Data breach exposes vulnerabilities at GM, Ford, Tesla, Toyota and dozens more

Data breach exposes vulnerabilities at GM, Ford, Tesla, Toyota and dozens more

A few months ago in episode 59 of the Cocktail Investing podcast, we discussed the looming cybersecurity threats to be had in the corporate supply chain. After that conversation, we figured it was only a matter of time until a high profile supply chain attack occurred. It was only a matter of months until the vulnerabilities for several automotive companies and their suppliers were exposed. How they address it means more spending associated with our Safety & Security investing theme.

To check out our latest Cocktail Investing podcast, click here.

 

Security researcher UpGuard Cyber Risk disclosed Friday that sensitive documents from more than 100 manufacturing companies, including GM, Fiat Chrysler, Ford, Tesla, Toyota, ThyssenKrupp, and VW were exposed on a publicly accessible server belonging to Level One Robotics.

The exposure via Level One Robotics, which provides industrial automation services, came through rsync, a common file transfer protocol that’s used to backup large data sets, according to UpGuard Cyber Risk. The data breach was first reported by the New York Times.

According to the security researchers, restrictions weren’t placed on the rsync server. This means that any rsync client that connected to the rsync port had access to download this data. UpGuard Cyber Risk published its account of how it discovered the data breach to show how a company within a supply chain can affect large companies with seemingly tight security protocols.

This means if someone knew where to look they could access trade secrets closely protected by automakers.

Source: Data breach exposes trade secrets of carmakers GM, Ford, Tesla, Toyota | TechCrunch

Cocktail Investing Ep. 24: As Amazon becomes the Death Star of retail, the Fed still looks for inflation in a deflationary world

Cocktail Investing Ep. 24: As Amazon becomes the Death Star of retail, the Fed still looks for inflation in a deflationary world

In this week’s program, Tematica’s investing mixologists, Chris Versace and Lenore Hawkins discuss the week’s economic data, relevant political happenings and share where they have spotted a few of the latest Thematic Signals. A few highlights include:

 

  • While most Wall Street economists are still forecasting Q2 GDP to be around 3 percent, the NY Fed’s Nowcast and the Atlanta Fed’s GDPNow are below 2 percent, with an even lower forecast for Q3. We point out what they are likely seeing that the usual Wall Street suspects are missing and why this could be problematic for 2Q 2017 earnings season.
  • With the first half of 2017 almost over, only one other year going all the way back to 1928 has had a smaller maximum drawdown in equity indices during the first half. Find out what tends to happen in years where the first half sees such a steady move up.
  • The yield curve is giving us a very different message from the major equity indices. We discuss what and why this is important for investors.
  • We talk about what is happening in oil, on the demand as well as supply side, and what it means for the economy, geopolitics and earnings expectations for not only oil companies, but the entire S&P 500.
  • We wrap up our discussion with a focus on Amazon (AMZN) on its whirlwind of recent announcements from its acquisition of Whole Foods (WFM) to Nike (NKE) now selling some of it products directly to the online giant. We also explain why Amazon is THE poster child for thematic investing.
  • Finally, as if retail isn’t suffering enough from the retailing Death Star of Amazon, we discuss why a new report on retail and the food & beverage industries is a positive for our Safety & Security investing theme.

 

And be sure to tune into next week’s podcast when Lenore and Chris talk with Security-as-a-Service provider Alert Logic about the evolving world of cybersecurity. All that plus what to focus on next week and of course all the usual Cocktail Investing Podcast goodness.

Companies mentioned on the Podcast
  • Amazon (AMZN)
  • Amplify Snack Brands (BETR)
  • Apple (AAPL)
  • Bonobos
  • BP (BP)
  • Chevron (CVX)
  • Dick’s Sporting Goods (DKS)
  • Finish Line (FINL)
  • Foot Locker (FL)
  • Kroger (KR)
  • Marathon Oil (MRO)
  • Nike (NKE)
  • Sprouts Farmers Market (SFM)
  • Safeway Inc.
  • United Natural Foods (UNFI)
  • Wal-Mart (WMT)
  • Yum Brands (YUM)

 

Resources for this podcast:
Chris Versace Tematica Research Founder and Chief Investment Officer
Lenore Hawkins Tematica Research Chief Macro Strategist
Is a Safer, More Entertaining and Eventually Autonomous Car Near?

Is a Safer, More Entertaining and Eventually Autonomous Car Near?

It seems every day we hear about the inevitability of the autonomous car, a member of our Disruptive Technology investing theme, with many hoping that it will usher in a new area of safety.  According to the Association for Safe International Road Travel, 3,287 people die, on average, every day in road crashes. That translates into 1.3 million deaths annually with an additional 20-50 million injured or disabled. Globally, road crashes are the 9th leading cause of death.

Clearly, there is room for improvement and Apple’s (AAPL) CEO Tim Cook agrees, citing the auto industry as ripe for a major disruption in a recent interview on Bloomberg Television. According to Cook, there are three vectors of change intersecting: autonomous driving, electrification of the auto and ride-sharing. From our thematic investing lens, this is where Disruptive Technologies meet the Connected Society.

Cook revealed that his company is focusing on autonomous systems, referring to it as a very important core technology that is probably one of the most difficult AI (Artificial Intelligence) projects to work on. Apple has hired over 1,000 engineers to work on the technology and just this April secured a permit from the California DMV to test three self-driving sports-utility vehicles. The company is clearly also focused on the ride-sharing vector of change, as last year Apple invested $1 billion — pretty much chump change for the company these days — in Didi Chuxing, the biggest ride-hailing service in China. As for electrification, it remains to be seen if Apple will develop their own electric vehicles or partner and sell their technology.

Apple is not alone, as the electrification leader Tesla (TSLA) continues to break new ground and Alphabet (GOOGL) is working on autonomous technology in partnerships with Fiat Chrysler Automobiles (FCAU)and Lyft. BMW (BMWYY), in cooperation with Intel (INTC), reports that it intends to have Level 3, 4 and even 5 capabilities for self-driving by 2021. Level 3 is defined as conditional automation that requires a driver to intervene in certain situations, but aren’t obligated to be constantly monitoring progress. Level 4 is full autonomy, while Level 5 requires zero input from a driver to navigate city and highway roads and is expected to be at least on par with the performance level of a human driver.

 

A Conversation with One of the Pioneers of In-Car Information & Entertainment

To better understand the evolution of the smarter vehicle, on a recent episode of Cocktail Investing, Tematica Research’s Chris Versace and Lenore Hawkins spoke with Ted Cardenas, Senior Vice President of Marketing, Car Electronics Division at Pioneer Electronics Corp (PNCOY). Given that about 95 percent of his company’s business is related to auto and the company will reach its 80th anniversary next year, we thought he’d have some valuable insight. This is the company that introduced the consumer laser disc in 1979, the car CD player in 1984 and GPS car navigation in 1990, with around four decades in the car entertainment space.

Ted pointed out to us that compared to home or office-based technologies, the car is a seriously brutal local for innovation where electronics need to be able to withstand extremes in temperatures, moisture and vibrations – not exactly the friendliest environment! We discussed how the increasingly Connected Society allows for not just millions of on-demand songs, but also delivered the “killer app” of real-time traffic information thanks to all those GPS enabled smart phones tagging along with their drivers.

The Connected Society has materially changed product development for the car as well as it also means connected companies. The need for higher and higher speed data networks and the innovations that allow for and take advantage of them means that companies no longer have to, or should for that matter, go it alone. Each company is only part of the solution as we see more specialization taking place with the consumer benefiting from a simple, usually intuitive solution in which all the complexity has been blissfully hidden.

In this new development paradigm, relationships are increasingly important as companies specialize within the solution set and we’ve seen some of the complexity offloaded to smartphones, allowing for greater flexibility as consumer can choose which device best fits their needs. For Pioneer, this means offering in-dash multimedia receivers that are compatible with popular smartphone interfaces and apps such as Apple CarPlay®, Android Auto ™, and Waze®, as well as features such as Bluetooth® music streaming, hands-free calling, Spotify® and Pandora®.

Pioneer isn’t just innovating within entertainment and communications as the company is also developing advanced driver assist for both OEM and aftermarket, allowing owners of older cars to benefit from the latest in safety improvements. When asked about his expectations around the timeline for the truly driverless car, Ted framed his analysis in the context of the evolution of in-car GPS systems – an evolution by degrees rather than a binary event.

The first GPS systems were developed by Pioneer and were used to figure out where you were on a map, but could not provide point-to-point directions. Those first systems also didn’t provide 100% coverage, so drivers could find themselves driving into a GPS void when traveling in areas not covered by the devices internal maps. Over time the map coverage became increasingly more complete and turn-by-turn directions evolved from available only in highly-trafficked areas into the most remote. He suspects we will see something similar with driver-assist that will offer more thorough assistance in more populated areas with less as one gets into more rural areas. Over time the level of assistance and coverage areas will expand.

Finally, we discussed how the increasingly smart car will also do more of the heavy lifting when it comes to maintenance, providing a more seamless driver experience that not only provides autonomous transportation, but monitors and schedules its own maintenance needs. We likely not alone in looking forward to the day when we no longer find ourselves noticing that little oil change reminder sticker a few months and few thousand miles late. The car of the future will be safer, smarter and a lot more entertaining.

 

Companies mentioned on the Podcast

  • Alphabet (AAPL)
  • Apple (AAPL)
  • BMW (BMWYY)
  • Fiat Chrysler Automobiles (FCAU)
  • Intel (INTC)
  • Pandora (P)
  • Pioneer Electronics (PNCOY)
  • Tesla Motors (TSLA)
Cocktail Investing Ep. 23: The Evolution of the Safer, More Entertaining and Eventually Autonomous Car

Cocktail Investing Ep. 23: The Evolution of the Safer, More Entertaining and Eventually Autonomous Car

It seems every day we hear about the inevitability of the autonomous car, a component of our Disruptive Technology investing theme, with many hoping that it will usher in a new area of safety.  To better understand the evolution of the smarter vehicle, Tematica Research’s mixologists Chris Versace and Lenore Hawkins spoke with Ted Cardenas, Senior Vice President of Marketing, Car Electronics Division at Pioneer Electronics Corp (PNCOY).

Pioneer isn’t just innovating within entertainment and communications as the company is also developing advanced driver assist for both OEM and aftermarket, allowing owners of older cars to benefit from the latest in safety improvements. When asked about his expectations around the timeline for the truly driverless car, Ted framed his analysis in the context of the evolution of in-car GPS systems – an evolution by degrees rather than a binary event.

 

Companies mentioned on the Podcast
  • Alphabet (AAPL)
  • Apple (AAPL)
  • BMW (BMWYY)
  • Fiat Chrysler Automobiles (FCAU)
  • Intel (INTC)
  • Pandora (P)
  • Pioneer Electronics (PNCOY)
  • Tesla Motors (TSLA)

 

Resources for this podcast:
  • Chris Versace – @_ChrisVersace
  • Lenore Hawkins – @EllesEconomy
  • Tematica Research – https://www.tematicaresearch.com
  • Pioneer Electronics – http://www.pioneerelectronics.com/PUSA/

 

Chris Versace Tematica Research Founder and Chief Investment Officer
Lenore Hawkins Tematica Research Chief Macro Strategist
Auto Sales Miss Again

Auto Sales Miss Again

While the mainstream financial media does its darndest to convince investors that the weak Q1 GDP was once again due to “seasonal” factors, the Cash-Strapped Consumer showed up again this morning as auto sales for April came in weaker than expected again, after a rough March.

With about 84 percent of the industry reporting at this point, the overall sales pace is tracking at 16.67mm SAAR versus expectations for 17.10mm. Here is the breakout by company:

  • Ford (F) down 7.2 percent yoy
  • Toyota (TM) down 4.4 percent yoy
  • General Motors (GM) down 5.8 percent yoy
  • Fiat-Chrysler (FCUA) down 6.6  percent yoy
  • Nissan (NSANY) down 1.5  percent yoy
  • Mercedes (DDAIY) down 7.9  percent yoy
  • Mazda (MZDAF) down 7.8 percent yoy
  • Honda (HMC) down 7.0  percent yoy
  • Volvo (VOLVF) up 15.4 percent yoy
  • Volkswagen (VW) up 1.6  percent yoy

With only two companies reporting better sales on a year-over-year basis, April was another rough month. We did see one slightly bright spot out of Ford (F) where overall sales of trucks were up 7.4 percent year-to-date over last year. These could be a barometer for the health of small businesses, which we’ve seen have been more optimistic of late on hopes for tax reform in their favor.

So far consumer income and overall spending have been disappointments, and now auto sales came in weaker than expected. That argument for “seasonal” weakness in Q1 isn’t looking too strong.

Markets and auto sales in reverse

Markets and auto sales in reverse

Last week the S&P 500 lost 1.4 percent, the largest weekly loss since the week before the election. No wonder investors pulled $9.1 billion net out of mutual funds, resulting in the steepest weekly redemption rate since last June’s Brexit freak-out. This move reverses about 10 percent of the some $90 billion of inflows since the election as the Trump Trade loses steam in the face of weakening hard data. When we look at what happened in March versus January and February, we can see how investors could get spooked.

In January and February, most everything was moving up, save for the energy sector.

XLY Chart

By March sector performance has shifted around significantly, with most every sector now in the red for the month.

XLY Chart

 

Looking into the details a bit, we see that the 50 stocks in the S&P 500 with the largest exposure to domestic sales fell 4.2 percent in March while those with the most global exposure were flat – a stark contrast from the earlier narrative of deregulation and protectionism which boosted small cap stocks with a heavy domestic focus. We are also seeing a move back into quality and liquidity with the largest 50 companies in the S&P 500 outperforming the smallest 50 by 3.6 percent in March. We’re also seeing more defensively positioned companies, like real estate investment trusts (REITs) and other dividend stalwarts come back into favor.

Aside from equities, we’ve seen bond yields cease their upward climb as the dollar has rolled over and even the Mexican peso is now up 15 percent year-to-date in an apparent refutation of a NAFTA rethink. While the mainstream financial media may be jawboning about growth that is right around the corner, core capital spending orders are flat year-to-date and up all of 1.3 percent year-over-year from 2016’s painfully depressed levels.

For all that talk of the consumer in a giddy mood with the Michigan Consumer Confidence Index hitting a record high, real consumer spending just experienced its worst three-month rate of change since 2012.

Oh and remember how we’ve been hammering about how if things are oh so rosy why is the auto sector having a rough go of it? Well, it just got rougher. With about 80 percent of the auto industry reporting so far this morning, sales are tracking to be coming in at the lightest pace in almost three years. So much for accelerating spending.

  • Honda (HMC) started the reporting off with a miss, down 0.7 percent. This miss is particularly painful as March 2017 has a more favorable sales calendar and day trade adjustment than 2016.
  • Nissan (NSANF) and Mazda (MZDAF) did better, up 3-5 percent year over year.
  • Ford missed big time, down 7.2 percent year over year versus expectations for 5.9 percent decline.
  • GM (GM) missed estimates as well, up 1.6 percent versus 7 percent expected.
  • Fiat-Chrysler (FCAU) missed with a 5 percent volume drop versus expectations for roughly no change.
  • Toyota (TM) sales in the U.S. fell 2.1 percent.

Our Cash Strapped Consumer may be feeling better, per sentiment surveys, but they certainly aren’t out buying and unless we see some real wage gains or (and this is decidedly not a long-term solution) consumer credit starts flowing more freely, spending can’t get much more robust. In many respects these sentiment and confidence surveys are like watching a person consume an excess amount of alcohol – at one point they are feeling great and all is well with the world, but it’s only a matter of time before they are reaching for Drinkwell, Alka Seltzer and other hangover remedies as they contend with the next day’s reality.