Don’t Be Duped by Voting Misinformation Before the Midterms

The midterm elections are just a few days away. Though historically the president’s party takes a beating in the House and Senate, that’s far from assured this year. Will the midterms be a rebuke or an endorsement of the Trump administration? On November 6, you will decide.

As 2016 emphatically demonstrated, elections are also a major battleground for information warfare. Coordinated misinformation campaigns focus not just on individual candidates but also the electoral system itself. And though political operatives have used misleading tactics for years, the amplification and network efforts of social media have been like gasoline to a fire. Misinformation now spreads farther, faster, and ensnares unwitting accomplices who share bad information without realizing it.

Tech companies and governments are slowly beginning to realize that the information war is on and they need to respond. But you still need to be aware, and be informed.

The Facts

The balance of the House and the Senate will be decided on Tuesday, along with 36 governorships, 30 state attorneys general, many state legislative seats, and crucial local ballot initiatives on everything from a new tax to fight homelessness in San Francisco to recreational marijuana to climate change to drug sentencing reform.

To find out accurate information about where you can vote, whether you can still register, and who and what is on the ballot in your area, you can consult your local election officials. The US Election Assistance Commission lists the phone numbers and websites for every state and US territory on its website. There are also third-party tools supported by nonpartisan organizations like Ballotopedia, Democracy Works, and Vote411.org, which allow you to input your address and receive individualized voter information for your area.

What People Are Saying

There’s a ton of misinformation out there, and it’s always evolving, but there are a few general themes that come up every election cycle.

Voter Fraud

Voter fraud is a constant boogeyman. In the months leading up to the 2016 election, for instance, President Trump warned that millions of undocumented immigrants would vote. After he won the presidency but lost the popular vote to Hillary Clinton, he said that voter fraud was the reason. None of this, said the state authorities whose job it is to maintain the integrity of elections in the US, was true. In fact, when all the votes had been tallied—137.7 million of them—states investigating claims of voter fraud found “next to none,” according to Tthe New York Times.

Still, months into his first term, President Trump created a commission explicitly to study voter fraud. After intense criticism from experts who called it unnecessary, as well as legal challenges, it was dissolved in January, having released no evidence to substantiate the president’s allegations that millions of people voted illegally in the 2016 election. That hasn’t stopped people from claiming it’s a major issue, or from imposing restrictions like voter ID.

To support claims for widespread voter fraud, many point to states and counties where there are more registered voters than eligible adults. In California, for example, the claim that 11 counties have more people registered than are eligible to vote has spread from a conservative activist group called Judicial Watch to Alex Jones to Breitbart all the way to secretary of state candidate Mark Meuser, who regularly records and tweets out videos alleging widespread registration fraud in the state. This argument is misleading, as The Sacramento Bee, the Los Angeles Times, and The San Diego Union Tribune have all reported, because they combine “inactive” and “active” voters lists. In California, inactive voters—who, for example, may have moved but not returned an address confirmation notice—are still eligible to vote, according to state law; they just need to show proof of residency when they arrive at the polls. A January report from the California secretary of state noted that only 75 percent of eligible voters in the state are registered.

Fraudulent claims of voter fraud don’t always come in the form of misleading numbers; they can be photos, too. Doctored or out-of-context photos and videos that purport to show voter fraud taking place were shared during the 2016 election—such as one Photoshopped image that combined two separate photos to make it look like ICE was arresting people in line to vote—and as recently as last week during the presidential election in Brazil. As with other misinformation campaigns, real images taken out of context are often used as fake “proof.”

What makes this kind of misinformation so intractable is how it has the trappings of verisimilitude—a lawsuit from a Washington, DC-based group, the buy-in of political candidates and mainstream-adjacent news organizations. It also feels right to many people, who have been primed for years to suspect that fraudulent votes are a huge problem.

It’s not that voter fraud never happens; it does. But very rarely, and nowhere near the levels suggested by right-wing conspiracy theories or the president. Here’s where you can find these numbers yourself: The nonpartisan Brennan Center for Justice, run by the New York University School of Law, has put together lots of research on the persistent myth of voter fraud.

Voter Suppression

Under the National Voter Registration Act of 1993, states are required to accurately maintain their voter rolls. The rules by which states purge voters vary by jurisdiction, and they are incredibly confusing. Errors in the process and inaccurate data have led to the disenfranchisement of thousands of eligible voters. And some states have become far more aggressive in purging voter rolls since the Supreme Court struck down aspects of the Voting Rights Act in Shelby County v. Holder.

Georgia, in particular, is facing ongoing lawsuits for voter suppression over its practices. Other states have drawn national scrutiny for moving polling places miles out of town or implementing voter ID laws that disproportionately affect certain communities.

But the issue of voter rolls can be complicated and varies by state, making it a perfect topic to sow confusion along party lines. For instance, one viral stat going around says that 700,000 voters have been removed from the voter rolls in Colorado; some have suggested this is part of the nationwide effort to purge legitimate voters. The Colorado government has pushed back, pointing out that these voters were purged over the course of a decade, according to the Republican secretary of state, Wayne Williams, for legitimate reasons.

Voting Machines

There’s also misinformation swirling around the actual hardware we use to vote. Again, this is nothing new. In the 2016 election, a video that purported to show a “rigged” machine not allowing a vote for Trump in Pennsylvania went viral, at least in part after being promoted by Russian operatives. The malfunction turned out to be user error, but it was shared as proof of voting fraud by thousands of people.

During early voting for this year’s midterms, reports emerged of machines in parts of Texas switching US senate race votes if people vote the straight party ticket. This is actually happening; according to the Texas secretary of state’s office, only 20 or so people have reported such a problem, and the government and the voting machine company blame the issues on user error. But voting experts say the problem lies with the machines themselves, which have been known to be unreliable when voting a straight party ticket for years. And while experts have also said that the machines are insecure, there does not appear to have been hacking in this case. Nevertheless, claims that this is the work of hackers or a coordinated conspiracy by Republicans have flourished.

Stories about voting machines are ripe for misinformation. After 2016, the US is on high alert for election interference: More than half of Americans say they are not too confident or not at all confident that the US election system is secure from hacking or other technological threats, according to a recent Pew survey. In both of the above cases, though, quirks of the voting machines themselves turned out to provide the more likely explanation—something to remember before drawing quick conclusions. And while progress has been uneven, it’s worth noting that election officials have taken steps to shore up the electoral system in the past few years.

Bad-Faith Campaign Messaging

Spreading misinformation and uncertainty about elections is another unfortunate electoral tradition, whether it’s by candidates, parties, or more anonymous actors. Historically, these tactics often target specific communities, such as robocall campaigns intended to suppress the black vote or fake flyers distributed on college campuses or in communities of color. This week, North Dakota’s state Democratic Party affiliate posted on its website and Facebook a warning to hunters that they may lose their licenses in other states if they vote in the election.

Politicians and their campaigns are engaged in direct disinformation targeting people likely to vote for their opponents, as The New York Times notes. This includes everything from the wrong date for election day being sent out to voters, to text messages that seem to come directly from the president. These texts are made to look like the presidential alert that went out a few weeks ago, though in this case they are telling voters that their early vote has not been recorded. The purpose seems to be merely to confuse, as the Daily Beast reported, noting that state governments aren’t sure the messages are illegal but are looking into it. Fake text messages have also popped up this campaign season, too.

Why It Matters

Voting in America is hard. It happens on a work day. People aren’t automatically registered when they hit voting age or even when they get a driver’s license in most states. The early voting process is different in every state. All of this contributes to low voter turnout, particularly in non-presidential elections.

Researchers trying to understand why people don’t vote point to myriad factors, including confusion about how to vote and whether people are eligible. It’s this problem that misinformation can so easily exacerbate. In 2007, then senator Barack Obama and Senator Chuck Schumer introduced the Deceptive Practices and Voter Intimidation Prevention Act, after high-profile cases of misleading voter tactics in the 2006 midterms. It didn’t pass, and subsequent attempts haven’t been any more successful. California recently passed a law creating an Office of Elections Cybersecurity to explicitly counter online misinformation intended to discourage voting. Facebook also recently announced a new policy to try to address misinformation on its platform that is intended to suppress the vote.

To help you recognize fact from fiction, familiarize yourself with the many sites and sources devoted to identifying misinformation. There are fact-checking sites like Snopes, where you can look up specific stories. The nonprofit investigative news organization ProPublica runs a coalition of newsrooms called Electionland dedicated to accurate reporting on the midterms, which is a fantastic resource for finding real news that matters. (WIRED is a partner on ProPublica’s Political Ads Collector project.) You can also arm yourself with tools, such as the new bot-catching Chrome extension BotCheck, which will reveal bots in your social feeds, and reverse-image-search tools, which let you figure out where an image actually originates.

With voter turnout during midterms historically low, each vote can have a large impact—particularly when it comes to local elections, which can be decided by a handful of votes. If misinformation, intentional or otherwise, can dissuade one person from showing up, that matters.


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Trump’s ‘Game of Thrones’ Tweet Is Odd, but Trademark-Infringing? Probably Not

Of all the apparatuses presidents have at their disposal for making pronouncements—press secretaries, official statements, televised addresses from the Oval Office—the one President Trump used to trumpet forthcoming sanctions on Iran is by far the strangest: a Game of Thrones meme.

On Friday morning the president posted the image below on Twitter. It’s a picture of himself emblazoned with the phrase “Sanctions Are Coming” in a typeface not that dissimilar from the one used in the Game of Thrones logo along with the date “November 5.” Subtle, it was not.

As soon as it went up, and as soon as it was clarified by the White House that the sanctions in question were indeed the ones that had been relaxed during the Obama administration and which Trump had been seeking to reimpose, Twitter went nuts. Folks began responding with memes of their own—”Indictments Are Coming” etc.—and even the show’s cast got involved. Sophie Turner, who plays Sansa Stark, replied “Ew,” and Maisie Williams (Arya Stark), in perhaps the best Twitter drag of the day, retweeted the president and just added “Not today.” (“Not today,” for those who don’t remember, is what Arya Stark’s swordfighting instructor, Syrio Forel, told her is what she should say to the god of death.)

Then HBO got in on the action, sending out a tweet reading, “How do you say trademark misuse in Dothraki?” Reached for comment the network added, “We were not aware of this messaging and would prefer our trademark not be misappropriated for political purposes.” Trump evoking the show’s logo and slogan, it seems, doesn’t sit very well with the people who actually make the show.

But could the network or creators successfully sue? Probably not. First off, it doesn’t seem likely that HBO actually wants to make a legal claim of trademark infringement. At most, the network is playing along. Trump referenced the show; they responded. Simple as that. But the response, and subsequent online chatter, did raise some questions about whether or not the president went too far.

Most likely, he didn’t.

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If HBO were to bring a claim, it would probably be for what’s known as trademark dilution, says Daniel Nazer, a staff attorney for the Electronic Frontier Foundation’s intellectual property team. Typically, these are the kinds of claims companies make when they feel their very-famous trademarks are being used in ways that deplete the uniqueness, or dilute, their intended message. A company can’t, say, put something that looks like the Nike “swoosh” logo on the side of a commercial plane or use “Just do it.” to sell condoms.

A dilution claim also generally requires that the entity claiming infringement be able to prove the public was genuinely confused. Because Trump’s tweet wasn’t being used in commerce, and because it’s unlikely anyone thought he was legit affiliated with Game of Thrones, dilution would be a hard argument to make. “I think this would be a tough, a tough case,” Nazer says. “No one is likely to be confused that HBO is endorsing this tweet or sponsoring sanctions against Iran. My view is that this shouldn’t be a viable suit.”

Instead, Nazer says, Trump’s tweet would be treated more like a parody—legally speaking. If, for example, Saturday Night Live did a sketch about waiting for a train in New York titled “The G Train Is Coming” that pokes fun at MTA tardiness and references Game of Thrones, that’s not an infringing use. (It’s also a funny idea, SNL. Please make that sketch and credit Nazer.) As for Trump’s use of the Thrones font, the files used in typefaces can be protected, as is (presumably) the actual logo, but because Trump just uses a script that looks like the GoT emblem, the image the president tweeted is likely not infringing. It’s ironic, but the bottom line is that the man who likes to take shots at the media is protected here by the First Amendment.

The parody aspect, though, is compelling, because the metaphor doesn’t quite align. In Game of Thrones, “winter is coming” is a call to remain vigilant, and a warning that White Walkers could come and threaten the living when winter arrives. Yet winter has been coming on the show since the pilot; it’s a slow march that’s taken seven years. Trump’s “November 5” warning promises something he intends to do in a matter of days. Also, one presumes, Trump thinks the sanctions are a good idea, but the coming of winter in Game of Thrones is something most sane people in Westeros fear. It’s possible Trump wants Iran to be afraid of the sanctions, but the wordplay still doesn’t quite land.

“It’s kind of riffing on it, but it’s hard to know what the satirical or parodic intent is here,” Nazer says. “Winter in the Game of Thrones universe is kind of terrible, so I’m not sure if they really thought it through. There’s probably nothing much beyond it looks cool.”

Half an idea without any sense of its viability? Sounds about right.


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China's finance ministry calls out Xiaomi over accounting errors

FILE PHOTO: Customers wait to pay at a Xiaomi store in Beijing, China June 21, 2018. REUTERS/Jason Lee/File Photo

BEIJING (Reuters) – Chinese authorities on Tuesday said smartphone maker Xioami Corp made errors in its accounting, sending the company’s Hong Kong-listed shares down amid a wider sell-off of China tech stocks.

Xiaomi was one of several internet firms named in the annual inspection by China’s Ministry of Finance. Other firms include e-commerce giant Suning.Com Co Ltd and online game developer Wuhu Shunrong Sanqi Interactive Entertainment Network Technology Co Ltd.

Xiaomi’s stock was down 4 percent on Tuesday morning.

The ministry in its report said Xiaomi had made tax errors on corporate gifts and had incorrectly recorded some corporate costs. The document noted that the firm has already rectified the errors.

It also noted that other companies had made efforts to evade taxes by shifting their profits overseas.

A Xiaomi spokeswoman declined to comment on the report.

The rebuke comes as the company is facing teething issues following its much-anticipated listing in July. Its stock is down more than 30 percent since the initial public offering (IPO) amid a wider sell off of China tech stocks that has also affected peers Alibaba Group Holding Ltd and Tencent Holdings Ltd.

It also comes as China is making revisions to its tax code and cracking down on evasion in a wide-scale cleanup that ensnared A-list movie star Fan Bingbing among others.

Despite its tumbling price, Xiaomi has reported healthy smartphone sales in 2018. Earlier this month it said it has already surpassed its full-year sales goal of 100 million handsets.

Reporting by Cate Cadell; Editing by Christopher Cushing

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IBM’s Call for Code Prize Goes to a Team With ‘Clusterducks’

You know when you try to go online at a Starbucks or on an airplane, first you get a little popup that asks you to accept some terms before you can get to the internet? That popup window exists in a sort of netherworld between actual internet connection and being offline–you pick it up via Wi-Fi, but until you click a box, you’re not actually online. A team of five developers realized in that gray area was potentially a huge opportunity to save lives.

It’s an intractable problem during natural disasters: telecommunications networks and power grids are often damaged or overwhelmed; without them, first responders struggle to help survivors, coordinate evacuations, and even count the dead. Project Owl proposes an elegant solution: an AI-powered disaster coordination platform paired with a robust communication network that can reach people even when other connections are down. The key to making it all work? Those popup windows, which the team can beam out to people in hard-to-reach areas via buoys equipped with a low-frequency Wi-Fi network.

Now Project Owl has won IBM’s first ever Call for Code contest, which challenged developers across the world to build disaster relief technology using IBM and open-source software. More than 100,000 developers from 156 countries participated in the contest. A panel of judges including former President Bill Clinton selected Project Owl from a field of five finalists whose solutions ranged from using AI to speed up the rebuilding process after an earthquake to feeding firefighters live data during wildfires via sensors.

The winners were announced at an awards ceremony in San Francisco Monday night. The grand prize includes $200,000 and IBM’s pledge to help the team make their project a reality.

“The most important thing to me will be to deploy this for real,” says Angel Diaz, IBM’s Vice President of Developer Technology, Open Source & Advocacy, who was a leading force behind Call for Code. “Usually these hacks will be one and done, but no, we are going to make this real. We are going to deploy this.” In fact, the top 10 finalists will all have their projects officially sanctioned by the Linux Foundation.

After announcing the challenge in May, IBM hosted more than 300 hackathons and events in 50 cities across the globe, and offered its technology for free to all participating teams. Developers were also encouraged to use whatever existing technology they could find; the only requirement was that their creations work. “It has to be real, it has to work, because we’re going to take this into production. We’re not running a fantasy,” Diaz says.

Project Owl hopes to have their solution ready to help in hurricanes, floods, and fires by the end of the year.

Make Way for DuckLink

When the Project Owl teammates—developers Charlie Evans, Taraqur Rahman, Nick Feuer, Bryan Krouse, and Magus Pereira—accepted their prize on Monday night, many of them were seeing one another face to face for the first time. They live spread out around America, from North Carolina to Texas to New York. Most had only met on the Slack channel IBM set up for the contest.

The idea for Project Owl’s hardware originated with Pereira, a recent graduate from East Carolina University in Greenville, North Carolina. Pereira explained an idea he’d had—one which had previously won him a competition at his university.

“Since I’m in the Carolinas, we get a ton of hurricanes. A few years ago we had a hackathon to come up with a solution to help the community,” Pereira says. “For some reason I was just thinking about communication and I had buoys in my mind.” He created the “clusterduck,” a buoy with internet-of-things-type low-frequency connectivity that could form an ad-hoc communication network in areas hit hard by natural disaster.

Together Project Owl made the clusterducks real, and created a software platform around them to allow civilians to communicate with first responders in real time. The hardware/software solution works by harnessing low-power, long-range radio frequency called LoRa, the same technology that powers most internet of things devices. By combining LoRa units with Wi-Fi routers in waterproof buoys placed throughout a disaster area, Project Owl creates a network that can link back with any rescue operation running the Owl software. If you’re in an area with no internet or cellular service and you turn on your Wi-Fi, you’ll see Project Owl in the list of available networks. Click on it, and you’ll get that familiar Starbucks-like popup. But instead of asking you to agree to terms of service, it asks for crucial information like your name, location, how you are doing, what services you need, whether you need immediate assistance or for first responders to call family and friends to update them on your condition.

Project Owl/IBM

The team built the custom Owl software in four months. So far, they have tested it with EMS and government responders in simulated environments. It has not yet been used in an actual emergency. People in a disaster area with a Project Owl network will also need to pull up their Wi-Fi settings and select the correct network themselves; the popup won’t be available if people just try to connect to cellular service.

Still, the combination of a Wi-Fi popup with LoRa connectivity is an innovative idea. It allows you to use whatever device you already own to get onto an ad-hoc emergency communication network, without even having to click on a link or download an app, both of which are often impossible without a robust internet connection. Project Owl makes the most of very low-frequency connectivity to provide a lifeline to those who would have otherwise been cut off.

The clusterducks are also not very expensive to make—about $38 each, according to the developers. To cover a metropolitan area like San Juan, Puerto Rico, which is 77 square miles, Krouse says, would require a few hundred clusterducks, for a total cost of approximately $12,000. The idea would be to roll out clusterducks in hurricane- or flood-prone areas, so that they can be easily deployed when a disaster actually strikes. Relying on solar panels and battery packs, the clusterducks network could be turned on the moment they are needed and work off the grid. They could also be sent into a hard-hit area after the fact.

Project Owl/IBM

The Owl software can be used with or without the clusterduck networks. “The software itself is an incident management system. One of the things that makes it so great and useful is that you just talk to it. It’s a conversational experience,” says Krouse, who calls it a souped-up chatbot that uses just about every single IBM Watson API, as well as a custom natural-language AI. Owl stands for “Organization, Whereabouts, and Logistics.” First responders can coordinate from the Owl application, setting up incident zones, accessing data from FEMA and the Red Cross, as well as crowdsourced user data. People can text or call the Owl management system, or type into it directly from a computer or phone.

Call for Code and the Focus on Real Help

Technology, Silicon Valley denizens have often insisted, can save the world. But recent years have given rise to a growing realization that technology is not good by default, that it can break things as much as it can fix them. IBM’s facial recognition technology, for example, has come under increased scrutiny, and the company is currently facing a class-action lawsuit for age discrimination.

Call for Code is not an explicit attempt at making amends for any past wrongs, at least not according to its organizers. But the contest, and the enthusiastic response from more than 100,000 developers, comes amidst a wider tech backlash, and at least some self-examination from major tech companies and the people they employ.

When Alexander Gil Fuentes, the digital scholarship librarian at Columbia University, reached out to big tech companies like Microsoft and Google for partnerships after Hurricane Maria hit Puerto Rico, none of them were interested in helping with mapathons to help people on the ground have accurate maps.

“We thought it would be an easy sell—tech workers taking two hours to work on helping the Red Cross would improve staff morale, we thought. Alas, none of the companies bought it, and only universities stepped up to the plate,” Gil says.

That was a year ago. To Gil, Call for Code and similar hackathons for good, like the Mozilla Challenge, show the winds may be changing.

On Monday, Google announced it will grant $25 million next year to projects that “use AI to help address some of the world’s greatest social, humanitarian and environmental problems.” The company has recently come under fire for its privacy practices and its plans for a censored search engine in China. Microsoft, which faced an internal revolt for its work with ICE this summer, announced a $40 million program called AI for Humanitarian Action last month. And so on.

With IBM, meanwhile, the Project Owl team is busy preparing to get their solution to market and figuring out the how to turn the project into an actual business. They envision some kind of model, where Project Owl manufactures the clusterducks and sells them to an organization like FEMA, and then FEMA can rent them out to municipalities on an as-needed basis.

“It started as a discussion between us and the United Nations and the Linux Foundation,” says IBM’s Diaz. “The hope is that at the end of the day, when we put the winning solution into market, into Africa, India, the US or wherever it’s applicable, when we save one life, ten lives, 100 lives, if we save one life then this entire effort is worth it.”


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Amazon Is What Worries Me About The Market

Source: ABS-CBNNews.com

Amazon Is What Worries Me About The Markets

Amazon (AMZN), the A in FANG got rocked Friday, as the company reported “disappointing” results. The stock traded down by nearly $200, more than 10% intraday, before closing lower by roughly 8%. The troubling fact is that Amazon is now down by 20% from its all-time high of $2,050, and the decline could get a lot worse from here.

Amazon 1-Year Chart

Source: StockCharts.com

Another concerning factor is that Amazon is not alone in reporting lower than expected revenues, or subdued growth relative to expectations. High-flyers like Facebook (FB), Netflix (NFLX), Alphabet (GOOG) (GOOGL), and others have all reported disappointing results in recent quarters. In fact, the entire FANG sector appears to be stumbling, and it could drag the entire stock market down when it falls.

Amazon’s Report: Far Less than Stellar this Time

Amazon is still very much a growth story stock. The company is trading at a nose bleeding 95 times this year’s projected earnings estimates. Ironically, the company’s EPS figures matter far less than Amazon’s revenue figures and forward guidance. But unfortunately for shareholders Amazon failed to meet expectations regarding both fronts.

  • Revenue came in at $56.6 billion, missing estimates of $57.1 billion.
  • YoY revenue increased by 29%, yet international revenue rose by just 13%.
  • AWS revenue also fell short, coming in at $6.68 billion vs $6.71 billion estimates.
  • EPS beat estimates $5.75 vs estimates of $3.14.

Now the Really Bad News

Forward guidance was atrocious. The company guided Q4 revenues and operating income substantially lower than most analysts were expecting.

  • Consensus estimates were $73.79 billion, and the company guided to a range of just $66.5-72.5 billion.
  • Also, the company guided for much lower operating income, only $2.1-3.6 billion vs estimates for $3.9 billion.

So, after quarters and quarters of smashing revenue estimates, and providing higher than expected guidance, the opposite is now beginning to happen. So, is this just a one off, or could growth at Amazon be slowing?

I think it’s the latter, growth is slowing, and Amazon is not alone. In fact, all the FANGs have reported slower than expected growth in one form or another throughout the past couple of quarters. The problem is that Amazon is so richly valued that its current valuation may not support the stock with a slower growth rate, and the share price could buckle.

The company guided for $66.5-72.5 billion in Q4, this is roughly a YoY growth rate of just 10-20% compared to $60.5 billion delivered in Q4 2017. Also, if we factor in growth in AWS revenues, revenue growth in Amazon’s core segment could be sub 10%, single digits next quarter. Does this growth trajectory really warrant a 95 P/E multiple?

Valuation: Far Too Rich to be Missing Estimates

Right now, Amazon is trading at about 95 times this year’s projected estimates. The problem is that this is an extremely rich valuation, and requires Amazon to execute almost flawlessly when it comes to revenue growth.

Unfortunately, growth is slowing. This year revenue growth should come in at about 32%, next year it’s projected to come in at 22%. However, next year’s projections could be optimistic, and judging by the company’s forward guidance growth is likely to be substantially lower next year.

In fact, lower end estimates call for growth of only about 15% next year, and based on Q4 guidance and other factors I believe Amazon’s growth will slow down to around this level. The problem for Amazon is that at 95 times earnings and with revenue growth at just 15% and slowing, the company is extremely overvalued right now.

Did You Think The Good Times Would Last Forever?

Source: iBankCoin.com

Rates are rising, growth is slowing, consumer spending will be impacted, and Amazon is not immune from a broader market slowdown. However, the stock has been a “can do no wrong” Wall St. darling for years now. Also, investors have been willing to pay just about any price to own the growth that Amazon delivered. Conversely, now that growth is slowing substantially, the stock could take a very big hit.

The remarkable thing is that Amazon’s stock price could be cut in half, but even with the stock at just $820 the company will still be trading at over 47 times 2018’s projected EPS. Still grossly overvalued by just about every traditional valuation metric.

The Challenge for The Market: Amazon is Not Alone

It would be one thing if Amazon was alone in showing cracks in its growth story, as well as in the sky-high valuation narrative. But it’s not, in fact, every member of FANG has now shown signs of a disappointing trend developing in the past couple of quarters.

F – Facebook: Reported an extremely discouraging quarter in July where user growth disappointed by 50%.

A – Amazon: Just reported weak revenues, and much lower guidance than expected going forward.

N – Netflix: Disappointed substantially on subscriber growth (by far the company’s most important metric) in Q2 of this year.

G – Google: Just days ago Alphabet disappointed on revenues as well, delivering just $33.7 billion vs estimates of $34.04 billion.

The problem for the various high growth/high multiple stocks (not just FANGs) is that substantial growth must be sustained to justify their incredibly rich valuations. Now that growth appears to be faltering, many high-flying stocks could experience significant declines.

This is a serious issue for the broader stock market as well. FANG has been the leader that has spearheaded this bull market stampede substantially higher in recent years. However, now that all the FANGs are showing serious signs of a slowdown their stock prices could potentially go a lot lower, and the broader stock market could decline much further as well. Just like FANGs led stocks on the way up, they could very easily lead stocks on the way down also.

Charts Look Terrible

Three out of the four FANGs are already in bear market territory, excluding only Alphabet. Moreover, all the declines began well before the S&P 500 peaked, which is even more troubling. This stealth bear market in FANGs appears to have started months ago, and it is now dragging down the broader market as well.

Facebook

Amazon

Netflix

Google


There Could Be A Lot More Pain Ahead

The bottom line is that Amazon’s revenue miss and lower guidance is deeply troubling. This is the stock that has arguably been the single strongest leader in this bull market. Furthermore, this is not just a “one-off”, as the company both missed estimates and guided substantially lower. Therefore, this could be a developing trend and significantly lower growth is plausible for Amazon going forward.

Moreover, it’s not just Amazon, all the FANGs and many other high flying/high multiple names are showing signs of faltering growth. In fact, many high growth names are illustrating comprehensive signs that growth is slowing relative to expectations. The problem is that this clashes with the expanding GDP numbers, and the overall narrative that the economy is doing “great”.

I don’t believe the economy is doing so great. I believe the GDP numbers are a mirage brought on by late cycle fiscal, and tax stimuli. Once their effects wear out, the economy could stall due to significantly higher interest rates, incredibly high debt levels, and other growth inhibiting factors.

In fact, Amazon, FANGs, and many other companies are already beginning to show signs of strain, and are likely to face further growth issues in the near and intermediate term. This makes Amazon’s stock price appear substantially overvalued here. Therefore, there could be a lot more pain ahead for Amazon, as well as for other high multiple stocks in general going forward.

Thank you for taking the time to read my article. If you enjoyed reading it, feel free to press the “Like” button, and if you’d like to be notified about my future ideas, hit the “Follow” link.

Disclaimer: This article expresses solely my opinions, is produced for informational purposes only, and is not a recommendation to buy or sell any securities. Investing comes with substantial risk to loss of principal. Please conduct your own research, consult a professional, and consider your investment decisions very carefully before putting any capital at risk.

Disclosure: I am/we are long GOOG, FB, NFLX.

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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​Red Hat leaders praise IBM acquisition, but employees are worried

When Bloomberg broke the news that IBM was acquiring Red Hat, Red Hat‘s corporate leadership already had all its ducks in a row. The company’s worker-bees, though, were blindsided. Many of them are worried sick about Big Blue’s acquisition of the world’s largest Linux and open-source power.

Paul Cormier, Red Hat’s president of Products and Technologies, proclaimed, “Today is a banner day for open source. The largest software transaction in history and it’s an open source company. Let that sink in for a minute. We just made history.”

After reflecting on Red Hat’s history, Cormier concluded, “From IBM’s first billion dollar investment in open source, to Red Hat’s contributions in open source communities and efforts to bring open source into the enterprise, and now, with IBM making a $34 billion investment in Red Hat and the open hybrid cloud – if there was ever any doubt that open source was here to stay, I think this announcement can officially put that argument to rest. And we’re just getting started.”

Red Hat CEO Jim Whitehurst also praised the deal in an e-mail to all Red Hat employees. “We have barely scratched the surface of the opportunity that is ahead of us. Open source is the future of enterprise IT.” He continued:

Powered by IBM, we can dramatically scale and accelerate what we are doing today. Imagine Red Hat with greater resources to grow into the opportunity ahead of us. Imagine Red Hat with the ability to invest even more and faster to accelerate open source innovation in emerging areas. Imagine Red Hat reaching all corners of the world, with even deeper customer and partner relationships than we have today. Imagine us helping even more customers benefit from the choice and flexibility afforded by hybrid and multi-cloud. Joining forces with IBM offers all of that, years ahead of when we could have achieved it alone. Together we can become *the* leading hybrid cloud solutions provider.

Moving on, Whitehurst emphasised,

“Red Hat is still Red Hat. When the transaction closes, as I noted above, we will be a distinct unit within IBM and I will report directly to Ginni. Our unwavering commitment to open source innovation remains unchanged. The independence IBM has committed to will allow Red Hat to continue building the broad ecosystem that enables customer choice and has been integral to open source’s success in the enterprise. IBM is acquiring Red Hat for our amazing people and our incredibly special culture and approach to making better software. They understand and value how and why we are different and they are committed to allowing us to remain Red Hat while scaling and accelerating all that makes us great with their resources.”

It’s that last part which has Red Hat staffers worried. Can Red Hat still be Red Hat under IBM? Many Red Hat employees fear it can’t be.

In the first hours since the news broke, I’ve been told by Red Hat staffers:

“I can’t imagine a bigger culture clash.”

“I’ll be looking for a job with an open-source company.”

and

“As a Red Hat employee, almost everyone here would prefer it if we were bought out by Microsoft.”

Why all the fear?

First: The news, which had been scheduled to be released early next week, broke early. None of Red Hat’s rank and file knew this was coming. Red Hat’s leadership had no chance to let them know in a timely manner to comfort the blow.

Second: While IBM has a long, distinguished history of supporting open source, in recent years they’ve been perceived as a company falling behind the times and is hamstrung with red tape and bureaucracy. This is the opposite of the Red Hat’s open organization leadership style.

Whitehurst, aware of his crew’s nerves, promises Red Hat will continue “to focus on growing our culture as part of a new organization. Specifically, Red Hat’s “Collaboration, transparency, participation, and meritocracy–these values make us Red Hat and they are not changing. In fact, I hope we will help bring this culture across all of IBM. Together we can.”

If Whitehurst can deliver on these promises, Red Hat employees will have nothing to worry about. Indeed, they can look forward to even greater success.

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SK Hynix warns of more chip price falls, capex cut as trade tensions bite

SEOUL (Reuters) – SK Hynix offered a downbeat outlook for semiconductors on Thursday, warning prices of flash memory chips will fall further until early next year from over two-year lows, hit by waning smartphone sales and weaker Chinese demand.

FILE PHOTO: The logo of SK Hynix is seen at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji/File Photo/File Photo

The South Korean firm, a key Apple Inc supplier and the world’s No.2 memory chipmaker by sales, also forecast lower capital spending for next year, as escalating Sino-U.S. trade tensions make it tough to predict demand.

SK Hynix shares fell as much as 5.2 percent on Thursday to their lowest level since August 2017 despite the company posting record quarterly operating profit and sales. The shares pared losses to trade 3.0 percent lower by 0410 GMT.

“Given global economic uncertainties and under the assumption that we will keep working on the inventories, we expect that investment will be adjusted to a lower level than this year,” Myoung Young Lee, SK Hynix’s executive vice president, told analysts.

Lee did not elaborate on the size of its 2019 investment saying the company’s business plans are not complete, but added that it would set up quarterly investment plans instead of an annual budget to better respond to demand uncertainty.

Hynix, which spent around 10 trillion won ($8.8 billion) as capex in 2017, has planned to invest at least 30 percent more this year to boost output, hoping to ride on the coattails of the industry’s two-year supercycle of tight supply and soaring prices.

FILE PHOTO – SK Hynix Inc’s DRAM modules are seen in this picture illustration taken at the company’s main office building in Seoul October 24, 2012. REUTERS/Kim Hong-Ji/File Photo

But some chip prices have already started falling and are set to end the unprecedented industry boom and soaring profits for chipmakers around the world, analysts say.

SK Hynix joined a growing list of chipmakers sounding caution on the industry outlook, as they wrestle with excess inventory due to weakening demand for smartphones, cryptocurrency mining devices and consumer electronics.

Chipmakers including Texas Instruments Inc and STMicroelectronics offered disappointing forecasts this week, hammering tech sector shares and roiling global stock markets.

“Tough times are ahead until roughly the first half of next year, but we will have a clearer picture early next year when chipmakers lay out their investment plans,” said Lee Wang-jin, analyst at Taurus Investment and Securities.

Average prices of NAND flash memory chips, used in smartphones and memory cards to store data, are down sharply to levels seen in early 2016, and expected to continue to slide until the first quarter of 2019, SK Hynix said.

It expected DRAM price increases would slow through the first quarter of next year and then remain flat or rebound afterwards. DRAM memory chips are used in servers, gaming PCs and cryptocurrency mining devices to process large amounts of data.

SK Hynix said its July-September operating profit rose 73 percent to a record 6.5 trillion won, beating a 6.3 trillion won average forecast from 19 analysts, according to Refinitiv data.

Sales rose 41 percent to a record high of 11.4 trillion won compared to the same period a year ago.

Reporting by Ju-min Park and Heekyong Yang; Writing by Miyoung Kim; Editing by Stephen Coates and Muralikumar Anantharaman

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Nokia kicks off cost-cutting plan after third-quarter profit drops 27 percent year-on-year

HELSINKI (Reuters) – Telecom network equipment maker Nokia on Thursday announced a new cost-cutting program after reporting quarterly profits down 27 percent from a year ago.

FILE PHOTO: The new Nokia 8110 is seen during the Mobile World Congress in Barcelona, Spain, February 27, 2018. REUTERS/Yves Herman/File Photo

The Finnish company, rival to Sweden’s Ericsson and China’s Huawei [HWT.UL], said it was targeting annual cost savings of 700 million euros by the end of 2020, without elaborating the scale of expected job reductions.

Nokia will this year complete a 1.2 billion euro cost-saving program launched after its 2016 acquisition of Franco-American Alcatel-Lucent.

Nokia’s third-quarter non-IFRS operating profit came in at 487 million euros ($555 million), broadly in line with analysts’ mean forecast of 492 million euros in a Reuters poll.

Reporting by Jussi Rosendahl and Anne Kauranen, additional reporting by Teis Jensen in Copenhagen, editing by Terje Solsvik

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What It's Like to Fly the WWII-Era Plane That Crashed on LA's 101 Freeway

Watching the flames devour the wing of a World War II-era aircraft that crash-landed on the 101 Freeway in Los Angeles, a few questions come to mind. How did the pilot escape unharmed? How’d he manage not to whack any cars as he came down around 2 pm on Tuesday? Why was the plane, a T-6 Texan, dressed up like a German fighter aircraft (sans swastikas)? And, most pressing of all, what is anybody doing flying a 70-year-old plane over northwest LA?

That last one, at least, is easy enough to answer.

“The T-6, out of all the airplanes I’ve flown, is one of my favorite aircraft to fly. It’s a beautifully handling aircraft, it’s extremely well built, very powerful, and it’s just a lot of fun,” says Dave Whitcomb, a professional pilot who has logged about 500 hours in the T-6 while working with a group called History Flight, which takes members of the public out flying in old-timey planes.

The crashed plane, a North American T-6 Texan, currently belongs to Condor Squadron, KTLA reports. (The Van Nuys-based non-profit’s pilots fly the vintage aircraft for parades and other events, according to its website.) In its previous life, the aircraft saw some combat during World War II and the Korean War, but mostly served as a trainer for pilots preparing to climb into the cockpits of Mustangs and Corsairs. Like a driver’s ed car, the two tandem seats each have a full set of controls. Forty-two feet from wingtip to wingtip, the plane can hit 205 mph at 5,000 feet, thanks to its single engine.

The joy of flying a vintage aircraft is similar to that of driving an old race car, Whitcomb says. Without any of the automated systems that pilots now spend most of their time monitoring, operating the T-6 requires constant adjustments to the stick in your right hand, the throttle and propeller controls in your left.

“You’re always flying the airplane,” he says. “In a smaller aircraft like that, it feels like it’s a part of you. Whereas big heavy jets today, you’re not manipulating the controls as much, because they’re so stable.”

Throw in the joy of reliving history, and it’s easy to see why you’d want to climb into the T-6’s cockpit, slide open the canopy, and slide through the air like the pilots of old.

Most of the folks flying T-6’s today are very experienced, Whitcomb says, largely because insurance companies aren’t in the business of covering rookies who want to zip about in a relatively rare and expensive plane. (Someone in Italy’s selling one for $28,735.) Most of the aircraft now have GPS navigation systems; they all have modern radios.

And while the T-6 is generally reliable, it only has a single engine, meanings that if that one craps out, you’re gonna make like Icarus. (This is why Whitcomb avoided flying the T-6 over large bodies of water or unlandable terrain.) That’s where the experience comes in. When an engine failure turns your plane into a glider, it’s time to look for a long, smooth landing surface—like the 101— steadily drop altitude, float down gradually, and hope everybody in their 21st century car can get out of the way.


More Great WIRED Stories

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Their Flight Wasn't Until the Next Morning. Passengers Slept on the Floor. Then Airport Security Prodded Them to Stay Awake

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

Have you ever noticed that there are never enough seats for passengers at airports?

Many are forced to mill around because, well, what else are you going to do?

You don’t expect, however, airport staff to instruct you on the milling-around rules. Nor, indeed, on the sleeping-at-the-airport rules.

Last weekend, though, passengers at Stansted Airport near London had a difficult time.

Some passengers flew in from elsewhere late at night and didn’t have a connecting flight until the next morning.

What are passengers supposed to do all night? Wouldn’t you try to get some sleep?

The UK’s Metro describes how passengers tried to find any perch they could to get a few winks.

But when there are only 50 seats and perhaps 500 passengers, there’s only one option: the floor.

I’ve done it before. Perhaps you have too. You try and find a corner, lie down, grip your valuables and hope no one bothers you.

At Stansted last weekend, however, airport security patrolled the scene.

As one passenger, Ricardo Gavioli, told Metro: 

I even saw a young couple sitting together on the ground and when the woman tried to rest her head on her boyfriend’s chest and stretch her legs security came up and prodded her into an upright position.

Gavioli likened it to “sleep deprivation torture.” He said: 

The security were passing every ten minutes to tell people to sit upright and not to lie down.

Why would the airport behave this way?

The airport offered a simple statement: 

We don’t allow people to sleep on the floor or come with sleeping equipment (camp beds, hammocks, sleeping bags etc), and people sleeping on the floor will be asked to sit up or move if necessary. 

There is a caveat, says the airport:

However, nobody is stopped from sleeping or woken up while sitting in a chair.

How very reasonable when there’s hardly a chair to be had.

Why, in fact, doesn’t the airport start charging for chairs? I’m sure U.S. airlines can offer them software for that.

I wonder how Stansted executives fall asleep in meetings. Does security prod them awake, too?

Stansted has banned sleeping on the floor between midnight and 2 a.m. This, it claims, is to accommodate renovation work and, as the airport told the Telegraph:

Feedback shows passengers don’t like arriving at the airport for an early flight to find lots of people blocking access and getting in the way of both staff and those traveling.

They also don’t like having nowhere to sit.

Still, perhaps many will find this approach reasonable. 

Is it also reasonable, though, to prod people awake when they have nowhere else to go and they’re not doing any harm?

Stansted says too many travelers deliberately decide to sleep on the floor, so they don’t have to pay for a hotel.

On the people’s foghorn, Twitter, passengers offered reasonable arguments. There’s just nowhere to go in that airport.

Of course, the airport says passengers should arrive at a time nearer their scheduled departure. 

Many know, however, that this can also provide a crush not worth tolerating.

This airport security’s prodding behavior isn’t exactly unique.

The airport insisted this was to allow cleaners to do their jobs.

Perhaps one idea for passengers is to avoid Stansted altogether.  

Until, that is, the renovations are done and the reception is gloriously welcoming. 

Should both things ever occur, that is.

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