July 31, 2014

The New York Times - Paying Ransoms, Europe Bankrolls Qaeda Terror 5-15min

Kidnapping Europeans for ransom has become a global business for Al Qaeda, bankrolling its operations across the globe. ... While European governments deny paying ransoms, an investigation by The New York Times found that Al Qaeda and its direct affiliates have taken in at least $125 million in revenue from kidnappings since 2008, of which $66 million was paid just last year. ... In news releases and statements, the United States Treasury Department has cited ransom amounts that, taken together, put the total at around $165 million over the same period. ... These payments were made almost exclusively by European governments, who funneled the money through a network of proxies, sometimes masking it as development aid, according to interviews conducted for this article with former hostages, negotiators, diplomats and government officials in 10 countries in Europe, Africa and the Middle East. The inner workings of the kidnapping business were also revealed in thousands of pages of internal Qaeda documents found by this reporter while on assignment for The Associated Press in northern Mali last year. ... In its early years, Al Qaeda received most of its money from deep-pocketed donors, but counterterrorism officials now believe the group finances the bulk of its recruitment, training and arms purchases from ransoms paid to free Europeans. ... While in 2003 the kidnappers received around $200,000 per hostage, now they are netting up to $10 million, money that the second in command of Al Qaeda’s central leadership recently described as accounting for as much as half of his operating revenue. ... “Kidnapping hostages is an easy spoil,” wrote Nasser al-Wuhayshi, the leader of Al Qaeda in the Arabian Peninsula, “which I may describe as a profitable trade and a precious treasure.”

DealBook - In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates 5-15min

Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan. ... “I am not sure how I got the loan,” Mr. Durham, age 60, said. ... Mr. Durham’s application said that he made $35,000 as a technician at Lourdes Hospital in Binghamton, N.Y., according to a copy of the loan document. But he says he told the dealer he hadn’t worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car. ... This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers. ... Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640. ... While losses from soured car loans would be far less than those on subprime mortgages, the red ink could still deal a blow to the banks not long after they recovered from the housing bust. Losses from auto loans might also cause the banks to further retrench from making other loans vital to the economic recovery, like those to small business and would-be homeowners. ... In another sign of trouble ahead, repossessions, while still relatively low, increased nearly 78 percent to an estimated 388,000 cars in the first three months of the year from the same period a year earlier, according to the latest data provided by Experian. The number of borrowers who are more than 60 days late on their car payments also jumped in 22 states during that period.

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Fortune - This CEO is out for blood 5-15min

Elizabeth Holmes founded her revolutionary blood diagnostics company, Theranos, when she was 19. It’s now worth more than $9 billion, and poised to change health care. ... In the fall of 2003, Elizabeth Holmes, a 19-year-old sophomore at Stanford, plopped herself down in the office of her chemical engineering professor, Channing Robertson, and said, “Let’s start a company.” ... Robertson, who had seen thousands of undergraduates over his 33-year teaching career, had known Holmes just more than a year. “I knew she was different,” Robertson told me in an interview. “The novelty of how she would view a complex technical problem–it was unique in my experience.” ... Holmes had then just spent the summer working in a lab at the Genome Institute in Singapore, a post she had been able to fill thanks to having learned Mandarin in her spare hours as a Houston teenager. Upon returning to Palo Alto, she showed Robertson a patent application she had just written. As a freshman, Holmes had taken Robertson’s seminar on advanced drug-delivery devices–things like patches, pills, and even a contact-lens-like film that secreted glaucoma medication–but now she had invented one the likes of which Robertson had never conceived. It was a wearable patch that, in addition to administering a drug, would monitor variables in the patient’s blood to see if the therapy was having the desired effect, and adjust the dosage accordingly. ... “I remember her saying, ‘And we could put a cellphone chip on it, and it could telemeter out to the doctor or the patient what was going on,’ ” Robertson recounts. “And I kind of kicked myself. I’d consulted in this area for 30 years, but I’d never said, here we make all these gizmos that measure, and all these systems that deliver, but I never brought the two together.” ... Still, he balked at seeing her start a company before finishing her degree. “I said, ‘Why do you want to do this?’ And she said, ‘Because systems like this could completely revolutionize how effective health care is delivered. And this is what I want to do. I don’t want to make an incremental change in some technology in my life. I want to create a whole new technology, and one that is aimed at helping humanity at all levels regardless of geography or ethnicity or age or gender.’ ” ... “Consumerizing this health care experience is a huge element of our mission,” Holmes says at our first meeting in April, “which is access to actionable information at the time it matters.” In our conversations over the next two months, she comes back to that phrase frequently. It is the theme that unifies what had seemed to me, at first, a succession of diverse, disparate aspects of her vision. ... Though she has now raised more than $400 million, she says she has retained control over more than 50% of the stock.

Financial Times - Troubled waters: the Mekong River crisis < 5min

China is bafflingly silent about strange, record-breaking changes that have been wreaking havoc on the mighty Mekong River in recent months ... The dams China has built hundreds of miles upstream from Kroolong’s home are what brought me to the Mekong, one of the world’s mightiest waterways. The river is so long that if it were in the US, it would stretch all the way from Los Angeles across to New York. It starts off high in the snowy peaks of the Tibetan plateau before plunging down through the mountains of China’s southern Yunnan province towards Myanmar, Thailand, Laos, Cambodia and finally Vietnam, where it pours into the South China Sea. Just under half the river’s length is in China, which first started damming it in Yunnan more than 20 years ago. ... The early dams were large but nothing like two enormous, newer ones. The Xiaowan, completed nearly four years ago, is one of China’s biggest hydropower projects after Three Gorges on the Yangtze River, with a wall almost as high as the Eiffel Tower and a reservoir that can hold 15 billion cubic metres of water. It is dwarfed in volume, though not quite height, by the newer Nuozhadu dam, which can store 22.7 billion cubic metres of water. Together, the pair can hold enough to drown an area the size of London in water 24 metres deep. ... There have long been odd stories about the impact these two dams might be having on the countries further south, where people have blamed them for everything from drought to a drop-off in fish catches. But what emerged from my visit to the Mekong, as I followed the story of the floods that took Den Kroolong’s boat, was even stranger – a cautionary tale about the world’s newest superpower, and about water, a resource under mounting pressure.

Businessweek - Puerto Rico: Tropical Tax Haven for America's Super-Rich 5-15min

It’s 2 a.m. at the La Factoria bar in Puerto Rico’s Old San Juan, a hipster joint with a sagging couch, tile floors, and Christmas lights that wouldn’t be out of place in Brooklyn’s Williamsburg. While Get Lucky plays, tipsy couples slink out the doors onto the colonial city’s cobblestone streets and into this warm April night. At the bar, a 28-year-old hedge fund trader—the type of person who posts his SAT results on his LinkedIn page—is ranting about the tax code. He’s obsessed with it, complaining that the U.S. is the only major country taxing citizens on their worldwide income, no matter where they reside. That’s why he moved here. ... Struggling to emerge from an almost decadelong economic slump, the Puerto Rican government signed a law 18 months ago that creates a tax haven for U.S. citizens. If they live on the island for at least 183 days a year, they pay minimal or no taxes, and unlike with a move to Singapore or Bermuda, Americans don’t have to turn in their passports. (Puerto Ricans are U.S. citizens but cannot vote in federal elections.) About 200 traders, private equity moguls, and entrepreneurs have already moved or committed to moving, according to Puerto Rico’s Department of Economic Development and Commerce, and billionaire John Paulson is spearheading a drive to entice others to join them. ... Most of the new arrivals downplay Puerto Rico’s fiscal problems, which include runaway pension obligations and an underground economy that leads to low tax collection rates. They’re also convinced their 20-year contracts with the government guaranteeing the tax benefits are sacrosanct. They will survive the inevitable Internal Revenue Service audits, they say, as long as they follow the residency rules.

Wired - Waiting for Dark 5-15min

The inside story of two crypto-anarchists and their quest to create ungovernable weapons, untouchable black markets, and untraceable money. ... Concerns about the police are justified for Wilson and Taaki, who have dedicated their careers to building some of the most controversial software ever offered to the public. Wilson gained notoriety last year as the creator of the world’s first fully 3D-printable gun, a set of CAD files known as the Liberator that anyone can download and print in the privacy of their home to create a working, lethal firearm. Taaki and his collaborators recently unveiled a prototype for a decentralized online marketplace, known as DarkMarket, that’s designed to be impervious to shutdown by the feds. ... The programming provocation they released a few hours ago is called Dark Wallet, a piece of software designed to allow untraceable, anonymous online payments using the cryptocurrency bitcoin. Taaki and Wilson see in bitcoin’s stateless transactions the potential for a new economy that fulfills the crypto-anarchist dream of truly uncontrollable money. ... “I believe in the hacker ethic. Empower the small guy, privacy and anonymity, mistrust authority, promote decentralized alternatives, freedom of information,” he says. “These are good principles. The individual against power.” ... According to a study published in May by the nonprofit Digital Citizens Alliance, more than 40,000 mostly illegal products are now listed for sale on the obscured corner of the Internet known as the dark web, more than twice as many as before the Silk Road bust. ... Wilson and Taaki intend Dark Wallet to be the most user-friendly method yet to spend bitcoins under the cover of anonymity’s shadow—without switching to a niche alternative coin or trusting any shady middleman.

Globe & Mail - Cheap at sea, pricey on the plate: The voodoo of lobster economics 5-15min

In 2013, Atlantic Canada was responsible for 68,000 tonnes, or just over half, of the 131,500 tonnes of lobster landed on the east coast of North America last year. And for the 160 fishermen in Lobster Fishing Area 32 off the coast near Dartmouth, N.S., this year’s annual nine-week lobster season (April 19 to June 20) has been breathtaking. So much lobster had been landed in Nova Scotia by the second week of June that the shore price dropped to $3.50 a pound, which was why everyone was so cranky. I’d been calling it a glut until a couple of local exporters begged me to refer to a “bountiful harvest” instead. They didn’t want their customers to think lobster was cheap. ... To a lobster enthusiast, of course, cheap lobster sounds like a good, i.e. delicious, thing. But it never materializes. There is a voodoo to lobster economics. What used to be poor man’s fare, the fallback meal of people too impoverished to afford anything else, is now a billion dollar business and a universal mark of luxury – with the result that a lobster that sells for $3.50 on the wharf can cost $60 and more on a restaurant plate in New York or Toronto or Shanghai, regardless of how many lobsters are pulled from the sea. How this happens is the life story of Larry the Lobster.

The Verge - Inside the life of a pro gamer < 5min

E-sports are turning silly teenagers into disciplined professionals ... To get an insider’s perspective on the rigors and sacrifices demanded by a career in gaming, I spoke with two veterans of the trade: 22-year-old Peter “ppd” Dager and 25-year-old Saahil “UNiVeRsE” Arora from Evil Geniuses (EG). In spite of their young age, both have years of competitive experience and are the most senior members of a five-man squad that includes a pair of teenagers. They carry the EG banner into mythical battle in Valve’s massively popular Dota 2 multiplayer game, which today hosts the grand final of a $10 million tournament known as The International. Captained by ppd, EG came within just one win of reaching tonight's final against Team Newbee, but in the end had to settle for an honorable third place and a $1 million prize. ... The life of a pro gamer requires uncommon discipline and perseverance, because the obstacles to success are as numerous outside the game as they are fearsome inside it. Parents won’t respect what you do, fans won’t understand when you fail, and most of the money goes to only the very best. As tough as that is, passion, team camaraderie, and a growing acceptance of e-sports as a legitimate career path are making competitive gaming bigger than ever.

The Economist - MH17 and the war in Ukraine: Collateral damage < 5min

The shooting down of an airliner shows how reckless Vladimir Putin’s sponsorship of Ukrainian rebels has been ... For all his anti-Westernism, Mr Putin cares about his international image enough to want to avoid defeat. ... He cares even more about his power at home. The Russian people are keen on both the war in Ukraine and Mr Putin: his approval rating is a remarkable 83%. Gleb Pavlovsky, a former Kremlin consultant, wrote recently that Russians see the war as a “bloody, tense and emotionally engaging” television drama that has little to do with reality but which they want to see continue. Mr Putin prospers as the drama’s producer and leading man; he cannot rewind the narrative in such a way as to extricate himself. ... But the audience’s enthusiasm does not mean it wants to pay to keep watching. So far the sanctions imposed in response to Russia’s annexation of Crimea have seemed of greater symbolic than economic importance, and this plays to Mr Putin’s strengths. In Russia he controls the symbols. But serious economic sanctions of the sort to which the EU seems to have inched closer could do him genuine harm, given the already stagnant economy. ... If concern along those lines led to Mr Putin’s efforts on the international stage, though, it does not seem to have changed the situation in eastern Ukraine, or the show being offered to Russian television audiences. ... One explanation for the lack of change could be that Mr Putin does not believe that Europe will act decisively. The evidence of history seems to be on his side. Though on July 22nd the council of ministers sent a stronger message than it had before, Europe retains a deep ambivalence about inflicting real economic pain on Russia. ... Ukraine, the rebels and Russia show every sign of eschewing any opportunity it might offer for reflection and reconciliation. The incompatibility of their interests has only been thrown into sharper relief.

The Economist - Corporate tax in America: How to stop the inversion perversion < 5min

Restricting companies from moving abroad is no substitute for corporate-tax reform ... Tightening the rules on corporate “inversions”, as these moves are called, does nothing to deal with the reason why so many firms want to leave: America has the rich world’s most dysfunctional corporate-tax system. It needs fundamental reform, not new complications. ... America’s corporate tax has two horrible flaws. The first is the tax rate, which at 35% is the highest among the 34 mostly rich-country members of the OECD. Yet it raises less revenue than the OECD average thanks to myriad loopholes and tax breaks aimed at everything from machinery investment to NASCAR race tracks. Last year these breaks cost $150 billion in forgone revenue, more than half of what America collected in total corporate taxes. ... The second flaw is that America levies tax on a company’s income no matter where in the world it is earned. In contrast, every other large rich country taxes only income earned within its borders. Here, too, America’s system is absurdly ineffective at collecting money. Firms do not have to pay tax on foreign profits until they bring them back home. Not surprisingly, many do not: American multinationals have some $2 trillion sitting on their foreign units’ balance-sheets, and growing. ... All this imposes big costs on the economy. The high rate discourages investment and loopholes distort it, because decisions are driven by tax considerations rather than a project’s economic merits. The tax rate companies actually pay varies wildly, depending on their type of business and the creativity of their lawyers: some pay close to zero, others the full 35%.

The Economist - Schumpeter: Unplugged and unproductive < 5min

Chinese business has been slow to embrace the internet. As it does, productivity should soar ... AT FIRST glance it would appear that China has gone online, and gone digital, with great gusto. The spectacular rise of internet stars such as Alibaba, Tencent and JD would certainly suggest so. The country now has more smartphone users and households with internet access than any other. Its e-commerce industry, which turned over $300 billion last year, is the world’s biggest. The forthcoming stockmarket flotation of Alibaba may be the largest yet seen. ... So it is perhaps surprising to hear it argued that much of Chinese business has still not plugged in to the internet and to related trends such as cloud computing and “big data” analysis; and therefore that these technologies’ biggest impact on the country’s economy is still to come. That is the conclusion of a report published on July 24th by the McKinsey Global Institute (MGI), a think-tank run by the eponymous consulting firm. It finds that only one-fifth of Chinese firms are using cloud-based data storage and processing power, for example, compared with three-fifths of American ones. Chinese businesses spend only 2% of their revenues on information technology, half the global average. Even the biggest, most prestigious state enterprises, such as Sinopec and PetroChina, two oil giants, are skimping on IT. Much of the benefit that the internet can bring in such areas as marketing, managing supply chains and collaborative research is passing such firms by, the people from McKinsey conclude. ... Although millions of Chinese businesses sell their products on Taobao, an online marketplace owned by Alibaba, vast numbers remain offline: only 20-25% of small firms in China are internet-connected, compared with 75% in America. This helps explain why the labour productivity of local small businesses is roughly two-thirds of the average for all firms in the country; the comparable figure in Britain is 90% and in Brazil it is 95%. ... In all, MGI predicts that “a great wave of disruption has just begun.”

The Economist - Siemens: Fixing the German dynamo < 5min

Joe Kaeser is transforming Siemens’s structure; changing its culture will be harder ... LONG-LIVED companies can change radically over time. Nokia, for example, began in 1865 as a pulp mill; recently it sold its mobile-phone business to Microsoft (see article) and now it mainly makes networking equipment. By contrast, Siemens has been quite consistent. The Economist first wrote about the company in 1868, when it joined a consortium to build a telegraph cable from Britain to Russia and India. In an 1882 article about another tech boom—the spread of electric lighting after the perfecting of the dynamo—we noted that Siemens was hedging its bets by making both alternating- and direct-current ones. To this day, when asked to sum up his firm’s business in a word, Joe Kaeser, its chief executive, says, “electrification”. ... Mr Kaeser is nonetheless hoping to remake Siemens, at least partly. After electrification, he likes to add two more words: automation and digitisation. The engineering giant is to focus on doing these three things profitably. Businesses that do not fit these criteria will be fixed or sold.

The Economist - Energy in Central Asia (1): Mi CASA no es tu CASA < 5min

A plan to export electricity looks cursed ...WAR in Afghanistan, corruption and regional rivalries: until recently these were the main hurdles to a $1.2 billion, American-backed project to send surplus electricity from Central Asia to energy-hungry Afghanistan and Pakistan. Now comes another: there is unlikely to be any surplus electricity. ... The concept, first aired eight years ago, was simple. In summer, when Afghanistan and Pakistan most need electricity, melting snow fills hydropower reservoirs beyond capacity in Tajikistan and Kyrgyzstan. The idea was to harness the spillover, generating electricity to send south along a transmission line to needier places (see map). In winter, as rivers freeze and both former Soviet republics themselves face dire electricity shortages, all the electricity generated would be kept at home. ... But in the years since Western governments mooted the 1,200-kilometre (750-mile) power line, known as CASA-1000, electricity shortages in Tajikistan and Kyrgyzstan have worsened. This summer, to conserve water in readiness for the winter, Kyrgyzstan is actually importing electricity from Tajikistan.

The Economist - Free exchange: Sun, wind and drain < 5min

Wind and solar power are even more expensive than is commonly thought ... SUBSIDIES for renewable energy are one of the most contested areas of public policy. Billions are spent nursing the infant solar- and wind-power industries in the hope that they will one day undercut fossil fuels and drastically reduce the amount of carbon dioxide being put into the atmosphere. The idea seems to be working. Photovoltaic panels have halved in price since 2008 and the capital cost of a solar-power plant—of which panels account for slightly under half—fell by 22% in 2010-13. In a few sunny places, solar power is providing electricity to the grid as cheaply as conventional coal- or gas-fired power plants. ... But whereas the cost of a solar panel is easy to calculate, the cost of electricity is harder to assess. It depends not only on the fuel used, but also on the cost of capital (power plants take years to build and last for decades), how much of the time a plant operates, and whether it generates power at times of peak demand. To take account of all this, economists use “levelised costs”—the net present value of all costs (capital and operating) of a generating unit over its life cycle, divided by the number of megawatt-hours of electricity it is expected to supply. ... The trouble, as Paul Joskow of the Massachusetts Institute of Technology has pointed out, is that levelised costs do not take account of the costs of intermittency.* Wind power is not generated on a calm day, nor solar power at night, so conventional power plants must be kept on standby—but are not included in the levelised cost of renewables. Electricity demand also varies during the day in ways that the supply from wind and solar generation may not match, so even if renewable forms of energy have the same levelised cost as conventional ones, the value of the power they produce may be lower. In short, levelised costs are poor at comparing different forms of power generation. ... the most cost-effective zero-emission technology is nuclear power.

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