Apple’s misjudgment over San Bernardino - Financial Times

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February 18, 2016 6:21 pm

Apple’s misjudgment over San Bernardino

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Cook should drop his objection to the FBI order on iPhone access

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ver since Edward Snowden revealed the extent of mass surveillance of private communications by the US and UK intelligence agencies, technology groups and governments have had an increasingly fractious relationship.

The American and British security services insist they must maintain the right to penetrate secure networks to combat the growing threat of jihadi terror. The US tech companies counter that they should be allowed to protect customer privacy. The FBI has now brought this stand-off to a head with a court order requiring Apple to help unblock an iPhone used by one of the perpetrators of the fatal San Bernardino shooting last December.

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Tim Cook, Apple’s chief executive, has decided to challenge the order, voicing his company’s strong objection to a “chilling” example of “over-reach by the US government”. After the Snowden revelations, Apple, like other tech companies, is entitled to scrutinise any such request carefully. But Mr Cook’s outright resistance in this particular case is a serious misjudgment.

The San Bernardino murders took place in Apple’s home state of California. Fourteen people died and 22 were injured. The perpetrators, Syed Rizwan Farook, and his wife, Tashfeen Malik, were later killed in a police shootout. The FBI is seeking access to the contents of Farook’s iPhone. Apple makes a commercial virtue of the fact it cannot itself reach the data on iPhones, but a court has ordered it to create software that would allow the FBI to circumvent certain security measures, using an identifier supplied by Apple specifically for Farook’s device. 

Mr Cook argues these measures would “undeniably create a backdoor” to every iPhone. If the FBI were seeking blanket access to private data on all iPhones that would be a legitimate concern. The FBI is doing no such thing. It wants to decrypt this particular handset. Any subsequent use of the software would require a separate court order, a vital safeguard.

Mr Cook’s message to customers implies a further concern that granting access to this iPhone will set a precedent for other governments to make similar demands. True, Apple would find it harder to resist orders to help authorities from less friendly jurisdictions; and it is possible to imagine prosecutors in, say, China or the Middle East demanding access to the devices of dissidents or troublemakers. Even so, it is equally possible to imagine situations, such as a murder investigation, where Apple could and should co-operate with any prosecuting authority.

Podcast

Apple versus the FBI

Apple has taken a stand against a US court order that it must help the FBI unblock an iPhone used by one of the San Bernardino shooters. Ravi Mattu discusses the FBI request and Apple’s response with Sam Jones, FT defence and security editor, and Tim Bradshaw, San Francisco correspondent. Music by David Sappa.

The FBI’s case is strong. Indeed, it could hardly be stronger. It has not mounted a vague fishing expedition. It wants to investigate an act of terrorism carried out by US citizens, on US citizens, on US soil. 

Mr Cook’s firm initial response to the court order has won support from other tech companies, such as Google and WhatsApp, and applause from privacy campaigners, including Mr Snowden himself. He tweeted that it was “the most important tech case in a decade”. But Apple’s chief executive has overplayed his hand. He should back down and, subject to specific safeguards, enable FBI access to this device.

There is a broader point. Mr Cook may say he is acting to protect the privacy of all iPhone users. But Apple and other US technology companies sometimes give the impression that they float above national jurisdictions, notably in tax and other regulatory matters. The San Bernardino case should concentrate minds. Apple, and others, need to realise that, however powerful they are, and however popular their products, they do not live in a moral universe of their own creation.

Russia and Saudi Arabia Agree to Freeze Oil Production - TIME business

Russia and Saudi Arabia Agree to Freeze Oil Production Posted: 16 Feb 2016 06:15 AM PST (DUBAI) — Russia’s energy minister said Tuesday that his country has agreed with OPEC members Saudi Arabia, Qatar and Venezuela to freeze oil production levels if other producers do the same. The ministry quoted Energy Minister Alexander Novak announcing the decision following an unexpected, closed-door meeting involving the four countries in the Qatari capital, Doha. The meeting reflects growing concern among major oil producers about the effects a prolonged slump in crude prices will have on their domestic economies. Novak said the countries are willing to freeze output levels at January levels “if other oil producers join the initiative.” Getting other major oil suppliers to go along with that plan could be tricky. Prices have fallen sharply since summer 2014, leaving producers scrambling to win market share from competitors. Oil prices rose following the meeting, with a barrel of benchmark New York crude trading up 77 cents at $30.21. A barrel of Brent, the international standard, gained 89 cents to $34.28. Speaking to reporters after the meeting, Saudi Oil Minister Ali Naimi said producers would continue to assess the state of the market in the months ahead. He described freezing output at January levels as an adequate step for now. All of the countries at the meeting except Russia are part of OPEC, which has refused to cut its official production targets, a move that would bolster faltering prices. Saudi Arabia dominates policy-making within the 13-member bloc of oil producing countries. The aim of OPEC’s keep-pumping strategy has been to attempt to ride out the 12-year lows in prices and force higher-cost producers, such as shale drillers in the U.S., out of the market. Notably absent from Tuesday’s meeting was Iran, which shares control of a major underwater natural gas field with Qatar. It is eager to ramp up its exports now that sanctions related to its nuclear program have been lifted, saying recently it aims to put another 500,000 barrels a day on the market. Jason Tuvey, Middle East economist at Capital Economics, said Tuesday’s agreement should help support prices. But he noted that only some OPEC members have signed on to the deal, and that compliance with the bloc’s own quotas has long been a challenge for the group. “Even if output is frozen, this will still be at extremely high levels,” he added. “Saudi oil production remains close to record highs” of more than 10 million barrels a day.

Volkswagen’s Former CEO ‘Knew About Defeat Device in Early 2014’ - Fortune

Volkswagen’s Former CEO ‘Knew About Defeat Device in Early 2014’

Posted: 15 Feb 2016 08:59 PM PST

The role of Volkswagen AG’s top management in the diesel emissions scandal came under increased scrutiny at the weekend, after a German newspaper reported that then-chief executive Martin Winterkorn knew about the risk of a U.S. investigation into the use of so-called ‘defeat devices’ as early as May 2014.
The Sunday edition of the tabloid Bild-Zeitung (German-language, paywall) a mass-circulation tabloid, reported that a senior member of VW’s staff had alerted Winterkorn in May about the fact that the Environmental Protection Agency and California Air Resources Board were zeroing in on excessive emissions of nitrogen oxides in VW’s diesel cars. It said the alert was given in an internal memo that has been uncovered by the internal investigation being carried out at VW’s order by law firm Jones Day.
“There is no well-founded explanation for the dramatically higher NOx emissions that can be given to the authorities,” the memo said. “It is to be suspected, that the authorities will examine the VW systems to see whether Volkswagen has installed engine management software (a so-called Defeat Device).”
It’s the second–still unconfirmed–leak suggesting that knowledge of the problems went far higher, far earlier, than VW admits. The German magazine ‘Manager’ had alleged that the VW brand’s management had already discussed the issue (specifically, a letter from the EPA) in the spring of 2014, citing minutes from the meeting.Winterkorn resigned in September, saying he hadn’t known anything about the manipulations, which the company has suggested was the result of a conspiracy among a small circle of engineers. According to various German media reports, Winterkorn has told Jones Day that although he knew of an issue with excess emissions in the U.S. in May 2014, he wasn’t aware of the use of defeat devices applied specifically to circumvent U.S. regulations. The head of VW’s operations in the U.S., Michael Horn, has made similar arguments.

The revelations may have an important bearing on the legal issues facing VW: U.S. authorities are typically inclined to exact higher penalties for wrongdoing, the more senior management was aware of it. In addition, the revelation strengthens the case of investors suing VW for creating a false market in its shares by failing to disclose the extent of the problem earlier. The scandal wiped more than €25 billion off the company’s shares initially.
Bild said the memo in question was penned by Bernd Gottweis. Gottweis had the reputation of being an internal ‘fire-fighter’ before Winterkorn took over as CEO in 2007, leading a team called the “Product Safety Taskforce,” which concentrated on crisis prevention and management. He was pulled out of retirement by VW in October, in the weeks following Winterkorn’s resignation.
According to Bertel Schmitt, a veteran reporter-turned-PR man-turned blogger, Gottweis’ duties occasionally set him against Winterkorn while the latter was still head of quality assurance at VW. In the years after Winterkorn took over as CEO, Schmitt writes, Gottweis was quietly sidelined.
Separately, Bild reported that a senior VW manager had already admitted the true level of emissions to a CARB official on August 5, over a month before the EPA issued its first Notice of Violations against the company, taking the scandal public. Bild added that VW brand chief Herbert Diess had convened meetings on Aug. 24 and 25 to discuss how to react to the scandal that was about to break.
VW had declined to comment on the report Sunday. A spokesman didn’t immediately respond to a request for comment Monday. Earlier this month, the company postponed its annual shareholder meeting and the publication of its annual results “with a view to questions that are still open regarding the consequences of the emissions issue, and valuation questions arising from it.”
This article originally appeared on Fortune.com

Japan’s Economy Contracts in Latest Setback for Abe Recovery - TIME Business

Japan’s Economy Contracts in Latest Setback for Abe Recovery

Posted: 14 Feb 2016 06:40 PM PST

(TOKYO) — Japan’s economy contracted at a 1.4% annual pace in the last quarter as weak consumer demand and slower exports battered the recovery.

Despite the lackluster report, Tokyo’s main share index, the Nikkei 225, jumped 4.4% to 15,615.84 in early trading Monday, helped by a weakening in the Japanese yen.

The latest contraction, the second in 2015, adds to worries that Prime Minister Shinzo Abe’s strategy for reviving the economy through inflation fueled by massive monetary easing is not delivering as promised. The slowdown in China, one of Japan’s biggest export markets, has been a further hindrance.

Japan’s central bank has already resorted to imposing negative interest rates on some bank deposits it holds to help spur more lending, though cash-rich companies appear generally uninterested in borrowing.

Growth also has been stunted by slow increases in wages, which leave households less inclined to spend. Companies are still drawing down excess capacity built up during decades of fast growth, and have held back on domestic investments, viewing their shrinking and aging home market as less attractive than other faster growing economies in Southeast Asia and elsewhere.

Consumer demand fell more than expected in the last quarter, dipping to a four-year low, offsetting moderate growth in business investment, said Marcel Thieliant of Capital Economics. He expects consumer demand to perk up in coming months, in anticipation of a sales tax hike, to 10% from 8%, in April 2017.

“However, this should be short-lived, as activity will almost certainly slump once the tax has been raised,” Thieliant said. “The upshot is that the Bank of Japan still has plenty of work to do to boost price pressures.”

Despite the zigzags in growth last year, the economy eked out a 0.4% expansion in 2015, better than the flat-lining of 2014. But that pace of growth falls far short of the expansion needed to achieve Abe’s goal of a 600 trillion yen ($5.3 trillion) economy by 2020.

With the Japanese currency at a level of about 113.5 yen to the dollar, and some economists forecasting it could rise further as investors seek refuge from financial market volatility in a traditional “safe haven,” corporate profits will likely grow less than in recent years, adding to pressures on growth.

Abe has been maneuvering ahead of an election for the upper house of Japan’s parliament this summer. One possible tactic to reassure voters and boost support for his ruling Liberal Democrats would be to postpone, for a second time, the tax hike meant to help mend tattered public finances.

AT&T Plans to Test 5G Wireless Connectivity in 2016 - Fortune

AT&T Plans to Test 5G Wireless Connectivity in 2016

Posted: 12 Feb 2016 10:58 AM PST

AT&T has unveiled its roadmap for bringing ultrafast wireless connectivity to the U.S.
The company announced Friday that it will start testing 5G wireless connectivity in 2016 as part of a plan to broadly roll out 5G connectivity across its network in the future. The company said in a statement on Friday that the 5G trials will start in Austin, TX by the end of this year, though the company cautioned that widespread connectivity to 5G likely won’t be available for several years.
“We’re conducting our 5G trials in such a way that we’ll be able to pivot to compliant commercial deployments once 5G technology standards are set,” the company said in a statement. “The international standards body, 3GPP, will likely complete the first phase of that process in 2018.”
Indeed, 5G connectivity is unlikely to have widespread availability across the U.S. until 2020, at the earliest.
In an interview with Fortune last year, Tom Sawanobori, CTO at industry organization CTIA, noted that 5G has yet to reach industry-standard status. The standards will determine how 5G must create connections between devices and cellular towers and what services it could provide. He told Fortune that 5G will go through several “iterations” before an international standard is endorsed.
Still, debate rages over when 5G could make its way to the market. Verizon, AT&T’s chief competitor and another company conducting 5G trials this year, has said that it can get widespread 5G coverage to the market by 2017. AT&T responded to the claim last year, telling CNET that it was too early for any carrier to make 5G “promises.”
Philip Solis, research director at ABI Research, is far more bearish on 5G than the companies themselves. He toldFortune last year that he believes “5G will be deployed in full force—more coverage, more supporting devices, maximized implementation of technology—closer to 2030 than 2020.”

His comments followed Sawanobori’s claim that at least for right now, 4G long-term evolution (LTE), the predominant connectivity option today, will be “sufficient for the foreseeable future.”
For consumers, 5G could hold significant promise. When 5G finally makes its way to the market and devices start connecting to it, customers will see up to 100 times the Internet connection speeds they’re currently getting on a wireless network. As AT&T notes in its statement on Friday, whereas 4G LTE speeds are measured in megabits per second, 5G will be measured in gigabits per second. To put that into perspective, a standard-sized television show file could be downloaded in less than three seconds on 5G. On 4G LTE, it could take minutes.
So why start 5G testing now, even though its broader adoption is so far out? AT&T, like Verizon, believes that the market needs faster and more reliable networks as the number of devices calling on wireless data increases. The company said in a statement that since 2007, data usage on its network is up more than 150,000%, due in large part by widespread smartphone adoption and people using those handsets to watch video. Indeed, more than 60% of the company’s data traffic in 2015 came from video, AT&T says.
Looking ahead, AT&T says that it will use the data it gleans from its Austin trials to guide its rollout plans across the country.
“New experiences like virtual reality, self-driving cars, robotics, smart cities and more are about to test networks like never before,” John Donovan, chief strategy officer and group president at AT&T Technology and Operations said in a statement. “These technologies will be immersive, pervasive and responsive to customers. 5G will help make them a reality.”
This article originally appeared on Fortune.com

Gravitational waves: Science 'discovery of century' explained perfectly in one paragraph - The Independent

Gravitational waves: Science 'discovery of century' explained perfectly in one paragraph

The importance of the detection of gravitational waves - as predicted by Albert Einstein 100 years ago - has been captured in a "great" one-paragraph explanation of the scientific breakthrough.

Posted on Reddit, the description was among a series offered in a section of the forum website that asks users to "explain like I'm five".

One answer to the query "why is today's announcement of the discovery of gravitational waves important, and what are the ramifications?" impressed readers beyond all others.

The user said they had explained the discovery of "ripples in the fabric of spacetime" to a pair of five-year-olds earlier that day.

They wrote: "You know how when you throw a rock in a pool, there are ripples? And how if we throw bigger rocks in, they make bigger ripples?

"Well, a long time ago, a really smart guy named Einstein said that stars and planets and stuff should make ripples in space, and he used some really cool math to explain why he thought that.

"Lots of people checked the math and agree that he was right. But we've never been able to see those ripples before."

Albert Einstein predicted the existence of gravitational waves in 1916, as part of his theory of relativity. He said massive objects moving in space would cause "ripples" in spacetime - or gravitational waves.

A number of figures have come close to proving their existence, from Russian physicists to researchers at the Massachusettes Institute of Technology, with two American scientists coming closest in 1993.

The Reddit user continued: "Now some people built a really sensitive measuring thing that uses lasers to see them, and they just proved that their device works by seeing ripples from a really big splash.

"So now we know how to see them and we can get better at it, which will help us learn more about space."

The "sensitive measuring thing" is the twin Laser Interferometer Gravitational-wave Observatory (LIGO) detectors, which are in Louisiana and Washington in the US.

The "really big splash" that the LIGO detectors have measured is the merging of two massive black holes about 1.3 billion years ago - whose ripples are still washing past Earth.

Reddit users - including one apparent LIGO scientist - praised the answer.

"I read the other responses and felt dumber than before. This one really helped," said one user.

"This seems the most understandable," said another.

A user who said he was one of the 1,000 LIGO scientists who worked on the research said: "Great explanation! This discovery has ushered in an awesome new era of astronomy.

"Before we started detecting gravitational waves, looking out at the universe was like watching an orchestra without any sound."

How Much Does America’s Huge National Debt Actually Matter? - TIME

How Much Does America’s Huge National Debt Actually Matter?

Posted: 11 Feb 2016 06:48 AM PST

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After briefly surging to the forefront of the national debate, concerns about U.S. debt appear to have gradually dissipated in the body politic. A recent Pew survey found just slightly above half of Americans consider the budget deficit a top priority, down from 72% in 2013, and the issue has fallen in that time from the public’s number two priority (behind only the economy) to number nine.
But while deficit hawks may no longer hold as much sway, their concerns are still worth investigating, especially as election season approaches. The essential question: How much does national debt matter? For a country like the U.S. with a good payment history, (relatively) strong economy and control over its own currency, the answer at least for the moment, is “not too much.” To understand why, looking at the country’s total debt, which has nearly doubled following the financial crisis, matters less than how much it costs to finance our debt. That is, the most important number is the minimum payment on the credit card bill, rather the the total amount we owe.
Luckily for the U.S., that minimum payment has actually decreased even as total debt has risen. The more people want to buy U.S. debt (Treasury bonds), the lower interest payments the government needs to offer in order to incentivize those purchases, and American bonds are in high demand because they’re seen as a relatively safe investment in a troubled economic climate. As a result, the United States is forking over less in debt interest payments (as a percentage of GDP) now than it has since the late 1970s—even though the country owes significantly more.
Ok great, so we can borrow even more? Not exactly. While our debt load right now isn’t necessarily worth getting angsty about, thanks in large part to cheap cheap financing, at some point you really can have too much of a bad thing.
MORE: Why the World’s Debt Epidemic May Lead to a New Economic Crisis
Where exactly that point is continues to be a matter of dispute. There’s an ongoing controversy over whether a particular high debt watermark among advanced economies—such as a 90%-debt-to-GDP ratio—is broadly correlated with slower growth, or whether such thresholds are effectively arbitrary or too general to be of significance.
That debate has become heated at times, particularly because debt is such a partisan issue. But there may be more common ground than has generally been portrayed. Kenneth Rogoff, a Harvard professor who popularized the 90% hypothesis, says his point is simply that such a threshold should be very loosely considered a warning sign that invites further scrutiny of a nation’s economic fundamentals, such as growth potential, demographics, interest rates and fiscal policy. Robert Pollin, co-director of the Political Economy Research Institute at the University of Mass. Amherst and one of Rogoff’s primary critics, says there’s no basis to the 90% number and we should only be looking at those same economic fundamentals. There’s a real disagreement there, and one that has been heavily played up in the press, but it’s not exactly Montagues and Capulets.
Moody’s Analytics provides a sort of middle ground by creating a per-country debt threshold using a concept concept called “fiscal space.” In this framework, each country is assigned a debt-to-GDP limit—based on its economic growth forecast, interest rates, and other factors—beyond which point the nation “will default unless policymakers take unprecedented steps.”

This has the benefit of avoiding a one-size-fits-all rule and gives a nuanced picture of debt load as a matter of risk management. Maintain at least 124 points of fiscal space and Moody’s considers your country in the safe zone. Fall below that and you’re in the “caution” area, then “significant risk,” and so on. It’s also effective at showing how debt realistically impacts advanced countries—not necessarily through outright default, but rather via unpleasant emergency measures like higher taxes and dramatically lower spending.
MORE: This One Chart Explains Why Twitter Is in Trouble
The U.S. ranks somewhere in the middle of the fiscal space picture at 165, with 41 debt-to-GDP points to spare before we enter the caution zone. That means we have a decent amount of spending room before Moody’s ratings start to sound dire. For comparison, Norway leads the fiscal space list with a score of 246, the U.K. comes in a 132, slightly outside the caution area, and Japan is right in the red with a last-place score of 0.
However, Mark Zandi, chief economist at Moody’s Analytics, emphasizes that the fiscal space score shouldn’t be considered without broader context. For example, he says even increasing debt within safe levels can edge up interest rates over time, raising the cost of debt, or leaving less room for maneuver should another financial crisis strike. On the other hand, in the current economic environment of low interest rates, low inflation, and relatively low growth, more spending on items like infrastructure or education might actually be a good idea by increasing productivity and stimulating the economy. A report last year from the International Monetary Fund suggests that countries in the fiscal space safe zone might be better served living with their debts and trying to outgrow them through long-term economic expansion instead of trying to suffer the pain (and potential economic damage) of cutting productive spending or raising taxes.
But while the U.S. is far from trouble at the moment, it will have to clean up its fiscal house at some point. The Congressional Budget Office projects public debt in 2026 will jump ten points to 86% of GDP, and will hit a record 155% of GDP in three decades. Interest on debt, that minimum credit card payment, is projected to eclipse military spending by 2021, putting the squeeze on other fiscal priorities. If spending continues on its projected course and nothing is changed, debt interest payments will become a larger government expense than even Social Security by about 2060.
The CBO says we can we can keep debt-to-GDP levels where they are now by either cutting spending or raising taxes by 1.1% of GDP if we start now, or 1.9% if we start in ten years (returning to historically normal levels will take more severe measures). That’s not a huge burden, but it will get more painful the longer we wait.
“At this point what we’re doing is fine, we shouldn’t necessarily be focussed on the fiscal situation,” Zandi says. “But you look into the next decade, and then three decades from now, things are going to break.”

Instagram’s Newest Feature Is a Bigger Deal Than It Seems - TIME Business

Instagram’s Newest Feature Is a Bigger Deal Than It Seems

Posted: 09 Feb 2016 08:49 AM PST

Instagram announced Monday that it’s finally adding a much-desired feature: The ability to switch between multiple accounts without having to log out.
The photo-sharing app’s new functionality is an obvious boon for the social media managers of the world. But it’s likely to see adoption from Instagram’s everyday users as well, as there’s a growing contingent of people actively living double lives on the platform.
For some of Instagram’s youngest users, maintaining the carefully edited, jealousy-inducing persona that a successful Instagram account requires—every post showing you living your best possible life—has become tiring. So they have taken to creating fake Instagrams, or “finstagrams,” which are private accounts not tied to their real names. You only share your finstagram account with your closest friends, so you have the freedom to share pictures that are not agonizingly framed to get the maximum number of likes.

“You post things you wouldn’t want people other than your friends to see, like unattractive pictures, random stories about your day and drunk pictures from parties,” Amy Wesson, an 18-year-old Trinity College student, told The New York Timeslast fall. The spontaneity and freedom of a finstagram is similar to the vibe of Facebook in its early days, before the parents invaded, or Snapchat, whose disappearing photos encourage a certain level of visual honesty.

Is this a change that will massively increase Instagram’s user base? Probably not. But it’s likely to keep teens more satisfied with the platform and less likely to grow restless and move on to the next hot social app. Now they’ll have the best of both worlds: a place to show off and a place to communicate intimately with friends.

From ZIRP to NIRP: What's the Fed's next move? - CNBC

From ZIRP to NIRP: What's the Fed's next move?

Jeff Cox | @JeffCoxCNBCcom

Negative interest rates in the U.S. may seem like a far-fetched idea, but the Federal Reserve is telling banks to prepare, just in case. 

For the first time ever, the governing agency and U.S. central bank is requiring banks to include, in a round of stress tests commencing this year, to prepare for the possibility of negatively yielding Treasury rates. The scenario is purely hypothetical and not a forecast, according to a Jan. 28 Fed news release .

However, the development is part of a larger scenario of a world where zero rates are morphing into negative rates.

This is how beggar-thy-neighbor monetary policies work, and perhaps why they ultimately fail. 

One nation mired in an economic slump decides that the best way out is to devalue its currency, cheapening its exports and thus making them more attractive in countries that have higher-yielding currencies and, consequently, more buying power. 

Seeing the success that country has, another seeks to emulate. And then another. And another. And another. In order to stay ahead of the game, central banks keep devaluing until there's nothing left, tangibly at least, to devalue, and negative interest rates come into play. 

Read MoreWill negative rates deck Japan's banks?

Pretty soon you have nearly a third of all sovereign debt holding negative yields. In turn, what seemed like a powerful tool to stimulate lending and export-led economic growth becomes a toothless tiger that global central banks continue to deploy, the latest being in Japan. Suddenly, zero interest rate policy, or ZIRP, has morphed into negative interest rate policy, or NIRP. 

This is no dystopian hypothetical. This is what central banking has become in a global economy beset by meager growth. 

Worries are growing that the Federal Reserve soon could bring NIRP to U.S. rates. Japan went to NIRP last week, and the yield on the 10-year Japanese government bond went negative overnight Monday for the first time ever. 

"It appears that NIRP is becoming the main policy tool for a number of major central banks as they battle falling inflation, rising currencies and economic weakness," Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said in an analysis. "The effectiveness of slightly negative interest rates is far from assured, and increasingly negative interest rates may not just weigh more heavily on the stock market, but on drivers of economic growth as well." 

Read MoreNegative rates in US? Here's why it could happen

Indeed, ZIRP seemed to pull stock markets higher, but the spreading of NIRP has coincided with a sharp global equity decline, particularly in financial stocks. 

The Fed's chances of going to NIRP seem, at least now, to be slim. Its policymaking arm, the Federal Open Market Committee, just hiked its interest target in December for the first time in nine years, so changing now would seem like a stunning retreat. 

Yet several high-ranking officials recently have paid at least lip service to the idea. 

In a speech last week, Fed Vice Chair Stanley Fischer said Europe's experiment with negative rates is "working better than I expected," raising speculation that should things deteriorate the U.S. central bank would consider going negative. 

Negative rates in the U.S. would begin with the interest paid on excess reserves that banks store at the Fed, a number currently at $2.15 trillion that earns 0.5 percent interest. The idea would be to charge banks to store reserves, making the cost prohibitive to let the money lie fallow there and push it into the broader economy through lending, thus stimulating growth.

It's an idea that works in theory and, for a period, worked in practice for the four European governments that tried it. However, there are problems. 

Read MoreThe recession signal investors may be missing

One is that banks would need to make up that lost revenue someplace and instead of lending could amp up fees and rates. Another is that the more countries that join in, the less effective one nation's low or negative interest rates are. 

Finally, in a problem that would be especially acute in the U.S., negative rates could send a jolt through the $2.75 trillion money market space and, some fear, lead to a "break the buck" scenario that occurred during the financial crisis when one large money market fund couldn't return par on its investments. 

"Things would have to get truly desperate to go to negative rates," Kim Rupert, managing director of global fixed income at Action Economics, said in an interview. "Our money markets are obviously the biggest in the world and have a lot of commitments tied to them and the liquidity for a lot of our economy. Jeopardizing the money markets would be too dramatic an effect for the Fed to consider going in that direction." 

Still, the futures market is indicating that if the Fed doesn't move to outright NIRP, the chances for an aggressive rate-hiking policy ahead, as indicated after the December rate rise, are nil. 

The CME's FedWatch tool briefly went into a kind of backwardation Monday, indicating a -2 percent chance for a rate hike at the March FOMC meeting (the probability quickly moved back to plus-2 percent). The tool's farthest date, February 2017, indicates just a 15 percent chance of an increase, the implication being no moves in 2016 even though the Fed's "dot plot" of official projections points to four hikes this year. 

The actual fed fund futures curve does not indicate a rate rise fully priced in until December 2017. 

Michael Darda, chief economist and market strategist at MKM Partners, thinks the Fed would be wise to heed market signals and pay less attention to its models, including the Phillips curve guideline, that indicate a faster tightening cycle. The Fed's moves to end ZIRP and quantitative easing, along with China's decision to peg the yuan to the dollar, "has translated into a tightening world monetary policy" similar to what happened in the 1930s. 

"The current risk is that policymakers are overly optimistic about the business cycle carrying on in a way that allows inflation to return to its target," Darda said in a note to clients. "Given the U.S. dollar's reserve currency status and the PBOC's quasi peg, global monetary conditions have tightened sharply, causing world nominal growth expectations to weaken. There are some disturbing parallels to 1937, in our view, that should continue to be monitored closely." 

What the Fed will need to weigh ultimately is whether going to NIRP is worth risking its credibility, and whether low or negative rates will have any discernible effect on financial conditions. Bank stocks already are in a bear market, the economy is slowing and damage from the energy sector clearly is seeping into other parts of the economy. 

Moving to NIRP now might be regarded as a panic reaction that actually could make things worse. 

"I don't think there are high odds that we're going to fall into a recession this year, but what if we did?" said Jim Paulsen chief investment strategist at Wells Capital Management. 

"If we went into recession now, when you had a zero short rate effectively and a sub-2 percent 10-year Treasury and a $4 trillion Fed balance sheet to spin out and a debt-to-GDP ratio that's 100 percent on sovereign government debt, I think there would be a fair amount of panic in the cultural mindset because there would be a sense that we went into recession and there's nothing anyone could do about it," he added. "That's a dangerous situation to put yourself in."

Facebook Just Got Dealt a Huge Setback in India - Fortune

Facebook Just Got Dealt a Huge Setback in India

Posted: 08 Feb 2016 06:48 AM PST

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Monica Lewinsky Launches Anti-Cyberbullying Emoji InitiativeNorth Korean Satellite Passed Over Super Bowl StadiumIndia’s telecommunications regulator has just banned the practice of zero rating, where operators charge different tariffs for different data services. That means mobile carriers can no longer charge for normal mobile data usage but exempt certain services from counting towards the data limit.
Crucially, Facebook’s Free Basics service, which gives people free access to a limited set of services through special partnerships with local mobile carriers, is now effectively dead in India. For the operators, the whole point of Free Basics is to get people used to the Internet, then encourage them to buy a data plan so they can see what people are linking to from the free services.

Free Basics was already the subject of intense controversy in India (and elsewhere), with Internet freedom activists pointing out that it is a violation of net neutrality. The service, once known as Internet.org, simply does not treat all content as equal.

Facebook last year partnered with local carrier Reliance to offer Free Basics in India, but the regulator, TRAI, temporarily suspended the deal in December. TRAI said it wanted time to consider whether Free Basics was in violation of net neutrality principles.
Now it’s made its decision. “No service provider shall offer or charge discriminatory tariffs for data services on the basis of content,” TRAI said Monday.
The only exceptions are for closed electronic communication networks, where the data doesn’t come from or go to the Internet, and for emergency-services data. If operators flout the new rule, they could find themselves paying up to 5 million rupees ($74,000) in fines.

Campaigners, such as those at Access Now, were delighted.
The move means India joins a very small group of countries that have decided to ban zero rating as a net neutrality violation. With many other countries across Asia, Africa and Latin America also being in Facebook’s sights, it will be interesting to see whether others choose to follow India’s lead.

The other countries that have so far decided to nix zero-rating include Chile, the Netherlands and Slovenia. However, that ban may soon lift in the latter two countries because the European Union just agreed a new set of harmonised net-neutrality rules for EU countries, and those rules do not mention zero rating.
It’s probably worth noting how the chairman of the French telecoms authority, ARCEP, greeted the Indian news:

Of course, not everyone sees zero rating as a bad thing. It essentially involves giving people free stuff, after all, and it may play a genuine role in getting people in poorer countries online for the first time. Facebook’s Free Basics package doesn’t only offer people Facebook services – it also tends to include things like local health and employment information and Wikipedia.
As Mark Zuckerberg complained last month: “Who could possibly be against this?”
However, it can certainly be an anticompetitive practice, as it helps certain services to entrench themselves while discouraging people from trying out their rivals. The debate over zero rating will rage on for a while yet – but in India, the jury is in.
This article originally appeared on Fortune.com

China Wants to Make Its Biggest Foreign Takeover Ever - Fortune

China Wants to Make Its Biggest Foreign Takeover Ever

Posted: 03 Feb 2016 08:35 AM PST

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North Korea’s Plan to Launch Rocket Earns Global CondemnationJapan Is Spending $107 Million to Rebuild a Tiny Pacific IslandChina made its boldest overseas takeover move yet when state-owned ChemChina made a $43 billion bid for Swiss seeds and pesticides group Syngenta on Wednesday.
The largest ever foreign purchase by a Chinese firm, announced by both companies, will accelerate a shake-up in global agrochemicals and marks a setback for U.S. firm Monsanto, which failed to buy Syngenta last year.
China is looking for ways to secure security of food supply for its population and the Syngenta deal will give it access to technology and expertise as well as global market share and Western distribution networks.
“Only around 10% of Chinese farmland is efficient. This is more than just a company buying another. This is a government attempting to address a real problem,” a source close to the deal told Reuters.
With growth slowing at home, Chinese companies are looking abroad for deals that can boost their businesses. If completed, the Syngenta acquisition would be more than double CNOOC’s $17.7 billion purchase of Canadian energy company Nexen in 2012.
Syngenta shares rose on news of the deal, but at around 412 Swiss francs, were some way below the agreed offer price of $465 per share, equivalent to 480 francs, reflecting market concerns that the deal could yet stumble over regulatory hurdles.
However, Syngenta CEO John Ramsay , who described the deal as “very appropriate and attractive,” said he saw no major barriers and noted that ChemChina had secure financing in place.
A source with knowledge of the deal said the funding would come from a range of Chinese players, as well as HSBC and China CITIC Bank International.
“I think the overall regulatory approvals will not be very challenging,” Ramsay told Reuters, adding he expected antitrust regulators to acknowledge the limited overlap.
The Committee on Foreign Investment in the United States (CFIUS), whose mandate is U.S. national security, would not pose a major hurdle, Ramsay said.

Syngenta’s board would still have to consider any rival offers, Ramsay said. But ChemChina, short for China National Chemical Corp., has agreed to pay about $3 billion in fees should it fail to meet all requirements for the deal, while Syngenta will owe ChemChina about $1.5 billion if the deal falls through for any reasons the Swiss group is accountable for.
“The discussions between our two companies have been friendly, constructive and cooperative, and we are delighted that this collaboration has led to the agreement,” ChemChina Chairman Ren Jianxin said.
In a hint of what may be in store for the enlarged group, Syngenta’s chairman said ChemChina will be on the lookout for more deals as China strives to improve its food supply.
“ChemChina has a very ambitious vision of the industry in the future. Obviously it is very interested in securing food supply for 1.5 billion people and as a result knows that only technology can get them there,” Michel Demare said.
China Calling
ChemChina’s move on Syngenta may be the biggest, but it is not the first as Chinese corporates shift offshore.
Similar deals include last year’s buyout of Italian tire maker Pirelli by ChemChina. In January, ChemChina announced the acquisition of German industrial machinery maker KraussMaffei Group for about $1 billion.
Beijing is keen to boost farming productivity as it seeks to cut reliance on food imports amid limited farm land, a growing population and higher meat consumption.
A global glut of corn and soybeans has depressed grain prices for the past three years, prompting U.S. farmers to reduce spending on everything from equipment to seeds and pesticides. The cutbacks, along with pressure from investors and a desire to bolster profit, have sent many of the world’s largest agricultural companies scrambling to cut deals.
DuPont and Dow Chemical agreed in December to combine in an all-stock merger valued at $130 billion in a first step towards breaking up into three separate businesses, a move that was seen as a trigger for further consolidation.
This article originally appeared on Fortune.com

Hillary Clinton is at her best when she's counted out, campaigning her heart out - Jill Abramson - The Guardian

There is a picture on the wall of the Espresso Café here in Portsmouth, New Hampshire, in a corner near the exit. Hillary Clinton is talking to voters, but it doesn’t show the famous “Hillary cried” moment from eight years ago, when the senator teared up on the eve of the presidential primary.

She was exhausted, and a loss to Barack Obama was predicted. Some pundits believed the unusual display of emotion was a turning point that helped show Clinton had a human side.

That was sexism. Why do powerful women need to show their softer side or shed tears to be considered fully human? 

 There are way too many Hillary Clintons

Suzanne Goldenberg 

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The whole issue of Clinton’s likeability – now, on the verge of a potential defeat to Bernie Sanders, as then against Obama – rests on a long established, sexist double standard that many sociologists and business-school professors have studied: power and likeability have a negative corollary with powerful women. With men, that is not the case. If Clinton is judged too powerful and aggressive, she’s dinged for being unlikeable. If she’s too soft, she’s dismissed. Women, unlike men, are rarely perceived as warm and competent. This locks them in a classic double-bind. Certainly, I’ve seen it at points in my own career.

“Rand Paul may be coming Sunday,” one of the waitresses in the Portsmouth coffee shop told me the other day, hopefully. (I didn’t have the heart to tell her that he wasn’t coming because he had dropped out of the Republican field that morning.)

In her speeches and in debates with Sanders over the past week, Clinton vacillated between stressing her competence as a “progressive who gets things done” and talking more personally. Mostly, she got the equation right.

Chuck Campion, a Boston consultant who helped power Clinton’s come-back-from-the dead win in New Hampshire eight years ago, described her “amazing fortitude”. She campaigned “’til the last dog dies”, just as her husband famously said in 1992, when scandal almost led to loss in the Granite State. Turns out, Clintons are often at their best when they face defeat.

A wonderful part of the New Hampshire primary is that it is, in itself, personal. You can cover many campaign spots, some in small places, and see many candidates in a single day, by pure virtue that the state it is so small. It’s full of citizens who believe it’s their civic duty to see for themselves before the voting on Tuesday.

This is Hillary Clinton’s fourth New Hampshire primary, if you count Bill’s two. It might be her last, and it’s been poignant to see her up here, campaigning her heart out once again.

It was a bit nostalgic for me, too. My first New Hampshire primary reporting was in 1976. I was a college senior pining to be a real reporter. I remember going to the Sheraton Wayfarer hotel in Manchester after the votes were counted, gazing at the giants of political journalism at the time – the gonzo master Hunter S Thompson included. They were the famous boys on the bus. (Both Thompson and the author of that book, Timothy Crouse, worked for Rolling Stone.) I don’t remember seeing a woman anywhere, and I didn’t think I would ever get to sit on a barstool with the big boys. Still, it’s true, as Rolling Stone editor Jann Wenner recently emailed me: “Well, Jill, they is called ‘dem good ole days’. And the stakes weren’t as high and there was so much less media.”

On Wednesday, I went to two of Clinton’s get-out-the-vote rallies and watched her in a CNN candidate forum. Although she confessed it is hard for her, Clinton was more personal than I’ve seen her. In Manchester, she spoke of her mother’s hard life and resilience, which she obviously shares. “We may get knocked down, but we get back up,” Clinton said to cheers.

She talked about the people who come up to her after her appearances, who tell her their stories: about medicine that wasn’t affordable, about a son who died of a drug overdose, or the duress of caring for a family member with Alzheimer’s disease.

In Dover, she almost began to choke up when she said, “People share their hearts because they hope someone will respond.” At the CNN town hall, she gave her most thoughtful answer to a philosophical question posed by a rabbi in the audience. He asked her: “How do you cultivate the ego – the ego that we all know you must have, a person must have to be the leader of the free world – and also the humility to recognize that we know that you can’t be expected to be wise about all the things that the president has to be responsible for?”

“I think about this a lot,” Clinton answered. “Um, I feel very fortunate that I am a person of faith, that I was raised in my church and that I have had to deal and struggle with a lot of these issues about ambition and humility, about service and self-gratification – all of the human questions that all of us deal with. But when you put yourself out into the public arena, I think it’s incumbent upon you to be as self-conscious as possible.” She talked about her husband’s being more of a political natural than she is. She revealed that a minister, with whom she is close, emails her a piece of scripture every morning at 5am.

Then there was an addendum: “And the final thing I would say, because again, it’s not anything I’ve ever talked about this much publicly, everybody knows I – I have lived a very public life for the last 25 or so years. And so I’ve had to be in public dealing with some very difficult issues and personal issues – political, public issues. And I read a, um, a treatment of the prodigal son parable by the Jesuit Henri Nouwen, who I think is a magnificent writer of spiritual and theological concerns. And I – I read that parable and there was a line in it that became just a lifeline for me. And it basically is practice:

“The discipline of gratitude.”

It is odd that Hillary Clinton, one of the most familiar figures in American politics, has repeatedly felt the need to re-introduce herself in more personal terms. 

Although she’s been criticized for serving too much spinach, she delved into her platform, too, and no one is more impressive or knowledgeable on the issues. At each appearance I saw up-close-and-personal this week, she drew contrasts with Sanders on taxes, healthcare and guns. In Manchester, she was joined at a rally with former congresswoman Gabrielle Giffords, who was almost killed by a gunman in 2011.

By 8pm on Wednesday, she was still explaining the differences with her opponent over the Affordable Care Act; she was due at the televised CNN forum with Sanders an hour later. (Sanders would, she said, scrap Obamacare and start all over again with a pie-in-the-sky health reform plan that could never pass Congress.)

Clinton was once expected to trounce Sanders, but he has held a big lead in New Hampshire. So much for being the Anointed One. With the sudden rise of Marco Rubio on the Republican side, her campaign wasn’t getting as much attention as it did in 2008. Clinton’s nearly-down-but-not-out campaigning certainly didn’t feel like the high-wire act it was eight years ago.

Some of her advisers think an upset is still possible up here. Her campaign manager, Robby Mook, sought to lower expectations and said at a Thursday breakfast hosted by Bloomberg News that Clinton faced “significant head winds”. But, he added, “We are here – and we are all in.” Sanders’ huge following among young voters (he won 84% of them in Iowa) and surprisingly large campaign coffers will likely carry the Democratic nomination fight well into the spring. 

The Wayfarer hotel was torn down in March. These days, an anodyne bar and restaurant at the Radisson seems to be the press hangout in Manchester. The reporters are busy tweeting and doing TV interviews, rather than drinking and smoking, and plenty of them are female, from digital outfits that didn’t even exist back when “Hillary cried”. That was a long time ago now.

Shell Reports a 44% Drop in Earnings Amid Oil Price Slump - Time Business

Shell Reports a 44% Drop in Earnings Amid Oil Price Slump

Posted: 04 Feb 2016 12:59 AM PST

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Oil Giant BP Reports 91% Plunge in 4th Quarter EarningsSolar Industry Gets a Victory in CaliforniaEthanol Is No Longer the Third Rail of the Iowa Caucus(LONDON) — Royal Dutch Shell said fourth-quarter earnings tumbled 44% as the collapse in oil prices took its toll on another European oil company.
Profit adjusted for changes in the value of inventories and one-time items dropped to $1.83 billion from $3.26 billion in the same period a year earlier, the Anglo-Dutch energy giant said Thursday.
The results came days after Shell sealed a 47-billion-pound takeover of BG Group Plc, which will increase the company’s proven reserves of oil and natural gas by 25%. While critics questioned the deal because of the plummeting price of oil, CEO Ben Van Beurden compared it to the bold moves that have defined the industry and promised it would rejuvenate Shell.
The BG deal comes as Shell and other oil companies are slashing jobs and postponing investments to adjust the bottom line to the dramatic circumstances.
Jobs will also be eliminated in the Shell-BG deal. In a trading statement unveiled just before shareholders voted on the BG merger, Shell said last month that streamlining and integration from the deal would include the loss of 10,000 staff and contractor positions across both companies in 2015-2016.
“In 2015, we significantly curtailed spending by reducing the number of new investment decisions and designing lower-cost development solutions,” Van Beurden said. “Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that.”

Oil prices have been plunging. Brent crude, the benchmark for international oil, fell 34% last year and hit a 12-year low of $27.10 a barrel in January. It traded at $33.54 on Wednesday, having been above $100 a barrel as recently as September 2014.
The company cut capital investment by $8.4 billion to $28.9 billion and slashed operating costs by 4.1 billion to $41.1 billion for 2015. The company expects another $3 billion in cuts this year.
Net income improved, rising 58% $939 million
The report comes amid sweeping changes for the company. Shell has exited from exploring in Alaska for the foreseeable future and cancelled the Carmon Creek heavy oil project.
Oil supplies are high even though consumption growth has tailed off, particularly in China. OPEC members, meanwhile, haven’t wanted to cut production — even at a time Iran wants to turn on the taps after decades of sanctions.

Campaign groups like Greenpeace suggest that it’s time that the oil giants changed and relied on other forms of energy for their profits, citing more electric cars, solar panels, and better-insulated homes.
“Shell and BP have bet heavily on the wrong energy sources, and now they’re losing big,” Greenpeace UK’s senior climate adviser Charlie Kronick said. “The problem is that with thousands of jobs, billions in investments and people’s pensions tied up with their companies’ fortunes, Big Oil’s bosses won’t be the only ones to pay for their shortsightedness.”

Google Overtakes Apple as the World’s Most Valuable Public Company - Time Business

Google Overtakes Apple as the World’s Most Valuable Public Company Posted: 01 Feb 2016 01:58 PM PST Alphabet, the holding company formed by Google last fall, handily beat analysts’ expectations in its quarterly earnings report Monday. The results sent the company’s stock soaring in after-hours trading, helping it topple Apple as the most valuable publicly traded company in the world. The Mountain View, Calif. firm generated $21.3 billion in revenue, beating Wall Street estimates of $20.8 billion. Earnings were $8.67 per share, beating estimates of $8.09 per share. The company attributed its strong revenue growth to search ads, YouTube and programmatic advertising. For the first time, Alphabet released separate financial information for Google (which includes search, YouTube and Android) as well as a cadre of so-called moonshots that Alphabet has lumped together as “Other Bets.” These include things like smart thermostat company Nest and innovation incubator Google X. The new data reveal just how dependent Alphabet is on search as its core business. Google generated almost $75 billion in revenue for the year 2015 and had an operating profit of $23 billion. Other Bets generated just $448 million during the same period and posted a loss of $3.6 billion. Still, investors rallied behind Alphabet’s stock thanks to the strength of search. Shares were up more than 5% in after-hours trading Monday, giving Alphabet a market capitalization of more than $570 billion, according to CNBC. The market cap of Apple, which has held the crown of most-valuable company since 2013, was around $535 billion at market close.