Hugh Hendry Shuts Down Fund, Says “Markets Are Wrong, It Wasn’t Supposed To Be Like This”

Hugh Hendry, the feisty bearish Scotsman who posted a 31% gain in 2008 betting against banks is shuttering his firm, Eclectica Asset Management, following a 15 year run that ended in loss.

Hendry’s flagship fund, Eclectica, dropped 9.4 percent this year through August, with assets of $30.6 million.

Via Bloomberg: 

“It wasn’t supposed to be like this,” Hendry said in an investor letter seen by Bloomberg. The fund “became strongly correlated over the short term to maelstrom of President Trump and the daily news bombs emanating from the Korean Peninsula,” making it impossible to manage small amounts of money, he said.

After a killer 2008, Hugh made headlines in 2009 talking shit about all the empty real estate in China, posting YouTube videos and whatnot showing darkened office buildings with no tenants.

Hendry’s joining a long list of vanquished fund managers for 2017

With the closing of Eclectica, Hendry joins a long list of hedge fund managers who have folded up shop this year – including Eric Mindich, Leland Lim and John Burrbank. Just shy of 260 funds liquidated in Q1, which followed a record number of closings in 2016 – with more managers liquidating funds than any year since the financial crisis.

What’s Hugh gonna do? 

Hendry told investors he’s going to sit out the next major market inflection, though he said he’s optimistic about the global economy and recommends investors stay long.

“For the first time in an age all parts of the world are enjoying synchronised economic momentum and I can’t see it ending for some time,” he wrote in the letter. Hendry added that he doesn’t envision an abrupt rise in interest rates that would interrupt the equity rally.

Full letter here (via ZeroHedge)

CF Eclectica Absolute Macro Fund

Manager Commentary, September 2017

What if I was to tell you I wasn’t bearish on anything? Is that something you would be interested in?

It wasn’t supposed to be like this and it is especially frustrating as nothing much has gone wrong with the economy over the summer. If anything we feel more convinced that our thesis of a healing global economy is understated: for the first time in an age all parts of the world are enjoying synchronised economic momentum and I can’t see it ending for some time. It’s just that our substantial risk book became strongly correlated over the short term to the maelstrom of President Trump and the daily news bombs emanating from the Korean Peninsula; that and the increasing regulatory burden which makes it almost impossible to manage small pools of capital today. Like I said, it wasn’t supposed to be like this…

But let me bow out by sharing my team’s views. For the implications of a sustained bout of economic growth are good for you. It’s good because it should continue to underwrite a continuation in the positive performance of global equities. I would stay long. It’s also good because I can’t see interest rates rising abruptly to interrupt the upward path of equities. And commodities have already acknowledged the upturn in the fortunes of the global economy and are likely to trend higher still. That’s a lot of good news.

But it is bad news for me because funds like mine are required to demonstrate negative correlation with risk assets (when they go up like this I go down…), avoid large drawdowns and post consistent high risk adjusted returns.

Oh, and I forgot, macro fund clients don’t like us investing in the stock market for the understandable fear that we concentrate their already considerable risk undertaking. That proved to be an almighty puzzle for a fund like mine that has been proclaiming the stock market as a “safe-ish” bet ever since 2013.

Let me explain the “markets are wrong and we boom now” argument. To begin with, and for the sake of clarity, I think we have to carefully go back and deconstruct the volatile engagement between capital markets and central banks for the last ten years for an understanding of where we stand today.

The first die was cast by the central bankers in early 2009: having stared into the abyss of a deflationary spiral in 2008 the Fed and the BoE announced a radical new policy of bond purchases named Quantitative Easing. The bond market hated the idea as it was expected to cause a severe inflation problem.

Thankfully Bernanke, a student of the great depression knew better.

Markets primed themselves for inflation yet even with a ripping stock market in 2009/10 they were disappointed. QE rescued the financial system but the liquidity created was distributed to the very rich who have a very low monetary velocity and so the expected inflation fillip never materialised as the liquidity injection came to be stored rather than multiplied by the banking system.

Several years later, in 2013, the Fed suggested a reduction in the pace of its QE program. They wanted to tighten credit conditions gradually. However, capital markets beat them to it and the ensuing “taper tantrum” tightened monetary policy on their behalf. Within four months the market had taken 10 year treasuries from a yield of 1.6% to 2.9%, a move of far greater impact, and much more rapid, than anything the Fed had contemplated doing.

Markets initially thought the US could cope with this higher level of rates, but with a slowing economy, an unfortunately-timed oil price crash, and persistent ghosts in the machine (like the substantial Yuan devaluation fear which never materialised) they were proven wrong. Back then, with a 7.6% national unemployment rate and tepid wage inflation, this tightening always looked a little premature to us and so it proved with the rate of price inflation inevitably sliding lower to present levels.

And so last year, following many years of berating the Fed for its easy monetary policy regime, investors collectively threw in the towel. This rejection of the basic tenets of the business cycle by those who direct the huge pools of real money is proving particularly onerous to attack as it seems that the basic macro fund model is broken: there are just not enough “coins in them pirates’ chests” to challenge the navy of this flawed real money doctrine. Managers, and I must count myself in this camp, feel compromised by our poor absolute returns since 2012 and we find ourselves unable to put up much resistance to this FAKE NEWS.

Why should you fight it? Well let’s look at the last few times American unemployment dipped below 4.5% like today. I would largely ignore 2000 and 2006 when monetary policy was tightened and the economy buckled under the duress of the dramatic reversal in what had been credit fuelled misallocations of capital in the TMT and property sectors. No, for me 1965 is far more illuminating. Then, like today, there was no epic bubble or set of circumstances whose reversal could cause a slump; people forget but recessions don’t come out of thin air. No, in 1965, economic growth got choked by a tight labour market; a market as ominously tight as today’s.

In the middle of 1964, CPI core inflation was running at 1.7% and indeed dropped to just 1.2% in 1965; unemployment was 4.5%, the same as today. And yet by the end of 1966 inflation had essentially got out of control and didn’t dip below 2% again until 1995, almost 30 years later.

It seems to me that wage or cost push inflation is far more difficult to prevent and contain than asset price inflation. It tends to bear comparison with how Hemmingway described going broke: slow at first and then devastatingly quick. It may prove especially potent right now as the labour market is tight and there are no catalysts to generate a self-correcting US recession with both central bankers and markets now  united in their desire for loose policy.

Look at the graph below, the unemployment rate (red) is at lows, job openings (blue) have increased beyond the hiring rate (teal) and are now approaching the unemployment rate for the first time since the Job Openings and Labor Turnover Survey data began. Ultimately robust GDP growth plus this labour tightness will lead to wage hikes and conceivably a self-sustaining inflationary cycle.

This is all the more ominous as the Fed has been reluctant to unwind its balance sheet. The largesse of this program fell to those already wealthy (“the global creditor”) and who had a low propensity to spend:
financial markets boomed, less so the real economy. However the legacy of QE plus wage gains would turn this equation on its head. It would distribute incremental dollars to those with a much higher propensity to spend. The boost to monetary velocity from widespread wage increases would start to look much more like the helicopter money that Chairman Bernanke promised back in 2002 and subsequent central bankers dared not distribute.

The macro shock would not necessarily be the subsequent inflation but, that by waiting to respond until later, higher policy rates might fail in the first instance to induce a recession setting off a loop begetting higher and higher rates. Let me explain: companies will continue to employ staff, and with wages increasing, it is likely that sales will hold up and, depending on whether they achieve productivity gains or not, corporate profitability might also remain firm. So companies will commit to pay staff more whilst raising prices to meet higher wage and interest payment demands where possible. Like I said, wage or cost push inflation is a very different beast to contain.

I have to say that should this scenario unfold then capital markets will be as culpable as the Fed. This year, bond investors have aggressively flattened the US yield curve. The clear message is that 1.25% overnight rates threaten to pull the US economy into recession. I disagree. I think they are undermining the ability of the Federal Reserve to respond proactively; the Fed is simply not going to hike rates under such conditions having learnt the hard way back in 1999 and 2005. But what if such flatness has more to do with the commercial investment pressure brought on by QE rather than a genuine recession threat? Could it be that the bond market’s cautionary recessionary indicator is stuck flashing RED whilst the US economy goes from strength to strength? I fear so.

Clearly of course no one knows. However if an inflationary path like 1966 is gestating then I fear there is very little chance that anything timely will be done about it. Rate hikes will continue to be sparse, we only have one quarter point hike predicted between now and the end of 2019, which if fulfilled will be highly unlikely to spark a severe recession. Most likely the US economy will continue to grow and the labour market will tighten making a larger adjustment to rates in the future inevitable.

And so QE could conceivably end up doing what it was always supposed to do in the first place: find its way through the financial system to increase, not decrease, interest rates. This scenario would diminish greatly if bond curves steepened a lot now and gave the Fed the credibility to hike. Sadly I just don’t see this happening. They will steepen of course but I fear only after the virus of cost push inflation is released into the global hothouse.

This potentially leaves us in a strange environment. In the absence of any recognisable asset bubble set to burst, and the Fed grounded, the US economy is unlikely to slip into recession. China continues to rip. And now the European continent is recovering. Risk assets should continue to trend positively. And with the bond market, wrongly in my opinion, infatuated with the likelihood of an approaching US recession, the Treasury market is unlikely to move much. This is simply not a good time to offer a risk diversifying portfolio.

However, perhaps being long fixed income volatility isn’t such a bad idea. It has not been persistently lower than this for almost three decades. And unlike equity volatility it does not tend to trade in lengthy and definable regimes; it is never a great idea to go long equity volatility just because it happens to be low. The same cannot be said of its fixed income counterpart.

The collapse in volatility since 2012 seems to resonate with the drawn out process of QE in the US and its slow spread across the world. However that era is clearly now abating as this year’s synchronised global growth gradually shifts the debate from looseness to gradual global tightening. And yet fixed income volatility resides on the floor…

Looking at the one year implied volatility on 10 year swaps, the cost of entry seems reasonable even compared to the narrow trading range we have seen this year. That is unless you expect volatility to crash and  the trading range to contract even further. With only one Fed hike priced in until the end of 2019 any further contractions are likely to be driven by outright recession. In that case volatility will rise across all asset classes. On the other hand, if our thesis is right, and the market and Fed are too complacent on inflationary pressures, then it is likely that we see more hikes from the Fed alongside yield curves steepening from their currently very low levels. Fixed income volatility will surge. When the status quo priced in is this boring, fixed income volatility really has only one direction it can go.

With inflation still weak and government bond prices unlikely to crack just yet it is too early to seek a short fixed income trade in disguise. In the past, correlations have, just like in the stock market, typically been negative between the price (SPX or Treasury) and the implied volatility (VIX or swaption vol.). Now however the correlation is mildly positive. So being long fixed income volatility is not necessarily the same as  being short fixed income. My contention is simply that fixed income volatility has over shot to the downside, that such moments are fleeting and that you are not necessarily dependant on a correction in treasury prices.

Sadly I will be unable to participate with such trades during the next upheaval in global markets with the Fund but I hope that this commentary has at least roused you into contemplating scenarios that are presently deemed less plausible.

It remains only that I thank you for the great honour of having been responsible for managing your capital and to wish you all great financial fortune.

Hugh Hendry and team

This afternoon’s top stories from Bloomberg: 

Shkreli played? 

How’s this for irony? Pharma bro Martin Shkreli, who was recently convicted of fraud, may have been played. His $2 million Wu-Tang album, the most expensive record ever sold, might not actually be… a Wu-Tang album. Bloomberg News reporters Devin Leonard and Annmarie Hordern have the full story here. In other Shkreli news, the former pharmaceutical executive was jailed Wednesday—but not for his fraud conviction.—Katie Robertson

Bitcoin crashed after a Chinese exchange said it will halt trading. The cryptocurrency fell for a fifth day, the longest losing streak in more than a year, after one of China’s largest online exchanges said it would stop handling trades by the end of the month amid a government crackdown. China accounts for about 23 percent of bitcoin trades and is home to many of the world’s biggest bitcoin miners.

Nestle is buying a majority stake in coffee roaster Blue Bottle. The Nespresso owner is looking to bolster its lead in the java market amid increasing demand for upscale blends. Blue Bottle, which is based out of California, sells coffee within 48 hours of roasting it and gives Nestle a bigger bite of the U.S. market.

Who is Warren Buffett’s successor? The next CEO of Berkshire Hathaway is one of the most guarded secrets in the business world. That didn’t stop JPMorgan’s new Berkshire analyst from placing odds on one man: Greg Abel. The 55-year-old is the head of Berkshire’s utility businesses.

How rich Chinese use visa fixers to move to the U.S. Have a spare $500,000 to invest in an economically distressed American area (that actually isn’t distressed at all)? China’s EB-5 fixers will help you every step of the way. They’ve turned some of the world’s most forbidding bureaucratic machinery into a kind of consumer good for China’s rising wealthy class.

Netflix CFO David Wells told a room full of attendees at the Goldman Sachs ‘Communacopia’ Conference in NY that the company has no regrets spending $6 billion on content this year, despite the company’s $4.8 billion debt.

While Netflix has been criticized by analysts for their “free spending ways,” especially on original content, Wells says the cash outlay has been worth it, considering the streaming giant’s 104 million users worldwide.  made massive financial bets on Emmy nominated content which appear to be paying off.

“You could decide to invest everything and more into content, so we have some discipline reserve for growing operating margin at this point,” Wells said.

Subscriber growth has been booming too, with over 100 million customers:

“Just a headline: If we’re able to grow the top line, we’re going to be guided by steady growth of operating margin and reinvest what’s left into content,” he said.

“For a while, we were not budget-constrained, we were project-constrained,” Wells continued. “We might be to the point where we might start seeing more budget constraint. That has some benefits in terms of helping drive discipline on the content line.”

Of note, Netflix original content is getting better ratings, on average, than licensed shows from legacy networks

Yes, they have a ton of debt. Yes, their P/E of 223 is at Amazonian levels – their closest competitor. But they’ve been crushing user growth estimates and guidance while falling in line on revenues / eps.

Variety reports that Netflix’s spending budget could increase to $7 billion next year.

Exodus nails $NFLX

While Netflix is currently trading well above the “Oversold” level within iBankCoin‘s Exodus service, keep an eye on it… 8 out of the last 8 times it flagged oversold, $NFLX returned 14.11% within 7 days.

If you’re not a member yet, join here.

An angry federal judge revoked Martin Shkreli’s $5 million bail and ordered him jail on Wednesday at the request of prosecutors, after the former pharmaceutical exec offered $5,000 over Facebook to anyone who could deliver a strand of Hillary Clinton’s hair.

“On HRC’s book tour, try and grab a hair from her,” Shkreli wrote on Sept. 4, adding “I must confirm the sequences I have. Will pay $5,000 per hair obtained from Hillary Clinton.”

The post caught the attention of the U.S. Secret Service, who beefed up protective measures for Clinton during her book tour.

New York Judge Kiyo Matsumoto said the 34 year old Shkreli “demonstrated that he has posed a real danger” to the public. Shkreli – who was out on bail awaiting sentencing in his securities fraud trial – wrote a letter to the court which stated that his offer was an “awkward attempt at humor or satire.”

“I wanted to personally apologize to this Court and my lawyers for the aggravation that my recent postings have caused,” Shkreli wrote, adding “I understand now that some may have read my comments about Mrs. Clinton as threatening, when that was never my intention when making those comments”

Via CNBC: 

A somber-looking Shkreli, wearing a purple dress shirt and a shaggy mop of hair, was taken into custody by U.S, Marshal deputies just after 6 p.m. as his grim-faced legal team stood by.

He will be held in the federal jail known as the Metropolitan Detention Center in Brooklyn until his sentencing on securities fraud charges, which Matsumoto set on Wednesday for Jan. 16.

Shkreli’s lawyer Benjamin Brafman argued in his own letter that his client – an avid supporter of President Trump – was simply engaging in political hyperbole, pointing out that comedian Kathy Griffin was not prosecuted after she posted a photo of herself holding up a bloody Trump-head effigy.

“Another example of political hyperbole is when President Donald Trump, as a candidate, caused a controversy last year by implying that ‘Second Amendment people’ could prevent former Secretary Clinton from abolishing their right to bear arms.”

Sorry Martin, club Fed awaits.

Content originally published at ZeroHedge

A new bombshell joint report issued by two international weapons monitoring groups Tuesday confirms that the Pentagon continues to ship record breaking amounts of weaponry into Syria and that the Department of Defense is scrubbing its own paper trail. On Tuesday the Organized Crime and Corruption Reporting Project (OCCRP) and the Balkan Investigative Reporting Network (BIRN) produced conclusive evidence that not only is the Pentagon currently involved in shipping up to $2.2 billion worth of weapons from a shady network of private dealers to allied partners in Syria – mostly old Soviet weaponry – but is actually manipulating paperwork such as end-user certificates, presumably in order to hide US involvement.

The OCCRP and BIRN published internal US defense procurement files after an extensive investigation which found that the Pentagon is running a massive weapons trafficking pipeline which originates in the Balkans and Caucuses, and ends in Syria and Iraq. The program is ostensibly part of the US train, equip, and assist campaign for the Syrian Democratic Forces (SDF, a coalition of YPG/J and Arab FSA groups operating primarily in Syria’s east). The arms transfers are massive and the program looks to continue for years. According to Foreign Policy’s (FP) coverage of the report:

The Department of Defense has budgeted $584 million specifically for this Syrian operation for the financial years 2017 and 2018, and has earmarked another $900 million of spending on Soviet-style munitions between now and 2022. The total, $2.2 billion, likely understates the flow of weapons to Syrian rebels in the coming years.

But perhaps more shocking is the following admission that Pentagon suppliers have links with known criminal networks, also from FP:

 According to the report, many of the weapons suppliers — primarily in Eastern Europe but also in the former Soviet republics, including Kazakhstan, Georgia, and Ukraine — have both links to organized crime throughout Eastern Europe and spotty business records.

The sheer amount of material necessary for the Pentagon program — one ammunition factory announced it planned to hire 1,000 new employees in 2016 to help cope with the demand — has reportedly stretched suppliers to the limit, forcing the Defense Department to relax standards on the materials it’s willing to accept.

It is likely that the organized crime association is the reason why the Pentagon has sought to alter its records. In addition, the sheer volume of weaponry continuing to ship to the Syrian battlefield and other parts of the Middle East means inevitable proliferation among unsavory terror groups – a phenomenon which has already been exhaustively documented in connection with the now reportedly closed CIA program to topple the Syrian government. The associations and alliances among some of the Arab former FSA groups the DoD continues to support in the north and east remains fluid, which means means US-supplied weapons will continue to pass among groups with no accountability for where they end up.

One of the authors of the OCCRP/BIRN report, Ivan Angelovski, told Foreign Policy that, “The Pentagon is removing any evidence in their procurement records that weapons are actually going to the Syrian opposition.” The report is based on internal US government memos which reveal that weapons shipment destination locations have been scrubbed from original documents.

Falsified and altered Pentagon procurement documents (Click to enlarge):

Is an EUC (End User Certificate) still an EUC if it doesn’t include an end user?

Balkan Insight, which is hosting the original investigative report: “Seven US procurement documents were whitewashed to remove reference to ‘Syria’ after reporters contacted the Pentagon to enquire about whether the exporting countries – Bulgaria, Romania, Serbia, Ukraine and Georgia – had been informed of the destination.”

The fact that Foreign Policy, which is the foremost establishment national security publication in the world, would admit that the Pentagon’s Syria weapons procurement program is tied to East European organized crime is itself hugely significant. At this point the evidence is simply so overwhelming that even establishment sources like FP – which itself has generally been pro-interventionist on Syria – can’t deny it.

FP further reports that the Pentagon program “appears to be turbocharging a shadowy world of Eastern European arms dealers.” And adds further that, “the Pentagon is reportedly removing documentary evidence about just who will ultimately be using the weapons, potentially weakening one of the bulwarks of international protocols against illicit arms dealing.”

Map/Infographic produced as part of the OCCRP/BIRN report, itself confirmed by Foreign Policy magazine. Notice the map denotes that prior CIA weapons went directly to Idlib province (northwest, section in green) and the Golan border region (south). Both of these areas were and continue to be occupied by al-Qaeda (in Idlib, AQ’s Hay’at Tahrir al-Sham). In Idlib specifically, analysts have confirmed genocidal cleansing of religious minorities conducted by AQ “rebels” directly assisted by CIA weapons.

Late last month we featured the story of Bulgarian journalist Dilyana Gaytandzhieva, who was fired from her job after being interrogated by national intelligence officials for exposing the same Pentagon arms network which is the subject of the latest OCCRP/BIRN investigation. At the time, Al Jazeera was the only major international outlet which covered the story, which confirmed that Bulgarian agents interrogated Gaytandzhieva and “tried to find out her sources.” An anonymous source had leaked a large trove of internal government files connected to the arms trafficking to the East European-based Trud Newspaper journalist, which was the basis of her reporting. The newest investigation released Tuesday appears to include some of the same documents, also confirmed by Gayandzhieva.

Read the full OCCRP/BIRN investigation here.

Read Zero Hedge’s original coverage of the Pentagon’s Balkan arms pipeline here.

In an effort to censor the free flow of information – which cost Hillary Clinton the election, Facebook is following in Google’s footsteps with a new initiative to flag and demonetize videos deemed ‘objectionable’ or ‘fake news,’ as the social media giant begins to place ads inside of videos and articles vs. directly into news feeds.

Carolyn Everson, VP of Marketing Solutions, says the new policies are in reaction to advertiser concerns over being paired with content they disagree with.

“Facebook’s 5 million advertisers are increasingly sensitive to their product pitches showing up next to offensive content after a controversy at Google’s YouTube earlier this year. Facebook wants to avoid that so-called brand safety problem.” –Bloomberg

Facebook plans to ensure ‘offensive’ material is enforced via a combination of human and automated review. Via Bloomberg: 

The new guidelines apply to publishers that want to run ads with their content and require an “authentic, established presence on Facebook,” proof that “they are who they represent themselves to be, and have had a profile or page on Facebook for at least one month,” the company said.

Bloomberg also reports that Special Prosecutor Robert Mueller is “red-hot” focused on “Russia’s effort to influence U.S. voters through Facebook and other social media.”

BEIRUT (AP) — Syria’s civil war has been one of the modern world’s most brutal conflicts and one of its most heavily filmed. Hundreds of thousands of amateur videos uploaded to YouTube document every heartbeat of the war over the past seven years, from momentous events like cities under bombardment to intimate scenes like a father cradling his dead children.

Syrian activists fear all that history could be erased as YouTube moves to rein in violent content. In the past few months, the tech giant has implemented new policies to remove material considered graphic or supporting terrorism, and hundreds of thousands of videos from the conflict suddenly disappeared without notice. Activists say crucial evidence of human rights violations risks being lost — as well as an outlet to the world that is crucial for them.

Activists are rushing to set up alternative archives, but they also recognize nothing can replace YouTube because of its technological infrastructure and global reach.

“It is like we are writing our memories — not in our own book but in a third party’s book. We don’t have control of it,” said Hadi al-Khatib, co-founder of the Syrian Archive, a group founded in 2014 to preserve open source evidence of crimes committed by all sides of the Syrian conflict.

Based on his database and review of around 900 groups and individuals, al-Khatib said some 180 channels connected to Syria were shut since June, when YouTube began using machine learning protocols to sift through videos on the site for objectionable content.

Working with YouTube, al-Khatib’s group secured the return of about 20 channels, salvaging about 400,000 videos. But about 150,000 videos remain in jeopardy, pending a decision from YouTube, which is still reviewing whether to reinstate them, he said.

“Nothing is lost forever yet,” al-Khatib said, speaking from Berlin. “But this is very dangerous, because there is no alternative for YouTube.”

YouTube, which is owned by Google, says it will correct any videos improperly taken down and that it is in dialogue with the activists on a solution. But many activists fear a repeat or a permanent loss. The shutdowns were chilling for a community that had just celebrated a possible precedent for Syria when the International Criminal Court in August issued an arrest warrant based on video evidence for a Libyan military commander.

One prominent Syrian human rights group, the Video and Documentation Center in Syria, said it will stop using YouTube and will set up its own storage and platform. “The risk became very big now and we don’t trust this platform anymore for keeping violations evidence,” Husam AlKatlaby, VDC executive director, said in an email.

VDC, registered in Switzerland, has specialized in documenting rights violations since 2011. Its founders are prominent activists, including one still missing after being kidnapped by gunmen in Syria. The group limited access to its YouTube channel since 2014, after the company warned it over graphic content.

But not everyone can afford to go on their own. Also, YouTube provides activists with personal accounts for free and technological tools to edit, translate and upload anytime — vital for people out in the field in dangerous circumstances taking video of events.

Activists used YouTube first to report on the peaceful protests that erupted in 2011 against the rule of President Bashar Assad, using videos taken on mobile phones. As the conflict got bloody, so did the videos, catching the immediate aftermath of chemical attacks, spectacular aerial bombings, rescuers pulling children from rubble, and new strikes hitting rescuers and survivors. Militant groups uploaded videos of beheadings. Government supporters uploaded their own imagery and propaganda.

Often, the images were the only thing to grab the world’s attention in an intractable conflict. A video last year that was viewed more than 4.3 million times showed a child covered in blood and dust after surviving an airstrike in Aleppo, as government forces advanced to recapture the city from rebels.

YouTube previously relied in part on a system of community flagging of content deemed inappropriate.

In the Syrian context, that often turned political. Supporters and opponents of the Syrian government have waged digital wars reporting each other’s channels or videos, prompting YouTube to close some. Many videos were lost, including footage of a 2013 chemical attack in a Damascus suburb.

Under pressure in Europe and the West to do more to rein in extremist content, YouTube introduced a number of new measures, including machine learning, which trains itself to recognize patterns in enormous numbers of videos and police “objectionable” material, which then is reviewed by human experts to determine if it should be taken down.

A YouTube spokesperson said the machine learning can remove “a lot of content at a scale.”

“The vast majority of time our reviewers get it right. And when we make mistakes, we act quickly to correct them,” the spokesperson said, speaking on condition of anonymity in line with company regulations.

The spokesperson said activists need to improve their data when uploading videos, properly identify them as documenting ights violations and provide context. Meanwhile, the machine learning is being tweaked.

But the closures’ suddenness and breadth stunned those documenting the conflict. Many opposition activists already feel the international political world is turning against them as the Syrian government and its allies make major battlefield gains. Some were convinced the YouTube shutdowns were because of political pressure.

“There are attempts to finish off the conflict in Syria by any means, including having no coverage or a total blackout on the media by the Syrian opposition,” said Tala Kharrat, spokesman for Qasioun News Agency, a news platform whose channel was among those shut down and subsequently reopened on appeal.

Another prominent news platform, the Shaam News Network, has nearly 400,000 videos on its YouTube channel, viewed some 90 million times. In July, its operators found a message saying their channel no longer exists.

Mizyan Altawil, spokesman for SNN, said his network is no stranger to scrutiny of its content, but this time the shutdown was different, with no prior warning. Even more confusing, the channel was reinstated, only to be closed again, then reopened. “We are constantly on the alert,” Altawil said.

The Syrian Archive reached out to activists and media groups affected by the removal and contacted YouTube to restore them. With a team of six and a budget of $96,000, the Archive is also downloading videos to its own server, an expensive and labor-intensive endeavor. The group is partially funded by Google through its Digital News Initiative.

Al-Khatib said the group knew the issue will come up one day, given the concerns over proliferation of violent content, and that it was always a “grey area” how long YouTube would handle graphic material. But, he said, the best evidence for war crimes can come from videos showing violence, even ones uploaded by the perpetrators with the intent to terrorize, like an execution video.

“If they take it down, there will be no graphic content but there will be no evidence.”

As emergency workers scour the Florida keys for victims of Hurricane Irma in need of food, water and medical attention, FEMA administrator Brock Long estimates that 25 percent of homes in the Keys were destroyed, and another 65 percent damaged when the storm rolled through with 130 mph winds.

“Basically, every house in the Keys was impacted,” he said.

FEMA: 90% of Florida Keys' homes damaged or destroyed pic.twitter.com/HIdMvbbudj

— Fox News (@FoxNews) September 12, 2017

Via Fox:

Brock Long, a Federal Emergency Management Agency administrator, said preliminary estimates suggested that 25 percent of the homes in the Keys were destroyed and 65 percent sustained major damage.

As road repairs progress, some residents were allowed to return to their properties for a first look after the devastation – while the lower keys, including Key West with its 27,000 residents, are still off limits.

“It’s going to be pretty hard for those coming home,” Petrona Hernandez told Fox News. Hernandez’s concrete home on Plantation Key with 35-foot walls was unscathed, unlike others a few blocks away. “It’s going to be devastating to them.”

Just south of the town of Islamorada on Matecumbe Key, 57-year-old Donald Garner checked on his houseboat, which sustained minor damage. Nearby, three other houseboats were partially sunk. Garner had tied his to mangroves.

“That’s the only way to make it,” said Garner, who works for a shrimp company.

Consumer credit reporting agency Equifax has already been hit with over 30 lawsuits over what may be the largest breach of sensitive information in U.S. history – at least 23 of which are class-action filings, and all of them representing individuals.

On Tuesday, Massachusetts AG Maura Healey – a Democrat who in March led the state in suing the Trump administration over the travel ban – announced her intent to take Equifax to court, the first such lawsuit from a state prosecutor’s office over a data breach which has affected up to 143 million Americans. “In all of our years investigating data breaches, this may be the most brazen failure to protect consumer data we have ever seen,” said Healey.

In a press release, the Mass AG’s office is claiming that Equifax did not “maintain the appropriate safeguards to protect consumer data,” which is a violation of state consumer protection and privacy laws.

While Equifax offered people a free credit monitoring service which initially waived the right to sue the company, they later clarified that customers could sue if they sent Equifax written notice within 30 days. Yesterday, the company said that use of the free credit monitoring service does not waive the right to take legal action.

Via CNN: 

New York Attorney General Eric Schneiderman said the clarification came as a result of conversations with his office.

“The victims of this breach shouldn’t also have to worry that they’ve waived their legal rights simply because they were trying to protect themselves. That’s why my office reached out to Equifax last week about the terms of use,” he said in a statement.

Schneiderman’s office is currently investigating the breach, as are attorneys general in Pennsylvania, Connecticut and Illinois.

Regulators and investigators across the country have already begun to dig into the scope and disclosure of the hack – including safeguards and procedures Equifax had in place prior to the attack. The NY AG’s office begun an investigation into the breach last week, along with the Consumer Financial Protection Bureau and the FBI.

Setting sale before the storm

Separate of the lawsuits, a bipartisan group of senators called upon federal prosecutors to investigate stock sales by three Equifax executives before the company publicly disclosed the hack, generating nearly $2 million in proceeds shortly after the breach was detected.

SEC filings show that Equifax CFO John Gamble sold $946,000 worth of shares on Aug 1, while two other executives sold shares and exercised options worth nearly $850,000.

The lawmakers, led by senators John Kennedy (R-LA) and Jack Reed (D-RI) is asking the SEC and the FTC to look into the sales.

“As part of your investigations, we request that you conduct a thorough examination of any unusual trading, including any atypical options trading, for violations of insider trading law,” the senators wrote. “We request that you spare no effort in your investigations and in enforcing the law to the fullest extent against anyone who is found to be at fault.”

Former Citigroup Chief Vikram Pandit predicts that up to 30 percent of back-office banking jobs could disappear in the next five years due to developments in artificial intelligence and robotics.

In a Singapore interview with Bloomberg Television’s Haslinda Amin, Pandit said “Everything that happens with artificial intelligence, robotics and natural language — all of that is going to make processes easier,” adding “It’s going to change the back office.”

Former Citi CEO Vikram Pandit says automation will wipe out 30% of 'back-office" banking jobs within 5 years. $C pic.twitter.com/j5byJzWSEf

— ZeroPointNow (@ZeroPointNow) September 13, 2017

Banks have already started to roll out automated systems

While Vikram Pandit’s prediction is bad news for back-office employees, banks have already begun to use AI and machine learning in a big way.

From stock picking quants such as those currently under development by iBankCoin (to be rolled out in Exodus), to “robo-advisors” which handle client portfolios deemed too small to justify a costly human broker, to high frequency trading (HFT) algos, to intelligent fraud detection systems which detect and adapt to fraudulent behavior – banks are becoming increasingly reliant on automated systems.

JPMorgan ($JPM) Chase invested $600 millio0n in 2016 for “emerging fintech solutions,” and have been integrating automation wherever possible. The bank is gunning for legal jobs with their “Contract Intelligence” platform (COiN) which “analyze(s) legal documents and extract important data points and clauses.” According to Techmergence.com, manually reviewing 12,000 annual credit agreements requires approximately 360,000 hours. With COiN, the same agreements are able to be reviewed in seconds. How is a recent law school grad with $150k in debt supposed to compete?

Showcasing Innovation: A quick look at how $JPM is using machine learning. #JPMInvestorDay pic.twitter.com/ZxAngU2jTw

— J.P. Morgan (@jpmorgan) February 28, 2017

JPM is also using their “Emerging Opportunities Engine” introduced in 2015 to help identify clients “best positioned for follow-on equity offerings,” and the firm is also rolling out an internal virtual assistant using a ‘natural language interface’ to manage an initial 120,000 employee help-desk requests.

Wells Fargo ($WFC) announced their “Artificial Intelligence Enterprise Solutions” group in February, led by EVP and head of the bank’s Innovation Group, Steve Ellis. Their goals are to “…increase connectivity for the company’s payments efforts, accelerate opportunities with artificial intelligence, and advanced application programming interfaces to corporate banking customers.”

In other words; optimize banking operations currently handled by slow and inefficient humans.

In April, Wells Fargo tested an AI-driven chatbot via Facebook Messenger with several hundred employees. The virtual assistant is designed to provide basic tasks such as resetting passwords and accessing account information.

“AI technology allows us to take an experience that would have required our customers to navigate through several pages on our website, and turn it into a simple conversation in a chat environment. That’s a huge time-saving convenience for busy customers who are already frequent users of Messenger.” – Steve Ellis, head of Wells Fargo’s Innovation Group

Bank of America ($BAC) is jumping into AI with their “intelligent virtual assistant” named Erica – a chatbot which leverages “predictive analytics and cognative messaging” to give financial advice to the firm’s more than 45 million customers. Erica is also a 24/7 mobile banking assistant, available to perform “day-to-day transactions”

Yesterday at #Money2020, @DigitalMMoore revealed innovative new capabilities coming to mobile and ATM. Watch the replay to catch up: pic.twitter.com/G1Tg0ymxbU

— Bank of America News (@BofA_News) October 25, 2016

“We want to be there for customers in the moments that matter most. Incorporating artificial intelligence into our mobile banking offering will help customers manage their simple banking needs more efficiently and consistently, which then allows our specialists in our financial centers to spend more time with customers to understand their more complex needs and help them improve their financial lives.” -Thong Nguyen, president of Retail Banking, Bank of America

Citibank ($C)has invested heavily in startup Feedzai, a fraud detection company which uses AI and “machine based learning” to pour through vast amounts of data and conduct large-scale analyses of potentially fraudulent behavior.

While AI will help banks survive in a world of thinning margins and fierce competition, the back offices of a bank is where many debt-laden graduates grind out their start in the industry – working 14 hour days to claw their way up the ladder. With entry level banking jobs beginning to evaporate, living the dream in finance is about to become much more difficult.