; Editing by Martin Howell and Raju Gopalakrishnan

These 5 Productivity Hacks and Tools Can Save You a Bunch of Time in 2019

From reducing inefficiencies in often redundant and overlooked regular tasks to providing more advanced resources tailored to specific professions and businesses, productivity tools are increasingly prevalent. Conversely, simple methods for managing time more effectively and taking necessary breaks can alleviate stress and reduce instances of wasted time.

Time Boxing & Limiting Technology

Timeboxing has become an essential method for managing overloaded schedules, reducing stress, and increasing productivity. Timeboxing is predicated on the concept of managing tasks through interval time periods of topic-oriented work with small breaks interspersed between them.

 Similar to the Pomodoro Technique–which has been optimized and implemented in a variety of fields and applications–timeboxing aims explicitly to create a more consistent focus and mental clarity that mitigates fatigue. Stress is a byproduct of being overworked, which frequently stems directly from inefficient work and time management. Health concerns around stress are well-documented, and improving time management and productivity is not only good for your career but also your general health.  

Timeboxing takes some practice to develop into a habit and requires that you learn more about your attention and energy patterns. Dividing your time into intervals where you focus intensely on work for extended periods followed by shorter small breaks are designed to facilitate concentration. Our brains tend to work the most efficient through small intervals, and short breaks in between these intervals can provide a reprieve from stress and the feeling of work overload.

Limiting technology usage–mainly before bedtime–has also been touted as a practical way to improve efficiency in work, improve sleep, and increasing morning focus. Staring at screens at night or throughout the day can reduce energy and motivation the following morning. Overexposure to blue-screened device light can even throw off your circadian rhythm.

It’s exceptionally challenging to limit technology use in today’s world, especially considering the prevalence of screens everywhere, seemingly endless news feeds, and social media. However, reducing the use of technology–or at least monitoring it better with an app like Forest–can increase focus and even improve mood.

Tools and Tech

Digital tools for enhancing productivity are everywhere nowadays. Many of them provide automated task and project management while others offer more field-specific resources like software libraries. Regardless of how you’re looking to tackle time-saving and improved productivity, the variety of productivity technology and tools available today is seemingly endless.

Evaluating more general day-to-day time-saving tools, Vivid Technologies — led by founder and CEO Omer Khan — distinguishes itself as the company behind their Digital IVR product. The goal is to remove the frustrating customer service experience by transitioning the phone call into an interactive, user-friendly interface. Users can exchange voice, text, and picture messages with agents while concurrently working on other tasks. There is no waiting for a customer service rep to answer as the call service integrates directly with the user’s phone to alert them once an agent is available. Vivid developed out of a Google and Microsoft Accelerator and has now partnered with Telenor–one of the largest telecommunications companies in the world–to offer their products to all customers of Telenor.  Phone customer service is a largely outdated model, and Vivid caters to millennials with a more efficient and interactive approach.

Other platforms like ActiveCollab are comprehensive project management tools for working with clients and teams. The integrated payment and invoicing functionality bridges many of the challenges facing entrepreneurs, small businesses, and freelancers who have to jump back and forth between task management services and payment applications. Users can either select from a self-hosted application option on your own server or through their monthly cloud service plan. Communication tools, project management, and payment are primarily siloed technologies, incorporating them into one platform can ease learning curves for new tools and support business processes within one interface.

Another emerging collaborative tool is LucidChart, designed for working on diagrams and charts with other team members on any device. A diverse template gallery can be used for building diagrams on anything from financial portfolios to software development workflows. Businesses are trending to an increasingly visual medium, with the ability to confer their message easily projected through informative graphics and interactive guides to their products. LucidChart is available to anyone who needs to diagram rapidly and effectively.

The Productive Road Ahead

Increasing productivity to save time is one of the most effective ways to reduce work overload and balance your schedule. Subsequent effects on improved health through reduced stress are profound. For businesses, specific productivity tools and platforms can help reduce inefficiencies by heightening collaboration and providing the fundamental resources to build new products and designs. In a professional world moving faster than ever, sometimes it is vital to slow down and take measure of how to subtly improve productivity and save precious time.  

How to Keep Your Business Self-Sustaining After That Initial Success

In this age of constant market evolution and new technology, there is no such thing as a static business that is self-sustaining. The traditional approach of implementing stable and repeatable processes, so that your business can run itself, no longer works.

Just ask former big brand companies, like Blockbuster, Kodak, Lehman Brothers, and Sears, what happened to them.

As a small business advisor, I always recommend that being “self-sustaining” requires taking frequent and aggressive measures to step out ahead of the pack, including yourself, before you start feeling the pain of change and new competitors around you.

Specific measures that go beyond the traditional linear thinking include the following:

1. Develop new products for your existing segment.

Rather than enhancing the offering you have, develop and offer new products that capitalize on the customers that you already know well.

Competitors tend to focus on price and other variations to existing offerings. Too many businesses only think of new products when in crisis mode.

For example, Facebook added WhatsApp as a cross-platform messaging and Voice over IP (VoIP) service to enhance the self-sustaining growth their social media platform before any downturn. WhatsApp alone now has a user base of over one and a half billion users.

2. Introduce disruptive technologies to this domain.

Rather than rely only on linear thinking, the best entrepreneurs are always looking to offer in parallel a more dramatic new alternative.

Since these usually require a large investment, and more time, including customer education, they need to be started while your current business is still healthy.

Apple did this with the introduction of the smartphone, which altered the value chain for computers, video, and software, which were already staples that they knew well. Richard Branson is doing it with Virgin Galactic space rides, without impacting his Virgin Airlines.

3. Populating new domains to sustain your market.

If your product is already unique, then new domains would include adding online to enhance store fronts, and alternatives for business to complement consumer offerings.

These allow you to get new growth without fighting existing competitors. Defining new domains is even more powerful.

Elon Musk is doing both of these, first by expanding his Tesla electric vehicle initiatives beyond cars, into self-driving taxis and trucks, and secondly by entering new domains of transportation with SpaceX and Hyperloop. He entertains no sense of a static business.

4. Redefine your product to reach a new category.

This strategy, often called breakaway positioning, has the intent of expanding your product opportunity into a previously unreachable category.

It also has the advantage over competitors of retaining existing customers, while at the same time attracting new customers from another category.

For example, Swatch was able through marketing to define their watches as fashion accessories, as well as timepieces, greatly expanding their segment. Uber added UberLUX, with stylish high-end cars, to declare access to the limousine category.

5. Implement a plan of regular strategic acquisitions.

Unlike a total reliance on internal innovation and organic growth, growth through acquisition or merger is generally faster and can be self-sustaining as a process. Further, acquisition offers other advantages such as easier financing, instant economies of scale, and new market penetration.

For example, even the giant Amazon acquired Whole Foods as a growth entryway into the competitive grocery and food industry. Apple acquired Shazam to quickly boost Apple Music by letting users identify songs, movies, and commercials from short audio clips.

The reality is that you can never stop changing your business, and still be self-sustaining. The strategies outlined here may seem intuitively obvious, but they require real effort and discipline to implement, perhaps why so few companies consistently outperform the market.

Change is the only constant in business, so now is the time for making your plan for regular change a priority.

Oracle sees strong third quarter on cloud strength, share rise

(Reuters) – Oracle Corp on Monday forecast current-quarter profit above estimates after growth in its cloud services and license support unit helped the business software maker surpass Wall Street expectations for the second quarter.

FILE PHOTO: People gather prior to the start of a keynote speech at the All Things Oracle OpenWorld Summit in San Francisco, California September 24, 2013. REUTERS/Jana Asenbrennerova/File Photo

Shares rose 5 percent, with the company saying that excluding fluctuations in exchange rates, it expected third-quarter adjusted profit to be between 86 cents and 88 cents per share.

Analysts on average were expecting 84 cents, according to IBES data from Refinitiv.

Revenue at its cloud services and license support unit, its biggest, rose 2.7 percent to $6.64 billion and beat analysts’ estimate, as more companies shifted to cloud computing from the traditional on-premise database model to cut costs.

Oracle’s in June created a new revenue reporting structure that merged its cloud and software license businesses, which analysts have said gives little insight into the standalone performance of its cloud unit.

Oracle is a late entrant to the rapidly growing cloud-based software business, but has aggressively stepped up its efforts to catch up with rivals such as Workday Inc, Microsoft Corp and Salesforce.com Inc.

“Oracle’s growth in cloud services and license support of just 3 percent appears to be contradicting the strength in the overall cloud market,” said Daniel Morgan, senior portfolio manager of Synovus Trust Co, which hold 152,500 shares in the company.

Last month, Workday reported a 35 percent jump in cloud subscription revenue, while Salesforce’s flagship product Sales Cloud grew 11 percent.

“Oracle is still dragging behind other old line enterprise software players like Microsoft in its transition to becoming a top cloud company,” said Morgan, whose firm also hold shares in Salesforce and Microsoft Corp.

The company’s net income rose to $2.33 billion, or 61 cents per share, in the second quarter ended Nov. 30. Excluding items, the company earned 80 cents per share, beating the average analyst estimate of 78 cents.

Total revenue fell marginally to $9.56 billion, but brushed past analyst expectation of $9.52 billion.

Shares of the company were up at $48 in after-market trading.

Reporting by Vibhuti Sharma in Bengaluru; Editing by Arun Koyyur

2019 – The Game Changers

Looking back is not always that easy and sometimes painful. Your vision may not be 20/20 but reasonable clarity may be had by sticking to the facts and the actual data. Having said this, looking forward is a much tougher proposition. You are looking into the unknown. We haven’t gotten there yet.

However, staring into the future is a task that must be undertaken from time to time. I stare hard at pending “Risks.” Others stare hard at pending opportunities. “Preservation of Capital” demands that “Risks” come first, as “avoidance” is often the key to success. If you can stay out of the potholes, you can keep going and proceeding ahead is what gives us all the ability to win at the “Great Game.”

One of the biggest “Game Changers” is the breakage of a fifty year cycle where the United States, and Europe, had to depend upon hostile nations for oil and natural gas. We were hemmed in by them and many political decisions and economic decisions were based upon the fact that we needed their energy. With fracking and re-fracking and horizontal drilling, this has all changed and to the significant benefit of the Western world.

Last week the United States Geological Survey (USGS) announced a groundbreaking oil and gas discovery in the West Texas Permian Basin. According to the organization’s statement, 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids are now believed to lie untapped in the Texan and New Mexican Permian Basin. The figures in last week’s announcement are more than double the previous resource assessment.

“Christmas came a few weeks early this year,” said U.S. Secretary of the Interior Ryan Zinke in response to these rather incredible numbers.

American strength flows from American energy, and as it turns out, we have a lot of American energy. Before this assessment came down, I was bullish on oil and gas production in the United States. Now, I know for a fact that American energy dominance is within our grasp as a nation.

Dr. Jim Reilly, the Director of USGS, a part of the U.S. Department of Interior, highlighted how remarkable the discovery was in the larger context of the industry.

In the 1980’s, during my time in the petroleum industry, the Permian and similar mature basins were not considered viable for producing large new recoverable resources. Today, thanks to advances in technology, the Permian Basin continues to impress in terms of resource potential. The results of this most recent assessment and that of the Wolfcamp Formation in the Midland Basin in 2016 are our largest continuous oil and gas assessments ever released. Knowing where these resources are located and how much exists is crucial to ensuring both our energy independence and energy dominance.

What this all means is that we are now capable of breaking OPEC’s back. They have lost control. The United States has gained control. We can now tell them to “Stuff It,” as we not only gain energy independence but a whole new source of revenues, and taxes, that can be used to our advantage, as we export oil and natural gas to both Europe and Asia.

Any fool can know. The point is to understand.

– Albert Einstein

The next, far less pleasant “Game Changer” is the Democrats taking over the House. This is going to cause all kinds of turmoil, in my estimation. They are likely going to try to impeach President Trump and the markets may take a bath if this happens. Bonds or equities, the rancor of serious political infighting is never good news.

Then we have Brexit becoming quite unwieldy, Italy still fighting over its budget with the European Union and the economy of China slowing down as both their internal and external debts rise to record levels. Then there is the Chinese currency, which could get “re-evaluated” several times during the next year. The tariff stand-off with the United States is, in fact, a “Game of Thrones” as each nation vies for global power and influence. All of these issues could change the Game and cause roller coaster rides in the markets.

Next, there is the Fed. They are the central bank of the United States and the continual raising of interest rates is not helping the economy of the country. “Will they stop or will they go on,” is the central question. The Governors have 14 year terms and they can brandish their “Independence” as they wish, but the Fed was created by the Congress in 1913 using the Federal Reserve Act and what is given can be taken away, or muted, if the Congress does not feel that the Fed is acting in the best interests of the country. The Fed is NOT a Constitutional mandate, I remind all of you.

Then there is the CLO market. There are some large financial institutions that are worried that the bottom is about to drop out of this market. As an observation, the total outstanding volume of leveraged loans is about $1,130 billion or 5.5% of the U.S. GDP. CLOs, which are repackaged corporate debt, has made up most of the appetite for these loans.

These instruments hold approximately half, or $600 billion, which is roughly 3.0% of the U.S. GDP. The catalyst for the concern is not so much the drop in prices as the fund flows, with Lipper reporting that loan funds saw a record outflow of $2.53 billion in the week ended December 12, as we are now in the fourth consecutive week of selling. A significant “Game Changer” could be happening here.

The road to success is dotted with many tempting parking spaces.

– Will Rogers

“Game Changers” now abound all around us. Look closely, think, plan, execute, don’t slow down. Stay out of harm’s way. Avoid the Risks. Choose wisely!

California is Considering Taxing Texts. Here's the 1 Insane Detail Hardly Anyone Has Noticed

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

It sounded bad. 

So bad, in fact, that it was just the sort of thing you’d expect from California.

My home state has a certain reputation —  especially among those who don’t live there — for taxing its inhabitants,

This week, there came news of a potential new tax, one that sounded so Californian as to border on parody.

And a million accusing Eastern fingers pointed toward the west and its serial predilection for socialized nonsense. (I’m not sure how many of those fingers came from East Coasters, how many from Russians and how many from Russians who had emigrated to the East Coast.)

The essence of the tax lies in the fact that people have stopped talking on the phone so much. 

Yes, California currently taxes phone calls. It dedicates the revenue raised to providing the least fortunate with some sort of telecommunications service.

It does the same with other utilities, too.

The phone call revenue has, naturally, fallen as telephonic talking has fallen, so the state proposes taxing texts. Doing this, says California’s Public Utilities Commission, could raise $44.5 million.

Which leaves one small, painful detail: Not many people send text messages.

You might think you do, because texting has become a generic term for constantly saying things in writing to people via your phone — only to occasionally be misunderstood.

Yet the majority of people use iMessage, WhatsApp or even Facebook Messages. These are sent over the internet. 

And, if California suddenly decided it now wants to include these over-the-web services in its tax proposals, does that mean it can start taxing every email? 

Now there’s a delicious revenue-generating idea that could instantly finance so many Californian projects and deter people from sending those dreary reply-all emails that plague business life. 

Naturally, phone industry lobbyists are drinking — I mean, working — late into the night to prevent California’s proposal from being instituted in a vote on January 10.

Should it pass, there might be enormous confusion, with users assuming that all their phone messaging is being taxed? 

What if they stopped texting altogether? 

That simply wouldn’t be the modern world anymore.

Self-Driving Cars? Don't Hold Your Breath

Yeah, yeah, I know. Self-driving cars are just around the corner. Any day now. They’re being tested everywhere. They’re going to revolutionize transportation. Put thousands of Uber drivers and teamsters out of work. Don’t hold your breath.

Despite conventional wisdom, AI programmers haven’t been able to solve basic problems, like identifying pedestrians, or differentiating between dogs and children. AI programmers have totally failed to implement programs that exhibit anything resembling common sense, which is exactly what’s needed to drive in a world full of humans.

According to a recent article on NPR, in California (the only state that requires the reporting of automobile deaths from autonomous vehicles) there have been three deaths in about 10 and 15 million miles of autonomous driving, That compares VERY unfavorably to conventional driving, where it would typically take 260 million miles to result in three deaths.

According to the Guardian, a whistleblower at Uber recently revealed that Uber’s self-driving program results in an accident every 15,000 miles. By comparison, the average human gets in 3 to 4 accidents over 65 years while driving an average of 13,474 miles a year, for roughly one accident every 250,000 miles. That’s a pretty big delta for a technology that’s supposedly right around the corner:

Self-driving cars are particularly hazardous to pedestrians, according to NPR, because their ability to recognize pedestrians somewhat more than 90 percent of the time. Humans, by contrast, are incredibly good at spotting other humans, with a success rate probably around 99.99 percent. Even AI proponents at Carnegie Mellon admit that a five year old child can out perform AI when it comes to common sense decisions. As NPR explains:

“[autonomous vehicles] can’t figure out what a pedestrian is or [what] a pedestrian is going to do. They can’t separate a child from a dog. Sometimes a tree branch overhanging the road will be taken as something in the way.”

Such limitations have huge consequences, as when an autonomous vehicle killed a pedestrian because it couldn’t perceive that she was walking a bicycle. Similarly, simply slapping some stickers on a stop sign–an action that wouldn’t fool a toddler–can confuse a self-driving car.

And that’s far, far beyond the capability of any AI program, because it literally requires human intelligence.

Thus, according to the Guardian, so-called “self-driving” cars will always need a human being present to “take the wheel” when the AI program fails. It should seem obvious, though, that any automobile that requires a human “minder” isn’t really self-driving; it’s just doing cruise control on steroids.

So, while cars will be able to parallel park on their own, and function reasonably well in environments, like freeways, where human behavior is well-delineated, it seems highly unlikely, despite all the rosy hype, that fully autonomous cars are in our near future. Barring the emergence of the “singularity” (which seems unlikely), self-driving cars will remain an oxymoron.

But, but… what about all the breakthroughs we’ve been seeing in AI?

Not ready for prime time, I’m afraid. While AI programmers have successfully improved their programs’ ability to play games with bounded, well defined rules, they’ve been stumped when comes to operating inside environments (like businesses) where the rules are flexible and unbounded.

This is not to say that AI–as currently implemented–can’t be useful. Facial recognition, for example, is good enough to be useful to law enforcement. AI programs can play games (which have bounded rules) much better than humans. AI is excellent at looking for patterns in huge data sets. But none of those functions require common sense, which is required for a fully autonomous vehicle.

I fully expect to get plenty of pushback on this column because I’ve been making similar observations about AI literally for decades and I always get exact same pushback. Every freakin’ time. I’ve come to the conclusion that arguing with AI true believers is like arguing with fundamentalists about the end of the world which )like the long-awaited “singularity”) never seems to actually arrive. 

Apple to push software update in China as Qualcomm case threatens sales ban

SHANGHAI/SAN FRANCISCO (Reuters) – Apple Inc, facing a court ban in China on some of its iPhone models over alleged infringement of Qualcomm Inc patents, said on Friday it will push software updates to users in a bid to resolve potential issues.

FILE PHOTO : An attendee uses a new iPhone X during a presentation for the media in Beijing, China October 31, 2017. REUTERS/Thomas Peter

Apple will carry out the software updates at the start of next week “to address any possible concern about our compliance with the order”, the firm said in a statement sent to Reuters.

Earlier this week, Qualcomm said a Chinese court had ordered a ban on sales of some older iPhone models for violating two of its patents, though intellectual property lawyers said the ban would likely take time to enforce.

“Based on the iPhone models we offer today in China, we believe we are in compliance,” Apple said.

“Early next week we will deliver a software update for iPhone users in China addressing the minor functionality of the two patents at issue in the case.”

The case, brought by Qualcomm, is part of a global patent dispute between the two U.S. companies that includes dozens of lawsuits. It creates uncertainty over Apple’s business in one of its biggest markets at a time when concerns over waning demand for new iPhones are battering its shares.

Qualcomm has said the Fuzhou Intermediate People’s Court in China found Apple infringed two patents held by the chipmaker and ordered an immediate ban on sales of older iPhone models, from the 6S through the X.

Apple has filed a request for reconsideration with the court, a copy of which Qualcomm shared with Reuters.

WHERE’S THE HARM?

Qualcomm and Apple disagree about whether the court order means iPhone sales must be halted.

The court’s preliminary injunction, which the chipmaker also shared with Reuters, orders an immediate block, though lawyers say Apple could take steps to stall the process.

All iPhone models were available for purchase on Apple’s China website on Friday.

Qualcomm, the biggest supplier of chips for mobile phones, filed its case against Apple in China in late 2017, saying the iPhone maker infringed patents on features related to resizing photographs and managing apps on a touch screen.

Apple argues the injunction should be lifted as continuing to sell iPhones does not constitute “irreparable harm” to Qualcomm, a key consideration for a preliminary injunction, the copy of its reconsideration request dated Dec. 10 shows.

“That’s one of the reasons why in a very complicated patent litigation case the judge would be reluctant to grant a preliminary injunction,” said Yiqiang Li, a patent lawyer at Faegre Baker Daniels.

HIT LOCAL SUPPLIERS

Apple’s reconsideration request also says any ban on iPhone sales would impact its Chinese suppliers and consumers as well as the tax revenue it pays to authorities.

The request adds the injunction could force Apple to settle with Qualcomm. But it was not clear whether this referred to the latest case or their broader legal dispute.

Qualcomm has paid a 300 million yuan ($43.54 million) bond to cover potential damages to Apple from a sales ban and Apple is willing to pay a “counter security” of double that to get the ban lifted, the copy of the reconsideration request shows.

Slideshow (4 Images)

Apple did not immediately respond to questions about the reconsideration request and Reuters was not independently able to confirm its authenticity.

Lawyer Li said the case would undoubtedly ramp up pressure on Apple, especially if a ban was enforced.

“I think that Qualcomm and Apple, they always have those IP litigations to try to force the other side to make concessions. They try to get their inch somewhere. That’s always the game.”

Reporting by Adam Jourdan in Shanghai and Stephen Nellis in San Francisco; Editing by Himani Sarkar

Tesla To 90,000: Delivery Forecasts For The Fourth Quarter

Tesla is on track to deliver more than 61,000 Model 3s in the fourth quarter.

Summary

Much is written about Tesla (TSLA) and Elon Musk on this platform and elsewhere. The circus that surrounds Tesla is well-known and heavily-covered on this platform – so I won’t write about any of that here.

Instead, this is simply an attempt to forecast Q4/18 vehicle deliveries based on the best available data. Overall, I estimate that Tesla will deliver ~91,085 vehicles – up 9% from last quarter, including over 61,000 Model 3s. This estimate implies that Tesla will meet their 2018 target for 100,000 Model S and X delivered with a bit of breathing room to spare.

Given analyst revenue estimates of ~3.5% sequential growth, Tesla will need to keep ASPs from slipping more than 4.5% to meet those top-line targets, assuming my estimates are close and assuming the Tesla’s non-automobile units are flat sequentially. Tesla has raised prices several times over the last few months, which should help prevent too much price erosion on their vehicles, although this will be offset by the introduction of the $46,000 Model 3 MR.

In my view, Tesla has a good chance of beating its Model S/X delivery target and a reasonable chance of beating analysts’ top-line estimates. I will continue to hold my Tesla shares.

Model S Delivery Estimate: 14,907 Vehicles

Each of the estimates herein is based primarily on three pieces of data.

Each estimate is based on Tesla’s actual delivery information from past quarters. This data is available in Tesla’s quarterly update letters delivered on earnings day. Tesla also provides estimates of this data in an 8-K filing within a day or two of the end of a quarter. This data provides Tesla’s actual deliveries but is only available quarterly – unlike many manufacturers which provide similar data every month.

This data provides Tesla

(Inside EVs Monthly Plug-in EV Sales Scorecard)

Estimates are also based on monthly estimates for Tesla’s American sales from Inside EVs Monthly Plug-in EV Sales Scorecard. Inside EVs only includes sales in the United States but is updated each month, usually within a few days of the end of the month.

This data is a bit incomplete for the most recent month, as shown above: Spanish Model S registration results are not yet available.

(Tesla Motors Club)

Estimates are further based on European vehicle registration date from Tesla Motors Club. A post on TMC’s forum contains European sales data from each European country, with data updated as it becomes available. This data is a bit incomplete for the most recent month, as shown above: Spanish Model S registration results are not yet available.

Compiling these three data sources into one for the Model S, and combining the data into quarters rather than months, I arrive at the following table:

Compiling these three data sources into one for the Model S, and combining the data into quarters rather than months, I arrive at the following table

(Author based on data from Inside EVs and Tesla Motors Club)

Here, the “Model S Registrations, Europe” is data from Tesla Motors Club, by quarter. “Model S Sales, United States” is data from Inside EVs, also organized by quarter. Total Model S Sales is simply the addition of those two lines and Tesla Deliveries refers to Tesla’s published total Model S deliveries in a given quarter. Most of this data comes from 8-Ks, as Tesla doesn’t usually break down S vs. X deliveries in its quarterly update letters.

As shown, over the past year, sales in Europe and the United States have made up ~85% of sales of Model S vehicles over the past year, with the remainder of sales primarily occurring in APAC and Canada.

We could simply multiply sales by ~1.5x to move from the two-month Q4/18 sales to three-month sales, but history tells us this would be very inaccurate. Why? Because Tesla tends to sell the fewest vehicles in the first month of each quarter and more vehicles in the last month of each quarter:

Tesla Monthly Sales for the Model S and X show monthly seasonality

(Author based on data from Inside EVs and Tesla Motors Club)

As shown, Tesla has had six months where they sold more than 10,000 Model S and X vehicles combined: 9/16, 12/16, 3/17, 9/17, 12/17, 3/18, and 9/18. All of those months are the third month of a fiscal quarter. Indeed, since the start of 2015, Tesla has always delivered the most vehicles in the third month of the quarter.

Thus, simply multiplying the first two-month results by 1.5x will yield inaccurate delivery estimates: Those estimates would have been too low in each of the past 15 quarters.

Tesla will sell nearly 15,000 Model S vehicles in Q418

(Author based on data from Inside EVs and Tesla Motors Club)

To remedy this problem, the above chart includes only the first two months of European registrations and Inside EVs sales estimates from every quarter. For example, last quarter, Insides EVs showed Tesla having Model S sales of 1,200 in July, 2,625 in August, and 3,750 in September. Thus, the above chart shows 3,825 (1,200 + 2,625) Model S vehicles sold in the United States in Q3/18 – excluding the 3,750 reported September sales.

The Tesla deliveries above are actual deliveries for the quarter, and the percentage of sales is sales in the first two months divided by total sales. As shown, last quarter, U.S. and European sales in the first two months of the quarter accounted for 37% of total Model S deliveries in Q3/18.

For Q4/18, I estimate that Tesla will deliver ~14,907 Model S vehicles. This is based on assuming that reported deliveries in the first two months will be 39% of total quarterly deliveries – the average percentage of the last two quarters. Averaging the last two quarters here is conservative compared to using the 37% metric from Q3/18, which would yield an estimate closer to 16,000 Model S deliveries.

Model X Delivery Estimate: 14,923 Vehicles

Tesla Model X is the best-selling SUV EV.

(Author based on data from Inside EVs and Tesla Motors Club)

Last quarter, Tesla delivered 13,190 Model X vehicles. Thus far in Q4/18, Tesla has delivered 5,683 vehicles, although data from Tesla Motors Club is again missing Spain for November. That is a very minor exclusion though, given that Spain is averaging 15.9 Model X registrations/month. Given the level of error inherent in these estimates, the absence of this data is trivial.

We will again take the first two months’ data rather than full-quarter sales data to form estimates: Sales of the Model X show a lot of seasonal variability as in the chart above.

Tesla could deliver nearly 15,000 Model X vehicles in the next quarter.

(Author based on data from Inside EVs and Tesla Motors Club)

Last quarter, first two-month sales in the United States and Europe represented 38% of total Model X deliveries. If we estimate that the same percentage of Model X deliveries occurred in those regions in those months, this suggests that Tesla may deliver ~14,923 Model X vehicles in the fourth quarter.

Notably, while Tesla did not provide a Q4/18 forecast for Model 3 deliveries (or production), Tesla did forecast deliveries for the Model S and X (combined):

In each of the last four quarters, Tesla has suggested that Model S and X deliveries should total 100,000 or more. If Tesla meets my estimates, they would beat this target with a little bit of breathing room to spare:

Tesla Deliveries Q4/17 Q1/18 Q2/18 Q3/18 Q4/18E
Model S/X Deliveries 28,425 21,815 22,319 27,710 29,830?
Cumulative, 2018 21,815 44,134 71,844 101,674?

That said, the margin of error on this estimate is quite high. Notably, this estimate excludes China, which may have seen sales fall off in the fourth quarter. Tesla has denied reports that sales in China fell 70% in October:

“‘While we do not disclose regional or monthly sales numbers, these figures are off by a significant margin,’ a Tesla spokesperson told MarketWatch in emailed comments.”

MarketWatch, Nov 27, 2018

However, even with less dramatic declines than 70% it is possible – perhaps even probable – that these estimates will be too high as Tesla’s U.S. and European sales may make up a higher proportion of total sales given tariffs in China. We’ll find out in January.

Model 3 Delivery Estimate: 61,255 Vehicles

According to Autoweek, the Tesla Model 3 will roll out in Europe in February 2019

(Author based on data from Inside EVs)

The Tesla Model 3 is not available in Europe. According to Autoweek, the Tesla Model 3 will roll out in Europe in February 2019 – well after the end of Q4/18. Because of that, Model 3 deliveries are based solely on data from Inside EVs.

Aside from the United States, the Tesla Model 3 is only available in Canada – it is also not yet available in APAC. Thus, American sales represent the vast majority of Tesla Model 3 deliveries. Last quarter, for example, Inside EVs reported Model 3 sales equal to 97% of total Model 3 deliveries.

in Q2/18, Model 3 sales were higher in the second month of the quarter (May 2018) than in the final month of the quarter (June 2018).

(Author based on data from Inside EVs)

Sales of the Model 3 have not been going on long enough to draw as strong of conclusions as for the Model S and X. Sales appear to show some monthly seasonality: Last-month-of-quarter sales were the highest in four of the five quarters that the Model 3 has been offered. However, in Q2/18, Model 3 sales were higher in the second month of the quarter (May 2018) than in the final month of the quarter (June 2018).

Overall, the trend here is that last-month-sales are becoming decreasingly over-sized for the Model 3. This is based up by first two-month data:

I estimate that Tesla will deliver ~61,255 Model 3 vehicles in the fourth quarter of 2018

(Author based on data from Inside EVs)

As shown, over the past four quarters, first two-month sales have made up an increasing proportion of total sales – from 31% in Q4/17 up to 57% in Q3/18. As the quarters pass, Tesla’s monthly Model 3 sales are becoming flatter and flatter, with respect to in-quarter seasonality.

Because of flattening monthly variations, I will estimate the first two-month sales make up 59% of total Model 3 sales – continuing the 53%, 55%, 57% trend of increase by 2 pp each quarter. Thus, I estimate that Tesla will deliver ~61,255 Model 3 vehicles in the fourth quarter of 2018.

Tesla to 90,000: Total Deliveries Estimate is ~91,085

Tesla will deliver an amazing 91,000 electric vehicles next quarter: More than every before

Tesla will deliver nearly a quarter-million electric vehicles in 2018 - more than twice as many as last year.

(Author based on Tesla filings and own estimates)

In total, my estimates would result in 91,085 Tesla deliveries in Q4/18. This would be a record for the company. This estimate implies ~9% sequential growth in automobile deliveries.

Given 9% sequential growth in deliveries, Tesla should break their own record for the most automotive revenue in a quarter, set last quarter at $6.1 billion. Given the relatively small size of Tesla’s other segments, Tesla would also be very likely to beat their Q3/18 revenue as well.

Last quarter, Tesla earned $6.82 billion in revenue. Analysts at Yahoo Finance expect Tesla to generate $7.06 billion in revenue next quarter, up 3.5% from Q3/18. If automobile sales rise 9% in Q4/18, that may be an achievable target: Tesla would need to prevent automobile ASP from falling more than ~4.5% to beat this revenue target, assuming they ship 91,085 automobiles and assuming that non-automotive segment revenue is flat from Q4/18.

The primary driver for falling ASPs in Q4/18 will be the introduction of the less-costly Model 3 mid-range. Depending on product mix, this $46,000 vehicle could reduce average sales prices substantially, although that decline may be offset by waves of price increases on Tesla vehicles, beginning in the middle of last quarter. Given those price increases, Tesla may have a good shot at beating top-line revenue estimates. We will find out in ~early February.

Happy investing!

Members of The Growth Operation, my cannabis newsletter community, receive:

  • Daily run-downs of breaking cannabis news – including news on both U.S. and Canadian cannabis producers.
  • Exclusive access to my in-depth research articles on smaller cannabis companies.
  • Access to my Model Cannabis Portfolio and my current portfolio.
  • Access all my past Seeking Alpha articles – even back-articles that are no longer free.
  • Try it out for free for two weeks – no risk; no cost for two weeks. 🙂

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