Friday, October 28, 2016

There May Be A Way To Hack The IoT Botnet Hackers

From The Register:

Researchers expose Mirai vuln that could be used to hack back against botnet
Exploit can halt attacks from IoT devices
Security researchers have discovered flaws in the Mirai botnet that might be used to mitigate against future attacks from the zombie network.

Scott Tenaglia, a researcher at endpoint security firm Invincea, found a weakness in the HTTP flood attack that Mirai is capable of mounting. Specifically a stack buffer overflow vulnerability in the code that offers a means to crash the process, and therefore terminate the attack from that bot.
Flood attacks are the most straightforward (and crude) way to DDoS a webiste. The flaw might be leveraged to stop such attacks, though crucially not offering a way to prevent other forms of assault.
This simple "exploit" is an example of active defence against an IoT botnet that could be used by any DDoS mitigation service to guard against a Mirai-based HTTP flood attack in realtime. Although it can't be used to remove the bot from the IoT device, it can be used to halt the attack originating from that particular device. Unfortunately, it's specific to the HTTP flood attack, so it would not help mitigate the recent DNS-based DDoS attack that rendered many websites inaccessible....

"Economists React to Third-Quarter GDP: ‘The U.S. Is Roughly on Track’"

From Real Time Economics:
The U.S. economy picked up in the third quarter, easing worries about a more protracted slowdown and leaving the expansion on track for another year of  unspectacular growth. Gross domestic product, a broad measure of output, expanded at a 2.9% annual rate, the Commerce Department said Friday, up from the second quarter’s 1.4% pace. That could well be enough for Federal Reserve officials to raise interest rates at their December meeting. Here are some initial reactions from economists and analysts:
This shows that the U.S. is roughly on track. It’s a natural bounce back following a pretty underwhelming year so far. The election campaign has probably created a degree of uncertainty that has impacted growth. We’ve seen financial markets reacting to pretty much every twist and turn in the campaign, so it’s logical that there would be some feed-through to growth. But, underneath all of that, the labor market is still doing well and inflation is creeping up. It’s this underlying picture that matters more than more fickle quarterly data. There’s nothing here that will put the Federal Reserve off hiking in December.” — Luke Bartholomew, Aberdeen Asset Management

“The bigger-than-expected 2.9% annualized gain in third-quarter GDP growth confirms that the economic recovery has regained some of the momentum lost within the last year. As such, this leaves the Fed firmly on track to raise interest rates in December and a hike at next week’s FOMC meeting isn’t entirely out of the question.” —Paul Ashworth, Capital Economics

The good GDP report solidifies the case for an increase in the federal-funds rate later this year. An increase is unlikely at the Federal Open Market Committee’s meeting next Tuesday and Wednesday, just a week before the presidential election. But an acceleration in growth in the third quarter, as well as continued improvement in the labor market and indications of higher inflation, will lead the FOMC to boost the federal funds rate by 0.25 percentage point at their meeting on Dec. 13 and 14, to a range of 0.50% to 0.75%.” —Stuart Hoffman, PNC Financial Services...

...“We reckon the leap in [soy]bean exports contributed 0.9 percentage points to growth….In short, the headline GDP number looks good but the soybean export surge will reverse in [the fourth quarter], and that’s a significant headwind. Even with decent consumption, a further rise in capex and a clear rebound in state and local government consumption, our starting assumption for the quarter is GDP growth of 2%. But the headline today will increase expectations for a December rate hike a bit further; we think the Fed will act.” —Ian Shepherdson, Pantheon Macroeconomics...MORE
Now there's a guy who digs into the details.

Still Looking For Inflation

The BEA just reported their advance estimate of GDP at 2.9% which if it holds would be the best growth in a couple years. We'll come back to that.
In the meantime Alphaville's David Keohane directs us to Macquarie's discussion of the current state of inflation.
From FT Alphaville:

You show me your inflationary impulse and I’ll show you mine
You may consider the below as a series of questions that need answering in the face of recent hopes (that’s the right word, yeah?) for a return of inflation.

You can see why hopes are being raised that this isn’t another false dawn:
But, as Macquarie say echoing others, “at this stage, almost the entire inflationary impulse was caused by rapid recovery in commodity prices and the onset of the base effect.”

So…. the question becomes are there drivers for inflation outside of commods?Macquarie’s Victor Shvets, head of Asia strategy, and Chetan Seth say no:
Whether we examine core CPI, core PCE or core PPI, there are few (if any) signs of any significant inflationary pressures.
For example, in the US, core CPI remains broadly flat at around 2.2%-2.3% vs. the historic average of 3.8% over the 1960-2015 period or 2.8% average between 1985 and 2015. Similarly, PPI final demand remains stuck between 0% and 1% whilst the PPI final demand ex Food & Energy remains broadly flat at ~1.1%-1.2%. The same applies to trimmed PCE (1.6%-1.7%) as well as core PCE. Thus, even though headline CPI levels are very likely to exceed the Fed’s target of 2% in 1Q2017, it seems unlikely that core inflation gauges will reflect much pressure.
The same applies to Eurozone and Japan, although in a much more forceful and extreme manner. Eurozone core CPI continues to stagnate at ~0.8%-0.9% (even as headline CPI has moved into positive territory). The same largely applies to PPI, with core PPI (ex Construction & Energy) remaining negative 0.5%-1%. The situation is even more extreme in Japan, with CPI ex taxation, food & energy, barely budging (0.2%-0.3%) whilst the PPI remains negative (down 3%-3.5%). Headline CPI is also deeply in deflationary terrain.
And their argument is that there are good reasons for that since most of the real drivers here are structural: Secular stagnation and a “declining return on humans’ manifesting in a fall in the pricing power of labour, more of which below — making it “hard to see where pricing and inflationary pressure would come from.”...MORE
Macquarie's charts must be especially handy for the directionally challenged community, what with the helpful arrows.

That Time the FT's Kaminska Beat the Telegraph's Evans-Pritchard To the Big Macro Story
If You've Noticed A Perma-Bid In Commodities, You're Not Imagining It
"The Fed's Game Changer?"
San Francisco Fed: "What Is the New Normal for U.S. Growth?"
...And A Quick Look At The Interplay Between Currencies and Inflation

That's the last couple weeks. If interested in more see the search blog box, upper left or the Google search of the site which shows 25,900 hits. That can't be right:

Thursday, October 27, 2016

Tesla: "After All Is Said and Done, More Is Said Than Done" (TSLA)

Regular trade:         $204.01 +1.77 (0.88%)
After-hours:            $203.30 -0.71 (0.35%)
A net gain of a dollar and six cents since Tuesday's close. 
Which of course brings to mind this Warren Buffett quote:
"Now I'm known as a long-term investor and a patient guy, but that is not my idea of a big move."
-Warren Buffett

In this 1999 Fortune article "Mr. Buffett on the Stock Market". Granted the time and tape he was talking about was even worse:

December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00
The headline quote is -Aesop.

JP Morgan Talks Tesla (TSLA)
Just A Reminder: "Musk Urges Tesla Workers to Cut Costs Ahead of Fundraising Round" (TSLA)
"Tesla Earnings Smash Expectations After Dramatic Change In Reporting Methodology" (TSLA)
Tesla Motors Plans to Change How it Reports its Earnings (TSLA)

That gets us to Tuesday. For more, going back to the IPO, use the search blog box if one is so inclined. 

Uber to Challenge Airbus in the Autonomous Electric Flying Taxi Business

As the only analysts covering the nascent as-yet-theoretical autonomous electric flying taxi market we intend to be the the go-to source for all things autonomous electric flying taxi and/or theoretical.

From Forbes:

Uber's vision for revolutionizing urban transportation includes helicopter-like Vertical Take-off and Landing vehicles. (Uber)
 Uber’s vision for revolutionizing urban transportation includes helicopter-like Vertical Take-off and Landing vehicles. (Uber)
Taking a page from tech industrialist Elon Musk, well known for promoting audacious futuristic concepts including a Mars colonization plan and a vacuum tube-based Hyperloop system to transport people and cargo at near supersonic speed, ridehailing giant Uber has laid out a vision for the future that includes small, helicopter-like vehicles to help commuters literally overcome congested roadways.

The company sketched out the concept in a post on today by Jeff Holden, Uber’s chief product officer. It also posted a 97-page white paper detailing the benefits and challenges of creating such a service.

Forget about terrible freeway traffic. If Uber’s idea is realized, some day commuters will summon flying-car-type VTOLs, or Vertical Take-off and Landing vehicles, to ferry them to their destination, avoiding ground-based headaches. The company hasn’t itself perfected the technology, but envisions electric, fixed-wing vehicles with multiple overhead propellers. Ideally, they would take off and land at spaces including existing office building helipads, from atop modified parking garages or even used available land near highway interchanges to create a network of “vertiports,” according to the company.

“On-demand aviation has the potential to radically improve urban mobility, giving people back time lost in their daily commutes,” Holden said in the post. “A network of small, electric aircraft that take off and land vertically will enable rapid, reliable transportation between suburbs and cities and, ultimately, within cities.”

Unlike helicopters, these vehicles would need to be much quieter and “will ultimately use autonomy technology to significantly reduce operator error,” he said.

In contrast to Musk’s Hyperloop proposal, the technology for an airborne ride-hailing system may not be as challenging as the legal and regulatory issues. In particular, showing that this type of low-flying vehicle can operate safely in urban environments will be tricky, said Katie Thomson, a former general counsel for the U.S. Transportation Department who now chairs the transportation group for Morrison & Foerster LLP.

“The technological aspects of a driverless passenger plane are much easier to tackle than the operational/integration aspects,” Thomson said. “As a general matter, the public is willing to accept less risk when it comes to flying than they tend to be when they are using surface transportation.”
She sees three significant hurdles ahead if Uber moves forward with its on-demand air transportation plan. These include creating a workable air traffic control system and airworthiness standards for such vehicles; managing noise issues; and the need for Uber to meet a federal “economic fitness review” to be authorized to operate as a new air carrier....MORE
To date, Airbus seems to have the better drawings although Ubers bank account could theoretically support all the artists on earth past the, say, kindergarten level.

See also yesterday's:

The Effect Of Airbus' Cash Squeeze On Their Autonomous Flying Taxi Project Is Probably Nil
for the genesis of our securities research interest:
Following up on this morning's "Planes, Trains and (self-driving) Automobiles".

Back in August we posted "Airbus Reveals Ambitious Plan for Autonomous Flying Taxis" with the comment:
"Your move, Uber."
Now I'm starting to wish I hadn't pulled Mr. Kalanick's teat quite so hard....
Here's Airbus' Future of Urban Mobility page.

And here are Uber's "Fast-Forwarding to a Future of On-Demand Urban Air Transportation" at Medium and the 97 page PDF of the same name.

Discerning reader will note that a potential marketing differentiation between the two companies:

While Airbus A³ mentions parachutes on their welcome page, Uber doesn't drop the P-word until page 22 of the white paper, but then goes further by referring to the (also theoretical) bouncing-baby-all-swaddled-up approach to safety:
Achieving high perceived safety is also valuable, especially during the initial adoption. Recent GA aircraft have implemented an emergency safety mode that’s equivalent to pulling to the side of the road. By avoiding the use of a large rotor, a DEP aircraft is also able to take advantage of Ballistic Recovery Systems (BRS) whole vehicle parachutes that can be deployed in an emergency to safely bring the vehicle to the ground, and it can avail itself of other evolving safety technologies being tested such as whole aircraft airbags.
GA is general aviation, 
Ballistic Recovery is a publicly traded company probably ripe for a pump-n-dump, 2¢, last.  

And Uber isn't really challenging Airbus because while Uber says they will deploy the autonomous electric flying taxis, Airbus intends to approach things from the manufacturing side.
No word on what Apple is up to.
And NVIDIA has probably already developed the chip to make it all happen, stored in some back room in Santa Clara, waiting for the market to catch up.
(we like love NVIDIA but cautious ahead of earnings)

"What is Truth in Economics?"

From Lars Syll:
28mptoothfairy_jpg_1771152eIn my view, scientific theories are not to be considered ‘true’ or ‘false.’ In constructing such a theory, we are not trying to get at the truth, or even to approximate to it: rather, we are trying to organize our thoughts and observations in a useful manner.

What a handy view of science.

How reassuring for all of you who have always thought that believing in the tooth fairy make you understand what happens to kids’ teeth. Now a ‘Nobel prize’ winning economist tells you that if there are such things as tooth fairies or not doesn’t really matter. Scientific theories are not about what is true or false, but whether ‘they enable us to organize and understand our observations’!....MORE

Ouch, that's going to leave a mark.
And to a Laureate (2005, game theory) no less.

Questions America Wants Answered: "Do Writers Deserve to Make a Living?"

We get some of our best ideas reading the news so journos should probably be fed and watered but for much of what passes as writing, comme ci, comme ça. It's a tough world, what that Tennyson guy unsentimentally called "...Nature, red in tooth and claw".

From The Walrus:

Not everyone believes literary labour constitutes work

Illustration by AAGGraphics
I recently participated in a Labour Force Survey, and calculated my weekly time investment at about seventy hours, though I’ve never made more than $10,000 per year off writing. Relying on teaching and editing—and this year, a grant from the Canada Council—I’ve still never cracked $30,000 per year altogether. When I began writing seriously, my mom advised me to marry rich; I’m dating a grad student. Yet even against self-interest, I have an ambivalent view of whether I should be making a living.

I don’t think I’m alone in feeling this way. Writers are the unacknowledged accountants of the world; get enough of them together, and the subject of money will probably come up. In my experience, writers either bemoan how hard it is to make ends meet, or stay silent. The silent sometimes have undisclosed sums behind them, or, I suspect, they also feel oddly unable to state a claim to a livelihood with any conviction.

Why? When I worked the graveyard shift at a bagel shop, I felt I earned every dollar. Even when I’m editing other people’s writing, the fact that I’m being paid seems only proper. But if I spend a few weeks on a short story, and never collect a cheque, I don’t feel I’ve been short-changed.
I can’t name a literary writer who would put their work on a level with that of doctors or firefighters—or even journalists.
A deep-seated anxiety about whether literary labour constitutes work has long pervaded the profession. In a rich critique of creative writing programs for the London Review of Books, Elif Batuman identified writing as a source of shame for many of its practitioners. How else to explain creative writing’s “fetish of ‘craft’,” she writes, “an ostensibly legitimising technique, designed to recast writing as a workmanlike, perhaps even working-class skill”?

True this may be, but writers are hardly the only ones who think their practice lacks some quality to distinguish it as legitimate work. I recall a relative once asking me what I’d been up to all morning.

“Working,” I said.

“What kind of work?”


She was visibly perplexed. “Did you have to do it?”

I said no....

JP Morgan Talks Tesla (TSLA)

From Barron's Stocks to Watch:

Tesla Motors: Not as Good as It Looks?
JPMorgan’s Ryan Brinkman and team contend that Tesla Motors’ (TSLA) earnings weren’t as good as they looked as they maintain their Underweight rating on the stock. They explain why:
Tesla reported 3Q16 earnings yesterday that at first glance appear to represent a very strong beat to consensus and JPM estimates across all metrics. However, we see one reason why the 3Q16 earnings report is not as good as it looks, and another reason why it might not be as good as it looks.

Firstly, on why it is not as good as it looks: Tesla reported a +$139 mn benefit from the sale of Zero Emission Vehicle (or “ZEV”) credits, vs. our model which had forecast $25 mn and vs. guidance for a negligible amount. We estimate this alone helped EPS +$0.73 vs. our model, meaning that what appears to be a large +$1.13 beat to JPM was more like a +$0.40 beat — so still a beat, but not as strong.

Secondly, on why it might not be as good as it looks: We cannot help but feel that there are some comparability issues relative to the firm’s reported revenue, gross profit, and net income relative to even those analyst estimates included in consensus (i.e., those who had attempted to account for a complicated change in accounting methodology prompted in part by the company’s recent termination of residual value guarantees on vehicles sold in the US). For instance, revenue tracked $2,298 mn vs. JPM $1,914 mn and consensus $1,902 mn, even though the approximate number of deliveries in the quarter was known ahead of time — we feel the difference clearly relates more to the change in accounting than it does to ASPs.

Because of these comparability issues, we are choosing to focus more on free cash flow performance in the quarter, as cash flows are unaffected by the change in accounting....MORE
Previously at Stocks to Watch: "Tesla Motors: It Beats! (We Think)"

Meanwhile in another corner of the Dow Jones Empire, MarketWatch says:
"Riding high on profit, Tesla’s Elon Musk promises much, trash-talks nearly everyone"
After hubris, nemesis.
And after nemesis, catharsis.
But let's not get ahead of ourselves and start catharting just yet.
Which gives us time to check our motivations: 
Insane Woman (La Monomane de l'envie) by Théodore Géricault, 1822
Musée des Beaux-Arts de Lyon

Nah, not envy, it's just money.

Intel IoT Security Maven: Divide the Internet Into Compartments to Save Us From the Internet of Things

From The Register, whose headlines and sub-heads are usually livelier than ours:

Divide the internet into compartments to save us from the IoT fail whale
Intel's chief IoT security bloke puts forward one possible solution
The best way of protecting us from Internet of Things botnets is to compartmentalise the entire internet, Intel’s chief architect for IoT security solutions has said.

Sven Schrecker, speaking exclusively to The Register at IoT Solutions World Congress in Barcelona, also branded the potential impact of IoT botnets as ‘“devastating”, warning that the Krebs website attack was just the tip of the iceberg.

So far IoT botnet miscreants have employed “quiet exploitation followed by loud exploits,” Schrecker said. “They’re just making it difficult for internet services to function.”
If the operators behind these IoT-enabled botnets were to “point them at industry” instead of smaller targets such as individual journalists’ websites, as happened with infosec researcher Brian Krebs, the impact on the world economy could be “devastating”, he added.

The recent high-profile IoT botnet DDoS attacks have, so far, avoided using traditional traffic amplification techniques such as DNS reflection because consumer-grade IoT devices are so easily hacked en masse. This makes it much harder for DDoS mitigation services to cope, as was seen when Akamai threw Krebs off its network with two hours’ notice.

An attack against infrastructure would quickly harden legislators’ attitudes towards the IoT, Schrecker warned, giving them a “very strong will to alter” existing light touch governmental security mandates.

Is self-regulation an option before the same sharp minds that gave us the EU cookie directive omnishambles set their sights on the IoT? Schrecker was quietly confident, though he hedged his bets: “We have the makings of a standard for IIOT [Industrial Internet of Things, the new-fangled term for what used to be called M2M]. If that works, it can go to IoT. Setting standards is not a quick process but consolidated industry opinion saying the same thing, that’s much more strengthened.”...MORE

Dude, Where's La Niña?

A quick note on terminology for normal people who don't obsess about this stuff:
  • ENSO = the El Niño/Southern Oscillation
  • ENSO Neutral = the ocean surface temperature anomaly in the ENSO 3.4 region is between +0.5°C and -0.5°C.
  • El Niño/La Niña conditions exist when the anomaly is greater than (Niño) or less than (Niña) the half-degree cut-off for neutral.
  • A full blown El Niño/La Niña is declared when the conditions persist for three overlapping three-month periods i.e. five consecutive months.
And that's the point of this post, that although we'll get to La Niña conditions, which will have some weather effects, and may even become a (weakening) La Niña, it is really starting to look as though the conditions won't stick around long enough to become the monster La Niña we were looking for back in March.

First up, from NOAA's Climate Prediction Center, Oct. 13:

Synopsis:  La Niña is favored to develop (~70% chance) during the Northern Hemisphere fall 2016 and slightly favored to persist (~55% chance) during winter 2016-17.

ENSO-Neutral conditions were observed during September, with negative sea surface temperatures (SSTs) anomalies expanding across the eastern equatorial Pacific Ocean by early October (Fig. 1). All of the Niño regions cooled considerably during late September and early October, with the latest weekly value of Niño-3.4 index at -0.9°C (Fig. 2). Subsurface temperature anomalies also decreased toward the end of the month (Fig. 3), reflecting the strengthening of below-average temperatures at depth in the east-central equatorial Pacific (Fig. 4). Atmospheric anomalies across the equatorial Pacific edged toward La Niña during September, with a stronger tendency toward La Niña late in the month. The traditional Southern Oscillation index and the equatorial Southern Oscillation index were positive. The lower-level winds were near average across most of the basin during the month, but enhanced easterlies were becoming more persistent west of the International Date Line. Upper-level winds were anomalously westerly near and just east of the International Date Line. Convection was weakly suppressed over the central tropical Pacific and was more enhanced over Indonesia compared to last month (Fig. 5). Overall, the combined ocean and atmosphere system reflects ENSO-Neutral during September, but are more clearly trending toward La Niña conditions. 
The multi-model averages favor borderline Neutral-La Niña conditions (3-month average Niño-3.4 index less than or equal to -0.5°C) persisting during the Northern Hemisphere fall and continuing into the winter (Figs. 6 and 7). Because of the recent cooling in the Niño-3.4 region and signs of renewed atmospheric coupling, the forecaster consensus now favors the formation of a weak La Niña in the near term, becoming less confident that La Niña will persist through the winter. In summary, La Niña is favored to develop (~70% chance) during the Northern Hemisphere fall 2016 and slightly favored to persist (~55%% chance) during winter 2016-17 (click CPC/IRI consensus forecast for the chance of each outcome for each 3-month period).period)....

And from Columbia University/IRI, the plume of model predictions, published Oct. 20:

Wednesday, October 26, 2016

Just A Reminder: "Musk Urges Tesla Workers to Cut Costs Ahead of Fundraising Round" (TSLA)

The man with the plan. Eight weeks ago.

From Bloomberg, September 2, 2016:
  • Internal memo asks for delivery of ‘every car we possibly can’
  • ‘Would be awesome to throw a pie in the face of naysayers’
Elon Musk sent an e-mail to employees at Tesla Motors Inc. urging them to cut costs and deliver “every car we possibly can” in a push to show positive cash flow in the third quarter.

The chief executive officer of the electric-car company said it would be his last chance to show improved financial numbers before he tries to raise more money. The third quarter is crucial to Tesla’s future because the company is trying to acquire SolarCity Corp. and preparing to roll out the Model 3, its lower-priced sedan, late next year.
“The simple reality of it is that we will be in a far better position to convince potential investors to bet on us if the headline is not ‘Tesla Loses Money Again,’ but rather ‘Tesla Defies All Expectations and Achieves Profitability.’” Musk wrote in an Aug. 29 e-mail obtained by Bloomberg on Friday. “That would be amazing!"
A Tesla spokesperson verified the authenticity of the e-mail.

Rallying Troops
The e-mail says that Tesla is “on the razor’s edge of achieving a good Q3, but it requires building and delivering every car we possibly can, while simultaneously trimming any cost that isn’t critical, at least for the next 4.5 weeks.”

Tesla delivered 50,568 vehicles in 2015 and has said it will deliver about 80,000 this year. It missed its first two quarterly sales targets and has not given guidance for the third quarter, but has said it will deliver 50,000 cars in the second half of the year.

“I thought it was important to write you a note directly to let you know how critical this quarter is,” Musk wrote. “The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.”...MORE
Fortune's headline was even more direct:
Elon Musk Wants to Cut Tesla Spending, “At Least for the Next 4.5 Weeks”
"Tesla Earnings Smash Expectations After Dramatic Change In Reporting Methodology" (TSLA)
Tesla Motors Plans to Change How it Reports its Earnings (TSLA) 

"Tesla Earnings Smash Expectations After Dramatic Change In Reporting Methodology" (TSLA)

Following up on this morning's "Tesla Motors Plans to Change How it Reports its Earnings (TSLA)", ZeroHedge gets on the "Say, there's something different about these numbers" love train.

The stock is up $8.09 (4%) at $210.33 but considerably off the afterhours top-tick $ 216.48 (16:18:30 PM)

From ZH:
There was a sudden burst of confusion heading into today's Tesla earnings. As Bloomberg reported, a change in the way Tesla Motors Inc. will report quarterly results after today’s market close has created a bit of a last-minute headache for analysts, with earnings estimates varying widely. The electric-car maker is phasing out most of the non-GAAP adjustments it’s traditionally made, including ones for resale value guarantees or vehicles leased through banking partners. Starting today, when the company discusses third-quarter adjusted non-GAAP earnings per share, it plans to exclude only stock-based compensation.
The SEC in recent months has raised concern that public companies may be straying too far too often from Generally Accepted Accounting Principles. Though Tesla has telegraphed its plan for weeks, many analysts are only now revising forecast models and some are sitting out the guessing game entirely this time. That means it may be challenging to draw firm conclusions about whether Tesla missed or beat Wall Street expectations - giving added importance to what Chief Executive Officer Elon Musk says on a follow-up conference call about cash or production plans.
So heading into today's earnings, the average estimate in a Bloomberg survey of analysts stands at an adjusted loss of 54 cents a share, based on seven forecasts that have comparable methodologies that the firms say take the new practice into account. While all seven of those projected a loss, there are others who say the company may post a profit.
Well, those who expected a profit got just that, because momnets ago Tesla not only reported revenue of $2.3 billion, far higher than the $1.9 billion expected, but also reported its first quarterly profit of $74 cents, smashing consensus estimate of a 54 cent loss.
Since there will be much confusion over how these numbers make any sense, here is what the company said:
Starting this quarter, our financial releases no longer include the non-GAAP revenue disclosures that we historically provided. To simplify our financial reporting, we add back non-cash stock-based compensation (SBC) to calculate non-GAAP results. Consistent with previous quarters, non-GAAP automotive gross margin will also exclude ZEV credit sales.

Total Q3 GAAP revenue was $2.30 billion, up 145% from Q3 2015, while total Q3 gross margin was 27.7%, compared to 21.6% in Q2.

Total automotive revenue was $2.15 billion on a GAAP basis, up 152% from Q3 2015. Our final Q3 delivery count was 24,821, over 300 more than the estimated delivery count we shared on October 2nd. Deliveries increased 114% from the third quarter of 2015, and was comprised of 16,047 Model S and 8,774 Model X vehicles. In addition, 5,065 vehicles were in transit to customers at the end of the quarter. These vehicles will be delivered in Q4.

Our Q3 GAAP net income was $22 million, or $0.14 per share on 157 million diluted shares, while our non-GAAP net income was $111 million, or $0.71 per share on a diluted basis, after adding back $90 million of SBC. Both figures include an $0.08 per share loss of other expense, net, primarily related to foreign currency transactions and the conversion of most of our 2018 convertible notes.
Confused? So are we, and sadly charting the results does not help:

And here are the company's GAAP revenues:...
...MORE, including cash flow. 

The Effect Of Airbus' Cash Squeeze On Their Autonomous Flying Taxi Project Is Probably Nil

Following up on this morning's "Planes, Trains and (self-driving) Automobiles"/

Back in August we posted "Airbus Reveals Ambitious Plan for Autonomous Flying Taxis" with the comment:
"Your move, Uber."
Now I'm starting to wish I hadn't pulled Mr. Kalanick's teat quite so hard.

From Bloomberg Gadfly:
Tesla Motors Inc. gets a lot of flak for burning through prodigious amounts of investors' cash. But you don't have to be doing something revolutionary to do that. Look at Airbus.

The plane-maker's net cash fell by almost half to 5.6 billion euros ($6.1 billion) at the end of September from 10 billion euros at the end of 2015. The decline is partly due to production problems ranging from engines not being ready to missing toilets. Airbus's free cash-flow, before M&A and customer financing, was a negative 4.2 billion euros compared with a mere negative 1.6 billion euros a year earlier. Ultimately, a company's ability to generate cash should be a concern, so should we be worried?No, not really. Most of the cash flow shrinkage relates to a big increase in working capital. Inventories jumped to 33.5 billion euros at the end of September from 29 billion euros at the end of 2015.

This Cash is on Fire 
Airbus' net cash pile shrank by more than 40 percent in the first nine months of this year
Launching new aircraft always consumes cash, but at Airbus there are too many nearly-but-not-quite-finished airplanes sitting on the tarmac awaiting engines (A320neos) and cabin equipment (A350s). Airbus won't get the money until they're delivered to customers.

Awaiting Liftoff 
Airbus has a working capital problem due to supply chain troubles

These problems, while vexing, look solvable. Airbus said teething troubles with a Pratt & Whitney engine were "largely over," although it conceded it will get some of that machinery more slowly than it would like....MORE
What kind of analysis is this? They haven't even mentioned the autonomous flying taxis.
I want my autonomous flying taxi.

Here's Airbus' Future of Urban Mobility page:

And here's the latest on the taxis from Autoblog, Oct. 23:

Airbus wants to build a self-flying taxi called Vahana

Apparently, Vahana is a Sanskrit word that "denotes the being, typically an animal or mythical entity, a particular Hindu deity is said to use as a vehicle." Put more simply, Vahana is a vehicle fit for a god. Or, if you're A3 (that's A Cubed), a Silicon Valley-based subsidiary of Airbus, Vahana is the name of a fully electric autonomous vehicle. And not just any autonomous vehicle – this is airborne travel. As you'd expect from Airbus, Vahana travels in the sky, not on roads.

A3 hopes to have a full-size prototype ready to fly by the end of 2017, and an actual demonstrator is scheduled to follow by 2020. "Full automation also enables us to make our aircraft as small and light as possible, and will significantly reduce manufacturing costs," according to company CEO Rodin Lyasoff. To what end? "Beyond developing the vehicle itself, we're seeking to move key technology categories forward, foster development of the regulatory regime for the certification and operation of automated aircraft, and to otherwise nurture an ecosystem that will help enable the vertical cities of the future," says Lyasoff.

And what about safety? Not to worry. Vahana only has room for a single passenger, and there's an onboard "ballistic parachute that works even at low altitudes." Still, building a self-flying vehicle is bound to be rife with challenges. There are regulatory hurdles galore, not to mention what we're sure is going to be a very high cost of entry. We'll see how it goes....MORE (video)

Planes, Trains and (self-driving) Automobiles

A dive into transportation wonkitude with Ms Iz as our tour guide.
From FT Alphaville:

The autoignition temperature of manual cars is much higher than Fahrenheit 451

According to Bloomberg’s Chris Martin and Joe Ryan
Mass transit, the lifeblood of cities worldwide, is under threat from the biggest innovation in automotive technology since Henry Ford’s assembly line first flooded streets with cars.
They also note:
The self-driving vehicles being pioneered by Tesla Motors Inc., Alphabet Inc.’s Google and others are poised to dramatically lower the cost of taxis, potentially making them cheaper than buses or subways, according to a joint report by Bloomberg New Energy Finance and McKinsey & Co. Having no driver to pay could reduce taxi prices to 67 cents a mile by 2025, less than a quarter of the cost in Manhattan today, the report found.
Which, quite frankly, is amazing stuff from the likes of McKinsey — since at some point in their illustrious history they must have done some public transport consulting work, no?
We’ll spare you the exhaustive repetition of what actual public transport experts have repeatedly told us on that front. Suffice to say they don’t believe SD cars will pose much of a threat to public transport because costs in this space are determined by geometrical constraints, not human labour availability. As to the idea they’ll be cheaper than human-driven cars, we’ve covered the reasons why that might not be the case at all here and here.
What we will note is that the above is typical of the poor quality research coming out in this space — focussed as it is on fanning enthusiasm for the new tech (and related consulting contracts no doubt) rather than alerting investors to the practical realities and challenges.
As a rule, we’ve found most of the reports that grab the headlines are sparse on figures and big on assumptions, while those that cite actual figures and facts get crowded out entirely.
Many of these assumptions ignore basic facts such as that operating a SD network in the near future will clearly demand more labour hours not fewer (not least because autopilot cars will need to be supervised for a long while yet, but also because SD car networks will need a small army of specialist coders, administrators, lawyers and lobbyists, not to mention maintenance and cleaning staff, to be added to the cost structure). Nor do the assumptions appreciate the tragedy of the commons effect in operating unsupervised transport systems. Think of the average cleanliness of a night bus at the end of its cycle, then double the squalor. Without supervisory drivers onboard it is undoubtedly the case that cars will be exposed to everything from small child mess and late-night takeaway cast offs to doggy disasters and all sorts of other disgustingness....

Also at FT Alphaville:

SD cars and productivity

Apple's Earnings Report: Analysts React (AAPL)

From ZeroHedge:

Wall Street Reacts To Apple's Disappointing Earnings
As reported last night, despite a kneejerk spike higher in AAPL shares, the stock ultimately faded the release of its Q4 earnings which had a mix of positive and negative components, however the market ultimately focused on the latest revenue and ASP miss and the projected margin decline and glossed over Tim Cook's exuberant revenue forecast for 2016, pushing the stock lower by nearly 3% this morning. 
So, having had a chance to digest the results, Wall Street's sellside analysts chimed in, and the prevailing sentiment was neutral to negative, with Stifel's Aaron Raker most disappointed, downgrading the stock from Buy to Hold, and lowering his price target to $115.
  • Downgrades to hold from buy, lowers PT to $115 from $130
  • Says Apple stock is likely to remain “range-bound” for next two-three quarters until investors gain greater insight into potential fundamental upside drivers
WELLS FARGO (Maynard Um)
  • Says 1Q gross margin guidance of 38%-38.5% (vs 38% in FQ4) was disappointing; notes FX had a 50bps impact
  • Management commentary aligns w/Wells Fargo view that units per carrier are higher in non-S cycles (this yr) and lower in S-cycles (next yr)
  • May create some headwinds in next year’s cycle, weigh on margins
Rates market perform

  • JPM continues to be cautious on consumer demand into early 2017
  • Expects better trends in H2’17 on increased shareholder returns and stronger replacements
  • Says co. FY1Q rev. view implies 76m iPhone units sold into channel; being driven by Samsung Note 7 problems and extra week in qtr
  • Rates overweight, raises PT to $114 from $107...

Possibly related (your Climateer early warning system):

April 24, 2016
"Decline in iPhone Shipments Could Make Apple Worst-Performing Top Five Smartphone Brand of 2016" (AAPL)
Aug. 20, 2015
Peak Smartphone: "Smartphone Sales Declined for the First Time in China" 
July 2015 
Gartner on Consumer Electronics Markets: Goodbye Growth
June 2015 

Chart Porn: How the Financial Times’ Instagram Following has Exploded in a Year

It's a cult.

From Digiday:
The Financial Times has found an unlikely outlet for its charts and graphics: Instagram.
A year ago, it had 40,000 followers to its Instagram account. Now, it’s at 286,000, and it’s adding thousands by the day, according to the publisher.

“It’s important to make sure we’re not just joining in with what other publications are doing, that we have our distinct voice and identity,” said Jake Grovum, social media journalist at the FT, pointing out that many publishers get their images from the same newswire service. “That’s why we post things that are not necessarily Instagram-friendly, like a chart on how U.S. and U.K. bonds have performed.”

Last week, for instance, it posted two charts and one graphic to the platform. One on Microsoft’s share price reaching an all-time high since since its IPO was the most liked Instagram image of that day with 1,400 likes. It also featured a graphic on how debates have historically affected the U.S. presidential campaign and a chart on the space journey of the Schiaparelli probe. These are a mix of charts taken from the paper, or made specifically for social media, which have a different color-scheme and a black background.

The platform has proven versatile: There’s a place for breaking news, like when Michael Bloomberg announced he was running for president, as well as pieces made specifically for Instagram, like this report on the people around the financial district in London: the deli owners, newsagents, teachers and tailor. Grovum and three social media staffers in London together usually post between one and four images a day. Previously, this was much more intermittent. There’s also room for images that typically would do well on Instagram: Each day, it posts something from the FT photo diary, like this image on the Northern Lights, which had over 2,000 likes.

Instagram is not a traffic play, but the FT regularly updates the bio with links to projects it’s trying to promote. Currently, there’s a link to the Future of Britain, a project on how Britain will look after it leaves the EU. Previously, it has linked to reports on pensions in the U.K. and a poll tracker on the U.S. election....MORE

Tesla Motors Plans to Change How it Reports its Earnings (TSLA)

From Barron's Stocks to Watch:

Tesla Motors: Let Confusion Reign?
Tesla Motors’ (TSLA) plans to change how it reports its earnings, something that has the potential to cause plenty of confusion when it releases its earnings on Oct. 26. Oppenheimer’s Colin Rusch and team try to get in front of the change:
Given the potential confusion around Tesla’s anticipated reporting changes, we are publishing an updated model to help investors navigate these adjustments. The critical change in proforma revenue is the recognition of lease revenue not total vehicle value. Due to high percentage of deferred revenue (~35%), this change also materially changes EPS. We expect cash flow estimates to remain intact. We also believe the new reporting structure highlights the importance of Tesla’s lease partners and risks around Tesla’s used vehicle market whether it is older vehicles cannibalizing new sales or the brisk pace of innovation limiting interest in older vehicles. While used Tesla’s have held value well to date, we view the end of lease vehicle strategy as a critical variable for future cash needs….MORE

Arpa-E's $85 Million Plan to Build a Battery the Size of the Grid (or something)

The Institute of Electrical and Electronics Engineers seem to know some stuff about electricity.
From IEEE Spectrum:
As the electric grid is increasingly powered by renewables, it will need energy storage for when the wind isn’t blowing and the sun isn’t shining. But the three top grid-scale energy storage technologies today—pumped hydropower, lithium-ion batteries and “flow” batteries—arguably, aren’t up to the challenge.

The U.S. Department of Energy’s technology incubator ARPA-E (Advanced Research Projects Agency-Energy) wants to change that. It’s going long on a number of high-risk, high-reward R&D projects that might change the entire grid storage equation. U.S. Energy Secretary Ernest Moniz has said he thinks grid-scale battery storage will be the key innovation that enables the grid to completely decarbonize by midcentury.

“There’s a lot of discussion about what the grid of the future will look like,” says Eric Rohlfing, ARPA-E Deputy Director for Technology. “Of course what we want to do is enable much higher penetration of renewables. So storage is an obvious way to do that… The two key points of grid storage are: it has to be cheap, and it has to be durable—to go through a lot of cycles.”

Here’s the grid-energy storage landscape today: Pumped hydropower, in which excess electric power pumps water uphill and is returned to the grid using water turbines when that water is released back downhill, makes up 95 percent of today’s grid-scale energy storage, according to ARPA-E. In total, it contributes 20.4 gigawatts of generating capacity to the grid. However, pumped hydro requires compliance with land use and environmental regulations, huge supplies of water, and big hills to pump the water up. So, while it’s reliable and cheap, it’s not broadly or universally scalable.

Lithium-ion batteries have powered the consumer electronics revolution of the past 30 years, but they’re also expensive, compared to, say, pumped hydro. And their flammability, as Samsung Galaxy Note 7 customers know, could be more than just an inconvenience if a grid-sized battery farm went full Hindenburg with a flame out. So, at the grid scale, lithium ions could perhaps only be scored partly reliable, affordable, or scalable.

The flow battery, another promising technology, stores its power in vats of electrolyte; it’s scaled up simply by adding more vats. Though flow batteries represent a new frontier of grid-scale reliability, at present they’re also expensive.

According to a recent report, ARPA-E has invested $85 million in energy storage research projects since 2009. The website for ARPA-E chronicles some 73 projects at companies, labs, and universities—among them, MIT, Harvard, Stanford, UCLA, Penn State, Oak Ridge National Laboratory, Lawrence Livermore National Laboratory, Ford, Boeing and General Electric.

Today there are already grid-scale energy storage technologies based on simple scientific principles that everyone learned in high school physics. Lift a mass m to a height h, and its gravitational potential energy is m times h times the acceleration due to gravity (9.8 meters per second squared).
All of which means unused energy on the grid can be readily stored in the form of mass—typically, water or slabs of metal or concrete—that’s been lifted or pumped up a hill. Then when the grid needs that energy, what’s gone up is allowed to come down, and the stored energy is then recaptured via water turbines or regenerative braking devices.

In April, the U.S. Bureau of Land Management granted the California-based company Advanced Rail Energy Storage, or ARES, a right-of-way lease to test out a rocks-on-railcars energy storage idea on a 43-hectare parcel of public land in southern Nevada. The ARES project is expected to store 12.5 megawatt-hours of energy with 50 megawatts of power capacity. And according to the company, its patented technology can be scaled up. As ARES’s CEO James Kelly told the electric utility industry blog Utility Dive in April: “If we had a 500-MW project, we could double the capacity, and it would only increase capital costs by 20 percent.”

On the other hand, says Rohlfing, pumped hydropower is limited in a crucial way:
It can’t be deployed everywhere. Let’s say you want to alleviate the problem of storage in the [U.S.] desert southwest. Where are you going to get the hydro, and where are you going to pump it? There need to be a variety of solutions to address the storage problem. Pumped hydro is demonstrated, it’s successful, and it’s low cost. And, in fact, that was one of the drivers for electrochemical batteries. We wanted to be as cheap as pumped hydro. That’s challenging. That’s very hard.
With that in mind, ARPA-E has set some lofty goals for the electrochemical battery research it supports: a price of $100 per installed kilowatt-hour of grid storage; 5000 charge-discharge cycles (i.e. 10 years of system life); and a roundtrip efficiency of 80 percent or greater per charge-discharge cycle.

Of the 73 energy storage projects listed on ARPA-E’s website, the agency recognizes eight grid-storage technologies that it says are very promising and/or well along the path to wide-scale deployment. (IEEE Spectrum will feature an interview with representatives from two of those eight ARPA-E-highlighted storage projects in future posts.)

In general, says Rohlfing, electrochemical batteries still rank among the most promising energy storage technologies—but not necessarily the lithium-ion kind that Elon Musk touts with his Tesla Powerwall home storage system....MORE

Templeton's Mark Mobius Reveals Strategy For Picking Small-Cap Multibagger Stocks & Also Offers Stock Tip As Diwali Gift

Is gold going out of style for the Holiday?

From the Rakesh Jhunjhunwala fanboi site:
Mark Mobius, the visionary fund manager of Templeton Mutual Fund, is a battle-scarred champion of the stock market with several multibagger stock picks to his credit. Tanvir Gill of ET has charmed him into revealing all top secrets of the techniques he adopts to find the winner stocks and has also got him to recommend a stock as a Diwali gift to us 
Tanvir Gill, the young-faced editor of ET Now, is one of the most pleasant faces on television. Her stylish mannerisms and charming smile mesmerizes the audience and they stay glued to the show, resulting in super-high TRPs for the channel.
However, Tanvir’s USP is not only her effervescent personality and charming smile but that she has also a deep knowledge of stocks and a razor-sharp mind. She is also a master of psychology and knows how to get her guests to reveal secrets that the audience wants to hear.
One can see this play out in Tanvir’s latest interview of Mark Mobius, the legendary fund manager with Templeton, the trillion-dollar global Mutual Fund.
When Mark Mobius started straying from the topic and began dilating on academic global macro-economic issues, Tanvir rightly sensed that the audience would soon lose interest. She tactfully and skilfully brought Mark Mobius back on track and got him to reveal information on specific stocks and strategies.
I know you are not going to talk stocks though I would want you to talk stocks”, Tanvir started off in a firm tone, laying down the terms of engagement.

She then coaxed him to give three ground rules that have never failed while picking up a multibagger idea within the small cap universe.

Three-fold strategy to finding multibagger small-cap stocks

Mark Mobius cautioned that small-cap and midcap stocks represent risky businesses with unpredictable business cycles. He warned that the companies are owned by the promoter-families and that there are doubts about the integrity of the management.

However, he assured that if investors follow his three-fold strategy, they could avoid the deadly stocks and at the same time home in on winning stocks that can become multibaggers:
(i) Ensure that the Company has very good management. The management must be people with integrity. They must also be people with good management know-how and with a deep understanding of the market. They must also know how to relate to investors. The corporate governance of the Company must be impeccable.

Mobius emphasized that quality of management is “very, very important”. He added that his fund does a lot of intensive research into the people behind the companies before investing any funds in it....MORE, including the Diwali gift.
HT: Alpha Ideas

Tuesday, October 25, 2016

Funds In The Agricultural Commodities

Symbol        Last      Chg
Corn           349-6   +1-4
Soybeans    993-2 +1-2
Wheat        404-4 +2-0

From Agrimoney:

AM markets: soybean, vegoil futures take turn under pressure
Fund watching in ags is sometimes a bit like a playground game.

As soon as they are spotted, funds seem to have a habit of freezing.

As in the last session, when just as all eyes had focused on the twin boost to grain prices of short-covering and (unconfirmed, but suspected) cash inflows, the support stopped, sending prices sharply lower.

"Wheat does the Icarus," ie the mythological figure that burned then crashed, was how Tobin Gorey at Commonwealth Bank of Australia described the session.

'Concern about production'On Tuesday, it was the turn of parts (but not all) of the oilseed sector to raise questions of whether it had been flying a bit close to the sun. 
Kuala Lumpur palm oil futures for January - which in the last session touched 2,828 ringgit a tonne, the highest for a benchmark contract since March 2014, and indeed have been a flagship for the oilseeds rally – turned tail and shed 1.8% to 2,772 ringgit a tonne as of 09:45 UK time (03:45 Chicago time).

Worries remain over Malaysian palm oil production, with trees still suffering a hangover from El Nino-inspired drought a few months ago

"There is concern about palm oil production in Malaysia coupled with hopes of increasing demand into China that is fuelling the rally," said Joe Lardy at broker CHS Hedging.

That said, the market may need proof of output decline, potentially from official Malaysian Palm Oil Board data early next month, to continue the rally, besides ideas of decent export demand.

Latest statistics from both cargo surveyors SGS and ITS showed Malaysian exports running 10.9% lower in the first 25 days of October than in the same period of last month.

Prices dipWith palm oil lower, Chicago-traded soyoil dropped too, by 0.6% to 35.77 cents a pound for December delivery.

And that undermined soybeans themselves, which dropped by 0.4% to $9.88 a bushel for November delivery, and by 0.4% to $9.98 ¼ a bushel for January.

US Department of Agriculture data overnight on US crop progress offered little help, in showing the US harvest bang in line with the five-year average, at 76% complete as of Sunday.

'Turnaround Tuesday'And the weather outlook for South America - where farmers are planting soybean crops, and so which could be a potential source of risk premium – was not so helpful either.

"Forecasters say South America will receive regular rounds of showers over the next fortnight to keep soils favourable for planting and establishment," said CBA's Tobin Gorey.

In fact, Terry Reilly said that price volatility is "considered low for this time of year for traders looking for an eventual South American weather play later this year".

Meanwhile, Benson Quinn Commodities flagged negative technical signals, saying that soybeans are "well overbought and due for technical correction so look for 'turnaround Tuesday' selling to develop overnight and Tuesday".

Turnaround Tuesday-ishTurnaround Tuesday is the idea among (mainly Chicago) grain traders that strong price trends on the first day of the week are reversed a bit in the second session.

But, while working for soybeans and soyoil, the adage had lost its edge when it came to grain markets.

Corn futures for December were higher, but only by 0.25 cents a bushel at $3.48 ½ a bushel, still 4 cents down for the week.

Again, the USDA crop progress data were not much help, showing the US harvest 61% complete, only 1 point behind the five-year average despite some wet Midwest weather....

DARPA’s Autonomous Ship Is Patrolling the Seas with a Parasailing Radar

From MIT's Technology Review:

Forget self-driving cars—this is the robotic technology that the military wants to use.
California may be the home of Google’s robotic cars, but just off the coast, DARPA is testing technology that puts the search giant’s trundling little autonomous marshmallows to shame.
The defense agency’s robotic ship—the Continuous Trail Unmanned Vessel, to those in the know—has been running sea trials on its new radar system. But the technology doesn’t sit aboard the ship: instead, it’s slung behind it on a parasail in order to reach heights of between 500 and 1,500 feet.
Tests show that the extra altitude boosts the radar’s effectiveness, vastly extending its range beyond what's possible when it’s simply fixed to a ship’s mast. DARPA believes this is what the future of naval warfare looks like: drone boats out patrolling in potentially hostile waters, while manned boats remain out of harm’s way for as long as possible....MORE

Yes, Yes NVIDIA Set New All-Time Highs Yesterday and Today, However... (NVDA)

$71.56 up 85 cents after hitting $71.66.

Last week when Tesla formalized their relationship with NVIDIA, something we had already assumed into NVDA's stock price when TSLA parted ways with MobilEye, there was happiness among the longs that we didn't join.

Some analysts were forecasting as much as a billion bucks of revenue to NVDA but we have to caution: until Tesla proves it will be able to raise the cash they need, by actually, well, raising the cash, there is a greater than trivial chance that the illiquidy forces Musk's baby into a reorg.

And then this week we got the gaming news with Nintendo's Switch which may set up a 5% bump in revenues going forward but doesn't address the key market opportunity driving the stock: Artificial Intelligence.
And we won't know how that's going until next week.
In the meantime here are the stories of the past few days.

From Investopedia, Oct. 20:

Nvidia Could Make $1B From Tesla's Self-Driving Decree: Analyst (TSLA, NVDA)
NVIDIA Corp. (NVDA) is the unlikely winner of Tesla Motors Corp.’s (TSLA) decision to equip all cars in production with hardware required for self-driving. (See also: Tesla Announces Self-Driving Hardware For All Cars In Production).

According to Mizuho Securities analyst Vijay Rakesh, Tesla’s decision could translate into an additional $25 million to $1 billion per year in revenue for the chip company, based on Tesla’s current production estimates and the type of chipsets it uses. The Drive PX chipsets made by Tesla retail for between $250 to $300. Assuming a production estimate of 90,000 cars, this could mean $25 million for Nvidia.

If Tesla decides to go with the more expensive Titan GPU (which retails for $1200 per chip), then the same figure bumps up to a billion dollars. However, Rakesh states that addition of 2-4 Titan GPUs per Model 3, which is expected to cost $35,000, might prove to be “price exorbitant” for Tesla.
Tesla announced the addition of self-driving hardware equipment for all cars in production during a conference call yesterday. The Palo Alto-based car company also said that the eventual goal was to make a road trip from New York City to Los Angeles using self-driving car technology.

Tesla’s decision to go with Nvidia technology follows its rift with previous supplier Mobileye NV (MBLY). (See also: Tesla Fires Back At Mobileye Accusations). According to a report in online publication Electrek, the company has been experimenting with Nvidia’s parallel computing platform to develop Tesla vision, an end-to-end computer vision framework that enables detection, processing, and learning from raw images in surroundings....MORE
And from Barron's Tech Trader Daily:

Nvidia Surges: Jefferies Sees $320M Per Year in Nintendo’s ‘Switch’
Following word last week that chip maker Nvidia (NVDA) will sell parts that power Nintendo‘s (NTDOY) new “Switch” video game system, Jefferies & Co.’s Mark Lipacis today pounded the table for shares of Nvidia, reiterating his Buy rating, and his $80 price target, after concluding the new machine is worth as much as $320 million a year for Nvidia.

To put that in perspective, Nvidia is projected to make total revenue of $6 billion this fiscal year ending in January.

Nvidia shares today closed up $3.17, or almost 5%, at $70.71.
“We estimate this to be a $200-$320m annual opportunity for NVDA near term,” writes Lipacis of the Switch.

“While the incremental dollars would likely be margin dilutive, we view upside potential to our sales and EPS estimates of $0.11-0.16 in 2017.”

Lipacis gives the rundown of Nvidia’s work on Switch:
It appears that the Switch will be powered by an NVDA Tegra processor. NVDA created new gaming APIs to take full advantage of the custom software on the device. NVDA stated that gameplay is further enhanced by hardware-accelerated video playback and custom software for audio effects and rendering. We suspect the processing performance will be lower than the Sony PlayStation or the Microsoft Xbox. NVDA’s expertise in providing high-performance graphics should help boost gameplay as well as demand for the hybrid console.

This is an outgrowth of Nvidia’s “Shield” game console, which had mixed success: “NVDA’s history in a mobile gaming form factor dates back to its SHIELD product, originally launched in 2013....MORE
The market is looking for record earnings to go with the record stock price and any perception of failure to meet expectations, whether justified or not, could set up a tumble.

We continue to bet on one of the class acts of Silicon valley but investors have to know what  they have here and unless they are willing to ride a 20% down move to get to greater glory profits they should maybe go buy some T-bills.

NVDA NVIDIA Corporation daily Stock Chart

That Time the FT's Kaminska Beat the Telegraph's Evans-Pritchard To the Big Macro Story

Not that they are in direct competition but they do have similar ambits.

Last Friday we saw something increasingly rare at the perch of Alphaville's benevolent dictator, Paul Murphy; Izabella stopped by the Markets Live post:
PM So, what else
IK Hi there
PM Izzy was threatening to join us
PM Ah there you are Izzy!
IK Just wanted to come in to spare Paul from talking to himself
PM I thought you’d wondered off
PM What’s on your mind?
IK Inflation
IK It’s back
IK In case you haven’t noticed
PM Emoticon
PM I had noticed, from a personal perspective
PM But didnt think it was actually showing thru in official figures as yet
IK But I don’t think it’s just a British thing. Huge pick up in my inbox of thought pieces focused on the return of inflation in 2017 (potentially in a big way)
PM But go on
IK And it’s not just me who thinks it may be a thing
IK (not to go all zerohegde on this)
IK From my inbox today
PM (No, don’t go ZH on us)
The death of deflation?
Dear Izabella,
Please join Dario Perkins for a conference call at 15:00 (UK time) on Wednesday 26th October where he will answer questions on major macro drivers such as :
· Will inflation taken over from deflation in 2017?
· Could we see another taper tantrum in bond markets, or worse a repeat of 1994?
· Can central banks do anything to manage these risks (e.g. Japanese-style yield targeting)
· How vulnerable are asset prices to rising yields?
IK But i’m more interested in the anecdotal stuff.
PM hmm
PM Go on
IK (I’m not saying it’s a bad thing guys!)
IK I think the really interesting stuff is happening on the freemium model side of things
PM In what sense?
IK We heard marc andreessen calling for start-ups to start raising prices earlier this year. And then there’s all sorts of anecdotal stuff like Spotify looking to charge
IK Or rather to windup some of the freemium stuff
IK And just personally. All the stuff i used to be able to get for free on the internet (like picture editing websites), all suddenly behind paywalls
IK Is it just me? Maybe....

She followed up on her guest appearance with "Have we crossed the inflation Rubicon?"
(I know the timestamps say otherwise, I'm going by the order the posts hit the feedreaders)

On Saturday the estimable International Business Editor of the Telegraph, AEP, posted "Inflation: next year's ticking time bomb" which focused on the British angle, what with the declining price of the £ when purchased in other currencies.

This all ties into something we have observed that, while not inflation per se, points in that direction.
Take a look at some of the commodities tracked by FinViz (on blogroll at right).
It's certainly not, by any stretch, all of them but enough to signal something may be afoot:

Although strangely the precious metals seem to have given up the ghost (we are still thinking $875 gold, which would imply nasty stagflation).

That's some of the stuff we're looking at these last few days.