Category Archives: Technology

A Disturbance In The Force

Overnight the news came out that Apple had cut its parts orders for the iPhone 8 by 50%. While it has been obvious for a while that this iteration of the iPhone was being greeted with a yawn, I think nobody realized that it was a disaster in the making. So now the Apple boosters are saying that the iPhone X, rumored to be priced at $1,000 or more, will bring redemption. Really.

Anyway, we finally see a little selling as one of the major generals of this market has been wounded.

Self-Driving Cars

Probably the most dramatic innovation in transportation since 1885 (the first car, Daimler-Benz Patent Motor Car, Model 1) is the self-driving car.

But what does self-driving really mean? These are the SAE levels:

Level 0: Automated system issues warnings but has no vehicle control.

Level 1 (”hands on”): Driver and automated system shares control over the vehicle. An example would be Adaptive Cruise Control (ACC) where the driver controls steering and the automated system controls speed. Using Parking Assistance, steering is automated while speed is manual. The driver must be ready to retake full control at any time. Lane Keeping Assistance (LKA) Type II is a further example of level 1 self driving.

Level 2 (”hands off”): The automated system takes full control of the vehicle (accelerating, braking, and steering). The driver must monitor the driving and be prepared to immediately intervene at any time if the automated system fails to respond properly. The shorthand ”hands off” is not meant to be taken literally. In fact, contact between hand and wheel is often mandatory during SAE 2 driving, to confirm that the driver is ready to intervene.

Level 3 (”eyes off”): The driver can safely turn their attention away from the driving tasks, e.g. the driver can text or watch a movie. The vehicle will handle situations that call for an immediate response, like emergency braking. The driver must still be prepared to intervene within some limited time, specified by the manufacturer, when called upon by the vehicle to do so.

Level 4 (”mind off”): As level 3, but no driver attention is ever required for safety, i.e. the driver may safely go to sleep or leave the driver’s seat. Self driving is supported only in limited areas (geofenced) or under special circumstances, like traffic jams. Outside of these areas or circumstances, the vehicle must be able to safely abort the trip, i.e. park the car, if the driver does not retake control.

Level 5 (”wheel optional”): No human intervention is required. An example would be a robot taxi

Levels 0 and 1 are widely available today. Tesla is at level 2. The new Audi A8 is available with level 3 (up to 37 mph.). It appears that level 3 will be widely available in 2018-2019 when level 4 will be on a few models. By 2020, level 5 will be available.

Here is the 2017 CES presentation from Toyota that covers this issue. Their concept is 9 minutes in, discussion of safety and levels 19 minutes or so. It even explains why the Audi is limited to 37 mph.

This is a revolution, folks, that will change all our lives. Pay attention.

Internet Advertising

I’m seeing an increasing number of companies (e.g. Proctor and Gamble, Restoration Hardware, Uber… ) complaining publicly that they are receiving little or no value for their internet advertising spending. It is trite to say that half of every advertising dollar is wasted, you just don’t know which half. But in these cases, companies claim to be reducing their internet ad spending without significant negative impacts. Reasons given include poor placement and fraud, although these seem very hard to quantify.

Given that a big chunk of the market cap out there comes from highly valued internet advertising companies (Google, Facebook, etc.) I think one should “watch this space.” Closely. Very closely.

Sticker Shock

A buying panic in the biotechs today as the FDA approved a radical new therapy for certain blood cancers.

This therapy, developed by Novartis, costs a cool $475,000 for a course of treatment.

RuhRoh

P&G is one of the most sophisticated advertisers in the world. You have to be, to sell soap.

Tired of paying for “bot”-clicks and poorly placed ads, P&G cut over $100 million out of its digital advertising spend in the fourth quarter, and nothing happened.

As P&G CFO Jon Moeller said on the recent earnings call: “We didn’t see a reduction in the growth rate… What that tells me is that that spending that we cut was largely ineffective.”

This should be a warning to the advertising companies – Google, Facebook, etc.

Edit: During the Cannes Lions Festival of Creativity, Unilever’s chief marketing and communications officer Keith Weed reportedly asserted that some 60% of online traffic is “bots”.

Dreaming

FANG is so over. Now it is FANTASIA (Facebook, Amazon, Netflix, Tesla, Alphabet, SalesForce, Intel, and Apple)

Nothing Really Matters

Ooh yeah, ooh yeah
Nothing really matters
Anyone can see
Nothing really matters nothing really matters to me

Anyway the wind blows

— Freddy Mercury, Bohemian Rhapsody

Source: zero hedge, of course.

Something Is Going To Snap

Snapchat is trading this morning at a $40 billion valuation. In 2016 revenue was $404 million, and it lost $514.6 million. User growth slowed from 17 percent in Q2 2016 to 3.2 percent in Q4.

There is only one word that applies – mania.

Ad Blockers

There’s a fuss being made by the advertising industry about the increasing use of ad blockers. The industry is, to say the least, being disingenuous.

I run into sites that say I’m running an ad blocker. But I’m not blocking ads. I’m blocking trackers – third party cookies, for example – which are an entirely different thing. I don’t object to advertising, especially on free sites. I do object to using the ads as a stalking horse for data collection about my browsing habits. Arguably, the advertisers are all about the data collection – the ads themselves are incidental.

Turn off the tracking and just show me ads and I won’t object. And don’t lie about what you’re doing.

More Of The Same

Market internals are horrible and fundamentals more so, but the major indices are being held up by the mega-cap stocks that Hussman terms the “winner take all” group. The poster children make up the FANG group – Facebook (P/E 107), Amazon (P/E 952), Netflix (P/E 348) and Google (P/E 32). It seems that people are selling everything else and buying these momo monkeys.

If previous collapses are any precedent, these gems can be expected (with the possible exception of Google) to lose over 90% of their value.