Reuters - Iran says Saudi Arabia should move to curb oil price fall

Iran says Saudi Arabia should move to curb oil price fall {http://reut.rs/1zFewfi}


(Reuters) - Falling world oil prices will hurt countries across the Middle East unless Saudi Arabia, the world's biggest crude exporter, takes action to reverse the slump, Iran's deputy foreign minister told Reuters.

Hossein Amir Abdollahian described Saudi Arabia's inaction in the face of a six-month slide in oil prices as a strategic mistake and said he still hoped the kingdom, Tehran's main rival in the Gulf, would respond.

Oil prices closed on Wednesday at a 5-1/2 year low, registering their second-biggest ever annual decline after OPEC oil exporters, led by Saudi Arabia, chose to maintain oil output despite a global glut and calls from some of the cartel's members - including Iran and Venezuela - to cut production.

"There are several reasons for the drop of the price of oil but Saudi Arabia can take a step to have a productive role in this situation," Abdollahian said.

"If Saudi does not help prevent the decrease in oil price ... this is a serious mistake that will have a negative result on all countries in the region," Abdollahian said in an exclusive interview on Wednesday evening.

His comments highlight continued tensions between the Shi'ite Muslim republic and Sunni Muslim kingdom, locked in a battle for regional power and influence despite hopes of rapprochement since the inauguration of Iran's President Hassan Rouhani in August 2013.

Abdollahian said Iran would have more discussions with Saudi Arabia about the oil price, both through oil officials at OPEC and through the foreign ministry. He did not give specific details on when any meeting might take place.

Saudi Arabia said last month that it would not cut output to prop up oil markets even if non-OPEC nations did so.

The Iranian deputy minister also criticized Saudi military involvement in Bahrain, which has been gripped by tension since 2011 protests led by majority Shi'ite Muslims demanding reforms and a bigger role in running the Sunni-ruled country.

Abdollahian said Bahraini authorities' continued detention of Shi'ite opposition leader Sheikh Ali Salman would have "serious consequences" for the government there.

Tehran and Riyadh accuse each other of interfering in the pro-Western Gulf island kingdom, one of several countries where their power struggle has played out. They also support opposing sides in wars and disputes in Iraq, Syria, Lebanon and Yemen.


U.S. "NOT ACTING" AGAINST ISLAMIC STATE

Abdollahian dismissed United States efforts to fight Islamic State, also known by its Arabic acronym Daesh, as a ploy to advance U.S. policies in the region.

"The reality is that the United States is not acting to eliminate Daesh. They are not even interested in weakening Daesh, they are only interested in managing it," he said.

The United States and its allies have carried out hundreds of air strikes against Islamic State in Iraq and Syria. Washington has also sent military support to Baghdad's Shi'ite-led government but its role in Syria - where it has called for President Bashar al-Assad to step down - is more limited.

Iran has sent Revolutionary Guard commanders to help its Shi'ite and Alawite allies in Baghdad and Damascus battle Islamic State and other Sunni fighters. But Abdollahian denied that Iran conducted aerial attacks on Iraqi sites.

"On the ground, where the U.S. should take serious action, there are no serious actions taking place. The US is not doing anything," he said, accusing Washington of pursing a contradictory policy towards Islamist militants. "One day they support Daesh, another day they are against terrorism," he said.

Abdollahian reaffirmed Iran's commitment to Assad, saying the Syrian president must be involved in any political transition aimed at ending more than three years of conflict.

He also criticized the latest U.S. sanctions on Iranian individuals and entities, saying they would not have a good impact on Tehran's talks with world powers over its disputed nuclear program.

"The United States must know that these actions make them bear a greater responsibility should the negotiations fail," he said. "If the other side is honest in their actions, then we should expect these talks to reach a desirable conclusion."

WSJ : Politics Threaten Eurozone’s Happier New Year

Politics Threaten Eurozone’s Happier New Year

The eurozone economy keeps on muddling through, just about avoiding disaster yet still running at stall speed.

Growth has averaged just 0.2% a quarter for the past six, or 0.8% annualized. There are some reasons to hope for a modest pickup in 2015. But politics cast a dark shadow.

On the hopeful side of the ledger, the European Central Bank’s rate cuts and modest asset purchases are having an effect. The euro has fallen some 13% against the dollar from its 2014 peak, although on a trade-weighted basis the decline is a more modest 5.7%. That should still help provide some support for eurozone exporters; and most expect the euro to decline further in 2015.

The ECB’s actions and expectations of more, in the shape of sovereign-bond purchases, also have pushed long-term bond yields to record lows in most eurozone countries. ECB data show that borrowing costs for small and medium-size enterprises in countries such as Spain and Italy also have started to fall.

Lower oil prices should be beneficial for Europe, acting as a tax cut. This is a double-edged sword for the ECB, because it will likely push headline eurozone inflation into negative territory, and a swing in the price of a volatile commodity like oil isn’t a solution for Europe’s problems. But it should ease pressures, at least.

On a more fundamental level, indicators from Germany, the eurozone’s largest member, are turning around. The closely watched IFO Business Climate index has climbed for two months in a row after six months of decline. Germany’s consumers are continuing to spend, too, although this isn’t the engine for growth that it is in other Western countries.

Eurozone credit and monetary statistics also are finally painting a brighter picture. Annual growth in one measure of money supply, currency in circulation and overnight deposits, accelerated to 6.9% in November. A sustained rise in this measure has historically tended to predate a pickup in economic growth, Berenberg Bank points out, as consumer and investment spending steps up. ECB surveys have suggested greater appetite to borrow and willingness to lend.

But politics is both the clear and unpredictable risk for 2015. Greece might be the most obvious concern, though not necessarily the most important. France and Italy have yet to show they are serious about overhauling their sclerotic economies. And the U.K. may yet enter into a far-reaching debate about its European Union membership. Unemployment is very high, particularly among young people, and populist parties are on the rise across the Continent.

Perhaps one of the biggest risks is also the source for many investors and economists of the biggest hope. A decision by the ECB to undertake sovereign-bond purchases could prove a political hot potato, particularly in Germany. But the more overengineered such a program is to make it politically palatable, the less effect it may have on markets or the economy. Striking a balance may well be the ECB’s trickiest task for 2015.

>>> Asian Update

Asian Mid-session Update: China Dec manufacturing PMI ends the year on low note


***Economic Data***
- (CN) CHINA DEC OFFICIAL MANUFACTURING PMI: 50.1 V 50.0E (lowest since June 2013)
- (CN) CHINA DEC NON-MANUFACTURING PMI: 54.1 V 53.9 PRIOR (4-month high)
- (AU) AUSTRALIA DEC RPDATA/RISMARK HOUSE PRICE INDEX M/M: 0.9% V -0.3% PRIOR; 2014: +7.9 v 9.8% y/y
- (KR) SOUTH KOREA DEC HSBC MANUFACTURING PMI: 49.9 V 49.0 PRIOR; 4th month of contraction, highest since Aug 2014
- (SG) SINGAPORE Q4 ADVANCED GDP Q/Q: 1.6% V 3.0%E; Y/Y: 1.5% V 1.8%E
- (ID) INDONESIA DEC CPI M/M: 2.5% v 1.5% PRIOR; Y/Y: 8.4% v 6.2% PRIOR; CORE CPI Y/Y: 4.9% V 4.2% PRIOR
- (ID) INDONESIA NOV TRADE BALANCE: -$425M v $23M PRIOR
- (ID) Indonesia Dec HSBC Manufacturing PMI: 47.6 v 48.0 prior; lowest level since Apr 2011 and 3rd month of contraction

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 closed, S&P/ASX +0.4%, Kospi +0.2%, Shanghai Composite closed, Hang Seng +0.8%, Mar S&P500 +0.5% at 2,061

***Commodities/Fixed Income***
- Feb gold +0.1% at $1,185, Feb crude oil +1.2% at $53.90/brl, Mar Copper +0.5% at $2.84/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 3.3 tonnes to 709.0 tonnes; Lowest level since Sept 2008

***Market Focal Points/Key Themes/FX***
- Hong Kong is leading regional indices higher, while Nikkei225 and Shanghai Composite remain on extended New Year holiday break. China December official PMIs saw Manufacturing index hit its lowest level since mid-2013, even though non-manufacturing recovered to a 4-month high of 54.1. Manufacturing PMI components New Orders and Output were at 2014 lows, and inventories and employment were at 10-month lows. NDRC economist Zhang said the PMI data "indicate that industrial growth is still in a downward trend, but the pace of declines is slowing." Similarly, ANZ economists noted the decline of both official and HSBC PMIs suggests that Chinas manufacturing sector is still struggling due to sluggish domestic demand.

- USD/JPY is up over 60pips above 120.40 amid the overall USD strength. BOJ Gov Kuroda noted the central bank has plenty of tools left to ease policy further, adding he would be opposed to loosen commitment on inflation target since "that in itself will make it impossible to meet the price target." Separately, Business Federation (Keidanren) chairman Sakakibara said 2015 is likely to be better than upper 1.0% estimated by think tanks, adding he believes this to be the year when Japan undeniably escapes deflation and gets on track to economic recovery. Sakakibara also said all efforts will be made to persuade corporations to raise wages by a similar amount after a 2% increase for the first time in 15 years in fiscal 2014.

- In Australia, December RPData house prices rose 0.9% m/m after falling 0.3% last month. For the year, price growth was 7.9%, down from 9.8% in 2013. RPData economist said the figures present "further evidence that the housing market is losing some steam", while CommSec economist noted that "growth rate of Australia home prices is easing to more sustainable levels, not a boom and not a bust". AUD/USD was down over 50pips from the 2014 close, falling below $0.8130.

- North Korea leader Kim gave another clear hint of wishing to reduce tensions with the South, stating "there is no reason not to hold the highest-level talks." Seoul offered a noncommittal response, noting South Korea is open to all kind of talks with North Korea. Separately, trade data for South Korea saw 2014 surplus at its record level of $47.4B, as exports rose 2.4% and import rose 2%. Dec Exports to US were up 21.5%, to China +1.7%, and to EU +5.6%, and forecasts for 2015 are for exports to rise 3.7% and imports to rise 3.2%.

- Over the holiday, Handelsblatt feature citing ECB Pres Draghi noting the risk of ECB failing its mandate is higher than 6 months ago and that sovereign bond purchases remain among the central bank options. Draghi added that the risk of deflation in the eurozone cannot be ruled out but is limited, adding he was confident that all eurozone economies will grow in 2015. Note that Lithuania also formally became the 19th state to use the euro currency. EUR/USD fell another 50pips below $1.2050 in the Asian trading hours - a new 2 1/2 year low that was also within 15pips of its 4 1/2 year low.

***Equities***
US markets:
- GM: Announced three new recalls affecting more than 92K SUVs and pickup trucks - financial press

Notable movers by sector:
- Materials: Chinalco Mining Corp International 3668.HK -5.1% (provides operating update); Fortescue Metals +4.4%, BC Iron BCI.AU +16.0%, Atlas Iron AGO.AU +39.4% (iron ore futures trading higher)
- Energy: Buru Energy BRU.AU -3.5% (terminates acquisition agreement)

FT : UK on track but borrowing and tax to rise

UK on track but borrowing and tax to rise

Britain faces years of steeper public borrowing, slower debt reduction and higher taxes after the May election — whichever party is in power — despite the economic recovery remaining on track, according to the Financial Times’ annual survey of economists. The plunge in oil prices alongside rising incomes will continue to heal the wounds of the great recession, most of the economists surveyed believe. But in a blow to chancellor George Osborne, a large majority of the 95 respondents thought the next government was unlikely to stick to plans for deep spending cuts to reduce the deficit. After a solid year of growth, which was predicted by economists at the start of 2014, the nation’s leading forecasters expect the new year to be similar, with a "decent" recovery continuing even if expansion slows slightly. Dame Kate Barker, a former member of the Bank of England’s Monetary Policy Committee, said the fall in the oil price would boost consumption in the first half of the year. But many economists believe that the uncertainties surrounding the May election risk undermining the momentum in the economy. Sir Howard Davies captured the nervousness felt by many economists that the lack of a majority government or strong coalition government after the vote could knock back the economic recovery. "A messy coalition could be negative. Major projects would be thrown into uncertainty, and there would be market doubts about the government’s ability to take needed tough decisions," he said. The majority of economists who expressed a view said they would cut their growth forecasts if the next government sought a referendum on Britain’s membership of the EU. Whatever the result of the general election, most economists were convinced that a new government was unlikely to follow the chancellor’s current austerity plans and would instead borrow more and tax more by the end of the next parliament. Such a move would mean avoiding spending cuts to unprotected departments that a large number of the economists thought both implausible to deliver and undesirable. The expectation was that austerity would be softened with slightly higher borrowing so that public sector debt fell a little slower as a share of national income than under the government’s current plans. Few expressed fears that such an outcome — similar to Labour’s plans for deficit reduction — would undermine the nation’s international credibility on its public finances. Kathrin Muehlbronner of Moody’s, the credit rating agency, said that while the political parties differed on the speed of planned deficit reduction, "what is important from our perspective is that all the main political parties appear to be committed to further fiscal consolidation". Amid a continued strong economic recovery in Britain, there is a nagging perception among economists, however, that the Bank of England is lagging in its response to faster growth and lower unemployment than it expected. Not a single economist out of 85 who expressed a view thought the bank would raise rates before the summer, while 25, including five former MPC members, thought rate increases should come sooner. A large majority of economists thought the BoE would keep interest rates on hold at least until November, but a majority who expressed a view thought the first rate rise should either already have happened or should happen by this summer.

>>> US Close Dow-0,89% S&P-1,03% Nasdaq -0,87%

Closing Market Summary: Stocks Slide to End 2014

The stock market ended the last session of 2014 on a lower note. The S&P 500 lost 1.0%, but that did not stop the benchmark index from gaining 11.4% over the course of 2014. Meanwhile, the tech-heavy Nasdaq ended the session (-0.9%) and the year (+13.4%) ahead of the S&P 500.

Before we delve into the details of today's trading day, it is important to note that trading volume at the NYSE was among the lowest of the year (650 million), suggesting few carbon-based life forms took part in the final affair of the year.

All ten sectors settled in the red with utilities (-1.9%) ending at the bottom of the leaderboard. In all likelihood, today's selling was a function of profit taking after the countercyclical sector led the 2014 market rally with a gain of 24.3%.

The remaining groups did not fare much better. The top-weighted technology sector (-1.2%) was among the early leaders, but began fading from its high not long before noon ET, dragging the broader market down with it. Apple (AAPL 110.38, -2.14) began the day with a slim gain, but found itself in the red within the first 45 minutes of the session. The largest sector component continued retreating throughout the day while other large cap tech names followed suit. Shares of Apple fell 1.9% today, but still soared nearly 38.0% in 2014. Chipmakers, meanwhile, outperformed with the PHLX Semiconductor Index losing 0.6%.

The outperformance of chipmakers helped the Nasdaq exhibit some relative strength, but the index also received a helping hand from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 303.35, -1.27) shed 0.4% while the health care sector (-1.0%) could not stay out of the red, narrowing its 2014 advance to 23.3%.

Elsewhere among cyclical groups, financials (-1.2%) lagged while the energy sector lost 0.8% to widen its 2014 decline to 10.0% amid another volatile day in oil trading pits. WTI crude dipped below the $52.60/bbl mark ahead of the close, but rocketed back to its session high to end the day lower by 1.0% at $53.49/bbl.

Also of note, the consumer discretionary sector (-0.4%) ended ahead of other groups. Homebuilders and retailers were responsible for the outperformance as iShares Dow Jones US Home Construction (ITB 25.88, +0.20) gained 0.8% while SPDR S&P Retail ETF (XRT 96.01, -0.28) slipped 0.3%.

Treasuries capped a strong year with another rally. As a result, the benchmark 10-yr yield fell two basis points to 2.17%, finishing 87 basis points below its close from December 31, 2014. On a somewhat related note, the Dollar Index (90.27, +0.28) climbed 0.3% to end the year at its best level since early 2006.

Economic data included Initial Claims, Chicago PMI, and Pending Home Sales:

* The initial claims level increased to 298,000 for the week ending December 27 from an upwardly revised 281,000 (from 280,000) while the consensus expected an increase to 290,000 

* The Department of Labor reported that there were no special factors driving the increase in unemployment insurance filings; however, it is possible that the Christmas holiday played at least a small part in the increase  * The continuing claims level fell to 2.353 million from an upwardly revised 2.406 million (from 2.403 million) while the consensus expected a decline to 2.375 million 

* After four consecutive months above 60, the Chicago PMI fell from 60.8 in November to 58.3 in December while the consensus expected a decline to 60.0  * Pending home sales for November rose 0.8%, which was in-line with the consensus 

Friday's data will be limited to the ISM Index for December (consensus 57.5) and the November Construction Spending report (consensus 0.1%). Both reports will be released at 10:00 ET.

* Nasdaq Composite +13.4% YTD  * S&P 500 +11.4% YTD  * Dow Jones Industrial Average +7.5% YTD  * Russell 2000 +3.6% YTD

Reuters - Biological bad luck blamed in two-thirds of cancer

Biological bad luck blamed in two-thirds of cancer cases

WASHINGTON, Jan 1 (Reuters) - Plain old bad luck plays a major role in determining who gets cancer and who does not, according to researchers who found that two-thirds of cancer incidence of various types can be blamed on random mutations and not heredity or risky habits like smoking.

The researchers said on Thursday random DNA mutations accumulating in various parts of the body during ordinary cell division are the prime culprits behind many cancer types.

They looked at 31 cancer types and found that 22 of them, including leukemia and pancreatic, bone, testicular, ovarian and brain cancer, could be explained largely by these random mutations - essentially biological bad luck.

The other nine types, including colorectal cancer, skin cancer known as basal cell carcinoma and smoking-related lung cancer, were more heavily influenced by heredity and environmental factors like risky behavior or exposure to carcinogens.

Overall, they attributed 65 percent of cancer incidence to random mutations in genes that can drive cancer growth.

"When someone gets cancer, immediately people want to know why," said oncologist Dr. Bert Vogelstein of the Johns Hopkins University School of Medicine in Baltimore, who conducted the study published in the journal Science with Johns Hopkins biomathematician Cristian Tomasetti.

"They like to believe there's a reason. And the real reason in many cases is not because you didn't behave well or were exposed to some bad environmental influence, it's just because that person was unlucky. It's losing the lottery."

Tomasetti said harmful mutations occur for "no particular reason other than randomness" as the body's master cells, called stem cells, divide in various tissues.

Tomasetti said the study indicates that changing one's lifestyle and habits like smoking to avoid cancer risks may help prevent certain cancers, but may not be as effective for others.

"Thus, we should focus more research and resources on finding ways to detect such cancers at early, curable stages," Tomasetti added.

The researchers charted the cumulative number of lifetime divisions in the stem cells of a given tissue - for example, lungs or colon - and compared that to the lifetime cancer risk in that tissue.

Generally speaking, tissues that undergo more divisions - thus increasing the probability of random mutations - were more prone to tumors.

The study did not cover all cancer types. Breast and prostate cancer were excluded because the researchers were unable to ascertain reliable stem cell division rates.

WSJ : Volkswagen’s Rally Is on Wobbly Wheels

Volkswagen’s Rally Is on Wobbly Wheels

Volkswagen has mapped out its route to a better future, but the road conditions look treacherous.

The company’s preference shares, which are more widely traded than its voting shares, have climbed about 20% since mid-October. Fueling this confidence are luxury brands Audi and Porsche, which together generate about 70% of the company’s automotive earnings before interest and taxes. VW has also benefited more than peers from the growth in China, which is responsible for 45% of Volkswagen brand sales.

Yet further progress on all fronts looks challenging.

Since 2000, car sales in China increased tenfold, but demand appears to be waning, Morgan Stanley says. VW will suffer if there is any further slowdown, with Volkswagen-branded sales in China down about 8% in November, year over year.

VW’s continued growth also rests on another wobbly pillar: a European car-sales recovery. So the company needs to deliver more cars in the U.S. But it faces big challenges there, too, with Volkswagen-brand sales in the U.S. having fallen 11% through November compared with a year earlier.

ENLARGE
IN COMBO
Meanwhile, VW’s investment budget, high already, may climb further. Capital expenditures for the next five years are projected by the company to expand slightly compared with prior forecasts, to €85.6 billion ($103.6 billion), including an increase of €2 billion, to €24 billion, for the Audi brand alone. The aim is to surpass rival BMW in terms of car sales. But Audi’s automotive operating margin is on a downward trend, having fallen to about 9.4% in the third quarter from about 10.5% for the same period in 2012. Higher expenditures could exacerbate that.

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If global demand is lower than expected, then VW must cut costs to improve profitability. To investors’ delight, the company said last year that it would shift its focus to sales and profitability versus expensive deal making. As part of the strategic overhaul, VW is targeting about €10 billion in efficiency savings a year across all 12 of its brands, equivalent to about 5% of the company’s operating costs.

This also could prove to be a struggle. Union representation accounts for half of the company’s supervisory board, making it difficult to trim employment costs in Germany, where most of its workforce is based. For example, VW still makes basic components to help keep its German factories running, which gives the company more control of its manufacturing process but at a higher cost. The company says it will improve efficiency elsewhere, but substantial savings remain elusive.

Even after the recent bounce in share prices, VW still trades at roughly a 20% discount to BMW based on multiples of forward earnings estimates. The challenges VW faces in delivering on its promises will make it tough to bridge that gap.

WSJ : Startups Risk a Downer for Investors

Startups Risk a Downer for Investors

Buying a stock, with all its attendant filings, analyst coverage and forecasts, still can be a gamble. So imagine getting excited about one isolated price signal on a private company with all the disclosure of the Air Force’s Area 51.

Yet that is what is setting pulses racing as 2015 dawns. Xiaomi, a closely held Chinese smartphone maker, recently raised $1.1 billion at an implied valuation of more than $46 billion. That puts it ahead of Uber Technologies, the unlisted taxi-booking application developer that got new funding in December valuing it at $41 billion. Both numbers also are higher than the market capitalizations of roughly three-quarters of the S&P 500’s members.

In theory, such startup valuations matter little to anyone but a relative handful of founders, employees and venture capitalists. The average investor doesn’t get a seat at the table or more than an occasional glimpse of what even is on the table.

In practice, news of such amazing, and seemingly unobtainable, investments stoke bullish sentiment, leaving individual investors potentially vulnerable.

Venture capitalists and other insiders usually do extensive due diligence before committing to the likes of Uber. But their basis for valuation differs from the approach of mainstream investors buying stocks, with venture funds also considering exit timelines, the cash needs of a startup to keep expanding and maintaining incentives for management and owners as equity stakes get parceled out. They also can, of course, just get things wrong.

Ordinary investors also must consider the wider context. In a world thirsting for yield amid ultralow interest rates, money has sought riskier corners of the market. Almost $24 billion of new commitments flowed to U.S. venture funds in the first nine months of 2014, according to the latest data from Thomson Reuters and the National Venture Capital Association. That is more than in each of the preceding five years in their entirety and sets up 2014 to have been the biggest year for new venture money since before the financial crisis.

This raises the risk of dollars being deployed into questionable businesses, which then eventually find their way into the wider market via initial public offerings, which are priced off the back of those high startup valuations.

While IPOs allow young companies to raise money for expansion, they also are the means by which early investors cash out. After all, the very valuations placed on companies such as Xiaomi suggest adequate funding can be found without going to the trouble and expense of listing. So while it is in the interests of startup owners to make grandiose claims about supposedly game-changing businesses, ordinary investors should beware when shares finally come up for sale.

Furthermore, individual investors, lacking relationships with Wall Street banks, often don’t get to actually buy a hot new company’s stock at the IPO price, instead having to bid for it on the open market. That can carry a big cost.

Compare the one-year return on new U.S. IPOs if you bought the stock at the starting price or at where it closed on its first day of trading. On average, the investor lucky enough to get in before the open made a full 17.2 percentage points more for IPOs in the years 1995 through 2013, according to data compiled by Dealogic, though the range is wide. For example, in 1998, during the tech bubble, the early bird made a 33% return while the buyer at the end of the first day actually lost money on average.

For 2014, the relative performance is harder to assess as, by definition, any stocks that underwent an IPO haven’t been held for a year yet. But the preliminary data for returns to date don’t augur well. On average, the return calculated off the actual IPO price is about 19%, according to Dealogic. The return from the end of the first day of trading: about 6%.

In part, this reflects the downward jolts often delivered to the share prices of recently listed companies as lockups on insiders such as management expire in the months after the IPO, opening up large slugs of stock for potential sale. The bigger issue: those eye-popping pre-IPO valuations, putting pressure on startups and their banks to achieve big prices out of the gate when they list. Those flashes of value from startup-land are tantalizing, but can ultimately be a mirage for ordinary investors.

(DailyBeast) Newest U.S. Stealth Fighter ‘10 Years Behind’ Older Jets

Newest U.S. Stealth Fighter ‘10 Years Behind’ Older Jets
America’s $400 billion, top-of-the-line aircraft can’t see the battlefield all that well. Which means it’s actually worse than its predecessors at fighting today’s wars.
When the Pentagon’s nearly $400 billion F-35 Joint Strike Fighter finally enters service next year after nearly two decades in development, it won’t be able to support troops on the ground the way older planes can today. Its sensors won’t be able to see the battlefield as well; and what video the F-35 does capture, it won’t be able to transmit to infantrymen in real time.

Versions of the new single-engine stealth fighter are set to replace almost every type of fighter in the U.S. Air Force, Navy and Marine Corps inventory—including aircraft specifically designed to support ground troops like the A-10 Warthog. That will leave troops in a lurch when the F-35 eventually becomes the only game in town.

“The F-35 will, in my opinion, be 10 years behind legacy fighters when it achieves [initial operational capability],” said one Air Force official affiliated with the F-35 program. “When the F-35 achieves [initial operational capability], it will not have the weapons or sensor capability, with respect to the CAS [close air support] mission set, that legacy multi-role fighters had by the mid-2000s.”

The problem stems from the fact that the technology found on one of the stealth fighter’s primary air-to-ground sensors—its nose-mounted Electro-Optical Targeting System (EOTS)—is more than a decade old and hopelessly obsolete. The EOTS, which is similar in concept to a large high-resolution infrared and television camera, is used to visually identify and monitor ground targets. The system can also mark targets for laser-guided bombs.

“EOTS is a big step backwards. The technology is 10-plus years old, hasn’t been able to take advantage of all the pod upgrades in the meantime, and there were some performance tradeoffs to accommodate space and stealth,” said another Air Force official familiar with the F-35 program. “I think it’s one area where the guys are going to be disappointed in the avionics.”

Ironically, older jets currently in service with the Air Force, Navy and Marine Corps can carry the latest generation of sensor pods, which are far more advanced than the EOTS sensor carried by the F-35. The latest generation pods—the Lockheed Martin Sniper ATP-SE and Northrop Grumman LITENING-SE—display far clearer high-definition video imagery in both in the infrared and optical spectrum—and from greater distances. Further, both pods have the ability to beam those full-motion video feeds to ground troops, which provides those forces with vital intelligence information.

The end result is that when the F-35 finally becomes operational after its myriad technical problems, cost overruns, and massive delays, in some ways it will be less capable than current fighters in the Pentagon’s inventory.
Both pods also incorporate the ability to mark targets with an infrared laser beam—which the EOTS lacks—that helps pilots and ground controllers coordinate their attacks. Some pilots consider the infrared marker to be crucial to the close air-support mission to support ground troops. The F-35 EOTS, which is an integral component of the new stealth fighter, was envisioned as a replacement for targeting pods altogether to preserve the JSF’s stealth frame. (Targeting pods can bulge out a bit, and leak out unwanted signals.) But along with the stealth came performance compromises that also hinder the ability to upgrade the system—the specifications of which were set more that 15 years ago—far before anyone imagined a jet would be providing video imagery to ground forces.

When the Pentagon had initially drawn up the Joint Strike Fighter program’s specifications during the later half of the 1990s, the EOTS would have been bleeding-edge technology. However, in the 14 years that have passed since the Pentagon awarded Lockheed the contract to develop the F-35, technology has evolved—and the services have gained experience from over a decade of war.

“It was an awesome system when the F-35 specs were drawn-up in the late ’90s—LANTIRN [targeting pod] was the most advanced pod at that time,” said the first Air Force official affiliated with the F-35 program. “But we’re now a couple of generations beyond that spec with the targeting pods. EOTS is about a [1990s-era Northrop Grumman AN/AAQ-28(V)] LITENING II-equivalent targeting pod.”

That means that the EOTS camera does not have the range or high-resolution capability that would be found on the current targeting pods carried by American fighters flying over Iraq, Syria, and Afghanistan. It also means that future F-35 pilots won’t be able to see their quarry in the same kind of detail that they can on current U.S. jets.


The Air Force is currently using the advanced LITENING-SE on many of its fighters like the F-16, which is about two generations newer than the old 1990s-vintage LITENING II-pod. Meanwhile, Lockheed Martin is delivering the new Sniper Advanced Targeting Pod-Sensor Enhancement (ATP-SE) to the Air Force—which is, ironically, an advanced version of the original Sniper XR pod that the F-35’s EOTS sensor was based on.

More damningly, the F-35 won’t be able to send even its already lower-quality live video down to those soldiers on the ground because its specifications were set before the wars in Iraq and Afghanistan started. Back then, no one ever imagined needing to beam live video to ground troops from a fighter jet. Nor are there any current plans to add that capability to the F-35.

“At no point is F-35 fragged to have VDL [video down-link] unless it carries a targeting pod and the F-35 EOTS does not have and will not get an IR [infrared] marker,” the first F-35 official said. “It won’t fit in the space available.”

The lack of an infrared pointer is a huge problem, according to multiple Air Force pilots with experience flying combat missions in support of ground forces. In aircraft like the A-10, F-15E or F/A-18 Hornet, when ground troops pass target coordinates—or if the pilot spots enemy forces shooting—that pilot can turn on the infrared pointer to highlight the target. If the ground controller—known as a Joint Terminal Attack Controller—sees the “sparkle” from the infrared pointer, he can confirm that the pilot is illuminating the correct target.

Further, if a pilot sees something of interest, he or she can use the infrared pointer to draw the attention of the ground controller, who can then confirm if the target is hostile or not. “F-35s will never have this,” the first F-35 official said. “It also helps pilots orientate themselves during weapons delivery passes.”

Officials at JSF-maker Lockheed Martin couldn’t respond to queries by press time, but the F-35 program does not appear to have a plan to rectify the problem.

One Air Force official said that with enough time and more money, the EOTS could be fixed. “Because in five years when the USAF [US Air Force] comes to Lockheed Martin and says we absolutely need an upgraded EOTS with an infrared pointer and [video down-link], Lockheed Martin says... OK no sweat, that’ll be $5 million per jet,” the Air Force official said. “Thus lies the problem in the U.S. military industrial complex. They purposefully build products that require mass amounts of money to ‘upgrade’ when in fact, they could have planned ahead and built an easily upgradable ship / aircraft / radio / weapon system.”

One of the JSF officials agreed that the EOTS does not speak well for the Pentagon’s ability to buy new weapons. “EOTS is a poster child for one of the ills of the acquisition process,” the official said. “Because all of the subsystems depend on each other, requirements aren’t allowed to change after the design is ‘finalized.’ It’s not a big deal, unless it takes 20 years to field the jet… then it’s a problem.”

The end result is that when the F-35 finally becomes operational after its myriad technical problems, cost overruns, and massive delays, in some ways it will be less capable than current fighters in the Pentagon’s inventory.

“Will the F-35 even have parity with those jets in the CAS mission set 10 years from now? I don’t know, dude. It doesn’t look good.”

NY Post : “Mad Men” are turning into Mad Bots.

“Mad Men” are turning into Mad Bots.
More than half the $15 billion expected to be spent in 2015 on US digital display advertising will take place through computers — without any human negotiation, according to a recent report.
Computer-driven advertising sales, called programmatic advertising, will grow to 55 percent of the segment’s ad spend, the report said.
“The technology and infrastructure are all in place,” Lauren Fisher, an analyst with eMarketer and author of the report, told The Post Wednesday.
“And with the grunt work done and the testing behind us, we’ll see programmatic ad spending explode, she said.”
Programmatic advertising uses automated technology systems — or programs — for buying and selling advertising.
As such, it replaces face-to-face negotiations between hard-nosed publishers and media buyers trying to wangle the best advertising rates they can.
It’s enough to turn “Mad Men” ad executive Don Draper into Bot Draper.
It’s particularly suitable for digital-display ads, which is all advertising unrelated to searches and e-mails that appears on mobile phones and tablets, as well as on desktop and laptop computers.
Programmatic is also destined to drive transactions in traditional media like TV, newspapers and magazines, although ad experts are reluctant to predict when this domination will occur.
The growth of digital display ads sold through programmatic advertising is expected to hit 48 percent this year, according to Fisher.
Fisher admitted advertisers were initially drawn to programmatic advertising as a cost-saving tool.
It not only promised a system for cheaply unloading ad inventory that otherwise would have gone unused — remainders, if you will — but rendered obsolete such traditional yet time-consuming details as RFPs [Requests For Proposal], price negotiations and insertion orders.
In programmatic advertising, a media buyer for an advertiser programs a computer with ad-buying instructions — including, perhaps, how much it wants to spend and whom it wants to reach — and the computer, loaded with inventory data, determines if the advertising goal can be met.
Before the computers arrived, humans negotiated these deals.
And let’s not forget the computers are reducing the importance, as well as the expense, of those three-martini business lunches made famous recently by “Mad Men.”
But now, Fisher said, it’s programmatic’s ability to incorporate data into ad-buying decisions that sets it apart.
“The biggest benefits of programmatic are using data to make smarter decisions about where to spend your ad dollars and then being able to reach who you really want to reach,” Fisher said.
“Thanks to cookies and other identifying sources, advertisers learn who viewers are down to the level of a single individual,” she said. “TV isn’t as granular, which means it could soon be caught up in a struggle with programmatic advertisers who insist on having the same digital tools they already use.”