INDIA

Google and Microsoft Bet on 27-Year-Old Stanford Alum to Make AI Work For a Billion Users

Saritha Rai
Thu, November 2, 2023 



(Bloomberg) -- In her one-room home on a quiet street in Agara, a tiny village three hours southwest of Bangalore that’s fringed by rice paddies and groundnut fields, Preethi P. sits on a stool near a sewing machine. Normally, she would spend hours mending or stitching clothes, averaging less than $1 a day for her work. On this day, however, she is reading a sentence in her native Kannada language into an app on a phone. She pauses briefly, then reads another.

Preethi, who goes by a single name, as is common in the region, is among the 70 workers hired in Agara and neighboring villages by a startup called Karya to gather text, voice and image data in India’s vernacular languages. She is part of a vast, unseen global workforce — operating in countries like India, Kenya and the Philippines — who collect and label the data that AI chatbots and virtual assistants rely on to generate relevant responses. Unlike many other data contractors, however, Preethi gets paid well for her efforts, at least by local standards.

After three days of working with Karya, Preethi earned 4,500 rupees ($54), more than four times the amount the 22-year-old high school graduate usually makes as a tailor in an entire month. The money is enough, she said, to pay off that month’s installment on a loan taken to partly repair the crumbling mud walls of her home that have been carefully patched up with colorful saris. “All I need is a phone and the internet.”

Karya was founded in 2021, before the rise of ChatGPT, but this year’s frenzy around generative AI has only added to tech companies’ insatiable demand for data. India alone is expected to have nearly one million data annotation workers by 2030, according to Nasscom, the country’s tech industry trade body. Karya differentiates itself from other data vendors by offering its contractors – mostly women, and mostly in rural communities – as much as 20 times the prevailing minimum wage, with the promise of producing better quality Indian-language data that tech companies will pay more to obtain.

“Every year, big tech companies spend billions of dollars collecting training data for their AI” and machine learning models, said Manu Chopra, the 27-year-old Stanford-educated computer engineer behind the startup, told Bloomberg in an interview. “Poor pay for such work is an industry failure.”

If meager wages are an industry failure, it’s one that Silicon Valley bears some responsibility for creating. For years, tech companies have outsourced tasks like data labeling and content moderation to cheaper contractors overseas. But now, some of Silicon Valley’s most prominent names are turning to Karya to address one of the biggest challenges for their AI products: finding high-quality data to build tools that can better serve billions of potential non-English speaking users. These partnerships could represent a powerful shift in the economics of the data industry and Silicon Valley’s relationship with data providers.

Microsoft Corp. has used Karya to source local speech data for its AI products. The Bill & Melinda Gates Foundation is working with Karya to reduce gender biases in data that feeds into large language models, the technology underpinning AI chatbots. And Alphabet Inc.’s Google is leaning on Karya and other local partners to gather speech data in 85 Indian districts. Google plans to expand to every district to include the majority language or dialect spoken and build a generative AI model for 125 Indian languages.

Many AI services have been disproportionately developed with English-language internet data, such as articles, books and social media posts. As a result, these AI models poorly represent the diversity of languages for internet users in other countries who are accessing AI-powered smartphones and apps faster than they’re learning English. Nearly one billion such potential users live in India alone, as the government pushes for a rollout of AI tools in every sphere from healthcare to education to financial services.

“India is the first non-Western country we are doing this in, and we are testing Bard in nine Indian languages,” said Manish Gupta, head of Google Research in India, referring to the company’s AI chatbot. “Over 70 Indian languages spoken by over a million people each had zero digital corpus. The problem is so stark.”

Gupta ticked off a list of issues that AI firms need to address in order to serve India’s internet users: Non-English datasets are dismally low quality; hardly any conversational data exists in Hindi and other Indian languages; and digitized content from books and newspapers in Indian languages is very limited.

When used for South Asian languages, some large language models have been found to make up words and struggle with basic grammar. There are also concerns these AI services may reflect a more skewed view of other cultures. It’s critical to have broad representation of training data, including non-English data, so AI systems “don’t perpetuate harmful stereotypes, produce hate speech, nor yield misinformation,” said Mehran Sahami, a professor in the computer science department at Stanford University.

Karya, a social impact startup headquartered in Bangalore and supported by grants, is able to broaden the pool of languages represented in part by specifically targeting workers in rural areas who might not otherwise be contracted for such tasks. Karya’s app can work without internet access and it provides voice support for those with limited literacy. In India, over 32,000 crowdsourced workers have logged into the app, completing 40 million paid digital tasks such as image recognition, contour alignments, video annotation and speech annotation.

For Chopra, the goal isn’t just to improve the supply of data but to fight poverty. Karya’s founder grew up in an impoverished neighborhood called Shakur Basti in West Delhi. He won a scholarship to study in an elite school where he was bullied because his classmates said he “smelled poor.” Chopra landed at Stanford to study computer science but realized he hated the “how you make a billion dollars” mindset he encountered there.

After graduating in 2017, he began working on his long-held interest: using technology to tackle poverty. “It takes a mere $1,500 in savings to make an Indian eligible to enter the middle class,” Chopra said. “But the impoverished can take 200 years to reach that level of savings.”

Microsoft, he learned, had been paying a hefty amount for collecting speech data, albeit of poor quality, to feed its AI systems and research. In 2017, for instance, although 1 million hours of digitized spoken data was available in Marathi, a language spoken in Mumbai and its Western India region, only 165 hours was available for purchase. His startup has since put together 10,000 hours of Marathi speech data for Microsoft’s AI services, read by men and women from five different regions.

“Tech companies want the data, accent and all,” Chopra said. “You cough, they want that in the speech – it represents natural language.”Saikat Guha, a researcher at Microsoft Research India who focuses on the ethics of data collection, said he has also used Karya’s content for a project to aid those with visual disabilities in finding jobs. “The quality of data is far better than any other source I’ve used,” said Guha. “If you pay workers fairly, they’re more invested in their work, and the end result is better data.”

Meanwhile, over 30,000 young, school-educated women are working with Karya to help collect “gender intentional” datasets – such as that the doctor or boss isn’t always a he – in six Indian languages for the Bill & Melinda Gates Foundation. It’s the biggest such effort in Indian languages and will serve as a corpus to build datasets to reduce gender-related biases in LLMs.Karya isn’t stopping with India. The company said it’s in talks to sell its platform as a service to organizations in Africa and South America who will do similar work.

For now, women in Yelandur, another village southwest of Bangalore, eagerly await Karya’s next project: transcribing from a Kannada audio recording. Among them is Shambhavi S., 25, who earned a few thousand rupees from a previous assignment while working in the quiet of her home after feeding her in-laws dinner and putting her children to bed.

“I don’t know what artificial intelligence is, I haven’t heard of it,” said Shambhavi. “I want to earn and educate my children, so they can learn how to use it.”

Most Read from Bloomberg Businessweek

Billionaire Amazon founder Jeff Bezos moves to Florida, where his parents live—and capital gains are not taxed

Christiaan Hetzner
Fri, November 3, 2023 

After launching Amazon from a garage in Seattle in 1994, centibilllionaire Jeff Bezos is leaving the Pacific Northwest behind and setting sail for Florida.

In an Instagram post, the world’s third wealthiest person—with a net worth estimated at $160 billion—said he wanted to be closer to my parents after they recently moved back to Miami.

“My parents have always been my biggest supporters,” he posted to his Instagram account, adding that his spacefaring company Blue Origin is increasingly shifting operations to Cape Canaveral.

Florida also offers a financial benefit to the Amazon founder—it doesn't charge capital gains tax which, for a man who's sold some $30 billion in stock since 2002, according to Bloomberg, can be quite substantial

Feeling at home

Even though Bezos said he’s relocating to Miami, not a whole lot will change for the owner of the Washington Post newspaper. He won't need to scout the real estate market for a new residence, since he already reportedly bought in August a $68 million Miami mansion on the small, man-made island of Indian Creek popularly known as “Billionaires Bunker”. In October, he added his next-door neighbor’s $79 million property as well.

But Miami is not the only place where Bezos lives. In addition to his collection of luxury cars and private Gulfstream jets, Bezos owns multiple properties valued recently at a half billion dollars.

Washington's historic tax

His move may have something to do with a Washington state supreme court decision in March of this year to uphold a 7% tax on capital gains that took effect in January 2022 despite a legal challenge.

The ruling is considered historic since legislators in Olympia took the opposite view of the Internal Revenue Service: they classified the tax as an excise tax rather than an income tax in order to circumvent the fact that Washington state does not have an income tax under state law. A majority of voters in Seattle are now in favor of a similar capital gains tax for the city itself.

Unlike most people, entrepreneurs and other ultra-high net worth individuals typically do not pay taxes on their personal earnings, since their wealth stems from assets rather than salaries and bonuses.

Instead, the IRS collects every time one of these assets is liquidated, a far more meddlesome issue for the super-rich. For this reason, Florida is popular among the billionaire class since the state does not impose its own levies on such disposals—as it has no income tax in the broader sense, either.

Even if Bezos’ tax dollars are set to move from the Pacific Northwest, the centibillionaire said he would still leave something behind as a token of his appreciation: “Seattle, you will always have a piece of my heart.”

Oh, and the city still gets to keep Amazon.

This story was originally featured on Fortune.com

Sustainable cotton group boosts tracking for top retailers

Wed, November 1, 2023

FILE PHOTO: A truck drives past bales of cotton in Luis Eduardo Magalhaes

By Ross Kerber

(Reuters) - Swiss-based sustainability group Better Cotton said on Thursday it has added new functions to a platform that big retailers use to trace materials through their supply chains.

Better Cotton said retailers including Walmart and Marks and Spencer will be able to tell where cotton was grown and traded, eventually to the level of individual farms. Currently the platform tracks only the total volume of cotton produced.

Jacky Broomhead, Better Cotton senior manager, said the current functionality is much like an electrical customer who knows the sources of generation feeding their local grid, but not to individual houses. "The changes mean you'll you know what you're getting. You'll be able to see the journey the cotton has taken to you as a retailer," she said.

Created by companies and several nonprofits including the World Wildlife Fund, Better Cotton aims to support improved practices in areas like water and soil stewardship and to promote better working standards. It says it supports 2.2 million farmers globally, accounting for 22% of world cotton production.

Fashion retailers face pressures from consumers and activist groups to sell products with less environmental impact and made in safe labor conditions.

Better Cotton has suspended its licensing of cotton sourced from the Chinese province of Xinjiang. At the time it cited factors including human-rights concerns and audit difficulties. Western retailers have faced backlash for raising human-rights issues.

Participants in the supply chain for cotton include spinners, traders and manufacturers. Marks and Spencer's head of materials and sustainability, Katharine Beacham, said it will use the new functionality to track cotton at scale.

"By improving the traceability of our cotton further down the supply chain, we're able to work with our suppliers more closely," she said.

(Reporting by Ross Kerber in Boston; Editing by Matthew Lewis)

Why Can’t We Just Quit Cows?

Naoki Nitta, Grist
Fri, November 3, 2023 

YOU WANNA QUIT ME, HUH, WELL DO YA

Photo: Jens Schlueter (Getty Images)

This story was originally published by Grist. Sign up for Grist’s weekly newsletter here.

Cattle play a colossal role in climate change: As the single largest agricultural source of methane, a potent planet-warming gas, the world’s 940 million cows spew nearly 10 percent of all greenhouse gas emissions — much of it through belches and droppings.

For these reasons, greener diets are but one prong in a larger set of food-based solutions for curtailing human-caused climate change, said Stephen Sturdivant, an environmental engineer at the Environmental Protection Agency. “We need a comprehensive combination of strategies to achieve a truly sustainable future,” he said. “We can’t just cherry-pick our way to get there.”

The nation’s taste for meat and dairy is undeniable. In addition to a steady, decade-long-rise in beef consumption, which hit 20 billion pounds in 2021, Americans gobbled up 12 percent more cheese, butter, and ice cream than in the previous year, continuing an upward trend that started half a century ago.

There’s a fundamental disconnect, though, between our growing demand for animal-based protein and its enormous carbon footprint. Producing a pound of steak generates nearly 100 times more greenhouse gas than an equivalent amount of peas, while cheese production emits eight times the volume of making tofu.

Although the American beef and dairy industries are among the most efficient in the world — due in part to better breeding, genetics, and nutrition — they still leave a significant hoofprint. The nation’s 92 million cattle generate 4 percent of the country’s total greenhouse gases and account for 40 percent of all agricultural emissions.

However, if those herds were to magically disappear, it wouldn’t eliminate the problem entirely. According to a peer-reviewed study, an animal-free agricultural system would shave just 2.6 percent off the country’s total greenhouse gas emissions. Of course, any reduction would be noteworthy given the nation’s outsized role in climate change — that drop would be equivalent to three times Portugal’s annual emissions — though that benefit would come with drawbacks.

With no livestock to feed, the acreage now used to grow silage and hay could be replaced with food crops. Yet because higher value fruits and vegetables require quality soil, specific climate conditions, and ample water infrastructure, most of that land would be limited to growing calorie-heavy, hardy broad acre crops such as corn and soybeans — a system change that would add its own climate impacts.

In fact, agriculture’s current emissions are a result of a certain balance between crops and livestock, said Robin White, a professor of animal and poultry science at Virginia Tech and the lead author of the research. Crops need fertilizer, a resource often provided by livestock, and producing synthetic versions is an energy-intensive process that typically requires fossil fuels and emits methane. Cattle also help keep agricultural byproducts — from fruit peels and pulp to almond hulls and spent brewery grains — out of landfills, reducing the carbon output of crop waste by 60 percent.

Eliminating the nation’s cattle and replacing feed production with food crops would create more food, White said, resulting in a caloric surplus of 25 percent. That abundance, however, would come with deficits in essential nutrients, as plant-based foods tend to fall short in vitamin B12, calcium, iron, and fatty acids. (Although existing studies reflect good long-term health in vegetarians, research on those who eschew all animal-derived foods is inconclusive.)

Larger discussions around sustainability tend to overlook these complexities, said White. Food insecurity is often tied to caloric sufficiency, but doesn’t always reflect nutritional needs, particularly those of vulnerable populations. Pregnant, lactating, and elderly women, for example, are susceptible to anemia and low bone density, mainly due to inadequate iron and calcium intake — nutrients readily available in red meat and dairy products, and easily accessible to large swaths of the population.

“These types of nuances get lost,” said White, when we focus exclusively on the broader metrics of diet change. While balanced choices can work for individuals, keeping the country adequately fed and healthy is a complicated endeavor. “There’s an entire agricultural system behind that food production,” she added, and changing the pieces within it requires careful examination.

Given the scale of the beef and dairy industries, the central role they play in feeding people, and the difficulty of removing them from the economy, cattle clearly aren’t moving on any time soon. For that reason, there’s been no shortage of resources aimed at, quite literally, the gut of the emissions issue.

As with most ruminants, cattle make the most of a paltry diet, converting cud, grains, and crop waste into muscle and milk. Extracting all that energy from cellulose and plant fibers requires the work of digestive microbes; cow rumens host entire colonies of bacteria, yeast, and fungi that ferment complex carbohydrates into microbial protein, which they then absorb, and volatile fatty acids, which they expel as methane and other gases.

Several dietary supplements have been shown to minimize bovine bloating. A twice-daily garlic and citrus extract can cut emissions by 20 percent, while a red seaweed additive can inhibit them by as much as 80 percent without impacting animal health or productivity or imparting detectable flavor to the resulting proteins. But having a transformative impact will require industrial-scale production and implementation. The promising strain of seaweed, for instance, prefers tropical waters, and developing a supply chain robust enough to serve tens of millions of cattle with a daily intervention leaves a trail of unanswered questions regarding effective farming, processing, and distribution techniques.

Ultimately, tinkering with the animals’ digestive system may hold the most scalable answer. Jennifer Doudna, who won the 2020 Nobel Prize in chemistry for pioneering the CRISPR gene-editing tool, is leading a University of California team that hopes to do just that. The recently launched project aims to identify the offending gut bacteria through metagenomics, another breakthrough technology that maps the functions of complex microbial communities, then restructure their DNA to produce less methane. The goal is to develop an oral treatment for calves that, once administered, will continue repopulating their rumen with the genetically modified microflora.

“We’re trying to come up with a solution to reduce methane that is easily accessible and inexpensive,” Matthias Hess, an associate professor at UC Davis and a project lead, said in an interview. It’s a fix that, if successful, could make a serious dent in tamping down cattle emissions the world over.

Their mission launched earlier this year, funded by the TED Audacious Project. Along with livestock, microbiomes generate nearly two-thirds of global methane emissions through landfills, wastewater, and rice paddies. If successful, “our technology could really move the needle in our fight against climate change,” Doudna said in a recent TED Talk.

Even as science tries making cows more climate-friendly, the tide of consumption has seen a steady shift. In the last two years, the majority of Americans have upped their intake of plant-based foods, with almost half of Millennials and Gen Z-ers regularly eating vegan. But there’s also been another notable tip in the scale: Just 12 percent of the country eats half the nation’s beef. And for many in the meat-heavy minority, the perils of climate change seem to do little in nudging them toward planet-friendlier meals.

A global study of factors that encourage greener diets found that climate risk perception is but one influencing factor, along with health implications and economic circumstances. Yet it’s the people around us, said Sibel Eker, the report’s lead author, who hold the most sway in changing individual attitudes, beliefs, and values — in other words, there’s power in herd mentality.

“If there are more vegetarians or flexitarians around you, you tend to think that this is the norm in society,” said Eker, a sustainable service systems researcher at the International Institute for Applied Systems Analysis in Austria. “So if you have the intention of changing your behavior, the social cost [to do so] becomes lower.”

In fact, when it comes to influencing environment-related behaviors such as recycling and ditching cars, social norms and comparisons are incredibly effective, far outpacing other drivers such as financial incentives and public appeals, according to a separate study by the U.S. National Academy of Sciences. And positive visibility and reinforcement — by individuals, a community, or mass and social media — do more to encourage climate action than shaming people who aren’t fully on board, Eker said. Otherwise, it just makes the matter alienating and polarizing.

In the end, the overarching nature of the food system requires a collective approach to shrinking its enormous emissions. While there’s no denying the outsized environmental footprint of animal-based foods, dietary shifts are part of a much larger strategy around food-based climate action, said the EPA’s Sturdivant. Along with improved farming practices such as maximizing yields and minimizing inputs, reducing food loss and waste is just as critical. And for these reasons and more, Meatless Mondays, vegan Fridays, and less polluting cows all have their place in mitigating the role cattle play in warming the world.

This article originally appeared in Grist at https://grist.org/agriculture/why-cant-we-just-quit-cows/. Grist is a nonprofit, independent media organization dedicated to telling stories of climate solutions and a just future. Learn more at Grist.org

 Gizmodo

FOURTH FEMALE TEAM WALK
NASA Astronauts Accidentally Lose Tool Bag During Space Walk

Victor Tangermann
Fri, November 3, 2023 

Orbital Oopsy

During a Thursday spacewalk outside of the International Space Station, NASA astronauts Jasmin Moghbeli and Loral O’Hara were tasked with replacing a bearing of an assembly allowing the station's solar arrays to stay pointed at the Sun.

But as they were getting to work, the pair "inadvertently lost" a "tool bag" in an "orbital oopsy," according to a NASA update, an object that was later spotted by flight controllers harmlessly floating off into the distance.

Fortunately, the tools "were not needed for the remainder of the spacewalk," allowing the two astronauts to return back inside.

More importantly, the bag's trajectory meant it was unlikely to "recontact" — or smack into — the space station, meaning the accident hopefully won't be a big deal.

Space Snafu

It's far from the first time astronauts have lost track of tools in space. Back in 1965, NASA astronaut Ed White infamously lost a spare glove during a spacewalk outside of his Gemini 4 spacecraft. Over the decades, several other astronauts have lost other objects, from spare bolts in 2006 to an entire bag ironically containing a debris shield in 2017.

In some cases, tools are even intentionally jettisoned. Case in point, earlier this year, Russian cosmonauts Sergey Prokopyev and Dmitri Petelin intentionally let a sizeable bundle of discarded hardware drift off into space.

"Bye bye," said one of the cosmonauts after letting go of the bundle during a livestream of the spacewalk. "Just flies beautifully."

The problem, of course, is that not every piece of space debris will stay out of the way of future space travelers. Scientists have long been worried about the sheer amount of junk littering our planet's orbit, something that's actively endangering the lives of astronauts.

While the latest space "snafu" likely won't pose any threat to the astronauts currently stationed on board the ISS, that doesn't mean there aren't any risks associated with losing track of a bolt or an entire tool bag during the next spacewalk.

More on astronauts littering: Cosmonauts Caught Littering Directly Into Space 

CAPITALI$M IS DEBT AND CONSUMPTION

Dimon: The excess savings amassed by low-income consumers are now gone

JPMorgan Chase (JPM) CEO Jamie Dimon sees a divergence between the two ends of his customer base, with lower-income consumers running out of a cash cushion they amassed during the pandemic.

“They don't have excess savings anymore,” said JPMorgan Chase CEO Jamie Dimon in a interview with Yahoo Finance on Wednesday night where he discussed topics ranging from geopolitics to the future direction of interest rates.

Executives from other banks view it the same way, noting that lower-income consumers are feeling more pain on several fronts. Wells Fargo’s CEO of consumer lending, Kleber Santos, called it a "tale of two cities" on Thursday.

Middle- and upper-class customers are "performing quite well" while there are "signs of stress" among those with lower incomes, Santos said while speaking at a BancAnalysts Association of Boston conference. "That’s where the deterioration is mostly."

Wells Fargo bank branch in Beverly Hills, Calif. (PATRICK T. FALLON/AFP via Getty Images) (PATRICK T. FALLON via Getty Images)

As a result, he said, Wells (WFC) is becoming "more conservative" on extending loans to that income segment, and not originating subprime loans "anywhere, any asset class, nothing."

The strength of the US consumer is a subject of debate across the financial world at a time when economic data has been coming in largely stronger than expected despite the Federal Reserve’s interest rate hiking campaign as the central bank seeks to cool inflation.

The Fed on Wednesday maintained its benchmark interest rate in a range of 5.25%-5.50%, the highest in 22 years, while leaving the door open for further action as officials work to bring inflation back to the central bank's 2% target.

The Fed also upgraded its assessment of the economy to "strong" in the third quarter from "solid" in September, a change that comes after third quarter GDP data published last week showed growth clocked in at a whopping 4.9% annualized rate over the summer months. That was driven in large part by strong consumer spending.

Federal Reserve Chair Jerome Powell speaks during a news conference Wednesday. (Susan Walsh/AP Photo) (ASSOCIATED PRESS)

"We may have underestimated the balance sheet strength of households and small businesses," Fed Chair Jerome Powell said at a press conference Wednesday while discussing the strength of the consumer.

"The question is how long can that continue."

As of the end of the second quarter, total US credit card debt crossed $1 trillion as delinquency rates edged closer to pre-pandemic levels, according to a household debt and credit report from the Federal Reserve Bank of New York. On Tuesday the New York Fed will release third quarter results.
What the market is 'most worried about'

Several other banks have offered warnings about slowing consumer spending while releasing their third quarter earnings in recent weeks, highlighting the pain they see among the lower end of their customer bases.

Citigroup (C) CEO Jane Fraser said affluent customers are accounting for almost all of the spending growth, and weakness is showing among those with lower credit scores. Citi expects its credit card losses to reach pre-COVID levels by the end of the year.

Jane Fraser, CEO of Citigroup. (Mike Blake/REUTERS) (Mike Blake / reuters)

Bank of America (BAC) CEO Brian Moynihan said its consumer bank balances are still above pre-pandemic levels but they are coming down. In late September, he said the bank's consumers were spending at pre-pandemic rates "consistent with 2016, 2017, 2018."

Fifth Third (FITB) executives also cited more economic pain among lower-end subprime borrowers. And that, according to Fifth Third CEO Tim Spence, is what the market is "most worried about right now."

Capital One (COF) CEO Richard Fairbank said spending and delinquencies among lower-end consumers, which the bank saw rising in past quarters, is beginning to stabilize, but now higher-income customers are starting to follow the same downward trend.

"Our upmarket segments are sort of just a little bit behind," he said.

'There are a lot of different ways to measure it'

To be sure, Dimon told Yahoo Finance that overall the consumer "is in very good shape," and that if the economy does go into recession "the consumer is going in better shape than they gone in most recessions."

At the same time, the boss of the largest US bank said the lower third of consumers who have accounts with the largest US bank have run out of their excess savings amassed during the pandemic.

The middle class is getting close to zero, he said, with no excess savings. "But they still have jobs and wages are going up."

The wealthy, he added, “still have excess."

JPMorgan Chase CEO Jamie Dimon. (Elizabeth Frantz/REUTERS) (Elizabeth Frantz / reuters)

Taken together, the savings in an average checking account at JPMorgan "is being spent down" and "we’ve seen that number coming down."

There is still disagreement even within JPMorgan about when the overall figure from all consumers will drop further.

Dimon said he saw three different forecasts, all produced by JPMorgan. One said this savings number would come down by the first quarter of next year, one said the third quarter, and one said the end of next year.

"There are a lot of different ways to measure it."

Real estate industry facing pushback to longstanding rules setting agent commissions on home sales

ALEX VEIGA
Wed, November 1, 2023 

Homes in Middlesex Township, Pa., are shown on Apr. 19, 2023. A case in federal court in Missouri ended Tuesday with a jury ordering the National Association of Realtors and some of the nation's biggest real estate brokerages to pay almost $1.8 billion in damages after finding that they artificially inflated commissions paid to real estate agents. 

(AP Photo/Gene J. Puskar, File) 

LOS ANGELES (AP) — A series of court challenges seek to upend longstanding real estate industry practices that determine the commissions agents receive on the sale of a home — and who foots the bill.

A federal jury in one of those cases on Tuesday ordered the National Association of Realtors along with some of the nation's biggest real estate brokerages to pay almost $1.8 billion in damages, after finding they artificially inflated commissions paid to real estate agents.

The class-action lawsuit was filed in 2019 on behalf of 500,000 home sellers in Missouri and some border towns. The verdict stated that the defendants “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”

If treble damages — which allows plaintiffs to potentially receive up to three times actual or compensatory damages — are awarded, then the defendants may have to pay more than $5 billion.

“This matter is not close to being final as we will appeal the jury’s verdict,” Mantill Williams, a spokesman for the NAR, said in a statement. “In the interim, we will ask the court to reduce the damages awarded by the jury.”

Williams said it will likely be several years before the case is resolved.

But already the NAR and several real estate brokerages are facing another lawsuit over agent commission rules. Fresh off winning the verdict in the 2019 case, the lawyers filed a new class-action lawsuit in the U.S. District Court for the Western District of Missouri that seeks class-action status covering anyone in the U.S. who sold a home in the last five years. It names the trade association and seven brokerage companies, including Redfin Corp., Weichert Realtors and Compass Inc.

“What’s at issue nationwide is costing Americans about $60 billion in extra real estate commissions,” said Michael Ketchmark, one of the attorneys representing the plaintiffs in the lawsuits.

The focus of the lawsuits is an NAR rule that requires that home sellers offer to pay the commission for the agent representing the homebuyer when they advertise their property on a local Multiple Listings Service, where a majority of U.S. homes are listed for sale. This is in addition to also having to cover the commission for their listing agent or broker.

The NAR's rules also prohibit a buyer's agent from making home purchase offers contingent on the reduction of their commission, according to the complaint.

“Defendants’ conspiracy forces home sellers to pay a cost that, in a competitive market and were it not for defendants’ anticompetitive restraint, would be paid by the buyer,” the plaintiffs argued in the lawsuit filed Tuesday.

Plaintiffs also claim that the NAR requirement effectively keeps commissions for a homebuyer's agent artificially high.

If NAR’s “Mandatory Offer of Compensation Rule” were not in place, then homebuyers would foot the bill for their agent's commission, which would open the door for competition — and lower commissions — among agents vying to represent a homebuyer, the plaintiffs contend.

The NAR argues that the practice of listing brokers making offers of compensation to buyer brokers is best for consumers.

“It gives the greatest number of buyers a chance to afford a home and professional representation, while also giving sellers access to the greatest number of buyers,” Williams said.

The NAR spokesman also noted that the trade association's policies have always required that an offer of agent compensation be made without specifying an amount, adding that it could be as little as $1 or even a penny.

In July, the independent Bright MLS, which covers some states in the eastern part of the country, changed the rules so that it's OK for a home listed in that region's MLS to not include an offer of agent compensation at all. That still falls within NAR's guidelines.

“In addition, regardless of the offer, those offers are always negotiable,” Williams said.

As home prices have soared in recent years, pushing the national median sales price to $394,300 as of September, so have agents’ commissions.

“Today, what effectively happens is the buyer agent's commissions are added to the sale price of the house, inflating the sale price,” said Stephen Brobeck, senior fellow at the Consumer Federation of America. “If sellers no longer had to pay the buyer agents, there wouldn’t be that inflation and buyers could negotiate the commission down and they would end up paying less money.”

Typically, the home seller pays their listing agent, who then splits the commission with the buyer’s agent according to the NAR rules. Traditionally, that works out to a 5% to 6% commission split roughly evenly between the buyer’s and seller’s agents.

Such commissions are justified, given the professionalism agents offer their clients and the hefty expenses they often incur in preparing to sell a home, including costs for staging, marketing, photography, lock boxes and even cleaning, said Matthew Shelton, a Kansas City area real estate agent.

“Never have I had a seller even bat an eye or question a commission,” he said. "If somebody takes control and limits what commissions can be charged that would be more concerning, you know, if they put a cap on anything. I don’t think that that’s accurate or correct.”

The 2019 lawsuit originally also included Anywhere Real Estate Inc. and Re/Max, but the two companies reached a settlement agreement, which included Anywhere paying $83.5 million, Re/Max paying $55 million, and the pair agreeing to pull back on their relationships with NAR.

Homebuyers and sellers aren’t likely to see any immediate change in the way agent commissions for homes listed on the MLS are typically handled, as the NAR has vowed to appeal Tuesday’s verdict.

However, the industry will be watching for what the court will do next now that the jury has spoken.

“What’s critical is how far the court orders the industry to restructure their compensation and offers," Brobeck said. “The real solution is for buyers to be able to finance the buyer-agent commissions as part of their mortgages .... But there are regulatory barriers to that occurring right now — regulatory barriers that are strongly supported by the industry."

In a blog post Tuesday, Redfin CEO Glenn Kelman noted that it may take days or weeks for the judge to decide what structural changes the jury's verdict will entail, and possibly years of court appeals.

“For now, the initial size of the damages alone will ensure major change,” he wrote.

Last month, Redfin announced it would mandate that its brokers and agents withdraw from NAR membership, citing partly the trade association's requirement of a fee for the buyer’s agent on all listings.

The agent commission lawsuits aren’t the first time that the residential real estate industry has drawn scrutiny about the impact its rules have on competition.

The Justice Department filed a complaint in 2020 against the NAR, alleging it established and enforced rules and policies that illegally restrained competition in residential real estate services. The government withdrew a proposed settlement agreement in 2021, saying the move would allow it to conduct a broader investigation of NAR’s rules and conduct.

___

Associated Press writer Michelle Chapman in New York and Heather Hollingsworth in Kansas City contributed to this report.

MONOPOLY CAPITALI$M

Cedar Fair, Six Flags agree to $8 billion theme park merger


Cedar Fair and Six Flags Thursday announced an $8 billion "merger of equals." The combined company will operate 42 parks and 9 resort properties across 17 U.S. states. File Photo by Bill Greenblatt/UPI | License Photo

Nov. 2 (UPI) -- Cedar Fair and Six Flags amusement park operators said Wednesday they are entering a merger of equals transaction to create a combined company valued at approximately $8 billion.

When this merger closes Cedar Fair shareholders will own approximately 51.2% of the new combined company while Six Flags shareholders will own 48.8%.

The companies did not disclose whether employees will lose jobs in the merger.

"Our merger with Six Flags will bring together two of North America's iconic amusement park companies to establish a highly diversified footprint and a more robust operating model to enhance park offerings and performance," said Cedar Fair CEO Richard Zimmerman in a statement.

Both companies' boards of directors approved the merger.

"The combination of Six Flags and Cedar Fair will redefine our guests' amusement park experience as we combine the best of both companies," Six Flags CEO Selim Bassoul said in a statement. "Six Flags and Cedar Fair share a strong cultural alignment, operating philosophy, and steadfast commitment to providing consumers with thrilling experiences."

Zimmerman will be the CEO and President of the combined company. Bassoul will be the executive chairman of the combined company's board of directors.

The combined company will operate 27 amusement parks, 15 water parks and 9 resort properties across 17 states in the United States, Canada and Mexico.

According to the two companies, benefits of the merger include "an expanded and diversified footprint, a more robust operating model and a strong revenue and cash flow generation profile."

The companies also expect significant cost savings and increased revenue.

"Cedar Fair and Six Flags expect the combined company will benefit from the significant value created by total anticipated annual synergies of $200 million," their joint statement said. " Approximately $120 million of these synergies are expected to be related to identified administrative and operational cost savings, which the companies anticipate realizing within two years following transaction close."

South Korea’s Main Airlines Agree On Plan to Push Merger Through

Heejin Kim
Wed, November 1, 2023 

In this article:

(Bloomberg) -- Asiana Airlines Inc. agreed to a plan on merging with Korean Air after holding long-running talks to overcome concerns about how their combination might impact competition on European routes.

The plan, signed off at a board meeting Thursday, includes selling Asiana’s cargo business to another South Korean carrier, removing the main obstacle to the merger. Others will also be allowed to use the airlines’ Seoul to Paris, Frankfurt, Rome and Barcelona routes.

European regulators feared that if Korean Air took over Asiana, a move first proposed in 2020, it would threaten competition on airfreight services to and from Europe, as well as passengers routes.

Read More: Korean Air Seeks to Fix EU Concerns Over $1.3 Billion Asiana Buy

Three Asiana board members voted in favor of the plan, one opposed it and another abstained, a spokeswoman at Asiana told Bloomberg News.

Korean Air said it will submit the new proposals to European authorities and await a decision. The airline aims to win approval by the end of January.

It is also awaiting the nod from the US and Japan. The airline said it will talk with US authorities and submit a proposal to Japan, with expectations of a decision in early 2024.

“While Korean Air continues its efforts to secure approval from the European Commission, the airline will also communicate closely with the remaining regulatory bodies to finalize the approval process as quickly as possible,” a Korean Air spokesperson wrote in a text message to Bloomberg News.

Others such as China and the UK have already given the green light to the plan.

Korean Air said it will seek a buyer that guarantees Asiana’s cargo workers keep their jobs.

“Korean Air proposed alternative ways to ease competition concerns but the EC rejected all of them — the cargo business sale was the only option to propose for winning approval,” the spokesperson said.

State-run Korea Development Bank has injected 3.6 trillion won ($2.7 billion) of taxpayers’ money into trying to salvage debt-ridden Asiana. When outlining the merger in 2020, KDB said it would give South Korea a single, competitive national airline amid restructuring and consolidation in the industry.

Having surged in anticipation of an agreement being reached, Asiana’s shares slid Thursday afternoon in Seoul, dropping 7.7% as of 2:45 p.m.

More on mergers in the aviation industry:

Spirit CEO Says Pandemic Losses Pushed It to JetBlue Merger


Italy Sees Closing of ITA Stake Sale to Lufthansa by End of 2024


Air India Plots Rapid Buildout of Budget Unit, Taking On Indigo


Air France-KLM Takes SAS Stake in $1.2 Billion Restructuring

 Bloomberg Businessweek

Asiana backs sale of cargo unit, removing one hurdle to Korean Air merger

Wed, November 1, 2023 


By Heekyong Yang and Hyunsu Yim

SEOUL (Reuters) - South Korea's Asiana Airlines said on Thursday its board had approved the sale of the company's cargo business - an important step towards allaying EU competition concerns about a proposed takeover by Korean Air Lines.

Korean Air, the country's biggest carrier, said in a statement following the decision that it had submitted a package of remedies to the European Commission - remedies that also include it divesting routes to some European Union cities.

Analysts said, however, that Asiana's greenlighting of the cargo unit sale did not necessarily ensure smooth sailing ahead for the deal.

They noted the desired valuation for the air cargo unit of some 700 billion won ($520 million) including debt, as reported by local media, was probably too high. That could become a new stumbling block for the sale and hence regulatory approval.

"The price seems to be way too expensive, and there aren't that many players at home with the means to spend that much money on Asiana's debt-ridden cargo unit ... there are lingering uncertainties," said Bae Se-ho, an analyst at Hi Investment & Securities.

And even if the deal gets the nod from the European Union, it still needs approval from the United States and Japan, analysts also noted.

Korean Air said in a statement that while it was continuing with "its efforts to secure the approval from the European Commission, the airline will also communicate closely with the remaining regulatory bodies to finalize the approval process as quickly as possible."

Approving the sale was a contentious issue at Asiana amid concerns that a takeover by Korean Air would lead to the loss of many Asiana jobs. Just this week, one board member resigned ahead of the vote, although the reasons for the departure were not disclosed.

In the end, three board directors voted in favour, while one opposed the plan and one abstained, a source familiar with the matter said, declining to be identified.

Korean Air also said it will buy 300 billion won of convertible bonds issued by Asiana, part of fresh financial support to the smaller airline.

Any takeover of Asiana by Korean Air would come amid a wave of consolidation in the industry, with Lufthansa acquiring a 41% stake in Italy's ITA Airways and British Airways and Iberia owner IAG buying the remaining 80% of Spanish carrier Air Europa it does not already own.

Asiana creditors, including state-run lender Korea Development Bank, have been looking for a new owner for the debt-laden carrier for several years. Korean Air agreed to acquire Asiana in 2020.

As of end-June, Asiana had debt of more than 13 trillion won.

The company accounts for about a fifth of South Korea's market for overseas air cargo. With 11 cargo planes, its service encompasses 21 routes to 25 cities in 12 countries, including the United States, Germany and Russia.

Shares in Asiana closed down 8.7%, a decline analysts attributed to a lack of potential positive news for the airline now that the sale has been approved.

($1 = 1,342.9900 won)

(Reporting by Joyce Lee, Heekyong Yang and Hyunsu Yim; Editing by Edwina Gibbs)

How Japan poses a threat to the global financial system


The Economist
Thu, November 2, 2023 

The bank of japan (boj) failed to deliver a Halloween thriller. Even as central banks elsewhere have raised interest rates in recent years, the boj has stuck with its ultra-loose policy, designed to stimulate growth. Japan’s benchmark interest rate sits at -0.1%, where it has been for seven years. And on October 31st, despite building pressure, the bank decided merely to tweak its cap on ten-year government-bond yields. The 1% ceiling on yields, which the bank makes enormous bond purchases in order to defend, is now a reference rather than a rule. Indeed, yields on the benchmark bond are at 0.95%, their highest for over a decade (see chart).

After the boj’s announcement, the yen fell to ¥151 to the dollar, its lowest in decades. Inflation, long quiescent, is no longer so low—the boj raised its forecasts for underlying “core” inflation over the next three years. Many analysts expect the central bank to end its yield-curve-control policy once and for all early next year, and to have raised interest rates by April. But even when the boj does finally raise interest rates, it is likely to be by just a fraction of a percentage point, meaning the gulf between Japanese bond yields and those in the rest of the world will remain large, with major consequences for global financial markets. A fright is still in the offing.

To understand why, consider the impact Japan’s rock-bottom interest rates and continued intervention to suppress bond yields have had. Low rates at home have generated demand for foreign assets, as investors seek better returns. Last year the income from Japan’s overseas investments ran to $269bn more than was made by overseas investors in Japan, the world’s largest surplus, equivalent to 6% of Japanese gdp. The huge gap between bond yields in Japan and those in the rest of the world now presents dangers to both the Japanese investors that have bought foreign bonds and the global issuers that have benefited from Japanese custom.

Jeopardy is particularly apparent at Japan’s largest financial firms, which make big investments abroad. The cost of hedging overseas investments depends on the difference between the short-term interest rates of the two currencies at play. America’s short-term interest rates are more than five percentage points above Japan’s equivalent, and the gap exceeds the 4.8% yield on ten-year American government bonds. This means Japanese buyers now make a guaranteed loss when buying long-term bonds in dollars and hedging their exposure. Hence why the country’s life insurers, which are among the institutions keenest to hedge their currency risk, dumped ¥11.4trn ($87bn) in foreign bonds last year.

The huge gap between short-term interest rates means that Japanese investors now have more limited options. One is to continue buying overseas, but at greater risk. Meiji Yasuda Life Insurance and Sumitomo Life, each of which held more than ¥40trn in assets last year, say they will increase their overseas bond purchases without hedging against sudden currency shifts, in effect betting against a sudden rise in the yen. Life-insurance firms are usually conservative, but the longer the enormous gap in interest rates persists, the more they will be encouraged to take risks.

Meanwhile, rising yields on long-term Japanese bonds, which will surely rise further still if the boj does abandon yield-curve control, may tempt local investors to bring home their money. Japan’s 40-year bonds offer yields of 2.1%—enough to preserve the capital of investors even if the boj hits its target of 2% inflation. Martin Whetton of Westpac, a bank, says that this prospect ought to worry firms and governments in America and Europe used to a voracious Japanese appetite for their bonds.

In such a scenario, a source of demand would turn into a source of pressure on the funding of Western firms and governments. The yen might then surge, as Japanese investors sell foreign-currency debt and make new investments at home. Bob Michele of JPMorgan Asset Management warns of a decade of capital repatriation.

The flow of Japanese capital to the rest of the world, which emerged during a decade of easy monetary policy around the world, looks likely to be diminished. Whether the resulting pain will be felt by local financial institutions, or foreign bond issuers, or both, will become clearer over the months to come. What is already clear is that it will be felt by someone.

For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.

© 2023 The Economist Newspaper Limited. All rights reserved.

Japan Faces Speculators on Two Sides Challenging the Yen, Bonds

Ken McCallum
Wed, November 1, 2023 
 

 

(Bloomberg) -- The contradictions in Japan’s efforts to protect the yen while slowing the pace of rising bond yields are becoming increasingly clear in currency and debt markets.

While Thursday presents a slightly different picture after the Federal Reserve kept rates on hold, the action in Tokyo on Wednesday underscores Japan’s huge challenge.

The day began with the nation’s top currency official at the finance ministry giving one of the starkest warnings yet that authorities were ready to intervene in the foreign exchange market to stem the yen’s fall. By lunchtime the Bank of Japan was preparing to wade into the debt market to slow the speed of the 10-year bond yield’s ascent toward 1%.

The BOJ’s unscheduled bond purchases were jarring — coming just 24 hours after the central bank removed its 1% cap on these yields. The operation also worked directly against efforts to support the yen, which is being weighed down by the wide gulf between interest rates in Japan and the US.

The upshot for the currency was a 0.5% advance Wednesday and a further 0.2% gain so far Thursday. That’s taken it away from the 151 level versus the dollar, but it remains well within sight if its 33-year low set last year. The 10-year bond yield still ended up for the day and was just 1.5 basis points below the fresh decade high it set before the central bank announced its buying operations. Bond futures point to lower yields Thursday while the longer-term picture for gains is unchanged, and a 10-year debt auction due later in the day has traders on edge.

“The MOF and BOJ’s actions are out of sync,” said Tsuyoshi Ueno, senior economist at NLI Research Institute, who sees the answer to the problem lying out of their hands and in any future interest rate cuts in the US. “Until then, authorities will have to be patient.”

Speculators in both markets are betting that Japan’s policymakers won’t be able to maintain their balancing act, and the stakes are rising. An excessive yen depreciation could worsen Japan’s inflation, in part by pushing up import prices, while higher yields could prematurely crimp Japan’s recovery.

“We’re on standby,” said Masato Kanda, the top currency official at the ministry, echoing language he used a year ago on the day Japan made the first of three forays into the market. “But I can’t say what we’ll do, and when — we’ll make judgments overall, and we’re making judgments in a state of urgency.”

Read more: Japan Ramps Up Yen Intervention Warning After BOJ-Fueled Selloff

His comments on Wednesday followed the yen’s biggest one-day drop since April on Tuesday after the BOJ’s underwhelming tweak to its cap on bond yields showed that moves away from ultra-loose policy would likely continue to be slow and gradual.

Japan’s stock market, on the other hand, the Topix index climbed the most in more than a year because of the tailwind to equities from low borrowing costs and the weak yen.

While Japan’s 10-year benchmark yield had doubled since July 27, one day before Governor Kazuo Ueda made his first tweak to yield-curve control, it is still about four percentage points below its US equivalent.

The BOJ appears intent on moderating moves while traders are constantly trying to push yields higher.

“Although the BOJ took action to discourage rises in yields, market players probably want to see the long-term yield reaching 1%,” said Keisuke Tsuruta, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co.

He added that the unscheduled buying operation this time may have been a pre-preemptive move before the closely-watched 10-year bond auction Thursday.

BOJ Buys More Bonds to Slow Rising Yields a Day After Tweak

“At the bottom of the BOJ’s thinking is its lack of assurance that they could achieve sustainable inflation of 2%, so a somewhat easy monetary policy needs to be maintained,” said Shusuke Yamada, head of Japan currency and rates strategy at BofA Securities Inc. “For the finance ministry, it’s looking at volatility and trading levels for foreign exchange. Letting the yen weaken has disadvantages for consumers.”

--With assistance from Yumi Teso and Daisuke Sakai.

CRIMINAL CAPITALI$M
Indian authorities seize $65 million of property in Jet Airways fraud case


Reuters
Wed, November 1, 2023 a

Naresh Goyal, Chairman of Jet Airways speaks during a news conference in Mumbai

GALURU (Reuters) - India's financial crime agency has seized properties worth 5.38 billion rupees (nearly $65 million) as part of its probe into money laundering allegations against the now-defunct Jet Airways and founder Naresh Goyal, the agency said on Wednesday.

The Enforcement Directorate (ED) said it has seized 17 residential and commercial properties in London, Dubai and India that were registered in the names of various companies and people, including Goyal, his wife and son.

Goyal has been in judicial custody since September when the ED arrested him in relation to the money laundering that was filed by state lender Canara Bank in May.

Jet Airways had siphoned off loans from a consortium of banks led by State Bank of India and Punjab National Bank, the ED said.

The agency doubled down on its claim that under Goyal's leadership, the airline had siphoned off funds under the garb of professional and consultancy fees to overseas entities and towards the expenses of Goyal and his family members.

"Naresh Goyal implemented a massive financial fraud," it said on Wednesday.

Goyal's lawyer told Reuters, "We are going through the charge sheet and are currently evaluating our options."

Goyal founded Jet Airways in 1992 and led it to become India's second-largest carrier in India by market share. It shut down operations in April 2019 after running out of cash. ($1 = 83.2615 Indian rupees)

(Reporting by Indranil Sarkar in Bengaluru; Editing by Savio D'Souza)