FT : European Banking Authority plans overhaul of EU bank stress tests

European Banking Authority plans overhaul of EU bank stress tests
Watchdog wants lenders across the bloc to have more control over how they model results

Lenders will have more leeway to police themselves under a planned overhaul of the biennial bank stress tests carried out by the European Banking Authority.

The watchdog argues that the current methodology — introduced in the wake of the financial crisis to show how much capital would be depleted if a lender came under pressure — has outlived its usefulness.

In proposals floated on Wednesday, the EBA, which ensures bank regulations are applied evenly across the EU, said it to wanted to focus instead on how banks use their capital in more “relevant” scenarios.

It wants lenders across the bloc to have more control over how they model results, with the ability to cast aside existing constraints if they explain why, according to its discussion paper.

“The framework we are proposing today aims at making the EU-wide stress test more informative, flexible, and cost-effective,” said José Manuel Campa, the EBA’s chairman.

Separate sets of results would be published under the plans: one from the supervisors and one from the banks, with the banks having to explain any discrepancies. While banks would have to give far more detail than is now the case, the supervisors would be required to give less.

The EBA argues that the planned redesign would give more information than similar tests in the UK and the US. Its current stress tests have been judged by markets to be the most lenient because there is no pass or fail benchmark and there is a lag between the publication of results and any supervisory follow-up in terms of ordering action that a bank should take.

Simon Gleeson, a regulatory partner at law firm Clifford Chance, said the EU and the US operated almost diametrically opposed exercises.

“What the EBA is saying here is that they want banks to do in effect a parallel stress test, in which they take into account how they would actually respond to the stress, and assess what the impact would be after those responses,” he said. “The result of the bank’s parallel test will by definition be a lower number than the supervisor’s test.”

The EBA said it wants the new tests to be more cost-effective and relevant — but that requires a “trade-off” with reliability.

“Relevance can a priori be increased by relaxing methodological constraints in the stress test methodology, thereby allowing banks, to a larger extent, to leverage on own data and models, which may be better tailored to their individual business models, market environments and business practices,” the EBA paper reads.

“At the same time, methodological constraints act as safeguards to ensure the reliability of the projections. Achieving relevance in the stress test in practice thus requires trade-offs between realism and reliability.”

The EBA move comes after Mr Campa’s predecessor, Andrea Enria, questioned the value of its stress tests, arguing that elements of them were no longer “tenable”. He is now the European Central Bank’s top banking supervisor.

The EBA maintains only a co-ordinating role in the stress tests, with local supervisors left to decide how to run them.

The European body has no power to overrule local supervisory decisions to give an easier ride to banks in the tests, something underscored when the Financial Times revealed that Deutsche Bank had been given special treatment by the ECB in the 2016 exercise.

The EBA will consult until April on the tests’ redesign. This year’s test results will be published in July, having been run on the existing methodology.

TechCrunch : Boeing partners with Tactical Robotics to develop VTOL tech

Boeing partners with Tactical Robotics to develop VTOL tech

Boeing has signed a new agreement with Israel-based Tactical Robotics, an exploratory deal that will see the two companies work together jointly on “developing, producing and marketing” aircraft with vertical take-off and landing (VTOL) capabilities based on Tactical Robotics’ ‘Fancraft’ enclosed rotor technology.
Already, the Urban Areonautics-owned Tactical Robotics has developed ‘Cormorant,’ an autonomous flying car vehicle that has the footprint of roughly a Humvee, but that can take off and land vertically thanks to its Fancraft rotors. Unlike open rotors, these are placed inside ducts which provide advantages both in terms of directing airflow, and providing enhanced safety for anyone around the vehicle because they’re mostly covered. This new arrangement between the two companies will begin with exploring options for Cormorant in terms of production and deployment, for potential applications including disaster response.
The overall deal between Boeing and Tactical Robotics could be much broader-reaching, however, and includes development and exploration of both piloted and autonomous VTOL aircraft. This is yet another example of how the VTOL industry is heating up in terms of partnership, investments and productization.

FT : Palladium bull market puts $18bn dent in carmakers’ profits

Palladium bull market puts $18bn dent in carmakers’ profits
Demand for ingredient of catalytic converters soars as supplies fail to keep pace

The bull market in palladium caused by a chronic shortage of supplies has cost the global automotive industry $18bn over the past year, according to a new report by US bank Citi.

The price of the silvery white metal has surged more than 80 per cent over the past year as industrial consumers have scrambled to meet demand for the critical ingredient in catalytic converters for petrol and hybrid cars.

Analysts at Citi believe that barnstorming run — palladium hit a record high above $2,500 an ounce last week — squeezed cash flows, costing the car industry $18bn in 2019.

“Platinum group metals [which include palladium] now represent a whopping 15 per cent of global automakers’ cash flow, up from 7 per cent a year ago and 4 per cent three years ago,” said Citi analyst Max Layton in a report, noting that his calculations assumed that buyers had not hedged the cost of their purchases.

Mr Layton added that the figures would be even higher for automakers with heavy exposure to gasoline vehicle sales, which have greater weightings of palladium and rhodium in their converters.

One of the big factors behind the surge in price has been demand from China, where carmakers have to meet more stringent standards on air pollution. This has led to an increase in the amount of palladium that goes into catalytic converters. The converters built using palladium convert toxic emissions such as carbon monoxide and nitrogen oxide to carbon dioxide, water and nitrogen.

At the same time, supply has failed to keep up with demand and inventories have been whittled down. This is because palladium is produced alongside platinum or nickel — commodities where new projects have been few and far between.

However, analysts note that the rally may fade if carmakers start to substitute cheaper platinum for palladium.

“By some accounts 25 per cent [of the palladium] . . . can be substituted for platinum in gasoline vehicles in 18 to 24 months and this may already be in the pipeline,” said Mr Layton, who is not convinced the rewards of staying bullish on palladium at current prices outweigh the risks. “In this case, this could gradually affect the market from 2021 and would likely substantially affect the market from 2022.”

Still, carmakers, which are ploughing billions of dollars into electric vehicles, may be disinclined to switch. Citi believes that the bigger threat to the market is renewed sales from Russian stockpiles, as the country’s leading palladium producer Norilsk floods the market in an effort to prevent that substitution. Norilsk’s Global Palladium Fund, established in 2016, supplied 1m ounces of palladium in 2017 and 2018 respectively, according to Scotiabank, helping to keep a lid on prices.

However, palladium’s recent surge — it is up more than 25 per cent this year — suggests the metal is very scarce or demand has ramped up abnormally, said Nicky Shiels, a commodity strategist at Scotiabank in New York.

The rising price of palladium has also led to some unexpected consequences. Police in London have warned car owners of the risk of thefts of catalytic converters while Toyota, maker of the Prius hybrid car, has advised UK drivers to buy a “Catloc” device, which is fitted around the converter to stop it being cut out.

Other more obvious effects include the rising share prices of producers such as Norilsk, Anglo American and Sibanye Gold. The stock price of the latter, listed in Johannesburg, has more than doubled since September.

Analysts believe Anglo American’s platinum business, which has its own listing in South Africa, could pay a special dividend this year.

FT : China warns push to contain coronavirus reaches critical stage

China warns push to contain coronavirus reaches critical stage
First case of Sars-like disease is confirmed on US soil as number of patients doubles

Chinese authorities have said that efforts to control the outbreak of a deadly Sars-like virus have reached a critical point as more than 100m Chinese prepare to board trains and aeroplanes to return home for the lunar new year.

The coronavirus has killed nine people and infected at least 440 in 13 provinces, Beijing said on Wednesday, nearly doubling the number of affected people from a day earlier.

The disease is believed to have originated in a seafood market in the Chinese city of Wuhan in December but has now spread across the globe to Hong Kong, Thailand, Taiwan, Japan, South Korea, Macau and North America. US authorities confirmed the first case on American soil on Tuesday.

Direct flights from Wuhan to the UK are now subject to “enhanced monitoring” by medical staff who will check if passengers are unwell, the department of health said on Wednesday.

Human-to-human transmission of the virus was confirmed this week. The World Health Organization was due to meet on Wednesday in Geneva to decide whether the outbreak was a “public health emergency of international concern”.

The outbreak was now at its most critical stage of prevention and control, China’s National Health Commission said on Wednesday morning in Beijing, as the nation of more than 1.4bn people prepared to celebrate the lunar new year, often called the spring festival, which begins on Friday. The holiday over the next two weeks leads to the largest mass movement of people in the world.

“During the spring festival travel season, there is greater movement of people, which increases the risk of spread and difficulty of prevention and control and we must not let down our guard and be highly vigilant,” said Li Bin, vice-minister of China’s Health Commission.

The outbreak has brought to mind China’s Sars crisis in 2003, which was initially covered up by authorities. The outbreak killed 800 people as it spread around the region. Several officials lost their jobs in the wake of the Sars scandal.

This time around, officials in Beijing have signalled a high degree of urgency in controlling the outbreak of the coronavirus, even posting veiled threats against anyone seeking to conceal important information about the virus.

Hong Kong’s food and health secretary Sophia Chan told local media on Wednesday that a 39 year old man from Wuhan, who had arrived in the semi-autonomous Chinese territory by high-speed rail, had shown “highly suspicious” signs of having contracted the virus. The man was travelling with four relatives en route to Manila before being rushed to a Hong Kong hospital. His relatives did now show any symptoms.

Banks, including Hong Kong’s biggest lender HSBC, have issued travel advice to employees. HSBC has stopped short of banning travel to Wuhan but has advised staff to exercise caution and remain vigilant when travelling.

In Wuhan, people with fevers and flu-like symptoms are being stopped from travelling at airports and train stations. US authorities are screening travellers at New York’s JFK Airport, San Francisco International Airport and Los Angeles International Airport.

The Taiwanese government said on Wednesday that it would no longer admit tour groups from Wuhan and might broaden this ban to tour groups from other parts of China, depending on the spread of the disease.

The decision came after Taiwan reported its first confirmed case on Tuesday night, a Taiwanese woman who worked in Wuhan and returned home for a lunar new year holiday.

Tsai Ing-wen, Taiwan’s president, on Wednesday urged the WHO to stop ignoring her country, as the spread of the disease highlighted the need for global co-ordination in disease prevention. The WHO has refused to allow Taiwan to participate in the information-sharing process for the disease.

“The 23m Taiwanese people, just like other corners of the globe, can become the frontline in the prevention of infectious diseases anytime. I again appeal to the WHO not to exclude Taiwan for political reasons,” Ms Tsai said.

She also urged China to share fully accurate and timely information about the disease with Taiwan.

Markets recovered slightly on Wednesday after falling a day earlier on concern over the outbreak. China’s CSI 300 index was up 0.6 per cent while Hong Kong’s benchmark Hang Seng climbed 1.1 per cent.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance
:

  • ZION -4%, FULT -3.7%, IBKR -3.6%, PNFP -3%, CBSH -1.6%, AMTD -1.5%, BKR -1.5%, JNJ -1.4%, WSFS -0.8%, TBK -0.5%

Other news:

  • NVAX -15.6% (files prospectus supplement relates to the issuance and sale of up to $100 mln common stock)
  • ADAP -6.8% (announces intended public offering of ADSs)
  • HCM -4.3% (announces intent of proposed offering of $110 mln ADSs)
  • APLT -2.8% (announces public offering of 1.75 mln shares of common stock)
  • EFC -2.5% (prices 4.6 mln shares of common staock at $18.29 per share)
  • ZYME -2.1% (files preliminary prospectus supplements for offering of common shares and pre-funded warrants)
  • ELAN -1.4% (files mixed securities shelf offering)
  • KSU -0.9% (downgraded to Hold at Deutsche Bank)

Analyst comments:

  • ZION -4% (downgraded to Neutral from Buy at BofA/Merrill,downgraded to Neutral from Buy at Janney)
  • ARNC -2.2% (downgraded to Underperform from Neutral at Longbow)
  • SQM -1.4% (downgraded to Reduce from Hold at HSBC Securities)
  • KSU -0.9% (downgraded to Hold from Buy at Deutsche Bank)
  • UN -0.9% (downgraded to Hold from Buy at Berenberg)
  • EL -0.6% (downgraded to Neutral from Buy at Citigroup)
  • HII -0.6% (downgraded to Market Perform from Outperform at Cowen)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance
:

  • EXPR +6%, NAVI +5.7%, IBM +4.6%, COF +2.3%, NFLX +1.7%, ASML +1.7%, ADPT +1.5% (also files for 8 mln share common stock offering by selling shareholders), ABT +1.2%, FITB +1%, UAL +0.7%, WTFC +0.6%

Other news:

  • MNLO +7.4% (Point72 discloses 5.8% passive stake)
  • CIT +5.8% (to join S&P MidCap 400)
  • IONS +5% (announces 'positive' topline results from the Phase 2 study of AKCEA-APOCIII-LRx in the treatment of patients with hypertriglyceridemia who are at risk for or have established cardiovascular disease)
  • SUPN +4.1% (reports FDA acceptance for review of NDA for SPN-812 for the Treatment of ADHD)
  • ETN +2.8% (Eaton enters into agreement to sell its hydraulics business to Danfoss A/S for $3.3 bln)
  • HZNP +2% (extending late move higher after announcing the FDA approved TEPEZZATM for the treatment of thyroid eye disease)
  • SKT +1.9% (to join S&P SmallCap 600)
  • VRSK +1.7% (Verisk Analytics to sell imagery sourcing group assets to Vexcel Imaging)
  • FBK +1.5% (FB Financial [FBK] announces merger agreement with Franklin Financial Network [FSB])

Analyst comments:

  • ACMR +6.4% (initiated with an Overweight at Morgan Stanley)
  • NPTN +5.1% (upgraded to Buy from Hold at Needham)
  • SCPL +2.5% (initiated with a Buy at DA Davidson)
  • JD +1.7% (initiated with a Buy at DZ Bank)
  • BABA +1.3% (initiated with a Buy at DZ Bank)
  • BHC +1.2% (upgraded to Equal Weight from Underweight at Wells Fargo)
  • FTNT +1.2% (upgraded to Outperform from Mkt Perform at Raymond James)
  • OUT +1.2% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • ADP +1% (upgraded to Outperform from In-line at Evercore ISI)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • MNLO +7.4%, EXPR +6%, CIT +5.8%, NAVI +5.7%, ACMR +4.3%, IBM +4.2%, SUPN +4.1%, HZNP +3.5%, NFLX +2.5%, SKT +2.3%, ETN +2%, SCPL +1.9%, VRSK +1.7%, RIO +1.5%, FBK +1.5%, UBER +1.5%, CBSH +1%, ASML +0.8%, ADPT +0.7%, COF +0.7%
  • Gapping down:
    • NVAX -11.4%, ADAP -4.6%, HCM -4.3%, FULT -3.7%, IBKR -3.6%, PNFP -3%, APLT -2.8%, EFC -2.7%, ZION -2.3%, ZYME -2.1%, ELAN -1.4%, AMTD -1.1%, KSU -0.9%, JNJ -0.9%, WSFS -0.8%, EL -0.6%, PBR -0.5%

Fortune : Mysterious GPS outages are wracking the shipping industry

Mysterious GPS outages are wracking the shipping industry
For the global maritime shipping industry, spotty satellite navigation is a disaster waiting to happen.

--> Link to Article : http://bit.ly/2ReM8DT

The call came in by radio one evening last September, at around 9 p.m. On the line was the master of a tanker, approaching the end of a monthlong journey from the Port of South Louisiana and carrying more than 5,000 metric tons of ethanol. The message was urgent: The ship’s GPS signal had suddenly disappeared—leaving the crew to navigate Cyprus’s shoreline in the dark.

On the other end of the line was the pilots’ office at the Vasiliko oil terminal, whose staff oversees shipping traffic at Vasiliko’s harbor on Cyprus’s arid, palm-fringed southern coast. Stelios Christoforou, the pilot on duty, recognized the gravity of the situation right away. In daylight, an experienced ship captain can maneuver using paper maps, markers, and the coastline as guides. But at night, GPS becomes a critical tool in unfamiliar waters—especially near Cyprus, where NATO and Russian warships roam. And any accident could spill the tanker’s cargo across miles of coastline.

Christoforou gave the tanker’s master detailed instructions over the radio. It was crucial that the ship avoid a hard-to-see fish farm that could block its path to the west, he explained. He then went out to meet the ship by tugboat; there, he assumed the controls and guided the tanker into the harbor. Christoforou knew the coast’s ins and outs intimately, having worked in the port for six years. Still, these situations made him uneasy. In years past, GPS had occasionally disappeared near Vasiliko for a few seconds, but lately it was vanishing for hours or entire days at a time. “It’s not normal,” the pilot says.

In Cyprus, the not-normal has become routine: The global positioning system signal has been unreliable for much of the past two years. The outages have turned the tiny Mediterranean nation into a case study for a growing global problem: intentional interference with the planet’s most widely used navigation aid.

The sources of such disruptions are hard to trace. But navigation experts agree that they’re on the rise, often in conjunction with crime or armed conflict. And the expanding interference has exposed vulnerabilities for GPS and for the oceangoing shippers who depend on it—an industry that handles more than 80% of global trade, according to the International Maritime Organization, the United Nations regulatory agency.

In recent years, GPS has become so reliable and so ubiquitous that you can forget it’s even there—much less that it can fail. But it’s surprisingly easy, it turns out, to knock the system into disarray. The shipping industry, meanwhile, appears underprepared to cope with breakdowns and unwilling to invest in self-defense in the absence of the kind of Exxon Valdez–like disaster it has so far been fortunate to avoid. Rick Hamilton, GPS information analysis team lead at the U.S. Coast Guard Navigation Center, says shippers and governments alike face an existential question: “How much risk are you willing to take to avoid spending a whole lot of money?”

Newsletter-Blue-Line-15
Like another revolutionary technology, the Internet, the global positioning system began as a Pentagon project; it’s still maintained by the U.S. Air Force. But in the mid-1990s, it was opened to civilians, and in 2000 the government stopped degrading the civilian signal, making GPS stronger and more reliable and hastening its adoption worldwide.

The system has rivals in Russia, China, and the EU—collectively known as Global Navigation Satellite Systems (GNSS). But GPS’s supreme advantage is its extensive coverage: A network of at least 24 live satellites positioned around the globe means you are always in sight of at least four, and a receiver—whether in an oil tanker or your smartphone—can triangulate your exact location.

Today GPS is ingrained in daily life, and especially so in business. It is used to guide ships, planes, and trains; by cranes in ports to find and stack containers; and by trucks to deliver those goods to warehouses and stores. Farming, mining, drilling for oil: Each depends on GPS in ever-growing degrees.

But as GPS has become commonplace, the risks associated with losing it have grown. In a June 2019 paper prepared for the Department of Commerce, the research nonprofit RTI International estimated the cost of a 30-day GPS outage in the U.S. at $1 billion per day. The marine industry would be among those hit hardest, because of the bottlenecks an outage would cause in ports and waterways. And U.S. losses would represent only a fraction of the worldwide impact.

It would take Bond-villain-level exploits to knock GPS offline entirely. But on a local level, all satellite navigation systems are vulnerable. Their signals, which grow weaker as they travel from orbit to earth, are often interrupted accidentally, by atmospheric disturbances or faulty equipment. They can also be interrupted on purpose, by transmitters beaming a conflicting signal, a technique known as “jamming.” Typically, the stronger the conflicting signals, the farther that disruption will reach.

More sophisticated, and more malicious, is “spoofing,” which creates fake signals that convince the receiver it is somewhere it is not. Done correctly, spoofing can go undetected—and is capable of leading an oil tanker, for example, off course in open water.

High-powered jamming and spoofing are usually the work of armies and intelligence services. Military ships employ sophisticated anti-­jamming technology; as GNSS-guided missiles and drones assume growing roles in combat, the cat-and-mouse of satellite disruption has become a given. Indeed, as tensions mounted between the U.S. and Iran in 2019, what appeared to be jamming and spoofing occurred in and near the Strait of Hormuz, the oil-shipping choke point between Iran and the Persian Gulf states.

But commercial vessels seldom carry such technology. That’s worrisome, because small-scale GPS disruption has become something almost anyone can do. Off-the-shelf jammers, though illegal in the U.S. and many other countries, are easy to find online for as little as $20, with prices rising as their range increases. Drug-smuggling networks use jammers to mask their activities; illegal fishing operations use them to obscure where they got their catch. And thieves who steal shipping containers deploy jammers to block the trackers hidden inside them.

Perhaps more unsettling, spoofing is no longer particularly difficult either. In 2013, Todd Humphreys, director of the Radionavigation Laboratory at the University of Texas at Austin, spoofed a 213-foot, $80 million yacht. Last June, an Israeli cybersecurity firm called Regulus announced that it had spoofed a Tesla Model 3. (Tesla dismissed the report as a marketing ploy and said it did not have any safety concerns related to the report.)

As GPS has become democratized, in other words, so has disruption—making interference difficult to track or even quantify. In 2018, the Coast Guard began publishing excerpts from reports about GPS outages, including those involving “unknown interference”—a category that includes suspected jamming or spoofing. Those published reports number in the low hundreds worldwide, but Rick Hamilton adds that that’s “a very, very, very small subset of what’s going on out there.” An EU-funded project, Strike3, underscores how much bigger the problem may be. From December 2017 to October 2018, it recorded 15,200 interference “events”—of which “many hundreds” were strong enough to disrupt satellite navigation systems entirely.

Newsletter-Blue-Line-15
Beginning in February 2016, ships near the city of Kerch and other ports along the Black Sea began experiencing odd navigation glitches. Over the following months, GPS locations for thousands of ships appeared to suddenly accelerate and move dozens of miles inland—usually to airports. These “spoofs” all took place near a geopolitical hotspot: Kerch is in Crimea, which Russia annexed from Ukraine in 2014.

Those incidents turned out to be the leading edge of a wave of GPS interference events involving commercial ships and aircraft. (See the accompanying timeline.) Many took place near contested borders or zones of armed conflict. And one particular region became a locus of anxiety: the eastern Mediterranean.

The region’s biggest shipping conduit is the Suez Canal, which conveys around 1,500 ships a month between the Red Sea and the Mediterranean, many of them oil tankers bound for Asia or the EU. The “East Med” is also ringed by areas of active combat, including a simmering insurgency on Egypt’s Sinai Peninsula and the devastating multisided conflict in Syria. And at the hub of this troubled region is Cyprus—whose strategically important ports are refueling points not just for ships using the Suez but also for warships patrolling Syria’s waters.

On the south coast of Cyprus, where Stelios Christoforou works, GPS began to act strangely in January 2018. On vessels offshore or in port, loud alarms would sound as their captains lost the ability to see their GPS location. The alarms would blare as long as GPS was absent: hours, even entire days. Other times, the ships’ GPS locations would be visible—but in impossible places. “Sometimes you see the tugboats in the mountains,” Christoforou says.

The disruptions weren’t confined to Cyprus. Beginning in 2018, NATO and the U.S. Coast Guard registered outages across much of the East Med—as far north as Turkey, east to Lebanon and Israel, and south to the Mediterranean entrance of the Suez Canal, across a range of at least 65,000 square miles. “It’s a very congested area, and disruption in GPS and navigation could have devastating consequences,” says ­Chronis Kapalidis, a former lieutenant commander in the Greek Navy and a maritime security researcher at shipping consultancy HudsonAnalytix. By the end of 2019, GPS disruptions across the Mediterranean had been reported to the Coast Guard 38 times, referencing hundreds of incidents, including some farther to the west, to the coasts of Libya and Malta.

Unlike with most GPS interference, authorities believe they’ve tracked some East Med disruptions to their source. Investigations by the European aviation agency Eurocontrol and the Cypriot Department of Electronic Communications connected the outages to jamming signals from Syria and concluded they were a by-product of the conflict there. (Neither agency has widely publicized the finding, but both confirmed it to Fortune.)

In March 2019, a report by Humphreys, the Texas GPS expert, and the Center for Advanced Defense Studies, a research center in Washington, D.C., went further in assigning blame. The authors traced the jamming to the Khmeimim air base on Syria’s coast, the “nerve center” of Russia’s military operations in that country—around 137 nautical miles from Vasiliko. The disruptions were unusually strong and sophisticated, and the authors surmised that they were intended to protect Khmeimim from missiles and drones. The same report pointed to a Russian role in the 2016 Black Sea spoofing. It noted that many of those incidents coincided with visits by top Russian officials, including President Vladimir Putin—suggesting a protective effort of another kind.

Russia has consistently denied roles in GPS disruptions; Russian authorities did not respond to requests for comment from Fortune. But experts caution that Russia’s emergence as a plausible culprit for some interference doesn’t account for the phenomenon’s growing frequency. In other hotspots, questions about culpability persist. In the Suez, outages have been variously (and speculatively) blamed on Egyptian authorities fighting insurgents and on illegal fishing.

In December, the NATO Shipping Centre, which works with commercial shippers, said that interference continued in the East Med, with “potentially dangerous consequences.” In Vasiliko, outages have tapered off recently. Still, Christoforou and his fellow pilots remain on alert in case something goes wrong. “I worry a little bit when the vessels approach in the night,” he confesses.

At the governmental level, concern over interference is growing, but action isn’t imminent. Last June, 14 maritime groups wrote to the Coast Guard, asking it to work with the International Maritime Organization to resolve the GPS outage issue. In December, the Coast Guard told Fortune it was still in talks with the State Department about how to proceed.

With state actors sluggish, responsibility falls to shipowners and ship-management companies. Shippers have been reluctant to speak openly about the GPS issue, however, or about what they’re doing to bolster their defenses. Of the 26 ship-management companies contacted for this story, only two, Cyprus’s Lavar Shipping and Norway-based Wilhelmsen, admitted on the record that their ships had experienced GPS interference.

Multiple shipping experts described an industry in transition. Generally, captains and crews have the skills to cope with GPS outages. But broader changes over the past 25 years have increased shippers’ dependence on satellite navigation. Ships have become bigger, faster, and more automated, while crews have shrunk. Offshore infrastructure has proliferated—think undersea cables, aquaculture, and wind farms—making marine space much more crowded. At the same time, says Jonathan Turner, director of the English marine consultancy NLA International, a younger generation of sailors “are switching from dependency on their own skills to rely on some machines,” leaving older crew members worried about a “skill fade” among sailors unprepared for life without GPS.

No one interviewed for this story thought the disruptions outweighed GPS’s advantages: charting a course across open waters, making ports more efficient, and rescuing crews in emergencies. But while a constellation of reinforcement options exist—including more robust anti-jamming receivers, land-based backup systems, or more training—those options cost serious money. A military-grade anti-jamming antenna, for example, costs about 10 times as much as a regular antenna.

Such investments can seem daunting in an industry that reported profit margins of less than 1% in 2019. The shipping world is grappling with slowing trade, overcapacity, and new, costly fuel regulations. The upshot, sources tell Fortune, is that shipowners will be loath to pay much for GPS defenses until outages cross over from a nuisance to a crisis—that is, until a major accident occurs.

Newsletter-Blue-Line-15
More than 5,000 miles from Cyprus, in Beaufort, N.C., Christopher Nolan has made a career of showing merchant mariners how to navigate without GPS. The former Coast Guard officer teaches “celestial navigation,” which involves determining one’s location using little more than the position of astronomical bodies in relation to the horizon—in essence, the way Magellan did it.

Nolan’s students include college-age kids and amateurs but also mid-career officers. For them the two-week courses are a requirement for licenses to command large vessels outside U.S. coastal waters. Some have studied traditional navigation, but they tend to be rusty. “It’s a perishable skill,” says Nolan. “Once you’ve passed your exam, you’re never tested on it again.” And many younger mariners have never operated in a GPS-free world.

Nolan isn’t alone in bringing old-school methods back into the curriculum. In 2015, the U.S. Naval Academy resumed teaching celestial navigation to all incoming officers. The academy attributed the decision in part to the rise of cyberthreats that could impede electronic navigation. The class of 2017 was the first in at least 15 years to graduate with core training in the discipline.

Navigating by the stars is far less accurate than GPS, and far more time-consuming. But these basic seafaring skills may soon be tested more frequently than ever before in the GPS era. Nolan says his wife, ­Kellee, a commander in the Coast Guard, teaches her subordinates a timeless rule of thumb. “Look out the window, look at the chart, and look at the GPS,” he says. “In that order.”

February 2016: Black Sea ports
Hundreds of ships report seeing their GPS locations suddenly migrate dozens of miles inland. A report by U.S. researchers later links many of the incidents to visits to Russian-annexed Crimea by President Vladimir Putin and other senior Russian officials.

March–April 2016: South Korea
A six-day outage near the North Korean border affects more than 1,000 planes and 700 ships.

Late 2017–present: Suez Canal
Persistent GPS outages plague the Egyptian shipping artery. Potential causes include an insurgency in the nearby Sinai Peninsula and illegal fishing operations.

Fall 2017 and Fall 2018: Russian-Scandinavian frontier
Finnish and Norwegian authorities complain about jamming and spoofing of GPS signals near their borders with Russia during NATO military exercises in the region. Russian officials deny responsibility.

January 2018–September 2019: Cyprus and the “East Med”
Sporadic outages across the eastern Mediterranean, concentrated around Cyprus and near Lebanon and Israel. Cypriot and U.S. investigators link the disruption to military activity in Syria.

June–July 2019: Israel
Weeks of disruptions are reported by pilots taking off and landing at Tel Aviv’s Ben Gurion airport. An Israeli official publicly blames Russia; a Russian official calls the charge “fake news.”

FT : The birth of ‘digital twins’ will transform our world

The birth of ‘digital twins’ will transform our world
Increasingly sophisticated representations of the real world in the cloud can catalyse growth

Science fiction writers have had no end of fun imagining alternative realities and parallel worlds. Today, we are building them in digital form.

With the number of connected devices forecast to grow to 42bn by 2025, according to research group IDC, we are rapidly entering the era of “hyper-data”. Each of those devices emits a constant stream of data, enabling us to build a digital cloud that will metaphorically encircle our planet. We can, to use the jargon, create “digital twins” of the real world.

Last week in New York, Microsoft’s chief executive, Satya Nadella, described the benefits of those digital twins, which he labelled one of the biggest trends in technology. Referencing Robert Gordon, the economic historian who has highlighted the stalling of innovation, Mr Nadella acknowledged that many economies were experiencing sluggish productivity growth. But Mr Nadella argued that increasingly sophisticated digital representations of the real world, enhanced by mass computing power and machine learning, would optimise information flows and catalyse economic growth.

Digital twins could also yield significant environmental benefits. “Bits will help atoms be more efficient by bridging offline and online,” he said.

To take one example, he pointed to UK retailer Marks and Spencer, which is increasingly using in-store sensors to create digital twins of its retail space. It can then use those data models to optimise its stores’ physical layout, monitor the temperature of its meat coolers and keep an eye on queues at its checkouts.

Similarly, factories can run far more efficiently and reduce waste if their operators are able to twiddle knobs in digital simulators and test ways to improve the run rate. “That changes the productivity of the manufacturing plant,” Mr Nadella said.

Others talk about digital twins representing the “third wave” of the internet, after search and social media. The online world will evolve from a consumer internet to an enterprise internet, profoundly affecting the way we run roads, railways, airports, mines, factories, hospitals, power plants, distribution centres, construction projects and cities.

“The real world has always been offline. Now we are putting it online,” says James Dean, co-founder of SenSat, a London-based geospatial data company backed by China’s Tencent that is using drone and satellite imagery to map infrastructure. “If we can create a digital representation of the world and we can add some funky analysis then it gives us digital superpowers.”

Mr Dean argues that digital twins can transform the construction industry, which has an appalling productivity record. SenSat is already modelling the route of the proposed HS2 railway line running from London to the north-west of Britain, creating some 18bn data points. That should help builders monitor the controversial project’s progress to ensure smoother workflows, vital considering the project’s big and growing cost overruns.

The vision behind digital twins is inspiring, but the unsettling experience of the consumer internet over the past two decades should alert us to the potential dangers.

Asu Ozdaglar, a professor at the Massachusetts Institute of Technology and deputy dean of its new Schwarzman College of Computing, says that all such complex systems are inherently unpredictable. “The excitement around how these technologies can transform society is very real,” she says. “But we should also be aware of their possible negative consequences.”

The obvious concerns are security, privacy, surveillance and ethics that need to be addressed before these systems are deployed. She warns that “cascades” of problems can also result from extreme interconnectedness.

Take car navigation systems, such as Waze, for instance. Although they promise to reduce delays for drivers, they sometimes route traffic through residential streets where children play. They can also prove counterproductive by encouraging herd behaviour. Drivers can flood “quicker” routes, worsening congestion. Sometimes less information is more useful.

“You have to build carefully designed models and look at the empirical evidence. Whenever you provide incentives, you get some unintended results,” Prof Ozdaglar says.

The explicit purpose behind MIT’s Schwarzman College is to blend the insights of computer scientists and social scientists to address such complex challenges. Its aim is to produce “bilingual” experts.

Industry must do the same. The consumer internet, built on the mantra of “move fast and break things”, has smashed too much crockery. The enterprise internet must continuously prove its social value in the real world.