China's Huawei posts 28 percent rise in 2017 net profit

HONG KONG (Reuters) – China’s Huawei Technologies [HWT.UL], the world’s third-largest smartphone maker, posted a 28 percent rise in 2017 net profit on Friday, driven by cost controls and a solid performance in its home market.

FILE PHOTO: The Huawei logo is seen during the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Photo

The outlook for Huawei, which trails Samsung Electronics (005930.KS) and Apple Inc (AAPL.O) in smartphones, is clouded by strong competition in the domestic market and declining sales in the United States, as Washington plans higher import tariffs on China’s tech products.

Shenzhen-based Huawei saw net profit for 2017 rising to 47.5 billion yuan ($7.3 billion), a big rebound from last year’s 0.4 percent increase. The rise is largely attributable to a 85 percent drop in net financing expenses as the company booked smaller foreign exchange losses.

Revenue grew 15.7 percent to 603.6 billion yuan, in line with the company’s previous guidance and its slowest growth in four years.

Huawei vowed to focus on improving profit after posting the slowest profit growth in five years in 2016 as its slim-margin smartphone business weighed down profit growth.

Huawei’s consumer business, which includes smartphone operations, grew at a slower 31.9 percent to 237.2 billion yuan ($37.85 billion) after shipping 153 million smartphones last year. The year earlier the segment had grown 43.6 percent.

Huawei this week launched its most expensive flagship smartphone to date in Europe – the triple-camera P20 series that sell for 649-899 euros – a fresh attempt to compete head-to-head with Samsung and Apple in the high-end phone market.

Market share gains in Europe have helped Huawei offset the company’s exclusion from the U.S., the world’s most profitable market for phone sellers.

Revenue from the Americas dropped 11 percent to 39 billion yuan.

Reporting by Sijia Jiang and Farah Master; Editing by Sunil Nair

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Mideast ride-hailing app Careem resumes Ramallah services

DUBAI (Reuters) – Middle East ride-hailing app Careem said on Wednesday it had resumed services in the Palestinian city of Ramallah in the Israeli-occupied West Bank after striking a deal with Palestinian transport authorities.

FILE PHOTO: An employee shows the logo of ride-hailing company Careem on his mobile in his office in the West Bank city of Ramallah July 17, 2017. REUTERS/Mohamad Torokman

Dubai-based Careem suspended services in Ramallah last November, four months after launching there, at the request of the Palestinian Authority, which exercises limited self-rule in the West Bank.

Careem said in a statement it had agreed with the Palestinian transport ministry for its fares to be the same as metered taxis. It has resumed services only with licensed taxi drivers but plans to later add private cars.

Careem believes its services will remain competitive even with fares the same as for regular taxis. It said the taxi booking and payment services on its app were convenient compared with hailing a cab on the street.

Ride-hailing apps have faced opposition in many markets around the world by making inroads into the traditional taxi industry.

Careem said it had signed up hundreds of drivers in the West Bank, where the Palestinian unemployment rate is high.

The ride-hailing company has raised over $500 million and expanded to over 90 cities across 13 countries predominantly in the Middle East since launching in 2012.

Careem started services in the West Bank city of Nablus and in Gaza City this year and said it would continue looking at adding more cities in the tiny Palestinian-ruled enclave.

Careem is a Middle East rival to U.S. company Uber Technologies [UBER.UL], which does not operate in the Palestinian territories.

Reporting by Alexander Cornwell; Editing by Mark Heinrich

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Americans less likely to trust Facebook than rivals on personal data

(This March 25 story has been corrected to remove reference to level of trust being lost over time)

FILE PHOTO: Facebook Founder and CEO Mark Zuckerberg speaks on stage during the annual Facebook F8 developers conference in San Jose, California, U.S., April 18, 2017. REUTERS/Stephen Lam

By David Ingram and Eric Auchard

SAN FRANCISCO/LONDON (Reuters) – Opinion polls published on Sunday in the United States and Germany cast doubt over the level of trust people have in Facebook over privacy, as the firm ran advertisements in British and U.S. newspapers apologizing to users.

Fewer than half of Americans trust Facebook to obey U.S. privacy laws, according to a Reuters/Ipsos poll released on Sunday, while a survey published by Bild am Sonntag, Germany’s largest-selling Sunday paper, found 60 percent of Germans fear that Facebook and other social networks are having a negative impact on democracy.

Facebook founder and chief executive Mark Zuckerberg apologized for “a breach of trust” in advertisements placed in papers including the Observer in Britain and the New York Times, Washington Post and Wall Street Journal.

“We have a responsibility to protect your information. If we can’t, we don’t deserve it,” said the advertisement, which appeared in plain text on a white background with a tiny Facebook logo.

The world’s largest social media network is coming under growing government scrutiny in Europe and the United States, and is trying to repair its reputation among users, advertisers, lawmakers and investors.

This follows allegations that the British consultancy Cambridge Analytica improperly gained access to users’ information to build profiles of American voters that were later used to help elect U.S. President Donald Trump in 2016.

U.S. Senator Mark Warner, the top Democrat on the Senate Intelligence Committee, said in an interview on NBC’s Meet the Press” on Sunday that Facebook had not been “fully forthcoming” over how Cambridge Analytica had used Facebook data.

Warner repeated calls for Zuckerberg to testify in person before U.S. lawmakers, saying Facebook and other internet companies had been reluctant to confront “the dark underbelly of social media” and how it can be manipulated.

A figurine is seen in front of the Facebook logo in this illustration taken March 20, 2018. REUTERS/Dado Ruvic

“BREACH OF TRUST”

Zuckerberg acknowledged that an app built by a university researcher had “leaked Facebook data of millions of people in 2014”.

“This was a breach of trust, and I’m sorry we didn’t do more at the time,” Zuckerberg said, reiterating an apology first made last week in U.S. television interviews.

Facebook shares tumbled 14 percent last week, while the hashtag #DeleteFacebook gained traction online.

The Reuters/Ipsos online poll found that 41 percent of Americans trust Facebook to obey laws that protect their personal information, compared with 66 percent who said they trust Amazon.com Inc, 62 percent who trust Alphabet Inc’s Google, 60 percent for Microsoft Corp.

The poll was conducted from Wednesday through Friday and had 2,237 responses. (reut.rs/2G9hvrv)

The German poll published by Bild was conducted by Kantar EMNID, a unit of global advertising holding company WPP, using representative polling methods, the firm said. Overall, only 33 percent found social media had a positive effect on democracy, against 60 percent who believed the opposite.

It is too early to say if distrust will cause people to step back from Facebook, eMarketer analyst Debra Williamson said in an interview. Customers of banks or other industries do not necessarily quit after losing faith, she said.

“It’s psychologically harder to let go of a platform like Facebook that’s become pretty well ingrained into people’s lives,” she said.

Data supplied to Reuters by the Israeli firm SimilarWeb, which measures global online audiences, indicated that Facebook usage in major markets and worldwide remained steady over the past week.

“Desktop, mobile and app usage has remained steady and well within the expected range,” said Gitit Greenberg, SimilarWeb’s director of market insights. “It is important to separate frustration from actual tangible impacts to Facebook usage.”

Additional reporting by William James in London, Dustin Volz in Washington D.C. and Chris Kahn in New Editing by Kevin Liffey

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Why The Market Is 'Crashing' And What You Need To Do About It

(Source: imgflip)

The stock market just had its worst week since the correction began, with the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and Nasdaq (QQQ), falling 5.6%, 5.9%, and 7.3%, respectively.

Chart

SPY Price data by YCharts

This means that the market has now retraced to its previous low, something I warned was historically likely to happen.

Chart

SPY data by YCharts

But still investors are understandably worried about the return of such volatility, after 2017’s freakishly calm and bullish year. In fact, according to CNN’s Fear & Greed Index, a meta analysis of seven different market indicators, investors are not just afraid but are petrified right now.

(Source: CNN)

But since the root cause of fear is uncertainty and doubt, let’s take a look at what caused the stock market’s latest freakout. More importantly discover why these fears are likely overblown, and why the you shouldn’t be racing for the exits.

What The Market Is Freaking Out Over Now

On Thursday, President Trump announced that he would be imposing 25% tariffs on $50 billion to $60 billion worth of Chinese imports covering 1,300 products including: aerospace, information and communication technology, and machinery. This was in retaliation for years of Chinese intellectual property theft against foreign companies, including US firms.

The Chinese responded with calls for America to “cease and desist” and the Chinese embassy said:

“If a trade war were initiated by the US, China would fight to the end to defend its own legitimate interests with all necessary measures.” -Chinese Embassy

Thus far, Chinese retaliation has been modest, just $3 billion against 128 US imports including: pork, aluminum pipes, steel and wine. However, according to Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, those $3 billion in tariffs appear to be in response to Trump’s earlier steel and aluminum tariffs.

Those only affected $29 billion in US imports, before Trump began exempting most US allies.

The Wall Street Journal is reporting that China will now ratchet up its own counter tariffs, specifically against, “U.S. agricultural exports from Farm Belt states.” Specifically, this means tariffs on U.S. exports of soybeans, sorghum and live hogs, most of which come from states that voted for Trump.

Apparently, the Chinese began planning for a potential US trade dispute last month when the Chinese Commerce Ministry met with major Chinese food importers to discuss lining up alternatives sources of major US agricultural products. For example, China is considering switching its soy imports to Brazil, Argentina and Poland.

The concern that many people have is that during the announcement on the Chinese tariffs, which cover just 10% of all US imports from that country, Trump stated that this was just the first in a series of upcoming tariffs against China.

So many are worried that if the President truly believes that “trade wars are good and easy to win”, then he could potentially escalate this trade tiff into a full blown trade war. Something that history shows is never a good thing, and sometimes has disastrous consequences.

How Bad Would A Full Blown US/China Trade War Be?

The White House has stated that it wants to reduce the US/China trade deficit by $100 billion a year, or about 20%. Theoretically, that could mean that Trump might impose tariffs on all Chinese goods, in order to make them more expensive and less competitive with either US goods or those from non-tariffed countries.

So what effects would this have on the US? Well, first of all prices will increase initially, since companies like Walmart (WMT) have complex supply chains with contracts for sourcing for its stores. So in the likely case a 25% tariff on $50 billion to $60 billion in Chinese imports represents a $12.5 billion to $15 billion increase in US input costs.

Or to put another way Trump’s China tariffs are likely to boost inflation by 0.08%, and drive core PCE from 1.5% to 1.6%. Now that isn’t the total negative affect to the US economy. After all, China has already retaliated in response to steel tariffs, and is likely to now ratchet up its own counter tariffs.

How bad could that be for American exporters? Well, China supplies just 2% of US steel, meaning that the steel tariffs represent a $580 million loss of export revenue. In response, they slapped tariffs on US goods (with apparent plans to completely replace them with foreign alternatives) of $3 billion. That’s a retaliation tariff ratio of 5.2, meaning for every $1 in export revenue threatened by US tariffs, China appears to be willing to cut its US imports by as much as $5.20.

However, in 2017, Chinese imports of US goods totaled $130 billion, so there is no way this retaliatory ratio could hold. However, theoretically, if the US and China were to get into a full blown trade war, China could cease importing up to $130 billion of US products.

That worst case scenario would likely require Trump imposing similar (25%) tariffs on all Chinese imports to the US, which totaled $506 billion last year. In the worst case scenario, that could temporarily raise US prices by $127 billion.

Worst Case US/China Trade War Costs

Impact

Cost To US Economy

% Decrease In Real GDP Growth

Increase In Inflation

Core PCE

Higher US Prices

$127 billion

0%

0.7%

Lost US Exports

$130 billion

0.7%

0%

Total

$257 billion

0.7%

0.7%

2.2%

Sources: thebalance.com, CNN, Marketplace, Bureau of Economic Analysis

Nominal US GDP would not fall due to rising prices; in fact, it would increase. However, GDP is reported as inflation adjusted, meaning that price increases would not have an measured affect on economic growth since they are by definition excluded.

However, they do represent a true cost to the economy, since it means consumer pay more and have less money to spend on other things. The effect on GDP would potentially be seen via China’s replacement of potentially $130 billion in US exports with those from other nations. That would knock off 0.7% from US economic growth. Currently, the Federal Reserve is projecting 2.7% growth in 2018, so in our worst case scenario that would fall to 2.0%.

Meanwhile, the higher US prices would represent about 0.7% increase in inflation, pushing the core, (ex-food & fuel), personal consumption expenditure index to 2.2%. Core PCE is the Fed’s preferred inflation metric because it’s a survey of what people actually buy, taking into account rising prices, (switching to cheaper alternatives).

The bottom line is that a full blown US/China trade war has the potential to do significant damage to America. It could potentially lower economic growth 25% over a year, and raise inflation by nearly 50%. But just above the Fed’s stated 2.0% target. Fortunately, this worst case scenario is unlikely to actually happen.

Trade Wars Are Terrible But This “Tariff” Isn’t Likely To Become One

First understand these tariffs are not immediate. US Trade Representative Robert Lighthizer’s office will have 15 days to publish a list of the goods, which will be followed by a 30-day comment period before they go into effect. Tariffs and retaliatory tariffs are not a light switch, but a slow moving regulatory process.

This means that it will likely be six weeks (early May) before any US tariffs on Chinese imports begin. Chinese retaliation in terms of decreased exports would likely start by late June/early July at the earliest. Or to put another way, half of the impact of the worst case scenario would be eliminated by timing.

And time is our friend here because most trade disputes, even threatened tariffs, are merely negotiating tactics. Most of the time tariffs get called off relatively quickly as both sides seek some kind of resolution.

After all, China potentially could take a 3.8% hit to GDP if it lost its US export market, cutting its economic growth in half. That’s something it has no interest in. Meanwhile, the sharp hit to Trump’s constituency (states that helped elect him), plus slower US economic growth, would certainly not help the President’s re-election efforts in 2020.

We’ve already seen that the President’s threatened tariffs can get walked back. For example, the steel and aluminum tariffs that freaked out the market a few weeks ago. Trump has since “temporarily” exempted: The European Union, Canada, Mexico, Brazil, Australia, New Zealand and South Korea. These countries actually are responsible for 2/3 of all US steel imports while China represents just 2%.

In early March, China’s Supreme Court vowed to strengthen China’s protection of intellectual property rights, something that Chinese tech firms have been calling for. This means that the trigger for these tariffs might already be fading. It also means that both China and the US have a relatively easy way out, in which no one loses face, because each side can claim some kind of victory.

What The Fed Did To Potentially Spook The Markets

The other potential partial factor for this week’s sharp drop is the Federal Reserve’s March meeting in which it hiked the Federal Funds rate by 25 basis points to 1.5% to 1.75%. This was already priced in by the bond market and was a surprise to no one. The Fed said that, “The economic outlook has strengthened in recent months” and boosted its economic growth forecasts:

  • 2018: 2.7% (from 2.5%)
  • 2019: 2.4% (from 2.1%)
  • 2020: 2.0% (from 1.8%)
  • Long-Term: 1.8% – unchanged

The Fed also updated its core PCE projections:

  • 2018: 1.9%
  • 2019: 2.1%
  • 2020: 2.1%

Meanwhile the Fed’s new unemployment forecast is:

  • 2018: 3.8%
  • 2019: 3.6%
  • 2020: 3.6%

Now none of these upgraded projections are significant, since they basically mean the Fed is just more bullish on the economy. But what potentially concerned the market is the Fed’s slightly more hawkish stance on interest rates.

(Source: CME Group)

Basically, this revised plan from the Fed calls for:

  • 2018: two more hikes (same as before)
  • 2019: three hikes (same as before)
  • 2020: two hikes (one more than before)

The Fed basically expects to raise its Fed Fund rate, which is the overnight interbank lending rate, to 3.5% by the end of 2020. Of course, that’s assuming the US economy keeps growing as quickly as predicted.

3.5% is still far below the historical norm (4% to 6%), so why should that have concerned investors? Simply put because it indicates that the Fed might end up triggering a recession.

Yes You Should Fear An Inverted Yield Curve…

While the Fed Funds rate has no direct link to the bond markets that actually control US corporate borrowing costs, most US banks do benchmark their prime rate off it. The prime rate is how much they charge their most creditworthy and favored clients.

The prime rate has now been raised to 4.75%. The prime lending rate is what most non mortgage consumer loans are benchmarked off. So this means that US consumer borrowing costs are rising, and could rise another 1.75% by the end of 2020. That could certainly slow the pace of consumer borrowing, and potentially increase the US savings rate. While a good thing in the long term, it would potentially cause consumer spending to slow. Since 65% to 70% of US GDP is driven by consumer spending that might in turn slow US economic growth and, more importantly to Wall Street, corporate profit growth.

But here is the real reason that investors should worry about the Fed Funds rate potentially rising another 1.75%. Because under current economic conditions, it would almost certainly cause a recession. That’s based on the single best recession predictor we have, the yield curve. This is the difference between short-term and long-term treasury rates.

The yield curve is 5/5 in predicting the last five recessions. If the curve gets inverted, meaning short-term rates rise above long-term rates, a recession follows relatively soon (usually within one to two years).

Why is this? Two reasons. First, if short-term rates are equal to or above long-term rates, the bond market is signaling that it expects little economic growth and inflation ahead.

More fundamentally, it’s because financial institutions borrow short term to lend long term, at a higher interest. This net margin spread is what creates lending profits and is why loans get made in the first place. So if short-term borrowing rates rise higher than long-term rates, it can decrease the profitability of lending, and result in fewer loans. Thus, consumer spending can fall, businesses invest less, and the economy slides into a recession.

And while the Fed Funds Rate has no direct link to the interest rates that companies care about (long-term rates that benchmark corporate bond rates), studies show that the short-term treasury bonds track closely with the Fed Funds Rate. But long-term rates, such as the 10-year Treasury yield, do not, as they are set by the bond market based mostly on long-term inflation expectations.

This is why the market freaked out over January’s labor report that showed wages rising 2.9%. The fear is that if the labor market is too hot, then rising wages trigger faster inflation which forces the Fed to hike rates high enough to trigger a yield curve inversion. This is what occurred before the last three recessions.

Basically, this means that if the Fed were to proceed with its revised rate hike schedule, then short-term rates would likely rise by 1.75% or so. Long-term rates, on the other hand, are set by inflation expectations and the 10-year yield of 2.83% is currently pricing in 2.1% inflation.

(Source: Bureau Of Economic Analysis)

However, inflation has been stuck at 1.5% for the last four months, and so far shows no signs of rising to those long-term expectations. Which means that 10-year yields are not likely to rise 1.75% by 2020, in line with rising short-term rates.

That in effect indicates that seven rate hikes would almost certainly invert the yield curve, heralding the next recession. The good news? The Fed isn’t likely to keep hiking if inflation remains low and threatens to invert the yield curve.

…But The Fed Isn’t Likely To Invert The Curve

So if the Fed’s current forecast calls for low inflation, but enough rate hikes to likely trigger a yield curve inversion and possible recession, why am I not freaking out? Two main reasons. First, Jerome Powell, the new Fed Chairman, is not an economist, but a veteran of Wall Street. Over his career, he’s been:

  • Managing director for Bankers Trust – a US bank
  • Partner at The Carlyle Group – a private equity firm
  • Founded Severn Capital – a private equity fund specializing in industrial investments
  • Managing partner for the Global Environment Fund – a private equity fund specializing in renewable power

Here is why this matters. Economists are big fans of economic models, such as the Phillips Curve. This says that as unemployment falls below a certain, (full employment), wages and thus inflation, must rise.

Powell has indicated that he’s willing to go where the data takes him, and not just assume the models are correct. In other words, Powell doesn’t buy into the fears of the Fed’s more hawkish members.

In fact, take a look at what he said during the last Fed post meeting press conference:

“There is no sense in the data that we are on the cusp of an acceleration of inflation. We have seen moderate increases in wages and price inflation, and we seem to be seeing more of that… The theory would be if you get below the sustainable rate of unemployment for a sustained period, you would see an acceleration of inflation. We are very alert to it. But it’s not something we observe at the presentWe will know that the labor market is getting tight when we see a more meaningful upward move in wages… Wages should reflect inflation plus productivity increases … so these low wage increases do make sense in a certain sense… That is a sign of improvement (rising labor participation rate), given that the aging of our population is putting downward pressure on the participation rateIt’s true that yield curves have tended to predict recessions … a lot of that was when inflation was allowed to get out of control.” -Jerome Powell

What we see in these quotes is a man who understands finance and understands that the world is more complex than simplified models would indicate. He seems to realize that we are NOT at full employment. So until wages start rising there is no reason to assume we are and that inflation is about to accelerate to dangerous levels.

Powell has also indicated that he expects tax cuts to fuel more investment, boosting productivity, which would allow wages to rise without triggering higher inflation. This is something that I expect as well and the key reason that I’m personally so bullish on the economy, and expect the current expansion to continue for many years.

The bottom line is that Powell seems to be a man who will, for the sake of expectations, make a forecast. But he seems more than willing to ultimately alter monetary policy as the economic data indicates is necessary, not raising rates just because the Phillips Curve says to.

And as a former Wall Street banker who is well aware of the yield curve and its importance, I don’t consider it likely that he’ll blindly keep hiking rates based on a plan from a few years ago. When the facts change, Jerome Powell changes his mind.

Which brings me to the biggest reason to shake off and ignore this last terrible week in the stock market.

US Economic Fundamentals Remain Strong And That’s All That Matters

The stock market may be a forward looking instrument, but it’s also prone to fits of violent pessimism whenever anything bad happens. The market often takes a worst case scenario like “sell first, ask questions later” approach.

Trump announces tariffs? It MUST mean we’re headed for a full blown global trade war that will trigger massive inflation, a shrinking economy, and a bear market! Sell everything!

The truth is that while sometimes the worst case scenario happens (such as the Financial Crisis), 99% of the time negative effects of anything are not as bad as people fear. Or to put another way very seldom is it true that “this time is different.”

So let’s take a page of out Jerome Powell’s playbook and look at the data. I’ve already covered why the last jobs report was darn near perfect.

Meanwhile, the risk of a recession is the lowest I’ve seen since I discovered Jeff Miller’s excellent weekly economic report 18 months ago.

(Source: Jeff Miller)

Specifically, according to a collection of meta analyses of leading indicators and economic reports, the four- and nine-month recession risk is 0.39% and 15%, respectively. Of course, these can and do change over time as new data comes in. But the point is that based on the most recent evidence there is no reason to fear a recession.

Finally, the New York Fed’s Nowcast (real time GDP growth estimator) is saying that Q1 and Q2 GDP growth is likely to come in at 2.9%, and 3.0%, respectively.

Now that also changes with economic reports as they come in, but if true then this is how US economic growth is trending:

  • 2016: 1.5%
  • 2017: 2.3%
  • Q1 2018: 2.9%
  • Q2 2018: 3.0%

Does this portend doom and gloom for the economy, labor market, or corporate earnings growth? No it does not.

I’m not saying stick your head in the sand and ignore all risks. But rather than freak out over POTENTIAL worst case scenarios to the economy we focus on the facts as best we know them. Right now those facts are:

  • low and stable inflation
  • strong job market but not at full employment (otherwise wages would be rising)
  • accelerating economic growth
  • strong and accelerating corporate profits
  • stock market trading sideways = valuation multiples falling = less risk of a bubble and crash

Bottom Line: Markets Are Driven By Short-Term Emotions, Your Portfolio Decisions Shouldn’t Be

Don’t get me wrong a full blown trade war with China would be a terrible thing. It would undoubtedly significantly increase inflation, slow the economy, and potentially force the Fed to raise rates to dangerous levels. These are things that could certainly trigger a bear market or even a recession.

However while all those risks are real, the probability of such a worst case scenario remains remote and speculative. What we do know for sure is what the economic data shows. Which is that the fundamentals underpinning the current economic expansion and bull market remain strong. More importantly, in an economy this large, it would take a large and protracted negative shock to derail those fundamentals and trigger the kind of market crash that many now fear is imminent.

That doesn’t mean that you shouldn’t protect yourself. I myself am continuing to de-risk my high-yield retirement portfolio with a strong focus on quality, undervalued, low volatility, and defensive stocks. But my point is that I’ve been doing that for several months now, back when the market was still roaring higher, and before fears of a trade war surfaced. That’s because I believe in building a bunker while the sun is shining so you never have to fear any market storm.

My recommendation to investors remains the same. Stay calm, focus on your long-term strategy, and don’t let the market’s knee-jerk reactions to likely overblown speculative fears cause you to make costly short-term mistakes.

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

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

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Tumblr Confirms That Russian Trolls Spread Misinformation On Its Service

Tumblr confirmed on Friday that Russian trolls spread misinformation on the blogging service in prelude to the 2016 U.S. presidential election.

Tumbler, part of the Verizon Communications’-owned Oath media group, said it discovered last fall that 84 accounts were linked to the Internet Research Agency. This Russian propaganda outfit was one of the groups identified in a recent Justice Department indictment alleging the Kremlin’s role in spreading fake news through popular social media services to increase division among Americans and interfere with the 2016 presidential elections.

Tumblr’s confirmation that Russia-linked groups misused its service follows a similar admission by social media forum operator Reddit in early March. The IRA and other Russian-linked entities were also alleged by the DOJ to have spread fake news and misleading online advertising on social networks like Facebook (fb) and Twitter (twtr).

Tumblr said that after discovering the questionable accounts, it contacted U.S. law enforcement, terminated the accounts, and deleted the posts, the contents of which Tumblr did not describe. The Russian-linked Tumblr accounts spread misinformation via “organic content,” or conventional postings, rather than online ads, Tumblr said.

The blogging service said it worked “behind the scenes” with the DOJ and provided information that led to the Justice Department’s indictment, revealed in February.

“Remember, the IRA and other state-sponsored disinformation campaigns play off our zero-sum politics,” Tumblr said in a statement. “They want to drive a wedge between us so that we spend our time fighting with each other instead of building towards the future. We’ll be watching for signs of future activity, but the best defense is knowing how they operate and how to judge the content you see.”

Get Data Sheet, Fortune’s technology newsletter.

Tumblr said it would notify users who interacted with any of the IRA-linked accounts and that it would keep a public record of usernames associated with those accounts. Some of the IRA-linked usernames include 1-800-gloup, best-usa-today, ricordio, and stopropaganda, according to a separate Tumblr post.

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7 Excuses You Use to Put Off Starting Your Business

I have talked with hundreds of people about starting a business. People often tell me would love to start a business–then follow up with a list of reasons why they aren’t able to take the first step. From “I’m not good enough” to “not enough savings” and everything in between, there are many reasons starting a business can feel impossible.

And I understand. Starting a business feels overwhelming. Though I knew from my first lemonade stand that startup life was for me, it took me years of hesitating before I finally took the plunge. Here are the seven common reasons you might be hesitating–and seven ways to overcome these fears.

1. I don’t know how.

The beauty of business is that you can learn everything as you go from web resources, books, and peers. Most libraries have a business desk staffed with knowledgeable librarians who specialize in helping people just like you get started with business planning. Many libraries have free online access to the Lynda.com training database so you can learn online free and at your own pace. When I first started my company, Google was my best friend–anything I didn’t know was only a few clicks away. 

With increasing numbers of people working for themselves, chances are you know at least one person who is self-employed. Take them for coffee, ask them how they got started. It doesn’t have to be in the same industry. Ask for introductions to other entrepreneurs they know.

2. I’m too young or too old.

I hear twentysomethings say they’re too young and sixty somethings say they’re too old. But it doesn’t matter. The average American will change careers 5-7 times. That’s careers, not jobs. Age is truly one of the most meaningless measures of readiness. You can learn new things, you can adapt to change, and you can start a business at any age. You’re never too young or too old do change your life and start something you’re proud of.

3. What if I fail?

I fail frequently and you will, too. Get comfortable with the reality that 99 percent of everything you do won’t work. But the 1 percent that does work is magical.

4. My parents don’t support my startup dreams.

There are a lot of difficult dynamics at play when discussing your life choices with parents. But unless you’re asking your parents to bankroll your startup, it’s not really up to them. You only have one life, build one that you’re proud of without worrying about the opinions of others.

5. I don’t have the cash.

It’s a common misconception that you need a lot of capital to start a business. If you have access to a computer and the internet, you can start any number of businesses. I started my business with a $500 credit card loan and a hefty chunk of student loans. A lot of the software you need is available free and there are a variety of businesses you can start small.  As you start collecting payments, you can grow your business.

6. What will my friends or partner think?

If your friends or partner don’t support your dreams, get new ones. Seriously. It’s hard to let friends and lovers go, but if they are only contributing negatively to your dreams, it’s time to let them go. Practice now by telling your friends about your business idea–they might surprise you.

7. I’m not good enough.

Stop it. You know you’re wrong about that. It’s going to be scary, but no one else is better equipped to make your ideas and dreams into reality.

Running your own business is a lot work and there are many stressful moments. But the real rewards of building something you’re proud of far outweigh the imagined obstacles. Now you’re ready to start a business–no excuses!

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China Mobile 2017 net profit up 5 percent on boost from 4G subscriber growth

HONG KONG (Reuters) – China Mobile, the world’s biggest mobile phone operator by subscribers, on Thursday posted a 5 percent rise in annual net profit, fueled by growth in 4G subscribers.

FILE PHOTO: A man walks past the China Mobile logo at the Mobile World Congress in Barcelona, Spain, February 28, 2018. REUTERS/Sergio Perez

China’s top telecommunications operator’s net profit for 2017 stood at 114.4 billion yuan ($18 billion), up from 108.8 billion yuan a year earlier, it said in a filing to the Hong Kong stock exchange.

Its 4G mobile network subscribers rose to 650 million in 2017 after the addition of 114 million customers, while its number of 4G base stations climbed to 1.87 million, covering 99 percent of China’s population.

The company said it aims to dedicate more resources to research and development and expects 5G technology to drive growth.

“We are expecting 5G technology development to drive new business models across the spectrum,” it said in a statement.

China Mobile announced a final dividend of HK$1.582 per share for the year ended December 2017.

Along with an interim dividend of HK$1.623 per share and a special dividend of HK$3.200 per share to celebrate the 20th anniversary of its Hong Kong listing, the total dividend payment for 2017 was HK$6.405 per share.

Operating revenue for 2017 rose 4.5 percent from a year earlier to 740.5 billion yuan.

China Mobile is also making big investments into burgeoning so-called Internet of Things, in line with the Chinese government’s strategy to see more devices and people become interconnected.

Reporting By Anne Marie Roantree and Sijia Jiang; Editing by Shri Navaratnam

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BlackBerry to provide software for Jaguar Land Rover EVs

(Reuters) – BlackBerry Ltd and Tata Motors Ltd’s Jaguar Land Rover (JLR) said on Thursday they reached a licensing agreement to use the Canadian company’s software in the luxury car brand’s next-generation electric vehicles.

FILE PHOTO: A Blackberry sign is seen in front of their offices on the day of their annual general meeting for shareholders in Waterloo, Canada in this June 23, 2015. REUTERS/Mark Blinch/File photo

BlackBerry will provide its infotainment and security software to JLR, in the Canadian firm’s latest licensing deal for its autonomous-driving technology after similar agreements with Qualcomm Inc, Baidu Inc and Aptiv Plc.

BlackBerry’s QNX unit, which makes software for computer systems on cars and has long been used to run car infotainment consoles, is expected to start generating revenue in 2019.

Its Certicom unit focuses on security technology and serves customers such as IBM Corp, General Electric Co, and Continental Airlines.

JLR, which was bought by the Tata group in 2008, said last year that all its new cars would be available in an electric or hybrid version from 2020.

Britain’s biggest carmaker said in January it would open a software engineering center in Ireland to work on advanced automated driving and electrification technologies.

Reporting by Ismail Shakil in Bengaluru; Editing by Amrutha Gayathri

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The Noisy Fallacies of Psychographic Targeting

At this point in the deafening media cycle around the story, it’s probably unnecessary to summarize the going Facebook/Cambridge Analytica scandal, but briefly and just in case: Facebook recently announced the suspension of a marketing data company called Cambridge Analytica from its platform after a whistleblower confirmed it had misused ill-gotten Facebook data to construct so-called “psychographic” models and help Trump win the presidency.

For the impatient, my fundamental thesis is this: Cambridge Analytica’s data theft and targeting efforts probably didn’t even work, but Facebook should be embarrassed anyhow.

For the more patient: What on earth is the sinister-sound “psychographics” about, and how is your Facebook data involved?

Antonio García Martínez (@antoniogm) is an Ideas contributor for WIRED. Before turning to writing, he dropped out of a doctoral program in physics to work on Goldman Sachs’ credit trading desk, then joined the Silicon Valley startup world, where he founded his own startup (acquired by Twitter in 2011) and finally joined Facebook’s early monetization team, where he headed their targeting efforts. His 2016 memoir, Chaos Monkeys, was a New York Times best seller and NPR Best Book of the Year, and his writing has appeared in Vanity Fair, The Guardian, and The Washington Post. He splits his time between a sailboat on the SF Bay and a yurt in Washington’s San Juan Islands.

The awkward portmanteau coinage of “psychographics” is meant to be a riff on the “demographics” (i.e. age, gender, geography), which are the usual parameters of how marketers talk about advertising audiences. The difference here is that the marketer attempts to capture some essential psychological state, or some particular combination of values and lifestyle, that imply a proclivity for the product in question. If it sounds nebulous, not to say somewhat astrological, it is. As a great example of the type of cartoonish zodiac that emerges from this approach, take the age-old classic, the Claritas PRIZM segments (now owned and marketed by Nielsen), which have been around since the 90s. One sample segment:

Kids & Cul-de-Sacs:  Upscale, suburban, married couples with children – that’s the skinny on Kids & Cul-de-Sacs, an enviable lifestyle of large families in recently built subdivisions. […] Their nexus of education, affluence and children translates into large outlays for child-centered products and services.

This sort of caricature of a consumer segment was created as much for potential targeting as for populating ad agency pitches to clients. It took a complex and bewildering world of consumer data and preferences and reduced them to a neat mythology of just-so stories that got ad budgets approved. (“Aspirational Annie wants a starter car!” “Gregarious Greg spends over $400 per month on entertainment!”)

With the rise of programmatic, software-driven advertising in the late aughts, these truthy marketing fairy tales have taken a more quantitative tinge. Which, in the context of Facebook and Cambridge Analytics, is where the psychometricians at Cambridge University come in. Two researchers at the Department of Psychology there, Michal Kosinksi and David Stillwell, had endeavored to craft completely algorithmic approaches to human psychological evaluation. Those efforts included a popular 2007 Facebook app called myPersonality that allowed Facebook users to take a psychometric test and see themselves ranked against the ‘Big Five’ personality traits of openness, conscientiousness, extraversion, agreeableness, and neuroticism (often shortened to OCEAN). According to the report in The Guardian,which first ran the whistleblower’s claims, Cambridge Analytica had approached the authors of the myPersonality app for help with its ads targeting campaign. On being rebuffed, another researcher associated with Cambridge’s psychology faculty, Aleksandr Kogan, offered to step in and reproduce the model.

(Interestingly, you can still take some of their psychometric personality tests here. Don’t worry! No Facebook login required!)

Academic research centers with experimental volunteers and small sample sizes are one thing, but how do you do the study psychographics at Facebook scale? With an app, of course. Kogan wrote a Facebook app that asked Facebook users to walk through their computer-driven rating criteria with the specific view of ranking their ‘OCEAN’ characteristics, plus political inclinations.

Here is where the skullduggery comes in: Let’s assume you build a model that can actually predict a voter’s likelihood of voting for Trump or Brexit based on some set of polled psychological traits. For it to be more than a research paper, you need to somehow exploit the model for actual ads targeting. But the problem is that Facebook doesn’t actually give you the tools to target a psychological state of mind (not yet, anyway)—it only offers pieces of user data such as Likes. To effectively target an ad, Kogan would need to peg diffuse characteristics like neuroticism and openness to a series of probable Facebook Likes, and for Cambridge Analytics, he had to do it at a large scale.

Whether Kogan’s subjects realized it or not when they opted-in to his Facebook app, they allowed him to read some of their Facebook profile data. And for his collaboration with Cambridge Analytica, Kogan then hoovered in those users’ data, plus their friends’ data as well. (Facebook’s platform rules allowed this until mid-2015). That’s how the number of compromised users got as high as a reported 50 million. Kogan and Cambridge Analytica didn’t lure that many test subjects. They simply paid for or attracted hundreds of thousands, and pulling data from their subjects’ friends got them something like a third of the US electorate.

With the Facebook police asleep, and data theft pulled off, what was Cambridge Analytica’s next step?

They had to train a predictive model that guessed what sorts of Likes or Facebook profile data their targeted political archetypes possessed. In other words, now that Cambridge had a test set of people likely to vote for Trump, and knowing their profile data, how do they turn around and create a set of profile data the Trump campaign can input to the Facebook targeting system to reach more people like them?

Note that the aspiring psychograficist (if that’s even a thing) is now making two predictive leaps to arrive at a voter target: guessing about individual political inclinations based on rather metaphysical properties like “conscientiousness;” and predicting what sort of Facebook user behaviors are also common among people with that same psychological quality. It’s two noisy predictors chained together, which is why psychographics have never been used much for Facebook ads targeting, though people have tried.

While these conclusions are hard to make categorically even with the data in hand (and impossible to make without), a straw poll among my friends in the industry reveal near-unanimous skepticism about the effectiveness of psychographic targeting. One of the real macro stories about this election and Facebook’s involvement is how many of the direct-response advertising techniques (such as online retargeting) that are commonplace in commercial advertising are now making their way into political advertising. It seems the same products that can sell you soap and shoes can also sell you on a political candidate.

Conversely, if this psychographics business is so effective, why isn’t it commonly used by smart e-commerce players like Amazon, or anyone else beyond the brand advertisers who like keeping old marketing folklore alive?

One of the ironies of this most recent Facebook brouhaha is the differing reactions between the digital marketing professionals who’ve spent a career turning money into advertising pixels and a concerned public otherwise innocent to the realities of digital advertising. Most ad insiders express skepticism about Cambridge Analytica’s claims of having influenced the election, and stress the real-world difficulty of changing anyone’s mind about anything with mere Facebook ads, least of all deeply ingrained political views.

The public, with no small help from the media sniffing a great story, is ready to believe in the supernatural powers of a mostly unproven targeting strategy. What they don’t realize is what every ads practitioner, including no doubt Cambridge Analytica itself, knows subconsciously: in the ads world, just because a product doesn’t work doesn’t mean you can’t sell it. Before this most recent leak, and its subsquent ban on Facebook, Cambridge Analytica was quite happy to sell its purported skills, no matter how dubious they might really be.

More Cambridge Analytica

Photograph by WIRED/Getty Images

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Facebook critics want regulation, investigation after data misuse

SAN FRANCISCO (Reuters) – Facebook Inc faced new calls for regulation from within U.S. Congress and was hit with questions about personal data safeguards on Saturday after reports a political consultant gained inappropriate access to 50 million users’ data starting in 2014.

FILE PHOTO: Facebook logo is seen at a start-up companies gathering at Paris’ Station F in Paris, France on January 17, 2017. REUTERS/Philippe Wojazer/File Photo

Facebook disclosed the issue in a blog post on Friday, hours before media reports that conservative-leaning Cambridge Analytica, a data company known for its work on Donald Trump’s 2016 presidential campaign, was given access to the data and may not have deleted it.

The scrutiny presented a new threat to Facebook’s reputation, which was already under attack over Russians’ alleged use of Facebook tools to sway American voters before and after the 2016 U.S. elections.

“It’s clear these platforms can’t police themselves,” Democratic U.S. Senator Amy Klobuchar tweeted.

“They say ‘trust us.’ Mark Zuckerberg needs to testify before Senate Judiciary,” she added, referring to Facebook’s CEO and a committee she sits on.

Facebook said the root of the problem was that researchers and Cambridge Analytica lied to it and abused its policies, but critics on Saturday threw blame at Facebook as well, demanding answers on behalf of users and calling for new regulation.

Facebook insisted the data was misused but not stolen, because users gave permission, sparking a debate about what constitutes a hack that must be disclosed to customers.

“The lid is being opened on the black box of Facebook’s data practices, and the picture is not pretty,” said Frank Pasquale, a University of Maryland law professor who has written about Silicon Valley’s use of data.

Pasquale said Facebook’s response that data had not technically been stolen seemed to obfuscate the central issue that data was apparently used in a way contrary to the expectations of users.

“It amazes me that they are trying to make this about nomenclature. I guess that’s all they have left,” he said.

Democratic U.S. Senator Mark Warner said the episode bolstered the need for new regulations about internet advertising, describing the industry as the “Wild West.”

“Whether it’s allowing Russians to purchase political ads, or extensive micro-targeting based on ill-gotten user data, it’s clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency,” he said.

With Republicans controlling the Senate’s majority, though, it was not clear if Klobuchar and Warner would prevail.

The New York Times and London’s Observer reported on Saturday that private information from more than 50 million Facebook users improperly ended up in the hands of Cambridge Analytica, and the information has not been deleted despite Facebook’s demands beginning in 2015.

Some 270,000 people allowed use of their data by a researcher, who scraped the data of all their friends as well, a move allowed by Facebook until 2015. The researcher sold the data to Cambridge, which was against Facebook rules, the newspapers said.

Cambridge Analytica worked on Trump’s 2016 campaign. A Trump campaign official said, though, that it used Republican data sources, not Cambridge Analytica, for its voter information.

Facebook, in a series of written statements beginning late on Friday, said its policies had been broken by Cambridge Analytica and researchers and that it was exploring legal action.

Cambridge Analytica in turn said it had deleted all the data and that the company supplying it had been responsible for obtaining it.

Andrew Bosworth, a Facebook vice president, hinted the company could make more changes to demonstrate it values privacy. “We must do better and will,” he wrote on Twitter, adding that “our business depends on it at every level.”

Facebook said it asked for the data to be deleted in 2015 and then relied on written certifications by those involved that they had complied.

Nuala O’Connor, president of the Center for Democracy & Technology, an advocacy group in Washington, D.C., said Facebook was relying on the good will of decent people rather than preparing for intentional misuse.

Moreover, she found it puzzling that Facebook knew about the abuse in 2015 but did not disclose it until Friday. “That’s a long time,” she said.

Britain’s data protection authority and the Massachusetts attorney general on Saturday said they were launching investigations into the use of Facebook data.

“It is important that the public are fully aware of how information is used and shared in modern political campaigns and the potential impact on their privacy,” UK Information Commissioner Elizabeth Denham said in a statement.

Massachusetts Attorney General Maura Healey’s office said she wants to understand how the data was used, what policies if any were violated and what the legal implications are.

Reporting by David Ingram; Editing by Peter Henderson and Chris Reese

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