A very strange yet oddly compelling cult.
Not one of the good professor's most insightful blogposts but interesting because he puts the odds of Uber failing at only 5%.Here he schools me
And because you can feel his "I need numbers dammit" pain....
In the week since I posted my Uber valuation, I have received many suggestions on what I should have done differently in the valuation, with many of you arguing that I was being a over optimistic in my forecasts of total market, market share and margin improvements and some of you positing that I was too pessimistic. I don't claim to have any certitude about these numbers but the spreadsheet that I used to value Uber is an open one, and you are welcome to convert your suggestions into valuation inputs and make the valuation your own. In just the last few days, though, I have been watching an argument unfold among people that I respect. about whether the reason for my low valuation for Uber is that I am using a DCF model, with the critics making the case that valuing a company based upon its expected cash flows is an old economy framework that will not yield a reasonable estimate of value for new economy companies, driven less by infrastructure investments and returns on those investments, and more by user and subscriber economics. I have long argued that DCF models are much more flexible than most people give them credit for, and that they can be modified to reflect other frameworks. So, rather than deflect the criticism, I will try to build a user based model to value Uber and contrast with my conventional valuation.
Aggregated versus Disaggregated Valuation
If you are doing an intrinsic valuation, the principle that the value of a business is the present value of the expected cash flows from that business, with the discount rate adjusted for risk, cannot be contested. That is true for any business, manufacturing or service, small or large, old economy or new economy. Since that is what a discounted cash flow valuation is designed to do, I have to believe that what critics find objectionable in my Uber DCF model is not with the model itself but in how I estimated the cash flows for Uber, and adjusted for risk. I followed the aggregated model for discounted cash flow valuation where I estimated the cash flows to Uber as a company, starting with its revenues and working through the consolidated expenses and total reinvestment each year and discounted these cash flows at a cost of capital that I estimated for the entire company. Along the way, I had to make assumptions about a total market that Uber would go after, the market share that I expect the company to get in that market and the operating margins in steady state.Disaggregated ValuationValue is additive and you can value any company on a disaggregated basis, breaking it down into different divisions/businesses, geographical areas or by units:
- Business Units: In a sum of the parts valuation (SOTP), you can break a multi-business company into its individual business units and value each unit separately. I have a paper where I describe the process of doing a SOTP valuation, using United Technologies, a conglomerate, as my example. If that SOTP valuation is much higher than the value that the market attaches to the company, you may very well find an activist investor targeting the company for a break up.
- Geographical Groupings: When valuing a multinational, you can break the company's operations down geographically and value each geographical grouping (Asia, Latin America, North America, Europe) separately, not only using different assumptions about growth and risk in region but even different currencies for each region.
- Unit-based Valuation: More generally, when valuing any company, you can try to value it on a unit-basis, building up to its value by valuing each unit separately and then aggregating across units. Thus, a pharmaceutical company can be valued by taking each of the drugs that are in its portfolio, including those in the pipeline, and valuing that drug based upon its cash flows and risk and then adding up the values across the entire portfolio. A retail business can be valued by valuing individual stores and adding up the store values and a subscription-based company can be valuing by valuing a subscription and multiplying by the number of subscriptions, current and forecasted.I may be misreading the critics of my Uber valuation but it seems to me that some of them, at least are making the argument it is better to value Uber, by valuing an individual Uber user first, and then scaling the value up to reflect not just the number of users that Uber has today (existing users) but also new users it expects to add in the future.Aggregated versus Disaggregated Valuations: Weighing the Trade offsValuation on a disaggregated basis allows you to be much more flexible in your assumptions, allowing them to vary across each grouping but there are four reasons why you seldom see them practiced (or at least practiced well) in company valuation.
- Law of large numbers: As companies get larger and more diverse, there is an argument to be made that you are better off estimating on an aggregated basis rather than a disaggregated one. The reason is statistical. To the extent that your estimation errors on a unit basis are uncorrelated or lightly correlated, your estimates on an aggregated level will be more precise than the unit-based estimates. For example, you will have a much better chance of estimating the aggregate revenues for Pfizer correctly than you do of estimating the revenues of each of its dozens of drugs.
- Information Vacuums: Information on a disaggregated basis is difficult to get for individual businesses, geographies, products or users, if you are an investor looking at a company from the outside. If you are doing your valuation from inside the company (as an owner or venture capitalist), you may be able to get this information, but as you will see with my Uber user valuation, even insiders will face limits.
- Missing Value Pieces: When valuing a company on a disaggregated business, it is easy to overlook some items that are consequential for value. In sum of the parts valuation, for instance, analysts are so caught up in estimating the values of individual businesses that they sometimes forget to value "corporate costs", which can be a multi-billion drag on value.
- Corporate Structure: There are some items that are easier to deal with at the aggregate level, because that is where they affect the business. Thus, you can model when taxes come due and the effect of losses easier when you are valuing an aggregated business than when you are valuing it on a disaggregated level. Similarly, if you are concerned about legal penalties or corporate governance, these are better addressed at the aggregated level.It is true that aggregation comes with costs, starting with the blurring of differences across disaggregated units (business, geographies, products, users) as well as the missing of competitive advantages that apply only to some units of the business and not to others. It is also true that using an aggregated valuation can result in a process that is disconnected from how the owners and managers at user-based companies think about their companies and thus cannot help them in managing these companies or valuing them better....MUCH MORE
...MUCH MORECanada’s Supreme Court upheld a British Columbia court ruling today that ordered Google to de-list entire domains and websites from its global search index.The 7-2 landmark ruling stems from case Google v. Equustek, which began when BC-based technology company Equustek Solutions accused distributor Datalink Technology Gateways of relabeling one of its products and selling it as their own online. Further, Equustek also claimed Datalink acquired trade secrets in order to create a similar competing product. Datalink first denied the accusations, then fled the province, continuing business operations mostly outside of Canada. Datalink representatives never appeared in court, and Equustek won default judgment.Though Google was never directly named in the lawsuit, Equustek requested that the search engine remove Datalink search results until the allegations could be tested. Google did so voluntarily, de-indexing over 300 websites associated with Datalink, but only on the Canadian version of the search engine.The Supreme Court of BC then granted a broader injunction ordering Google to stop displaying search results globally for any Datalink websites, which Google appealed in the Supreme Court of Canada. The court found in favor of Equustek, rejecting Google’s argument that the right to freedom of expression should have prevented the order from being issued....
US tight oil companies staged a comeback at the first sign of a price recovery last year. Now, as surging US shale activity undercuts the oil price, markets want them to start putting on the brakes.
Front-month WTI futures—the US crude benchmark price—briefly fell below $43 per barrel on 21 June before recovering to around $44/b later in the month. That's an almost $10/b-drop from a year-earlier.
Bearish market sentiment from speculators—due to fears that commitment to the Opec-non-Opec production cuts may waiver—may account for some of the pressure on prices.
But the real culprit is US shale. The rig count has been on a tear, rising every week for the last six months. And a flood of crude is following. US tight oil output looks set to rise by around 1m barrels per day by the end of this year (compared to the year-earlier level) exceeding nearly all expectations at the start of the year.
Not long ago, investors were enamoured by shale companies' plans to grow at a double-digit pace this year. The thinking was that Opec would pick up the slack and tight oil would get the benefit from both high growth and rising prices. That logic helped make US shale equities some of the market's best performers in 2016, following the collapse a year earlier.
But as it has become clear that US tight oil is once again swamping the market, investors have turned sharply against go-go shale growth. Take valuations. Investor sentiment towards shale peaked in early December, in the weeks after Opec first announced its deal to rein in supply. Since then, the S&P's Exploration and Production index is down 30%. And being in the Permian, where the growth has been concentrated because of the play's strong economics, hasn't been much help. A group of 11 Permian-focused drillers tracked by Petroleum Economist saw their shares drop by an average of 27% over the same period.
Another sign that the market is trying to cool shale growth has been the slowdown in new equity and bond issuances. Last year, producers tapped equity markets for around $31bn as they sought to raise cash to fortify their balance sheets and fund growth, according to data from the research house PLS. That slowed to less than $5bn in the first quarter of this year. It has likely fallen further in Q2 as investors grow weary of pumping more money into the sector.
There has been a similar slowdown in deal-making for tight oil producers. The first quarter of this year was gangbusters for oil bankers, with 20 deals worth $21.36bn in the Permian alone, according to the consultancy PWC. But the deal pipeline for oil producers, especially for big-ticket items, has frozen up since then, Chad Michael, managing director for upstream investment banking at Tudor, Pickering, Holt & Co, told an IPAA conference in southern California last week....
...MORE...According to data from the investment bank Raymond James, if oil stays at $50/b, the shale industry is on pace to outspend its cash flow by 50%—a staggering number even by the sector's own profligate standard....
...Combine Kalanick's statements and the corporate culture he created with the fact the central figure in the Waymo lawsuit was in contact with Uber before he left the Alphabet company's autonomous efforts and even a dull-witted paralegal could make a case for conspiracy,This latest would seem to make the conspiracy point pretty much a lock. More after the jump.
And that would threaten Uber's existence....
Uber made an unusual commitment to the engineer it hired to lead its driverless car project: It would cover the costs of legal actions against him over information stored in his head from his previous job at Waymo.
That promise -- buried in the fine print of an otherwise straightforward employment contract for an executive -- emerged in documents unsealed last week in San Francisco federal court.
Waymo alleges that in 2015, Anthony Levandowski and Uber Technologies Inc. hatched a plan for him to steal more than 14,000 proprietary files, including the designs for lidar technology that helps driverless cars see their surroundings. Uber, which acquired Levandowski’s startup, Otto, in August for $680 million, has denied Waymo’s allegations.Sunday, June 25
The Alphabet Inc. unit’s claims were bolstered Wednesday when it told the court Uber has said that Levandowski informed then-Chief Executive Officer Travis Kalanick more than a year ago that he had five discs containing Google data. Kalanick told him not to bring the information with him to Uber, and Levandowski said he then destroyed the files, according to the filing.
Even though neither of the men are still at the company -- Kalanick stepped down this week while Levandowski was fired last month -- Uber has to defend itself from Waymo’s suit as well as a possible criminal probe after U.S. District Judge William Alsup asked prosecutors to take a look at the allegations.
Uber’s legal fees promise is further evidence that the talent competition in the driverless car sector is cut-throat. It was a highly risky benefit to offer, according to Jim Pooley, a lawyer at Orrick in Menlo Park, California.
The indemnification document may be “very powerful” evidence that Uber suspected Levandowski would be taking proprietary information from Waymo, said Pooley, who has more than 35 years of litigation experience and is the author of the “Secrets: Managing Information Assets in the Age of Cyberespionage.”
“What Uber did was to leave the door open for Levandowski to use whatever he remembered of Waymo’s trade secret information, so long as he didn’t deliberately memorize it,” the lawyer said....MORE
Analysis It is now increasingly clear that the global outbreak of a file-scrambling software nasty targeting Microsoft Windows PCs was designed not to line the pockets of criminals, but spread merry mayhem.
The malware, dubbed NotPetya because it masquerades as the Petya ransomware, exploded across the world on Tuesday, taking out businesses from shipping ports and supermarkets to ad agencies and law firms. Once inside a corporate network, this well-oiled destructive program worms its way from computer to computer, encrypting the infected machines' filesystems.
Although it demands about $300 in Bitcoin to unscramble the hostage data, the mechanisms put in place to collect this money from victims quickly disintegrated. Despite the slick programming behind the fast-spreading malware, little effort or thought was put into pocketing the loot, it appears.
"The superficial resemblance to Petya is only skin deep," noted computer security veteran The Grugq. "Although there is significant code sharing, the real Petya was a criminal enterprise for making money. This [latest malware] is definitely not designed to make money. This is designed to spread fast and cause damage, with a plausibly deniable cover of ransomware.”
Here's a summary of the NotPetya outbreak:
In the beginning
- The malware uses a bunch of tools to move through a network, infecting machines as it goes. It uses a tweaked build of open-source Minikatz to extract network administrator credentials out of the machine's running memory. It uses these details to connect to and execute commands on other machines using PsExec and WMIC to infect them.
- It also uses a modified version of the NSA's stolen and leaked EternalBlue SMB exploit, previously used by WannaCry, plus the agency's stolen and leaked EternalRomance SMB exploit, to infect other systems by injecting malicious code into them. These cyber-weapons attack vulnerabilities patched by Microsoft earlier this year, so the credential theft is usually more successful, at least at places that are on top of their Windows updates.
- Crucially, NotPetya seeks to gain administrator access on a machine and then leverages that power to commandeer other computers on the network: it takes advantage of the fact that far too many organizations employ flat networks in which an administrator on one endpoint can control other machines, or sniff domain admin credentials present in memory, until total control over the Windows network is achieved.
- One way to gain admin access is to use the NSA exploits. Another way is to trick a user logged in as an admin or domain admin into running a booby-trapped email attachment that installs and runs the malware with high privileges. Another way is to feed a malicious software update to an application suite running as admin or domain admin, which starts running the malware on the corporate network again with high privileges. It is understood NotPetya got into corporate networks as an admin via a hijacked software update for a Ukrainian tax software tool, and via phishing emails.
- With admin access, the software nasty can not only lift credentials out of the RAM to access other internal systems, it can rewrite the local workstation's hard drive's MBR so that only it starts up when the machine reboots, rather than Windows, allowing it to display the ransom note; it can also encrypt the filesystem tables and files on the drive. NotPetya uses AES-128 to scramble people's data. Needless to say, don't pay the ransom – there's no way to get the keys to restore your documents.
- Not only should you patch your computers to stop the SMB exploits, disable SMBv1 for good measure, and block outside access to ports 137, 138, 139 and 445, you must follow best practices and not allow local administrators carte blanche over the network – and tightly limit access to domain admins. You'd be surprised how many outfits are too loose with their admin controls.
- The precise affected versions of Windows aren't yet known, but we're told Windows 10's Credentials Guard spots NotPetya's password extraction from memory.
- Creating the read-only file C:\Windows\perfc.dat on your computer prevents the file-scrambling part of NotPetya running, but doesn't stop it spreading on the network. Note, the software is designed to spread internally for less than an hour and then kicks in; it doesn't attempt to spread externally across the internet like WannaCry did.
So far, the vast majority of infections have occurred in Ukraine and Russia, but some big names in the West have also suffered. International advertising conglomerate WPP was taken offline (even its website was down), global law firm DLA Piper was infected and, most worryingly, shipping goliath Maersk is warning of a worldwide outage that could seriously bork the global transport supply chain. Computer terminals in major ports were borked for hours by the malware.
In Ukraine itself, which appears to be ground zero for the attack, the situation was critical. Large numbers of businesses were caught by the software nasty – the contagion has broken the automatic radiation monitoring systems in Chernobyl, meaning some unlucky scientists are going to have to take readings manually for the time being. Energy companies were hit as well as government agencies.
According to Ukraine's cyber-cops, as well as phishing emails booby-trapped with malware-laden attachments, financial software firm MeDoc was used to infect computers in the ex-Soviet nation. We're told miscreants managed to compromise a software update for the biz's products, which are widely used in the country, so that when it was downloadable and installed by victims it contaminated their network with NotPetya. If this software was running with domain admin access, it would be immediately game over....MUCH MORE
Raise a fund. Invest in hot startups. Cash out in 10 years with hefty profits (and fees) for your trouble. The model that has performed so well for venture capital over the last few years (and sometimes not so well) is stumbling.
Private equity research firm Pitchbook reports startup exits—sales or mergers of companies delivering returns to shareholders—has fallen in recent years. The number and value of startup exits were down about 70% last year from their 2014 peak. Despite big IPOs of companies such as Snap, 2017 has yet to yield a bumper crop of new exits as companies stay private longer.
That’s pushed venture capital firms to reevaluate how to cash out some, or all, of their equity holdings without waiting (and waiting) for an IPO.
It’s not a new problem, says Scott Jordon, managing director at Glynn Capital, but it’s now more acute. The time it takes for technology firms time to IPO has stretched (pdf) from around five to eight years in 2000 to about 11 years today. Pitchbook’s Nizar Tarhuni says they’re seeing venture firms extend funds or negotiate longer periods than the standard 10 years to return money to their limited partners such as pension funds. Of course, IPOS aren’t the only game in town. Plenty of companies are opting to pursue mergers and buyouts, two avenues that have remained relatively open even as IPO activity has stalled. Venture funds have also raised record sums. Last year, more than 200 venture capital funds raised $41.6 billion, a 10-year high, reports the National Venture Capital Association.
Although private investors have proved willing to pour billions into fast-growing, money-losing Silicon Valley startups such as Uber, that’s changing....MOREThat second chart is very telling.
I'm reminded of a situation I watched back in the day.
A trader sold a position to another firm a few minutes before a trading halt. The news was negative.
The buyer D.K.'ed (Don't Know) the trade, meaning we'd still own the position, at which point the head of the firm got on the phone and told his counterpart "I don't want the shit, whyd'ya you think I sold it to you?"
It's pronounced "lee-duhl" – you'll need to know that when a Lidl supermarket replaces your local grocery store.See also:
Lidl is a German grocery chain that offers heavily discounted yet shockingly high-quality products.
"[Lidl] is going to be an interesting wake-up call for a lot of retailers," George Faigen, of management consulting firm Oliver Wyman, said to Retail Dive on June 15.
"The question is not whether it will disrupt the American grocery industry, but to what degree."
The company hopes to appeal to a wide range of shoppers with its simple store layouts and offerings pared down to just six aisles of carefully selected items. It's seen success throughout Europe, and now it's ready to take on the United States.
With a plan to open more than 600 stores across America, analysts expect Lidl to push traditional grocery stores to their breaking points, and the end result will likely be an Amazon versus Lidl "grocery war."
What's Lidl's strategy? Let's take a look…
Lidl Will Take the United States by Storm, Just Like It Did Europe
The German discounter evolved from a single store in tiny Ludwigshafen, Germany, to more than 10,000 stores across 27 countries in just over 40 years.
Now Lidl has opened its first 20 stores in America. Its newest locations are concentrated in Virginia, North Carolina, and South Carolina, however 90 more East Coast locations are planned for the coming year.
To get ahead in the cutthroat U.S. grocery industry, Lidl executives say they plan to offer discounts that are practically unheard of to American consumers – up to 50% lower than rival stores.
What's more, several of the recently opened stores sit adjacent to or across the street from a Wal-Mart (NYSE:WMT), the "low-price" retailer, putting Lidl in prime position to steal critical market share.
Lidl's entry to the American market comes at a time when shoppers are looking for new experiences. In fact, according to a survey from Oliver Wyman, an international management consulting firm, 39% of U.S. consumers say they would like to shop at Lidl once a week or more, while 67% said they would shop at the store at least once.
How Lidl Balances Quality and Price… and Why American Grocers Can't Keep Up
How is Lidl so successful?
The German grocer has made its name offering a very limited assortment of goods, many of them private label, at ultra-low prices – and it plans to use that same strategy to rein in U.S. consumers.
"A lot of the [typical] supermarkets are so large, it's a challenge for people to go shopping," said Lidl U.S.'s CEO Brendon Proctor last month. "If I wanted to go in and get a bottle of ketchup – first of all, there are probably about 24 aisles in the store. I have to find what aisle it's in. I get there, I find that there's 50 types of ketchup. Who honestly needs 50 types of ketchup? So we can streamline that."
Lidl's unique strategy is to offer a simplified assortment of goods to consumers. Pared down to just six aisles, Lidl's stores are easy for people to navigate. To make things efficient and keep storage costs down, Lidl often keeps items in the cardboard containers they were shipped in.
You see, the company is able to offer its high-quality, private label brands at below-average prices by cutting down on typical store costs like storage and lighting.
Lidl has also embraced technology in ways that other traditional brick-and-mortar retailers are failing to do. According to Retail Dive, Lidl uses data to measure everything – from the time it takes to move products to shelves to the exact care, temperature, and timing required to make a dozen roses bloom right as they arrive at the store.
"Lidl wants to reinvent exactly the way Americans shop," said Anne Schwedt, a German economy expert, to DW on June 14.
"The mainstream players are going to have a hard time competing with prices on the lower end, and they'll have a harder time being differentiated on the higher end," said Doug Koonts, head of content and research at Planet Retail, to Retail Dive.
However, even if Lidl takes out the mainstream players, the retailer still has to face this e-commerce leviathan…
Amazon: The King of All Disruptors
While Lidl's strategy of offering high-quality items at below-average prices is unique to the European market, we've already seen the same thing unfold in the United States.
We're talking about Amazon.com Inc. (Nasdaq: AMZN). The e-commerce leviathan just bought the giant organic grocery retailer Whole Foods Market Inc. (Nasdaq: WFM), and you can be sure it will give Lidl a run for its money.
But here's the thing: For investors, it doesn't matter which company wins the battle for the American grocery market. The smart money is on Amazon even if a Lidl pops up next to every Wal-Mart in the country.
That's because Amazon's hefty $13.7 billion investment has less to do with groceries and more to do with one long-term strategy.
You see, Amazon is going to leverage Whole Foods the same way it has leveraged its enormous warehouses, according to Money Morning Capital Wave Strategist Shah Gilani. Shah is an expert in identifying and profiting from market-shaking trends.
"The Whole Foods acquisition fills in the missing link in Jeff Bezos' grand plan to sell the world to the world and profit from the sale of everything, including books, clothes, food, and anything to do with data," said Shah on June 22.
Amazon's recent purchase means it has Whole Foods' 457 stores to play with....MORE
PM Hi there -- welcome to Markets Live
PM Suddenly lots of things happening...PM Suppose we need to in on the various bits of tech-related news
PM That's John Shepherd Barron, inventor of the ATMPM The ATM is 50 years old today
PM Spin forward to the cutting tech of today...MORE
Pope: Why do I have to push "1" for Latin? It should only be Latin! If you're gonna come here, learn the language! Foreigners!And from there it just descended into madness.
"And then they ask 'Are you sure you want to withdraw $DCXLII?'"
"$642? The ATMs in the Vatican give out ones!?"
Smallest note in the EU is €5 Maybe it's €640 and two Hail Marys?
"Romanes eunt domus."
The line is "People called 'Romanes' they go the house." "Romanes" is not a Latin word; he pluralized a second declension word as if it were third declension, so it doesn't translate to anything.
"Eunt?? What is eunt???"
3rd person plural present active of the verb 'eo, ire', meaning to go.
In 2003, I had the best business idea ever. The MBTA had recently announced an upcoming increase in the price of Boston transit tokens, from a dollar to $1.25. The change would not be effective until the following January, which meant that any T tokens acquired before then would be guaranteed a 25% return. I had just over a month to hoard as many tokens as possible.
I wasn’t the only one with this strategy; many of my classmates did the same. But after a month-long buying spree, it became clear that realizing those profits would be a pain in the ass.
We could never use all those tokens ourselves, and there was no secondary market because all our friends had made the same brilliant investment. If only T tokens were tradeable on the blockchain!
How many potential buyers were discouraged by the lack of a convenient aftermarket? Without the liquidity limitation, the MBTA could have held a far bigger token sale. Maybe it could have paid for a new railway. Maybe another Big Dig. Maybe even a hyperloop!
Why don’t we finance all our infrastructure projects with token sales? Is Trump still looking for ways to pay for that wall? Issue a Wall Token and put it on the blockchain! Each Wall Token confers the right to one border crossing.
But it turns out such Tokens might constitute a security....
...If there is an effective hedge against calamity, it is a combination of geographic diversification, retention of capital in mobile form and the keeping in personal touch with active businesses, both at home and in other centers.Considering what was going on in Germany at the time, and about to engulf all of Europe, it was pretty good advice.
One must keep personally alert, active and in the swim. Retired businessmen, in my opinion haven't much chance. One must not tie up all one's assets in one's home town or in a form that is not liquid and subject to easy shifts. There are far too many people who have a small business in their home city, their own house in the same city, and if they own any securities, some shares perhaps of the local utility company.
In addition their friends and connections are all in a radius of 10 to 15 miles.
My real thought is that one's greatest assets are his mental competence to do something useful and his connections.
Therefore establish some emergency connections away from home. Establish a fund or funds away from home as well, both as a "calamity hoard" and as an aid to keeping your foreign interests alive....
...One ought to be able to move to several parts of this country and the world, and have enough friends to be happy and get a helping hand to start, and have ready at hand enough funds for a grubstake to start.
Ask yourself how many widely separated places you could go to and make a successful new start in life....
Happy 75th Anniversary to one of the few MUST READ Investing Books: Gerald M. Loeb's "The Battle for Investment Survival" Chapters 1-3Earlier:
Submitted by Scott Cleland on Fri, 2017-06-16 18:46
In proposing to buy WholeFoods for $14b, Amazon has surprisingly invited unwelcome serious antitrust investigation into, and public discussion about, Amazon’s core conflicted retail/MarketPlace business model and the many alleged predatory, discriminatory, and unfair standard Amazon business practices, that Amazon commits, not only in the grocery business segment, but in all other retail segments.
In stating “the parties expect to close the transaction in the second half of 2017,” that means Amazon expects no serious antitrust investigation of whether the transaction “substantially lessens competition,” and thus no “second request” from antitrust authorities requesting more information and questions to answer.
If a “second request” comes, which is likely, there is no way the companies can continue to “expect” the deal will be approved in 2017. That’s because such an investigative process effectively does not have any deadline for the reviewing authority, DOJ or the FTC, to either: approve, approved with conditions, or challenge the deal.
The facts and analysis that follows will show why it is quite clear that the reviewing antitrust authority will want to be thorough and not cursory in its formal review of this Amazon-WholeFoods transaction.
The combination of: the likely multiple alleged anticompetitive behaviors; the likely number of complaints and complainants; the online-offline complexity of investigating the complaints; the importance of this case as an online-offline antitrust merger precedent; the exceptional size, scope, reach, speed and non-transparency of Amazon’s online business; and the expected high-public profile of this transaction; all would auger for the reviewing authority to err on the side of caution and investigate the transaction fully.
Let me be clear here about what I am saying and not saying.
First, what’s obvious here is that the transaction will attract a lot of concern in private and publicly in multiple dimensions. That’s precisely because of the many serious implications this “Everything Store” proposed transaction will have for the future of competition in many markets, which in turn will delay Amazon’s transaction timetable.
Second, I doubt there will be any serious traditional horizontal concern about combining Amazon’s small shares of the offline grocery business -- depending on how the grocery market is defined here.
Third, most of the antitrust concern will come with the exceptional market power that Amazon wields online, combined with the under-appreciated conflict in its business model where half of its retail revenues come directly from consumer-customers, and the other half of its retail revenues come from its MarketPlace offering where Amazon is the mall and gatekeeper for around 15 of its top 20 grocery competitor-customers, that have had to capitulate to Amazon’s market power and operate on Amazon Marketplace in order to reach all their offline customers online.
In layman’s terms, the problem Amazon’s retail intermediary model causes competitors is that it simultaneously is a direct retail competitor overall, at the same time it is the dominant online broker that has disintermediated its competitors from their customers when they are in the online world, and in that broker role, they are routinely criticized as not being an “honest broker” or as being a “non-neutral platform,” that routinely self-deals anti-competitively, because Amazon has market power to extract it with impunity, and no antitrust or regulatory accountability to speak of – to prevent it....MUCH MORE
"To a 1935 reader...nothing was more terrifying than the prospect of buy-and-hold..."
"Loeb's preferred strategy of continual in-and-out, concentrated, 'speculation' seemed radical, fresh and far safer than buy-and-hold."
"Loeb recommended swapping...eerily like churning...he specifically recommended against letting money ride in the market."
"That may not be sound advice today"Remember, the forward was written in mid-2007, as it turned out selling your losers on single-digit percentage drops was the only way to save yourself, if long, from October 2007 through March 2009.
"Long before the Efficient Market Hypothesis Loeb argued that markets were pretty efficient"
An earner who earns more than he can spend is automatically an investor. Storing present purchasing power for use in the future is investing, no matter in what form it's put away.
Money itself, government bonds, bank deposits, real estate, commodities, diamonds, gold.
In fact, attempting to offset inflation, the rising cost of living or the devaluation of the dollar, however it's labled, has become the number one investment consideration...
...Diversification is necessary for the beginner, on the other hand the really great fortunes were made by concentration.You see why the book is timeless. Those lines could have been written yesterday.
Tomorrow we'll have the rest of the intro. and some snips from the first few chapters....
A new patent filed by Apple in 2015, and published today by the United States Patent and Trademark Office, shines some light on what the company could be working on in regards to sleep tracking technology and its recent acquisition of Beddit. Called "Adjusting alarms based on sleep onset latency," the new patent describes in detail a system that could receive data from devices like an iPhone, Apple Watch, or a Beddit-like flat, flexible sensor, and intelligently track user behavior to help them get their best night sleep possible (via AppleInsider).
The patent explains that most people have typical bedtime habits recurring every night, such as going to the bathroom, shutting blinds, taking a shower, etc. These "sleep ritual activities" directly affect each person's "sleep onset latency," or the amount of time it takes you to fall asleep after first lying down and attempting to go to sleep. The problem with most modern alarm apps is that they can't understand a restless night's sleep, or a lengthy sleep onset latency period, and Apple's new patent tries to address these issues.
The first step is for the sensors to determine your sleep ritual activities, and Apple's patent has a few ways to go about doing that. One is by using sound data, so when the device detects someone brushing their teeth, taking a shower, "or any other activity that generates an identifiable or unique sound," the sleep tracking system can start accumulating data for that night's sleep because it knows you're about to try to rest. Other tips related to sleep rituals for Apple's sleep tracking system include user movement, light/dark levels in a room, and even app usage....MORE
Across nearly five decades in the 20th century, Gerald M. Loeb prospered in the world of Wall Street. So what made Loeb really stand apart?
Perhaps it was Loeb's ability and desire to articulate exactly what it takes to win in the bond and stock markets. Loeb's gift to investors ultimately came in the form of a book, "The Battle for Investment Survival."
Loeb writes with brutal honesty.
"Nothing is more difficult, I truly believe, than consistently and fairly profiting in Wall Street," he wrote at the start of Chapter 1. "I know of nothing harder to learn. Schools and textbooks supply only a good theoretical background."
Most individuals lose money on Wall Street because they don't prepare thoroughly, Loeb noted, or they don't spend enough time finding a professional who has mastered the skill of market timing.
Loeb wanted people to take matters into their own hands. That is, don't be sold something on Wall Street. Do your own research and find something to buy.
Don't simply trust an AAA rating for a bond or a very high price in a stock, because those are just snapshots of a security's value in a moment of time. Instead, look for high-quality merchandise on the market with a true potential to rise in value.
"If you know what you want and why you want it and when you want it, you'll generally pay a lot less for it than you will if you buy something that somebody else persuades you to buy," Loeb, who eventually rose to the role of chairman of the Manhattan brokerage E.F. Hutton, was quoted as saying in "The Wizard of Wall Street" by Ralph Martin.
No Short Cuts
Through "The Battle for Investment Survival," Loeb tells readers to take no short cuts. Watch a stock carefully, understand its price behavior, and find correlations between its price cycles and how it relates to the company's underlying fundamentals. Be patient, wait for all the proverbial stars to align, then strike big.
Last, but not least, recognize your mistakes early and exit a losing position quickly.
How influential is "The Battle for Investment Survival" since it came out in 1935? So much so that the San Francisco native also oversaw 10 revised editions of his book over the next 30 years.
The book deeply moved William O'Neil, a successful broker during the 1960s who formed an equity research firm that has served hundreds of institutional investors. O'Neil, who later founded IBD in 1984, once met with Loeb (1899-1974) to ask if he always stuck with the rule of selling a stock if it fell 10% below the purchase price. Loeb replied that he much preferred to be out of such a position well before such a loss. Without question, the first job in stock investing is preserving capital.
"I think meeting Loeb made a big impact on Bill O'Neil," Bryan Anderson, market strategist at Austin-based Beck Capital Management, told IBD. Anderson also worked for William O'Neil + Co. as an in-house equities portfolio manager from 1993 to 2000. "Loeb had great personal qualities. He valued honesty. He valued flexibility of thinking and being unbiased. You see that throughout the book."
Other golden nuggets in Loeb's book that resonate with IBD's CAN SLIM investing paradigm:
Concentrate on your best investments. "Diversification is a necessity for the beginner. On the other hand, the really great fortunes were made by concentration," Loeb wrote in a foreword to the 1965 edition. "The greater your experience, the greater your capability for running risks, and the greater your ability to chart your course yourself, the less you need to diversify."
Take profits often; lock in gains frequently. "Many 'long-pull' traders ignore a sign of a change of trend because they feel it is temporary. Often they are right, but eventually they are wrong, and usually at great cost. The short-term method requires the closing of the trade for a reason, and if later the situation changes, then one can re-establish the position," Loeb wrote.
A stock can plunge even if the market is doing fine. In the postscript section of his book, Loeb notes that from 1960 to 1964, the Standard & Poor's average of 425 industrial stocks rose, but seven leading electronics companies within the average underperformed. Among those seven, Loeb added a simple line graph of Transitron Electronic falling from 60 to 4.63 over the same time frame, a 92% plunge.
Even within a single industry, performance among companies can vary greatly. Loeb showed how Chrysler emerged as a big market winner, rising from 11.50 in 1961 to 50 by 1964 as new management led to outstanding growth in car sales, earnings and cash dividends. But rival American Motors, "which had prospered mightily in the 1957-59 period, due to its success with compact cars, saw the demand shift and was adversely affected," Loeb wrote. From 1960 to 1964, AMC shares sank from a peak of 23.50 to 15.
Build your position as a stock rises in price, not falls. "I believe in pyramiding, not averaging," Loeb wrote.
Loeb was born in July 1899 in San Francisco. His father sold a successful wine merchandising business in New Orleans and moved to the West Coast to start anew. Loeb's mother came from a wealthy family in which Loeb's grandfather struck it big in silver in Nevada, then invested his winnings in real estate in the Bay Area.
The 1906 San Francisco earthquake all but shattered the family's wealth. Two years later, Loeb's father and grandfather died just two weeks apart. Loeb's mother, now widowed, moved into a boardinghouse to raise Loeb and his younger brother.
Loeb learned to take financial responsibility at an early age. When Loeb was just 10, his mother took them on a trip to Europe and let young Gerald handle the hiring of a taxi, paying the hotel bill and tipping waiters on the steam ship across the Atlantic.
"She always wanted me to be boss of my own money, even at the earliest age," Loeb said. "For me, this freedom of experience . . . was the beginning of my financial education."
At age 11, Loeb contracted polio. Forced to spend much of his days in bed, Loeb devoured books. The physical handicap did not prevent Loeb from finishing high school, but he quit a plan to study architecture.
An inheritance from his father sparked a lifelong passion in securities investing.
At age 21 and with $13,000 in hand (roughly $221,000 in today's dollars), Loeb made two bond investments. The first purchase, a 15-year S.W. Straus Real Estate bond that offered 6% interest, was illiquid and market prices were arbitrary. The stated value of the real estate tied to the loans was highly questionable. Loeb sensed something was amiss and redeemed the bond for a small loss within a year. Later, the bond crashed to zero value after the issuers no longer could offset the big losses with the money received from bond sales.
For his second purchase, he called upon his father's friend, a senior partner at a top brokerage in San Francisco, who recommended a high-quality British bond, payable either in sterling or dollars at the customer's option. Unlike the first bond, which paid a handsome commission to the seller, this bond gave the broker only $2.50 to $5 in commission. In the process, Loeb also learned how the broker sent the order to New York via telegraph, bought the bond on the floor, had the cashier ensure that it was authentic, and finally got it mailed to the new owner.
A year later, Loeb saw the value of the bond rise and took his profit. He decided that he would do business the same way by acting in the customer's best interest.
One day during his first job as a bond salesman, Loeb got a verbal lashing for refusing to follow bosses' orders to sell low-quality bonds to a physician client that would have given the broker the biggest commission. He quit the same day. Loeb immediately got a job at a respectable brokerage, learning every aspect of the business by assisting the bond salesman, the statistician and the stock trader.
Becoming A Reliable Source
Loeb thrived in the securities business by adopting the ticker-tape machine, a sophisticated new technology at the time. Loeb not only learned much about tracking actionable price trends, but also became a reliable source of information to his customers. Trust among his customers was so great that they gave him discretionary power to buy stocks without client approval, then allocate the shares to accounts accordingly.
"He was giving people honest information," Anderson said. "Others were giving customers old information."
To further promote knowledge about business and the markets, Loeb launched an annual competition in 1957 to recognize excellence in financial journalism. He cared about the impact it could have to the public understanding of financial markets. The University of Connecticut acted as the initial steward of the awards. But in 1973, just a year before his death, Loeb decided to ask Harold Williams, a corporate lawyer who served as dean of UCLA's business school at the time, to become the new home of the prizes.
Williams, who served as commissioner of the Securities & Exchange Commission, says Loeb was aware of his past speeches on the issues of corporate governance and the role of board directors. "He felt my views were hospitable," Williams told IBD....MORE
Private flight has long been a luxury limited largely to the über-rich or super dedicated. Unless you have the deep pockets or connections to buy or rent your own small plane, plus a pay for a pilot, fuel costs, insurance, and hangar fees, you will be stuck in the chicken coop of crammed commercial flights with the rest of us peasants for all your flying needs.For an amazing look at how closely one of the sharing economy companies resembled Uber see:
But what if it didn't have to be that way? What if you could purchase an empty seat on a private flight that was going where you needed to go anyway for a majorly discounted price? This was, for a glorious and brief period of time, made possible by a promising new crop of startups dedicated to bringing flight-sharing to the masses.
Dubbed "the Uber of the skies," startups like Flytenow and AirPooler aimed to connect pilots whose private flights were not yet filled to passengers eager to reach their destinations without suffering the horrors of commercial air travel. Founded in 2013, the services were a great win-win for both parties: Pilots no longer had to simply eat the cost of empty seats on each trip, and passengers got to enjoy the thrill of small-scale flight for a very affordable price. For the first time, it seemed like consumers would have a real inexpensive alternative to the hell of economy class travel.
That is, until the Federal Aviation Administration (FAA) caught wind of all this innovation and decided to quash it once and for all. In a sneaky bid to shut down this kind of arrangement, the FAA decided to expansively interpret its own definition of a "common carriage" operator so that non-commercial small-scale pilots using these services would be legally put on the same level as the big boy commercial flights—with the same expensive regulatory and licensing requirements.
The FAA knew that small services like Flytenow and AirPooler simply could not keep up with these requirements, and thus effectively shut them down. Flytenow valiantly challenged the FAA's capricious actions in court all the way up to the Supremes; but unfortunately, the Supreme Court declined to take up the case in January of this year, effectively upholding the lower courts' siding with the FAA.....MORE
The European Commission has fined Google €2.42 billion ($2.7bn), a record amount, for breaching its antitrust rules. It deemed the company has abused its power as the world’s leading search engine, by manipulating results to favor its own online Shopping platform.Here's the European Commission press release:
Google must end the practice within 90 days “or face penalty payments of up to 5% of the average daily worldwide turnover” of Alphabet, its parent company. That would total around $14m according to the company’s most recent financial reports.
European commissioner for competition Margrethe Vestager acknowledged in a statement that, “Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing.
“But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals,” she added. “Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.
“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”,,,.MORE
When you shop online, you want to find the products you’re looking for quickly and easily. And merchants want to promote those same products. That's why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both.As Bezos says "What the Hell?"
We believe the European Commission’s online shopping decision underestimates the value of those kinds of fast and easy connections. While some comparison shopping sites naturally want Google to show them more prominently, our data show that people usually prefer links that take them directly to the products they want, not to websites where they have to repeat their searches.
We think our current shopping results are useful and are a much-improved version of the text-only ads we showed a decade ago. Showing ads that include pictures, ratings, and prices benefits us, our advertisers, and most of all, our users. And we show them only when your feedback tells us they are relevant. Thousands of European merchants use these ads to compete with larger companies like Amazon and eBay....MORE
How do ongoing advances in technology affect business management? That’s the question the prolific writing duo of Erik Brynjolfsson and Andrew McAfee pose in their new book, “Machine, Platform, Crowd: Harnessing our Digital Future,” being published on June 27 by W.W. Norton. Brynjolfsson, the Schussel Family Professor of Management Science at the MIT Sloan School of Management and director of the MIT Initiative on the Digital Economy, and McAfee, co-director of the MIT Initiative on the Digital Economy and a principal research scientist at MIT Sloan, also collaborated in 2014 on “The Second Machine Age,” another exploration of the changes digital innovation is bringing to the workplace. McAfee recently talked to MIT News about “Machine, Platform, Crowd.”
Q: What is your new book about?
A: “Machine, Platform, Crowd” is the answer to a question: How should I think differently about running my organization in this era of crazy technological progress? We need to rethink the balance between the work that we ask human minds to do in organizations, and the work we give to machines. We need to rethink whether you have a product orientation or a platform orientation. And we need to rethink the core of an organization, if there are literally these hundreds of millions of strangers out there across the internet who you can tap into.
Q: What’s different now compared to past moments of technological change?
A: Within the past five years, 10 years easily, at least two really fundamental things have happened. First of all, artifical intelligence started meeting its expectations and even exceeding them. We weren’t expecting that, and it’s pretty remarkable. The machines are much more capable. The second thing is, in the era of the smartphone, we have gone from a globe that was pretty disconnected, to having that same human population for the first time deeply interconnected through powerful devices, which are each about as powerful as all the computers collectively on campus when I was an undergraduate at MIT in the ’80s. Those are both legitimately new things.
Q: I know you’ve mentioned the rise of machines that can win at the game of Go as one instance of these advances. What are some of your favorite examples of machines, platforms, and crowds at work now?
A: Go is my favorite example of the power of machines, because it was so unanticipated that we would have a digital Go champion in 2016 or 2017. The insiders thought if that ever happened it would happen much, much farther out in the future.
In our section on products and platforms, we talk about companies like ClassPass, which is trying to build a purely digital platform; they don’t own any assets, but they’re trying to provide a virtual, very broad gym membership, or exercise membership [by offering rates for an array of memberships]. So they’re putting a platform over the industry of spinning, yoga, pilates, kickboxing, things like that. And if you had asked me just a little while ago for an industry that would not be greatly affected by the digital transformation, I might have said group exercise: You get in the gym with other people and sweat and have a workout. But after working on the book, I think that the exercise industry is going to be changed a lot by platforms.
Finally, we came across a very interesting company called Quantopia that is trying to be essentially a crowdsourced quantitative trading hedge fund. That may sound ludicrous, except, as the founder of the company has said, it is extremely unlikely that all the world’s top algorithmic traders are employed by the [relative] handful of companies that have dominated this industry. So to test that theory, they’ve been holding contests for algorithmic trading. It turns out, lo and behold, most of the people who win those contests are not insiders in the finance industry and have never even worked in finance. It tells me that if you can tap into the crowd and find the right brains, all over the world, and get them involved in what you’re doing, the results are potentially tremendous....MORE
The Gerald Loeb Awards were established in 1957 by the late Gerald Loeb, a founding partner of E.F. Hutton. His intention was to encourage reporting on business and finance that would inform and protect the private investor and the general public. As the most prestigious honor in business journalism, distinguished journalists and outlets nationwide submit entries to the competition.UCLA Anderson has been presenting The Gerald Loeb Awards since 1973 and the awards use a two-tier judging process comprising a preliminary round and final round. The awards banquet and celebration is held in New York City every June and is attended by the country's top business and financial publishers, editors, journalists, producers and celebrities. The Gerald Loeb Awards is a 501(3)(c) non-profit organization that operates primarily from sponsorship and private support....
2017 Gerald Loeb Award Finalists, Career Achievement Honorees and Date of Awards Banquet in New York City Announced by UCLA Anderson
Lifetime Achievement Award goes to Walt Mossberg of The Verge and Recode
Nicholas Varchaver of Fortune to receive Lawrence Minard Editor Award
60th Anniversary banquet and celebration to be held on June 27 in New York City
LOS ANGELES, May 18, 2017 /PRNewswire/ -- Judy D. Olian, chairman of the G. and R. Loeb Foundation Inc. and dean of UCLA Anderson School of Management, has announced the finalists of the 60th Anniversary Gerald Loeb Awards for Distinguished Business and Financial Journalism. She also revealed the recipients of the Lifetime Achievement Award and the Lawrence Minard Editor Award.
The 2017 Lifetime Achievement Award recipient is Walt Mossberg, executive editor at The Verge and Editor-at-Large for Recode. This annual award recognizes an individual whose career exemplifies the consistent, superior insight and professional skills necessary to further the understanding of business, financial and economic issues....MORE, including finalists in all categories.Finally, the official website.
Qatar blockade cuts 30% of global supply and threatens price increases for scientific instrument usersWe've been tracking the helium biz for a while.
he blockade of Qatar that started on June 5 has shut down the source of 30% of the world’s helium, threatening another round of shortages and price increases for scientific instrument users.
Helium is used to cool nuclear magnetic resonance magnets and as a carrier gas for gas chromatography and mass spectrometry. The element is also used in medical imaging and electronics manufacturing, as well as to float dirigibles.
Supply limitations and maintenance projects in the U.S. and overseas led to a quadrupling of helium prices and even scientific instrument shutdowns between 2011 and 2013. Some helium users may be better positioned to cope this time because they installed recycling equipment during the most recent shortage.
Qatar halted helium production after the blockade severed helium’s main route out of the country: by truck through Saudi Arabia to the Port of Jebel Ali in Dubai, United Arab Emirates. Saudi Arabia and several other Middle Eastern countries initiated the blockade when they cut diplomatic ties over Qatar’s support of extremist Islamic groups and ties to Iran.
Shipments take about a month to arrive at their destination, points out Phil Kornbluth, a consultant who previously ran Matheson Tri-Gas’s helium operations.That buffer of helium in transit, along with helium that left Qatar’s Port of Hamad on June 19, means customers may start to feel the blockade’s effects in July, Kornbluth says....MORE
Self-driving cars have captivated the world. Now, a Brooklyn-based start-up called Voodoo Manufacturing wants to bring the same autonomy and safety to manufacturing, with a factory that makes 3-D prints of any imaginable design, staffed almost entirely by robots.
Customers upload a design file to Voodoo's site. The start-up then manufactures their desired items in batches from one to 10,000 units per order. Voodoo's factory runs 160 different 3-D printers today, rather than using injection molding machines you'd find in a conventional factory.
Most recently, Voodoo began developing robots to run the 3-D printers with little to no human oversight, said CEO and co-founder Max Friefeld.See also 'Lights Out' manufacturing and 'dark factories'.
The robots, which Voodoo assembles from available sensors, arms, grippers and other components, can take a plate out of a printer, put a new one in, then restart it to begin the next job.
These tasks used to be done by people.
The company's proprietary software controls the way the robots work in conjunction with the printers, and keeps orders running on time.
"At a high level, our goal is to automate the machine-tending portion of our factory, and get to 80 percent utilization of all the hardware here," Friefeld said. "With a really lean team, we could operate around the clock, with maybe one person working the night shift."...MORE, including video.
FANUC, the Japanese robotics company, has been operating a "lights out" factory for robots since 2001. Robots are building other robots at a rate of about 50 per 24-hour shift and can run unsupervised for as long as 30 days at a time. "Not only is it lights-out," says Fanuc vice president Gary Zywiol, "we turn off the air conditioning and heat too."