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Monthly Archives: April 2017
NRA’s Chris Cox: Gorsuch Confirmation was a ‘Monumental Victory for American Freedom’ – National Review
Posted: April 28, 2017 at 2:58 pm
How is Chris Cox, the director of the NRAs Institute for Legislative Action, feeling about the new Trump administration so far? Hes practically bursting witheffusive praise for the new president and his team.
He was our candidate, the most proudly pro-Second Amendment nominee in American history, Cox said in the inaugural address of the NRA conventions Leadership Forum. So we made the earliest endorsement for president the NRAs history. And all of you had his back from that moment on.
From Coxs perspective, the election of Donald Trump in 2016 has already brought tangible benefits for Americas gun owners. Now, thanks to you, a true defender of constitutional principles, Justice Neil Gorsuch, sits on the U.S. Supreme Court! His appointment alone is a monumental victory for American freedom.
Cox went on to praise selected members of Trumps cabinet, calling them an all-star team of principled leaders. He began withVice President Mike Pence, calling him,committed to faith, family, and the God-given principles that make this country great. And thanks to you, hes fighting for us every day.
He said that Attorney General Jeff Sessions will need a hazmat suit to clean up the poisoned, politicized disgrace of a legacy left by Eric Holder and Loretta Lynch. But if anyone has the passion and integrity to restore the rule of law, its Attorney General Jeff Sessions.
He added that Americas enemies truly fear us again, because General James Mad Dog Mattis runs the Department of Defense. Mattis name garnered loud applause and plenty of audible oorahs.
Cox said that the organization will continue to push for National Right to Carry Reciprocity, which would allow concealed carry holders to lawfully carry their weapons outside of their home state.
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Where Is ASEAN On Press Freedom? – The Diplomat
Posted: at 2:58 pm
It has been another poor year for the subregion in the annual World Press Freedom Index.
Southeast Asia has scored badly again on the 2017 annual World Press Freedom Index, with notably big falls registered by Thailand, where the media industry is increasingly muzzled by a military government, and in Cambodia where criminal defamation laws are being used to silence dissent.
The bad news is that media freedom is in the worst state we have ever seen, Reporters Without Borders (RSF) said in its annual report. Media freedom has retreated wherever the authoritarian strongman model has triumphed.
Democracies began falling in the Index in preceding years and now, more than ever, nothing seems to be checking that fall, RSF said. As we have reached the age of post-truth, propaganda, and suppression of freedoms, this 2017 World Press Freedom Index highlights the danger of a tipping point in the state of media freedom.
Southeast Asia, which has long had its share of problems in the area of press freedom, continues to prove to be a troubling region in the world, with Cambodia and Thailand being especially concerning.
Cambodia fell four places, with RSF citing the killing of political commentator Kem Ley last July as an attempt to gag the media and critics. He was shot dead in broad daylight.
Head of RSF Asia-Pacific, desk Benjamin Ismal said that increasing attacks against the media, particularly in regards to the Global Witness report, had fostered an environment of intimidation and violence that can lead to self-censorship.
More and more Asian governments deliberately confuse the rule of law with rule by law By adopting increasingly draconian laws, governments with authoritarian tendencies hope to justify their attempts to gag the media and critics, he said.
In Southeast Asia, Indonesia, ranked 124th,performed best, followed by the Philippines in 127th spot. Both are democracies in a region of varied regime types. Myanmar, formerly ruled by a military junta but now led by the former opposition party, ranked 131st, one place ahead of Cambodia, which, ruled under the iron fist of Prime Minister Hun Sen, came in at 132nd. Thailand was ranked 142nd, followed by Malaysia on 144th, Singapore at 151st, and Brunei in 156th place. Laos, in 170th, and Vietnam, in 175th, were classified as media black spots.
Of the 180 countries surveyed, Norway came in first with North Korea last.
The report noted that any criticism of the Thai junta is liable to lead to violent reprisals, made possible by draconian legislation and a justice system that follows orders. Thailand fell six notches.
Ubiquitous, all-powerful, and led by press freedom predator Prime Minister Prayuth Chan-o-cha, the council keeps journalists and citizen-journalists under permanent surveillance, often summons them for questioning, and detains them arbitrarily, the report said.
Meanwhile, in Cambodia, Pa Nguon Teang, of the Cambodian Center for Independent Media, told the Phnom Penh Post there was an oppressive trend, with government officials attacking outlets like Radio Free Asia (RFA) and Voice of America (VOA), and recently excluding them from media events attended by Hun Sen.
I think the culture of impunity can continue to frighten journalists, he said, referring to past cases where no action was taken against security guards who had beaten reporters, including this correspondent.
The government classifies a number of media institutions as the enemy.
The index follows the court appearance of RFA journalist Chun Chanboth, who allegedly concealed his identity in order to interview a political prisoner in jail, and claims of a widespread crackdown on dissent by rights groups and opposition politicians ahead of commune elections due on June 4.
Critics have also argued that Phnom Penh might not be a wise choice for the World Economic Forum (WEF), which will be held here in the capital for the first time from May 10 to 12.
Unless the WEF is prepared to speak out forcefully against the ongoing intimidation of civil society and undermining of democracy by Prime Minister Hun Sen and his government, they should hold the meeting somewhere else, Phil Robertson, deputy director of Human Rights Watchs Asia division, said.
Luke Hunt can be followed on Twitter @lukeanthonyhunt
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Study: Professors widely oppose campus carry as inimical to academic freedom but fewer would alter teaching habits – Inside Higher Ed
Posted: at 2:58 pm
Study: Professors widely oppose campus carry as inimical to academic freedom but fewer would alter teaching habits Inside Higher Ed One of the major arguments against campus carry laws like the one imposed on Texas public universities last year is that having guns in the classroom chills academic freedom. Professors might avoid hot-button issues in class discussions, for example, ... |
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Freedom of religion and belief beyond the EU’s borders – EURACTIV
Posted: at 2:58 pm
Religious freedom is one of the most essential human rights, enshrined solidly in international law. Being part of EU primary law, the Union has committed to promote and protect religious freedom worldwide.
However, according to the Pew Research Center, about three-quarters of the worlds population live in countries with high or very high restrictions or social hostilities to religious minorities. This decade has also witnessed a rise in religion-related terrorism, with some regions being more affected than others, which has also led to armed conflict and sectarian violence.
To answer to this global problem, in May 2016, Commission President Juncker appointed Jn Figel as the first Special Envoy for the promotion of freedom of religion or belief outside the European Union. His mandate is due to expire in May 2017, potentially leaving the EU without representation in this arena.
EURACTIV organiseda stakeholder workshop to discuss the freedom of religion and belief outside the EU. Questions included:
How can the inclusion of all religious minorities be ensured?
Should the mandate of the Special Envoy be renewed and if so, should his/her position be strengthened?
Is the current institutional set-up suitable to guarantee the promotion and protection of freedom of religion and belief?
To see our upcoming events, visit: http://events.euractiv.com/
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Freedom of religion and belief beyond the EU's borders - EURACTIV
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Quality of Government, Not Size, Is the Key to Freedom and Prosperity – Niskanen Center (press release) (blog)
Posted: at 2:58 pm
April 27, 2017 by Ed Dolan
In the first post in this series, I examined the effect of the size of government on freedom and prosperity. Using indicators of economic freedom, personal freedom, and prosperity for a sample of 144 countries, I arrived at two significant results. First, I found that the data showed economic freedom to be positively associated with both personal freedom and prosperity. Second, I found that greater personal freedom and prosperity were associated with larger, not smaller, governments.
This post digs deeper into the data by constructing a measure of the quality of government. It turns out that the apparently positive effect of larger government on freedom and prosperity arises from a positive association between the size and quality of government. Quality of government affects freedom and prosperity much more strongly than simple size.
Measuring the Quality of Government
Both this post and its predecessor rely on three data sets. The first is the Economic Freedom Index (EFI) from the Fraser Institute, which includes measures of the size of government, protection of property rights, sound money, freedom of international trade, and regulation. The second is the Personal Freedom Index (PFI) from the Cato Institute, which covers rule of law, freedom of movement and assembly, personal safety and security, freedom of information, and freedom of personal relationships. The third is the Legatum Prosperity Index (LPI) from the Legatum Institute. The LPI includes data on nine pillars of prosperity, including the economy, business environment, governance, personal freedom, health, safety and security, education, social capital, and environmental quality. This post also makes reference to Cato Institutes Human Freedom Index (HFI), which is simply the average of the EFI and the PFI. The links provide detailed information on sources and methodology for all of these indexes.
Each index, in its own way, contains one or more components that bear on the quality of government:
Each of these indicators has a slightly different perspective on the quality of government. Despite their differences, however, they are highly intercorrelated. The pairwise correlation coefficients are 0.87 for the Cato and Fraser indicators, 0.89 for the Cato and Legatum indicators, and 0.83 for the Fraser and Legatum indicators. For purposes of this post, I combine the Fraser, Cato, and Legatum indicators into an equally weighted average that I will refer to as the quality of government indicator, or QGOV. In nearly all cases, QGOV has statistically greater explanatory power than any one of its components taken individually.
Keep in mind that when I describe QGOV as a measure of quality of government, I am using a kind of shorthand to refer to a narrow set of mostly procedural qualities. I think most readers will agree that governments with honest courts that protect property rights, uphold contracts, shun corruption, and respect due process are better than those that do not. Many people would like to live under a government that does other things, toosay, one that defends gender equality or promotes traditional values. A high QGOV score does not pretend to measure those qualities.
Quality of Government and Freedom
Our measure of the quality of government is strongly correlated with Catos Human Freedom Index, as well as with its personal and economic components. We have to be careful in assessing the strength of those relationships, however. Keep in mind that the Fraser Institutes property rights indicator is included in the EFI, that Catos rule of law indicator is included in the PFI, and both are also included in our measure QGOV. A simple correlation of QGOV with HFI would be biased upward if we did not adjust for the overlap. Accordingly, in further analysis I omit the rule of law component from the PFI to get an adjusted index of personal freedom, PFI*. Similarly, I omit the property rights subcomponent from the EFI to get EFI*and omit both components from the HFI to get HFI*. Later, I also omit the governance component from the LPI to get LPI*. The simple correlations of these indexes with QGOV are 0.59 for PFI*, 0.86 for EFI*, and 0.79 for HFI*.
The following figure provides a scatterplot of quality of government against the adjusted human freedom index:
Not surprisingly, wealthier countries tend to have higher-quality governments. The correlation of QGOV with the log of GDP per capita is 0.73. We can control for that effect by running a multiple regression that includes per-capita GDP. When we do so, the quality of government continues to have a statistically significant positive effect on the human freedom index, and also on both its personal and economic components.
Quality of Government and Prosperity
In the preceding post, economic freedom has a strongly positive relationship to prosperity, as measured both by the Legatum Prosperity Index as a whole and by a sub-index composed of its education, health, and safety components. The simple correlations were 0.72 for EFI and LPI, and 0.68 for EFI and EHS. Now we turn to the question of whether prosperity is also related to quality of government as measured by our QGOV indicator.
The following scatterplot shows the overall picture. The horizontal axis shows QGOV. Since the Legatum governance component is already a part of our QGOV indicator, the vertical axis shows the adjusted version of the prosperity index, LPI*, which omits the governance component of the original index.
The simple correlation of QGOV and LPI* is an impressive 0.90. The relationship between QGOV and the education, health, and safety index EHS (not shown) is nearly as tight, with a simple correlation of 0.83.
Because both QGOV and LPI* are positively correlated with GDP per capita, we need to control for the latter to verify the statistical significance of the relationship shown in the chart. In a multiple regression of LPI* on QGOV and the log of GDP per capita, the slope coefficients are statistically significant at the 0.01 level for both dependent variables. The overall correlation rises from 0.90 to 0.92 when GDP is included. Each 1-point increase on the 10-point quality of government scale is associated with a 4.2-point increase along the 100-point prosperity scale.
Quality of government vs. size of government
Next, we come to the issue of the relative effects of the quality of government vs. the size of government, as measured by our data. We use two alternative indexes of the size of government. One, abbreviated SGOV, is derived from IMF data on government expenditures (both consumption and transfers) as a percentage of GDP. The other, abbreviated SoG, is a component of Frasers economic freedom index. It is built up from sub-components measuring government consumption, transfers, government investment, and tax rates. Following the practice of the Fraser and Cato data sets, we measure the size of government, in both the SGOV and SoG versions, on a scale of 0 to 10, with a larger index value indicating a smaller government.
In the preceding post, we found that both size of government indexes correlated negatively with measures of freedom and prosperity, contrary to what most libertarians would expect. We now look more closely into that result, taking into account the quality as well as the size of government.
We can begin by comparing simple scatterplots of size and quality of government versus the human freedom index. The plots use SGOV as the size variable and HFI* as the freedom variable.
As the charts show, greater human freedom is associated with better quality and larger size of government, with a considerably stronger correlation for quality than size. However, simple correlations like this need to be interpreted with caution, as there are complex intercorrelations among multiple variables. In this case, we have a correlation of -0.42 between SGOV and QGov, that is, a tendency for larger governments to have a higher index of quality. We also have a correlation of 0.74 between QGOV and the log of GDP per capita (richer countries have higher-quality governments) and -0.48 between SGOV and the log of GDP per capita (richer countries have relatively larger governments).
We can use multiple regression to untangle these interactions, using HFI* as the independent variable and using QGOV, SGOV, and the log of GDP per capita as the dependent variables. When we do so, we get a strongly statistically significant positive coefficient on QGOV and no statistically significant relationship at the 0.01 confidence level for the other two variables. The overall correlation is 0.79, essentially the same as for the two-variable relationship shown in the left-hand scatter plot above.
If we use Frasers SoG component instead of SGOV as our measure of the size of government, we get essentially the same result: The association of SGOV with HFI* remains strongly positive, while neither GDP nor the size of government has a statistically significant effect.
Our conclusion: Quality of government has a strong positive association with human freedom, at least to the extent that our indicators measure these things. When all three dependent variables are considered together, the apparent association of larger government with less freedom disappears. As far as human freedom goes, the quality of government dominates the statistical relationship. Other things being equal, statistical measures of the size of government such as tax rates and the share of GDP devoted to government spending fade to insignificance when compared with protection of property rights, due process, and the other elements that go into our measure of quality.
We can do the same exercise using the Legatum prosperity index as our dependent variable. As before, we use the LPI* version, since we do not want to include Legatums governance component as part of both the independent variable and the dependent variable QGOV. Here are the scatter plots:
As before, to sort out the interactions among the variables, I use a multiple regression with LPI* as the dependent variable and QGOV, SGOV, and the log of GDP per capita as independent variables. The result this time differs in one respect. As before, we find that QGOV has a strong positive association with LPI*, while SGOV has no statistically significant relationship. This time, however, GDP per capita also has a positive and statistically significant effect on the dependent variable. The overall correlation for the multiple regression is 0.93, slightly higher than for the two-variable scatter plot. The results are essentially the same when we use SoG instead of SGOV as our measure of the size of government, and when we use the education-health-safety variable EHS as our measure of prosperity.
Our conclusion: Quality of government and GDP per capita both have strongly positive effects on prosperity, as measured by the adjusted Legatum prosperity index or by an index of education, health, and personal safety. However, other things being equal, the size of government, at least as we measure it, has no statistically significant independent impact on prosperity one way or the other.
Size and Quality of Government by Country
So far, we have dealt exclusively in correlations and general tendencies. Before we conclude, it seems worth looking, at least briefly, at the relationship between the size and quality of government country by country.
The following figure sets the stage by adding labels to some of the data points. The red lines divide the figure into quadrants according the median values for size and quality of government. A trend line runs roughly from France to Nigeria. The correlation between the two variables, -0.48, is not especially strong, but it is statistically significant.
The governments with the highest quality scores are found in the northwest quadrant. It is no surprise to find a cluster of Scandinavian countries there, with some of their fellow EU members not far away. Farther to the right lie New Zealand and Switzerland (CHE), two countries with well-run governments that are close to the median size. The US government is also close to median size. Its quality score is a little lower, but still well above the trend line. In the same quadrant, but below the trend linelarge but lower-quality governmentswe find Kuwait and Saudi Arabia. Some of the other Gulf States are in the same neighborhood.
The northeast quadrant is more sparsely populated. The outliers here are Singapore and Hong Kong, countries with governments that are well run, but small in terms of expenditures. South Korea also falls into this quadrant, as does Ireland, which has a well-run government that is relatively small by EU standards.
Moving to the southeast quadrant, we find countries that have small but low-quality governments, such as Nigeria, Democratic Republic of Congo, Chad, Central African Republic, Bangladesh, and others. These countries are also among the poorest on the planet in terms of per-capita GDP and human development.
Finally, in the southwest quadrant, we find the sorry example of Venezuelathis decades poster child for socialism gone bad. North Korea would probably be nearby, but we dont have enough data to include it in the sample. Russia and China are also in this quadrant, but much closer to the center, with both size and quality of government close to the median.
There is not enough room in the diagram to label all countries, or to display more than two variables. Additional data is provided in the following table, which includes size of government (SGOV), quality of government (QGOV), prosperity as measured by the full Legatum Prosperity Index (LPI), and freedom as measured by the Cato Human Freedom Index (HFI).
Conclusions
Some argue that freedom is not only good in itself, but is conducive to other good thingshealth, enlightenment, safety, and prosperity in all its many forms. Freedom is not easy to measure, however. It has both personal and economic dimensions, with a rich mixture of qualitative and quantitative conditions contributing to each of these.
Researchers at the Cato Institute, the Fraser Institute, the Legatum Institute, and elsewhere have done their best to assemble sets of data that bear on the complex interrelations among the many dimensions of freedom and prosperity. This post and the preceding one have investigated some of the most basic of these, reaching the following conclusions:
As in any statistical study, we should be cautious about drawing conclusions about causation. There is nothing in these results to suggest that making a countrys government bigger will automatically make it better. At the same time, it is hard to deny that there is a strong tendency in the cross-country data for larger governments to be better governments, when by better, we mean better able to protect property rights, better able to offer impartial civil and criminal justice, and less open to corrupt influences.
Readers are also encouraged to think about the country-by-country data reported in the chart and table above. There is a lot of variety in the world. Too strong a focus either on statistical regularities or on selected outliers can draw us too strongly toward conclusions that, in reality, admit of many exceptions.
For example, the small-government city states of Singapore and Hong Kong are rightly admired for their prosperity and economic freedoms. However, it gives one pause to note how many small-government countries enjoy neither. Chad, Bangladesh, and the Democratic Republic of Congo, labeled in the chart, are just the outliers among a whole cluster of countries in that category.
Similarly, a look at individual countries shows that our statistical indicators of big and small, or of good and bad, do not always line up with what we mean by these terms in other contexts. For example, many people in the West would readily name Russia and China as countries with governments that are conspicuously both big and bad. Yet, although Russia and China do fall into the southwest quadrant of our chart, they do so only barely. Statistically speaking, neither country is an outlier on either variable.
This post and the preceding one only scratch the surface of the available data. In future posts, I hope to address many unanswered questions. For example, is it possible to replicate the results reported here from other data sources, such as the indicators of economic freedom from the Heritage Foundation and the indicators of human well-being from the Social Prosperity Index? Do the results reported here for the whole sample also hold for subsets of countries, such as OECD members or those in the lowest income quartile? Also, how important is freedom to trade to personal freedom and prosperity? A preliminary analysis in an earlier post suggests that it is very important, but the question deserves a more thorough treatment. What about regulation and sound money as indicators of economic freedom? Finally, how important are various aspects of economic freedom and quality of government for rates of economic growth, as opposed to levels of freedom and prosperity, which have been our focus so far?
Stay tuned to this channel.
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Venezuelans march to prison to demand freedom for activists – ABC News
Posted: at 2:58 pm
Hundreds of opponents of President Nicolas Maduro were marching to a military prison outside Caracas on Friday to demand the release of Leopoldo Lopez and other jailed activists they consider political prisoners.
The march was part of an intensifying campaign by the opposition to force Maduro from office. Already 28 people have been killed, hundreds injured and more than 1,300 arrested in almost four weeks of street clashes between protesters, security forces and pro-government groups.
Light armored vehicles and national guardsmen blocked access to the Ramo Verde military prison where Lopez is serving a nearly 14 year sentence for inciting violence during a previous round of anti-government unrest in 2014.
Many foreign governments and human rights groups condemned Lopez's conviction as politically motivated. One of the prosecutors in the case, who has since sought asylum in the U.S., even said he was under orders from the government to arrest Lopez despite a lack of evidence.
Lopez's wife Lilian Tintori was at the front of a group of lawmakers and opposition activists carrying a large Venezuelan flag making their way to the prison. In a telephone interview with Colombia's Blu Radio, said she hadn't been allowed to see her husband since April 6 because authorities were punishing them for promoting protests. There was no immediate response from the government.
"For Maduro, not being on his side is a crime, thinking differently is a crime," she said. "They forgot what democracy is."
Foro Penal, a group that provides legal assistance to political prisoners, says at least 178 people are currently jailed for political activism.
President Donald Trump in February tweeted a photo of himself with Tintori at the Oval Office demanding that Lopez be let out "immediately."
At the time Venezuelan Foreign Minister Delcy Rodriguez accused Trump of committing an "aggression" against Venezuela and a day later the Supreme Court upheld the activist's conviction in a ruling on his appeal.
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Where Art and Technology Collide – New York Times
Posted: at 2:57 pm
New York Times | Where Art and Technology Collide New York Times From left, Travis Fitzgerald, Josh Pavlacky and Daniel Wallace, the founders of American Medium. Credit Stephanie Diani for The New York Times. Galleries like American Medium that work with young artists and cater to a crowd that has grown up with ... |
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Why Align Technology Inc.’s Shares Are Rallying 14.5% Today – Motley Fool
Posted: at 2:57 pm
What happened
Shares ofAlign Technology(NASDAQ:ALGN) were up 14.5% at 1:00 p.m. EDT following first-quarter revenue that was better than industry watchers' forecasts.
Growing global use of Align Technology's Invisalign clear dental aligners has made this a top-performing stock over the past three years, and first-quarter results show that demand remains strong.
IMAGE SOURCE: GETTY IMAGES.
In Q1, revenue grew 30%,to $310.3 million, when compared to a year ago. Diluted earnings per share in the quarter clocked in at $0.85, up from $0.50 last year. First-quarter sales were 5.8% higher than they were in the fourth quarter, a good sign given competition from 3Mand Dentsply Sirona.
The strong top- and bottom-line results came thanks to a 27% and 9.5% increase in case shipments versus last year and last quarter, respectively. International case shipments were particularly strong, up 41% year over year.
Align Technology is forecasting that a 25% to 27% increase in case shipments in Q2 will translate into revenue of between$340 million to $345 million, up 26% to 28% from the same period last year. It also expects to deliver diluted EPS of between$0.71 to $0.74 in the quarter.
Overall, this is yet another solid quarterly result from the company, and although there are ongoing patent challenges and competitors attempting to derail it, I think Align Technology will remain a stock investors will want to own in the coming years.
Todd Campbell owns shares of Align Technology.His clients may have positions in the companies mentioned.The Motley Fool owns shares of and recommends Align Technology. The Motley Fool has a disclosure policy.
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Five Considerations when Pursuing Patent Rights in the Blockchain Technology Space – IPWatchdog.com
Posted: at 2:57 pm
A blockchain is a subtype of distributed ledger data structure, in which transactions are grouped into blocks that reference each other in cryptographic hashes. Technologies are developing that implement blockchains to solve all sorts of problems related to transactions: privacy, security, data integrity, double-spending, dynamic/smart contracting, payments, interoperability, etc. I started in this space at a time when there was very little published literature on blockchain technologies, including published patent applications. Times have changed; now patent applications for blockchain technologies are readily available, with many patents granted. Blockchain technologies are a red-hot investment and development space right now and will be for at least the next couple of years. Many blockchain technology innovators begin with the same concerns. These concerns inspire the following five points of considerations for innovators in blockchain technologies who are interested in securing intellectual property rights.
Blockchain technology innovators, in my experience, have great foresight and can understand many advanced concepts in patent law, perhaps because one must understand the economics of incentivization/gamification to implement true blockchain technologies.
Raina Haque is the founder and lead patent attorney of Erdos Intellectual Property Law. Her technical background is in software engineering and bioinformatics. Prior to joining the legal profession, she was a business analyst and software engineer at a major Wall Street financial firm for global portfolio trading technologies. She was a research fellow at the National Institutes of Environmental Health Sciences in the Neurotoxicology and Nuclear Magnetic Resonance labs. At Wellesley College, her alma mater, she majored in bioinformatics. She serves the intellectual property needs of high tech and design clients. For more information, or to contact Raina, please visit her firm profile page.
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Micron Technology Should Exceed Its Bullish Q3 Forecast – Seeking Alpha
Posted: at 2:57 pm
Predicting Micron Technology's (NASDAQ:MU) quarterly earnings with a month remaining in the quarter is a fool's errand. EP is a fool, and this is his errand.
A lot has happened since the 2Q earnings release on March 23. One of the best things is the appointment of Sanjay Mehrotra, the former CEO and co-founder of Sandisk as the company's new CEO. The mystery of who would replace Mark Durcan (current CEO retiring at the May board meeting), and when his replacement would be announced, was a significant dark cloud. Mehrotra was a model of clarity at Sandisk (despite his sometimes very thick accent!). He'd spend all day in analyst presentations with audio (and video!) that worked, enough seats for all would be attendees, piles and piles and piles of excellent slides, and excellent presenters from several layers of management. Then there was his wonderful, incomparable CFO, Judy Bruner, who would explain complex financials that would make you slap your forehead with the simplicity of some difficult concepts she conveyed with a minimum of pain. May Mehrotra bring that much better interface to the investment community! May we have well organized and presented and detailed analyst days such as Sandisk used to have. Ernie (current CFO) is far better than Ron (blessedly replaced CFO). But could there be a Judy in our future? Under his leadership, the Mehrotra-led Sandisk sported a multiple, using almost any conceivable metric, well in excess of peers. Mehrotra's Sandisk doubled from a level where I already thought it was fairly priced and was sold to Western Digital (NYSE:WDC) for a nice premium to that higher price. And we Micron shareholders won't talk about what's happened to WDC since this takeover.
Lots of other things have been going on. Bernstein's Mark Newman believes contract length on chip pricing has lengthened out to a quarter. The eyepopping bids for Toshiba's NAND division have shown that lots of large users feel assured NAND availability is a "must have". Could disappointed bidders in that auction want a piece or all of Micron? I think so. And then there is spot and contract pricing of chips. DRAM spot and contract pricing have taken a breather after a multi month impressive run; DRAM spot remains above contract which is a bullish sign. And NAND prices, both spot and contract, continue to post impressive nightly upward moves. Check my instablog posts updating chip price action, which I won't repeat here.
And what about market share? For the first time its pretty apparent that Micron is gaining DRAM share from both SK Hynix (OTC:HXSCF) and Samsung(OTC:SSNLF). Lets not go too crazy, but perhaps they are also currently gaining NAND share from those two and from Toshiba (OTCPK:TOSBF) and Western Digital.
At the winter analyst day, on February 2, management presented their view that industry DRAM demand was running at a 20% CAGR (compound annual growth rate) and NAND demand is running at a 45% CAGR. I've taken the high end of the ranges in each case.
And how are the competitors doing? For its 2Q ended February, Micron reported that its DRAM bits were up 1%. And here's Goldman Sachs on April 27th on the other two competitors, Hynix and Samsung who have just reported:
Samsung reported that its 1Q17 DRAM bits were down low teens qoq (in line with guidance); Hynix's DRAM bit shipments for 1Q17 were down 5% qoq, in line to slightly below guidance. Samsung maintained 2017 guidance for industry bit growth to be in the high teens range yoy, and said that it will be in line with the market. Hynix fractionally (and this may be semantics) adjusted its DRAM view for 2017 demand growth to be "a little over 20%" from "around 20%", and for demand to be ahead of supply.
So Micron is picking up DRAM share from both of its competitors.
On the NAND side, Goldman reports that Hynix bits were down 3% QoQ and Samsung's were down "mid teens". So here too it seems that Micron is picking up share. Western Digital is expected to report as this is being written, so their numbers aren't known yet. Micron's NAND bits for the 2Q were up 18%.
And yes, mathematicians and purists among you will point out that there is a quarter end mis-match here on the comparisons where Micron's quarter ended in February and the competitors quarters ended in March. But I think its safe to say something VERY good is going on with Micron and that they are picking up market share in both NAND and DRAM. When has that ever happened? Given that the pricing environment is probably very similar across competitors, I would venture that the market is giving gold stars to Micron's current offerings in DRAM, and in 3DNAND where it also appears to be the cost leader. Time will tell.
And what about demand? Today's average sellside report would have one think the world is ending in chip pricing. Certainly Micron's and Hynix's low single digit PE's are suffering from this analytical gloom.
But we've recently heard from HPE (NYSE:HPE), Cisco (NASDAQ:CSCO), and Seagate (NASDAQ:STX), to name a few, that their earnings have been hurt by the unavailability and high price of chips. Here's Seagate on the subject, in their earnings call of April 26th:
Stephen James Luczo - Seagate Technology Plc
Well, I think the NAND shortages are interesting because, at the end of the day, I think it's more challenging for the technology industry to deal with the shortages than it is maybe beneficial to HDDs because of some comparison on a 500 gig. I mean, the reality is even a 500-gig NAND drive, at today's prices or even at six months ago prices, aren't remotely competitive to an HDD price.
I do think that the lack of availability of NAND in certain market segments results in people then shifting their strategies around do they use HDDs or not. So I think, for example, the NAND companies are constantly optimizing where do they shift their NAND. Does to go into phones? Does it go into the data centers? Does it go into the servers or does it go into the PCs? And depending on the grade of flash you're building, the capacity plans you put in six months ago and then what customers are asking for, there's this constant re-optimization of where the NAND is flowing.
I think in the short term probably, and I think HP indicated this on their call two quarters ago, that they felt that the PC industry was being constrained a bit on NAND. I think that probably has shifted some longer-term strategy around product portfolios that breathes some more life into the HDD space, in that people don't want to be caught short with storage technology of any type. And, of course, there again we're talking about 128 or 256.
A hedge fund friend reports that he heard on a conference call that SK Hynix is "sold out on DRAM for 2017".
When are the sellside analysts going to get the message that the memory cycle hasn't turned (yet)?
What about a 3Q earnings forecast? Enough with the yammering about boring stuff like company changes and market conditions! Where's that earnings forecast?
With apologies to Bernstein's Mark Newman, whose lucid model format I've used, here are some basic model input and ouput comparisons:
And here's the model, simplified and broken into three chunks of revenue, COGS, and consolidated P&L. First the revenue assumptions:
Next the COGs assumptions:
And finally the simplified consolidate P&L:
Conclusions. For my 2Q model, most of the individual variables were off but directionally correct. One of the most glaring errors was NAND pricing which the company explained by a heavy mix of dense TLC parts. NAND prices have continued to zoom, so I'm once again leading with a solid price increase and this may prove the weakest part of this model.
Hopefully I will have the time to tweak this before the end of the quarter. Hopefully any feedback will be specific, with reasons behind a grievance on any specific variable.
So that's the fool's errand. Good luck to all.
Disclosure: I am/we are long MU, INTC.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Micron Technology Should Exceed Its Bullish Q3 Forecast - Seeking Alpha
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