Tuesday, April 23, 2024

"LIVE BLOG: Tesla Q1 2024 earnings call"

 The scribes at Teslarati are doing the hard work.

April 23:

Tesla’s (NASDAQ:TSLA) Q1 2024 earnings call comes on the heels of the company’s Q1 2024 Update Letter, which was released after the closing bell on Wednesday, April 23, 2024. 

Tesla posted total revenues of $21.3 billion, with automotive revenues at $17.3 billion for the first quarter of 2024. The company also posted non-GAAP earnings per share of $0.45 and GAAP EPS if $0.34 for Q1 2024. Tesla also posted $1.2 billion GAAP operating income in Q1, $1.1 billion GAAP net income in Q1, and $1.5 billion non-GAAP net income in Q1. 

The following are live updates from Tesla’s Q1 2024 earnings call. I will be updating this article in real-time, so please keep refreshing the page to view the latest updates on this story. The first entry starts at the bottom of the page.

16:26 CDT – Hello, everyone, and welcome to our live blog of Tesla’s first-quarter 2024 earnings call. While Tesla did not exactly meet analyst expectations, the company’s first-quarter results were positively received by shareholders. As of writing, Tesla shares are trading up 8.14% in Wednesdaays’ after-hours. It’s been a while since TSLA shares saw such movement....

The call is just getting started, check their site often or wait until a transcript appears from one of the transcription services in a few hours or tomorrow.

SITE

There will be errors, transcription and otherwise, there always are.

The stock is trading at $156.24 up $11.56 (+7.99%) after hours.

"Generative A.I. Arrives in the Gene Editing World of CRISPR"

From The New York Times, April 22:

Much as ChatGPT generates poetry, a new A.I. system devises blueprints for microscopic mechanisms that can edit your DNA.

Generative A.I. technologies can write poetry and computer programs or create images of teddy bears and videos of cartoon characters that look like something from a Hollywood movie.

Now, new A.I. technology is generating blueprints for microscopic biological mechanisms that can edit your DNA, pointing to a future when scientists can battle illness and diseases with even greater precision and speed than they can today.

Described in a research paper published on Monday by a Berkeley, Calif., startup called Profluent, the technology is based on the same methods that drive ChatGPT, the online chatbot that launched the A.I. boom after its release in 2022. The company is expected to present the paper next month at the annual meeting of the American Society of Gene and Cell Therapy.

Much as ChatGPT learns to generate language by analyzing Wikipedia articles, books and chat logs, Profluent’s technology creates new gene editors after analyzing enormous amounts of biological data, including microscopic mechanisms that scientists already use to edit human DNA.

These gene editors are based on Nobel Prize-winning methods involving biological mechanisms called CRISPR. Technology based on CRISPR is already changing how scientists study and fight illness and disease, providing a way of altering genes that cause hereditary conditions, such as sickle cell anemia and blindness.

Previously, CRISPR methods used mechanisms found in nature — biological material gleaned from bacteria that allows these microscopic organisms to fight off germs.

“They have never existed on Earth,” said James Fraser, a professor and chair of the department of bioengineering and therapeutic sciences at the University of California, San Francisco, who has read Profluent’s research paper. “The system has learned from nature to create them, but they are new.”

The hope is that the technology will eventually produce gene editors that are more nimble and more powerful than those that have been honed over billions of years of evolution....

"Yuan internationalization drive hits a local speed bump" (slow motion devaluation)

From Asia Times, April 23:

Chinese companies reluctant to convert FX earnings into yuan as incentives rise for PBOC to let the currency fall  

As Chinese leader Xi Jinping works to increase the yuan’s role in global trade and finance, he’s encountering an unexpected speed bump: mainland companies.

New data from the People’s Bank of China (PBOC) suggest corporate chieftains are dragging their feet on converting foreign-exchange earnings into local currency.

In March, FX deposits rose to US$833 billion from $779 billion a month earlier, signaling that businesses are slow-walking moves to swap earnings into their home currency.

The most obvious explanation: higher offshore interest rates that are contributing to a weaker-than-expected yuan.

“This huge positive yield spread is not evaporating anytime soon,” says Alvin Tan, currency strategist at RBC Capital Markets.

The rate differential between the US and China is the most positive since 2007. “This powerful fundamental fact,” Tan notes, “is enough to explain why Chinese exporters are reluctant to exchange dollars for yuan.”

It’s also another reason for Beijing’s currency managers to resist the urge to chase a falling yen downward in the months ahead. It might backfire in ways that run counter to Xi’s grand vision for “yuanization.”

Granted, Xi and Premier Li Qiang have so far resisted the urge to devalue. But as Asia’s biggest economy hits intensifying headwinds, a weaker exchange rate could be just the thing to juice exports and ensure gross domestic product (GDP) stays near 5% and deflationary pressures remain in check.

There are myriad reasons why Team Xi and PBOC Governor Pan Gongsheng have not chased the yen lower.

For one thing, it would make it harder for property development giants to make offshore bond payments, raising the odds of more China Evergrande Group-like defaults. For another, it could make China an even bigger flashpoint ahead of the November 5 US election....

....MUCH MORE

We've been looking at the role of China's dollar-denominated debt in the policy-making context for years. Here's a post fromm 2020:

"China is underestimating its US$3 trillion dollar debt and this could trigger a financial crisis, says economist"
This is an old warning, November 16, 2018, but very important for an understanding of the high wire act the PBOC and the Government/Communist Party are embarked on....

And 2019:
SCMP: "China exchange rate drop could continue into 2020 as it tries to offset US tariff impact, analysts say"
Everything is connected.
One consideration that we are not seeing get enough play is the dollar denominated debt that Chinese companies have issued. More below but first up the South China Morning Post...

And:

China Has $3 Trillion of Dollar Denominated Debt. That Is A Potential Disaster
With Treasury Secretary Mnuchin last month reiterating his concern that China was devaluing the yuan (SCMP: China is letting value of yuan slide to offset trade war ...) I thought it time to re-post this piece from November 2018.

China is in a bit of a bind with the yuan. While devaluing would indeed offset the tariffs, it would also increase both the interest expense and maturity pay-off cost of all that dollar denominated debt....

Be all that as it may be, it looks like the Chinese-powers-that-be have decided to do the slow-motion devaluation and  it is costing more and more yuan to buy a dollar, with 8:1 sometime in 2025 being quite possible.

But if so, woe unto the German exporters. there's a reason Scholz was in Beijing. 
From TradingView, the last month of USDCNY action:

Chart Image

 

You can see why the Chinese companies would like to keep their FX reserves in FX.

"On Earnings Calls, Do Executives Mumble on Purpose?"

From the University of Chicago's Booth School of Business, Chicago Booth Review, February 26, 2024:

Research finds a link between vocal delivery and investor reaction.
Earnings calls are meant to be a simple, direct way to get information to investors, but sometimes the audio leaves listeners struggling to understand. Could that be deliberate?

Research by Seoul National University’s Bok Baik, Chicago Booth PhD student Alex G. Kim, MIT PhD student David Sunghyo Kim, and Korea University’s Sangwon Yoon suggests it might. They explored how the quality of the vocal delivery on earnings calls can influence investors’ trading in the moment, and find that market reactions tend to be more subdued when delivery is poor and listeners struggle to understand what is being said. The researchers contend that managers may even deliberately modulate the quality of their vocal delivery on the basis of their own economic incentives.

A variety of prior studies have established that the tone of earnings calls, and even the obtuse language and erroneous expressions that executives sometimes use, affect investor reactions. Baik, Kim, Kim, and Yoon instead focused on qualities that can hamper the clarity of vocal delivery, such as mumbling, mispronunciation, and lazy diction.

The researchers analyzed nearly 29,000 quarterly earnings calls occurring between 2008 and 2020 from almost 2,000 companies, limiting the calls to those that took place during market trading hours and focusing on the portion of the calls in which managers presented results.

They used an open-source model based on a deep-learning algorithm that converted audio files to letters, which were then combined into words and ultimately text. When doing this, the model generated a probability value, which represented the certainty of each audio-to-letter conversion. When there was a high probability for one particular letter, the researchers inferred clarity in the audio. But when the probabilities were more diffuse, they deemed the text to be less listenable and harder to understand. (For example, if the letter “a” was pronounced clearly, the model gave it a probability of 1—or else it might give it a 50 percent chance of being an a and a 50 percent chance of being an e.) The researchers took advantage of the probabilities that the model calculated to develop a score for audio clarity.

Using a regression analysis, they find that when the quality of vocal delivery fell, trading activity was more subdued than normal. On the other hand, clear delivery was associated with more active market reactions. When vocal-delivery quality was high, analysts were more likely to issue early forecast revisions even before an official earnings call transcript was released. High-quality vocal delivery also appeared to strengthen the media hype (measured by text sentiment analysis of coverage), as well as the positive relationship between earnings surprises and abnormal market reactions.

The link between vocal quality and trading activity....

....MUCH MORE

Also at the CBR:

How to Get into the Top 1 Percent of Dating Profiles 

"Is Elon Musk About To Force Everyone To View Tesla As An AI Company After Earnings?" (TSLA)

It is possible that Mr. Musk knows more about electric vehicles and the retail market for electric vehicles than I do. And it is possible that he intuits something about the industry or the regulatory or government policy framework toward electric vehicles that he hopes to either guard against or take advantage of.

And it's possible he's just a self-made centibillionaire loony.

From Investor's Business Daily, April 22:

All eyes will be on Chief Executive Elon Musk Tuesday during Tesla's (TSLA) first quarter earnings call as investors look for clarity and insight into his strategy and whether Musk is rebranding Tesla in plain sight. TSLA shares sank Monday.

It has become increasingly evident in recent weeks that Musk and Tesla are shifting toward an increased focus on autonomy, Full Self-Driving (FSD) and its robotaxi program as EV demand has slowed in 2024.

With Tesla's first quarter earnings and revenue release late Tuesday, Wall Street might be getting some answers.

Last week, Tesla announced plans to lay off more than 10% of its global workforce, with key executives leaving the company, and Musk saying it is part of the next "phase of growth."

The layoffs come after Reuters reported on April 6 that Tesla has switched focus from the $25,000 next-generation Model 2 in favor of prioritizing efforts on its robotaxi program. Following the report, Musk quickly announced that Tesla will unveil the robotaxi on Aug. 8.

Musk also took to X, formerly Twitter, on April 6 and said "Tesla is an AI/robotics and sustainable energy company." The Tesla chief has long said the company is more than just an auto company, but his recent proclamation signals a shift away from the automobile label.

A key question for the Tesla earnings call is whether Elon Musk is shelving the Model 2 for several years.

Adding to the uncertainty, Tesla last week requested shareholders ratify Musk's $56 billion 2018 compensation plan despite a Delaware court voiding the plan earlier this year. The shareholder meeting is scheduled for June 13. Musk in January posted on X that he was "uncomfortable growing Tesla to be a leader in AI & robotics without" around 25% voting control.

Tesla Stock: Moving Away From EV Business
On Monday, TSLA shares fell 3% to 142.65 in Monday market action, hitting a fresh 52-week low of 138.80 intraday.

Tesla stock dropped around 2% on Friday, diving 14% for the week and undercutting April 2023 lows.

Deutsche Bank analyst Emmanuel Rosner on Thursday wrote it now appears Tesla's future is tied to "cracking the code on full driverless autonomy," which represents a "significant technological, regulatory and operational challenge."

The analyst added that the shift in focus to the robotaxi is "thesis-changing" and that it could undergo a "potentially painful transition in ownership base" with EV investors "throwing in the towel" and "eventually replaced by AI/tech investors with considerably longer time horizon."

Meanwhile, Morgan Stanley analyst Adam Jonas wrote Wednesday that "it seems" Tesla is exiting the traditional EV auto industry.

"This doesn't mean that Tesla won't keep selling cars (including new launches) for many years to come," Jonas added.

Bracing For Q1 Earnings
With few details on Musk's strategy on the robotaxi and the next-generation vehicle, investors and analysts seem skittish ahead of the upcoming first quarter earnings call Tuesday after the market closes.

Analysts project Q1 earnings falling more than 42% to 49 cents per share with sales declining nearly 5% to $22.2 billion. If Tesla Q1 EPS comes in as expected, it would be the lowest quarterly level since the EV giant hit 48 cents per share in Q2 2021. It would be the first year-over-year revenue decline since early in the pandemic.

Tesla recently recast Full Self-Driving from FSD Beta to supervised FSD. That suggests that the EV giant could recognize more deferred FSD revenue, giving EPS a boost. As a result, Tesla's cash flow will be an important number to watch in Q1.

Tesla also began in April offering free FSD trials with the purchase of a new vehicle. Then, over the weekend, the EV company lowered the annual FSD price by 33% to $8,000. This move comes two weeks after he cut the monthly FSD subscription price to $99 per month, down from $199 per month.

Tesla reported in early April that global first quarter deliveries totaled 386,810 while it produced 433,371 vehicles. The deliveries included a combined 369,783 Model 3 and Model Y units along with 17,027 "other" vehicles. Tesla's 386,810 deliveries tally in Q1 undercut even the lowest estimates and marks the lowest quarterly deliveries since 344,000 in Q2 2022.

The EV giant blamed the first quarter performance on issues with the production ramp-up of the updated Model 3 along with factory shutdowns....

....MUCH MORE

If interested see also April 18's "Ahead Of Next Week's Tesla Earnings Report, A Reminder (TSLA)"  

Monday, April 22, 2024

Meanwhile, In Britain: "How facial recognition technology has changed policing"

This is nothing new for our Chinese readers and it is no surprise that the most surveilled Western city is keen on the technology but it is still a bit jarring when you think through the implications.

From The Times, April 5:

Scanning tool is the biggest game-changer for officers since DNA, says Met’s intelligence director

https://www.thetimes.co.uk/imageserver/image/%2Fmethode%2Ftimes%2Fprod%2Fweb%2Fbin%2F14803245-08ed-45fb-b156-0d807d4e2775.jpg?crop=1600%2C900%2C0%2C0&resize=1500

Police use vans with facial recognition cameras that scan the streets

Similar to the government’s artificial intelligence safety conference last year, the planned policy statement includes “guardrails and safeguards” that it ­believes will demonstrate to the public how the controversial technology will not impinge on their privacy. There are also hopes that it can be introduced at fixed cameras at railway stations.

Live facial recognition uses cameras attached to the top of police vans to scan the faces of people as they walk past, immediately assessing them against a wanted list and alerting officers if there is a match.

Chris Philp, the minister for policing, said that it had “revolutionised” crime detection and £230 million would be spent on police technology, including more facial recognition vans, over the next four years....

....MUCH MORE

If interested we have a few hundred posts on facial recognition and attempts at defeating same including this oldie-but-goodie from 2018:

ICYMI: The Most Valuable AI Start-up Inthe World Does Facial Recognition

Some thought us mad with our focus on countermeasures to the surveillance state. But there was a method to that madness.

We've looked at responses ranging from simple dazzle camouflage back in 2013's How to Hide From Cameras:

http://static.squarespace.com/static/514f916de4b04c6ad186e00d/514f94d2e4b05df537e5224e/514f94d2e4b05df537e5267d/1231283416153/DAZZLE.jpg/1000w

To hairstyles + makeup that confuse facial recognition algos:

https://i.guim.co.uk/img/media/396302866244e3539e54bc5571e27fb512f1e59f/62_0_885_531/master/885.png?w=620&q=55&auto=format&usm=12&fit=max&s=eefd8e09624ac90c3d07802fa5fe591b
...but this raises its own set of problems, not the least of which is 
taking a half hour to apply just so you can go down to the lobby.

To Hyperface clothing with thousands of pseudo-facial "hits" that simply overwhelm the computer:
"Anti-Surveillance Clothing Aims to Hide Wearers From Facial Recognition "

https://i.guim.co.uk/img/media/f28edd54e33cb391aea9f19448b8ff11ecb5fa54/25_0_663_398/master/663.png?w=620&q=55&auto=format&usm=12&fit=max&s=b052101fa6e1777fe2c8bfdf7ff395f7

From the scholarly stuff such as "Fooling The Machine: The Byzantine Science of Deceiving Artificial Intelligence".
To, as noted in ""Magic AI: 'These are the Optical Illusions that Trick, Fool, and Flummox Computers.":
...First though a bit of housekeeping.
Just so you know, I don't actually use the make-up techniques featured in the earlier posts. Despite the fact they have some efficacy at fooling the camera they make you look like a moron to human observers on the street. Better to just put on some glasses and blend into the crowd.
https://hips.hearstapps.com/toc.h-cdn.co/assets/cm/14/37/540fe7c50c224_-_tc-iconic-kennedy-weddings-9.jpg
Can you pick out the Kennedys in this photo?

Here's why we cared: There is big money in this stuff!!
From Bloomberg, April 8: 

China Now Has the Most Valuable AI Startup in the World
SenseTime Group Ltd. has raised $600 million from Alibaba Group Holding Ltd. and other investors at a valuation of more than $3 billion, becoming the world’s most valuable artificial intelligence startup.

The company, which specializes in systems that analyze faces and images on an enormous scale, said it closed a Series C round in recent months in which Singaporean state investment firm Temasek Holdings Pte and retailer Suning.com Co. also participated. SenseTime didn’t outline individual investments, but Alibaba was said to have sought the biggest stake in the three-year-old startup.

With the deal, SenseTime has doubled its valuation in a few months. Backed by Qualcomm Inc., it underscores its status as one of a crop of homegrown firms spearheading Beijing’s ambition to become the leader in AI by 2030. And it’s a contributor to the world’s biggest system of surveillance: if you’ve ever been photographed with a Chinese-made phone or walked the streets of a Chinese city, chances are your face has been digitally crunched by SenseTime software built into more than 100 million mobile devices.

The latest financing will bankroll investments in parallel fields such as autonomous driving and augmented reality, cover the growing cost of AI talent and shore up its computing power. It’s developing a service code-named “Viper” to parse data from thousands of live camera feeds -- a platform it hopes will prove invaluable in mass surveillance. And it’s already in talks to raise another round of funds and targeting a valuation of more than $4.5 billion, according to people familiar with the matter.

“We’re going to explore several new strategic directions and that’s why we shall spend more money on building infrastructure,” SenseTime co-founder Xu Li said in an interview. The company turned profitable in 2017 and wants to grow its workforce by a third to 2,000 by the end of this year. “For the past three years the average revenue growth has been 400 percent.”...MUCH MORE
Both Futurism and Quartz zoomed in (CCTV term) on the surveillance bit:
World’s Most Valuable AI Startup Also Happens To Be Part of “the World’s Biggest System of Surveillance”
The billion-dollar, Alibaba-backed AI company that’s quietly watching people in China

Some of our previous posts on various related subjects:
"The selling of facial recognition technology—and the staggering consequences"
Facial recognition In China
We'll be coming back to what has become a bit of an obsession on the blog, and the countermeasures thereto, but for now, just some of the applications. Remember, this isn't the state of the art, this is stuff that is being deployed right now.
The state of the art is really spooky....
 
"Who Owns Your Face?"
"China’s Surveillance State: AI Startups, Tech Giants Are At The Center Of The Government’s Plans"
"Casino ATMs are Using Facial Recognition to Spot Money Launderers in Macau"
DNA Techniques Could Transform Facial Recognition Technology
 Bank Robbers’ Aluminum Invisibility Cloaks Foiled by CCTV
Memo: New York Calling For Face Recognition Cameras At Bridges, Tunnels
Adversarial Images, Or How To Fool Machine Vision
Cargill Invests In Facial Recognition For Cows
And many, many more. Use the 'search blog' box if interested. 

Now, if you'll excuse me for a bit, I have to go out in public for a bite to eat:


https://media.allure.com/photos/58e4005b82145034c5ad10da/master/pass/Untitled-3.jpg

"Volkswagen electric car sales plunge: Why are Europeans returning to petrol?"

From EuroNews, April 11:

Sales of Volkswagen electric vehicles in Europe fell by almost a quarter in the first three months of the year as consumers returned to petrol.

The company said in its latest financial update on 10 April that sales of all-electric vehicles declined by 24% in Europe, while sales grew by 91% in China, year-over-year.

However, overall, the company said it increased its vehicle deliveries by 3% to 2.10 million vehicles with the main drivers being China, South America and North America.

"Vehicles with combustion engines increased by 4% to 1.97 million units, overcompensating the slight decline of 3% to 136,400 all-electric vehicles (BEV). In this segment, strong growth in China (+91%) did not fully offset the decline in Europe (-24%)....

....MUCH MORE

Bridgewater: "Ray Dalio’s Famous Trade Is Sputtering and Investors Are Bailing"

 From Bloomberg via Yahoo Finance, April 22:

It was an irresistible pitch. Give us your money, executives at Ray Dalio’s Bridgewater Associates and other hedge funds said, and we’ll funnel it into a money-minting, sure-thing strategy for the long haul. But now, after five years of sub-par returns, many of the institutional investors who sunk large sums into risk-parity funds, as they’re known, are demanding the money back.

Investors including public pensions in New Mexico, Oregon and Ohio have yanked out cash, slashing the size of the funds by an estimated $70 billion from their peak three years ago. For many, the pleas from firms for more time — that the next decade in markets is unlikely to resemble the last — ring hollow.

“It’s been disappointing for a long time,” said Eileen Neill, managing director at Verus Investments, an adviser to New Mexico’s roughly $17 billion public employee pension, which axed its risk-parity allocation in December. “The only time risk parity was really successful was at the time of the Great Financial Crisis and that was really its heyday.”

The lackluster run through the post-pandemic booms and busts has rattled faith in an allocation method pioneered by Dalio, who built Bridgewater into the world’s largest hedge fund. The strategy focuses on diversification across assets based on how volatile each is, and often uses leverage to optimize returns relative to the risks taken.

It flourished after the 2008 financial crisis as investors sought a way to protect themselves from the next big cataclysm. But as investors went on to plow back into stocks, they lagged in the up years. Then when markets cracked in 2022 — pummeling safe assets like US Treasuries — they were hit even harder.

All told, risk parity funds have lagged global 60/40 funds every year since 2019, according to a broad index of the industry.

That’s driven investors to pull out cash, cutting the amount in such funds to about $90 billion by the end of 2023 from a peak of about $160 billion in 2021, according to Verus estimates compiled from eVestment data.

First launched in 1996 to manage Dalio’s trust assets, it was billed as a way to use deep economic research to craft the best possible portfolio, instead of trying to call the next big thing.

Rather than pile on risk to chase big returns, the strategy generally involves diversifying across a broader array of assets like commodities and bonds and making each an equal driver of the portfolio’s volatility. To keep the risks balanced, the exposures can be dialed up or down based on how much prices are swinging around, making the strategy Wall Street’s favorite scapegoat in a selloff.

A Tough Environment
To the strategy’s proponents, the decision to bail just as stock prices hit new records reflects a classic investing error.

“That really is reasoning from the past decade, which I will claim is more exceptional,” said Otto van Hemert, director of core strategies at Man AHL, which runs about $15 billion in risk parity....

....MUCH MORE

Related 

Some of our posts on Bridgewater and/or its founder. Most recently:

Ray Dalio: "Are We In A Bubble?"

He says no but he was also pushing investments in China* that are now down 50 - 60%. 

He's such an odd duck. I mean most multi-billionaires are odd ducks, it's sort of a prerequisite for the self-made or a condition of employment for inheritors but even in this cohort he sticks out.

I on the other hand think things are bubbly but will get even more bubblicious as long as "the grass shall grow and excess liquidity flow." (apologies to all the U.S. - indigenous treaty writers of a couple centuries ago) 
And embedded therein: 
"Is Dalio's Bridgewater A Fraud? Here Are The Troubling Questions Posed By Jim Grant"—UPDATED II
Bridgewater, World’s Largest Hedge Fund, Is Building An Algorithmic Model Of Ray Dalio's Brain
Frederick Taylor and Ray Dalio's Brain: "Working for an Algorithm Might Be an Improvement"
Bridgewater's Ray Dalio Really Didn't Like The Wall Street Journal Story on His Brain (he's also against fake news)
"Why Ray Dalio is wrong about China"
Speaking of China, Bridgewater's Ray Dalio Has Some Thoughts
"Western Greed Fuels China's Domination"
It's good to name names. Unfortunately Dalio, Dimon, Fink and Cook sounds like the law firm from hell....

If interested see also:

September 2021: "Dalio’s Hedge Fund Risks Being Dumped by Pension on Weak Returns"

March 4, 2019
Bridgewater's Dalio Cuts His Odds of a Recession Occurring Before the Next U.S. Presidential Election.
Our bet, from two years ago had the U.S. stock market peaking this year and a recession to follow in 2020.
We'll be revisiting that prognostication....

"Why Ray Dalio is wrong about China"
No, not because of "Chinese Hedge Fund Jumps 258% After Dumping Ray Dalio’s Strategy"

"Climate-related funds grow 16% in 2023 to $540 billion — Morningstar"

From Pensions&Investments, April 22:

Assets in mutual and exchange-traded funds with a climate-related mandate globally rose by 16% in 2023 to $540 billion, according to data collected by financial services firm Morningstar.

The report said the increase was driven by continued inflows, product launches and market appreciation. Europe accounted for 84% of the climate-related assets, while China and the U.S. had market shares of 7% and 6%, respectively.

However, the $40 billion of inflows into climate funds last year represented the lowest levels in four years, according to Morningstar, mostly due to the high level of redemptions from climate solutions, and clean energy and technology strategies, which were “plagued by high interest rates and sticky inflation”, Morningstar said in a report.

The green bond fund category, nearly doubled its asset size in 2023 with a 41% surge, even as the iShares Green Bond Index Fund registered the largest annual outflow of $1.7 billion....

....MUCH MORE

Also at P&I online:
April 18
Man Group subsidiary uses AI for climate modeling in portfolios 

Happy Earth Day: "What Big Thing Are We Getting Wrong About the Future?"

See you at the face-painting booth!

From Discourse Magazine, April 15:

The old overpopulation scare is a warning about our cultural blind spots

I recently tracked down a copy of a fascinating old book, “Our World in Space,” by Isaac Asimov with illustrations by Robert McCall. Published in 1974, five years after the moon landing, it wonderfully captures a moment of exuberant excitement about the achievements of space exploration. But in one section, it also captures the way the people of an era can be blind to their own big errors.

If you’re not familiar with them, Asimov and McCall are two of the biggest names from a mid-20th-century era of techno-optimism. Every time you hear someone complain about today’s negative views of technology—which is nearly always portrayed as leading to dystopia—these are the guys they are comparing it to.

Asimov was a writer of classic science fiction (his Foundation series was recently brought to the screen) and a prolific popularizer of science. McCall was an artist known for his portrayals of space exploration—real NASA missions as well as imagined future technology—and for the giant mural, “The Prologue and the Promise,” that he created for Disney’s Horizons pavilion at EPCOT, which set a standard for optimistic portrayals of the future. You can see his visual influence in “2001: A Space Odyssey” and the Star Trek franchise. And his 1974 illustration of a spherical space station just might have had an influence on another big science fiction franchise.

Yet the error here is not an excess of optimism. It’s Asimov’s one big moment of pessimism that’s a problem.

The Population Flop
In some respects, Asimov’s description of the future of space exploration—essentially, a giant brochure for NASA’s most ambitious dreams—is not just optimistic but wildly over-optimistic. In “Our World in Space,” he projects that by now we should have whole cities of humans living under the surface of the moon as a springboard for colonizing the asteroids and the moons of Jupiter. But then at the end of one chapter is this jarringly pessimistic warning:

In one respect, a Moon colony, or any colony or combination of colonies outside the Earth, cannot help us. No one of them, nor all of them together, can help us solve our population dilemma. If anyone thinks that the important reason for exploring space is to find outlets for our expanding population, let him think again ... .

We must, of our own determination, and here on Earth, halt the population increase by balancing the birth and death rates ... . That leaves us with the necessity of decreasing the birth rate ... .

Remember that, above all.

It’s the hyper-emphatic ending that gets me. “Remember that,” Asimov says, “above all.”

What should strike you about this is how wrong it turned out to be. Asimov was writing at the height of the “population bomb” hysteria, when Paul Ehrlich was predicting mass starvation by the 1980s as a rising population outstripped the capacity of the Earth to feed them. But the population bomb was a flop. None of the catastrophes happened. India, for example, was supposed to be the first to starve as its population exploded. Instead, it embraced the Green Revolution and became a net exporter of food. Even the New York Times threw in the towel on overpopulation hysteria a few years back with a retrospective on how wrong Ehrlich turned out to be.

In fact, the current worry—far more realistically grounded—is that our biggest problem in the next century will be a falling global population.

Yet at the time Asimov wrote his gloomy words, he would have been solidly in the middle of the elite consensus. It’s clear he thinks others would regard him as irresponsible for not mentioning so important and well established a fact.

This started me thinking: What big thing are we getting wrong about the world, and the future, today? What idea is so universally accepted that we don’t realize all the things that are wrong with it?

There are undoubtedly several such ideas. (I will even acknowledge—purely in theory, mind you—that I might be wrong about something.) But I can propose one idea that enjoys much the same status as the “population bomb” in Asimov’s time—and which is wrong for many of the same reasons....

....MUCH MORE

Ron Baily at Reason Magazine put together some of the forecasts from the period surrounding the first Earth Day in 1970 for the thirtieth anniversary. By far the worst was Paul Ehrlich, partly because he had an impressive bullhorn (still on the faculty at Stanford) and partly because he was so spectacularly wrong,  Here's a a condensation via AEI Ideas in 2019:

1. Harvard biologist George Wald estimated that “civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind.”

2. “We are in an environmental crisis which threatens the survival of this nation, and of the world as a suitable place of human habitation,” wrote Washington University biologist Barry Commoner in the Earth Day issue of the scholarly journal Environment.

3. The day after the first Earth Day, the New York Times editorial page warned, “Man must stop pollution and conserve his resources, not merely to enhance existence but to save the race from intolerable deterioration and possible extinction.”

4. “Population will inevitably and completely outstrip whatever small increases in food supplies we make,” Paul Ehrlich confidently declared in the April 1970 issue of Mademoiselle. “The death rate will increase until at least 100-200 million people per year will be starving to death during the next ten years.”

5. “Most of the people who are going to die in the greatest cataclysm in the history of man have already been born,” wrote Paul Ehrlich in a 1969 essay titled “Eco-Catastrophe! “By…[1975] some experts feel that food shortages will have escalated the present level of world hunger and starvation into famines of unbelievable proportions. Other experts, more optimistic, think the ultimate food-population collision will not occur until the decade of the 1980s.”

6. Ehrlich sketched out his most alarmist scenario for the 1970 Earth Day issue of The Progressive, assuring readers that between 1980 and 1989, some 4 billion people, including 65 million Americans, would perish in the “Great Die-Off.”

7. “It is already too late to avoid mass starvation,” declared Denis Hayes, the chief organizer for Earth Day, in the Spring 1970 issue of The Living Wilderness.

8. Peter Gunter, a North Texas State University professor, wrote in 1970, “Demographers agree almost unanimously on the following grim timetable: by 1975 widespread famines will begin in India; these will spread by 1990 to include all of India, Pakistan, China and the Near East, Africa. By the year 2000, or conceivably sooner, South and Central America will exist under famine conditions….By the year 2000, thirty years from now, the entire world, with the exception of Western Europe, North America, and Australia, will be in famine.”

9. In January 1970, Life reported, “Scientists have solid experimental and theoretical evidence to support…the following predictions: In a decade, urban dwellers will have to wear gas masks to survive air pollution…by 1985 air pollution will have reduced the amount of sunlight reaching earth by one half….”

10. Ecologist Kenneth Watt told Time that, “At the present rate of nitrogen buildup, it’s only a matter of time before light will be filtered out of the atmosphere and none of our land will be usable.”

11. Barry Commoner predicted that decaying organic pollutants would use up all of the oxygen in America’s rivers, causing freshwater fish to suffocate.

12. Paul Ehrlich chimed in, predicting in 1970 that “air pollution…is certainly going to take hundreds of thousands of lives in the next few years alone.” Ehrlich sketched a scenario in which 200,000 Americans would die in 1973 during “smog disasters” in New York and Los Angeles.

13. Paul Ehrlich warned in the May 1970 issue of Audubon that DDT and other chlorinated hydrocarbons “may have substantially reduced the life expectancy of people born since 1945.” Ehrlich warned that Americans born since 1946…now had a life expectancy of only 49 years, and he predicted that if current patterns continued this expectancy would reach 42 years by 1980, when it might level out. (Note: According to the most recent CDC report, life expectancy in the US is 78.8 years).

14. Ecologist Kenneth Watt declared, “By the year 2000, if present trends continue, we will be using up crude oil at such a rate…that there won’t be any more crude oil. You’ll drive up to the pump and say, `Fill ‘er up, buddy,’ and he’ll say, `I am very sorry, there isn’t any.'”

15. Harrison Brown, a scientist at the National Academy of Sciences, published a chart in Scientific American that looked at metal reserves and estimated the humanity would totally run out of copper shortly after 2000. Lead, zinc, tin, gold, and silver would be gone before 1990.

16. Sen. Gaylord Nelson wrote in Look that, “Dr. S. Dillon Ripley, secretary of the Smithsonian Institute, believes that in 25 years, somewhere between 75 and 80 percent of all the species of living animals will be extinct.”

17. In 1975, Paul Ehrlich predicted that “since more than nine-tenths of the original tropical rainforests will be removed in most areas within the next 30 years or so, it is expected that half of the organisms in these areas will vanish with it.”

18. Kenneth Watt warned about a pending Ice Age in a speech. “The world has been chilling sharply for about twenty years,” he declared. “If present trends continue, the world will be about four degrees colder for the global mean temperature in 1990, but eleven degrees colder in the year 2000. This is about twice what it would take to put us into an ice age.”

And from a 2020 post on commodities:

May 2013 
Last month I tangentially mentioned Paul Ehrlich:
See also: the spectacularly wrong and wrong-headed forecasts made by Paul Ehrlich for which he has been rewarded with an endowed chair at Stanford-definitely a mark against Stanford.
And fully intended to gather some of his wrong-beyond-wrong predictions.
I forgot.
I'll get around to a full post on his doom-mongering but for now here are a couple of his comments on India:

"I don't see how India could possibly feed two hundred million more people by 1980."
-Population Bomb, 1968 

"I have yet to meet anyone familiar with the situation who thinks that India 
will be self-sufficient in food by 1971." 
-Population Bomb, 1968


In the book's 1971 edition, the latter prediction was removed, green revolution and all that.
The World Bank estimates India's population was 511 million in January 1968.
India is feeding 700 million more people than when Ehrlich wrote his 200 mil. line.
Meet M.S. Swaminathan and his students.

Giving society cheap, abundant energy . . . 
would be the equivalent of giving an idiot child a machine gun.
Paul Ehrlich, “An Ecologist’s Perspective on Nuclear Power,”
May/June 1978 issue of Federation of American Scientists Public Issue Report


It's not just Erlich who thinks like that, here's Amory Lovins:

 If you ask me, it’d be a little short of disastrous for us to discover a source of clean, cheap, abundant energy because of what we would do with it. We ought to be looking for energy sources that are adequate for our needs, but that won’t give us the excesses of concentrated energy with which we could do mischief to the earth or to each other.
Amory Lovins in The Mother Earth–Plowboy Interview, 
Nov/Dec 1977, p. 22

There are many, many more examples but for now, you get the point.

"Commodities: 'The Case for Human Ingenuity'":

“When you buy commodities, you’re selling human ingenuity.”
Dylan Grice on why investing in commodities for the long run is a bad idea (SocGen Cross Asset Research, December 2010)

And the last word:

"It doesn't matter how beautiful your theory is, it doesn't matter
how smart you are. If it doesn't agree with experiment, it's wrong."  
-Richard P. Feynman, Nobel Laureate-Physics, 1965

Of course Feynman hung his hat at CalTech, not Stanford.

California's Super Mega Perma Drought

From the U.S. Drought Monitor at the University of Nebraska-Lincoln, April 16: 

https://droughtmonitor.unl.edu/data/png/20240416/20240416_usdm.png

Posting this probably marks the high point of the recovery, at least that's the way it seems to work.

"There Is a Relationship Between Past Success and Future Returns After All"

From Institutional Investor, April 10:

Essentia Analytics has found a link between a manager’s past skilled investment decisions — not performance — and higher relative returns in the future.

A crack is growing in the language of the disclaimer stamped on every fund: past performance is not indicative of future returns.

New research shows that there is a statistically significant relationship between a portfolio manager’s past decision-making performance and future returns. Of course, returns that managers may have generated a year ago, still do not signal what they will deliver a year from now. 

The research team at Essentia Analytics, which has made a business out of helping active portfolio managers get a handle on their behavioral biases and generate better returns, found that an equity portfolio manager who has made skilled decisions over the last year is 1.51 times more likely to outperform their benchmark than a manager who has not. Essentia will publish a report on the research on Thursday.....

....MUCH MORE

As cross-asset analyst John Normand wrote in his last - after twenty-four years - research note for JPMorgan:

How to time mostly efficient markets ("Tactical position-taking assumes one can time the market to outperform the benchmark, due to some combination of these factors: (1) markets are partially efficient; (2) some institutions have access to broader information sources than others; and (3) some analysts are better arrangers of a mosaic of even fully public information.")

Normand is now head of investment strategy at A$315 billion  AustralianSuper.

"Europe embraces speedier, riskier way of building power grids"

From EurActiv, April 11:

The EU is looking to front-load massive anticipatory investments into its energy infrastructure, shifting risk from industry to consumers and risking a landscape with unneeded or under-used pylons.

Amid its green transition, Europe needs almost €600 billion in investments into high-voltage power lines, transformers and wires by 2030—an unprecedented need for investments into the grid.

Zsuzsanna Pató, senior advisor at clean-energy think-tank RAP, says the transition “has caused a massive mismatch” between power generation and transport capacity. 

She explains that the traditional challenge of connecting power demand to generation is exacerbated by the energy transition, which involves “shifting where power is generated while boosting demand through electrification.”

Energy-rich, windy, and sunny sites are often far away from where older coal or gas plants are located.

Timing matters, too. “There is a big pressure to speed up grid building to prevent a widening of the lead time gap between renewables and new loads,” said Pató. 

Brussels is betting on a fresh approach to solving the problem: “anticipatory investments.” Unlike regular investments, which are more closely tied to immediate and short-term expected demand, anticipatory investments deliver power lines and wires multiple times larger than what is needed today.

Ghost pylons
However, Europe could be left with unused ‘ghost pylons’ littering the countryside if renewable projects do not materialise or if power demand forecasts are incorrect.

There are many examples of massive investments in infrastructure that were subsequently underutilised or unused. In the 1980s, the US built $100 billion of unused nuclear power plants, and Spain boasts major airports that never welcomed more than a handful of passengers, which were built during the credit-fuelled boom of the 2000s....

....MUCH MORE

Nvidia's Jensen Huang: “even when the competitors’ chips are free, it’s not cheap enough.” (NVDA)

That's quite a statement. It was made in reference to NVDA's chips and CUDA software combo pack.

Whether it's true or not, the behemoths, MSFT, GOOG, META, etc. want to reduce their reliance on Nvidia's chips.

An extremely deep dive from Eric Savitz at Barron's, April 19:

Nvidia Won AI’s First Round. Now the Competition Is Heating Up.
Amazon.com, Google, Meta Platforms, AMD, and Intel have big ambitions in AI chips.

Artificial intelligence has delivered seemingly daily wonders for the past 18 months. For investors, the biggest surprise has been the rise of Nvidia , which has come from humble roots to thoroughly dominate the market for AI-related chips. 

Once known mostly for building PC add-on graphics cards for gamers, Nvidia has transformed its graphics processing units, or GPUs, into the beating heart of the AI revolution, powering the creation of large language models and running the inference software that leverages them in data centers around the world. Nvidia has been nearly alone on the field, with more than 90% market share.

But fresh competition is coming—from companies big and small—and the battle will be fierce. The stakes couldn’t be bigger: Lisa Su, the CEO of Advanced Micro Devices , has sized the AI chip market at $400 billion by 2027. Intel CEO Pat Gelsinger has projected a $1 trillion opportunity by 2030. That’s almost twice the size of the entire chip industry in 2023.

Nvidia’s Jensen Huang has built a company that is universally respected and admired, but chip buyers aren’t keen on relying on a single source. Hardware companies such as Dell Technologies , Hewlett Packard Enterprise , Lenovo , and Super Micro Computer can’t get enough Nvidia chips to meet customer demand—and they’d like alternatives. Cloud providers like Amazon.com and Alphabet ’s Google want more options so badly that they are designing their own chips. And companies that rely on AI-based systems want more computing resources at more manageable costs than they can get now.

Nvidia’s success is now an opportunity for everyone else.

It’s hard to find a product of any variety that has had more impact on the financial markets so quickly than the Nvidia H100 GPU, which launched in March 2022. 

Nvidia’s share price has more than tripled since the H100’s debut, boosting the company’s market value to $2.1 trillion. Among U.S.-listed companies, only Microsoft and Apple have higher market caps. And no other chip company is anywhere close.

This is no GameStop or Trump Media & Technology . In fact, Nvidia is the anti-meme stock: The company’s revenue growth has actually outpaced the stock gains. For its fiscal fourth quarter ended on Jan. 28, Nvidia posted revenue of $22.1 billion, up 265% from a year earlier. The company’s data center revenue was up 409%.

A few weeks ago, Nvidia launched its latest marvel, the Blackwell B200 GPU, which CEO Huang says dramatically outperforms the H100. With Blackwell, Nvidia raises the bar for its rivals. Nvidia for the foreseeable future will sell as many Blackwells as it can make—or, to be more precise, that partner Taiwan Semiconductor Manufacturing can make for it. 

Huang has said Blackwell GPUs will cost $30,000 to $40,000 apiece. The current H100s sell in the same range. But the chip prices aren’t the whole story. AI customers want to run workloads in the shortest time, at the lowest cost, with the highest accuracy and reliability, drawing as little power as possible. There are a number of companies that think they can do that as well—or better—than Nvidia.

Nvidia’s rivals fall into three groups: big chip makers, cloud computing vendors, and venture-backed start-ups. With a $1 trillion market at stake, this won’t be winner-take-all. It isn’t game over. It’s game on.

Nvidia’s most obvious challengers are Advanced Micro Devices and Intel. 

AMD shares have rallied 71% over the past 12 months, aided by the market’s perception that its new MI300 GPUs will chip away at Nvidia’s stranglehold on the market. That hope is inspired by AMD’s success at stealing market share from Intel in PC and servers. 

“AMD is really the only other company on the field,” contends Andrew Dieckmann, general manager of AMD’s data center GPU business. “We’re the only other solution being adopted at scale within the industry.” He says that AMD chips outperform Nvidia’s H100 for many inference workloads, while offering parity for model training. But AMD’s other asset is that it isn’t Nvidia.

“For the very large users, they are not going to bet their entire franchise on one supplier,” Dieckmann says. “There is an extreme desire for market alternatives.”....

....MUCH, MUCH MORE

Pro Tip: Improve Your Google Search Results

Via Elon Musk on Twitter:

Sunday, April 21, 2024

"What if everything we’ve come to think of as American is predicated on a freak coincidence of economic history? And what if that coincidence has run its course?"

Projecting a linear extension of past trends into the future has worked remarkably well for forecasters such as Ray Kurzweil, enough so that they can call themselves futurologists or somesuch and get paid for that rather nebulous title. 

There's a problem though. In the business of speculating on markets it is encapsulated in the witty ditty "The trend is your friend until the bend at the end." Okay, maybe not so witty but rhymey. I like rhymey.

In the world beyond speculating it is probably important to be aware of the possibility of that "bend at the end," even though 999 times out of 1000 you'll end up with the quote variously attributed to  Mark Twain, Thomas Jefferson, Seneca, Churchill, Thomas Dixon, Montaigne, Martin Farquhar Tupper, Anonymous et al.: "I am an old man and have known a great many troubles, but most of them never happened." —Quote Investigator

And the headliner, a repost from 2013:

A question that economic and market modelers had better be aware of. It is important enough that I've brought it up more than once:
Dec 2012

Other than that...

We only have one sample of U.S. market history, only one time the U.S. rose to economic dominance, only one period of invention like the one described above.

Anyone who uses past performance as anything more than past performance is either a mental defective or a charlatan. 
Nov 2008
 I've had my copy of the Cowles Commission's Common Stock Indexes 1871-1937 open on the desk for pretty much the past year.
I am struck by two things:
1) In the U.S. markets we've got one data-set, with a total of 1642 (Oct. '08) monthly points. Anyone trying to forecast off that had better have HUGE error bars. Or, fess up to the fact that no one really knows and acknowledge that this year a portfolio had a better chance if directed by an astrologer. (Arch Crawford is Hulbert's #1 market letter YTD...

Anyone serious about this stuff in light of fiduciary duty should probably read Dimson, Marsh and Staunton's Triumph of the Optimists, links below.

From New York Magazine:

Picture this, arranged along a time line.

For all of measurable human history up until the year 1750, nothing happened that mattered. This isn’t to say history was stagnant, or that life was only grim and blank, but the well-being of average people did not perceptibly improve. All of the wars, literature, love affairs, and religious schisms, the schemes for empire-making and ocean-crossing and simple profit and freedom, the entire human theater of ambition and deceit and redemption took place on a scale too small to register, too minor to much improve the lot of ordinary human beings.

In England before the middle of the eighteenth century, where industrialization first began, the pace of progress was so slow that it took 350 years for a family to double its standard of living. In Sweden, during a similar 200-year period, there was essentially no improvement at all. By the middle of the eighteenth century, the state of technology and the luxury and quality of life afforded the average individual were little better than they had been two millennia earlier, in ancient Rome.

Then two things happened that did matter, and they were so grand that they dwarfed everything that had come before and encompassed most everything that has come since: the first industrial revolution, beginning in 1750 or so in the north of England, and the second industrial revolution, beginning around 1870 and created mostly in this country. That the second industrial revolution happened just as the first had begun to dissipate was an incredible stroke of good luck. It meant that during the whole modern era from 1750 onward—which contains, not coincidentally, the full life span of the United States—human well-being accelerated at a rate that could barely have been contemplated before. Instead of permanent stagnation, growth became so rapid and so seemingly automatic that by the fifties and sixties the average American would roughly double his or her parents’ standard of living. In the space of a single generation, for most everybody, life was getting twice as good.

At some point in the late sixties or early seventies, this great acceleration began to taper off. The shift was modest at first, and it was concealed in the hectic up-and-down of yearly data. But if you examine the growth data since the early seventies, and if you are mathematically astute enough to fit a curve to it, you can see a clear trend: The rate at which life is improving here, on the frontier of human well-being, has slowed.
If you are like most economists—until a couple of years ago, it was virtually all economists—you are not greatly troubled by this story, which is, with some variation, the consensus long-arc view of economic history. The machinery of innovation, after all, is now more organized and sophisticated than it has ever been, human intelligence is more efficiently marshaled by spreading education and expanding global connectedness, and the examples of the Internet, and perhaps artificial intelligence, suggest that progress continues to be rapid....MUCH MORE
Re Triumph of the Optimists, the main point to take away is how different your portfolio returns look if you were invested in the Berlin market in late 1944, the Chinese market in 1949 or the U.S. market over the last 150 years. As The Economist pointed out the authors deliberately excluded the Warsaw and Moscow Exchanges "since they were closed down under communist rule. That led to returns best described as “steeply negative”. If these markets were taken into account, the historical equity premium would be even lower"

CXO Advisory put together the crib notes:
Triumph of the Optimists (Chapter-by-Chapter Review)

Victor Niederhofer takes a look at the methodology and conclusions.

Here's Dimson with an overview (7 page PDF)

Saturday, April 20, 2024

"Ukraine Is the First 'Hackers’ War'”

Coming to a country near you. 

The author, "Juan Chulilla, is a cofounder of Red Team Shield S.L., a company dedicated to developing defense solutions against weaponized commercial drones."

From IEEE Spectrum, April 10:

For clues to the future of warfare, study the struggle between FPV drones and electronic warfare

Rapid and resourceful technological improvisation has long been a mainstay of warfare, but the war in Ukraine is taking it to a new level. This improvisation is most conspicuous in the ceaselessly evolving struggle between weaponized drones and electronic warfare, a cornerstone of this war.

Weaponized civilian first-person-view (FPV) drones began dramatically reshaping the landscape of the war in the summer of 2023. Prior to this revolution, various commercial drones played critical roles, primarily for intelligence, surveillance, and reconnaissance. Since 2014, the main means of defending against these drones has been electronic warfare (EW), in its many forms. The iterative, lethal dance between drones and EW has unfolded a rich technological tapestry, revealing insights into a likely future of warfare where EW and drones intertwine.

After the invasion of Crimea, in 2014, Ukrainian forces depended heavily on commercial off-the-shelf drones, such as models from DJI, for reconnaissance and surveillance. These were not FPV drones, for the most part. Russia’s response involved deploying military-grade EW systems alongside law-enforcement tools like Aeroscope, a product from DJI that allows instant identification and tracking of drones from their radio emissions. Aeroscope, while originally a standard tool used by law enforcement to detect and track illegal drone flights, soon revealed its military potential by pinpointing both the drone and its operator.

On both sides of the line you’ll find much the same kind of people doing much the same thing: hacking.

This application turned a security feature into a significant tactical asset, providing Russian artillery units with precise coordinates for their targets—namely, Ukrainian drone operators. To circumvent this vulnerability, groups of Ukrainian volunteers innovated. By updating the firmware of the DJI drones, they closed the backdoors that allowed the drones to be tracked by Aeroscope. Nevertheless, after the start of the conflict in Crimea, commercial, off-the-shelf drones were considered a last-resort asset used by volunteers to compensate for the lack of proper military systems. To be sure, the impact of civilian drones during this period was not comparable to what occurred after the February 2022 invasion.

As Russia’s “thunder-run” strategy became bogged down shortly after the invasion, Russian forces found themselves unexpectedly vulnerable to civilian drones, in part because most of their full-scale military EW systems were not very mobile.

The Russians could have compensated by deploying many Aeroscope terminals then, but they didn’t, because most Russian officers at the time had a dismissive view of the capabilities of civilian drones in a high-intensity conflict. That failure opened a window of opportunity that Ukrainian armed-forces units exploited aggressively. Military personnel, assisted by many volunteer technical specialists, gained a decisive intelligence advantage for their forces by quickly fielding fleets of hundreds of camera drones connected to simple yet effective battlefield-management systems. They soon began modifying commercial drones to attack, with grenade tosses and, ultimately, “kamikaze” operations. Besides the DJI models, one of the key drones was the R18, an octocopter developed by the Ukrainian company Aerorozvidka, capable of carrying three grenades or small bombs. As casualties mounted, Russian officers soon realized the extent of the threat posed by these drones.

How Russian electronic warfare evolved to counter the drone threat...

....MUCH MORE, he's just getting warmed up.

Where this gets really nasty is:

"Omniviolence Is Coming and the World Isn’t Ready"

 A repost from 2019 that seems to have come true.

From Nautil.us:

In The Future of Violence, Benjamin Wittes and Gabriella Blum discuss a disturbing hypothetical scenario. A lone actor in Nigeria, “home to a great deal of spamming and online fraud activity,” tricks women and teenage girls into downloading malware that enables him to monitor and record their activity, for the purposes of blackmail. The real story involved a California man who the FBI eventually caught and sent to prison for six years, but if he had been elsewhere in the world he might have gotten away with it. Many countries, as Wittes and Blum note, “have neither the will nor the means to monitor cybercrime, prosecute offenders, or extradite suspects to the United States.” 
Technology is, in other words, enabling criminals to target anyone anywhere and, due to democratization, increasingly at scale. Emerging bio-, nano-, and cyber-technologies are becoming more and more accessible. The political scientist Daniel Deudney has a word for what can result: “omniviolence.” The ratio of killers to killed, or “K/K ratio,” is falling. For example, computer scientist Stuart Russell has vividly described how a small group of malicious agents might engage in omniviolence: “A very, very small quadcopter, one inch in diameter can carry a one-or two-gram shaped charge,” he says.
“You can order them from a drone manufacturer in China. You can program the code to say: ‘Here are thousands of photographs of the kinds of things I want to target.’ A one-gram shaped charge can punch a hole in nine millimeters of steel, so presumably you can also punch a hole in someone’s head. You can fit about three million of those in a semi-tractor-trailer. You can drive up I-95 with three trucks and have 10 million weapons attacking New York City. They don’t have to be very effective, only 5 or 10% of them have to find the target.” Manufacturers will be producing millions of these drones, available for purchase just as with guns now, Russell points out, “except millions of guns don’t matter unless you have a million soldiers. You need only three guys to write the program and launch.” In this scenario, the K/K ratio could be perhaps 3/1,000,000, assuming a 10-percent accuracy and only a single one-gram shaped charge per drone.
Will emerging technologies make the state system obsolete? It’s hard to see why not.
That’s completely—and horrifyingly—unprecedented. The terrorist or psychopath of the future, however, will have not just the Internet or drones—called “slaughterbots” in this video from the Future of Life Institute—but also synthetic biology, nanotechnology, and advanced AI systems at their disposal. These tools make wreaking havoc across international borders trivial, which raises the question: Will emerging technologies make the state system obsolete? It’s hard to see why not. What justifies the existence of the state, English philosopher Thomas Hobbes argued, is a “social contract.” People give up certain freedoms in exchange for state-provided security, whereby the state acts as a neutral “referee” that can intervene when people get into disputes, punish people who steal and murder, and enforce contracts signed by parties with competing interests....MORE

It gets worse.  

If interested see also 2022's "The US Navy wants swarms of thousands of small drones"  and two from 2021:

"Meet the future weapon of mass destruction, the drone swarm"
From The Bulletin of the Atomic Scientists.... 

"Autonomous 'Slaughterbot' Drones Reportedly Attack Libyans Using Facial Recognition Tech"

"Electric Shock: An Existential Crisis in the German Auto Industry"

From Der Spiegel, March 27:

Electric cars are selling poorly, and many German manufacturers are still focusing on the combustion engine. The threat from cheaper Chinese competitors is growing. Might this be the death knell of Germany's fabled automobile industry?

They got an early start in Paderborn. Five years ago, when the range of electric cars available in Germany was still quite limited, Caritas banished many of the diesel- and gasoline-fueled cars from its fleet and purchased 114 electric cars and 45 e-bikes. In one fell swoop, the Catholic Church's charity organization became a pioneer in the fuel-loving republic.

At the time, the CEOs of Germany's major car companies were still busy complaining about a lack of charging stations. In no time at all, Caritas Paderborn had 118 of its own charging stations installed. "Sustainable on the road" is emblazoned in red letters on the white, polished Caritas cars that around 500 of the organization's caregivers use to drive to the people they assist.

It all looked like a success story: According to Caritas, operating costs fell by 40 percent because electricity was cheaper than gasoline and the electric cars had to be serviced less often. CO2 emissions from the vehicle fleet fell by around 190 tons per year.

But the situation has since changed. Officials at Caritas ran into a problem they weren't expecting: There aren't many electric cars around that the charity can afford, and leasing rates have risen sharply.

Early on, Caritas sometimes paid less than 60 euros per month per vehicle. But today, new contracts cost 200 euros, often even 300 euros. E-cars are becoming less and less of a cost-saver for the organization.

"We're hardly able to find what we are looking for from German manufacturers," says Hans-Werner Hüwel, head of nursing and healthcare for the charity. Caritas is now increasingly switching from VW or Smart to electric models from Renault or its budget brand Dacia. But even these are often more expensive to lease than comparable combustion engines.

Still, he says the charity organization will remain loyal to electric cars for "as long as we can afford it." But he also reports that Caritas chapters in other areas have begun switching their fleets back to combustion engines.

Frustration among electric car buyers is helping to fuel a combustion boom. And it's not just at Caritas that the shift to electric cars has stalled. The German federal government's central modernization project is in danger of failing. Not only is the German populace not playing along, but manufacturers haven't come up with attractive products and the political framework conditions still haven't been optimized. Electric car purchases remain the domain of those with healthier salaries.

No German manufacturer currently has an electric car on the market that costs less than 25,000 euros, and most prices are well over 30,000 euros. The e-up!, a compact bestseller for years, was taken off the market by Volkswagen in 2023 – allegedly because it was no longer profitable. VW has no plans to bring cheaper electric vehicles back onto the market until 2026. Meanwhile, Mercedes and its Chinese partner Geely keep adding extras to the E-Smart, making it more expensive.

In most cases, it costs several thousand euros more to buy an electric car than a comparable combustion engine.

Added to this is an economic environment that makes the change seem unattractive: recession, inflation and highly volatile electricity prices, which were among the highest in Europe in 2023. The German Association of the Automotive Industry (VDA) expects sales to fall by 14 percent this year.

They may frequently tout clean mobility, but politicians have actually contributed to the current mess with policies that have been all over the map. The federal government canceled its subsidies for electric car purchases of up to 4,500 euros in mid-December - a sudden decision that unsettled consumers and left car manufacturers stunned.

At the same time, a 200-million-euro subsidy program that had only been announced in June and was intended to promote the private charging points known as wallboxes, in addition to the related solar systems and electricity storage units, was also cancelled. In one fell swoop, consumers who wanted to buy the expensive technology were left to fend for themselves.

In addition to the losing their possible financial attraction, the back and forth within the current German government has also taken a toll on the popularity of electric cars. German Transport Minister Volker Wissing of the business-friendly Free Democratic Party (FDP) is still flirting with synthetic fuels as an alternative to electric cars, as if the pace of the global car industry is set in Berlin and not in China and the United States, where Germany's naval gazing is of no interest to anyone.

What the German government is doing better than anything else is to confuse German car buyers more and more when it comes to deciding on an electric car. The consequence is that the German government's target of having 15 million electric cars on German roads by 2030 has faded into impossibility. So far, the figures are only a tenth of that.

This political disaster, though, has had economic consequences.

With manufacturers like VW struggling to get rid of their stocks of electric cars and new manufacturers entering the market at the same time, an unprecedented rebate battle raged at the beginning of the year. In the first quarter, retailers were offering discounts of 15 percent, 20 percent and sometimes even more. Those who already owned electric cars had to watch as the value of their vehicles melted away. Leasing has become less attractive because interest rates are high and electric vehicles are losing value faster than expected. Car rental companies such as Sixt are removing electric vehicles from their range in droves. The financial risk appears to be too high.

In Germany, the electric car is becoming a symbol of a shift to green technologies that has been botched by the state, just like the debate over the switch from gas heating to heat pumps that preceded it. The Alternative for Germany (AfD) party is waging a cultural war from the right against the electric car. Left-wing extremists, meanwhile, set fire on March 5 to an transmission tower just outside of Berlin, shutting down the Tesla plant there for several day. In a statement of responsibility, activists claimed the act was in protest against "techno-fascists" like Elon Musk.

At the same time, it is clear to almost every transport policymaker and auto industry executive in the world that the day of the electric car is coming – and fast. The question is whether Germany and its car manufacturers will be part of the transition and help shape it – or whether they will be bowled over by the change. No longer, it would seem, does Germany call the shots in the global automotive industry.

The pace and the technology are now determined by others. In China, the world's largest car market, almost a quarter of all new cars sold are all-electric vehicles. To survive in the country, you need competitive electric vehicles. The competition is no longer dominated by VW, BMW or Mercedes, but by Tesla from the United States and BYD from China. And the newcomers are no longer confining themselves to their home markets – they are also capturing market share in Germany and Europe.

Clinging to the old ways would be economic suicide. But the temptation is great to delay the death of the lucrative combustion engine for as long as possible. Mercedes-Benz boss Ola Källenius, who until recently wanted to go all-electric, is suddenly questioning the European Union's decision to phase out combustion engines by 2035. He says he doesn't know when the last gasoline or diesel car will be sold.

In Brussels, the shift to electric vehicles is apparently no longer a priority. European Commission President Ursula von der Leyen, once a staunch supporter of phasing out combustion engines, now considers it "very important" to review the issue in 2026. Manfred Weber, leader and group chairman of the European People's Party (EPP), the parliamentary group representing center-right Christian Democrat parties in the European Parliament, would like to "reverse" the ban on combustion engines. Germany's Christian Democratic Union party and its Bavarian sister party, the Christian Social Union, also want to make that demand part of their platforms for this spring's elections to the European Parliament....