NYC Is Redesigning Its Slow, Old, and Unpopular Bus System

Like the Empire State Building observation deck and a Circle Line cruise ship, the view from the top of a double-decker bus in New York has long been reserved for tourists and maybe the occasional local cajoled into showing them around. The bus part, however, is about to change: Starting this spring, Staten Island commuters will begin boarding blue-and-yellow double-deckers that will whisk them from their outer borough homes to the heart of Manhattan’s business district.

Yes, New York City is getting a bus makeover, the Metropolitan Transportation Authority announced this week, complete with 10 electric buses, already testing in Manhattan, Brooklyn, and Queens. And if you can believe it, the addition of shiny new vehicles to the fleet isn’t the most exciting thing about it. The MTA is also giving the city’s bus system—all 325 routes and 16,350 stops, used by 2.4 million riders every weekday—a “top-to-bottom, holistic review and redesign,” its first in decades. By reexamining the entire bus system, the city has a chance to fix its routes, ease congestion, give better options to transit riders, and maybe even relieve the pressure on its strained subway network.

In terms of direness, this revamp is closer to an episode of Hoarders than your standard spring cleaning. Since 2009, New York City’s annual bus ridership has plunged by almost 11 percent, even as the city’s population booms and its overcrowded subway flirts with collapse. The pattern repeats itself all over the country. In the LA area, annual ridership is down 25 percent over the same period, as more cars plug up highways and side streets. Austin, Texas, Denver, Colorado, and Washington, DC—all with growing populations—each saw bus use drop in recent years.

The problem isn’t the bus itself. The success of bus networks in countries like Brazil, China, and Germany—where nearly 100-foot-long human-toters have their own lanes and traffic signals, and race through congestion at 25 mph—makes clear that people are down with the things, as long as they’re practical, efficient, and safe. In Manhattan, buses average 5.5 mph. Chances are you could jog at that pace.

Part of the problem is that New York’s bus system was designed around the city as it once was, with lines connecting to the streetcars, busy wharfs, and big businesses of the time. The city has changed, of course. The bus network, not so much. Take the three lines that terminate in Port Richmond, a Staten Island ferry terminal. Those were probably super convenient—until 1962, when ferries stopped using the port.

A recent series of radical bus redesign projects have shown that smarter routing and scheduling can make all the difference. In 2015, Houston cut low-frequency routes in favor of a high-frequency grid that operates 24/7, and improved connections to the city’s light-rail network. Transit ridership climbed 7 percent. Seattle, Portland, and Columbus, Ohio, have seen similar results from their own network rejiggerings.

New York’s plans are still a bit sketchy, timeline-wise, though transit advocates are heartened by the involvement of new New York City Transit Authority president Andy Byford, who stepped into his role in January after establishing himself as a get-‘er-done kind of transit official in Toronto. We do know, however, that the redesign effort will kick off in Staten Island, where new routes (announced last summer) will have their debut in August.

But how does one go about redoing an entire city’s bus network, and making it easier for residents to get around? First things first: gathering data, so you can fit routes and stops to current patterns of living, working, and commuting. Fortunately, most cities have access to a wealth of data about how people are moving around inside of them.

The census offers a good baseline. New York can also track MetroCard use to know how many people are getting on which buses. It has years of GPS data to help determine where their vehicles are most likely to get stuck in traffic. It even has some intel about where ride-hailing companies are picking up and dropping off passengers, offering a better sense of what’s happening on the roads.

There’s the good, old-fashioned, underrated human too. “Operators know which stops are the busiest and which are not, and the most successful agencies we’ve seen in redesigning their networks engage operators at the very beginning,” says Kirk Hovenkotter, who studies transit agencies at the New York-based research and advocacy group TransitCenter.

Even the public can be helpful. In Houston, conversations between the transit agency and various community groups began in 2013, almost two years before the city officially launched its new network. Just know that you won’t make everybody happy. “You’ll definitely get some grumbling,” says Jon Orcutt, who directs communications at TransitCenter. “It’s inherent in change.”

The goal is to get a fresh picture of where people are, and where they go, and make the buses match up. If this neighborhood suddenly has hundreds of thousands more people in it, time for a bus line. If this waterfront area has a new ferry, maybe build some connections to it.

With those inputs in hand, start craft routes that do cure the maladies that plague many a system. Today, many routes curve and swerve, trying to cover the entire map, and get riders as close to their destinations as possible. That sounds nice, but hurts efficiency—too many stops, too many turns—and leads to infrequent service.

Organizations like the National Association of City Transportation Officials have encouraged metros to make long bus routes less circuitous, valuing efficient grid service. Cities are also thinking about cutting down the number of bus stops. This is doubly attractive in places—like a lot of New York—where sidewalk infrastructure makes it easy for riders to walk an extra block or so for the bus. New York (and other cities) are thinking seriously about bus-only lanes, bus stops that don’t block traffic, and traffic signals that give public transit—and not private cars—the jump on green lights. It’s even going for all-door boarding, making it faster to get everybody aboard. When San Francisco’s transit agency did something similar, dwell times at bus stops dropped 13 percent.

Cap that off by sending the buses where the people are, and voila: a bus system that might actually work. Now, NYC just has to fix the dang subway.


Transportation Going Public

Apple sensor supplier AMS warns of second-quarter slowdown

ZURICH (Reuters) – Chipmaker AMS reported first-quarter sales toward the lower end of its guidance range on Monday and warned of a downturn owing to weaker orders from one of its main customers.

FILE PHOTO: The logo of the multinational semiconductor manufacturer AMS (Austria Mikro Systeme) is seen during a annual news conference, in Zurich, Switzerland February 6, 2018. REUTERS/Moritz Hager

AMS did not name the customer, but the Austrian company is a big supplier to Apple, making components for the U.S. technology giant’s iPhone.

“We are not able to discuss the specific customer, but we are seeing significantly lower business from a large smartphones program and that is having a strong impact on the consumer business and the company as a whole,” said AMS head of investor relations Moritz Gmeiner.

For its second quarter, AMS said it expected sales to drop to between $220 million and $250 million, down from the $452.7 million in sales it reported for the first three months of 2018.

The downturn was based on weaker orders and lower forecast orders in the months ahead, Gmeiner said.

AMS added that changes in upcoming products, which prevented the pre-production of parts, mean that it also expects reduced utilization of factory capacity, which will hit profit margins.

The company, which also makes sensors used in cars and industrial gear, said the problem would be temporary and that preparations for ramping up production in the second half of the year remain on track.

FILE PHOTO: An iPhone X is seen on a large video screen in the Apple visitor centre in Cupertino, California, U.S., November 17, 2017. REUTERS/Elijah Nouvelage/File Photo

The Swiss-quoted company also confirmed its mid-term growth and profitability guidance, aiming for a 60 percent compound annual growth rate between 2016 and 2019, combined with an adjusted EBIT margin target of 30 percent from 2019 onwards.

First-quarter net profit rose to $99.9 million from a loss of $19.9 million a year earlier.

AMS shares have gained 8.1 percent this year, outpacing a Stoxx 600 Technology Index that has gained 0.7 percent.

The company’s stock has struggled of late, however, amid fears that Apple increasingly plans to use its own chips rather than buy them from third parties.

Weak results from Taiwan Semiconductor (TSMC) this month also spread concern about softer demand for smartphones.

Analysts have said that AMS obtains about 35 percent of its revenue from Apple, with mobile phone components making up the vast majority of its business with the U.S. company.

AMS supplies optical sensors that play a key role in facial recognition – one of the most distinctive features of Apple’s flagship iPhone X, which was introduced late last year and appears to have helped to drive AMS’s recent results.

Reporting by John Revill; Editing by David Goodman

India's Infosys to renew focus on digital services

MUMBAI (Reuters) – Infosys Ltd, India’s second-biggest IT firm, plans to renew its focus on digital services as it looks to boost growth amid shrinking profit margins in its legacy business and rising competition from local and international rivals.

FILE PHOTO: The logo of Infosys is pictured inside the company’s headquarters in Bengaluru, India, April 13, 2017. REUTERS/Abhishek N. Chinnappa/File Photo

Digital services – such as cloud, big data and analytics which accounted for more than a quarter of Infosys’ revenue in year to March 2018 – are a massive opportunity, Chief Executive Salil Parekh said on Monday at the company’s first analyst meeting in nearly two years.

“The idea is – this is a huge market, how can we be more relevant for our clients’ future through this market,” Parekh said.

India’s $154 billion software services industry, led by Tata Consultancy Services and No. 2 Infosys, is facing a margin squeeze in its legacy business such as routine infrastructure maintenance as clients increasingly demand more work for less money.

Digital services are the new, big long-term opportunity for most Indian IT firms as they help Western clients transform traditional businesses and prevent them from getting disrupted by tech-savvy and agile start-ups.

Infosys, earlier this month, reported a rise in profit and forecast healthy revenue growth for the year, but its outlook on profit margins failed to cheer investors.

On Monday, Parekh said Infosys had set a three-year roadmap. “The first year in fiscal 2019 to stabilize where we are, the second year to start to build momentum and (the) third year to start to accelerate where we can have more and more share of our clients’ relevance and that will obviously translate, overall, to a better Infosys,” he said.

Bigger rival TCS on Monday became the first Indian company to hit the $100 billion market capitalization mark, riding on the back of a record quarterly profit and a weaker rupee.

Reporting by Sankalp Phartiyal; Editing by Euan Rocha and Susan Fenton

Weighing The Week Ahead: The Costly Quest For Fresh Fears

The economic calendar is normal, with an emphasis on housing and sentiment data. Earnings season is in full swing and expectations remain high. We have witnessed improvement on several fronts. Since that is not very newsworthy, the punditry will be asking:

Where can we find some fresh fears?

Last Week Recap

In my last edition of WTWA, I asked whether strong earnings were already reflected in stock prices. That was a good guess, as each good earnings report was explained as “strong” or “anticipated,” depending upon whether the stock subsequently moved higher or lower.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, so check it out.

A screenshot of text Description generated with very high confidence

The gain for the week was about 0.5%, and the trading range was only about 2%. I summarize actual and implied volatility each week in our Indicator Snapshot section below.

Noteworthy

Amazon (NASDAQ:AMZN) has over 100 million subscribers to their “Prime” service, including 55% of the households in the US. (Barron’s)

Nearly half of crypto traders do not pay taxes. (MarketWatch).

Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) web presence dominates everyone else put together. (Visual Capitalist)

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

Feel free to add items that I have missed. Please keep in mind that we are looking for current news, especially from the last week or so. WTWA is not about long-term concerns like debt. These are important, of course, but not our weekly subject unless there has been some major change.

The Good

  • High frequency indicators remain positive (New Deal Democrat).
  • Industrial production increased 0.5%, down from 1.0% in February, but beating expectations of 0.3%. (Jill Mislinski, and see the Big Four update below)
  • Hotel occupancy broke records in Q1. Some astute readers pointed out that a past analysis was wrong because of holiday timing. Mrs. OldProf, who reads both the posts and the comments each week, jumped on this. “See, your readers agree with me!” Thirty-eight years and as mistake-prone as ever. Calculated Risk provides analysis and this chart.

  • Retail sales increased 0.6%, beating expectations of a 0.4% bump.
  • Mortgage delinquency rates are lower. Those thirty days past due – 3.73%. In foreclosure – 0.63%. (Calculated Risk).
  • Corporate earnings are strong, regardless of the chosen metric – beat rate, size of earnings and revenue beats. John Butters reports:

To date, 17% of the companies in the S&P 500 have reported actual results for Q1 2018. In terms of earnings, more companies are reporting actual EPS above estimates (80%) compared to the 5-year average. In aggregate, companies are reporting earnings that are 5.9% above the estimates, which is also above the five-year average. In terms of sales, more companies (72%) are reporting actual sales above estimates compared to the five-year average. In aggregate, companies are reporting sales that are 1.6% above estimates, which is also above the five-year average.

Brian Gilmartin agrees, but is more concerned about the effect of higher interest rates.

  • Corporate cash is increasing (WSJ) suggesting room for higher dividends and more stock buybacks. David Templeton (HORAN) explains, illustrating with this chart.

  • Housing starts for March hit a seasonally adjusted annual rate of 1,319K, beating expectations by 4%. Building permits of 1,354K also beat expectations. Calculated Risk comments on the data (mostly due to multi-family starts) and also on Homebuilder Confidence – down one point at 69, but still on “firm ground.”

The Bad

  • Jobless claims were almost unchanged from last week at 232K, but this was 5K worse than expectations. (Bespoke)
  • The Beige Book supported the current Fed picture of modest growth, but also had some warnings about the impact of current policies. Companies mentioned spikes in aluminum and steel prices. (Business Insider).
  • Leading indicators increased only 0.3%. This is a gain, of course, but smaller than the February pace of 0.7% and slightly below expectations of 0.4%. Jill Mislinski provides analysis and charts.

The Ugly

How about something that is responsible for 2.3 million annual deaths? From the International Energy Agency:

Today around 2.8 billion people – 38% of the global population and almost 50% of the population in developing countries – lack access to clean cooking. Most of them cook their daily meals using solid biomass in traditional stoves. In 25 countries, mostly in sub-Saharan Africa, more than 90% of households rely on wood, charcoal and waste for cooking. Collecting this fuel requires hundreds of billions of hours each year, disproportionately affecting women and children. Burning it creates noxious fumes linked to 2.8 million premature deaths annually.

Timothy Taylor explains:

The report estimates that an investment of an additional $42 billion, above and beyond what is already happening, would be needed by 2030 to provide access to clean cooking for the 2.3 billion people who otherwise will not have access to clean cooking by that time. At one level, $42 billion is a lot of money: at another level, it’s almost an absurdly cheap price to pay for the potential benefits.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

We have a normal economic calendar, featuring housing data, consumer confidence and sentiment, and the first look at Q1 GDP. Corporate earnings reports will again be the most important real news.

Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

A screenshot of a cell phone Description generated with very high confidence

Next Week’s Theme

The economic calendar emphasizes housing data and sentiment polls. The focus, barring important tweets to the contrary, will continue to be corporate earnings reports.

The quest to find an explanation for every market move reached a new peak last week. With evidence of good earnings, a stronger economy, and positive sentiment, an explanation was needed for the volatile market. Why is it flat at lower levels? I expect pundits and financial writers to be asking:

Where can we find some fresh fears?

One of the better CNBC anchors gave us a taste of what to expect. Chip stocks had moved lower, mostly because of events related to a single stock. With the ETF connections and algorithmic trading, the entire sector got hit and dragged the market down as well. (That’s the best I can do here, but I promise more in a special post. Meanwhile, I love most chip stocks, especially Lam Research (NASDAQ:LRCX)).

The anchor asked her guest. Aren’t semiconductor stocks cyclical? If this is the top of the cycle, what does it say about the overall economy?

That question could be a litmus test for traders versus investors.

There is plenty of reaching to find something wrong, and that was just one example. Here are some currently-raised concerns:

  • Yield curve inversion. So many who are rookies at recession forecasting are jumping on the yield curve inversion. Dr. Robert Dieli, the top expert on this topic, repeatedly warns not to forecast this signal. When it occurs, it will still provide lead time of about nine months. And it is more than just the yield curve. One must also consider the economic background and confirming indicators. Despite this, many are reaching far into the future.
    • Hale Stewart – A real possibility in the next 18 months. I frequently cite Hale on various topics, but economic forecasting is not his happy zone. Speculating on this topic is not helpful to investors.
    • Another favorite source, Pension Partners, seems to be reaching on this topic.
    • Barron’s notes, citing Dan Clifton (a good source), “My take from discussing the issue with clients is that the headwinds from a possible trade war are colliding with the tailwinds from $300 billion of additional stimulus from spending on top of the recently enacted tax cuts.”
  • The Fed. A knee-jerk reaction to the direction of Fed moves and old slogans. Those citing this fear pay little attention to the starting level of rates, the pace of change, or the criteria for increases (stronger economic data). Throw in the changes in Fed membership and leadership, and it is open season. (Barron’s).
  • The end of QE. Those who were wrong about QE effects (hyperinflation) and attributed stronger equity markets to Fed policy are now taking the other side. This gives them a chance to be wrong in both directions!
  • Debt.

    • US government debt. It is growing rapidly, and the pace cannot be sustained.
    • The pension time bomb. $400 trillion by 2050. (Visual Capitalist).
  • Trump Administration policies, especially regarding trade.

And here are some sensible refutations.

  • Yield curve.

Flat or inverted yield curves tell us something about:

Recessions – Inverted yield curves precede recessions, although flat curves can last for a long time before becoming inverted or showing a recession signal. All recessions are preceded by inversions but not all inversions lead to recessions.

Fed behavior – Flattening and inverted yield curve are associated with tightening of Fed policy, but tightening does not mean that a market sell-off or recession is around the corner. The link between the beginning of the tightening cycle and the impact on financial markets is loose.

Term premium risk – Flat yield curves tell investors there is no compensation for taking duration risk. There is limited reason to take marginal duration risk. We find that flat curves signal future increases in yield. It is a negative signal for bonds.

Equity markets – Flatter yield curve do not mean lower stock returns. Flattening curves are not associated with market sell-offs.

If you do not understand the chart below, you should be especially careful about reading scary stories about the yield curve. It is more than the slope of the curve; it depends upon how it happens.

    • Brian Gilmartin takes a balanced approach, citing some (ahem) other good sources.
    • Bob Dieli continues to deliver the best analysis of the business cycle. His monthly report is chock-full of data, analysis, and even some humor – if you are willing to go with economist jokes. Here is his current business cycle rating. You will not agree. Please note that he has been correct while almost everyone else has been wrong. The current expansion could have years to run.

This analysis has helped me stay on the right side of the market for eight years. Serious investors and institutions should subscribe to his service. It is information and analysis you cannot get elsewhere. Those on a low budget get the benefit of the basic conclusion via the “C-Score” in the weekly indicator snapshot.

  • Current conditions remain solid.
    • The Capital Spectator analyzes the current state of the business cycle, replete with data and charts, suggesting “that the economy will continue to expand.”
    • The Big Four update via Jill Mislinski is a great method to see the most important indicators at a glance.

As usual, I’ll save my personal conclusions and suggestions for today’s Final Thought.

Quant Corner

We follow some regular featured sources and the best other quant news from the week.

Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.

The Indicator Snapshot

Short-term trading conditions improved significantly this week. In mildly bearish conditions, our trading approaches can still be profitable, but that might not be true for everyone. We continue to monitor the technical health measures on a daily basis. The indicator did not drop low enough to take us out of the market in trading programs, but it was close.

The long-term fundamentals and outlook are little changed. The long-term technical health is back to strongly bullish.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score.

RecessionAlert: Strong quantitative indicators for both economic and market analysis.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

Georg Vrba: Business cycle indicator and market timing tools. None of Georg’s indicators signal recession.

Doug Short and Jill Mislinski: Regular updating of an array of indicators. Great charts and analysis.

Guests:

David Merkel explains why we should watch the thirty-year bond.

Dr. Ed Yardeni updates the forward earnings outlook.

JPMorgan demonstrate how this translates into stock prospects for next year, and the next five years.

Insight for Traders

Check out our weekly Stock Exchange post. We combine links to important posts about trading, themes of current interest, and ideas from our trading models. This week we asked, “How do you filter out noisy trading signals?” As usual, we discussed some stock ideas and updated the ratings lists for Felix and Oscar, this week featuring the Russell 1000 stocks. Blue Harbinger has taken the lead role on this post, using information both from me and from the models. He is doing a great job, presenting a wealth of new ideas and information each week.

This week’s theme was inspired by yet another great post from Dr. Brett Steenbarger. He explains that traders need to start each day with an open mind and focus on the job at hand. This is also excellent advice for investors, who spend waste too much of their time on bombast and sensationalism. We all want to be informed and to make intelligent decisions, so picking our sources and focus is crucial.

Insight for Investors

Investors should have a long-term horizon. They can often exploit trading volatility! I remind investors of this each week, but now is the time to pay attention.

Best of the Week

If I had to pick a single most important source for investors to read this week, it would be JPMorgan Asset Management’s quarterly Guide to the Markets. All facts, all charts, and no argument. It is professionally prepared – a valuable resource which you can get for free. Anyone spending some time with this will learn something valuable. Here is one example.

I hope readers will use the comments to suggest other examples.

Runner-up for BOTW is Alan Steel’s tirade. He captures what I am trying to say here in fewer words, and much more colorfully.

He recounts the failed predictions about QE, the PIIGS, Japan, US budget decisions, the fiscal cliff and the Mayan Calendar.

They’re all gone.

Lest we forget all of those presumed Armageddons; spat out by experts and their gimp-like algorithms boasting ninetieth percentile (plus) accuracy that resulted in zero-sum truths.

Did oil ever get to $250 a barrel, gold go to $5,000 an oz, the FTSE drop down to 500, or the Dow Jones Index fall to 1,000?

Now move a bit further backward and remember the global consensus of experts telling us planes would fall out the sky thanks to the Millennium Bug…

Floating Sideways

The truth about these things isn’t inconvenient to anyone other than the “experts” who predicted them, and of course those who fretted their arrival, or worse, lost out financially because they listened.

Those offenders experts expect our memories to remain as silent as their missing apologies for all that gloom and doom that’s now floating sideways on the other side of the global economic goldfish bowl.

Stock Ideas

Chuck Carnevale identifies 10 fairly valued dividend growth stocks, with an emphasis on total return. It is his usual combination of great ideas and a lesson in stock selection.

Blue Harbinger suggests ten investment ideas that compare favorably with the FAANG stocks, which have plenty of volatility and risk. Which reminds me. Diane Freeman (Investing.com) had an excellent roundtable on this topic more than a week earlier. She asked about FAANG versus the tech stocks. I tried to inject a touch of humor in the first part of my answer:

My approach separates the two parts of your question. I like tech in general but see the FAANG run as over-extended. Those who love emphasizing the high-flying leaders may keep the run going by changing the membership. They have already added an “A” to the original lineup and may be about to lose a consonant. Vanna can’t help with that one.

And then… CNBC takes up this topic on Fast Money, even simulating Wheel of Fortune. I suppose that GMTA is always possible, but I note that the mainstream media never cites sources for these ideas. It seems to happen often when I coin a new term. (Mrs. OldProf thinks they ripped me off, it is funny, but I should chill out. So, I will).

Time for Walmart (NYSE:WMT)? Hale Stewart continues his series on “Bottom Fishing the Aristocrats” with an interesting blend of fundamentals and technical analysis. I always like to illustrate both ideas and methods. Hale begins with support from the consumer staples sector, as shown here:

Great portfolio and side moat? Medtronic (NYSE:MDT) fits the bill. (Morningstar).

Eddy Elfenbein’s holdings are always a source of ideas. He provides regular updates on the stocks in his holdings. His method has a proven edge over the market. Or you can get the entire package easily and inexpensively by buying Eddy’s ETF (CWS).

A battle for the lead in AI chips, says Barron’s. This is an important theme. Should we guess the winning companies or buy a basket?

How about some energy ideas? Kirk Spano suggests two stocks to play the oil bull market.

Personal Finance

Seeking Alpha Senior Editor Gil Weinreich has expanded his excellent series for financial advisors (and serious individual investors) to include some podcasts. This week I especially enjoyed his discussion of how to cut retirement costs, with another great link to Prof. Laurence Kotlikoff. Read the entire post for several great ideas.

Abnormal Returns is always worth reading, with many links on an array of interesting topics. Wednesday the focus is on personal finance. From many good choices this week, I especially liked the advice from Ben Carlson, 3 Ways to Make Up for a Retirement Savings Shortfall.

Watch out for…

Taking Social Security too soon. Michael Tove (Kiplinger) explains the math. “Once you reach your full retirement age, your monthly Social Security check gets 8% larger for every year you delay taking benefits through age 70 (technically, it’s 2/3% per month). Mathematically, the “crossover point” is about 12 years”. That is just the beginning, since there are other benefits as well.

Real estate investor mistakes. Pat Curry (Bankrate) lists ten “terrible mistakes.” I usually do not link to slideshows, but this one does not launch a new ad on each click. The information about real estate planning is valuable, both for first-time buyers and for downsizing baby boomers.

IBM (NYSE:IBM), facing seasonal headwinds (Stone Fox Capital). [Jeff] Perhaps so, but that makes it a good platform for writing calls. It is currently on our watch list for that purpose.

Final Thoughts

Sources are important.

Since most people pay little attention to the background of those claiming authority, they might not notice that economists specializing in the business cycle are reaching a different conclusion from most others. These observers, new to the topic and eager to make a mark, use reasoning like the following:

  • The age of the business cycle – known to be irrelevant.
  • Guessing when an indicator like the yield curve will change – the “forecasting the forecast” error.
  • Speculating about the impact of proposed policies – even though we don’t know whether they will be adopted or what the effects might be.

I have a personal list of valuable sources. They are the very best contrarian indicators! They provide a regular listing of what is going wrong. Recently, I have noted a change. As conditions have improved, these sources have shifted in focus. Here are a couple of examples.

  • No near-term worries? No problem! Just reach farther into the future. It is actually easier to spin a tale when there is plenty of time and uncertainty.
  • Be flexible. Take whatever side works at the moment. If earnings are low, discuss the weak consumer and the unfairness. If earnings are rising, then emphasize the inflation threat.

Their business model seems to be one of supporting the insatiable appetite for confirmation bias from investors who have misjudged the market. Unfortunately, many average investors stumble on these sources and take the material seriously. They do not know about past errors or track records.

You never see a retraction or admission of an error. The only clue is that these sources monetize their audience with a “solution” to fear – gold, annuities, a no-fail trading system, or some other seductive, high-commission product.

The popular concerns are often quite valid. That is what makes them dangerous noise for individual investors.

The level of government debt is an important social problem. So is the inadequate funding for government pensions. We should address these problems before it becomes too late. But they do not have much to do with the current choices offered to investors.

I’m more worried about:

  • A negative confidence scenario. Investment and spending decisions depend on positive expectations.
  • Deterioration in the tariff and trade talks. This is the most sensitive issue for the market, and it remains a rhetorical playground for world leaders.

I’m less worried about:

  • North Korea. There seems to be genuine potential for reducing the nuclear threat and moving closer to normal relations. (Washington Post on Pompeo trip)
  • Market volatility. It has receded to a range close to historic norms. There are plenty of excessive moves offering opportunity.

[Are you struggling to remain objective about risk? Scared out of the market and unable to get back in? Not doing well on your own? I have several free papers on these topics. Just write for our free information on these topics. While they describe what I am doing, the do-it-yourself investor can apply the same principles. Just email your request to main at newarc dot com. Because of the turbulent conditions, I have also set aside extra time to speak with individual investors during the first week in May. Just write for an appointment—no charge and no obligation].

Disclosure: I am/we are long LRCX.

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

Additional disclosure: And may institute a covered write in IBM on Monday.

Southwest's Apology to Passengers on Flight 1380 Is Brilliant, and It's Not Just the Cash. Here's Why

For the passengers who survived the emergency landing on Southwest Flight 1380 this week, on which Jennifer Riordan died, the flight must have been a horrifying experience. 

The pilot and copilot have had been hailed as heroes, and Southwest CEO Gary Kelly was praise for the fast apology and condolence statement he offered via video. But you can imagine that the airline might want to continue to respond to the affected passengers quickly.

Apparently, it has. Even as the federal investigation into the incident continues, Southwest reportedly sent letters with personal apologies and quick compensation to passengers from Flight 1380 just a day after the emergency.

Obviously, any big company that faced a debacle like this needs to do something similar and quick.  Many do, but only in exchange for people offering to drop all claims against the company (more on whether that’s happening here, in a second).

But there’s something interesting in how Southwest handled the issue–a combination of what they offered, and how they worded the apology letter, as reported, signed by Kelly:

We value you as our customer and hope you will allow us another opportunity to restore your confidence in Southwest as the airline you can count on for your travel needs. … In this spirit, we are sending you a check in the amount of $5,000 to cover any of your immediate financial needs.

As a tangible gesture of our heartfelt sincerity, we are also sending you a $1,000 travel voucher…

Our primary focus and commitment is to assist you in every way possible.

What leaps out at me is, oddly, the smallest financial part of the compensation: the $1,000 travel voucher. (Although, it’s funny: psychologically people sometimes put a higher subjective value on a tangible thing valued at a certain amount, then they do on cash.)

Even in the wake of tragedy, Southwest is taking steps to try to keep these customers–as customers. 

As some commenters have pointed out, while the uncontained engine failure aboard flight 1380 was terrifying for passengers, and resulted in loss of life and injury, it’s by no means the first time a flight suffered a similar catastrophe and ultimately landed.

Commercial airlines like a 737 are designed to be able to fly with one of the engines disabled, and professional aircrew train and drill on what to do in this kind of situation. The emergency was deftly handled by Captain Tammie Jo Shults and first officer Darren Ellisor.

Part of why this story was so widely reported however, is that passengers were immediately sharing it on social media. One passenger famously paid $8 for inflight WiFi even while he thought the plane was going to crash, so that he could broadcast on Facebook Live what was happening and say a farewell to friends and family.

So, connect this to the travel vouchers. Beyond taking a step toward repairing the relationship with these passengers, what better PR result could Southwest hope for than some positive travel experiences and social media posts from one of them, as a result? 

I wouldn’t expect Southwest to articulate this rationale; that would actually undercut it. And, I do have a couple of other questions about how this all works, for which I’ve reached out to Southwest for answers. I’ll update this post when I hear back.

For example, I would assume that the family of the passenger who died on the flight, Jennifer Riordan, would be treated differently, and maybe also the seven passengers who reportedly were injured. 

There’s also the question of whether these are really just goodwill payments, or a way to quickly settle 100 or more potential claims against the airline. If it’s the more traditional, transactional legal strategy of just trying to settle claims quickly, then that undercuts a lot of this.

However, I’m judging based on the experience of one passenger, Eric Zilbert of Davis, California, that this might not be the case. Zilbert reportedly checked with a lawyer before accepting the compensation,” to make sure I didn’t preclude anything.” Based on the lawyer’s advice, went ahead and did so.

Of course, this doesn’t mean every passenger is happy with the gesture. For example, Marty Martinez of Dallas, the passenger who became famous after he livestreamed the emergency landing over Facebook Live, said he’s not satisfied.

“I didn’t feel any sort of sincerity in the email whatsoever, and the $6,000 total that they gave to each passenger I don’t think comes even remotely close to the price that many of us will have to pay for a lifetime.”

Even so, Southwest sort of got what they’d probably like to see in his case, anyway: a tangible demonstration that despite the experience aboard Flight 1380, he’s willing to fly with the airline again.

The proof? He gave his quote to an Associated Press reporter, the account said, “as he prepared to board a Southwest flight from New York.”

Facebook's damage limitation drive hits trouble in Germany

BERLIN/FRANKFURT (Reuters) – Facebook’s attempt to limit fallout from a massive data breach hit trouble in Germany on Friday as a privacy watchdog opened a case against the social network and politicians accused its bosses of evasion.

FILE PHOTO: Silhouettes of mobile users are seen next to a screen projection of Facebook logo in this picture illustration taken March 28, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

The social network has been at the center of controversy over suspected Russian manipulation of the 2016 U.S. presidential election via its platform, and the leak of personal data of 87 million users to a political consultancy that advised Donald Trump’s team.

A German data privacy regulator said it was opening a non-compliance procedure against Facebook in relation to the data leak to the consultancy, Cambridge Analytica, that was exposed a month ago.

The city-state of Hamburg’s Data Protection Commissioner, Johannes Caspar, notified Facebook in writing that he had opened a probe into suspected data abuse. The case could lead to a fine of up to 300,000 euros ($370,000).

“First we will seek a statement from Facebook and then hearings will begin,” said Caspar’s spokesman, Martin Schemm.

Such a fine, if imposed, would only be a pinprick for Facebook, which recorded revenues of more than $40 billion last year.

But the case marks a warning shot ahead of the introduction of tougher privacy rules across the European Union on May 25 that foresee penalties of up to four percent of worldwide revenues for serious violations.

Facebook did not immediately respond to a request for comment on the probe.

CHARM DEFENSIVE

Facing a hostile audience, a Facebook executive earlier met German lawmakers and repeated apologies by CEO Mark Zuckerberg over the Cambridge Analytica leak.

“What happened with Cambridge Analytica represents a huge violation of trust, and we are deeply sorry,” Joel Kaplan, vice president for global public policy, said according to the text of his prepared remarks.

Kaplan said Facebook would roll out a new ‘view ads’ feature, designed to make political advertising more transparent, in time for a regional election being held in the German state of Bavaria in October.

Social media experts say Germany’s parliamentary election last September was less affected by the spread of ‘fake news’ than the U.S. vote, where Trump pulled off a stunning come-from-behind victory.

Yet the far-right Alternative for Germany (AfD) was able to capitalize on a wave of discontent with an active campaign on social media, winning seats in parliament for the first time as Chancellor Angela Merkel’s Christian Democrats polled poorly.

The Bavarian party closely allied to Merkel’s conservatives is seeking re-election in October. Its leading figure in the federal government, Interior Minister Horst Seehofer, is taking a hard line on immigration in a bid to squeeze the AfD vote.

Lawmakers came away dissatisfied from the closed-door hearing, saying Facebook executives had failed to give clarity on how widespread the illicit harvesting of data using Facebook apps had been.

“We just experienced another slice of Facebook’s salami tactics,” said Thomas Jarzombek, the Christian Democrats’ digital policy spokesman.

Tabea Roessner of the opposition Greens said the hearing had shown Facebook was still in ‘business as usual’ mode. “That disrespects those affected,” she told the Handelsblatt daily.

Writing by Douglas Busvine, Editing by Matthew Mpoke Bigg, William Maclean

5 Science Books That Will Totally Change How You See the World

We generally think of vision as a simple mirror — there are certain objects out there and our eyes and brains process light to let us see those things — but science shows reality is a lot weirder and more complicated than that. Creative people, for instance, literally see things that others do not, and your mood can affect whether you perceive another face as smiling or sad.

In other words, we don’t perceive the world so much as we construct it. And if we change our emotions or our ideas we quite literally see things differently. If you want a fresh perspective, you can go to new places, or you can look at the same old places with fresh eyes.

If you’re looking to do the latter, Big Think recently put together a great list for you. The roundup of perspective-shifting books on science from writer Derek Beres promises titles that “push boundaries by confronting common wisdom and updating our collective knowledge.” Read them and the world will look strange and new.

“If you want to know why humans behave how we do, start with American neuroendocrinologist Robert Sapolsky’s tour de force,” suggests Beres. (These TED talks on psychology might help too.)

We’ve all likely heard that thanks to cell death and replacement, you have a mostly new body every seven years or so. But it’s not just your skin and bones that replace themselves — your brain actually grows new cells deep into adulthood and can reorganize itself to heal after trauma. That process is explored in depth in this book by poet/psychoanalyst Doidge.

“A clear bright light of optimism shines through every page,” wrote fellow neuroscientist V. S. Ramachandran in his review of the book.

“Psychology professor Lisa Feldman Barrett presents one of the most counterintuitive books in recent memory by claiming that we don’t react to our environment so much as constantly construct our reality. This groundbreaking work will change how you view your inner world forever, empowering you with the knowledge that pretty much every ‘reaction’ can be changed,” raves Beres about this book.

Tech addiction and just how positively — or negatively — our screens are affecting our lives is a hot topic lately. What does science have to say on this issue? To find out look no further than Levitin’s book. It “will change how you view tech–and your life,” promises Beres.

Want an unforgettable illustration of just how powerfully fresh ideas can reshape how we see the world? Then check out what this title does for your view of the humble octopus.

“Australian philosopher and professor Peter Godfrey Smith has exposed the unworldly reality of the octopus in such candor that we’ll never view this incredible cephalopod the same way. In the process he offers keen insights into the development of sentience and intelligence throughout the animal kingdom, humans included,” explains Beres.

If you’re convinced you should add a few more popular science titles to your reading list to spark creativity and awe, then check out the complete Big Think list for five more great suggestions.

Welcome to the Wikipedia for Terms of Service Agreements

Most people spend very little time thinking about the terms of service that govern life online. The agreement appears in a flash, we affirm that “I agree to the terms of service,” and then it’s all quickly forgotten.

Until, of course, something goes wrong. Last week, when Mark Zuckerberg appeared before Congress to defend Facebook, more than one senator pointed to the company’s terms of service. Could Facebook’s users be reasonably expected to understand what they’re signing up for? “I would imagine probably most people do not read the whole thing,” Zuckerberg responded. “But everyone has the opportunity to and consents to it.”

What if, before you consented, you could at least read the SparkNotes? That’s the goal of ToSDR—short for Terms of Service; Didn’t Read—a website that turns lengthy terms of service agreements into bulleted summaries, and then rates those terms from Class A (very good) to Class F (very bad). It functions as a sort of Wikipedia for terms of service agreements. Anyone can submit a bullet point and share their analysis of a service’s terms, which get turned into a rating of a site’s overall policy. The site, which has existed since 2012 but is relaunching next month on a new platform, hopes to create a broad network of shared knowledge.

“If nobody can individually read these terms,” says Hugo Roy, who helped create ToSDR, “then we have to figure out a collective solution.”

At Your (Terms of) Service

The idea for ToSDR came about in 2011. Roy, then a law student, had been hanging around the Berlin hacker scene when he met Michiel de Jong, a programmer, and Jan-Christoph Borchardt, a designer. The three shared an interest in digital rights activism and marveled, one day, about how easy it was for websites to change their terms of service without notifying users. What’s more, it was near impossible to make sense of how those changes would affect you as a user or make informed decisions about using certain sites. For years, the European Union had issued grades to commercial appliances to make it easier for consumers to understand which machines were most energy efficient. “You don’t have to know about how electricity works or how a washing machine works. You just have a rating which will tell you this is good, this is bad,” says Roy. What if they created a similar system for services on the internet?

The trio brought the idea to Chaos Communication Camp, a quasi-Burning-Man for hackers in the German countryside. The festival gave them the opportunity to hash out what a site like ToSDR might look like, and how it would translate dense terms of service into useful bits of information. Borchardt, the designer, took inspiration from the EU’s energy label and created a color-coded scale to show which services had the most and least user-friendly terms. But unlike the EU’s system, ToSDR wouldn’t have a dedicated agency to issue grades. Instead, they’d let the group decide. The fact that Github’s terms allow users to request indefinite removal of your personal information? Great. The fact that Instagram can retain your content even after you delete your account? Not so great. “It’s a collective of users organizing themselves to discuss and rate and try to come up with an agreement on what’s good term and what’s not,” says Roy.

The idea went over well, and after Chaos Communication Camp, the trio decided to turn idea into reality. Jong and Borchardt were both working full-time on other projects, but Roy had taken the year off from law school for an eight-month internship, which left him with four months of free time to work on ToSDR. While Jong and Borchardt created a prototype of the site, Roy started in on legal analysis. He also formed a Google Group where people could submit summarized terms of services that Roy would enter into a database.

One day, Roy brought up the project at “Hack and Tell,” a weekly event in a Berlin café for hackers to share what they’d been working on. He hadn’t planned to announce the project officially—it was still mostly an idea—but the next day, he got a call from a German journalist who wanted to write about ToSDR. The press attention led to a jolt of public interest. People started emailing Roy, Borchardt, and Jong, asking how they could get involved. “For me, I just wanted to see what we could come up with and show how it could be done,” says Roy. “And then because of all of this interest, we were like, ‘Whoa!’ How do we make this more stable?”

It was a question the trio wasn’t prepared to answer. Roy was running out of time before he had to return to law school; with Borchardt and Jong both working full-time, the Google Group quickly became unmanageable. The submissions began to pile up, and ToSDR began to to languish.

Coming to Terms

By 2016, ToSDR was barely even a side project for Roy, who had moved on to a career as a lawyer. Then he met a software developer named Chris Talib at a party in Paris. Talib considered himself something of an internet optimist, interested in projects that improved the web, so when Roy told him that no one had continued developing TosDR, it didn’t take long to convince him to take up the mantle.

In his spare time, Talib has worked to create a more functional version of ToSDR. The biggest problem? There was no easy way to contribute to the site. If ToSDR was going to look like Wikipedia, it needed the equivalent of a software tool like Wikimedia. “We didn’t have software to make it easy to contribute,” says Roy.

So Talib, along with programmer Madeline O’Leary, developed a platform called Phoenix, which makes it easy to submit and search information in the ToSDR database. In the new platform, you can quickly enter the service, the summary, the analysis, and the rating, along with a link to the original language in the terms of service agreement. Talib says he plans to introduce the platform to ToSDR next month—around the same time that the General Data Protection Regulation, a new standard for consumer data protections, goes into effect across the European Union.

If you ask Talib, the refresh marks the “second age” for ToSDR. The project didn’t quite take off back in 2012—not because of lack of interest, but because of lack of tools. Since then, someone has created a browser extension that brings up the abbreviated terms of service when you open a website like Facebook or YouTube, and a group of developers are building on a scraper tool called ToSBack that tracks how terms of service change over time. With Talib and O’Leary working in Phoenix to streamline submissions, they hope ToSDR can grow into something big.

ToSDR isn’t without its faults. It’s not designed to be a legal resource. It doesn’t use sophisticated software or artificial intelligence to translate the full terms of service. All the content is user-generated, which means the information is only as good as the humans who submit it. Some people misunderstand the terms they’re reading, or submit inaccurate descriptions of a service’s terms. (When you search Facebook on ToSDR, you’ll find a bullet point that says “Facebook UI induces oversharing.” Maybe true, though definitely not part of the site’s terms.) But the system is designed to correct itself. ToSDR users can have discussions about what’s listed there, just like Wikipedia editors collectively decide how history is summarized. The more people share, the better the resource becomes.

In its ideal form, ToSDR would become a place not only to review the terms of services we’re agreeing to, but to discuss what they mean. Does it matter if a site can delete your content at any time? What does it mean if there’s a broad copyright license? Where’s all that data going anyway? Roy sees this kind of collective conversation as part of a larger movement to democratizing information online. Whether the terms are good, or bad, or somewhere in between, the more we know, the better chance we have of one day demanding the terms we deem fit.

TED 2018: Soul-Searching at the Inspiration Assembly Line

Somewhere between my eighth and eighteenth turmeric lattes, I realized I was dangerously close to falling for TED. The annual conference, which gathers elite technologists, thought leaders, scientists, economists, futurists, visionaries, activists, physicists, poets, enthusiasts, academics, entertainers and billionaires has a binary reputation: For anyone who hasn’t been, it’s an object of easy mockery. For anyone who has, it’s a religion.

After five days in the garden of TED, downing blueberry mint kombucha, champagne gummy bears and green juice described as “good for when you feel like you’re being chased by a cheetah,” I had seen the light. The ideas felt exciting (flying cars! fluid democracies! arousal non-concordance!). The speakers elicited gasps of wonder, un-self-conscious giggles, or heavy sighs of righteous indignation. A workshop on the concept of awe actually inspired awe. At least four talks brought me to tears.

TED has a way of raising the stakes on every topic—no matter how tiny—to transformative, world-changing status. But as the world has begun to question the murky side effects of many of these groundbreaking innovations, the mind-blowing magic TED is known for can feel darker.

“No one is coming to the event in the frame of mind that all is well and easy in the land of technology,” TED Curator Chris Anderson said in a press call before the event. It was a sentiment that echoed throughout the conference. After VR pioneer Jaron Lanier’s wrapped up a talk criticizing Facebook and Google’s advertising-based “behavior modification empires,” Anderson pointed out that the same thing was happening to everyone in the room. On some level, he said, “we’re all in the behavior manipulation business. It’s what human interaction is about.”

It’s a well-honed formula. Try spending a week in a dark room while a river of eloquent speakers, one after another, deploy touching personal anecdotes and surprising revelations in meticulously crafted ten-minute emotional rollercoasters. It’s nearly impossible to avoid getting swept up. Poet Sarah Kay noted in a workshop that a week at TED can feel like “you’re a live wire of thoughts and feelings and emotions.” Singer Luke Sital-Singh, who crooned heartfelt songs Thursday evening, wore a nametag that read, “Ask me about making people cry.” Lanier, who followed a talk by a teacher who survived the shooting at Marjory Stoneman Douglas High School, spent the first few minutes of his talk trying to compose himself. “Chris didn’t warn me the talk before me would bring me to tears,” he said, to warm applause.

The posivibes were apparent whenever a presenter lost their place, welled up with tears, or suffered a technical malfunction. Each time, the audience encouragingly applauded the speaker back from the brink. I wondered if there was anything we wouldn’t applaud for. The hiccups? A fart?

Between sessions, I tested out gentle criticisms with attendees. Didn’t some of these standing ovations seem planted by the speaker’s friends? And wasn’t the rush to stand up and applaud less about the brilliance of the speaker more a way of signaling exactly how much we care about [stopping fascists/ethical AI/extreme poverty in India]? Are these talks, and our applause, an empty substitute for real action—the equivalent of an “awareness-raising” ribbon? How many of the power brokers in the room have actually changed the way they do business as a result of something they heard in a TED talk? How many of the attendees cheering along to calls for environmental reform arrived by private jet? Didn’t it sometimes feel like socially conscious theater? Don’t get me wrong, the turmeric lattes were delicious, but wasn’t the preciousness of it all – the “tech playground” filled with robots, virtual statues, short story dispensers, selfies printed onto cookies, soundscape immersions, and Vitagene genetic analyses – a bit much?

A few attendees responded to my criticism with nods of solidarity; others called me a hater and a cynic. It mirrored the tech industry’s range of reactions to any sort of criticism for the last ten years. This is an industry that’s used to being applauded for changing the world, not being picked apart for it.

TED’s organizers have worked to combat knocks that it’s more about giving rich people a cool experience than enlightening the world. Initiatives like The Audacious Project, a $250 million charity fund, and the TED Fellows program, which provides resources to “visionaries” who are creating positive change in the world, deserve kudos. As does the way TED addressed its own #MeToo scandal, by announcing it to the conference, noting two past attendees had been disinvited, and reading a code of conduct aloud.

The conference allows attendees to voice criticisms in the form of one-minute rebuttals on the main stage. One responder applauded the racial diversity among attendees, but expressed disappointment in the prevalence of imagery and content that depicted the African diaspora as a population in need of help and charity. “If diversity was the invitation that got us here, inclusion is the hard work,” he said. Another criticized video game developer David Cage’s use of “adolescent male fantasies” in a game demo. A male responder criticized actress Tracee Ellis Ross’s impassioned description of female fury, saying it did not invite him into the conversation. A female responder later pointed out that, in fact, Ellis Ross had expressly invited men to the conversation. “He admitted he didn’t hear that part,” the responder said.

Some TED sessions were designed to make attendees uncomfortable. (Setting aside the event’s many creature comforts, like massages, bountiful organic snacks and sleek Steelcase furnishings.) Anderson told the audience to “embrace the discomfort” during the opening session titled “Doom. Gloom. Outrage. Uproar,” in which speakers advocated for feminism, gun rights, an open dialogue around race and free speech for scientists, and deleting our social media accounts. They elicited tears, standing ovations, and whooping cheers from the eager TED audience, except for the man next to me, who played solitaire on his iPad. Ellis Ross described a situation where a friend of hers felt fury toward a man who touched her without her consent. “I feel like this is the point in the room where all the men are getting a little uncomfortable,” she said. Solitaire man got up and walked out. Too much discomfort.

Many of the talks concluded with a host asking follow-up questions about the dangers of the technology demonstrated. Couldn’t the video editing tools shown by Dr. Supasorn Suwajanakornbe of Google Brain be used to spread extremely compelling disinformation, for example? Dolby Labs chief scientist Poppy Crum used tubes that measured carbon dioxide in the air to detect the level of fear in the room, declaring that technology would render the poker face “a thing of the past.” Woa. Couldn’t that be used against us? The presenters all expressed a desire to ensure the technology they were building would have a positive effect on society.

But the programming left some attendees I spoke with feeling depressed. The last two years of headlines have shown us what happens when powerful technology like social media gets abused by nefarious actors. It’s difficult to imagine the same thing won’t keep happening with each new breakthrough. James Bridle, a writer and TED speaker, outlined the difficult challenge the tech industry currently faces: “Any technological problems of any size and scale are political problems as well,” he said. “We can’t fix it just by changing the technology, but also society that is using [it].”

On TED’s final day, Anderson noted that he hoped attendees could embrace discomfort “and maybe occasionally still feel joy in what’s being achieved.”

“I don’t know,” he added. “We’re all still trying to do this.”

The TED Experience

  • This year, the conversation at TED centered on Facebook.

  • An oral history of how TED became a global think-fluencing phenomenon.

  • According to one TED talk, mind-reading technology might be on the horizon. But will that might chip away at what it means to be human.

Exclusive: Amazon in talks with airline Azul for shipping in Brazil – sources

SAO PAULO (Reuters) – Amazon.com Inc (AMZN.O) is in talks with Brazilian airline Azul SA (AZUL.N) on shipping goods in the country, two sources with knowledge of the matter told Reuters, in the latest sign of the retailer’s big plans in Latin America’s largest economy.

FILE PHOTO: The logo of Amazon.com Inc is seen in Sao Paulo, Brazil October 17, 2017. REUTERS/Paulo Whitaker/File Photo

The talks with Azul, which serves over 50 percent more Brazilian airports than its nearest rival, are the strongest signal yet that Amazon is lining up distribution to sell products directly to consumers throughout the country.

It also shows that the U.S. e-commerce company is serious about overcoming the nation’s notorious logistical challenges, including shoddy roads, security problems and a national territory greater than the continental United States.

Representatives for Azul declined to comment on the talks.

Amazon said it did not comment on “rumors or speculation.”

The Seattle-based online retailer has so far waded slowly into Brazil’s highly competitive e-commerce market, starting with e-book sales in 2012, adding physical books two years later and offering third-party sales of electronics in October.

E-commerce accounts for around 5 percent of Brazil’s roughly $300 billion retail market, about half its share in the United States. Yet Brazil’s online sales have doubled in four years and are expected to grow at a double-digit pace in coming years.

Currently, Amazon relies on third-party vendors to ship their own goods sold on its Brazilian website, but that appears to be changing.

In February, Reuters reported that Amazon was looking to lease a 50,000-square-meter warehouse just outside Sao Paulo, in a sign the retailer may bring storage and distribution in-house.

In March, Reuters reported that the company met with an array of manufacturers in Sao Paulo to discuss plans to stock and sell products directly.

Both developments drove down shares in Brazilian e-commerce competitors, such as Magazine Luiza SA (MGLU3.SA) and B2W Companhia Digital SA (BTOW3.SA). MercadoLibre Inc (MELI.O) has also fought Amazon tooth-and-nail in Mexico and Brazil.

By partnering with Azul, Amazon would immediately gain access to a network of more than 100 airports in Brazil, implying its ambitions go far beyond metropolitan Sao Paulo.

Azul has built up an 18 percent share of Brazil’s domestic air travel market over the past decade by flying regional jets and turboprop planes into second- and third-tier cities underserved by other carriers.

Azul’s cargo unit, Azul Cargo Express, takes advantage of excess cargo capacity in its passenger flights to offer rapid delivery to locations ranging from far-flung Amazonian outposts to Brazil’s major metropolitan centers.

The company offers shipping to more than 3,200 municipalities, as well as a specialized e-commerce service known as Azul Cargo E-Commerce. Azul’s hub, Viracopos International Airport, is about a 45-minute drive from the warehouse Amazon has been eyeing northwest of Sao Paulo.

The sources, who requested anonymity as the negotiations are confidential, did not specify how advanced conversations were, nor did they say if the retailer has also engaged Azul’s rivals.

Competing airlines with Brazilian cargo operations include Latam Airlines Group SA LTM.SN and Gol Linhas Aereas Inteligentes SA (GOLL4.SA). Neither responded immediately to requests for comment.

Last week, Azul announced it has leased two Boeing Co (BA.N) freight aircraft “to support the rapid growth of its cargo business unit.”

Reporting by Gram Slattery; Additional reporting by Flavia Bohone, Gabriela Mello, and Tatiana Bautzer in Sao Paulo and Felipe Iturrieta in Santiago; Editing by Brad Haynes and Cynthia Osterman