Thursday Feb.10, 2022

💰 The big bitcoin bust

Looking up at “Don’t Look Up” [andresr/E+ via Getty Images]

Hey Snackers,

Timing is everything: Apple’s coming iOS update is finally designed to let you unlock your iPhone with your mask on — just as California, New York, and other states end mask mandates.

Stocks rose on Wednesday, and the tech-heavy Nasdaq notched a second straight day of gains. Yesterday, Fed members said there might be more than three interest-rate hikes this year. Today’s inflation data could give investors a clearer picture of when the hikes will come.

Versace

The DOJ arrests a quirky couple after seizing $3.6B in stolen bitcoin, as regulators crack down on crypto crimes

Bring on the Netflix drama... On Tuesday the Justice Department said it had seized $3.6B in bitcoin stolen in the 2016 hack of digital-currency exchange Bitfinex. The department said it had managed to recoup 80% — worth $71M at the time, but now worth $4.5B — in its largest financial seizure ever. That's not even the interesting part:

The incident: The DOJ arrested married couple Heather Morgan and Ilya Lichtenstein in connection with plotting to launder 119,754 bitcoins stolen from Bitfinex. (It’s unclear whether the two were also behind the hack.)
The characters: The NYC-based 30-somethings appear to be the crypto-bro versions of Bonnie and Clyde (cringe warning). Morgan is a rapper, "international economist," and "serial entrepreneur," so her Forbes contributor page says. If you're into finance rap, you might know her by "Versace Bedouin." Lichtenstein (nickname: "Dutch") is a self-described startup investor who’s active on Twitter.
The plot: Prosecutors say the couple used “sophisticated laundering techniques” to convert stolen bitcoin into legit-seeming cash (and gold… and Walmart gift cards). But they were able to launder only a fraction of the coins before the DOJ stepped in.
The denouement: The couple could face up to 25 years in prison. The DOJ says it’s working on ways to return the snatched crypto.

Digi-thug life… Crypto crimes are on the rise, and regulators are watching. Scammers took home a record $14B in crypto last year, while the DOJ set up a special enforcement team to target crypto crimes. In June, US officials recovered $2.3M in bitcoin paid as ransom.

The crypto crackdown could be good for bitcoin… Crypto has a bad rap for its role in scams and other crimes. But the DOJ is starting to back up its claim that crypto isn’t a criminal “safe haven.” The Bitfinex fail shows how difficult it can be to launder bitcoin undetected. While BTC is often used by criminals because of its hard-to-trace nature, it’s less anonymous than cash because the blockchain logs a permanent public record of all transactions.

DiCaprio

Netflix leads Oscar noms (again), while OG Hollywood studios embrace streaming to level the playing field

And the Oscar goes to… your couch. Netflix stole the show on Tuesday at the Academy Award nominations. The Flix secured 27 noms — nearly half went to its drama “Power of the Dog,” including a coveted best-picture nom. Netflix’s star-studded "Don't Look Up" (feat. Leo DiCaprio and Meryl Streep) got four nods. HBO Max’s “Dune” and “King Richard” earned a combined 16.

Other streamers with gold recognition: Apple received a record six Oscar noms, including best picture for “CODA.” Amazon scored six and Hulu one (womp).
Half of this year's best-picture-nominated films were from streaming companies, but no streamer has ever won the top award.

Power of the popcorn… The Oscars are Hollywood's highest honor, but award-show viewership has fallen as people tire of seeing blockbuster faves snubbed (like: “Spider-Man” and “No Time to Die”). Plus, nearly half of pre-pandemic moviegoers have yet to return to the big screen, and almost 10% say they never will. So traditional studios have started testing popcorn-popping from the couch with the “hybrid model.”

Last year WarnerMedia released all its movies on HBO Max at the same time they hit theaters, and Disney did hybrid Disney+ releases for a few of its blockbusters.
This year Warner's "Dune" — which dropped in theaters and on HBO Max — pulled in $400M at the global box office (and got 10 Oscar nods).

Studios are becoming streamers... and streamers are becoming studios. OG streamers face fresh competition from OG studios, which are focusing on streaming now too. Think: Universal's Peacock, Warner's HBO Max, and Viacom's Paramount+. Meanwhile, streamers are splurging on Oscar-worthy content to become studios: last year Netflix spent $17B on original content and bought iconic theaters in LA to premiere its flicks. That’s helped streamers rack up the Hollywood-level recognition that used to be dominated by big studios.

What else we’re Snackin’

Oceanic: Maersk, the Danish shipping company that makes giant cargo ships and containers, says the supply-chain crisis is not easing. Wild shipping demand helped Maersk haul in $15.5B in extra profit last year, for a total of nearly $20B.
Flipped: IAC — the holding company that used to own Tinder — is killing off print versions of magazines like Entertainment Weekly and InStyle. The mags will become digital-only brands, as readership and advertising continue to move online.
Prius: Toyota and Honda were upbeat about their outlook this year, as the car shortage (triggered by a chips shortage) and high demand allowed them to hike prices. Still, scarce parts led to a dent in Toyota’s profits.
KenTacoHut: Yum Brands — owner of KFC, Taco Bell, and Pizza Hut — saw quarterly sales grow 8% from a year ago, but it took a hit on profit. Rising costs of ingredients and wages weighed on the bottom line.
Connect: Microsoft’s LinkedIn is testing a “no politics” button that lets users block political content from their feeds, which could pressure Meta and Twitter to consider a similar feature.

Thursday

Weekly jobless claims
Earnings expected from: Coca-Cola, PepsiCo, Twitter, AstraZeneca, Philip Morris, Expedia, Kellogg, Zillow, Cloudflare, and Duke Energy

Authors of this Snacks own: Bitcoin and shares of Netflix, Apple, Amazon, Comcast, Disney, IAC, Microsoft

ID: 2033094

Latest Stories

Millie Giles & David Crowther

14m

Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

Why the World of Chocolate Is in Crisis

Governments and companies tackle the climate crisis as damage intensifies

Jack Morse

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Extreme weather has cost the US $2.6T, and the number keeps rising

Max Knoblauch

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The cost of waste: e-junk and emerging tech add to America’s pollution prob

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The biz of electric vehicles: the EV transition hits speed bumps

Bitcoin business will lose billions in the halving

Investors and miners have spent months prepping for the crypto-shattering event lying in bitcoin’s code. It’s finally arrived.

Friday, April 19th

What’s happening

Casey Newton

Platformer

11h

Meta’s new AI paves the way for social networks where nothing is what it seems

Five ways of thinking about Llama 3, its latest large language model

Screenshot of Meta’s AI image generator, frog in a bathrobe

Matt Phillips

15h

World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢

Pop Quiz!

What’s the world’s busiest airport?

Don't be a sucka

Rani Molla

17h

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

17h

Frozen Dead Guys

The audacious and expensive world of cryogenics

By one measure, stocks haven't looked this bad in decades

Earnings are important, but they aren't everything in the stock market.

Dow Jones Industrials Average Closes Day 477 Points Up

Rani Molla

20h

Meta’s not telling where it got its AI training data

Today Meta unleashed its ChatGPT competitor, Meta AI, across its apps and as a standalone. The company boasts that it is running on its latest, greatest AI model, Llama 3, which was trained on “data of the highest quality”! A dataset seven times larger than Llama2! And includes 4 times more code!

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

Meta’s battle with ChatGPT begins now

What is that training data? There the company is less loquacious.

Matt Phillips

20h

Today’s earnings: Who’s making money edition

Here are some some notable numbers out this morning, as earnings season gathers steam. Thursday’s main event will be Netflix after the close of trading. (Keep an eye on its advertising business.) But until then...

Parts distributor Genuine Parts beat, offsetting weak sales with cost control.
Credit card company Discover jumps, as delinquencies stabilize.
Builder D.R. Horton benefitted from the fact that there’s still no houses to buy.
Credit score giant Equifax was hurt by the fact that nobody wants mortgages.
KeyCorp, Comerica latest banks bummed by depositors demanding higher rates .
Insurance Marsh & McLennan did well by investing cash at high short-term rates.
Private equity giant Blackstone’s results were meh, due, in part, to lack of exits.

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Rani Molla

4/18/24

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."