Page 88 – Kanebridge News

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Stocks Are Already Responding To Post-Covid Pent-Up Demand. What You Need to Know.

Stocks and Covid

The narrative that Covid-19 vaccine inoculations will enable reopenings and a normalised economy has begun to play out. And while stocks have been down of late, the decline is actually a positive signal about the economy.

The hope has been that, as the roll-out of vaccines goes on, government restrictions will be lifted, and small businesses will rehire workers. The question mark, in addition to whether vaccinations will stop the pandemic, has been whether the economy will be healthy enough to bounce back.

After all, shops can only rehire if they have the cash, and consumers—many of whom are out of work—can only spend if they have money. Yet the trillions of dollars the government continues to spend to support the economy, including jobless benefits and direct stimulus checks, have provided a major boon for household cash savings.

The groundwork has been laid, it seems, for the demand the economy suddenly lost during the pandemic to come back just as fast.

At the same time, daily inoculations in America through January were many times higher than in December. The pace has remained brisk, with more than 65 million doses administered so far, according to the Centers for Disease Control and Prevention. States have indeed been reopening.

Economic data shows the improvement.

The unemployment rate is 6.3%, down from close to 15% at the depth of the pandemic and down 0.4 percentage point in January. Jobs are coming back, even if the labor-market recovery is uneven at times. Household incomes rose 10% in January from December.

As people grow more confident about their job prospects and safety, they are spending some of the cash they have accumulated. Retail sales rose more than 5% month over month in January. Companies are anticipating strong demand: Orders for durable goods rose more than 3% for January, more than triple the amount economists expected.

In short, reopenings are working for the economy and consumers are already unleashing pent-up demand. Economists expect gross domestic product to increase in the mid-single digits in percentage terms for 2021, a gain that would bring economic activity back to near the 2019 level. Economists at RBC Capital Markets wrote in a recent note that 9% growth for the year is conceivable.

On the surface, the stock market hasn’t seemed to reflect optimism. The S&P 500 is down more than 3% since Feb. 12. That is when interest rates begin their most recent pop higher, which makes the risk of owning stocks less attractive.

But growth stocks—a haven for investors during much of last year’s market turmoil—have been leading the decline. Those stocks are more sensitive to changes in rates and they are less influenced by economic growth than value stocks are.

The rising rates reflect changes that benefit value stocks: increasing expectations for inflation and better demand for goods and services. The Vanguard S&P 500 Value Index exchange-traded fund (VOOV) is flat since Feb. 12.

The strong economic trends are young. The most important factor now is how effective vaccines will be against new virus strains.

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Luxurious Slice Of The Sunshine Coast

Set on the dazzling Noosa River comes a world-class development of three luxurious apartments inspired by the idyllic climes of the Sunshine Coast.

On the market is the largest of the three, a ground floor residence offering 445sqm.

Here, exquisite craftsmanship and contemporary design meet in an intelligent layout that boasts expansive terraces and free-flowing living spaces throughout the 3-bedroom, 3-bathroom 2-car garage residence.

The work of multi-award-winning designer Chris Clout, the home sees natural light feature prominently with lofty ceiling heights and multiple, seamless connections to the outdoors. Elsewhere, wide eaves maximise the use of the wrap-around terraces while expansive outdoor entertaining spaces further elevates the offering.

Inside a considered, coastal palette is delivered by oak flooring and the use of timber fixtures alongside porcelain tiles, a stone finished kitchen and bathrooms – fitted with European appliance and bespoke joinery throughout.

The master suite proves a decadent retreat replete with a private balcony, large walk-in robe and luxurious stone and timber ensuite.

The residence is privy to a stunning horizon pool, while the park-like landscaped gardens highlight Noosaville’s sub-tropical appeal. The oversized terrace makes al-fresco entertaining effortless.

A basement offers secure parking while the complex is home to a gym, sauna and powder room.

The address is close by to the Sunshine Coast’s favourite cafes and bars, with a ferry stop to Hastings Street, Noosa Main Beach and Noosa Marina nearby.

The listing is currently with David Connolly (+61 438 259 956) and Lisa McKenzie (+61 417 776 361) of Century 21 Connolly Hay Group.
1/217-219 Gympie Terrace, Noosaville, $6million; Century21noosa.com

 

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INSIDE VICTORIAN COUPLE’S DESIGNER RETIREMENT RETREAT

Large Parsons Home

Australian retirees William and Catherine Parsons have settled down in a frontline beach house on the country’s south coast, about a 90-minute drive from Melbourne.

They took the long way home.

Retirees Catherine and William Parsons demolished their previous family home before completing their new beach house in 2019.

Leon Schoots for The Wall Street Journal

Back in 1995, Mr. Parsons, now a 71-year-old retired airline pilot, and his wife, 57, a retired nurse, spent $258,000 on a 1/7th-acre lot on a windy bluff on the, leading to the Port of Melbourne.

Their original plan was to raise their two daughters in a new 371sqm villa, completed in 1998, but faulty construction, they said, culminated in the home’s demolition in 2016. That fiasco paved the way for a $2.1 million do-over with new architects and new builders.

For several years the family endured makeshift living arrangements, including homeschooling their children, now adults, during extended overland trips on four continents, or “road schooling,” as Ms Parsons likes to call it.

Finally, in the autumn of 2019, the couple moved into a new 353sqm, four-bedroom home.

A dark-hue kitchen offers a respite from sunny days on Australia’s southern coast.

Leon Schoots for The Wall Street Journal

The three-story house has a concrete-and-eucalyptus facade sealed against potentially heavy winds and corrosive salt spray. The second floor has a sheltered terrace and pool area accessible from the split-level open living and dining area that highlights ocean views.

The couple make the most of the site, says Mr Parsons, with the help of poured-concrete walls and double-glaze windows. “We’re extremely exposed,” he says, “but the new house is rock solid. With the doors and windows closed, we can just hear the ocean. When they’re open, it’s like a train going past.”

Known for ideal surfing and hang-gliding conditions, the couple’s stretch of peninsula is a dunescape. They went for a wild look with $71,000 in landscaping, opting for low-maintenance indigenous species and a naturally planted roof garden.

The couple worked with Auhaus Architecture, a Melbourne studio specialising in upscale single-family homes. Kate Fitzpatrick, an Auhaus principal, estimates it costs an extra $160,000 to $200,000 to build on their site rather than on a sheltered inland lot. Benjamin Stibbard, her fellow Auhaus principal, says that the peninsula’s predominant southern winds, blowing most days off the ocean, can cause “rain that is horizontal,” adding that the house is “as waterproof as a bathtub.”

The peninsula can also have hot sunny spells in January and February, with temperatures well over 100 degrees. The couple spent $412,000 on concrete, and their double-thick walls help keep the house cool in summer and warm in winter.

The main section of the house includes a top-floor master suite and lower-level granny flat, while an adjoining single-storey wing, separated from the rest of the house by the $79,000 pool area and reached by a first-floor corridor, has bedrooms for their visiting daughters, as well as a music room and a yoga deck.

The shower in the master bath has a skylight.

Leon Schoots for The Wall Street Journal

To navigate the main portion of the house, the couple spent $52,000 on an elevator—an upgrade, jokes Ms Parsons, of the previous home’s dumbwaiter. But their major splurge, they say, was a spiral staircase.

“I have always had a thing for staircases,” says Ms Parsons of the $87,000 set of stairs, which has a looming sculptural presence when viewed from the pool and terrace.

The interior of the home tends to rely on dark elements, including eucalyptus panelling, but the staircase itself is painted gleaming white—at her architects’ suggestion, says Ms Parsons.

She might have opted for the original battered-silver of the unpainted steel, she says, but the white, she decided, “looks elegant.” On the whole, it “takes away the brutality” of the bare concrete walls that show traces of the wood forms used to shape them on site.

The kitchen has a hushed quality due to blue-green Japanese tiles, which give the back wall a dark iridescence. Left over from the master bathroom, one of four in the home, the single-glaze tiles were a last-minute substitute for a continuation of the veined white marble used for a countertop.

“The sun can be glaring in summer,” says Ms Parsons, “but there is something so lovely and soothing about looking at the kitchen—it’s like looking into a rock pool.”

One of two bedrooms reserved for the couple’s adult daughters.

Leon Schoots for The Wall Street Journal

The kitchen cost nearly $111,000, with $46,000 spent on a suite of American appliances from Wolf and Sub-Zero.

The staircase led to a second splurge: the placement of an antique piano that Mr Parsons inherited from his grandparents. Too big for the winding stairs, it was moved into the children’s wing with a crane while the house was still under construction.

“It was our first piece of furniture,” says Mr Parsons of the 19th-century upright, made in Dresden, Germany. Mr Parsons plays mainly classical music, while his daughters when visiting from college, may join in on the flute, guitar or ukulele. The plentiful concrete boosts the acoustics.

Settled into their new home at last, the couple have an easier time visiting nearby fellow retirees: Mr Parsons’ parents. “My father is 102 and my mother is 100,” he says, “and they’re still going strong.”

The exposed lot provides rousing ocean views but also exposes the home to harsh conditions.

Leon Schoots for The Wall Street Journal

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Australian Prime Property Market Continues To Surge

Australian Prime Property

Luxury residential price growth was consistent across Australia in 2020, but strongest in smaller cities, with greater growth forecast for 2021, according to the results of the Prime International Residential Index (PIRI 100) in the forthcoming edition of Knight Frank’s The Wealth Report 2021.

The PIRI 100, which tracks luxury residential prices across the world’s top 100 residential markets found five Australian cities – Perth, Gold Coast, Brisbane, Sydney and Melbourne – were ranked in the top 65 for luxury residential market performance over the past year.

It’s smaller cities that shone in 2020, with Perth coming in as the top performer at number 24 with 3.6% annual growth, the Gold Coast following at 36 with 3.2% annual growth and Brisbane at 44 with 2.5% growth. Sydney and Melbourne both held up well in what was a tumultuous year for the global market, with the Harbour city coming in 56 (1.1%) and Melbourne 63 at (0.9%).

“In 2020, 29 per cent of locations saw prices decline year-on-year, up from 21 per cent in 2019, however, five markets also registered double-digit price growth in 2020, compared with just two the previous year,” said Knight Frank’s head of residential research Australia, Michelle Ciesielski.

“Australia’s luxury residential property market fared well, with three of the five cities included in the PIRI 100 recording growth greater than the global average, and in the case of Perth, nearly doubling it,” Ciesielski added.

Knight Frank Data
Courtesy: Knight Frank.

The future of the prime market looks bright with the Knight Frank report forecasting luxury residential property prices in Perth, the Gold Coast and Sydney to rise by three per cent over 2021, while Brisbane is predicted for a two per cent rise and Melbourne to grow at a slower one per cent.

The forecast comes off the back of demand for luxury property in Australia continuing to be strong,  boosted by the ongoing pandemic and the continuing return of expats.

“Property prices in Perth are coming off the back of several years of price decline, but recently population growth has improved with prospering mining activity and resilient commodity prices, and this has led to a strong rebound in the residential market,” said Shayne Harris, national head of residential, Knight Frank.

“In Sydney, it’s the super-prime property market – those sales exceeding $10 million – which is driving up the overall prime performance as we see our ultra-wealthy clients upgrading the family’s main residence and buying new holiday homes as international travel is likely to remain subdued in the coming years.”

 

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2021: The Unexpected Is Expected

OPINION

—

For savvy investors, including property and mortgage investors, the new year traditionally starts by reading bold economic and property predictions penned by favourite fund managers and economists attempting to predict what lies ahead.

If 2020 taught us anything, it was to expect the unexpected. And while 2021 will be a continuation of the emotional roller coaster ride experienced the past 12 months, the difference is that the unexpected is now the expected.

It took me over a decade to truly appreciate and understand a quote from an old economics professor: “Economic forecasting is like trying to predict tomorrow’s weather whilst taking into account how people will collectively feel on that day”. There’s a big difference between economic forecasting and commentating, and those who are bold enough to forecast are (sadly) rarely right.

Despite uncertainty, Australia continues to earn its title as the The Lucky Country via leading virus control and a stable economy. The IMF’s latest predictions claim our economy will be powering towards 5.2% GDP growth this year and 4.1% GDP in 2022, much to the envy for the rest of the world. Despite what can be seen as one of the most significant trade wars in Australia’s history, the ongoing stoush with China, our aggregate exports are steadily growing, predominately off the back of mining.

Remarkably, there’s been no government support for continuing immigration during the pandemic — which traditionally is a significant economic driver— and my mind truly boggles as to how this is playing out.

When it comes to the Australian property market, we need to remember it was less than eight months ago that the general consensus of most respected economists and property commentators was that property would fall in excess of 10% – 20%. Some banks even predicted declines of up to 30%. Today, the RBA believes house values could increase by up to 30% over the next three years (so much for expert economic commentators).

Despite the overall positive property euphoria, we must not become complacent with the apparent advent of continued unabated growth and unwittingly underestimate the ‘iceberg effect’ – because we still don’t know what else could be lurking below the surface.

Iceberg Effect

No one can be quite sure of the quantum of zombie companies still feeding off the Government’s life support which is due to abruptly end this March. Moreover, once the bank moratorium is over, banks will surely begin recovering on delinquent loans. And we are yet to see the full ramifications of both of these unfolding events.

We believe that the possible negative aspects of the aforementioned events have been significantly mitigated due to the Government’s generous support measures and swift actions enabling us to enjoy our current and favourable set of economic circumstances.

Prime Minister Scott Morrison last week announced that 90% of the jobs lost during the darkest hour of the pandemic have been clawed back — thus allowing our free markets to take over the economic recovery without further government support. Interestingly, we are now experiencing a tsunami of capital flow through our financial markets.

Despite current rhetoric, as a commercial mortgage fund manager, we need to look deeper than the high-level property headlines. For commercial mortgage funds managers to engage longterm success, they need to be consistent and disciplined in their risk and credit assessments.This ensures maximisation of capital preservation can be maintained and our investors (including SMSF trustees) can rely upon the consistency of regular stable monthly income distributions.

And so to some quick fire market insights …

Regional Property

Despite a large spike in local migration from Sydney and Melbourne to regional areas, our view has not changed on the risk in lending in regional areas. Just as quickly as the prices and demand have gone up, they can as easily revert due to an exodus of people back to the metropo areas once the COVID-19 crisis abates and the physiological desire to work face-to-face, rather than through Zoom, may once again prevail. The second reason is linked to regional areas having lower restrictions on creating new housing supply. In regional areas, undersupply of properties could turn to oversupply in a relatively short period of time as it doesn’t have the same land constrains as the metro areas of Sydney, Melbourne and Brisbane.

Commercial and Industrial

According to this week’s data, the inner-city vacancy rates are 8.6% — essentially double last quarter’s figures with the delivery of further supply expected in 2021. This was not unexpected due to the additional restrictions on both businesses and landlords as well as the weakening, but still prevailing, negative stigma of working in the city. To add insult to injury, many multi-national corporations have loosened work from home policies and are slowly giving up commercial space in the city. Despite this negative trend, we remain optimistic that this will reverse over time, however as it might take years, investors should be prudent on the gearing of investments secured against this asset class.

House v Unit

Most of the positive property headlines focus on houses prices rather than the entire residential property market, which prompts a question about price trends for units? Corelogic recently published that the difference between house and unit prices has never been wider with this gap only continuing to expand.

In saying this, there are a number of contributing factors to consider:

 

  • Most units are concentrated in close proximity to the city and highly populated areas, which proved to be less desirable during COVID-19.

 

  • Investors make up the largest segment of unit purchases as they favour apartments over houses, due to ease of management and cost. Property Investment activity is at one of the lowest levels for over 10 years.

 

  • Due to Covid-19 we’re short approximately 500,000 people who are normally short to medium term renters — a direct correlation to the lack of overseas students and tourists.

 

  • Owner-occupiers are the predominate buyers in the current market and their requirements are different to those of the investor set, that is, they want larger apartments. Due to the lack of supply of this specific product, owner-occupier buyers are turning to houses as an alternative.

 

  • The Federal Government’s current $2billion Home Builder scheme is artificially increasing demand for houses through generous incentives on offer, the take up of which has far exceeded expectations.

Despite all the odds, including decreasing demand, unit prices remain resilient. We believe that unit prices, which normally lag behind house prices, will catch up in the long term and eventually the gap will shorten.

Mortgage Investment Opportunity

Msquared Capital has identified a number of emerging gaps in the commercial lending market which has enabled us to introduce investors to unique opportunities.

Business owners who’ve been temporally impacted by COVID-19 are now requiring commercial funding and banks have been slow to adapt and are still trying to wrap their heads around how to provide businesses with the right access to cashflow during COVID-19.  These business operators typically have quality real estate to offer as security and this creates a specific opportunity for our investors right now.

With the RBA recently making a strong public commitment that interest rates will remain unchanged until 2024, both business and consumer confidence around obtaining appropriate finance is high. On the flip side, those investors who have historically relied upon bank term deposits to provide them with a good regular income stream are losing out with TD rates hovering around a meagre 0.75%pa.. Accordingly, it’s a great time for those investors to look at alternate investments, including a registered first mortgage loan to a small business borrower (with target rates of return currently between 6.50%p.a. and 8.00% p.a).

 

 

Paul Miron has more than 20 years experience in banking and commercial finance. After rising to senior positions for various Big Four banks, he started his own financial services business in 2004.

M2 Capital

msqcapital.com

 

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HSBC Takes The Slow Boat To China

HSBC

Another year, another familiar-sounding strategic update at HSBC. The behemoth’s need to reiterate its pivot to Asia underlines what a slow, awkward process it is.

The London-headquartered, China-focused bank announced full-year results on Tuesday. As at peers, revenues were hit by lower interest rates globally and chunky allowances for pandemic-related loan losses. Unlike at investment-banking rivals, the bump in trading revenues from HSBC’s own trimmed-back business was a meagre offset. A much-anticipated new strategy amounted to more of the same—except for lowered shareholders returns.

The shares fell in early trading, extending a year of underperformance. For much of the past decade the stock has traded at a premium to most European peers because of HSBC’s strong business in Hong Kong and mainland China, both profitable, fast-growing markets. But that gap has narrowed considerably in the past year, likely for two main reasons: Investors want faster organizational change, and they are concerned that HSBC’s trademark business model of bridging East and West is getting more difficult.

The bank broadly delivered on its 2020 targets. However, return on tangible equity or ROTE fell to just 3.1% from 8.4% a year earlier, and dividends were suspended at the British regulator’s request. The pandemic seems a valid excuse. The real disappointment was in its guidance for future returns. Target ROTE has been reduced and delayed, even with an additional $1 billion in cost cuts. Dividend expectations were pared back too: The growing quarterly payment has been replaced with a 40% to 55% payout ratio, possibly topped up with buybacks or special dividends.

Strategically, the bank is still focused on shifting more assets from Europe and the U.S. into Asia, as well as increasing its wealth management business and making its operations more digital. The direction of travel makes sense, but the pace remains frustratingly sedate, particularly as competition in the region is picking up. Discussions continue about long-mooted exits from retail operations in France and the U.S.

The speed of change might accelerate under Chief Financial Officer Ewen Stevenson, who was put in charge of the new overhaul. A relative outsider, he joined HSBC in 2019 from RBS, now known as NatWest, where he led a far-reaching revamp of what was once the largest bank in the world by assets.

HSBC’s shares are also weighed down by geopolitics. Management says little on the topic of Sino-American relations, except to highlight a long history of successfully bridging international divides. That discretion may be the best way to juggle conflicting priorities, but does little to assuage investor concerns that its dual identity may eventually become untenable.

The bank has no good answers to geopolitical questions, giving it all the more reason to address organizational ones. For a company that makes much of its position in exciting high-growth Asian markets, HSBC’s expected returns are surprisingly modest. For its shares to regain their old lustre, that needs to change.

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Online Speech Is Now An Existential Question For Tech

Pixelated Facebook

Every public communication platform you can name—from Facebook, Twitter and YouTube to Parler, Pinterest and Discord—is wrestling with the same two questions:

How do we make sure we’re not facilitating misinformation, violence, fraud or hate speech?

At the same time, how do we ensure we’re not censoring users?

The more they moderate content, the more criticism they experience from those who think they’re over-moderating. At the same time, any statement on a fresh round of moderation provokes some to point out objectionable content that remains. Like any question of editorial or legal judgment, the results are guaranteed to displease someone, somewhere—including Congress, which this week called the chief executives of Facebook, Google and Twitter to a hearing on March 25 to discuss misinformation on their platforms.

For many services, this has gone beyond a matter of user experience, or growth rates, or even ad revenue. It’s become an existential crisis. While dialling up moderation won’t solve all of a platform’s problems, a look at the current winners and losers suggests that not moderating enough is a recipe for extinction.

Facebook is currently wrestling with whether it will continue its ban of former president Donald Trump. Pew Research says 78% of Republicans opposed the ban, which has contributed to the view of many in Congress that Facebook’s censorship of conservative speech justifies breaking up the company—something a decade of privacy scandals couldn’t do.

Parler, a haven for right-wing users who feel alienated by mainstream social media, was taken down by its cloud service provider, Amazon Web Services, after some of its users live-streamed the riot at the U.S. Capitol on Jan. 6. Amazon cited Parler’s apparent inability to police content that incites violence. While Parler is back online with a new service provider, it’s unclear if it has the infrastructure to serve a large audience.

During the weeks Parler was offline, the company implemented algorithmic filtering for a few content types, including threats and incitement, says a company spokesman. The company also has an automatic filter for “trolling” that detects such content, but it’s up to users whether to turn it on or not. In addition, those who choose to troll on Parler are not penalized in Parler’s algorithms for doing so, “in the spirit of First Amendment,” says the company’s guidelines for enforcement of its content moderation policies. Parler recently fired its CEO, who said he experienced resistance to his vision for the service, including how it should be moderated.

Now, just about every site that hosts user-generated content is carefully weighing the costs and benefits of updating their content moderation systems, using a mix of human professionals, algorithms and users. Some are even building rules into their services to pre-empt the need for increasingly costly moderation.

The saga of gaming-focused messaging app Discord is instructive: In 2018, the service, which is aimed at children and young adults, was one of those used to plan the Charlottesville riots. A year later, the site was still taking what appeared to be a deliberately laissez-faire approach to content moderation.

By this January, however, spurred by reports of hate speech and lurking child predators, Discord had done a complete 180. It now has a team of machine-learning engineers building systems to scan the service for unacceptable uses, and has assigned 15% of its overall staff to trust and safety issues.

This newfound attention to content moderation helped keep Discord away from the controversy surrounding the Capitol riot, and caused it to briefly ban a chat group associated with WallStreetBets during the GameStop stock runup. Discord’s valuation doubled to $7 billion over roughly the same period, a validation that investors have confidence in its moderation strategy.

The prevalence problem

The challenge successful platforms face is moderating content “at scale,” across millions or billions of pieces of shared content.

Before any action can be taken, services must decide what should be taken down, an often slow and deliberative process.

Imagine, for example, that a grass-roots movement gains momentum in a country, and begins espousing extreme and potentially dangerous ideas on social media. While some language might be caught by algorithms immediately, a decision about whether discussion of a particular movement, like QAnon, should be banned completely, could take months on a service such as YouTube, says a Google spokesman.

One reason it can take so long is the global nature of these platforms. Google’s policy team might consult with experts in order to consider regional sensitivities before making a decision. After a policy decision is made, the platform has to train AI and write rules for human moderators to enforce it—then make sure both are carrying out the policies as intended, he adds.

While AI systems can be trained to catch individual pieces of problematic content, they’re often blind to the broader meaning of a body of posts, says Tracy Chou, founder of content-moderation startup Block Party and former tech lead at Pinterest.

Take the case of the “Stop the Steal” protest, which led to the deadly attack on the U.S. Capitol. Individual messages used to plan the attack, like “Let’s meet at location X,” would probably look innocent to a machine-learning system, says Ms Chou, but “the context is what’s key.” Facebook banned all content mentioning “Stop the Steal” after the riot.

Even after Facebook has identified a particular type of content as harmful, why does it seem constitutionally unable to keep it off its platform?

It’s the “prevalence problem.” On a truly gigantic service, even if only a tiny fraction of content is problematic, it can still reach millions of people. Facebook has started publishing a quarterly report on its community standards enforcement. During the last quarter of 2020, Facebook says users saw seven or eight pieces of hate speech out of every 10,000 views of content. That’s down from 10 or 11 pieces the previous quarter. The company said it will begin allowing third-party audits of these claims this year.

While Facebook has been leaning heavily on AI to moderate content, especially during the pandemic, it currently has about 15,000 human moderators. And since every new moderator comes with a fixed additional cost, the company has been seeking more efficient ways for its AI and existing humans to work together.

In the past, human moderators reviewed content flagged by machine learning algorithms in more or less chronological order. Content is now sorted by a number of factors, including how quickly it’s spreading on the site, says a Facebook spokesman. If the goal is to reduce the number of times people see harmful content, the most viral stuff should be top priority.

A content moderator in every pot

Companies that aren’t Facebook or Google often lack the resources to field their own teams of moderators and machine-learning engineers. They have to consider what’s within their budget, which includes outsourcing the technical parts of content moderation to companies such as San Francisco-based startup Spectrum Labs.

Through its cloud-based service, Spectrum Labs shares insights it gathers from any one of its clients with all of them—which include Pinterest and Riot Games, maker of League of Legends—in order to filter everything from bad words and human trafficking to hate speech and harassment, says CEO Justin Davis.

Mr Davis says Spectrum Labs doesn’t say what clients should and shouldn’t ban. Beyond illegal content, every company decides for itself what it deems acceptable, he adds.

Pinterest, for example, has a mission rooted in “inspiration,” and this helps it take a clear stance in prohibiting harmful or objectionable content that violates its policies and doesn’t fit its mission, says a company spokeswoman.

Services are also attempting to reduce the content-moderation load by reducing the incentives or opportunity for bad behaviour. Pinterest, for example, has from its earliest days minimized the size and significance of comments, says Ms Chou, the former Pinterest engineer, in part by putting them in a smaller typeface and making them harder to find. This made comments less appealing to trolls and spammers, she adds.

The dating app Bumble only allows women to reach out to men. Flipping the script of a typical dating app has arguably made Bumble more welcoming for women, says Mr Davis, of Spectrum Labs. Bumble has other features designed to pre-emptively reduce or eliminate harassment, says Chief Product Officer Miles Norris, including a “super block” feature that builds a comprehensive digital dossier on banned users. This means that if, for example, banned users attempt to create a new account with a fresh email address, they can be detected and blocked based on other identifying features.

The ‘supreme court of content’

Facebook CEO Mark Zuckerberg recently described Facebook as something between a newspaper and a telecommunications company. For it to continue being a global town square, it doesn’t have the luxury of narrowly defining the kinds of content and interactions it will allow. For its toughest content moderation decisions, it has created a higher power—a financially independent “oversight board” that includes a retired U.S. federal judge, a former prime minister of Denmark and a Nobel Peace Prize laureate.

In its first decision, the board overturned four of the five bans Facebook brought before it.

Facebook has said that it intends the decisions made by its “supreme court of content” to become part of how it makes everyday decisions about what to allow on the site. That is, even though the board will make only a handful of decisions a year, these rulings will also apply when the same content is shared in a similar way. Even with that mechanism in place, it’s hard to imagine the board can get to more than a tiny fraction of the types of situations content moderators and their AI assistants must decide every day.

But the oversight board might accomplish the goal of shifting the blame for Facebook’s most momentous moderation decisions. For example, if the board rules to reinstate the account of former President Trump, Facebook could deflect criticism of the decision by noting it was made independent of its own company politics.

Meanwhile, Parler is back up, but it’s still banned from the Apple and Google app stores. Without those essential routes to users—and without web services as reliable as its former provider, Amazon—it seems unlikely that Parler can grow anywhere close to the rate it otherwise might have. It’s not clear yet whether Parler’s new content filtering algorithms will satisfy Google and Apple. How the company balances its enhanced moderation with its stated mission of being a “viewpoint neutral” service will determine whether it grows to be a viable alternative to Twitter and Facebook or remains a shadow of what it could be with such moderation.

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WhatsApp Co-founder Jan Koum Pays $109 Million For Home Next Door

Malibu Mansion

Jan Koum, the co-founder of WhatsApp, is paying approx. $109 million for a Malibu, Calif. mansion right next door to one he already owns, according to two people familiar with the deal.

The transaction is the latest big-ticket deal for Mr Koum in the Los Angeles area. In 2019 he purchased the neighbouring Malibu property from entertainment executive Ron Meyer for around $126 million. Then last year Mr Koum spent approx. $157 million for the Beverly Hills estate of Quibi founder Jeffrey Katzenberg.

The seller in the latest transaction is Diana Jenkins, a Bosnia-born entrepreneur and philanthropist. Ms Jenkins, founder of health-drinks company Neuro Drinks, was previously married to British financier Roger Jenkins. Her home came on the market last May for US$125 million, The Wall Street Journal reported. It is on Malibu’s Paradise Cove, and its prior owners include Barry Diller and the late country singer Kenny Rogers.

Sitting on a cliff top, the property has its own funicular leading down to the ocean (Mr Rogers was slapped with a US$2 million fine by local authorities for installing it.). On nearly 3 acres, it includes a single-story, five-bedroom house with vaulted ceilings, herringbone floors and floor-to-ceiling windows that open onto the gardens. It also has a dance studio and a recording studio. On the grounds, there is a three-bedroom guesthouse, a swimming pool, a waterfall and koi pond, a sports court and a guard house.

The funicular leads an oceanfront cabana, which has retractable ceilings, a wet bar, a built-in barbecue and fire pit.

Mr Koum, 44 helped launch WhatsApp, an internet messaging service, in 2009. Following the service’s acquisition by Facebook in 2014, he remained as a Facebook director for several years before stepping down in 2018. The Bloomberg Billionaires Index pegs his net worth at $15.7 billion.

Chris Cortazzo of Compass has the listing. The buyer was represented by Kurt Rappaport of Westside Estate Agency.

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Bitcoin Mining Is Big in China. Why Investors Should Worry.

China Bitcoin Mining

Critics of the nearly ubiquitous digital currency Bitcoin often focus on its environmental consequences. After Tesla announced recently that it had bought roughly US$1.5 billion in Bitcoin, sending the cryptocurrency’s value skyrocketing, sustainability investors decried the “level of carbon dioxide emissions generated from Bitcoin mining.” Certainly, “mining”—the energy-intensive process by which computers solve complex algorithmic problems to verify blockchain transactions, for which they’re rewarded in digital currency—is an undeniable environmental offender.

But there is another worrying aspect of Bitcoin, one that should make investors think twice about including it as part of an ethical investing strategy.

A large amount of new Bitcoin comes from Xinjiang, the region in northwest China where more than a million Uighur Muslims and other minorities have been imprisoned in concentration camps. According to the Cambridge Bitcoin Electricity Consumption Index, as of April 2020, China was responsible for 65% of all Bitcoin mining. And of that, 36% takes place in Xinjiang, the largest regional component. Why? Cheap coal means cheap energy to power the machines that mine Bitcoin. Xinjiang has an abundant supply of coal, and the region’s relative remoteness means that it’s far cheaper to use the resource locally than move it to other parts of China. The issue is not that the Chinese government uses forced labour in Xinjiang coal mines—the reporting on that is inconclusive. Rather, because of the atrocities occurring in Xinjiang, any product produced there brings with it high ethical and regulatory risk.

In the camps—which Beijing calls “vocational educational and training centres”—guards try to “deradicalise” Uighurs for crimes such as wearing long dresses, abstaining from pork or alcohol, or praying. While the difficulty of reporting in the region means that concrete evidence is scarce, camp survivors have described systemic torture, forced sterilization, and rape. (Beijing denies committing atrocities.) In January, right before leaving office, Secretary of State Mike Pompeo declared that Beijing was committing “genocide” in the region. His successor, Antony Blinken, agrees.

To summarize: Roughly 20% of new Bitcoin is mined in Xinjiang, the site of some of the world’s most egregious human-rights abuses.

Today, Bitcoin’s association with Xinjiang is barely discussed. But that may change. For public-facing funds considering investing in the notoriously volatile asset, there are two other risks to consider. The first is that because of the concern among the American public about human-rights abuses in Xinjiang, holding assets tied to the region comes at the risk of a public relations disaster.

Already, activists have criticised Olympic sponsors for participating in the “genocide Olympics”—the 2022 Beijing Winter Games. Multiyear campaigns to hive Xinjiang off from the global supply chain are already well under way.

In July, more than 190 organizations, including the AFL-CIO, called for clothing brands to end all sourcing from Xinjiang within the next 12 months. (In 2020, roughly 20% of the world’s cotton came from Xinjiang.) It’s not hard to imagine Bitcoin becoming another frontier in their campaigns.

Investors should be alert for regulatory action. Bitcoin’s Xinjiang relationship gives ammunition to those in the U.S. government who may want to further monitor or restrict the transactions. Analysts expect the Biden administration to pay close attention to Bitcoin. In mid-February, Treasury Secretary Janet Yellen criticised the “misuse” of cryptocurrencies in laundering money or funding terrorism. At the same time, Bitcoin’s Xinjiang connection could put it on the radar of the various arms of the Commerce, State, and Defense departments that are seeking to reduce U.S. dependence on physical and digital Chinese goods. If this trend intensifies, the Treasury Department could sanction the Bitcoin mining firms that have large operations in Xinjiang, or issue advisories that it is “studying” Bitcoin’s links to the region—signalling to global financial institutions another risk of holding the cryptocurrency.

In January, U.S. Customs banned the imports of Xinjiang cotton and tomato products and told U.S. companies to get forced labour out of their supply chains. Extricating Bitcoin from Xinjiang could be far more difficult. Unlike, say, blood diamonds or Iranian crude oil, Bitcoins exist only digitally. While there is a public record of the billions of Bitcoin transactions, it’s exceedingly complicated to determine the geographic origin of a particular Bitcoin. That means all Bitcoin holders can deny any connection to human-rights abuses—but also risk being tarnished by the association.

It has long been ironic that Bitcoin, developed to decentralize power, is so dependent on China, a country ruled by a government obsessed with centralizing it. But depending on China is one thing. Depending on Xinjiang is another. There are many excellent ethical and regulatory reasons not to buy Bitcoin. Add Xinjiang to that list.

Isaac Stone Fish is the CEO and founder of Strategy Risks, a firm that quantifies corporate exposure to China.>

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Smarter Ways To Wake Up

Smart Alarm

Let’s face it, getting out of bed, especially during these times, can take the power of a forklift to pry most of us from all that cocooning comfort to face the day. But maybe, if the wakeup method itself were a little more enticing rather than a shrill jolt, the process would be much less painful. Enter smart alarm clocks, which come with capabilities that rival house managers in real life as well as state-of-the-art entertainment systems that kick off your day in a more energized way.

While they don’t include robotic arms to physically lift you out of your lair, they do have some serious functionality that might inspire you to, in fact, get up.

Here are four of the latest models on the market.

Lenovo Smart Clock Essential

Lenovo

Part clock, part digital detox, the Lenovo Smart Clock isn’t just designed to tell you the time and wake you up. Thanks to a screen that gradually dims and brightens, it can help you fall asleep and get up less abruptly—so you can slide into your day in a more organic way. It works with Google Assistant, so all you have to do is ask it for things like news briefs, weather reports or updates on the traffic and you shall receive.

Set good nightly routines by telling it to dim the lights and lock the doors—and have it turn on the lights, play energizing music or start the coffee maker in the morning. If that’s not enough, when the screen is not in use, it displays the time on customizable clock faces.

The Lenovo Smart Clock Essential is available for around $79. lenovo.com

LaMetric Time

LaMetric Time

As clocks go, LaMetric Time takes the prize for coolest retro vibes. The Wi-Fi-connected timepiece lets you choose the clock face (from tons of adorable designs) that come to life in pixelated fashion. Program it to play your favourite tracks through Spotify or online radio, or you can stream tunes from Apple music—so you’ll wake up on the sunnier side of the bed instead of being scared out of a deep sleep.

The intelligent clock also has countdown capabilities, which can measure how much time you spend on daily tasks like cooking, fitness or other activities. Send notifications from your phone straight to your clock and it will display reminders right on screen. Like any good smart device, it also connects to other home functions—like lighting, appliances and temperature control.

The LaMetric Time is available for $199. lametric.com

 

Amazon Echo Dot

Amazon

The perfect companion for your nightstand, Amazon Echo Dot with its LED clock works with Amazon Alexa, so you can ask it just about anything—for a joke, to play music, to answer questions, to play the news or check the weather and set alarms. Before bed, program it to put on your favourite ambient sounds or audiobook, and then tell it to set a sleep timer, so it turns off while you turn in.

Controlling your smart home using your voice to do everything from turning the lights on and off to adjusting thermostats and locking doors is undoubtedly impressive, but this device’s most noteworthy feature is its capacity to set and store alarms—and a lot of them, 100 to be exact. Ask it to set single, one-off alarms or even repeating alarms on different days. Basically, you’ll never forget anything ever again.

The Amazon Echo Dot is available for $59.99. amazon.com.au

Reason ONE Smart Alarm Clock

Reason ONE Smart Alarm Clock

In terms of utility, Reason ONE Smart Alarm Clock makes no mistake on time. Its large digital time display is easy-to-read. And it automatically adjusts brightness based on ambient light. Paired with Amazon Alexa, you can set timers, check the weather or news and play music, podcasts or audiobooks. The accompanying Reason Home app lets you take the controls, so you can use it to manage any smart home device. And if you set it to night mode before bed, it eliminates the clock display entirely, which means you won’t have to cover it (or your head) to get the room pitch black.

The Reason ONE Smart Alarm Clock is available for around $30. thereasonclock.com

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