Central Perk: 19 mai 2014

luni, 19 mai 2014

Posted: 19 May 2014 10:26 PM PDT

With the NSA snooping around anywhere and everywhere, violating the constitution in the process, the following development was inevitable: Harvard & MIT Students Have Created an Email So Secure Even the NSA Can't Crack It.

Nearly a year ago, former CIA technical assistant Edward Snowden stepped forward to say he was responsible for one of the most explosive leaks in history. The National Security Agency was exposed, and Andy Yen, a Harvard PhD candidate, was appalled.

"I posted on Facebook, 'Hey, I don't really like the fact the government is wiretapping us. What's happening in America?'"

At the time, Yen was working at the European Organization for Nuclear Research in Switzerland, known as CERN, where the elusive "God Particle" was discovered, coincidentally alongside a handful of other Cambridge, Mass.-educated students from either Harvard or MIT. A team of five suddenly formed, all focused on creating a service stronger than Lavabit, Snowden's email provider.

That service is called ProtonMail, and it is launching out of private beta Friday.

ProtonMail is end-to-end encrypted email that is based offshore in Switzerland, where the team could operate free of surveillance mandates. Although "encryption is not necessarily a new technology," according to Yen, "only one to two percent of the population knows how to do it." ProtonMail handles the entire process without forcing users to install any software, and promises NSA-proof correspondence.

"Even we don't have the ability to read that email," Yen asserted. "If we can't read it, we obviously can't turn it over to any government agencies."

A main motivation behind starting ProtonMail was the human rights component. Referencing a writer in China who blogged about the service, Yen said, "Say you're an activist in China fighting for democracy, this is a life or death service."

The catch is similar to that of Dropbox's model — the service will be free, unless you're a "power user," and then ProtonMail will ring in at roughly $5 a month.

Supposedly, if you can understand Gmail, you can understand ProtonMail. If it's as good as advertized, will it be banned?

This is what it had to come down to. Government nonsensically spying on everyone led to a more-secure service that freedom lovers and criminals alike will embrace.

By the way, the encryption might be secure, but that will not stop the NSA from hijacking entire computers.

Cisco CEO Complains About NSA Allegations

Please consider In Letter to Obama, Cisco CEO Complains About NSA Allegations

Warning of an erosion of confidence in the products of the U.S. technology industry, John Chambers, the CEO of networking giant Cisco Systems, has asked President Obama to intervene to curtail the surveillance activities of the National Security Agency.

In a letter dated May 15 (obtained by Re/code and reprinted in full below), Chambers asked Obama to create "new standards of conduct" regarding how the NSA carries out its spying operations around the world.

The letter follows new revelations, including photos, published in a book based on documents leaked by former NSA contractor Edward Snowden alleging that the NSA intercepted equipment from Cisco and other manufacturers and loaded them with surveillance software. The photos, which have not been independently verified, appear to show NSA technicians working with Cisco equipment. Cisco is not said to have cooperated in the NSA's efforts.

Addressing the allegations of NSA interference with the delivery of his company's products, Chambers wrote: "We ship our products globally from inside as well as outside the United States, and if these allegations are true, these actions will undermine confidence in our industry and in the ability of technology companies to deliver products globally."

"We simply cannot operate this way; our customers trust us to be able to deliver to their doorsteps products that meet the highest standards of integrity and security," Chambers wrote. "We understand the real and significant threats that exist in this world, but we must also respect the industry's relationship of trust with our customers."

The letter follows a May 13 blog post by Cisco General Counsel Mark Chandler saying the NSA had "overreached." Chandler said that Cisco does not cooperate with any government, including the U.S. government, to "weaken our products."

Concern about the aggressive tactics of the NSA have hit Cisco's results, especially in emerging markets like Russia, Brazil and China. When the company reported quarterly earnings last week, it said that orders from emerging countries fell seven percent, and that Brazil, Russia, India, China and Mexico combined for a 13 percent drop. Individually, orders in Brazil fell 27 percent and in Russia, 28 percent.

If your computer and your router are not safe, is ProtonMail safe? Is anything really safe?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Maximum Overweight High Yield?

Posted: 19 May 2014 01:37 PM PDT

On May 13, the BCA came out with this recommendation U.S. High-Yield: Maximum Overweight.

Our model predicts that the default rate for speculative grade bonds will average near 3.0% during the next year. Moody's latest estimate for the 12-month trailing default rate is much lower at 1.7%. Our view is that the U.S. and global economies will continue to expand (and recession will be avoided) over at least a one-year investment horizon. In this case, default losses could remain less than that projected by our model which is calibrated to pre-crisis macro factors. The current cycle could see the default rate move lower still given the scope of deleveraging that followed the financial crisis and Great Recession. Corporate balance sheets are in excellent shape, and there is still an ample cash cushion available to fund operations in the event of a growth setback.

We continue to monitor three key factors for evidence of a turn in default risk: our Corporate Health monitor, bank lending standards, and Fed policy. None of these yet signal cause for concern.

No Cause For Concern - Yet

I doubt we see default rates spike as high as they did in 2009, not because corporations are really flush with cash, but rather because corporations are holding cash-substitutes (backed by debt). Those cash-substitutes can be used as cash in a credit crunch emergency.

Nonetheless, there are numerous problems with the "Don't Worry Yet" philosophy. What follows is a discussion from a risk-reward standpoint, starting with reward.

Potential Reward

Using the SPDR Barclays High Yield Bond (JNK) as a general proxy for high yield bonds, the reward prior to writeoffs is approximately 5.85%.

To calculate actual net return, start with 5.85%, subtract BCA's expected default rate of 3.0%, then subtract another 2.0% or so for inflation. Assume a recovery rate of 40-60% on defaults and you are overweight "junk" for a final net return 2%+-.

Potential Risks

What about the risks? Could BCA's model be wrong? Might default rates be much higher? Might the market start pricing in an expectation of higher defaults even if defaults themselves do not soar? What about rising rates? What about liquidity risks if the market turns on junk bonds?

What about the fact that complacency is at an extreme (see Big Appetite for Risk) and risky assets are typically the first to suffer in a downturn?

Do you really want to be overweight junk when the expected reward is so tiny? Obviously many people do, or junk bond yields would not be as low as they are right now.

The Fed created a junk bond bubble by holding the short-term rate to near-zero, fueled by round after round of QE and things like Operation Twist (selling the short end of the curve and buying the long end) a maneuver designed to bring down long-term rates.

I say "no thanks" to speculating in bubbles. Worse yet, the potential reward is tiny, and the model requires extreme complacency to continue for a year, something I think is highly unlikely.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

World's Unsold Cars Piling Up Everywhere: Fact or Fiction?

Posted: 19 May 2014 11:11 AM PDT

A few days ago a reader sent me a link about unsold cars piling up around the world. I did not touch the story because I had already seen it, years earlier in fact.

Flashback January 19, 2009 Unsold Car Images From Around The World.

Nonetheless, the story was recently picked up as "new" in so many places that Bloomberg's Barry Ritholtz felt the need to set the story straight in The Truth About Auto Sales.

This week, an e-mail landed in my inbox with the header "Unsold Cars."

Normally, I would have deleted the e-mail without a second thought. But several things about it warranted further notice.

The first were aerial photos of thousands of cars. Wow, this really was a lot of cars.

The second was the phrase "Timestamp: Friday, May 16th, 2014," which suggests that these photos were brand new.

What struck me was how familiar it all looked. Maybe that was because I posted those same photos on The Big Picture blog and Business Insider in February 2009.

The origin of the photos was a Jan. 16, 2009, article in the Guardian by Nick Mead. Note that this was smack in the middle of the financial crisis, when anything purchased on credit simply froze. At the time, other sites also picked up the photos from the Guardian, such as car blogs like Jalopnik, and market sites like Mish's Global Economic Analysis.

The truth about these five-year-old photos didn't stop the usual doom and gloomers from immediately running with them. Zero Hedge, Silver Bear, Daily Paul, and too many others to list here re-posted these old snaps as if they were new.

Which raises the following question: How trustworthy are your favorite Internet sources? It varies a lot.

UPDATE: Since I wrote this over the weekend, two other sites have identified the photos and story as false: Debunker site Snopes.com and, in far less family friendly but much more amusing language, the auto blog Jalopnik.

Moral of the Story

It's best to fact check, especially if you don't have a good memory. As with Barry, I did not bother posting the story last week because I knew I had seen those images before. Barry only posted the story because so many places incorrectly posted the story as new.

Note: The Silver Bear reference is incorrect. It is an undated duplicate of my 2009 post.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

Learn The Secrets Of Body Language
Sad Batman Meme Goes Viral
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Learn The Secrets Of Body Language

Posted: 19 May 2014 11:51 AM PDT

Body language is a language all it's own. You can tell a lot about a person by the way they position themselves. Educate yourself on the signs of body language so you can know what everyone is saying at all times even if they aren't speaking.

Sad Batman Meme Goes Viral

Posted: 19 May 2014 10:30 AM PDT

It didn't take long for Ben Affleck's Batman to become an internet sensation. He's been dubbed Sad Batman and Sad Batman has been photoshopped into every hilarious scenario you could ever hope to see him in.