Famed ‘Pivot’ Strategy of Startups May Not Work For GE

This article first appeared in Data Sheet, Fortune’s daily newsletter on the top tech news. Sign up here.

While I was out last week Fortune published my feature on Eric Ries, author of the wildly popular book for entrepreneurs , The Lean Startup. Ries is a whirling dervish of the startup and innovation world. He’s an author, speaker, coach, consultant, and even CEO of an ambitious if quixotic startup of his own, the Long-Term Stock Exchange, which aims to combat short-termism on Wall Street.

Ries is a prophet in Silicon Valley, and his first book is its Bible. The thrust of my feature is the 39-year-old’s pivot to helping big companies find their inner startup and the book he has published as their field manual, The Startup Way. Ries and his teachings have been valuable to numerous companies—P&G and ING have had promising successes—and his work is an inspiration to a veritable cottage industry of innovation consultants.

That said, it might not be clear for some time if concepts like “pivoting” and “minimum viable product” can ever move the needle for big companies. (Buzzwordery meets cliché in a Ries-inspired firm that’s actually called Moves The Needle, which boasts: “We are innovation architects.”) Ries’s primary example in his new book is GE, where he was deeply embedded and coached at the highest levels.

Ries says he is “cautiously optimistic” about GE. He might be the only one. When I read The Wall Street Journal’s impressive reporting on GE’s yes-man culture, I couldn’t help but wonder if the tens of thousands of workers trained in lean-startup methods and hundreds of projects that followed its techniques were part of the “success theater” the paper describes.

Incidentally, The Startup Way is making less of a dent in the world than its predecessor. According to Nielsen Bookscan, which measures only U.S. physical book sales, seven-year-old The Lean Startup sold three times as many books last week than The Startup Way, which came out in October. The Lean Startup is ranked No. 1,832 of all books on Amazon, a phenomenal ranking for such an old book; its heavily promoted successor is at No. 10,028.


My vacation reading: Anyone who writes should read this lovely and erudite essay by Amy Chozick of The New York TimesThe Economist competently sums up a thesis we at Fortune have been hammering for a year, that Chinese tech companies no longer are copycats—and that Silicon Valley has been arrogantly slow to figure this out … Onetime Time writer Joshua Cooper Ramo, supposedly an expert on Asian affairs, ought to pick up the haunting novel Pachinko, by Min Jin Lee. It’d be impossible to read it and not understand how Koreans feel about Japan … This stunning narrative in New York magazine about a young ex-Air Force linguist accused of disclosing top-secret information is all the more powerful for not having pointed out the central irony of the crime for which its subject will soon stand trial.

EU plans new tax for tech giants up to 5 percent of gross revenues

BRUSSELS (Reuters) – The European Commission wants to tax large digital companies’ revenues based on where their users are located rather than where they are headquartered at a common rate between 1 and 5 percent, a draft Commission document showed.

The proposal, seen by Reuters, aims at increasing the tax bill of firms like Amazon [AMZN.O], Google [GOOGL.O] and Facebook [FB.O] that are accused by large EU states of paying too little by re-routing their EU profits to low-tax countries such as Luxembourg and Ireland.

The plan resembles a French proposal on an equalization tax that was supported by several big EU states. However, it is likely to face opposition from small countries that fear becoming less attractive to multinational firms.

The document says the tax should be applied to companies with revenues above 750 million euros ($922 million) worldwide and with EU digital revenues of at least 10 million euros a year.

The proposal is subject to changes before its publication which is expected in the second half of March. Some of the key figures on rates and thresholds are in brackets, showing that work is still ongoing to define the final numbers.

Firms selling user-targeted online ads, such as Google, or providing advertisement space on the internet, such as Facebook, Twitter or Instagram, would be subject to the tax, the document said, citing these companies.

Digital marketplaces such as Amazon and gig economy giants such as Airbnb and Uber also fall under the scope of the draft proposal, the Commission said.

Online media, streaming services like Netflix, online gaming, cloud computing or IT services would instead be exempt from the tax.

The levy would be raised in the EU countries where users are located, rather than where companies are headquartered, reducing the appeal of smaller low-tax states.

“This would entail additional reporting requirements so that the tax authorities of member states can calculate how much tax is due in their jurisdiction,” the document said.

In the case of online advertisers, the tax should be levied “where the advertisement is displayed” and “where the users having supplied the data which is being sold are located.”

For online shopping, the tax would be collected in countries “where the user paying for being able to access the platform (or to conclude a transaction within the platform) is located,” the document said.

The levy would be calculated on the “aggregated gross revenues” of a business and should have a single EU rate “in the region of 1-5 percent.” It would be possible to deduct this tax as a cost from national corporate taxes.

The tax would be a temporary measure that would be applied only until a more comprehensive solution to fair digital taxation is approved, the Commission said.

The long-term solution would entail the adoption of new rules on a “digital permanent establishment”.

The proposal, once finalised, would need the approval of all EU states.

Editing by Matthew Mpoke Bigg

Week 9 Breakout Forecast: Short-Term Picks To Give You An Edge

Breakout Forecast Selections for Week 9:

Market conditions continue to show signs of recovery. Readers are cautioned that negative conditions are still strong, but have been significantly reduced. My momentum gauge is based on the size of the list of screened momentum stocks. The negative momentum indicator list is showing above average numbers at 35, but down from the prior week with 40. The positive momentum indicator has moved up significantly from all time lows. All time low for positive momentum selections is 10 (during week 6) and all time high is 120 (last August). The current positive momentum measure is still quite low at 35, but up from 30 in the prior week.

Additional selections from last week’s separate technical articles also showed double-digit returns in a short trading week: AGEN +16.32% and DRNA +19.98%

This week I have selected 8 breakout stocks from the following sectors: 5 healthcare, 2 basic materials, and 1 services. I continue to see strong signals of breakouts across the biotech sector as I described in my last sector report.

The two new selections of positive momentum stocks for this week include:

  1. Oasis Petroleum, Inc. (OAS) – Basic Materials / Independent Oil & Gas
  2. Senseonics Holdings, Inc. (SENS) – Healthcare / Medical Appliances

These stocks are not necessarily recommended for long term buy/hold unless you are comfortable with very large price swings. As I continue to observe, strong momentum events usually last from one to three weeks and may encounter some substantial decline before returning again to positive gains.

These are the most volatile selections I offer from among all the different Value & Momentum portfolios. Proposed entry points for each of the selected stocks are as close to the highlighted prices in yellow on the charts at market open. All stocks are selected for high short-term breakout results over one to three weeks.

Breakout Stock Charts for Week 9

Pick #1: Oasis Petroleum, Inc. (OAS)
– Basic Materials / Independent Oil & Gas

Significant institutional ownership increases in latest 13F filings:

Target price: $11.00

Pick #2: Senseonics Holdings, Inc. (SENS) – Healthcare / Medical Appliances

Significant institutional ownership increases in latest 13F filings:

Target price: $3.40

Breakout Forecast Performance Results:

Total Return Chart: +52.77%

Total Breakout portfolio returns by week for the past 5 weeks are listed below through the end of last week to illustrate the rolling returns of prior top performers and total portfolio returns:

Breakout Forecast Portfolio gains past 5 weeks / Top 3 Performing Stocks
Week 8 +3.79% / (FATE) +34.71%, (DRNA) +19.98%, (RUN) +0.51%
Week 7 +8.19% / (EGAN) +36.60%, (FLDM) +11.09%, (EROS) +10%
Week 6 +1.47% / (SRNE) +18.95%, (HAIR) +18.64%, (PIRS) +6.44%
Week 5 -2.79% / (QNST) +37.72%, (STAA) -5.47%, (CNAT) -5.50%
Week 4 -1.39% / (AGEN) +27.46%, (INVA) +8.56%, (WK) +0.45%

For those who are new to this short-term selection method I would highly recommend that you review the end of year performance summary and the links to methodology articles about how these high volatility, typical low cap, breakout selections work. Basically, I am trying to maximize the frequency of substantial positive returns using the parameters that resulted from my published doctoral research by focusing on the most volatile sector of stocks.

2018 YTD Chart: +11.58%
Cumulative return with 1-Week holding period.

The next charts shows the cumulative return for a longer fixed 2-week holding period instead of the 1 week holding period charted above. Because 2-week holding periods overlap with weekly selections, I have separated it into two charts, Odd and Even weeks:

  1. Using 2-week holding periods, the ODD Weekly Breakout portfolios have returned 12.77% compared to 5.39% for the S&P 500 YTD over the same holding periods.
  2. The EVEN Weekly Breakout portfolios have returned 1.12% compared to -0.86% of the S&P 500 in the equivalent 2-week holding period.

Chart 1. Chart 2.

Additional Value & Momentum Portfolio Returns:

Full portfolio composition reports are exclusive to members, however additional articles on the different categories of portfolios and samples of research provided to subscribers are listed in my public research profile.

If you are interested in subscribing to any of the Value & Momentum Breakout portfolios offered you can visit my subscription page here. Otherwise please click the “Follow” button at the top of the page and enjoy free updates on the progress of each of the different portfolios I offer that are outperforming the S&P 500 in each of their respective time periods.

As always, I wish you the very best in all your investments!

JD Henning, PhD, MBA, CFE, CAMS

Disclosure: I am/we are long DRNA, EROS, FATE, EGAN, FLDM, PIRS.

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

Vote Against The Rite Aid/Albertsons Merger

Grocer Albertsons signed an agreement to buy all Rite Aid (RAD) stores not bought by Walgreens (WBA). The deal is unusual, to say the least. Rite-Aid shareholders will effectively get $2.50 a share, which is a far below amount Walgreens paid for the 1,932 stores it bought. Shareholders should demand more than the low-ball offer.


Walgreens bought 1,932 stores for $4.4 billion, which values the stores at $2.28 million a store. Conversely, Albertsons will get the approximately 2,670 Rite Aid stores for $1.83 of cash plus a share of Albertson’s, for every 10 shares of Albertson’s. The exact terms of the deals are as follows:

Under the terms of the agreement, in exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either (I) one share of Albertsons Companies common stock plus approximately $1.83 in cash or (ii) 1.079 shares of Albertsons Companies stock. Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28.0 percent to 29.6 percent stake in the combined company, and current Albertsons Companies shareholders will own a 70.4 percent to 72.0 percent stake in the combined company on a fully diluted basis.

Source: Rite Aid

The approximately $2.50 per RAD stock values the buyout at $2.6 billion, or just $970,000 for each store. Paying less than half what Walgreens paid is wholly inadequate for shareholders. If an activist investor like Elliot steps in, as contributor Seven Corners Capital Management suggests, it would have a strong case in forcing Cerberus to raise its offer.

RAD Stock:

RAD data by YCharts

Take Cash and New Share or No Cash and More Shares

If no activist investor gets involved to get more for each RAD stock, then shareholders may either take the $1.83 in cash plus 1/10 Albertsons shares or take a bit more Albertsons shares only. As you will notice, the deal is structured to give very little money to shareholders. Investors need to consider how weak the combined company will be when it merges. Finding $375 million in synergies is hardly assured. As author Vince Martin calculated, assigning a 5x multiple to EBITDA and the combined Rite Aid/Albertsons would have a market cap of $7 billion. That would imply a share value of just $2 a share.

Speculating on Rite Aid

Author Daniel Jones believes the merger is good for shareholders. The bullishness is based on the combined firm achieving the cost synergies, $400 million in free cash flow from Rite Aid, and a P/FCF of just 4.2 times. The problem with this view is that Albertson’s stores are all dated and are in need of a major refresh. Prior to the merger, Rite Aid had walked through a more innovative business model that would embrace technology in its business. It would have focused more on delivering a better customer experience. This merger sets Rite Aid’s turnaround back.

Reader Sean Livingstone figures Amazon.com (AMZN) could swoop in to buy some of Rite Aid’s stores. The online retailer is working with Berkshire Hathaway and JPMorgan Chase to partner on health care. Yet the new company will focus only on the technology solutions. It will need a physical storefront to deliver easily accessible drugs.

Merger Sets Too Low a Value for Rite Aid Stock

CVS data by YCharts

The merger values RAD stock at just 0.2x EV/Fwd Revenue. CVS Caremark (CVS) is worth 0.5x while Walgreens (WBA) is valued at 0.6 times.

Source: finbox.io

Rite Aid is worth north of $3.50 a share at a 0.3x EV/Fwd. Revenue and that excludes assuming management succeeds in fixing the business and generating higher revenue in the future:

Source: finbox.io

Final Word

Rite Aid shareholders should vote against the merger and, should the deal go through, sell the stock before the Albertsons shares are issued. Cerberus failed to take Albertsons public through an IPO for over three years. This backdoor entry into the stock market is a troubling deal that hurts the RAD shareholder. Rite Aid had a fundamentally better chance of turning around its business as a pure-play pharmacy chain. The merged firm has two bifurcating goals of growing in the supermarket business and in pharmacy. The synergies between the two businesses are limited. Post-merger, the firm will suffer from low p rofitability and extra costs needed to put the two operations together.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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

Australian Dollar Is A Sell, But A Risky One

There are serious downside risks to the Australian dollar. Generally, I believe that you should sell AUDUSD (or trade the bearish thesis through related ETFs: FXA, CROC, DAUD, UAUD), but I want you to be aware of the risks.

First, let’s discuss why you should sell the Aussie. Then, I will explain why you should be cautious.


Consider the weekly chart.

Source: Trading View

Since 2016, the AUDUSD has been moving in a strict Fibonacci channel, with remarkable discipline. Every single level that was previously a resistance later became a support and vice versa. The general trend was up, but it was not until 2018 that the currency finally managed to break above 200-SMA and hold above it. Now, however, it is at risk of sliding below that critical level and possibly setting a new monthly low. Indeed, this week’s candle (see the chart below) nearly engulfs the previous candle, which is a sign of a strong bearish pressure. Indeed, last week, AUDUSD failed to hold above 0.382 Fibo trend-channel line and history shows that over the past two years, every time the currency failed to hold above that level, it then retreated towards 0.236 level and sometimes fell below it.

On a daily chart, the exchange rate has dropped below its weekly pivot level (0.7890) as well as below all key short-term moving averages (5, 10 and 21). Furthermore, relative strength index is weakening.


I believe two themes will be weighing on the Aussie on the fundamental side of things: divergent monetary policy between the Fed and the RBA and structural weaknesses in the domestic economy.

The Fed minutes from the meeting, held Jan. 30-31, were released on Wednesday. They indicated the Fed sees increased economic growth and an uptick in inflation as justification to continue to raise interest rates. Some analysts actually believe that the Fed is even more hawkish today than it was three weeks ago, when it held that meeting. David Kelly of JPMorgan predicts “unless there is some shock” there will be four rate hikes this year.

By contrast, the Reserve Bank of Australia (the RBA) is likely to follow a more gradual rate rise path, due to low wage growth and high household debt. Thus, divergent monetary policy will ensure that any rallies in AUDUSD will be hard to sustain. Indeed, the average monthly spread between two-year bond yields dropped below zero in February. In other words, the spread is now negative because the yield on U.S. Treasuries is higher compared to Australian bonds. This has not happened since July 2000. Yes, you read it correctly. The monthly average two-year yield spread between the U.S. and Australia has not dropped below zero for almost 18 years. But now it is below zero, which makes long positions on AUDUSD even costlier.

Source: Federal Reserve, Reserve Bank of Australia, personal calculations

Now to Australia’s domestic issues.

As already said, the combination of low wage growth and high debt means the RBA will stand pat on rates for a while yet. The problem, however, is that the debt is not only high, but that it is also getting higher. RBA data shows that the average household mortgage debt-to-income has risen to around 140% at the end of 2017 from nearly 120% in 2012.

Simultaneously, employment situation is just not getting better fast enough. Wage growth remains stubbornly low (too close to inflation level), while unemployment rate remains persistently high (it has been above 5.0% since 2012).

Source: Australian Bureau of Statistics

On balance, divergent monetary policy between the Fed and the RBA and structural weaknesses in the Australian economy (notably, debt-income situation) compels me to look for opportunities to short AUDUSD. However, there is one issue that dents my confidence – commodities.


Australia is a resource-rich country, which is exporting a lot of commodities – specifically, iron ore, coal, wheat and liquefied natural gas. The price of commodities has been going up lately as global demand improved. As a result, Australia’s trade balance went into surplus (see the chart below). Although that surplus already started to shrink in November last year, it was probably only a temporary adjustment. Indeed, oil price is up 4% year-to-date, and because energy is a major component of Australia’s exports mix, I expect to see further improvements in its trade balance in January and February.

Source: Australian Bureau of Statistics

Stronger exports will improve current-account balance and will drive the demand for the Australian dollar. This factor is making me a bit more cautious in my trading strategy.

Overall, I will be looking for opportunities to short AUDUSD – especially if I see any rallies, but my targets will be relatively modest. I doubt we will see 0.7000 in the nearest future, but 0.7500 is possible.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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

?Red Hat introduces updated decision management platform

Troubleshoot a network? No problem. Write a 3,000 word article on Kubernetes cloud container management? When do you want it. Talk to a few hundred people about Linux’s history? Been there, done that. Manage a business’s delivery routing and shift scheduling? I’ll break out in a cold sweat.

If you too find the nuts and bolts of business processing management a nightmare, you’ll want to check out Red Hat‘s latest program: Red Hat Decision Manager 7.

This program is the next generation of JBoss business rules management system (BRMS). This is a salable, open-source business rules management system. It includes both business resource planning and complex event processing (CEP) technology.

By helping your organization or business capture your business logic, it enables you to automate business decisions across heterogeneous physical, virtual, mobile, and cloud environments using a modern microservices architecture. The Decision Manager 7 is fully compatible with Red Hat’s Middleware portfolio and Red Hat OpenShift Container Platform so you can deploy it in hybrid cloud environments.

Tools such as this often require a lot of customizing coding before they’re useful. This is a low-code development tool, which enables business users to work smoothly with the application development team. If you think of it as a DevOps tool for management and developers, you won’t be far wrong.

There’s a real need for such programs. According to industry analyst firm IDC, non-traditional developers are expected to build 20 percent of business applications and 30 percent of new application features by 2021. If we want to avoid creating useless business process programs — and boy haven’t we all seen some of those! — Decision Manager could be quite useful.

According to Mike Piech, Red Hat’s VP and general manager of Middleware, “The notion of low-code development is less about eliminating code or cutting traditional programmers out of the application development process, and more about helping business and IT users to do what they need to do quickly and efficiently, and in a complementary manner. Ultimately, what low-code tools should offer — and what we have built with Red Hat Decision Manager — is not a platform geared toward one or the other, but rather a rich and tightly integrated feature set designed to provide a better user experience regardless of whether you are a business analyst or hardcore developer.”

Red Hat built this platform for both traditional and cloud-native applications. It can create rules-based decision and planning microservices that can be deployed on-premises within a customer’s datacenter, or as containerized services on Red Hat OpenShift Container Platform.

OpenShift, an OpenStack and Docker cloud-based technology — what does that have to do with business processes, you ask. Remember what I said about DevOps? It enables your business to enhance your processes with such DevOps tricks in trade as automated testing and continuous integration and delivery (CI/CD).

Companies want business process management (BPM). A Red Hat survey found over half of Red Hat customers, 57 percent, want BPM software to automate internal processes. Others, 46 percent, want it to help support new applications, while 41 percent want it to automate external processes, e.g., processes that touch customers, partners, or suppliers. Finally, a substantial minority, 29 percent, want it to support self-service applications.

Want to give Red Hat Decision Manager a try? Red Hat Decision Manager is available for download by members of the Red Hat Developers community. Customers can get the latest updates from the Red Hat Customer Portal. Just don’t ask me to work out your business processes before you try to automate them. I have enough trouble organizing my small business workflow.

Related Stories:

South Korean chat app becomes new outlet for #MeToo movement

SEOUL (Reuters) – A chat app where South Koreans can anonymously dish the dirt on their misbehaving bosses and colleagues is belatedly stirring the country’s #MeToo movement, shedding new light on sexual harassment in the heavily male-dominated corporate culture.

Prompted by a recent wave of complaints about workplace misconduct – including a groping allegation made by a South Korean public prosecutor last month – the app Blind has added a new feature: a message board dedicated to a rising number of #MeToo stories.

”We thought the prosecutor going public would put fresh momentum in the #MeToo movement in South Korea and our #MeToo board was definitely inspired by her action,” Kim Sungkyum, co-founder at Blind’s creator TeamBlind said.

Koreans are wary of being whistleblowers about harassment at family-run conglomerates or chaebol that dominate South Korean business. Their big fear: the companies will turn on them for rocking the boat and they will be victimized again.

Some 61 percent of South Korean respondents working at private companies said they would bypass in-house whistleblower hotlines, saying they didn’t trust their organization to keep complaints confidential, according to a survey by consulting firm EY. That was significantly higher than the Asia-Pacific average of 37 percent.

Instead, South Koreans are turning to Blind, which now has over a million users in the world’s most wired country.

“Employees are reluctant to use internal bulletins for fear of reprisals which is part of our country’s corporate culture,” said a banker at a South Korean state run bank who uses the app. “I think Blind can make people talk more freely, which can’t be controlled by their companies.”

In less than 24 hours after the launch of the #MeToo board on Blind more than 500 posts were uploaded, making the app intermittently unavailable due to heavy traffic, the app’s operator says.

By Thursday, the board had swelled with more than 1,600 posts, prompting conversations about workplace sexual misconduct ranging from cracking sexist jokes to making unwelcome physical advances.


FILE PHOTO: The Blind anonymous work talk application is seen in the Google Play store on a mobile phone in this illustration photo February 6, 2018. REUTERS/Thomas White/Illustration/File Photo

Blind says it encodes personal data and information to protect users’ privacy, and users must use their company email for verification.

When the app first came out four years ago, several companies requested Blind take down posts that might be damaging to their reputation. TeamBlind says it has not taken down any posts at a company’s request and has not faced any lawsuits for material posted on its message boards.

TeamBlind said it does reviews posts and has removed some that violated its terms of use, including publishing statements that might be defamatory or breach individuals’ privacy.

Globally, the #MeToo movement has exposed men accused of sexual assault and harassment in fields including entertainment, politics and business. Dozens of prominent men have quit or been fired from high-profile posts, and police have opened investigations into some accusations of sex assault.

But it was slower to catch on in South Korea, which ranked 118 out of 144 on gender equality last year, according to the World Economic Forum.


In the case of the public prosecutor – who said her boss groped her at a funeral in 2010 – the Supreme Prosecutors’ Office launched an inquiry into her allegations. The investigation is ongoing but the Prosecutor General has promised to take action to combat sexual harassment in the workplace. In another incident late last year, South Korean furniture maker Hanssem publicly apologized after a post detailing a female employee’s experiences of workplace sexual abuse went viral, sparking a boycott of the company’s products. Earlier this month, posts made on Blind said chairman of the group that owns Asiana Airlines had made inappropriate physical contact with female flight attendants.

Last week, Park Sam-koo, chairman of the airliner’s parent Kumho Asiana Group, issued an apology over the allegations, saying “it was all my carelessness and responsibility”.

Park did not respond for requests for comment, and the company said it had taken no action against him.

Despite the increased awareness, many South Korean Blind users say they are yet to see significant changes in their workplaces.

“Through Blind, I have come to realize there are so many things that need to be corrected in my company. But I haven’t seen any sweeping change yet,” said another user who said he was working for a major conglomerate. “We still have a long way to go.”

Reporting by Heekyong Yang; Editing by Ju-min Park and Lincoln Feast

Human rights groups say Mexico not investigating spyware claims

MEXICO CITY (Reuters) – A group of human and digital rights activists said on Tuesday that the Mexican government had failed to properly investigate allegations their smartphones were infected with spying software. They have asked for an independent investigation.

Activists, human-rights lawyers and journalists filed a complaint in June with the attorney general’s office, claiming the government had infected their phones to spy on them with software known as Pegasus, which Israeli company NSO Group allegedly sold to Mexico’s government.

“Since filing the complaint we said we did not trust the attorney general’s office would be able to investigate itself, since there is evidence it was that agency that purchased the malware,” the activist groups said in a joint statement.

The group includes the Miguel Agustin Pro Juarez Human Rights Center (Prodh), human rights advocacy group Article 19, Mexicans Against Corruption and Impunity and digital rights group R3D.

Mexican President Enrique Pena Nieto has asked the attorney general’s office to investigate the charges the government spied on private citizens, saying he wanted to get to the bottom of the accusations he called “false.”

“President (Pena Nieto) condemned the investigation to failure, threatening the accusers and concluding prematurely the charges were false,” said the statement.

Citizen Lab, a group of researchers based at the University of Toronto’s Munk School of Global Affairs, has said it found a trace of the Pegasus software in a phone belonging to a group of experts backed by the Inter-American Commission on Human Rights who investigated the 2014 disappearance of 43 students.

U.N. human rights experts called on the government of Mexico in July to “cease the surveillance immediately” of activists and journalists and to conduct a fully impartial investigation into the illegal spying.

The group of activists said Mexican authorities have not followed up on several leads, even failing to identify and question the government officials trained to use Pegasus.

They called on candidates for July’s presidential election to make a public announcement on the need to create a panel of independent experts to investigate the case.

Left-wing candidate Andres Manuel Lopez Obrador is leading in polls for the July vote. He is followed by Ricardo Anaya of the left-right coalition “For Mexico in Front” and trailing in third is Jose Antonio Meade of Pena Nieto’s ruling Institutional Revolutionary Party (PRI).

Reporting by Anthony Esposito; Editing by Michael Perry

'Black Panther' Discussion: This One's Gonna Be Fun

In case you haven’t been near a theater, TV, mall, or interstate overpass, and haven’t seen the news, Black Panther opened this weekend. And it opened big. Like, history-making box office numbers big. With good reason—T’Challa (aka Black Panther) is a hero fans have been anticipating for a long time. As WIRED’s Jason Parham noted last week before Marvel’s latest movie “black superheroes were never afforded the same deification” as their white counterparts, but now Panther director Ryan Coogler has made a movie that shows what a superhero movie can truly be. A lot of us here at WIRED saw the movie over the weekend, and now that the worries of spoilers have receded (yes, this post will have them, continue at your own risk), it’s time we finally talk about it at length. Here we go—Wakanda forever!

Angela Watercutter: OK, I’m not going to say too much right off the bat because I want to know what my colleagues thought, but I will just say that Black Panther lived up to the hype. Like, the anticipation for this movie had been building for months and I was starting to worry that nothing could live up to what fans were hoping for with this movie, no matter how talented everyone working on this film is, but judging from the reaction at the screening I saw, people are thrilled. Did you guys have the same experience? How did you feel walking out of the theater? Did you sense that your fellow theater-goers were satisfied?

Peter Rubin: Angela, we were both in Hall H for Marvel’s panel at Comic-Con last July, and after Ryan Coogler surprised the crowd with some BP footage, we both know what was possible. The mood in that room—among attendees, Comic-Con staffers, and the crew itself—was not your usual “ah, this looks cool!” anticipation. Something cathartic happened in there. And even though I had the opportunity to go to a press screening earlier last week, I skipped it, because I wanted to see it for the first time in a theater full of people who were invested in it.

I wasn’t disappointed. Not by the movie, and not by the feeling of joy and lightness (and yes, Oakland pride) that was occupying every chair at in that theater. Two seats over from me was a young kid, seven or eight years old, in a full-on T’Challa suit; in the 24 hours since I saw the movie, I haven’t been able to stop thinking about the T’Challas (and Okoyes and Shuris) all over the country, stepping out into recess feeling like heroes. Justice, you’ve already seen it twice, right? What kind of differences did you notice in the two screenings—either in the crowd’s reception or in your own enjoyment?

Justice Namaste: The first screening I went to (second one is today!) was in Oakland on opening night. The only screening I’ve been in that nearly matched the energy in the theater during Black Panther was during the opening weekend of Get Out, when one of my friends actually fell out of their chair during the pivotal scene.

Visually, no other Marvel movie has ever come close to Black Panther—the lush Wakandan landscapes, the vibrantly colored costumes, even the wearable tech was beautiful. And that moment where the Royal Talon Fighter dips below the veil and we get an aerial look over the Golden City? Jawdropping.

But even with all this to mull over, when I left the theater, what was left ringing in my ears was Erik Killmonger’s last words: “Bury me in the ocean with my ancestors who jumped from ships, ‘cause they knew death was better than bondage.” In my opinion, the driving relationship in the film was that between T’Challa and Killmonger. (Or, thought of another way, the one between T’Chaka and N’Jobu, but realized through their sons.) T’Challa and Killmonger didn’t spend much time together on screen when they weren’t trying to murder each other—their lack of real dialogue was one of the movie’s more disappointing choices—so the tension between them was largely ideological, but it still drove the story. The “son reckoning with his father’s legacy” trope is a staple of the MCU, but it’s a limited one. Using a villain like Killmonger to complicate the idea of what heroism actually looks like, though? That’s a much more fascinating story.

Phuc Pham: As much as I enjoyed watching T’Challa grapple with both his opponents and his emotional demons, I couldn’t shake the sense that his heroic arc was a copy-paste of the superhero’s journey that Marvel has come to rely on. I mean, this is the fourth guy that has had a plot twist regarding his father upend his world.

Killmonger, on the other hand, was much more interesting to me. While T’Challa does his whole superhero thing, his archenemy points to actual systemic oppression, grounding Marvel’s universe in the real world in a way that feels new and bold. His motivation, essentially, is black liberation the world over—which to me qualified as the biggest heroic endeavor in the film. (At least until you realize that the means to achieve that end are vibranium weapons and a high body count.) Like you, Justice, I wish T’Challa and Killmonger had spent more screen time hashing out their ideological differences. The scenes when they engage in ritual combat are visceral—no Black Panther powers allowed!—but also seemed like wasted opportunities for some fight chatter about how best to rule Wakanda as well as improve the lives of the African diaspora.

Watercutter: Totally. I also wanted Killmonger and T’Challa to have more time to actually talk about their differences. Because, unlike almost every other Marvel villain before, Killmonger didn’t just want to rule to be a ruler. He wanted liberation, and in that he and T’Challa weren’t too far apart—they just had different ideas of how to achieve it. In that final scene that Justice mentioned, I truly didn’t want Killmonger to go. I wanted him to join T’Challa and stay in Wakanda. That, to Jason’s point, doesn’t happen often in these films. Maybe it happened a bit with Loki, but he’s always been a character with many allegiances. (And yes, Peter, I remember that Comic-Con Hall H panel—I’ve never felt anything like that a SDCC, and doubt I ever will again.)

Jason, in your great review last week you talked about how Black Panther showed what a superhero movie could do. What do you think it demonstrated in how it portrayed both its heroes and villains?

Parham: I didn’t think Michael B. Jordan’s acting was particularly strong, but I do agree that Killmonger as a character was perhaps the film’s most compelling—because he really wasn’t your typical antihero. I think Jelani Cobb at The New Yorker was correct in that the real villain was history itself. Killmonger’s rage was merely a product of the times, and all the despair he’d seen firsthand around the world. That’s a heavy burden to reckon with, but not an untrue one. In doing this, Coogler positioned the film in a really smart way, giving it historical currency but also contemporary heft, and all without feeling like he was trying to make some obvious political statement.

One of the more brilliant aspects of the movie—a credit to Coogler and Joe Robert Cole’s fine script—was its insistence on complicating character arcs, especially with people like W’Kabi and M’Baku, who expertly straddled the line between good and bad. Then there’s someone like Okoye, who is fiercely loyal to Wakanda in every regard. Her inner confliction felt so palpable—being forced to serve an unfit king and wage war against her lover (Danai Gurira’s Okoye was maybe my favorite character, along with Shuri and M’Baku). Everyone felt like they were doing what was best for Wakanda, which you can’t really fault them for. It felt like a truer reflection of what it means to be alive in the world today. Black Panther succeeds on so many levels. I’m curious: what did everybody think were some of the stronger aspects of the film?

Namaste: This is the obvious answer, but I just have to say it—the women. The strongest part of the film was undoubtedly all of the women characters. And that extends to the women behind the scenes as well. Lupita Nyong’o’s Nakia, Angela Bassett’s Ramonda, Letitia Wright’s Shuri (and of course Okoye and the rest of the Dora Milaje) were complex characters whose identities and motivations did not revolve solely around men. The audience saw Okoye as both a warrior and a lover, Nakia as an undercover spy who’s more concerned with protecting human rights than gathering intelligence, and Shuri as a younger (and better?) Tony Stark.

Not to mention the fact that their actions and beliefs are key to driving the story forward. Nakia is the first character who really pushes T’Challa to consider what Wakanda’s responsibility is to oppressed people across the rest of the world. And T’Challa would likely be dead 10 times over without Shuri’s engineering brilliance. Speaking of which, I’ve seen Letitia Wright being called the breakout star of the film, a title she most certainly deserves. As Shuri, she delivers some of the funniest lines, while also masterfully navigating a series of tense and heart-wrenching moments. Sure, T’Challa might be the Black Panther, but these women are far from secondary characters.

Pham: I’m so glad the writers decided to adapt Nakia and the Dora Milaje away from the ways they’re set up in some of the older comic book runs, where Nakia has an unrequited crush on T’Challa and the Dora Milaje—in addition to their role as royal guards—are a pool of potential queens. So extra kudos to film-Nakia for asserting she doesn’t want to be a Dora.

There hasn’t been an MCU film that’s as focused on technology since the Iron Man trilogy, and I was struck by how hopeful Black Panther, both the movie and the character, are how a future shaped by it doesn’t have to be dark and bleak. Production designer Hannah Beachler has said how Blade Runner inspired her vision of Wakanda’s capital Birnin Zana, and it shows. The dense urban landscape, replete with pristine skyscrapers and dusty merchant stalls, certainly hearken to traditional cyberpunk environments. Here, though, Afrofuturism shines figuratively and literally. Wakanda forgoes the dim and damp settings of futuristic cities (why are the streets always slicked with rain?) for a warm glow that almost makes you root for Killmonger’s vision of an empire upon which the sun never sets.

Thematically, the film also bucks the trend of Marvel movies in which new technology always begets catastrophe. Tony Stark’s bleeding-edge armaments always seem to end up in the hands of terrorists while Chitauri tech enables a middle-aged megalomaniac to hunt high schoolers in his spare time. Meanwhile, T’Challa not only prevents vibranium from being weaponized but also closes the film with plans to open a Wakandan outpost in Oakland—a city adjacent to Silicon Valley wealth yet wracked by a 20 percent poverty rate—to share and exchange knowledge. In an age when technology is often abused for nefarious and disruptive ends, the Black Panther’s techno-optimism seems to be a call for fewer divisions, not more.

Rubin: The rest of you have already ticked off just about everything that made this movie so appealing, so in hopes of adding something new to the mix, I’ll close with the idea that Black Panther created an entirely new lane for the MCU. After all 4,000 characters band together to (presumably) defeat Thanos in the two Avengers: Infinity War movies, Marvel is going to need a way to move forward, and Wakanda’s entry onto the global geopolitical stage is one of those ways. The MCU has its cosmic arm, its street-level arm, its mystical arm—and now Wakanda links the political intrigue of the Captain America movies with the deeply personal stories of a fully-fleshed world.

Does that mean we’ll see a Dora Milaje prequel movie in 2021? An M’Baku standalone? Only time will tell, but with a roster of new characters, ready-made internal conflict, and a rising cadre of filmmakers who are ready and able to tell these stories, the MCU’s prospects as a long-range paracosm have never been better.

My 'Cash Flow Investing' Strategy

My wealth has come from a combination of living in America, some lucky genes, and compound interest.

– Warren Buffett

“Cash Flow Investing” is a strategy of my own design. It can either be a stand-alone tactic or used in combination with stock and bond picking. The basic concept is to receive money, each and every month, with a few quarterly additions if the yield is high enough, that can be used for living expenses or used to increase the size of your portfolio and your wealth.

The underlying fundamental is the compounding of interest which, if you receive money monthly, adds approximately 1.10% or 110 basis points to the yields that you are receiving. It also has a further advantage, made clear in our recent correction, of having the readily available cash to buy assets at lower prices and higher yields minus any change in dividends.

When I began to employ this methodology, some years ago, I quickly discovered that closed-end funds offered the best opportunity for its use, to employ my strategy. ETFs are the more touted protocol because, in my estimation, the manager receives more money as the assets increase, which is not the case in closed-end funds. Given this dynamic, closed-end funds are the ignored step-child, which is fine with me, as I load up on the monthly, with a few quarterly, dividend pay-outs.

After more than four decades on Wall Street, I also know that “stuff happens.” Consequently, I use investment-grade Corporate bonds, with maturities of 5-10 years, all bought at par or less, as the anchor of my program. Minus a credit event, you should receive all of your principal back, at one hundred cents on the dollar, upon maturity, regardless of the machinations in the markets. The Corporate bonds generally pay semi-annually, and they represent one-half of the portfolio.

Now I have spent countless hours choosing the closed-end funds that I prefer. Currently, my favored closed-end funds are composed of eight, mostly bond funds, with a few equities scattered about in some portfolios, and six MLP closed-end funds and one REIT closed-end fund. My favored MLP funds hold mostly pipeline companies which can be thought of as toll roads, collecting fees, for the transmission of oil and natural gas. Prices of the commodities up or prices down, the oil and natural gas still have to be transported. Choosing these funds is no easy task and the complexity of the choices is based upon any number of moving parts.

There is the NAV, the fund’s liquidity, the leverage used, the quality of the assets, the expertise of the manager, the yield, and the track record of the fund, just to name a few criteria. You have to know what you are doing because, if you don’t, you will make some very poor choices.

One of the components, of virtually all of the closed-end funds, is leverage. This is troubling to some investors mostly because of a lack of knowledge, and understanding, in my opinion.

First, the leverage is the funds and not yours. You are borrowing nothing, and it is the funds’ obligations. Second, closed-end funds are limited to a maximum of 50% leverage by statute. Closed-end funds do not have the 200% or 300% leverage of some ETFs, most of which I consider to be toxic investments that are in the gambling category.

Let’s examine the leverage in context. John Mauldin, in Forbes, cites an $8.6 trillion U.S. corporate debt level. He further states that the average ratio of U.S. corporate debt to GDP is 45.3%.

In the case of the MLP closed-end funds that I like, the average leverage is 27.83%. The one REIT fund that I favor is levered at 27.40%. Then the average for the closed-end bonds funds that I prefer is 30.62%. This puts the average leverage of all of my closed-end fund choices at 28.62%.

Now, let’s look at the yields. Most, as I said, are monthly payers which, by compounding the interest, adds about 110 basis points to the yield. For reference, I use Bloomberg’s “Indicated Yield” as the basis for my computations. In the case of the MLP closed-end funds, the average yield is 12.15%. The REIT closed-end fund yields 11.56%. For the bond closed-end funds the average yield is 11.17%. This then gives you an average yield of 11.63% for the funds that I find attractive. To put this in perspective, the ten-year Treasury closed Friday at 2.88%.

Therefore, at this point in time, if one-half of the money is in investment-grade corporates, yielding approximately 4.25% and one-half of the money is in the closed-end funds then the average total yield is about 7.94%. This is a quite conservative strategy, in my opinion, and one which allows for a peaceful night’s sleep when turmoil is jumping about you during our recent correction.

I also point out that appreciation can be a factor. The concept is to “make money on the money.” Therefore, if there is any meaningful appreciation, I generally suggest taking the profit and rolling out of one fund, or one bond, into another bond or another fund to keep making all the money possible on the cash that has been committed to the strategy. Adjustments can be made at the end of the year for tax planning, if necessary.

There you have it, “Cash Flow Investing” explained. Compounding interest leading to compounding assets which provide monthly cash to adjust to market conditions.

Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.

– Charlie Munger