Tuesday, January 15, 2019

Sometimes The Prognosticators Nail It: Professor Galloway's Predictions For 2019

A few days ago Gartner L2 published:

2019 Predictions
By Scott Galloway ·
11 January 2019
I love predictions. Nothing is more certain than the past, nor more uncertain than the future. Similar to a jet launching off an aircraft carrier, predictions ask us to mentally chart a path on the hard surface of the past. We leave the safety of the flattop and trust our wings of logic and creativity to support the prediction on the airflow of the future. I’m not sure if what I just said is more poetic or lame. Good money is on “yes.”
Anyway, let’s review our predictions for 2018 and dispatch a new crop for 2019....
...Predictions for 2019
Snap is the walking dead
It will be cut in half … again.

Twitter also cut in half
60% of Twitter hot topics content is generated by bots and foreign agents, and two-thirds of all shared links are by bots.
Strange bedfellows
A bevy of consumer and tech firms enter into strategic alliances and partnerships with only one objective: Push back on Amazon.

Hot or not
VR and crypto go from bad to worse. AI fails to live up to the hype. 3D printing rises from the ashes. Smart cameras become a hot category.

Amazon spins AWS and births one of the 10 most valuable firms
Spinning AWS will reduce antitrust concerns for Amazon. The cloud is the fastest-growing part of technology, and there is no pure-play way to play it. At the spin, these two firms could be worth more than as a whole.
Woke as a business strategy
The majority of new wealth creation is being captured by urban dwellers with college degrees (i.e., progressives — see map). As a result, we will see a number of companies become very woke in the next 12-24 months. 70% of high school valedictorians are female; same-sex male couples make on average $60K per year more than straight couples, and college graduates make +$1M more than non-college grads over their lifetime. The people who burned their Nikes in protest used their Discover card to buy their first pair....
Well here we are on January 15th, just four days later, and we have CNN reporting  that "Gillette's new ad isn't about shaving. It's about men in the age of #metoo".

Well you don't get much more woke than that.
And despite the ad possibly being fraught with...something...it is being talked about and apparently finding fans and selling blades:
Nailed it, Professor.
And a good thing too. If the big Proctor & Gamble brand hadn't come through for Mr. Gervais he might have resorted to one of these from Amazon. Dangerous, dangerous:

shaving axe 

"Japan’s Robot Hotel Just Laid Off Half Its Robots"

From Futurism:

Automation? In this economy?
Powering Down
Japan’s iconic Henn-na — literally “Strange” ­— hotel has decommissioned half of the 243 robots it once used to handle everyday operations.

Since opening in 2015, the hotel has raised publicity by “employing” hundreds of bizarre robots that ranged from bizarre-but-helpful-I-guess to downright annoying, according to The Wall Street Journal. The robot helpers made for a fun gimmick, but weren’t quite ready for the big leagues — a blow not just to dreams of an automated world, but to Japan’s pop-culture image as a leader in the space.

Bugging Out
Some of the problems stem from creative ideas that didn’t pan out, like a robot velociraptor that staffed the check-in desk. Others came from an inability to keep up with the breakneck pace of assistive technology, like how Churi, the personal assistant robot found in each room, could handle basic tasks but pales in comparison to the personal assistant that comes standard with any new smartphone.

 In case after case, these robots proved too annoying or broke down too often to be worth the trouble, according to the WSJ. The velociraptor couldn’t handle foreign guests, for instance; human employees had to come over to photocopy their passports.

Churi could change a room’s temperature and respond to basic small talk, but couldn’t answer any questions about the area or other attractions. Meawhile, Henn-na Hotel’s management was so confident in the robots’ abilities that they didn’t equip rooms with phones. Later on, management made up for Churi’s limitations with the cutting-edge solution of placing a human employee at the front desk to answer questions.

Meanwhile, Churi would reportedly wake up guests again and again after mistaking their snoring for a question that the robot couldn’t quite understand....MORE

"Airbnb says it's been profitable for two years straight as it heads for IPO"

A different kind of unicorn vs Uber or WeWork We.

From CNBC:
  • The company expects to hit 500 million guest arrivals by the end of the first quarter this year.
  • That would be 100 million new guest arrivals since its last stated total in August 2018.
  • Airbnb is one of several unicorns gearing up for a public debut this year, alongside private tech giants like Uber, Lyft and WeWork.
Airbnb posted its second straight year of profitability on an adjusted basis as it heads toward a possible IPO, the start-up announced Tuesday.

Airbnb is one of several giant private tech companies gearing up for a public debut this year, alongside Uber, Lyft and WeWork. But Airbnb is eyeing the offering with two years of EBITDA profits, according to a company blog post. EBITDA is a measure of operating profits before financing-related expenses like interest, taxes, depreciation and amortization.

The company expects to hit 500 million guest arrivals by the end of the first quarter this year — that's the number of completed bookings since the company's founding in 2008. That would be 100 million new guest arrivals since its last stated total in September 2018....

"Beware These January Days When The Fed's QT Will Rock Markets"

That's ZH's headline, not ours.
Important note after the jump.

From ZeroHedge, Dec. 27:
With traders finally accepting the reality that Quantitative Tightening means collapsing liquidity, tighter financial conditions and - obviously - lower asset prices, especially in the aftermath of Powell's "autopilot" comment regarding the Fed's balance sheet runoff which sent markets tumbling during the last FOMC meeting... 
... Nomura's Charlie McElligott reminds us of his October call anticipating a "financial conditions tightening tantrum" which was based-upon the enormous "global QT impulse" that month (and which proved to be accurate) for one simple reason: January 2019 should see similar "tightening" as the Fed’s balance-sheet run-off continues (including two heavy weekly QT periods during the first- and third- weeks of January). And that's not all: in a world of fungible global liquidity, January will be hit with the double whammy of it being the first month following the cessation of the ECB’s bond-buying program.

So for those who - correctly - view the shrinking Fed balance sheet as one of the most important drivers of (declining) asset prices, and who also expect a self-fulfilling prophecy to emerge as traders avoid buying stocks on major QT days (which would likely result in aggressive selling) here is the calendar of January - and 2019 - days that have the largest balance sheet shrinkage, courtesy of Nomura's George Concalves. Will it be right? We'll know as soon as the first trading day of 2019, when $18.2BN in TSYs are set to mature.
Putting the Fed's projected balance sheet shrinkage in context - assuming of course Powell doesn't fold to pressure and halt QT - this is how the Fed's asset shrinkage will look like in 2019....
note: the transmission effect of allowing the instruments to mature is not nearly as instantaneous as the opposite action of open-market purchases. In the case of a roll-off the treasury (or Fannie and Freddie) simply pay the Fed cash for the maturing amount. It is not as if the Fed is selling into the market.
The actual effect would come in later Treasury (or agency) debt offerings when the size of subsequent auctions would be increased to fund maturing debt, interest due and new deficits.

That may be why on January 2 the equity markets actually closed up a few DJIA points (18.78; S&P up 3.18) from the December 31 close.

However, the next day, January 3, the Down Joneses were off 660 points.
Whether there was any cause and effect I can't really tell, this stuff is all a brave new world experiment i.e. nobody knows but it is something to be aware of.

Additionally if there was causality the question for tomorrow and Thursday is: Will there be a difference between Treasury roll-offs and Agency issues?

The Race to Develop the World’s Best Quantum Tech

From IEEE Spectrum:

The United States and China both see quantum technologies as key to national security and economic progress
A few days before Christmas, U.S. President Donald Trump signed a bill into law that devotes more than US $1.2 billion to a national effort dedicated to quantum information science over the next 10 years. The National Quantum Initiative Act represents a bipartisan U.S. government push to keep up with China and other countries in developing technologies such as quantum computing, quantum cryptography, and quantum communication—all of which have some potential to upset the balance of economic and military power in the world.

Quantum computing has drawn special attention for its potential to someday crack the modern computer algorithms that protect government and corporate secrets. But investments in quantum science may also deliver breakthroughs that could help cement U.S. technological leadership and national security—or undermine them if another country develops a given quantum technology first. Notably, China has paid special attention to investing in quantum science as a way of bypassing traditional technological advantages enjoyed by the United States.

“It’s clear that China is taking advantage of what it sees as a historic opportunity to not only catch up with but leapfrog ahead of the United States,” said Elsa Kania, an adjunct fellow with the Center for a New American Security (CNAS) in Washington, D.C., during a recent press event.

But it’s more of a marathon than a sprint, Kania explained. The U.S. National Academies of Sciences, Engineering and Medicine acknowledged as much in a recent report that suggests a general-purpose quantum computer is still more than a decade away. Engineers must still figure out how to build much larger arrays of fragile qubits that remain stable long enough to perform useful computations. 

But whether or not quantum computing lives up to the hype, the possible implications for national security and technological leadership have spurred the United States and China into action. 
Those implications go well beyond quantum computing. Advances in quantum communications and cryptography could produce theoretically unhackable networks. Quantum radar and sensing could unmask the location of stealth aircraft and underwater submarines. And quantum navigation could provide precision geolocation capabilities without reliance on space-based GPS. 

Kania laid out many of China’s nationally-backed research efforts into such quantum technologies in CNAS report that she wrote with John Costello of the U.S. Department of Homeland Security in September. 

China’s national ambitions take a quantum leap
China’s interest in quantum technologies goes hand-in-hand with China’s anxiety over U.S. intelligence capabilities and surveillance activities within its borders, said Kania. Chinese leader Xi Jinping has emphasized the strategic importance of quantum technologies and even singled out Chinese success in quantum computing during his January 2018 New Year’s address....MUCH MORE

Shipping: "MSC to Close Capacity Gap on Maersk in 2019"

Via gCaptain:
By Mike Wackett (The Loadstar) – MSC is set to receive some 330,000 teu of newbuild tonnage this year and will close the gap on its 2M partner, Maersk Line, in the capacity rankings.

According to new analysis by Alphaliner, MSC has the largest newbuild pipeline of all ocean carriers this year, with 20 vessels expected, for an aggregated total capacity of 334,550 teu.

It said the privately-owned carrier was also expected to launch a “ship-jumboisation” programme this year that will see a series of 14,000 teu vessels converted to raise their nominal capacity to over 17,000 teu.

Meanwhile, stock market-listed Maersk Line is being obliged to adopt a much more cautious approach to its orderbook, with a view to not spooking investors concerned about the possibility of a global slowdown.

The Danish carrier only has six ships due for delivery, for a modest 73,600 teu of capacity, noted Alphaliner.

Indeed, without Maersk’s acquisition of Hamburg Süd and its fleet of around 650,000 teu, MSC would have been almost neck-and-neck with its top-ranked rival at the end of this year, with around 3.6m capacity.

MSC’s delivery pipeline this year includes eight 23,000 ULCVs for delivery in the second half. Alphaliner said it expected some of these to be deployed on the extended rotations of the 2M’s six Asia-Europe strings, while others were expected to cover for vessels taken out of service for around six weeks in the second half for the retrofitting of scrubber systems, ahead of IMO 2020.

The carriers with the next largest 2019 capacity expansion plans are Ocean Alliance partners Cosco and Evergreen, with newbuild pipelines of 181,000 teu and 134,000 teu, respectively.
“Cosco will continue its relentless growth in 2019, fresh from last year’s acquisition of OOCL,” said Alphaliner.

With this capacity injection, the Chinese state-owned carrier will widen the gap on the remaining alliance partner, CMA CGM, currently in fourth place in the rankings....MORE
 Our last two posts on MSC noted the company had resources to draw upon should the need arise:
"MSC" is the abbreviation, not a stock symbol. The company Is privately owned with the controlling shareholders, the Aponte clan, being worth at least $8 billion and probably over $10 B.

And Sept. 25
Shipping: "MSC Announces New Bunker Surcharge to Help Cover $2 Billion Per Year Low Sulphur Fuel Costs"
MSC Mediterranean Shipping Company S.A is another of the world's largest shippers who sound as though they are about to establish a GoFundMe page.
That's a joke.
The Aponte clan* is doin' alright.

*The latest Lloyd's 100 Most Influential People in Shipping (Edition Eight, Dec. 2017) has the Aponte famiglia at #10, just behind the Saadé family (CMA CGM) now led by Rodolphe after his father's death this summer, at #9.

If interested here's an ungated version of Edition Seven of the 100 Most Influential, for folks who don't subscribe via Maritime Cyprus.It's a year out of date but good background or a dandy prospect list.
The subscription makes a fine gift.

"Norway’s Oil Production To Fall To 30-Year Low"

 From OilPrice:
Despite cost controls, increased efficiency, and higher activity offshore Norway, oil production at Western Europe’s largest oil producer fell in 2018 compared to 2017 and is further expected to drop this year to its lowest level since 1988.

Last year, oil production in Norway fell to 1.49 million barrels per day (bpd), down by 6.3 percent compared to the 1.59 million bpd production in 2017, the oil industry regulator, the Norwegian Petroleum Directorate (NPD), said in its annual report this week. Oil production this year is forecast to drop by another 4.7 percent from last year to reach in 2019 its lowest level in thirty years—1.42 million bpd, the NPD estimates show.

As bad as it sounds, this year’s expected low production is not the worst news for the Norwegian Continental Shelf (NCS) going forward.

Oil production is expected to jump in 2020 through 2023, thanks to the start up in late 2019 of Johan Sverdrup—the North Sea giant, as operator Equinor calls it. With expected resources of 2.1 billion—3.1 billion barrels of oil equivalent, Johan Sverdrup is one of the largest discoveries on the NCS ever made. It will be one of the most important industrial projects in Norway in the next 50 years, and at its peak, the project's production will account for 25 percent of Norway’s total oil production, Equinor says.

The worst news for Norway’s oil production, as things stand now, is that after Johan Sverdrup and after Johan Castberg in the Barents Sea scheduled for first oil in 2022, Norway doesn’t have major oil discoveries and projects to sustain its oil production after the middle of the 2020s.

The NPD started warning last year that from the mid-2020s onward, production offshore Norway will start to decline “so making new and large discoveries quickly is necessary for maintaining production at the same level from the mid-2020s.”  
In the report this week, NPD Director General Bente Nyland said:

“The high level of exploration activity proves that the Norwegian Shelf is attractive. That is good news! However, resource growth at this level is not sufficient to maintain a high level of production after 2025. Therefore, more profitable resources must be proven, and the clock is ticking”....

However, here's the difference between Norway and the U.K.:
Since the early 1970s Norway and the UK pumped very similar quantities of oil and gas out of the North Sea, the return from this national natural resource for tax-payers was very different! 
That's Columbia Uni's Adam Tooze who came to us by way of a retweet from FT Alphaville's Colby Smith.

Professor Tooze was pointing to the Natural Resource Governance Institute who focus on extractive industry policy and advocacy, usually in less developed economies. More specifically, Prof Tooze was referencing:

Monday, January 14, 2019

"Cyberattack on Treasury bonds could be the missing ingredient for next economic crisis"

The blueprint for how the insurers would treat such an event is being played out in the current Mondelez v Zurich case. From The Register, January 11:

Cyber-insurance shock: Zurich refuses to foot NotPetya ransomware clean-up bill – and claims it's 'an act of war'
Snack company client disagrees, sues for $100m
US snack food giant Mondelez is suing its insurance company for $100m after its claim for cleaning up a massive NotPetya ransomware infection was rejected – for being "an act of war" and therefore not covered under its policy.

Zurich American Insurance Company has refused to pay out on a Mondelez policy that explicitly stated it covered "all risks of physical loss or damage" as well as "physical loss or damage to electronic data, programs, or software, including loss or damage caused by the malicious introduction of a machine code or instruction."...MORE
And the headline story from The Hill, January 13:
Trust is the fuel that makes the global financial system work — yet thanks to sophisticated operations by foreign government hackers who are increasingly willing to target that system, the risk of deliberate systemic disruption has never been greater. Even worse, soaring sovereign debt accumulated by governments worldwide has created an especially weak link susceptible to attack.

A dramatic rise in borrowing, especially by governments, has set the stage for a cyberattack to cause disruption that could cascade throughout the global economy. According to reporting by Bloomberg, U.S. Government debt is near $22 trillion — 40 percent of GDP — up from $9 trillion in 2007. Global debt of all kinds now tops $247 trillion, a staggering 320 percent of global GDP. These greater levels of debt are linked to higher levels of systemic financial vulnerability, according to a study by Columbia University’s Project on Cyber Risk to Financial Stability.

On their own these debt levels are already concerning to many investors, but the real threat to financial stability is the use of Treasury bonds and other debt instruments to raise short-term capital for trades in equities.

Treasury securities facilitate trade through “repo” agreements when they are sold to a lender, with the understanding that they will be repurchased at a fixed time — usually overnight but sometimes several weeks or more. This form of overnight borrowing is normally extremely low risk and provides liquidity for equity and other markets. However, because repos are not collateral but actually sales, the purchaser of the government-backed bond can use it in their own repo or collateralized contract while waiting to return it. In a healthy economy brimming with trust, re-using the same bond in this way means more capital is available for investment.
But the Task Force on Tri-Party Repo Infrastructure noted: “at several points during the financial crisis of 2007-2009, the tri-party repo market took on particular importance in relation to the failures and near-failures of Countrywide Securities, Bear Stearns, and Lehman Brothers.” The report goes on to say that “the potential for the tri-party repo market to cease functioning, with impacts to securities firms, money market mutual funds, major banks involved in payment and settlements globally, and even to the liquidity of the U.S. Treasury and Agency securities, has been cited by policy makers as a key concern behind aggressive interventions to contain the financial crisis.”
It is easy to imagine a rival nation seeking to deliberately cause the repo market to stop functioning as a way of reducing liquidity in the U.S. and global markets and hence, inflicting severe economic damage.
A nation-state that credibly gained access to tamper with repo records, even overnight, could sow discord simply by preventing the timely settlement of repo and other government-debt affiliated trades. Trust, which undergirds so much of the U.S.-led economic order’s growth and prosperity, is a two-way street which a dedicated adversary could undermine via cyber means.

A 2017 note from the Federal Reserve highlighted that the failure of timely settlement would be systemic. Even the prospect of a temporary delay in payments due to a possible U.S. Government default threatened market liquidity in 2013. America’s allies and economic partners in emerging markets are even more vulnerable, with sometimes singular outlets for their bonds, fewer safety valves, and less resiliency to economic shocks. Saudi Arabia, whose economy has repeatedly been targeted by Iranian actors and which is seeking an infusion of cash by selling international bonds, is a leading but not the only target....MORE

Programming Note: Climateer Investing Is Dropping Coverage of the Company Formerly Known as WeWork

It was fun back in 2014 when headlines like WeWork Worth $5Bil., Weally were fresh and new.

And in 2015 it offered an intellectual exercise: How To Convince Investors Your Startup Is Worth $10 Billion: "There has got to be a way to short this". And  $16 Billion Valuation WeWork Cut Forecasts as CEO Asked Employees to Change ‘Spending Culture’ "It has been a long cherished dream to figure out a way to bet against this one, links below.

Climateer Investing even took "WeWork: 'Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.'" at face value:
Roger that, energy and spirituality. Over....
C.I. did not disclose our response to WeWork's mandatory veganism: strategically located bar-b-que food trucks equipped with giant fans to waft the aroma at WeWork properties.

Even when our go-to WeWork jounalist left FT Alphaville we soldiered on: 
"WeWork is getting a lot bigger, but so are its losses"
With Alexandra Scaggs leaving FT Alphaville for Barron's* it appears there is an ecological niche that needs to be filled—WeWork....
But this latest is too much.

From StreetInsider, January 8:

WeWork to rebrand to The We Company and announce a major corporate and strategic shift - Fast Company.
WeWork to rebrand to The We Company and announce a major corporate and strategic shift - Fast Company. (LINK)
"The new structure is part of Neumann’s heady ambition to push the company’s market and opportunity beyond commercial real estate. Rather than just renting desks, the company aims to encompass all aspects of people’s lives, in both physical and digital worlds, he says."
The CEO also talked about the disappointing SoftBank round.
And TechCrunch::
WeWork rebranding won’t work
The company formerly known as WeWork has rebranded as the We Company — although a better name for its network of on-demand office spaces for the newly incorporated and nominally employed, co-living spaces for the same easyJet-set and educational and coding services could be “House of Cards.”...
They should have gone with "WeWork wēbwanding won't work" for the Elmer Fudd alliteration.

When it comes public get your shortin' shoes on.
And when the stock cracks we might relent and resume coverage of The Wee Co.

Here's our parting gift, 2017's "The story of WeWork’s mysterious first investor".

"Fed’s Powell: Balance Sheet to be “Substantially Smaller.” How Small? He Gave Big Clues..."

Wolf Richter at Wolf Street, January 11: 

In fact, QE started reversing at the end of 2014.
The Fed’s balance sheet would be “substantially smaller” after the Fed gets done with its QE unwind, Fed Chairman Jerome Powell said on Thursday. How far the Fed might go in shedding assets is a red-hot topic right now that causes a lot of fretting and howling on Wall Street and in the White House. Here is what Powell said at the Economic Club of Washington, D.C – and then we get into the dynamics and charts of what he described and what “substantially smaller” might mean:

“Yes, we wanted to have the balance sheet return to a more normal level, which is a level no larger than it needs to be for us to conduct monetary policy,” he said. When asked what level that would be, he said:

“Don’t know the exact level. That would depend really on the public’s appetite for our liabilities, specifically currency. To us, that’s a liability. And the public has a large appetite for currency….”

“So it will be substantially smaller than it is now,” he said. “But nowhere near what it was before, and the reason is, currency was well less than $1 trillion before quantitative easing started and now is moving up toward $2 trillion.”
“Currency in circulation”
The line item on the Fed’s balance sheet called “currency in circulation” is composed of Federal Reserve Notes – as it says on the wrinkled and thinning wad of twenties in my pocket — and coins. In other words, hard cash. And as Powell pointed out, this is a liability on the Fed’s balance sheet, not an asset.

The Treasury Department produces the bills and coins. But the Fed manages the amounts in circulation via the banking system. Currency in circulation grows when there is a lot of demand for paper-dollar cash. There must always be enough paper-dollars in the banking system to satisfy the demand by customers for the physical dollars. And as Powell pointed out, “the public has a large appetite for currency.”

This demand for dollars is on a global basis. People globally are hoarding this stuff, and some countries use it as their primary currency, or as an alternate currency alongside their own trashed currency. When the Financial Crisis set in, folks started hoarding more of it, and demand increased at a steeper rate.

This chart shows currency in circulation. The amount more than doubled from $830 billion in February 2008 to $1.72 trillion now:
Note the steeper curve during the Financial Crisis — and afterwards. I also went to the bank and withdrew some extra paper-dollars and stashed them away, just in case. And this, as it was done by hundreds of millions of people around the globe, increased demand for those paper-dollars.

Currency in Circulation and the Fed’s assets
But banks don’t get paper-dollars for free. They have to trade for them with the Fed dollar-for-dollar. So when currency is put into circulation via the banking system, the Fed records the currency as a liability, and what the Fed gets in return from the banking system dollar-for-dollar becomes an asset on the Fed’s balance sheet. This asset is mostly Treasury securities.

Until QE blew up that whole equation, the asset side of the Fed’s balance sheet was always slightly larger than currency in circulation and has grown in parallel with currency in circulation.

The reason the Fed’s balance sheet was slightly larger than currency in circulation is that the Fed has other assets on its balance sheet, including gold, and it has other liabilities than currency in circulation. But before QE started, currency in circulation was by far its largest liability....

Chinese AI/Facial Recognition Unicorn SenseTime Is Coming Back For Another $2 Billion

From Technode, Jan. 11:

Briefing: Chinese AI unicorn SenseTime prepares to raise $2 billion in funding
World’s Largest AI Startup Readies $2 Billion Fundraising – Bloomberg

What happened: The world’s most valuable artificial intelligence (AI) startup SenseTime is reportedly working with advisors to raise $2 billion in a fresh round of funding. People with knowledge of the matter told Bloomberg that the deliberations are at an early stage and details of the deal could change. A company spokesperson declined to comment when contacted by TechNode.

Why its important: The Chinese AI unicorn raised over $1.2 billion with a valuation of over $4.5 billion in 2018....MORE 
Previously on SenseTime:
ICYMI: The Most Valuable AI Start-up Inthe World Does Facial Recognition
"The 10 Biggest Artificial Intelligence Startups in The World"
"From laboratory in far west, China's surveillance state spreads quietly"
"How China’s AI Technology Exports Are Seeding Surveillance Societies Globally"
"China’s AI Giants Can’t Say No to the Party"
"China’s Surveillance State: AI Startups, Tech Giants Are At The Center Of The Government’s Plans"

Probably related:
Secretly Hankering to Be a Totalitarian? "How to Invest in the China Social Credit Score"

IoT: "SoftBank's ARM Spends Big to Meet Son's Connected World Dream"

From Bloomberg, January 11:
These days ARM Holdings Plc is expanding at such speed co-founder Mike Muller has to make a reservation before he can use his own office.

“This has become a meeting room so I have to book it when I’m here because we’ve run out of space,” said the company’s chief technology officer in an interview at ARM’s Cambridge, U.K., headquarters.
ARM has added about 2,000 employees bringing its headcount to just shy of 6,000 at the urging of Japan’s SoftBank Group Corp., which bought the company in 2016. This has cramped its existing facility, where employees are spread out among six low-slung office buildings.

ARM will soon move to a new 48-million pound ($61 million) building on the Cambridge campus -- featuring a vast 180-meter long atrium bookended by “floating” staircases, and wired with more than 1,000 kilometers of ethernet cabling. While begun before the SoftBank acquisition, it’s a headquarters that befits ARM’s newfound swagger and ambition.

“It’s quietly understated," Muller says with typical British irony, before adding, "It’s nice, it’s big."
Founded in 1990, ARM quietly grew into the U.K.’s largest listed company before SoftBank’s $32 billion takeover. It designs chips that are licensed to the world’s largest technology companies. As a result, just about every smartphone, mobile phone, and tablet runs on an ARM chip.

Now under SoftBank Chief Executive Officer Masayoshi Son, the English executives who run ARM are having to step out into the spotlight, due to Son’s ambitions for the company. Son presses ARM executives in meetings to move quickly through details of current operations and skip to long-range plans. He insists that ARM submit monthly updates to its 10-year business plan to keep it focused on the future.

ARM Chief Executive Officer Simon Segars said it means his job is to invest ‘like crazy’ as the company attempts to break into high-end computing and become central to self-driving car technology. Such efforts will have to start to pay off before spending is scaled back to prepare the company to go public again in about five years, as Son has indicated.

ARM’s new owner has also brought in a different audience. When Segars recently showed Son a new Lenovo Group Ltd. laptop built on a chip that uses ARM technology, he was asked to hang around and do a demonstration later that day for Bill Gates during a meeting with Microsoft Corp.’s founder.While Segars and his team are in the dream scenario for technology executives: invest for growth and worry about profitability later, the exchange is taking them out of their comfort zone. ARM’s technology is pervasive in semiconductors. Son wants ARM to move into software and services.

When Son first opened takeover talks with ARM, he became fascinated with a “science project,” according to Segars. One of the reasons Son bought ARM is his belief that the chipmaker, with designs that dominate the smartphone market, could achieve similar market sway in the chips that will power the internet of things -- industry jargon to describe the connection of everything from refrigerators to factory equipment to the internet.

That connected future doesn’t seem to be dawning as quickly as Son and many other futurists hoped. And one reason is because all those connected devices present a huge management hassle -- they must be made secure, have their software updated and stay connected. Doing this is technically complicated, and potentially expensive.

Another problem is that ARM didn’t have much expertise in services for the internet of things. It had always been two steps removed from the actual end users of the devices that incorporated chips made with its designs.

So now, with Son’s encouragement, ARM has begun bulking up its IoT services division. In August, the company spent $600 million for U.S.-based data analytics startup Treasure Data Inc. -- its largest deal in 14 years. In June, the target was Stream Technologies, a Glasgow-based company that improves connectivity for internet of things devices....MUCH MORE

The U.N.'s FAO Food Price Index Steady In December, Down For 2018

From the United Nations' Food and Agriculture Organization, January 10, 2019:

The FAO Food Price Index steady in December but lower in 2018 compared to 2017
Release date: 10/01/2019
» The FAO Food Price Index* (FFPI) averaged 161.7 points in December 2018, nearly unchanged from its November value as lower dairy and sugar quotations were largely offset by firmer cereal prices and somewhat higher prices of meat and oils. For the whole of 2018, the FFPI averaged 168.4 points, down 3.5 percent from 2017 and almost 27 percent below the highest level of 230 points reached in 2011. Sugar values dropped the most in 2018, with also vegetable oil, meat and dairy prices registering year-on-year decreases. However, international prices of all major cereals rose in 2018. 

» The FAO Cereal Price Index averaged 167.1 points in December, 3.0 points (1.8 percent) higher than in November and 9.6 percent above December 2017. Wheat prices were up slightly in December, mostly supported by harvesting concerns in Argentina due to untimely rains and tightening export supplies in the Russian Federation. However, strong competition for exports limited the rise in prices. International maize prices also rose in December, amid firm global demand coupled with weather concerns in the southern hemisphere. By contrast, international rice prices subsided for the sixth successive month, pressured further by a quiet pace of trade. Over the whole of 2018, the FAO Cereal Price Index averaged just over 165 points, some 9.0 percent higher than in 2017 but still 31 percent below its peak reached in 2011. Falling world output of wheat and maize contributed to the increase in prices during 2018, although overall global supplies of all the major cereals remained more than sufficient, leaving inventories still at high levels.

» The FAO Vegetable Oil Price Index averaged 125.8 points in December, posting a marginal increase of 0.5 points (0.4 percent) from the previous month and marking the first rebound after ten consecutive falls. The slight recovery was driven by higher palm oil prices, which reflect both rising domestic demand in major producing countries and firmer global import demand. By contrast, international soy and rapeseed oil prices continued to drift downward on account, respectively, of ample supplies in the US and weak demand in the EU. Falling mineral oil prices also weighed on vegetable oil values. For the year as a whole, the FAO Vegetable Oil Price Index averaged 144 points, down 15 percent from 2017 and reaching the lowest level since 2007, with palm oil prices registering the largest decline amid weak global demand accompanied by an accumulation of stocks in major producing countries.

» The FAO Meat Price Index* averaged 163.6 points in December, 1.3 points (0.8 percent) higher than its slightly revised value for November. While poultry and bovine meat prices changed only little in December, international price quotations for ovine meat fell slightly, mostly as a result of increased export supplies from Oceania. By contrast, pigmeat prices partially recovered, supported by strong global import demand, especially from Brazil. In 2018, the Index averaged 166.4 points, down 2.2 percent from 2017. The year-on-year decline reflected drops in the prices of pig and poultry meats, which more than offset higher ovine meat quotations. In bovine meat markets, prices remained close to their 2017 levels....

Artemis Capital's Chris Cole On The Risks of a Short-Volatility Blowup

I liked it better when Izabella Kaminska would interview Mr. Cole, no "triumphant return" talk, possibly because she knows the classics stuff better than the ZH writers.
(and definitely better than I)*
Sadly though we haven't seen him at FT Alphaville for a while.

From ZeroHedge:

Chris Cole: The Coming $2 Trillion Short-Vol Blowup Could Be More Devastating Than 1987 
In a now-legendary interview given almost exactly one year ago, Artemis Capital's Chris Cole appeared on the MacroVoices podcast to elaborate on a paper he had written titled the "Volatility and Alchemy of Risk", where Cole laid the risks posed by what he estimated to be $2 trillion in global explicit and implicit short-volatility exposure, and how the unwinding of this massive position could usher in an era of instability across asset classes as markets were forced into a devastating reevaluation of systemic risk.
And as fate would have it, barely a week later on Feb. 5, markets exploded in a massive short-vol squeeze that vindicated Cole's warnings and led to the death of one of the most popular short-vol ETPs - eroding years of profits accrued by amateur day traders who had reaped millions in profits off the short-vol trade.

Fortunately for legions of American retirees and retail investors, the February blowup proved to be an isolated incident. Markets staged a surprisingly swift recovery, and by the summer, had returned to all time highs. But Cole persisted with his warnings that what we saw in February was merely the weakest hands getting pushed out of the short-vol trade, and that more chaos would follow.

And so, with markets sloughing off a brutal fourth quarter, prompting some in the financial press to speculate about whether the bulls are back in charge, Cole is making his triumphant return to MacroVoices to offer his take on the volatility that gripped markets during the fourth quarter, along with a word to the wise:  The unwind of the massive short-vol trade that Cole predicted more than a year ago isn't over.

Rather, it's just beginning.
But first, a quick refresher: In Cole's view, traders have massively underestimated the risks associated with the short volatility trade by using it as a source of return and an input for taking risk. Counterintuitively, the more volatility goes down, the more risk rises. The more volatility goes up, the more risk is taken off. This sets up a regime of self-reflexivity that creates massive systemic risk.
I think what we saw last February actually just was the weak hand of the table being taken out by the short-vol trade. A lot of people read my paper. They came to me, and they said congratulations on getting it so right because there is this blowup of the short VIX ETP products that occurred, actually, literally within a couple of days after the interview.
And I said, you know what, that’s not what I was referring to. Those short-vol products, those VIX ETPs, the weak hands of the table, that was just the first phase of what is going to be a multi-year cycle and rebalance in the vol regime as many of these institutional short volatility strategies come unwound.
Looking back to the beginning of last year, Cole touches on one aspect of the vol-pocalypse that has been widely misunderstood: That rather than being an "all at once" volatility explosion, volatility as measured by the absolute move in fixed strike volatility options on the S&P 500, actually rose more in January than it did in February, suggesting that the first rumblings of the February vol explosion could be felt weeks before.
Cole followed that up with a step-by-step analysis of how a repricing in interest rates led to a liquidity crisis that ultimately drove the blowup in equities.
Yeah, I think 99% of the people would say February volatility rose more. Actually, if you look at the absolute move in implied vol, fixed strike vols of the S&P 500, vol actually moved more in January than it moved in February of last year. A lot of that was actually right-tail movement in volatility. I think that is quite shocking to most people. The bond spike in February was widely misunderstood. The media talked about this as a volatility event. But this was not a true vol event.
It was a liquidity crisis as a result of a rapid repricing and tail risk. You had a lot of very weak hands at the table that were shorting volatility in the form of these VIX ETPs on the expectation of continued stability. And it was, put quite simply, there was a point where many of these strategies had never been tested in a true volatile environment.
And when we had a revaluation, volatility higher. These weak hands at the table were taken out. And what we saw, actually, was not a fundamental repricing in vol driven by the credit cycle or fundamentals as much as it was the weakest hands at the table scrambling to buy tail risk insurance. Not to hedge their portfolios. To hedge their careers. They were forced to buy tail risk insurance or face insolvency. This is analogous to some of the subprime lenders that blew out in the late 2006–2007, the dumb, dumb, dumb money that was over-levered and was out of control and got taken out early. Of course that dumb money gets taken out first.
There is an initial panic. And then we begin to see a fundamental regime shift in volatility that comes later, after that dumb money is taken out. This is what we’ve begun to see in the fourth quarter of 2018 heading into this year. And my point here is that, in February, traders were not buying options because they thought volatility would increase. They were buying options because they were facing insolvency. And that bid on tail risk insurance is what caused the vol in the VIX to shoot up so dramatically.
Ultimately, the chaos from February was largely contained within the VIX ETP space, which represents only a sliver of the overall $2 trillion monster short-vol trade...which means there's still $1.995 trillion that Cole expects will unwind over the next 1-3 years.
In other words, "the Big one" - a blowup on par with (or possibly worse than) Black Monday - could be in the offing,
And it was a blowout of this teeny portion of the global short vol trade. I talk about this Ouroborus, $2 trillion worth of short-vol exposure. These VIX ETPs were only about $5 billion – $5 billion of $2 trillion. We still have the much larger $2 trillion unwind in the global short-vol trade that has just begun to start. And this is a fundamental regime shift in volatility that, if history is any guide, will last anywhere between one to three years and presents tremendous opportunity for different strategies that profit from change and coincides with not only quantitative tightening but also the evolution of the debt and leverage cycle.
Particularly if resurgent inflation forces the Federal Reserve to keep hiking interest rates. Cole argues that signs of these stressors are already appearing in the form of rising interbank lending rates and widening credit spreads. These risks have been amplified by the record levels of corporate debt that is only one notch above speculative grade - creating the potential for a wave of newly minted fallen angels to produce a reaction that blows up the entire market...

And we'll be back with more Mr. Cole tomorrow, including a couple of his FT Alphaville visits.

*From a 2014 post:
*memento mori, "Remember that you will die," a shorter version of "Respice post te! Hominem te esse memento! Memento mori!" i.e. Dude, look behind you, you're just a guy, remember-you'll die.

-Supposedly the words a slave whispered to a returning Roman general during his triumphal return.
Cambridge classicist Mary Beard makes a strong case against the simplistic popular conception in her book "The Roman Triumph".

From Friends of Classics Reviews:
...Balancing the enemy captives and bringing up the rear of the triumphal procession were the victorious general’s troops, chanting the mysterious “io triumpe”.

Less mysterious were the rude chants that the triumphing troops were licensed to direct at their general. Suetonius gives us a sample of what Caesar’s troops contributed: “Romans, watch your wives, the bald adulterer’s back home. You fucked away in Gaul the gold you borrowed here in Rome”.....
Traditionally these chants have been seen as “apotropaic”, designed to ward off envy and the evil eye in the moment when the successful general was most vulnerable. This is consistent with what is perhaps the best-known aspect of the traditional picture of the triumph, the slave who supposedly stood behind the general in his chariot to remind him that he was not a god, by repeating the words “Look behind. Remember that you are a man”. In the film Quo Vadis? the slave’s words receive an unintended comic twist when they are delivered to a triumphing Marcus Vinicius as he ogles a pretty girl in the crowd (nothing wrong with Marcus Vinicius!).

Beard points out that the slave and his cautionary words have been cobbled together out of bits and pieces of evidence from different contexts and periods and that no single text gives us the whole picture. She is similarly sceptical about the modern theory that the triumphing general impersonated the god Jupiter Best and Greatest, dressed in the clothes of his cult statue and with his face similarly painted red.

The impersonation of the god, the admonitory slave and the apotropaic songs all make a tempting package, but the evidence for the triumphator’s impersonation of Jupiter is very slender. What we can say is that Roman authors of the late Republic and early Empire were particularly concerned with the line between the human and the divine, and with the problematic concept of the divine human. Eventually, the emperor would be hailed as a god and receive divine honours, but this would be a slow and difficult process....

Sunday, January 13, 2019

"Earth’s magnetic pole is on the move, fast. And we don’t know why"

As if there wasn't enough going on, what with the volcanoes and the locusts and....I suppose it's probably time to start scanning for 'frogs' and 'festering boils' in the various news feeds.

From News.com, Australia:

Earth’s magnetic field is what allows us to exist. It deflects harmful radiation. It keeps our water and atmosphere in place. But now it’s acting up — and nobody knows why.
Planet Earth is alive. Deep beneath its skin, its life blood — rivers of molten iron — pulse around its core. And this mobile iron is what generates the magnetic field that causes auroras — and keeps us alive.

But, according to the science journal Nature, something strange is going on deep down below.
It’s causing the magnetic North Pole to ‘skitter’ away from Canada, towards Siberia.

“The magnetic pole is moving so quickly that it has forced the world’s geomagnetism experts into a rare move,” Nature reports.
Graphic via Science Journal Nature
Graphic via Science Journal Nature
On January 30 (delayed due to the US Government shutdown), the World Magnetic Model — which governs modern navigation systems — is due to undergo an urgent update.
This model is a vital component of systems ranging from geopositioning systems used to navigate ships through to smartphone trackers and maps.

The current model was expected to be valid until 2020. But the magnetic pole began to shift so quickly, it was realised in 2018 that the model had to be fixed — now.
“They realised that it was so inaccurate that it was about to exceed the acceptable (safe) limit for navigational errors,” Nature reports.

Every year, geophysicists from the US National Oceanic and Atmospheric Administration (NOAA) and the British Geological Survey do a check on how the Earth’s magnetic field is varying.
This is necessary as the liquid iron churning in the Earth’s core does not move in a consistent manner....

Related at News.com:
How humanity survived a supervolcano
Why we are obsessed with apocalypse

Thucydides on Fake News

"So little pains do the vulgar take in the investigation of truth,
 accepting readily the first story that comes to hand."
-Thucydides,  History of the Peloponnesian War.

-via  Gordon Rugg, "The studied subtexts of academic insults."
The complete quote is:
"There are many other unfounded ideas current among the rest of the Hellenes, even on matters of contemporary history, which have not been obscured by time. For instance, there is the notion that the Lacedaemonian kings have two votes each, the fact being that they have only one; and that there is a company of Pitane, there being simply no such thing. So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand."

How Chicago Mayoral candidates plan to raise $42 billion for pensions

Is that a lot of money for a city of  2.7 million (and declining) people?
It seems like a lot of money.
And Rahm will just mosey off, stage left, leaving behind...yikes, that is a lot of money.

From the Chicago Sun-Times ("The hardest working paper in America"), January 12:

EDITORIAL: How mayoral candidates plan to raise $42 billion for pensions
Chicago is on the hook for $42 billion in unfunded pension liabilities, which works out to $35,000 for every household, from bungalow dwellers to lakefront swells.
We asked the folks running for mayor where they would find the money.
Not surprisingly, they all called for new or higher taxes on a lot of stuff that won’t be a bother to the average Chicago voter — such as a tax on pot — but won’t solve the problem, either.

And who can blame them? We might take evasive action, too, if we were running for mayor.
Our own view, though — safely expressed from the sidelines — is that Chicago’s financial crisis is so severe that another property tax hike is almost inevitable in the next few years. And an expansion of the sales tax is likely, too. All the other solutions are only partial, or unworkable, or could make matters worse.

We generally favor, for example, the legalization and taxation of marijuana, as does every mayoral candidate we asked, except John Kozlar. But nobody can say how quickly a pot tax will come become a reality, or how much money it will really generate, or what percentage of the cut will go to the city rather than the state.

In the same way, we support building a casino in Chicago and taxing it heavily, but casino revenues can be extremely unreliable, a problem that will grow as online betting takes hold. Chicago can’t count on a take of $300 million a year, which is the estimated tax revenue often cited, and even that sum would only begin to solve the city’s financial problems.

Ultimately, as all the candidates say, the solution won’t be a single tax or levy, but some combination of new revenues, and the challenge will be to settle on the right mix. To their credit, most of the candidates don’t entirely rule out a property tax hike, though you get the sense they’d rather not say that loudly. It would be, as they say, “a last resort.”

We asked the candidates where they stood on eight frequently mentioned proposed sources of new revenue. We also asked them to cite at least one other revenue-generating idea of their own. We have summed up their responses in the accompanying chart.
It’s important to stress, though, that the candidates often responded at length — saying far more than what the chart reflects — and we urge you to read their full answers here.

Where the candidates stand on local taxes is, of course, of the utmost importance to all Chicagoans. Our hope is that this editorial package, presenting and contrasting their views, will give a greater understanding....MORE
I wonder why anyone would want to be mayor, much less 14 candidates?

People Are Gaming China's Mandatory Social Credit System Even Before Full Implementation

Buy diapers.
A few years ago the head of technology for Ant Financial's Sesame Credit said the system would assume you were a parent and responsible.
Of course for swinging singles the strategy might raise a few questions but that is the kind of stuff Chinese social media has been talking about for four years.

From the Lee Kuan Yew School of Public Policy at the National University of Singapore.
China's worrying mandatory social credit system 
It is optional for now, but in less than two years’ time, every Chinese citizen will be regulated under a broad social credit system that is the world's first.

The system is already being tested by selected companies and dozens of China's cities. Rongcheng, a city in the Shandong Province, has begun to rate its 740,000 adult residents.

All of them start with a full 1,000 points. A traffic ticket comes with a five-point penalty. On the other hand, heroic acts, donating to charity or volunteering gives one's score a boost.

Based on their score, individuals are allocated a grade ranging from a A+++ to D. High flyers enjoy benefits on rental of public bicycles, better terms for bank loans and discount on heating during winter.

On the other hand, restrictions may be slapped on those with low scores, such as temporary or permanent bans from buying plane or train tickets.

China's State Council says its social credit system hopes to establish and promote a culture of integrity. “Virtue is an internal requirement, and the reward and punishment mechanism is based on trustworthiness and distrust,” it said, in a public notice released in 2014.

Perhaps Dr Christoph Steinhardt, Associate Professor, University of Vienna's Department of East Asian Studies, offers a more realistic definition. “A nationwide system that uses digital technology to collect data from commercial, legal and social spheres, integrates this information in a centralised record and incentive system for trustworthy conduct and thereby seeks to steer individual, corporate and official behaviour.”

Individual, press and business freedoms
It is unclear how China's population of 1.38 billion will be rated when the system is officially implemented in 2020.

Some pilot projects prefer to keep their methodology secret. Sesame Credit, the financial arm of e-commerce giant Alibaba, would only say it uses a “complex algorithm” to rate users, the BBC reported. This includes tracking financial and consumption activities.

Sesame's technology director Li Yingyun was more candid in an interview with Caixin, a Chinese magazine.

“Someone who plays video games for 10 hours a day, for example, would be considered an idle person, and someone who frequently buys diapers would be considered as probably a parent, who on balance is more likely to have a sense of responsibility,” she said.

There are fears that the system will be used to silence the press. China is already ranked 176 out of 180 countries on the Reporters without Borders 2018 World Press Freedom Index.

Journalist Liu Hu, who has been detained for allegedly spreading falsehoods against the government, looks to be one of the first victims of the social credit system. Liu says he has been barred from buying plane tickets and property, and from sending his child to a private school. “You feel you're being controlled by the list all the time,” he told CBS News.

This control extends beyond the press and what they report. Punishing allegedly bad behaviour forces citizens to act a certain way to avoid penalties. Correct behaviour is determined by the state who are able to push their ideology onto the masses.

“Since the state decides which behaviours are included, how they are used in credit records, and what impact this credit record has on individuals, it is setting enforceable norms on what is “good” and “trustworthy” behaviour according to its ideology,” said Dr Steinhardt.

The system applies to businesses too. Starting from January this year, all companies with a Chinese business licence were allotted an 18-digit social credit code that the government can use to keep tabs on them.

Dr Samantha Hoffman, a non-resident fellow at the Australia Strategic Policy Institute, observed that Chinese authorities have pressured international airlines to use its preferred terminology when referring to Taiwan.

Qantas said it would use the preferred term, “Taiwan China”, on its global websites in line with China's wishes. In May, Japanese retailer Muji was fined 200,000 yuan (US$28,833) for listing Taiwan as a country on its products.

“Companies don’t have a choice but to comply if they want to continue doing business in China,” Dr Hoffman said, in an interview with Guardian Australia.

Big brother is always watching
All across China, there is already a heightened sense of being watched. The country has a network of around 170 million surveillance cameras. Another 400 million are set to be installed in the next three years.

“There’s no privacy and information security these days,” Li Shufu, Chairman of Geely Holding Group and Volvo Cars, said at a forum. “When you walk on the road, there are surveillance cameras everywhere.”

Authorities have also started to use a system that can identify people by their body shapes and how they walk. Developed by Watrix, it can zero in on a person's identity from 50m away.

“You don’t need people’s cooperation for us to be able to recognise their identity,” Huang Yongzhen, the company's CEO, told the Associated Press.

Few Chinese citizens were willing to talk about the downsides of a social credit system.

Perhaps they were heartened by signs that the government was being held accountable too. As of December 2017, over 1,100 government officials have been blacklisted for corruption. 

Can the system be trusted?
However, rampant corruption continues to threaten to create deeper social divides in China. Already there have been reports of residents using black data markets to boost their scores so they could be approved for a low-interest loan....MORE
Related, from Abacus, January 12:

China’s social app to rule them all wants to judge you for your purchases
Tencent has a new social credit system tied to WeChat Pay
China’s one app to rule them all, WeChat, has quietly launched its own social credit system -- meaning it plans to give a score to users of its platform based on their financial performance.

If you’re familiar with China’s Social Credit Score, this may sound creepy. But before you tweet this with the word “Orwellian” written in caps lock, hold off a bit, because this isn’t quite as frightening as that: This is reportedly more about earning perks for being good, instead of punishment for being bad.
The new system, called WeChat Pay Score, is similar to rival Alipay’s Sesame Credit: It scores users based on WeChat Pay data, personal consumption, compliance, and other behavior (like fulfilling obligations on time).

(Abacus is a unit of the South China Morning Post, which is owned by Alibaba.)

Sesame Credit is much the same. It tracks your consumption data and habits and gives a score based on which you can get certain perks. This may be a deposit waiver or even the option to apply for a visa without giving bank statements.
However, there is one notable difference with WeChat’s new system. The social media platform told reporters on Wednesday at the WeChat Open Class PRO event that based on the social relationships in WeChat, the payment scores of WeChat between friends will influence each other.

We asked WeChat for clarification; they cast doubt on the reports, but declined to explain further.
If the reports are accurate, it could mean that your score would be affected by your friends’ scores. Luckily, the program is opt-in, which is good if your friends aren’t good with money – and let’s face it, most aren’t. (Well, mine aren’t.)

WeChat is famously China’s app that can do everything -- like hailing a cab, ordering food or booking a hotel -- and you can pay for it all directly with WeChat Pay. That’s a lot of data, so maybe it’s not surprising that WeChat wants to do more with the spending behavior of its customers.

However, it’s not clear if this data will feed into China’s state-sponsored Social Credit System – which judging by the analysis available, has the potential to be the scary in an Orwellian sense. The system, which is scheduled to be rolled out by 2020, has “red lists” that give rewards for good citizens… but also blacklists to punish people for bad behavior....

Of course it will feed into the government's databases. I need to find the WeChat emoji for 'duh'.