*MSCI SAYS 66 ADDITIONS, 56 DELETIONS FROM MSCI ACWI INDEX
*MSCI: AMUNDI, ALLIED IRISH BNKS, DRILLISCH ADDED TO WORLD INDEX
Three largest additions to MSCI World Index will be Amundi (France), Allied Irish Banks (Ireland) and Drillisch (Germany).
- Three largest additions to the MSCI Emerging Markets Index are China Molybdenum Co H (China), Polyus (Russia) and Grupo Carrefour Brasil (Brazil)
- There will be 25 additions and 96 deletions from the MSCI China A Index
- Three largest additions to MSCI China A Index will be Shaanxi Coal Industry A, Rongsheng Petro Chemical A and Shanghai Lingang Holdings A
- MSCI cites semi-annual
Algorithms With Minds of Their Own
How do we ensure that artificial intelligence is accountable?
Everyone wants to know: Will artificial intelligence doom mankind—or save the world? But this is the wrong question. In the near future, the biggest challenge to human control and acceptance of artificial intelligence is the technology’s complexity and opacity, not its potential to turn against us like HAL in “2001: A Space Odyssey.” This “black box” problem arises from the trait that makes artificial intelligence so powerful: its ability to learn and improve from experience without explicit instructions.
Machines learn through artificial neural networks that work like the human brain. As these networks are presented with numerous examples of their desired behavior, they learn through the modification of connection strengths, or “weights,” between the artificial neurons in the network. Imagine trying to figure out why a person made a particular decision by examining the connections in his brain. Examining the weights of a neural network is only slightly more illuminating.
Concerns about why a machine-learning system reaches a particular decision are greatest when the stakes are highest. For example, risk-assessment models relying on artificial intelligence are being used in criminal sentencing and bail determinations in Wisconsin and other states. Former Attorney General Eric Holder and others worry that such models disproportionately hurt racial minorities. Many of these critics believe the solution is mandated transparency, up to and including public disclosure of these systems’ weights or computer code.
But such disclosure will not tell you much, because the machine’s “thought process” is not explicitly described in the weights, computer code or anywhere else. Instead, it is subtly encoded in the interplay between the weights and the neural network’s architecture. Transparency sounds nice, but it’s not necessarily helpful and may be harmful.
Requiring disclosure of the inner workings of artificial-intelligence models could allow people to rig the system. It could also reveal trade secrets and otherwise harm the competitive advantage of a system’s developers. The situation becomes even more complicated when sensitive or confidential data is involved.
A better solution is to make artificial intelligence accountable. The concepts of accountability and transparency are sometimes conflated, but the former does not involve disclosure of a system’s inner workings. Instead, accountability should include explainability, confidence measures, procedural regularity, and responsibility.
Explainability ensures that nontechnical reasons can be given for why an artificial-intelligence model reached a particular decision. Confidence measures communicate the certainty that a given decision is accurate. Procedural regularity means the artificial-intelligence system’s decision-making process is applied in the same manner every time. And responsibility ensures individuals have easily accessible avenues for disputing decisions that adversely affect them.
Requiring accountability would reassure those affected by decisions derived from artificial intelligence while avoiding the potential harms associated with transparency. It also decreases the need for complicated regulations spelling out precisely what details need to be disclosed.
There already are real-world examples of successfully implemented accountability measures. One of us, Curt Levey, had experience with this two decades ago as a scientist at HNC Software. Recognizing the need for better means to assess reliability, he developed a patented technology providing reasons and confidence measures for the decisions made by neural networks. The technology was used to explain decisions made by the company’s neural network-based product for evaluating credit applications. It worked so well that FICO bought the company.
This patented technology also provides accountability in FICO’s Falcon Platform, a neural-network system that detects payment-card fraud. Financial institutions and their customers need to understand why an incident of fraud is suspected, and the technology met that challenge, opening the door for Falcon’s widespread adoption by the financial industry. FICO estimates that today Falcon protects approximately 65% of all credit card transactions world-wide.
Falcon’s ability to detect suspicious patterns of behavior has also found use in counterterrorism efforts. Following the Sept. 11 attacks, the same neural network technology was used by airlines to identify high-risk passengers. That’s a far cry from Elon Musk’s assertion that artificial intelligence will cause World War III.
Until recently the success of systems like Falcon went underreported. Artificial-intelligence pioneer John McCarthy noted decades ago, “As soon as it works, no one calls it AI anymore.” Further advances in artificial intelligence promise many more benefits for mankind, but only if society avoids strangling this burgeoning technology with burdensome and unnecessary transparency regulations.
Joho Capital (Robert Karr ) discloses updated portfolio positions in 13F filing:
Highlights from 2017 Q3 filing as compared to 2017 Q2 filing:
- Increased positions in: SBUX (to ~0.01 mln shares from ~0.01 mln shares)
- Maintained positions in: CSTE (~2.32 mln shares), CGNX (~1.3 mln shares), HXL (~0.72 mln shares), MHK (~0.15 mln shares)
- Closed positions in: GRUB (from ~0.87 mln shares), BEDU (from ~0.35 mln)
- Decreased positions in: BABA (to ~0.97 mln shares from ~1.2 mln shares)
Notable post-earnings movers
- Post-earnings gainers: LUNA +14.6%, MARK +12.9%, DHT +4.9%, WOW +3.8%, BGNE +3.2%, OREX +2.3%
- Post-earnings losers: SWCH -2.9%
Fears for Lebanese economy if Saudis impose Qatar-style blockade
BEIRUT (Reuters) - Lebanese politicians and bankers believe Saudi Arabia intends to do to their country what it did to Qatar - corral Arab allies into enforcing an economic blockade unless its demands are met.
A poster depicting Saad al-Hariri, who has resigned as Lebanon's prime minister is seen in Beirut, Lebanon, November 13, 2017. REUTERS/Mohamed Azakir
Unlike Qatar, the world’s biggest supplier of liquefied natural gas with a population of just 300,000, Lebanon has neither the natural nor financial resources to ride it out, and people there are worried.
Up to 400,000 Lebanese work in the Gulf region, and remittances flowing back into the country, estimated at between $7-8 billion a year, are a vital source of cash to keep the economy afloat and the heavily-indebted government functioning.
“These are serious threats to the Lebanese economy which is already dire. If they cut the transfer of remittances, that will be a disaster,” a senior Lebanese official told Reuters.
Those threats came from Lebanon’s former prime minister, Saad al-Hariri, who resigned on Nov. 4 in a shock broadcast from Riyadh that Lebanese political leaders have ascribed to pressure from the Saudis.
Hariri, an ally of Saudi Arabia, on Sunday warned of possible Arab sanctions and a danger to the livelihoods of hundreds of thousands of Lebanese living in the Gulf.
And he spelled out Saudi conditions for Lebanon to avoid sanctions: Hezbollah, the Iran-backed group that is Lebanon’s main political power and part of the ruling coalition, must stop meddling in regional conflicts, particularly Yemen.
According to a Lebanese source familiar with Saudi thinking, Hariri’s interview “gave an indication of what might be waiting for us if a real compromise is not reached. The playbook is there in Qatar.”
Hariri’s resignation has thrust Lebanon to the center of an escalating rivalry between Sunni Saudi Arabia and Shi‘ite Iran.
The non-confrontational Saudi policy of the past towards Lebanon has gone, analysts say, under the new leadership of Crown Prince Mohammed bin Salman, 32-year-old son of King Salman.
He is now the de facto ruler of the kingdom, running its military, political and economic affairs.
Whether Iran and Hezbollah are willing to make significant concessions to Riyadh is doubtful, sources said.
“They (Hezbollah) might make some cosmetic concessions, but they won’t submit to the Saudi conditions,” a source familiar with Hezbollah thinking said.
“BALL IN HEZBOLLAH‘S COURT”
Lebanese analyst Sarkis Naoum said Riyadh wanted Hariri to return to Lebanon and press President Michel Aoun to open dialogue and address their conditions on Hezbollah’s regional interventions.
“They need to come up with a position that will be satisfactory to the Saudis ... If the Saudis decide on sanctions they will do it,” Naoum said.
A source close to Hariri said he had ”put the ball in the court of Aoun, Hezbollah and its allies, by saying ‘business cannot continue as usual.’
“There was no sugar-coating. The sanctions were spelled out clearly. They want Lebanon to be disassociated from Hezbollah”.
Aoun has welcomed comments that the former premier planned to return home soon, palace sources said on Monday.
Saudi frustration with Lebanon seems to have boiled over after a string of setbacks to its foreign policy.
Riyadh has been bogged down in the war it launched against Iran-allied Houthi rebels in Yemen in 2015.
Saudi Arabia has accused Iran and Hezbollah of backing the Houthis, and also said Hezbollah had a role in firing a ballistic missile from Yemen towards Riyadh earlier this month.
Hezbollah and Iran’s involvement in Syria has also transformed the war in favor of President Bashar al-Assad, while Saudi support for Sunni rebels in Syria’s civil war have amounted to little.
Hezbollah, a movement with a heavily armed fighting force in addition to seats in parliament and government, is Iran’s spearhead in the region.
Tehran’s Revolutionary Guard looks to be trying to replicate it by building coalitions of militia groups in Iraq and Syria, according to some analysts.
The list of potential sanctions against Lebanon, political sources there say, could include a ban on flights, visas, exports and transfer of remittances.
Some of those have been imposed on Qatar, but that blockade, initiated in June, has had limited effect on the emirate so far, beyond driving it closer to Iran.
NEW SAUDI POLICY
Allegiance to foreign backers is not new to Lebanon. Sunnis have always looked to Saudi Arabia for support and funding while Shi‘ite Lebanese tended to turn to Tehran and Hezbollah.
“The Lebanese have always been agents of foreign powers. They take their money, make promises, commitments and alliances,” Naoum said. But while Hezbollah fulfilled its promises to Iran, Sunni factions let Riyadh down, he said.
Thanks in part to Iranian investment in the group, Hezbollah now calls the shots in the Lebanese capital as well as playing a pivotal role in Syria and elsewhere in the Middle East.
Riyadh has historically channeled billions of dollars to Lebanon to help its reconstruction after the 1975-90 civil war and following massive Israeli incursions of south Lebanon.
Now it appears ready to do serious economic damage to Lebanon that could weaken Hezbollah’s standing at home and in the region, should its demands not be met.
The Saudi conditions are causing alarm among some Lebanese, who have long viewed Hezbollah as a “state-within-a-state”. Many believe the solution is outside the control of local players.
“Lebanon will pay the price,” a top Lebanese banker told Reuters. “The only pressure the Saudis have is economic ... they can put pressure by imposing sanctions that can hurt.”
Mick Davis leads contenders to become next Rio Tinto chairman
Former head of Xstrata poised to make comeback at Anglo Australian miner
Mick Davis, the former head of Xstrata, has emerged as a frontrunner to the next chairman of Anglo Australian miner Rio Tinto.
The South African-born businessman has held talks with Rio over the position, according to people familiar with the matter.
If Mr Davis is appointed it would be a stunning comeback for the South African-born businessman who built Xstrata into one of the world’s biggest mining companies before selling it to Glencore in 2012.
Last year, Mr Davis, who is chief executive of the ruling Conservative party in the UK, freed investors from financial commitments to his mining fund X2 Resources after it failed to pull off any deals during the depth of a commodity market downturn.
Mr Davis and Rio declined to comment on the talks, which were first reported by Sky News.
Rio has been looking for a new chairman since March when Jan du Plessis announced he would be joining BT Group. The company has said it wants to name a successor by the end of the year.
Its search has been complicated by several issues, including the resignation of the John Varley, the non-executive director tasked with finding a replacement for Mr du Plessis.
Mr Varley resigned in June after he was charged in the UK with fraud over his time as chief executive of Barclays. Ann Godbehere, another Rio board member, is now leading the search.
Rio has also been hit with fraud charges from US regulators who claim the company tried to hide a bungled acquisition of an African coal producer. The company was also fined nearly last month £25m by UK’s Financial Conduct Authority in connection with that deal for breaching its listing rules
The chairmanship of Rio, however, is still one of the most prestigious jobs in the mining industry and could appeal to Mr Davis.
Commodity markets are recovering from a brutal downturn that saw budgets and spending slashed to the bone.
Rio has emerged with one of the strongest balance sheets in the sector and is generating lots of cash from its iron ore mines in Australia.
Chief executive Jean-Sébastien Jacques, a hard charging French-born executive, has replaced nearly all of the top executive team since he was appointed in the summer of 2016.
Under Mr Jacques, Rio has sold assets, including most of its coal business, and returned billions of dollars to shareholders.
But many analysts say the company needs to diversify and bulk up its copper business, something it may have to do through acquisitions, an area where Mr Davis has plenty of experience.
Mr Davis could face competition for the job from internal candidates, however. Sam Laidlaw, the former head of UK gas company Centrica, sits on the Rio board and has been touted as a potential chairman, as has Simon Thompson, a former banker and mining executive.
Rio is also searching for a finance director to replace Chris Lynch, who has announced his intention to step down next year.
Impala Asset Management (Robert Bishop) discloses updated portfolio positions in 13F filing: New TSE LVS AA PM TXT positions
Highlights from 2017 Q3 filing as compared to 2017 Q2 filing:
- New positions in: BTG (~1.73 mln), TSE (~0.7 mln), LVS (~0.58 mln), AA (~0.53 mln), PM (~0.45 mln), TXT (~0.39 mln)
- Increased positions in: SBLK (to ~4.31 mln shares from ~1.95 mln shares), DHI (to ~0.95 mln from ~0.25 mln), HES (to ~1.41 mln from ~0.82 mln), SUM (to ~1.9 mln from ~1.41 mln), KSU (to ~0.46 mln from ~0.01 mln) HZO (to ~2.21 mln from ~1.8 mln),
- Maintained positions in: TECK (~13.5 mln shares), TRN (~2.13 mln shares), CAT (~0.93 mln shares), TTWO (~0.77 mln shares)
- Closed positions in: CSX (from ~0.95 mln shares), NEM (from ~0.68 mln), DAL (from ~0.63 mln), PVH (from ~0.2 mln), DOOR(from ~0.19 mln), SAVE (from ~0.11 mln), STLD (from ~0.05 mln)
- Decreased positions in: STNG (to ~0.3 mln shares from ~2.5 mln shares), FCX (to ~3.85 mln from ~4.87 mln), CENX (to ~2.05 mln from ~2.8 mln), STAY (to ~0.23 mln from ~0.82 mln), SALT (to ~0.73 mln from ~1.28 mln), RIO (to ~2.79 mln from ~3.31 mln), IP (to ~0.11 mln from ~0.52 mln), UNP (to ~0.26 mln from ~0.65 mln), HOG (to ~1.74 mln from ~2.08 mln), GLW (to ~0.19 mln from ~0.52 mln)
Senate plans disastrous tax on vesting that could kill stock compensation
A proposed tax that charges people as their startup equity vests instead of when they cash it out and actually have money to pay the taxes could wreck how tech companies recruit talent. And the industry doesn’t have much time to mobilize to get this tax changed.
The U.S. Senate released its proposed tax reform bill late last week under the aggrandized “Tax Cuts and Jobs Act.” It includes a tax on stock options and Restricted Stock Units (RSUs) that applies as they vest, rather than using the existing scheme that taxes stock options when they’re exercised or when the underlying shares are released for RSUs.
As famed VC Fred Wilson of Union Square Ventures explains, “What this would mean is every month, when your equity compensation vests a little bit, you will owe taxes on it even though you can’t do anything with that equity compensation. You can’t spend it, you can’t save it, you can’t invest it. Because you don’t have it yet.”
That’s a huge problem. Because if you’re not already quite wealthy, you might not be able to afford to pay those taxes until you actually liquidate your equity for cash. The proposed tax could prevent wide swaths of tech employees from accepting stock options and RSUs. This breaks the whole incentive structure for top talent to take intense jobs at companies with a risk for failure because there’d no longer be the potential for massive upside.
If there’s no shot at getting rich for grinding it out as an early employee at a startup, top talent won’t take those jobs.
Companies would have to shift to higher salaries and big bonuses to attract the best employees. But startups often don’t have the cash to do that. In order to attract talent they rely on equity that’s free to dole out at the time and only worth a lot if the company succeeds. This could push top product, design, engineering and sales people to work at bigger, established companies that can afford juicy salaries and bonuses. And with fewer equity-made millionaires and billionaires, there will be fewer people investing in the next generation of startups.
This in turn could reduce innovation, prevent the disruption of aging giants and lower the U.S. tech sector’s competitiveness with the world.
There’s no doubt that the tech industry is frothy, tons of people are accumulating huge wealth via equity and they could probably afford to pay higher taxes. But that’s only after they’ve earned their fortune by liquidating equity. A tax on vesting dissuades people from ever taking a swing for the fences.
Wilson recommends that people who want to fight this should call their senator, speak with the aide covering tax reform and ask for this tax on vesting to be changed or removed from the Tax Cuts And Jobs Act. The Senate could potentially try to push the Act through before year’s end. And if the vesting tax becomes law, it could wreak havoc on the startup world.
Starboard Value (Jeffrey Smith) discloses updated portfolio positions in 13F filing: New positions include EVHC, MAC, JACK; Closed out ARC, ABCO, NSP
Highlights from 2017 Q3 filing as compared to 2017 Q2 filing:
- New positions in: ETSY (~4.24 mln shares), EVHC (~2.64 mln), TYPE (~2 mln), BMS (~1.5 mln), MBI (~1.2 mln), MAC (~0.5 mln), JACK (~0.18 mln)
- Increased positions in: IWN (to ~0.66 mln shares from ~0.49 mln shares)
- Maintained positions in: MRVL (~33.72 mln shares), AABA (~12.3 mln shares), PRGO (~9.64 mln shares), AAP (~3.18 mln shares)
- Closed positions in: SRC (from ~2 mln shares), ABCO (from ~0.35 mln), NSP (from ~0.09 mln), PHG (from ~0.05 mln)
- Decreased positions in: HPE (to ~2.7 mln shares from ~10.5 mln shares), FCE.A (to ~3.37 mln from ~4.45 mln), FTNT (to ~3.92 mln from ~4.47 mln), BCO (to ~1.29 mln from ~1.71 mln), CTSH (to ~1.15 mln from ~1.43 mln), BAX (to ~1.36 mln from ~1.56 mln)
