Pittsburgh Synagogue Shooting Suspect's Gab Posts Are Part of a Pattern

11 people were killed and six others—including four police officers—injured Saturday when a gunman opened fire during a baby-naming ceremony at the Tree of Life Congregation, a Synagogue in Pittsburgh. The shooter, Robert Bowers, 46, surrendered to the police and was taken to the hospital, a local councilwoman told the The New York Times. Bowers—who has been linked to an account on the social media site Gab that shared anti-Semitic messages—is expected to face hate crime charges. The Anti-Defamation league called the shooting “likely the deadliest attack on the Jewish community in the history of the United States.”

Gab, a relatively small social network that claims to “defend individual liberty and free expression online” has fewer restrictions on what users can post than platforms like Twitter and Facebook. Its relative lawlessness has made it a gathering spot for white supremacists and other members of the extreme alt-right. The network released a statement following Saturday’s shooting identifying an account believed to have belonged to Bowers, the Synagogue shooter. “The account was verified and matched the name of the alleged shooter’s name, which was mentioned on police scanners,” the statement reads. “This person also had accounts on other social networks.” Gab says it took down Bowers account and contacted the FBI, according to the post. Paypal banned Gab from its payment platform after Saturday’s shooting.

This is the second attack this week in which the perpetrator has been linked to social media accounts that shared online conspiracy theories. Cesar Sayoc, 56, who was arrested earlier this week in connection with 13 explosive devices sent to prominent Democrats and CNN, is believed to have used sites like Twitter to share ultra-right-wing conspiracy theories about many of the people he targeted. That includes George Soros, a prominent Jewish philanthropist who is often the target of right-wing conspiracy theories, which have been repeatedly echoed by President Trump. The first device discovered Monday was located at Soros’ home.

It may never be entirely clear why Sayoc and Bowers chose to carry out violent attacks. But their social media activity is part of a broader increase in anti-Semitism online. Jonathan Albright, a researcher at Columbia’s Tow Center For Digital Journalism, has recently found a high volume of anti-Semitic content on Instagram, under hashtags like “#soros”. In advance of the midterm elections, far-right extremists have used anti-Semitism as a talking point on social media, according to a report released Friday from the Anti-Defamation league, a Jewish civil-rights group that tracks bigotry and hate crimes. The ADL’s researchers interviewed five Jewish Americans who are involved in politics and analyzed more than 7.5 million Tweets, sent between August 31 to September 17 of this year. In that time, they found that amount of anti-Semitic language had increased. “The online public sphere—now a primary arena for communication about American politics—has become progressively inhospitable for Jewish Americans,” the researchers wrote. They also concluded that the majority of anti-Semitic messages posted to Twitter came from real individuals, not bots.

Anti-Jewish sentiment is also on the rise in seedier online locales, including Gab and the message board 4Chan, both of which are already known to house hate speech and far-right conspiracy theories. The use of term “jew” and a slur for Jewish people dramatically increased on Gab and 4chan’s politically incorrect message board following political events like the 2016 presidential election, President Trump’s inauguration, and the 2017 white supremacist rally in Charlottesville, Virginia, according to a study conducted by the non-profit Network Contagion Research Institute that has yet to be peer-reviewed.

Anti-Semitism is also on the rise in the real world too. Instances of anti-Semitic harassment, vandalism, and assault increased 57 percent from 2016 to 2017, according to an Anti-Defamation League report released earlier this year. It’s the largest single-year jump the ADL has recorded since it began collecting data in the 1970s. In its most recently released survey, the FBI found that was an almost 5 percent rise in hate crimes in 2016—and, that of the roughly 20 percent of hate crimes that were religiously motivated, more than half were targeted against Jews. From 2014 to 2015, the FBI recorded a 10 percent rise in hate crimes.

It’s impossible, at this point, to directly correlate Sayoc and Bowers’ online postings to their subsequent violent attacks—but taken in tandem, the combination is troubling. Digital communities provide a fertile breeding ground for hate speech to fester and organize. It wouldn’t be the first time these online ecosystems spilled that hate into real world violence.

More Great WIRED Stories

Apple Shows Massive Cost Saving

Apple (AAPL) has been able to keep costs under control in the recent cycle. A recent teardown by IHS has shown a marginal increase in bill of material, BOM, compared to last year’s iPhone X. While the retail price of the iPhone XS Max has increased by $100 in comparison to the iPhone X, the BOM has seen only a $20 increase. The BOM cost for the iPhone X was $370 while the BOM cost for the iPhone XS Max is $390. Hence, the BOM makes only 35.48% of the total cost in the iPhone XS Max. In the iPhone X, this percentage was 37%.

Despite a higher SDRAM and a shift to 7nm processor technology, the cost increase has been quite low. The same report mentions that a Samsung Galaxy S9+ had a BOM of $375.80 with a retail price of $840. This shows that the S9+ had a much higher BOM cost of 44.73%. In addition to better margins on the iPhone XS Max, Apple is also reported to be performing better than last year’s cycle in terms of unit sales. This should certainly provide a strong tailwind to overall margins of the company. It is possible that Apple is able to break its eleven-quarter streak of falling year-on-year operating margins.

Better pricing

Many analysts believed that Apple would go with a lower pricing in this iPhone cycle. The upward price move was a bit of a surprise but it has helped Apple improve its gross margins in this segment. We can see from the IHS teardown that there has been over a 150 basis-point of improvement in the BOM margin of the XS Max compared to the iPhone X of last year. The touchscreen display cost is the biggest component in the overall BOM. This year, the display cost has remained close to last year’s cost of $120, even though the screen size has increased.

Apple cost savings on Xs Max

Fig: Major bill of material components in the iPhone XS. Source: IHS

Before the launch of this iPhone cycle, many reports suggested that Apple will maintain the $999 price level for its most expensive model. At this price range, the BOM of the XS Max would have increased to 39% of the retail price. All eyes are now on the unit sales generated by XS models and the reception of the XR model. Between the XS and XS Max, it seems that the XS Max has the upper hand. The incremental price is only $100 and many customers have a preference for bigger screens. This is especially true in China where bigger screens help in easier navigation of one-stop ecosystems.

It would be important to see if Apple can keep up this improvement in the XR model. The teardown of the XR model by IHS will happen within a week of the launch of the device. Although the XR model has a retail price which is $250 less than the XS model, several component costs would also be much lower for Apple. The biggest cost saving would be on display.

The cost of an LCD display is usually around $40-$50 which gives a cost saving of $70 from the OLED version. Another big component cost is the camera. In the XS Max, the camera cost is $37.60. The XR will have a single rear camera while the XS has a second telephoto lens. If the XR’s BOM cost is 36% of the retail price, the XR would have a total component cost of $270. This is $120 less than the XS Max.

Most of the projections estimate that the XR would corner over 50% of total unit shipments in the current iPhone cycle. There is a historical trend to support this forecast. CIRP estimated that the iPhone X sales were less than 20% of the total unit sales in June. This trend could be repeated in this cycle, which should boost the sales of the lower-priced XR. Hence, it would be very important to see the BOM of the XR and the level of cost saving which Apple can deliver in this model.

Source: CIRP

Growth in Services and margins

The Services segment has been showing good growth rate for the past few quarters. The trailing twelve months revenue from the Services segment is over $35 billion. Even at this level, Apple is able to deliver over 30% YoY growth in this segment. However, the Services segment is made up of revenue streams from several different businesses with huge differences in margins.

For example, it includes revenue from both the App Store and Apple Music. According to estimates, the App Store has a gross margin of close to 90% while Apple Music has a gross margin of 15%. Faster growth in lower margin businesses will improve the overall growth rate of the Services segment, but will not help in increasing the margin.

This is one of the reasons why Apple’s operating margin has been falling for the past eleven quarters.

Fig: Fall in operating margin of Apple on a YoY basis for the past eleven quarters.

The product mix in the Services segment will further shift towards lower-margin businesses as Apple grows its digital content offerings. Hence, it is very important that the iPhone segment continues to show improvement in gross margins by keeping the BOM under control. Investors should also note the sales mix within the iPhone segment. We can see from the CIRP image that there was a considerable decrease in the percentage share of the latest models compared to earlier cycles.

In this image, the latest models made close to 50% of total sales in June 2018 while in the earlier cycle, the latest models made over 80% of total sales mix. Apple has reduced the number of iPhone models available in this iteration. This should give the flagship models a better chance to improve their percentage share.

If Apple can limit the bill of materials for its iPhone XR model, we could finally see a break in the falling operating margin trend.

Investor takeaway

Apple has shown an improvement in BOM for the iPhone XS Max model according to a recent teardown by IHS. The BOM of this model is 35.48% of the retail price compared to 37% for the iPhone X in the last cycle. Apple could show a similar improvement in the XR model by controlling the cost of display and camera. If the sales mix in this cycle moves heavily towards the newer models, we should see significant improvement in margins from Apple.

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

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

Amazon projects holiday season sales below Wall St. targets

(Reuters) – Amazon.com Inc (AMZN.O) forecast disappointing holiday season sales on Thursday, projecting its fourth-quarter revenue growth would be the slowest in years, sending shares of the online retailer down 6 percent in after-hours trade.

A logo of the Amazon fulfillment is seen outside the Amazon fulfillment center in Kent, Washington, U.S., October 24, 2018. REUTERS/Lindsey Wasson

Third-quarter sales also missed analyst estimates, and Amazon forecast operating income for the fourth quarter below estimates.

The outlook marks a potential change for Amazon, which has posted consistent and strong revenue increases for years.

The retailer is preparing for its busiest time of year, the holiday shopping season that runs from around the U.S. Thanksgiving holiday in late November through New Year’s. It forecast that fourth-quarter sales will rise between 10 percent and 20 percent, or up to $72.5 billion. Analysts were expecting $73.9 billion, according to Refinitiv data.

That would be Amazon’s lowest quarterly sales growth since at least the start of 2016.

Amazon forecast operating income between $2.1 billion and $3.6 billion, below the $3.87 billion expected by analysts, according to FactSet.

Amazon’s chief financial officer, Brian Olsavsky, told reporters on a call that the company expected a strong holiday season.

For the third quarter, net sales rose to $56.58 billion from $43.74 billion a year earlier, but missed analyst estimates of $57.1 billion, according to Refinitiv data.

Amazon’s net income rose to $2.88 billion, or $5.75 per share, in the third quarter ended Sept. 30, from $256 million, or 52 cents per share, a year earlier.

Total operating expenses surged 21.8 percent to $52.85 billion as the company invests heavily in its Prime program, grocery delivery from Whole Foods stores and the creation of original video content.

Revenue from Amazon Web Services, the company’s fast-growing cloud services business, surged 45.7 percent to $6.68 billion, narrowly edging past estimates of $6.67 billion.

Shares of Amazon were trading down at $1,674.12.

Reporting by Jeffrey Dastin in San Francisco and Arjun Panchadar in Bengaluru; Editing by Leslie Adler

FCC to vote to allow U.S. devices to use European navigation system

WASHINGTON (Reuters) – The U.S. Federal Communications Commission said on Wednesday it will vote in November to allow U.S. devices to access the European global navigation satellite system known as Galileo, a move that could improve the services Americans use.

Galileo is a 10-billion-euro ($11.40-billion) satellite program being developed by the European Union as a rival to the U.S. Global Positioning System (GPS) that launched initial services in late 2016.

FCC Chairman Ajit Pai said in a Wednesday statement that “enabling the Galileo system to work in concert with the U.S. GPS constellation should make GPS more precise, reliable and resilient for American consumers and businesses alike .”

The FCC is proposing to waive its licensing requirements for non-federal operations with Galileo signals known as E1 and E5, subject to certain technical constraints, officials said.

The FCC includes conditions to ensure users of satellite-based positioning, navigation and timing services in the United States will benefit from Galileo signals. The systems are interoperable under a 2004 agreement.

Pai noted that GPS “is integral to numerous everyday applications – ranging from driving directions to precision farming.”

The EU has had to rely on Russian or U.S. GPS signals.

Europe in July launched four more Galileo satellites, taking the number in orbit to 26 and moving a step closer to having its own navigation system.

The Galileo system aims to have a total of 30 satellites by 2020. The EU aims to use Galileo to tap into the global market for satellite navigation services, the market for which it estimates will be worth 250 billion euros by 2022.

The EU, which first decided 17 years ago to move ahead with Galileo, has suffered some setbacks – including delays, financing problems and two satellites being put into the wrong orbit.

In August, Britain said it would start work on an alternative satellite system to Galileo.

Pai also said the FCC will vote in November to allow companies, like Tesla Inc CEO Elon Musk’s SpaceX and TeleSat Canada [PSPENC.UL], to expand the frequencies they can use so “that their fleets of low Earth orbit satellites can offer even better broadband service.”

In March, the FCC approved an application by SpaceX to provide broadband services using satellites at home and abroad and previously approved a similar request by Telesat, which is principally owned by Canada’s Public Sector Pension Investment Board and Loral Space & Communications Inc.

Pai also is proposing the first comprehensive review of the FCC’s orbital debris rules since their adoption in 2004 to address the “growing risk” to satellites from the rising amount of space junk.

Reporting by David Shepardson, editing by G Crosse

Apple and Amazon Might Still Be At Risk

The tech giants claim that Bloomberg’s story keeps changing and that much of it lacks evidence. However, there’s an ever better reason why the Bloomberg story can be dismissed out of hand: it’s completely ridiculous because if China wanted to add a spying capability to hardware, they have a far less detectable way to do so.

Contrary to how they appear to the electronically illiterate, circuit boards are not particularly complex. An competent electronic engineer can compare a board as manufactured to the board’s circuit design simply by eyeballing. That’s especially true as circuitry has migrated from the boards onto SOC (System On Chip) designs, which tends to make boards less complex.

Sticking a “spy chip” on a circuit board is about as subtle as storing a “secret” key to your car by using it as the hood ornament. The entire concept is beyond ludicrous, especially since it would be trivial for the Chinese government to hide the spy circuitry inside one or more the chips.

There are two ways this could be accomplished with little to no chance of detection:

1. When the chip is originally designed.

It’s been decades since chip designers laid out the internal circuity in a semiconductor by hand. Today’s designers use fantastically complex programs (called EDA or Electronic Design Automation) that handle the layout of the billions of components and connections that make up a modern chip.

During that process, much of the circuitry is transferred into the chip design in the form of “blocks” of pre-defined intellectual property (IP) that’s already been designed and tested to correctly perform certain functions. IP blocks are basically black boxes; if a designer upstream inserted some rogue circuitry, it would be propagated everywhere that IP block ends up.

There’s no evidence that this has ever happened but it remains a possibility. However, there’s much more likely point where a bad actor could insert rogue circuitry into a chip…

2. When the chip is manufactured.

Chip manufacturing plants (aka fabs) don’t simply make chips as designed. Especially at the smaller (and thus harder to manufacture) geometries reserved for the most important chips, fabs tend to have their own, proprietary manufacturing processes with their own peculiarities.

As a result, chip manufacturers have their own design engineers who make changes to the original chip design to ensure it can be correctly manufactured with an acceptable yield (i.e. a small number of failed chips.) While the fab engineers typical work closely with the original designers, it would be trivial for a fab engineer to add a rogue “spyware” block of IP that would be virtually undetectable.

What’s scary about this scenario is that chip-embedded rogue IP would be almost impossible to detect except, maybe, when it was communicating with another device or chip, like by piggy-backing data on the “noise” accompanying a wireless signal. (I don’t know if that would actually work, but there are probably other ways to accomplish the same thing.)

Note: I’m not saying that this has actually happened nor am I accusing SMIC of anything. (I’ve reached out to SMIC for comment but have not heard back from them.) Frankly, based upon what I’ve heard, their industry reputation is sterling. Certainly they’re extremely competent technically.

I am saying, however, that if China wanted to widely spy on companies and individuals, it wouldn’t need the absurdly ham-handed approach of adding a chip to a circuit board. In short, as ridiculous as Bloomberg’s “spy chip” story might seem, it theoretically could contain a core of truth. So maybe it’s unwise to immediately dismiss the Bloomberg story as utter nonsense.

Oculus Co-Founder and CEO Brendan Iribe Is Leaving Facebook

The co-founder and CEO of Facebook’s Oculus virtual reality business is leaving.

Brendan Iribe said in a Facebook post on Monday that he was stepping down from Facebook, without saying why. Although Iribe had the title of CEO—a carryover from when Oculus was an independent startup—Facebook CEO Mark Zuckerberg hired Hugo Barra, a former executive of the Chinese smartphone maker Xiaomi, to lead Oculus in 2017 as Facebook’s vice president of virtual reality.

Facebook bought the Oculus VR startup in 2014 for $2 billion and has since debuted several VR headsets like the Oculus Rift and Go, although the technology hasn’t caught on with mainstream consumers.

Iribe’s departure from Facebook follows the March 2017 departure of controversial Oculus co-founder Palmer Luckey. Two other Oculus co-founders, Nate Mitchell and Michael Antonov, remain at Facebook.

Iribe did not disclose any future plans.

His exit from Facebook comes amid arguments between higher-level executives there over a decision to cancel a future Rift VR headset that’s powered by personal computers, according a report by TechCrunch that cites an unnamed source. Facebook recently debuted its Quest VR headset that doesn’t need a PC to operate, but hinted during its annual Oculus event in September that it was still planning a newer version of its Rift headset.

Mitchell said in a Tweet on Monday that Oculus was “still driving forward on the Rift/PC platform with new hardware, software, and content.”

Several other executives from other startups that Facebook acquired have also left the social media giant in recent months.

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Instagram co-founders Kevin Systrom and Mike Krieger said in September that they would leave Facebook, just months after Jan Koum, the CEO of messaging app WhatsApp, said he was leaving the company.

Fortune contacted Oculus for more information and will update this story if it responds.

U.S. regulator orders halt to self-driving school bus test in Florida

WASHINGTON (Reuters) – The National Highway Traffic Safety Administration on Monday said it had ordered Transdev North America to immediately stop transporting school children in Florida in a driverless shuttle as the testing could be putting them at “inappropriate” risk.

The auto safety agency known as NHTSA said in an order issued late on Friday that Transdev’s use of its EZ10 Generation II driverless shuttle in the Babcock Ranch community in southwest Florida was “unlawful and in violation of the company’s temporary importation authorization.”

“Innovation must not come at the risk of public safety,” said Deputy NHTSA Administrator Heidi King in a statement. “Using a non-compliant test vehicle to transport children is irresponsible, inappropriate, and in direct violation of the terms of Transdev’s approved test project.”

In March, NHTSA granted Transdev permission to temporarily import the driverless shuttle for testing and demonstration purposes, but not as a school bus.

The agency said the company had agreed to halt the tests. A spokeswoman for Transdev did not respond to several requests for comment on Monday.

Transdev North America is a unit of Transdev, which is controlled by France state-owned investment fund Caisse des Dépôts et Consignations.

The company in August issued a news release saying it would “operate school shuttle service starting this fall with an autonomous vehicle, the first in the world.”

Transdev said the 12-person shuttle bus would operate from a designated pick-up area with a safety attendant on board, would travel at a top speed of 8 miles per hour (13 kph), with the potential to reach speeds of 30 mph (48 kph) once additional infrastructure was completed.

There are numerous low-speed self-driving shuttles being tested in cities around the United States with many others planned.

NHTSA previously said it was moving ahead with plans to revise safety rules that bar fully self-driving cars from the roads without equipment such as steering wheels, pedals and mirrors as the agency works to advance driverless vehicles. The agency has said it opposes proposals to require “pre-approving” self-driving technologies before they are tested.

NHTSA told Transdev that failure to take appropriate action could result in fines, the voiding of the temporary importation authorization or the exportation of the vehicle.

Earlier this month, French utility Veolia (VIE.PA) agreed to sell its 30 percent stake in Transdev to Germany’s Rethmann Group.

Reporting by David Shepardson; Editing by Bill Berkrot

House Passes Retirement Component Of Tax Reform 2.0

Posted by Jon Vogler, Senior Analyst, Retirement Research on Oct. 18, 2018, in Retirement

House passes retirement component of Tax Reform 2.0

On Sept. 27, the House of Representatives approved retirement reform legislation (the Family Savings Act) as part of the “Tax Reform 2.0” package of bills.

The House also passed the American Innovation Act of 2018, which is the small business innovation portion of the Tax Reform 2.0 package. On Sept. 28, it also passed the Protecting Family and Small Business Tax Cuts Act of 2018, which is the part of the package that would make permanent various individual and small business tax provisions from the Tax Cuts and Jobs Act.

The version of the Family Savings Act which passed is very similar to the measure I described in a previous blog entry. Among other items, the bill would:

  • Relax the minimum distribution requirements for retirement savings.
  • Open up multiple employer plan (MEP) membership so that small companies without a common interest could band together to sponsor plans.
  • Create a new Universal Savings Account.
  • Improve the rules relating to election of safe harbor 401(k) status by eliminating the notice requirement for non-elective contributions.
  • Permit plan participants to roll over their lifetime income investment to another retirement savings vehicle if the plan sponsor decides to discontinue that investment option in the plan.
  • Allow employers to adopt a qualified plan up to the due date of their tax return.
  • Repeal the maximum age for traditional individual retirement account (IRA) contributions.
  • Modify nondiscrimination rules to protect older, longer-service participants.
  • Allow families to access their retirement accounts for new child expenses without payment of the 10% penalty tax for early distributions.
  • Expand 529 education savings accounts.

The latest bill includes four key amendments

The bill also reflects four changes made via amendment before the full House vote was taken. These additional provisions would: (a) create a fiduciary safe harbor with respect to the selection of an insurer for a guaranteed retirement annuity contract in a defined contribution (DC) plan, (b) allow a 529 account to designate an unborn child as a beneficiary of the account, (c) eliminate a provision in the Family Savings Act that would have required a study of the Pension Benefit Guaranty Corporation’s single employer insurance program, and (d) exempt the bill from certain “pay-go” rules that otherwise could apply in the absence of revenue offsets.

According to the Joint Committee on Taxation, the Family Savings Act would reduce tax revenues by $21 billion over 10 years. The three most costly provisions are the new Universal Savings Account, the exemption from the required minimum distribution rules for individuals with an aggregate account balance (among IRAs and DC plans) of $50,000 or less and the open MEP changes.

As noted in my earlier blog, many of the provisions in the Family Savings Act were drawn from the Retirement Enhancement and Savings Act (RESA), a bipartisan Senate bill. It is unlikely that the Senate will take up the entire Tax Reform 2.0 package, or even the Family Savings Act, before the mid-term elections. It is possible, though, that the House and Senate could agree on a retirement package that reflects portions of the Family Savings Act and RESA in the lame duck session. It’s our understanding that preliminary talks between House and Senate staffers are already underway about a potential combination of the Family Savings Act and RESA.

We’ll keep you posted.


Ignites, “House passes retirement reform,” Joe Morris, Sept. 28, 2018

NAPA Net, “Retirement component of Tax Reform 2.0 moves to Senate,” Ted Godbout, Sept. 28, 2018

SPARK Institute, “House passes Family Savings Act, which contains SPARK-supported provisions,” Michael L. Hadley, Sept. 27, 2018

PlanSponsor, “Annuity selection safe harbor tacked onto retirement bill,” Rebecca Moore, Sept. 28, 2018

Important information

Blog header image: Lucky-photographer/Shutterstock.com

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial advisor/financial consultant before making any investment decisions. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.


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House passes retirement component of Tax Reform 2.0 by Invesco US

Weighing The Week Ahead: Major Market Misperceptions

We have a light economic calendar with a focus on housing. Earnings season would normally be the most important market theme. For now, observers are seeing what they want to see in earnings reports. That makes it easier for pundits to take up a favorite topic: What is about to go wrong?

There are so many candidates that picking one as a theme would be a pure guess – even more than usual. Sticking with my promise to focus on the most important questions, regardless of pundit preferences, I am going to summarize the most important current market misperceptions.

Last Week Recap

In my last edition of WTWA I asked whether earnings season would spark a rebound in stocks. That was indeed a frequently discussed topic. For part of the week, it looked like the answer would be “yes.” At week’s end, that issue is still in doubt.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring the futures chart from Investing.com. The image posted here shows a static view. If you go to the site, you can check out the news at various points during the week and adjust the view in many other ways. Since futures trade when the stock market is closed, you can also see that trading.

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The market was virtually unchanged on the week. That seems amazing to those who were watching it play out. The weekly trading range was 2.7 % — less than last week, but larger than we have experienced over the last few years. The VIX implied volatility measure remained higher than the actual results which are only slightly higher than the long-term average. I summarize actual and implied volatility each week in our Indicator Snapshot section below.


I trust that the astute WTWA readership has strong and varying passwords. If you have many accounts, you need a password manager. I use Dashlane and monitor their blog, where I ran across the 2018 NFL Password Power Rankings. Noting that her Packers were only #10, Mrs. OldProf said the results should be population-adjusted. (I think the model requires an intelligence variable as well!)

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The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

New Deal Democrat’s high frequency indicators are an important part of our regular research. They remain positive overall but have weakened somewhat in all time frames. The long-term indicators have drifted back to the neutral range.

When relevant, I include expectations (E) and the prior reading (P).

The Good

  • Earnings news – good so far. FactSet reports that 80% of companies have a positive earnings surprise and 64% a positive sales surprise. These are both better than the average result. The year-over-year growth has been 19.5%. The size of the beats is a bit less than average. Guidance has also been better than expected. The earnings news has been strong, but without much market reaction.

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  • Builder Confidence increased in October. Calculated Risk provides the analysis of the small beat over last month and consensus forecasts, concluding it to be “a solid reading.”

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  • The JOLTs report was again very strong, up over 18% year-over-year. David Templeton (HORAN) writes, “This is not the type of data output that occurs in a recessionary environment.”

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  • Some labor slack remains demonstrates Matthew C. Klein (Barron’s). He looks at the “super prime age” employment population and the increase in part-time workers resuming full-time jobs. The lack of wage pressure is the result.

The Bad

  • Housing starts registered only 1201K (SAAR). P 1268K E 1230K. Calculated Risk notes that starts are up 6.4% year-to-date compared to 2017. The comparisons will now be getting tougher. Bill’s continuing view is that there will be further growth in housing starts.

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  • Building permits for September were 1241K (SAAR). P 1249K E 1273K.
  • Existing home sales for September were 5.15M (SAAR). P 5.33 M E 5.30M. Calculated Risk notes that this is a “reasonable level” and less important than new home sales. While the YoY decline is small, it may reflect rising mortgage rates and the limitations on property tax deductions.
  • FOMC minutes should not really have been a surprise, but the market was troubled by the apparent willingness of the committee to raise rates beyond neutral.
  • Retail sales for September increased only 0.1% P 0.1% E 0.6%.Jill Mislinski tracks the data, noting that growth has been rising less than the post-recession trend for the last three years.

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The Ugly

Flood insurance in a World with Rising Seasis a study by Queens College, City University of New York researchers. The research notes the perverse incentives provided by government flood insurance, “$23 billion in the red as of 2016”. Coastal development and property values increase despite the higher risks of flooding.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

The calendar is a light one, with a focus on housing data. There will be plenty of earnings news, which would normally be the biggest story of the week.

Briefing.com has a good U.S. economic calendar for the week (which is why I am a subscriber). Here are the main U.S. releases.

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Next Week’s Theme

Earnings news is episodic. It is often challenging to find a theme in the stories. While the earnings reports will get attention, I expect pundit focus on a favorite theme: What is about to go wrong?

These stories will get plenty of attention. Some are valid concerns, but many reflect common misperceptions. I will balance the scales a by looking at the facts behind the assertions. To help follow the arguments, I am breaking with my customary procedure of offering opinions only in the Final Thought. My comments are italicized and in brackets.


The Corbin Advisors Industrial Sentiment Survey captures the concerns of the buy-side. Here is the word cloud.

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Some of these are certainly valid concerns. Let’s consider some misconceptions.

  • The economic cycle has lasted so long, it is about to end (and with it, the bull market). [I have seen several studies about the imminence of a cycle peak as a function of the length of the cycle. None show any support. Since this makes intuitive sense, and fits the purpose of the writer, it is simply asserted without evidence].
  • The VIX is a good predictor of market declines. [The VIX, calculated from the cost of equity options, is a concurrent or even trailing indicator, not a predictor. It also does not indicate complacency when the value is low. As I show each week, the cost of insurance always exceeds the actual volatility].
  • Things are so good, they must be about to turn. Jesse Colombo, cited in a MarketWatch report, explains why wealth is bad. Here is the key chart:

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[I hardly know where to start with this chart. It compares a combination of government, business, and individuals on the income side with individuals alone on the wealth side. Why? The Dot-com circle does not prove the point, so there is exactly one prior case. The vertical index is almost left to your imagination, and of course, no long scale to make the time periods similar. Why 1951, other than that is when the data started? Why is the stock market the cause of wealth? What about savings? But mostly, the problem is the “good is bad” concept. If you begin with a trough and go backward, you will find a peak. That does not help you identify a peak in real time. In the “housing bubble” circle, for example, you could have called the peak at any time after 2004. It is only in retrospect that the claim seems persuasive].

  • Indicator X (insert one of several) shows that there will be a recession soon. Last week it was a JP Morgan report of a 60% chance within the next two years. The chance for next year is 28%. [Little is known about JP Morgan’s model, but I am not impressed with the reports I have seen. There are not that many relevant past cases. Overfitting a model with a lot of variables is the biggest danger. You need to know how it was developed. That said, I don’t object to the odds for the next year. I don’t think they (or anyone else) can forecast more than a year ahead with any accuracy].
  • A crash is coming! Last week John Hussman pegged the possible loss at $20 Trillion. The report also listed other bearish forecasts with somewhat lower declines. [The forecasts suggest varying causes, but the numbers are all attention-getting. Large market declines have almost all been linked to recessions and/or financial stress, highlighting the importance of our weekly indicators].
  • The yield curve is inverting. [When there is an inversion we have a signal. That precedes a cycle peak by a year or so. There is no need to “forecast the forecast” as business cycle expert Bob Dieli puts it. Here is an example from his latest report.

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  • Well maybe it is not inverting, but rates are going higher. [This is typical commentary. As the long end rates moved higher, the inversion complaint shifted to an overall concern about rates. That type of analysis is a good indicator of an analyst on a mission. His/her glass will never get close to half-full].
  • Geopolitical issues are a threat to current stock prices. This is usually just presented as a laundry list, often with the claim that the current stock prices do not reflect these fundamental concerns. [There are some valid geopolitical concerns – those that affect global growth or inflation. Impact on oil prices, trade effects on prices, and reduced US exports are all good examples. Our challenge is to separate those concerns from a generalized list of “headwinds”].
  • Debt is growing and will undermine the entire financial system. [Debt is certainly growing, but so are assets and income. Looking only at the size of debt – with no log scale of course – makes things look totally out of control. I am not concerned about individual debt given the improvement in repayment ability. I am not very concerned about corporate debt, which may well be a rational choice given low interest rates. Government debt is another matter. It is a real problem. It needs to be addressed. Like many problems, there are no immediate consequences of neglect].
  • Indicators are “rolling over.” This is often cited as “growth is decelerating.” [A very high rate of growth cannot keep increasing forever. Settling back to a normal rate of growth is just fine. If, for example, the rate of GDP growth dropped to 2.7% or so, that would still be a healthy rate – good for employment, earnings, etc. A slowing of the rate of growth always happens before a decline, but it does not always indicate a decline. Think of it as a necessary but not a sufficient condition. Expect to see many indicators like this in the next few months].
  • The Fed is raising rates. [Interest rate increases in the current range are not very important for stock prices, according to all the historic data we have. This is not just a matter of a slogan. Check out any of the recent WTWA posts for more on this topic].

There are many other candidates for the list of pundits’ favorites. Please add your own ideas in the comments. In today’s Final Thought, I’ll add a few more observations.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

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Short-term trading conditions have taken a turn for the worse. The identification as “bearish” is a reaction to volatility, not a prediciton of a short-term decline. When conditions are technically challenged, we watch trading positions even more closely. It is possible for our trading models to exit completely if there is further deterioration.

Long-term trading has also dropped a point on a technical basis. This differs from the fundamental analysis which remains very strong.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Georg Vrba: Business cycle indicator and market timing tools. None of Georg’s indicators signal recession. Here is the latest chart on the Business Cycle Index.

Doug Short and Jill Mislinski: Regular updating of an array of indicators. Great charts and analysis. To emphasize the difference between sentiment and reality, it is time for another update of the Big Four indicators – the key elements in recession dating.

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The Big Four shows consistent and broad growth.

Guest Commentary

Liberty Street Economics takes a close look at the effect of increased regulation on bank arbitrage activity. The authors conclude that additional costs have decreased activity both by banks and hedge funds. You can readily see the flattening and recent decline of the notional value of derivatives. [Jeff – And of course, these positions are largely offsetting. We don’t really know the net exposures].

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James Picerno’s (The Capital Spectator) business cycle risk report provides a watchful positive.

For now, the risk of recession remains virtually nil and it’s unlikely that a downturn will start in the immediate future, according to broad set of indicators. But projections for next year, which remain highly speculative at this point, suggest that recession risk will rise – a forecast that deserves close attention as new data arrives in the weeks ahead.

Insight for Traders

Check out our weekly Stock Exchange post. We combine links to important posts about trading, themes of current interest, and ideas from our trading models. This week we asked whether traders would rather be “right” or be successful. This important concept is something you should decide and then live with. We also shared advice by top trading experts and discussed some recent picks from our trading models. Our ringleader and editor, Blue Harbinger, provided fundamental counterpoint for the models, all of which are technically-based.

Insight for Investors

Investors should have a long-term horizon. They can often exploit trading volatility.

Best of the Week

If I had to pick a single most important source for investors to read this week it would be this analysis of a trade by “Davidson” (via Todd Sullivan). He explains that market psychology and business returns often diverge, and he provides a helpful example of Kansas City Southern (KSU).

Market psychology often diverges from business returns. Identifying these situations is what produces investment opportunity, but the investment return is dependent on market psychology turning in the direction which benefits the investment decision. History tells us that investors eventually respond to the underlying returns. The issue for investors is that one may have to wait through a frustrating period of watching business returns evolve as anticipated without markets responding. KSU provides an excellent example of the investment process.

Check out the entire post to appreciate the example.

Stock Ideas

Chuck Carnevale applies his powerful analytical methods in a look at a popular candidate, IBM. As usual, he combines a lesson in analysis with good ideas about a specific stock. Watch the video! (See also Nicholas Ward’s analysis below in the “watch out” section.

Emerging markets? The Barron’s Roundtable highlights some beaten-down choices including Alibaba (BABA), Tencent (OTCPK:TCEHY), and Baidu (BIDU). “Alibaba was the consensus favorite of the roundtable.”

Morningstar identifies economic moats and strong balance sheets as the keys to maintaining dividends. Using that as an initial screen, they then look for the cheapest candidates, creating an interesting list of possibilities.

Personal Finance

Seeking Alpha Senior Editor Gil Weinreich’s Asset Allocation Daily is consistently both interesting and informative. Each week he highlights stories of interest for both advisors and investors. He also provides insightful commentary on important topics. Be prepared for something that cuts against the grain!

This week I especially enjoyed his discussion of annuities. I have joined others with annuity warnings – high commission products that substantially trail alternative methods. Gil thinks objectively about the concept, identifying why this approach might fit some investors.

[Jeff – BTW, I have occasionally had a client where an annuity was the correct solution. I take pride in helping people find a suitable solution at a discounted price.]

Abnormal Returns is an important daily source for all of us following investment news. His Wednesday Personal Finance Post is especially helpful for individual investors. I especially liked the Morningstar article by Christine Benz, Guess What? It May Actually Be Different This Time. She looks back at 2008 and her family’s wisdom in holding on. But then, are things different now? Not necessarily for the market, but for you? Tadas also pointed to the “watch out” piece below about ambulance chasing advisers. And also the Ben Carlson post on market corrections.

Watch out for…

Market advisers who play on your fears. Quentin Fottrell (MarketWatch) urges you to “proceed with caution when you sense that someone is trying to sell fear.”

IBM. Nicholas Ward speaks, no doubt, for many investors who have given up on the stock. He notes the difficulty in analyzing a company with a high yield, slowing revenue growth, but plenty of stock buybacks. [Jeff –In general, I agree that the stock is not exciting as a standalone purchase. We occasionally use it as a platform for selling near-term calls, allowing it to be called away. This has worked well, and we’ll probably invest in the buy/write on Monday.]

Final Thought

The progress in behavioral economics has made many people aware of anchoring – a perception that lingers in your mind, interfering with rational thought and analysis. David McRaney has a nice discussion. He reviews several interesting (and fun) examples of how providing a random number alters the perceptions in a group of subjects. How many African countries are in the UN? What is the population of Venezuela?

This effect is now widely accepted by nearly all market analysts. And then it is forgotten. The constant repetition of an idea has an effect. The factual basis does not matter. The aging bull market, the role of the Fed, and assorted correlation/causation errors are all examples. I have tried to illustrate a few of these, helped by readers who inquired about some of the posts mentioned.

Why are the anchoring stories so negative? Because the stories almost write themselves and attract the attention of a wide audience. Dr. Hussman thinks we might lose $20 Trillion (assuming we have done no profit-taking along the way). Mr. Colombo warns us that the apparent good news about improved wealth is actually a bad omen. The Hussman commentary often leads the list of popular articles. Mr. Colombo reports that he has 10 million followers across several different platforms. They are both major, successful forces in the world of market influence.

It would be interesting to calculate the market gains since Dr. Hussman first used “overbought, overbullish, and overvalued” and even before he added “obscene.” I’ll take the “over” on $20 Trillion.

We would all like to identify bubbles and get out of the way. An expert on bubbles must not see them everywhere. Compare this 2014 Forbes Colombo article with the one mentioned above: These 23 Charts Prove That Stocks Are Heading For A Devastating Crash. It had 170K page views, and every chart is a Silver Bullet candidate. [I raised questions at the time but got no response].

Predicting disaster is exciting and profitable!

Check out Ben Carlson’s list of those who benefit from a correction. There is no way to inoculate yourself against the anchoring bias, but you can follow a fact-driven process.

I’m more worried about:

  • Brexit. Necessary changes between the UK and the EU have not been negotiated (Barron’s). Contracts, derivative clearing, data protection, and key UK financial employees who are EU citizens. Will there be a delay?
  • The psychological effect of worries. Business and consumer confidence are important for a strong economy.

I’m less worried about:

  • Earnings growth. Can it be a catalyst again this month? The reaction to conference calls will give us a sense of the market mood.
  • The Saudi issues. The death of a US journalist is an important story. Like many other news items, it is not a financial story.

Disclosure: I am/we are long BABA.

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

Additional disclosure: About to buy IBM versus short calls

This 9-Year-Old Girl Scout Just Displayed Warren Buffett's Best Advice to Entrepreneurs. (It Worked Perfectly)

Keep that start in mind as we share the story of a 9-year-old Canadian Girl Scout (actually, they call them Girl Guides in Canada). Because she managed to sell an entire stock of Girl Scout cookies in 45 minutes recently, in a way that displays Buffett’s key advice to entrepreneurs.

Reporter Emily Fitzpatrick from the CBC found the girl, named Elina Childs, as she towed her wagon full of cookies down a line of people waiting to buy newly legal Canadian marijuana, at a store called Nova Cannabis.

The nine-year-old Girl Guide and her father … sold all 30 boxes in less than 45 minutes, earning $120 for Girl Guides.

“It amazed me how quickly they went,” said her dad, Seann Childs. “Even people in cars driving on the avenue there would stop and roll down their window and ask for cookies.” 

Which brings us back to Buffett. His best advice for entrepreneurs? (It differs from his top advice from investors, of course.)

“If there’s one thing to remember: Delight your customer,” Buffett told interviewer Dina Habib Powell at a Goldman Sachs event in 2016.

Regardless of whether Elina Childs actually knows about Buffett, his advice describes exactly what she did here. She found an audience that would be delighted by her product, rather than trying to force it onto other people.

Consider the more traditional methods lots of parents encourage their daughters to use to sell Girl Scout cookies, and how this compares.

  • Sell them door to door? Super inefficient. Who knows who’s even home? 
  • Stand outside a shopping center? Maybe, if you’re allowed to. But you’re probably trying to sell cookies to people on their way to or from a big store with a much bigger selection. Plus you’re competing with other girl scouts.
  • Bug your parents’ coworkers? This is a common strategy. I’m not sure how much it’s about delighting customers though, as opposed to pressuring them.

Instead, the 9-year-old Childs and her dad took the cookies to an audience that they could be sure would be delighted by the idea of buying cookies. 

(One thing that I haven’t understood, not having a lot of experience with this myself: Don’t you get the munchies after using marijuana, not before?)

Regardless, even if it’s been done before, it’s a smart way to find people who love your product: and a brilliant execution of Warren Buffett’s best advice.

5 Ways to Spot Bad Customers That Also Identify Great Employees

There is a cliche saying in marketing that it takes eight or 11 or 17 impressions — it gets longer every time marketers say it — before a customer is ready to buy from you. While some version of that is undoubtedly true, it’s easy to confuse those passive marketing impressions with your more intentional sales follow ups

So, how hard should you try to convince someone else to buy from you? In my opinion, not hard at all. The hardest customers for you to close will be the hardest customers for you to satisfy. 

I’ve seen this over and over again. When a prospective customer is skeptical of your product or service, it’s tempting to want to spin your conversation in a dozen ways so that they finally see the value that you provide. 

And, when you’ve persisted long enough for them to convert, they look for every opportunity to prove you wrong — to convince you that they weren’t actually a fit after all. Cue the cancellations, refunds, and over-and-beyond support to try to make things right.

While you shouldn’t waste time trying to close those picky customers, you should definitely invest time recruiting picky employees. The same traits that make for the worst customers are often found in the best employees. 

Here’s how to spot them.

They have options, and they are the prize.

The worst customers come to you with 10 other companies that are vying for their business. One of my consulting clients, a printing brokerage, was bombarded with estimate requests from companies that seldom intended to buy; they just needed at least three bids to appease management.

Rather than connecting with your messaging or seeing something unique in your product or service, the customer has put you on a long list of possible providers. Red flag. 

But, when a prospective hire has multiple companies pursuing them, it gives you confidence about their value in the marketplace. And, it moves the process along faster, because if you don’t get them, someone else will. 

They’re price shopping.

When a customer shops solely on price instead of value, that’s a recipe for disaster. Unless you’re selling a commodity or reselling a product against an identical supplier, a great customer would weigh the pros and cons of the full relationship and not just select the lowest price.

The best applicants, however, know their value and are willing to ask for it. Likely, they have multiple opportunities, and the price that you’re willing to pay is a key part of the equation. 

They come in with obscure questions.

If a customer is asking extremely specific questions during the sales process, rest assured that they will have extremely specific customer support tickets as well. When I demo our software at Trainual, a customer with a few clarifying questions about the product is good. A customer that asks about modifying the printing margins on a PDF export makes me raise an eyebrow.

But, the best employees ask a lot of questions during the hiring process. They want to know about your products and services, your team, your benefits, your mission — everything that will help them determine if your company is the right fit for them.

They want to make it a group process.

When a customer requests a demo, and then another demo with a different set of people, and then starts an email thread with a larger group, it shows that they aren’t the decision maker, and the sale is going to take a while. 

When an employee is interviewing, however, they should want to meet as many people as possible to make sure they’re a good fit with your team. They should ask questions about your teammates outside of town, introduce themselves to others when touring the office, and give everyone a chance to weigh in on the hiring process.

They don’t make quick decisions.

Some customers are decisive. They recognize the value of your solution and they pull the trigger. Other customers don’t make quick decisions, and can take weeks, months, or even years to convert, taking up a lot of your resources in the process. 

When you’re hiring, a quick decision or quick start date can show a lack of options, so a slightly longer decision process is actually a good thing. It can be frustrating when a transaction with a customer takes a long time to cultivate, and there are several red flags along the way. But, learn to recognize these same characteristics as positive with potential hires.

The customers that are hardest to sell are the hardest to please. The applicants that are hardest to sell are the hardest to live without.

Holiday Shopping 2018 to Hit $134 Billion; Amazon's Conversion Rates 3-5X Higher Than Walmart, Macy's, Target, eBay

Last year Amazon achieved holiday shopping conversion rates of 5.6% on mobile and 17.8% on desktop, massively outperforming rivals such as Walmart, Target, eBay, and others.

This year, the company appears poised to do it again.

The holiday Thanksgiving weekend is one of the biggest shopping events of the year, and Amazon leads all retailers in both mobile and desktop shopping, according to a new report from Lotame and Jumpshot. Retail searches jumped 182% after Halloween, according to the companies, and that led to a 75% increase in traffic to deal sites and other retail outlets.

But conversion is where it’s at, and there Amazon excels, peaking two weeks before Christmas, with these conversion rates on mobile:

  • Black Friday: 5.2%
  • Cyber Monday: 5.6%
  • December 11 week: 6.4%

On desktop, as you’d expect, the rates are significantly higher:

  • Black Friday: 16.1%
  • Cyber Monday: 17.8%
  • December 11 week: 20%

Those rates compare to an average of 1.3% mobile conversion at other e-commerce sites, including Walmart, Target, Macy’s, and eBay, and 7.3% on desktop.

“Shopping is a mobile-first industry,” says Ryan Rolf, VP of Data Solutions at Lotame. “With more and more mobile devices pushing e-commerce visits, retailers that neglect to take a mobile-first approach will lose out in 2018.”

That’s not necessarily entirely true. The conversion rates on desktop, for instance, are multiples of the conversion rates on mobile … so desktop does matter. Where mobile is key is in the discovery phase and the price check phase. Mobile is the “three-foot” device: never more than three feet from your body.

That means it’s usually the first device you turn to. 

Consumers often then turn to a desktop to complete the purchase with a bigger screen and keyboard, something I call “taps, clicks, bricks.” The upshot is then that retailers’ in-store experience, mobile experience, and desktop experience all matter.

Of course, that’s U.S. data.

Chinese or Indian data would show something quite different, since mobile is not just the default but the only computing platform available to the vast majority of people. And that may happen in the North American and European markets over time as well, as mobile continues to grow.

All is not lost for other retailers, however.

“Though consumer data shows Amazon dominates e-commerce, they’re not the only place people buy online, especially during the holiday shopping season,” said Deren Baker, CEO of Jumpshot. “It’s vital that marketers understand how consumer habits shift depending on how and where they discover and buy products.”

Walmart in particular has taken on Amazon’s challenge and invested heavily in e-commerce while also taking advantage of its large physical-store footprint … and working with Google to make all its products shoppable by voice via Google Home and Google Assistant.

It remains to be seen who the long-term winner will be.

The Noma Guide to Fermentation: A Cure for Kitchen Boredom

Occasionally, when shredding cabbage to make sauerkraut, I wonder, of all vegetables, why this one? Don’t get me wrong—little makes me happier than a late-night snack of beer, cheddar, crackers, and kraut, but the popularity of the lowly cabbage for fermenting always felt weirdly limiting.

It wasn’t for lack of great teachers. For the last few years, I’ve enjoyed working with the genius cheerleader Sandor Katz’s Wild Fermentation in one hand and the bulletproof straight shooting of America’s Test Kitchen’s Foolproof Preserving in the other. Somehow, though, the two left me tradition bound, and I never ventured beyond sauerkraut and kimchi. I needed some uncharted territory.

Flipping through The Noma Guide to Fermentation, which hits shelves this week, I came across a photo of corn on the cob being painted with a paste of fermented blueberries. It sounded like a crazy combination but Copenhagen’s Noma is often ranked as the top restaurant in the world and I felt confident that it would be good.

Once residing mostly in the domain of hippies and health-food stores, fermentation is quietly becoming the obsession of many high-end chefs. The Noma Guide is a deep dive that makes that infatuation official, describing what fermentation is, why it tastes good, and how we can learn from some incredibly capable pros about how to make our home kitchens hospitable for the good bacteria and fungi that transform our food, lending it more complex flavors.

In 2014, chef René Redzepi and his team at Noma went all in and built a fermentation lab out of shipping containers, later hiring the Guide‘s co-author David Zilber to run it. Now, Redzepi says, “Fermentation isn’t responsible for one specific taste at Noma—it’s responsible for improving everything.”

He’s not kidding. When Noma opened in a new location in Copenhagen earlier this year, symbolically integrating the fermentation lab, every dish on the menu featured a fermented element.

Following an informative and deftly written primer to start the book—the authors got editing and recipe testing help from food pros Chris Ying and Martha Holmberg—the Guide then divides and conquers, splitting Noma-style fermentation into several sections: lacto fermentation (salting fruits and vegetables to make the magic happen), kombucha, vinegar, koji (rice or barley inoculated with Aspergillus oryzae fungi), misos, new kinds of shoyu (soy sauce), various garums (fish sauce and friends), and non-fermented black fruits and vegetables like black garlic. Each of those sections gets its own detailed description and a raft of recipes.

Redzepi and Zilber’s interest in fermentation may sound simply like a good excuse for a new book, yet stretching the possible is a near necessity at Noma. Finding interesting ingredients in Denmark’s winter is challenging, but transform something that’s abundant in the summer into a wholly different food in the winter and you’ve got enough excitement to get you through the cold months.

Funk House

In their guide, Redzepi and Zilber encourage readers to build a fermentation chamber out of a speed rack (translation: make a temperature-controlled tent from a restaurant’s rolling sheet-pan rack, a little heater and humidifier, and a PID temperature controller), or make one out of a styrofoam cooler. I did none of this in my test kitchen and still made several ferments equipped with little more than a bunch of large Ball jars, and some inexpensive specialized equipment. I even did some book-sanctioned cheating, buying some rice koji, then riffing on the book’s roasted koji mole recipe, which has nothing to do with a traditional mole, but it has an intense range of deep flavors similar to its namesake. It also makes a swell glaze for roasted potatoes or a lovely stand-in for hot chocolate.

My partner in crime was Brian “I belong to several fermentation groups on Facebook” Gojdics. He’s a buddy, a world-class pizza chef, and—full disclosure—I’ve done a bit of consulting in the past for the restaurant where he is the executive chef.

Together, we plowed through the prep for multiple ferments: vats of lacto-fermented blueberries, pluots, mushrooms and honey; vinegar made with pluots—the recipe called for plums, but the pluots looked better; and coffee and mango kombuchas.

“This book’s rad, it gives the why,” Brian said.

Initially, I lost Brian to the book since he was seeing it for the first time. But once he set it down, all went quickly. We had our first few jars filled in half an hour, largely because it was easy. Fermenting with salt, aka lacto fermentation, where the salt lets the good, flavor-making microorganisms do their work while inhibiting any that might be harmful, simply requires the ingredient itself, plus about two percent of its weight in salt. A kilogram of cabbage, for example, gets 20 grams of salt. Or, as Brian put it, “You’re just adding salt to a thing and putting it into a jar.”

Eaten raw, elderberries can irritate the stomach. By adding them to elderflower wine, they become fermented and are rendered deliciously edible.

Evan Sung/Artisan Books

Here, apple kombucha has been combined with pine needles, giving the drink a bright green hue.

Evan Sung/Artisan Books

We started a pair of kombuchas, and this was where I was particularly happy to have a fermentation buddy—I’d never before deployed the Symbiotic Culture of Bacteria and Yeast known more commonly as a scoby. This is the rubbery disk you set floating atop a jar of sweetened black or green tea, so the microbes housed within can transform the sugars in the brew into alcohol and acetic acid. Scobys can live for months or years, and are often handed down or shared amongst kombucheers. Brian even keeps a collection of them in a big jar known as a scoby hotel, a term that makes me chuckle every time I read it.

That pluot vinegar required nothing more than the fruits themselves, a little bit of liquid yeast, and some already-made unpasteurized vinegar that’s added late in the game, a process dignified by another great term: backslopping.

What’s particularly nice about the book is that it takes the time to go into in-depth explanations. Many of its recipes have photos that illustrate what your ferment should look like over days, weeks, and even months, which is really helpful if you’re worried that what you’re making is going sideways. It also gives Redzepi and Zilber room to talk about their more unique creations. When they make vinegar out of celery, or miso out of peas (usually it’s soybeans), they understand that we’re going to need some suggestions on what to do with them. Celery vinegar, it turns out, makes an intriguing topping for fresh cheese when combined with herbs and olive oil. Miso made with with peas, or “peaso,” as they call it, can be folded into butter to adorn mashed potatoes, or it can be combined with garlic oil and used as a beef marinade. One particularly helpful pairing note is to simply use the fermented product with the same foods you’d pair their unfermented versions with.

The ferments we made became a bit of a running project (they all are, really), and they fared better when I gave them a quick, daily once-over. Brian stopped by after about a week and made sure everything was looking good, and discovered that the lacto pluots had developed a thin layer of harmless kahm yeast.

“It won’t hurt you, but the yeast itself might taste like vomit,” he said before walking it back a little. “OK, how about ‘it can have unpleasurable flavor profiles?'”

He skimmed off the offending yeast and it was good as new.

Deep Mushroom

Over the course of a week or two, the flavors of each ferment developed in interesting ways. The blueberry brine went from intense sweet-salty, to a bit tart, to very pleasingly sour while their flesh became intriguingly meaty. The Noma Guide calls the brine created by lacto-fermented mushrooms a “Swiss Army knife” that they use to season “everything from fennel tea to monkfish liver.” Lacking either of those, I dribbled a spoonful on a sandwich with cheddar and fresh tomatoes, which gave the whole thing a lovely, deep mushroom-y flavor. Swiss Army knife, indeed, I thought, getting similarly pleasing results when I drizzled some over a slice of reheated pizza with pesto and goat cheese.

We did have one significant flop. That pluot vinegar bubbled up a storm for a couple of days, eventually giving off a pleasant banana smell with boozy notes and bubbly fruit—early-stage booze!—but after about 10 days, it developed a layer of what looked like near-black fruit leather on top. I tried scraping it off, then stirring it up, but that didn’t work so well, and a new layer of darkness appeared on the top in mere moments. I checked in with Brian and decided to dump it.

Ya know what, though? I’d never made vinegar before, and everything else worked out pretty well. The Noma Guide preps you for the idea that not every experiment will work out every time. Besides, my wife Elisabeth, who jokingly referred to herself as a “kombucha professional” as she really enjoys the drink, gave my mango kombucha two thumbs up. Suddenly, taking another stab at vinegar sounded like fun!

One of the things that I like most about the book is the combination of getting nerdy in the lab and handing that work off to Redzepi and his chefs who, with expert technique and refined palates, tell you what to do with what you’ve made. Sparkling citric koji amazake practically has “amazing” in its name, but I’d have no idea what to do with it. Made from rice koji, rice, and water, amazake is a sweet Japanese drink. The Noma Guide‘s riff on the recipe uses barley in place of the rice, and fermenting with A. luchuensis fungi. Redzepi and Zilber suggest combining it with olive oil, garlic and shallots, then steaming clams in that mixture, reducing the liquid, and pouring it over the finished clams.

Sounds good, doesn’t it? Prepare to be amazed.

It's Imperative You Stop This One Bad Habit We All Do All The Time Because It's Ruining Us All

Here’s a recent moment I’m not proud of: I’m driving down a two-lane highway, listening to an audiobook, while checking a text and Google Maps using the split-screen feature on my Android phone. I look up to see a construction worker in the road signaling that I slow down and I’m suddenly ashamed of my irresponsible multi-tasking and distracted driving.

Oh, and by the way, I didn’t retain any of the last few minutes of my audiobook and the text definitely could have waited. 

I started to think back to a number of irritating moments and social interactions from the past few days and wondered how many could be attributed to similar bad habits. The receptionist at the dentist who tried to schedule me on the wrong day multiple times while clearly distracted; the harsh critique from a reader who had obviously not read more than a paragraph of my story; the numerous distracted drivers (even more so than me) who don’t quite stay in their lanes at all times. 

The fact that there is an epidemic of distractions, vanishingly small attention spans and an almost involuntary impulse towards multitasking is not a new revelation, but it occurs to me that the problem may be even more insidious, pervasive and dangerous than we’re acknowledging. 

But what’s become more apparent to me recently is that widespread multitasking – often out of what we perceive as a need to keep with the utter barrage of media and communication coming at us with unprecedented speed and frequency – may rise to the level of a public health issue.

I’m worried that the very workings of society itself, the social contract we have made to each other, is in danger of unraveling at the hands of our own incompetence, which is driven in part by a culture of distraction and a false sense that focus must be the sacrificial lamb offered up in order to keep up. 

We are so distracted that our distractions are distracting those around us and making us all dumber for it. 

It’s all common sense really. If you’re not paying attention, you’re going to miss things and get stuff wrong as a result. 

It’s ironic, I think, because part of the reason that we multitask is that we want to be our best selves. We convince ourselves that part of achieving this betterment is keeping up with everything happening in the world, the news, our social circles, or whatever.

But the truth is that none of us are keeping up with it all. And besides, true understanding and improvement comes from deep focus rather than shallow dithering. 

We’re not going to stop staring at screens any time soon, but hopefully we can start focusing on just one at a time and only when we’re not doing anything else. 

Recently I started leaving my earbuds at home for long runs. No music, no audiobooks, just the sound of the breeze and my repeated footfalls on the trail below me. I know what some of you are thinking, but no, I wasn’t bored. What’s more, I was actually able to focus better the rest of the day and felt less stress and anxiety.

U.S. making serious efforts to comply with EU data rules: EU officials

BRUSSELS (Reuters) – The United States is making serious efforts to comply with a landmark data transfer pact agreed two years ago, EU officials said on Thursday amidst criticism by some civil liberties groups and EU lawmakers that the U.S. is not living up to the accord.

European Justice, Consumers and Gender Equality Commissioner Vera Jourova holds a news conference in Brussels, Belgium September 28, 2017. REUTERS/Francois Lenoir

The comments came as the European Commission launched its second review of the EU-U.S Privacy Shield which aims to better protect Europeans’ personal data transferred across the Atlantic for commercial use.

The pact replaced a previous framework known as Safe Harbour, which Europe’s highest court quashed in 2015 because it gave U.S. spies excessive access to personal data. About 3,800 companies have signed up to the pact.

European Justice Commissioner Vera Jourova met U.S. Commerce Secretary Wilbur Ross in Brussels earlier on Thursday to discuss the review.

Officials from the Federal Trade Commission, the Office of the Director of National Intelligence (ODNI), the Department of Justice and the State Department, the EU executive and EU data protection agencies will also debate the topic over the next two days.

“All this pressure that we have created throughout the year seems to be working,” an EU official said, pointing to various measures that the United States has recently taken to adhere to the pact.

“Their level of preparedness for the review is a good sign of the seriousness of their approach,” he said, pointing to the 50-person U.S. delegation in the room during the exercise.

Lawmakers at the European Parliament have urged the Commission to suspend the accord until the United States observes the pact and its obligations in full, such as by appointing a permanent ombudsman. The Commission will publish its conclusions next month.

Reporting by Foo Yun Chee; Editing by Alexandra Hudson