November 2021 by Luckbox Magazine

life. money. probability.

NOVEMBER 2021

WE ALL HAVE DATA ISSU ISS UES

But DuckDuckGo is wrestling market share from dataexploiting competitors

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PLUS : MUSIC, MICRODOSING & MORE

10/12/21 4:01 PM

the control freak's guide to life, money & probability

Higher, faster, further. Why not more beautiful?

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PHOTOGRAPH: COURTESY OF DUCK DUCK GO

November 2021

Data Issues

12 Duck Call

DuckDuckGo offers a privacy-oriented alternative to invasive Google searches.

16 The Crisis in Data Privacy How Big Brother uses your personal information to manipulate you.

22 Data Brokers and Surveillance Capitalism

Your online profile has become a commodity in a booming marketplace.

⊲⊲

28 Take Back Control of Your Data

Enough, already. Follow these steps to fight back against the theft of your personal information.

26 Big Tech & The Law of Large Numbers

Here’s the math that underlies big tech’s attack on privacy.

November 2021 | Luckbox

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WHY IS EVERYONE TALKING ABOUT TASTY? OPEN NOW TO GET $500* BY VISITING TASTYWORKS.COM/OPENNOW *Offer valid for new U.S. and Australian residents who open and fund a new account with a minimum of $10,000 by 12/31/21. Offer not valid for non-US residents, IRA or Trust accounts. Visit tastyworks.com/opennow for full details.

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PHOTOGRAPH: (MICRODOSING) ISTOCK; (TY SEGALL) KENDALL POLIDORI

Acid and shrooms in the boardroom?

Ty Segall Channels Jimmy Page.

P. 31

P. 38

editor in chief ed mckinley managing editor yesenia duran associate editors mike reddy kendall polidori editor at large garrett baldwin technical editor mike rechenthin contributing editors vonetta logan, tom preston creative directors katherine bryja tim hussey

trends

trades&tactics

editorial director jeff joseph

life, luxury & the pursuit of happiness

actionable trading ideas

DIVERSIONS

POKER TRADE

TECHNICIAN

comments, tips & story ideas feedback@luckboxmagazine.com

CRYPTO CURRENTLY

contributor’s guidelines, press releases & editorial inquiries editor@luckboxmagazine.com

31 Tripping Over Microdosing SENTIMENT

34 Should Psychedelics Be Legalized?

RECORD HIGH

36 Spotify Knows You Intimately ROCKHOUND

PHOTOGRAPH: (MICRODOSING) ISTOCK; (TY SEGALL) KENDALL POLIDORI

contributing photographer garrett roodbergen

38 Ty Segall Channels Jimmy Page

BOOK VALUE

40 The Luckbox Bookshelf TRADER

42 Meet Alex Weisenbach

FINANCIAL FITNESS

44 Losing the COVID 15 CALENDAR

45 November 2021

47 Telltale Tells 48 Private Data & the Blockchain

CHEAT SHEET

INTERMEDIATE TACTICS

Picking INSERT Cyber Stocks 49 A New Way to Trade Crypto

ADVANCED TACTICS

50 Paper Trading Just Got A Lot Better FUTURES

54 Title Fight CHERRY PICKS

60 Where the Action Is FOREX

62 China Woes & the Yuan

THE LAST PICTURE

64 Tempering Taper Tantrums

51 The Wall of ‘What, Me Worry?’

DO DILIGENCE

52 Hacker Hedges

subscriptions & service support@luckboxmagazine.com media & business inquiries publisher: jeff joseph jj@luckboxmagazine.com

FAKE FINANCIAL NEWS

8 Dealing With My Data Issues

advertising inquiries advertise@luckboxmagazine.com

Luckbox magazine, a tastytrade publication, is published at 19 N. Sangamon, Chicago, IL 60607 Editorial offices: 312.761.4218 ISSN: 2689-5692 Printed at Lane Press in Vermont luckboxmagazine.com

On the cover: Illustration by Christian Northeast

Luckbox magazine

@luckboxmag 2019 & 2020 Best New Magazine Folio Award for Custom Content

Luckbox magazine content is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities and futures can involve high risk and the loss of any funds invested. luckbox magazine, a brand of tastytrade, Inc., does not provide investment or financial advice or make investment recommendations through its content, financial programming or otherwise. The information provided in luckbox magazine may not be appropriate for all individuals, and is provided without respect to any individual’s financial sophistication, financial situation, investing time horizon or risk tolerance. luckbox magazine and tastytrade are not in the business of executing securities or futures transactions, nor do they direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. luckbox magazine and tastytrade are not licensed financial advisers, registered investment advisers, or registered broker-dealers. Options, futures and futures options are not suitable for all investors. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating any securities or futures transaction or trade. For simplicity, the examples and illustrations in these articles may not include transaction costs. Nothing contained in this magazine constitutes a solicitation, recommendation, endorsement, promotion or offer by tastytrade, or any of its subsidiaries, affiliates or assigns. While luckbox magazine and tastytrade believe that the information contained in luckbox magazine is reliable and make efforts to assure its accuracy, the publisher disclaims responsibility for opinions and representation of facts contained herein. Active investing is not easy, so be careful out there!

November 2021 | Luckbox

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DATA ISSUES Every breath you take Every move you make Every bond you break Every step you take I’ll be watching you.

Every single day Every word you say Every game you play Every night you stay I’ll be watching you. —Every Breath You Take, The Police (1983) Sting composed those lyrics at Ian Fleming’s writing desk at the Goldeneye estate in Jamaica after his separation from his wife. The song became Sting’s greatest hit, but he found its popularity baffling. “I think the song is very, very sinister and ugly, and people have actually misinterpreted it as being a gentle little love song when it’s quite the opposite,” he told the BBC. “Sinister and ugly” also describes the way tech companies and governments collect and exploit people’s personal information, often with the goal of manipulating them. Luckbox readers recognize the gravity of the problem, according to a survey that found 84% of them consider data privacy a human right. But recent headlines suggest plenty of work lies ahead in the quest to protect personal data. Amazon has introduced Astro, a personal smart home robot on wheels that’s expected to retail for around $1,500. Unlike stationary listening devices, like Amazon’s Alexa, Apple’s Siri and Google’s Assistant, Astro can follow

an owner around the house, using its artificial intelligence, video cameras, mapping technology, and voice- and face-recognition software to capture live video and learn its owner’s habits. Facebook’s WhatsApp messages have become so secure that no one but the intended recipient can read them—or so said CEO Mark Zuckerberg in testimony before the U.S. Senate in 2018. A message to that effect even appears on the screen before users hit send. But WhatsApp employs more than 1,000 hourly workers in Dublin, Singapore and Austin, Texas, to sift through millions of private messages, images and videos on the lookout for fraud, spam, child porn and terrorist plots. Apple plans to thwart online child porn by enlisting consumer iPhones to detect the illegal content as it’s uploaded to an iCloud Photos account. The company intends to investigate accounts that have at least 30 images of suspected child porn and contact a national

Thinking Inside the Luckbox

Luckbox is dedicated to helping active investors achieve skill-derived, outlier results. 1 Probability is the key to improving outcomes in the markets and in life.

2 Greater market volatility brings greater opportunity for traders and investors.

3 Options are the best vehicle to manage risk and exploit market volatility.

4 Don’t rely on chance. Know your options because luck smiles upon the prepared.

center that fights child exploitation. Guardrails are expected to limit errors or abuse, but security experts and privacy advocates fear that Apple could expand the technology to spy on iPhones and censor other types of content. Their outcry prompted the company to push back the project’s starting date. Google announced in January 2020 that it planned to eliminate third-party cookies from Chrome by 2022. But in June the company backpedaled, delaying the move by another year and claiming it needed to “move at a responsible pace.” The United States increased its use of biometrics for immigration enforcement during the Trump administration. President Biden has proposed the American Families Plan, which would require financial institutions to report inflows and outflows that exceed a specified amount to the Internal Revenue Service in an effort to catch tax cheats. The Treasury Department has advocated setting the minimum at $600 so that scofflaws can’t get away with fraud by using multiple accounts, but lawmakers seem more likely to choose a floor of $10,000. Suffice it to say that the aforementioned corporate and governmental usurpations of privacy should concern every American. These examples should also indicate that citizens need to take control of their own privacy because the people causing the problem aren’t the ones to fix it.

Ed McKinley Editor in Chief

Jeff Joseph Editorial Director

Two ways to send comments, criticism and suggestions to Luckbox Email feedback@luckboxmagazine.com Visit luckboxmagazine.com/survey A new survey every issue.

Luckbox | November 2021

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SHORT INTEREST

Now is the moment to define and codify privacy in the digital age and create the agency necessary to protect it. —New York Sen. Kirsten Gillibrand at Forum Global’s data privacy conference

SEE PAGE 16

18.8 billion

Total records exposed from 1,767 publicly reported breaches in the first six months of 2021 —Security Magazine

SEE PAGE 26

DATA ISSUES Data brokers ... trade in personal data. They collect all kinds of extremely sensitive information, package it and sell it to banks, insurers, retailers, telecoms, media companies, governments and, occasionally, criminals. These companies sell information about how much money you make, whether you are pregnant, or divorced or trying to lose weight. They have also been known to sell lists of rape victims, AIDS patients and other problematic categories. SEE PAGE 22

—Excerpt from Carissa Véliz’s Privacy is Power

90+ BILLION

Do you believe data privacy is a human right?

DUCKDUCKGO’S ALL-TIME SEARCH COUNT

—Luckbox Reader Survey

SEE PAGE 12

SEE PAGE 10

YES: 83%

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Take our reader survey!

SCAN THIS

OPEN OUTCRY

Luckbox Reader Survey

87% of Luckbox readers believe the risks of companies collecting their data outweigh the benefits they receive

How much control do you think you have over the data the government collects about you?

Your thoughts on this issue? Take the reader poll at luckboxmagazine.com/survey

No control �� 44% Very little control �� 46% Some control ��4% A great deal of control ��6%

There’s more to Luckbox than meets the page. Look for this QR code icon for videos, websites, extended stories and other additional digital content. QR codes work with all cell phones and tablets with cameras.

1 Open your camera

2 Hover over the QR code

3 Click on the link that pops up

4 Enjoy the additional content

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Thinking About Crypto

I like the hard looks Luckbox takes into topics other media outlets avoid. With entertainment media companies buying up all the news media outlets, is it any wonder they cover topics that pander to drama or the political affiliations and lobbyist goals of their parent company and its shareholders? Again, that pesky notion that nothing is free. —Frederick Hall, Casselberry, FL Charles Hoskinson’s vision of how everything will be tokenized and tradable by 2050 is very future looking—an interesting view of a blended centralized and decentralized future. —Jack Sinclair, Chicago I enjoyed Vonetta Logan’s (Crypto Riche) article. Easy to read and informative. Good amount of information I didn’t know. Also, The Future of the Future of Money on how crypto may integrate into—actually has to— into current financial systems, while changing them, too. I like learning new information and getting some context around it, which Luckbox does well. —Dino Karahalios, Wauconda, IL

Who’s Your Data? We asked Luckbox readers their thoughts on data privacy and its importance to them.

Neither companies nor governments should be allowed to make the provision of services contingent upon the individual unwittingly providing personal data—period. The limitation of services should be contingent upon total transparency as to what data is collected and every use to which it might be put. —Lawrence Hand, FL

Personal identification data should only be shared with specific written and documented permission by the individual in clear unambiguous terms, and for what purpose and term. And the individual should have the right to rescind that permission at any time for any reason. —Robert Scott Richardson, Sarasota, FL Data privacy should be the No. 1 concern of consumers and companies! —Miriam Sexton, Dunedin, FL I understand and agree that companies have to make income, but with all of the privacy invasions in each of the terms and privacy policies of every single thing we use on the internet, and with the long involved process for every person who wants to use internet sites, we need to limit the amount of “private” information that they can insist on obtaining when an individual uses their services. —Patsy Powell, SD I believe that it’s a fair trade. It is up to the individual to protect their data. The government isn’t going to do it. We have seen how the no call list has gone: Your car’s warranty has expired! —Kelly Beach, Muskogee, OK

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SHORT INTEREST

$277 million

The classic rock era is nearly dead and buried— and so are its greatest icons.

Funding raised for psychedelics companies since 2020, according to the Canadian Securities Exchange

SEE PAGE 38

—Bloomberg Businessweek

—The Week on the death of Rolling Stones drummer Charlie Watts

SEE PAGE 31

29 LBS

The average weight gain of the 61% of adults who experienced undesired weight changes during COVID-19 —Harris Poll

SEE PAGE 44

Everybody thinks people are weak when they talk. Everybody. —WSOP champion Phil Hellmuth on poker tells SEE PAGE 47

November 2021 | Luckbox

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FAKE FINANCIAL NEWS

Dealing With My Data Issues Every action I took to protect my data took too long, cost money or wasn’t user-friendly to anyone born before 1981 By Vonetta Logan

y favorite tale of privacy involves a lot of unexpected players. I was camping in Michigan last summer and had a hankering for pizza. As I stood in line, the server asked a customer ahead of me for a phone number. He gave the number and the lady behind the counter looked at the screen, looked at the man and looked at the screen again. “I have a large pepperoni and sausage to-go for Mr. Barack Obama,” she said. Had I somehow happened upon our 44th president’s secret pizza place? Not likely. The patron in front of me was in his 60s and ... white. He paid in cash and used a fake name, but it’s pretty hard to order pizza without at least providing a phone number. But why does a tiny pizza place in Michigan care that much about your data? How concerned should you be about the info you share, the online searches you make or even the email messages you send? For this issue of Luckbox we’re all about keeping it tight—security-wise, that is. Carissa Véliz, author of Privacy is Power, writes, “to change our privacy landscape, we have to write about it, persuade others to protect their and our privacy ... unveil the inner workings of the abusive system that is the surveillance society ... envision new possibilities, and refuse to cooperate in our own surveillance.” My mission for

the magazine was to perform a “security shakedown” of my own practices. After a rigorous week of implementing protocols, my main takeaway is that privacy is regarded as a privilege and should be treated

My main takeaway from a rigorous week of implementing computer protocols is that privacy is a right that’s treated as a privilege. 8

as a right. I’ve spent the last week making data privacy and security my job and, luckily, I got paid to do it. But what’s the incentive for everyone else? Every action I took was either time-intensive, had costs associated with it or wasn’t user-friendly to digital non-native users or anyone born before 1981. Here are some of the steps I took. Once more into the breach … Like one of those unfortunate souls in a TV ad that runs at 2 a.m., you may be a

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victim of a large class of wronged people. Hackers have swiped your data if you’re among mesothelioma patients, belong to the Boy Scouts or frequent Home Depot. The majority of consumers have been the victim of at least one data breach. Equifax, Target, your shady ex—take your pick. At a site called Have I Been Pwned (pronounced poned for those born before ’81) you can check your email address and usernames against hundreds of known compromises. Updates in Google Chrome and Apple’s iOS also run searches against your information compared to known breaches. Bad news ... I’d been pwned! The problem a lot of people face is using the same password for multiple sites. Which brings me to… May I speak to your password manager? Everyone should use a password manager, like LastPass or 1Password, to generate unique, complicated passwords for each account. My S3xyKitty69 had been breached so I signed up for LastPass, and girl, this was harder than it needed to be. First, Google wanted to override everything with its autofill feature. I have spent much of my online life giving Google access to my passwords, so I had to export my passwords in a .CSV file and then import them into LastPass. LastPass’ freemium model means basic features are free, but using it across devices will cost you between $36 and $48 annually. I will say I will probably pay (my own money) to use the family feature because it would allow access to my parents’ passwords and that will come in handy as they get older. Duck duck go change your browser The third recommendation is to protect your web browsing activities. Facebook really changed the game with its super cookies that can track what you do when you’re not even on Facebook. I installed an ad blocker called Ublock Origin that prevents my data from going to advertisers, and I also installed mobile and web extensions of the browser DuckDuckGo. I’m running so many extensions I could be a contestant on The Bachelor. Duck’s commitment to privacy is refreshing, and they tout stats like “Google trackers are on 75% of websites” and “your data remains in Google indefinitely.” I did run into some issues with some pages or links

not loading, which I’m assuming happens because of the protocols DuckDuckGo has set. One search I ran was for a mechanic to install some heavy-duty tubes in my dirt bike tires. On Google, that search would return a nice Google map of places linked to a company’s Google business reviews. On Duck, I got a lot of YellowPages links (What year is this?) and links to Yelp. I could’ve just searched Yelp myself. But dedicated to this experiment, I took my bike to a random place I found on Duck. The mechanic turned out to be great, but Google is nearly a monopoly

anything. They can also spam you to within an inch of your life. Apple’s new iOS 15 has a “burner email” feature if you’re a customer of their iCloud service (starting at 99 cents per month). I signed up and got my new Apple burner email account. It forwards emails to an account of my choosing, but no one is the wiser. I signed myself up for a bunch of newsletters and web forums. Again, you need to have the time and the resources, and in this case a newer iPhone to use, but it totally works and I’ll be keeping this feature as well. So what did I learn? There’s a crap

Setting up alerts for your banking info, breached passwords and unauthorized logins can keep you abreast of dirty deeds. for a reason. I will say that Duck reduced the number of eerie ads I saw on my Instagram. You know, the ad for the thing you just emailed your friend about. For that alone, I’m keeping it as my browser. Opt to opt out You should learn who has your data. Worldprivacyforum.org has the most comprehensive list of data brokers and instructions for how to remove yourself from their systems. Some of the methods were pretty easy, but others wanted me to send a letter in the mail. Um, I don’t even know how much stamps cost. Baked-in features to your smartphone also allow you to prevent calls from unknown numbers and remove yourself from some email lists. It was a step I hadn’t thought of organically, but again it was time-consuming. New email, who dis? Everything old is new again. Remember back in the day when you gave the number to Empire Carpets 588-2300 to the shady dude at the bar who wouldn’t leave you alone? Little did you know that you were a privacy pioneer! Burner phone numbers and email addresses are all the rage now. Companies can actually embed trackers in an email to find out when you opened it, how long you read it and if you clicked on

ton of my data already out there, and once it’s out there it’s hard to get back. Keep your software up to date and, sadly, you should probably read the privacy policies of the sites, companies and apps that you use. Also, a lot of this is “privacy theater.” I feel super smug that I’m an Apple user and I believe Tim Cook cares about me and I use the “do not track” on my iPhone, but new research coming to light shows it’s probably like the walk button at a stoplight and doesn’t do much of anything. But setting up alerts for your banking info, breached passwords and unauthorized logins can go a long way to keep you abreast of dirty deeds tied to your identity. It’s not just what you post online, it’s the apps you use and the hardware you use to do it. All of this is easier for those who have easy access to the latest tech, fast internet and the ability to subscribe to security services. Because a company has a harder time getting my info now, they’ll move on to someone else and that sucks. Hopefully, Congress or the Federal Trade Commission can hold companies accountable for how they handle data. Waiting for the government to do something means we all get pwned, so take matters into your own hands. Vonetta Logan, a writer and comedian, appears daily on the tastytrade network and hosts the Connect the Dots podcast. @vonettalogan

November 2021 | Luckbox

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THE STRUGGLE TO PROTECT DATA PRIVACY

DATA ISSUES_

n 1890, future U.S. Supreme Court Justice Louis Brandeis was so alarmed by the new Kodak portable camera that he co-wrote a Harvard Law Review article entitled “The Right to Privacy.” But if Brandeis were alive today, he’d have more to fret about than an unauthorized reproduction of his likeness. There’s good reason to fear the technology that tracks every move made online.

Mainly to target ads, tech companies record web searches and site visits to compile staggeringly complete dossiers on every man, woman and child who logs onto the internet. That data is extremely valuable. In the wrong hands, it facilitates theft, blackmail and manipulation. Bad actors ranging from common criminals to aspiring dictators can use it to realize their dreams. Is there hope? Delve into this Luckbox special section on data privacy for answers and some actionable advice.

Data Privacy Issues

1700s_ 1700s

Thanks to Benjamin Franklin, the postal service carried mail in locked saddlebags.

1800s_ 1800s

Telegraph operators added ciphers to messages so people who knew Morse Code couldn’t read them.

1965_ 1965

The Constitution doesn’t mention privacy, but the Supreme Court ruled that a right to privacy can be inferred from other rights established in the document. 10

1973_ 1973

Sweden created the first national privacy law to criminalize data theft and give citizens access to their online records.

1991_ 1991

The Telephone Consumer Protection Act established the “Do-Not-Call” registry in an attempt to eliminate unwanted commercial phone calls.

1996_ 1996

The Health Insurance Portability and Accountability Act (HIPAA) was enacted partly to guarantee the privacy of healthcare information.

Luckbox | November 2021

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DuckDuckGo

A privacy-oriented alternative to Google

Privacy Roundtable Five data security experts on the state of online privacy

Data Brokers Companies practicing the black art of surveillance capitalism

Law of Large Numbers How big data uses normally distributed information

Take Control of Your Data Take these steps to protect your online privacy

2003_ 2003

The California Online Privacy Protection Act was the first state law requiring a privacy policy on commercial websites.

2013_ 2013

2018_ 2018

The General Data Protection Regulation (GDPR) began governing how personal data is gathered and handled in the European Union.

2018_

Edward Snowden leaked classified information from the National Security Agency to reveal numerous surveillance operations that violate individual privacy.

The California Consumer Privacy Act (CCPA) was signed into law to help residents take control of their personal information online.

2016_ British political consulting firm Cambridge 2016 Analytica obtained Facebook’s personal data on millions

At least 14 states introduced legislation requiring internet or telecommunications service providers to keep specified information confidential.

of Americans to aid the Trump presidential campaign.

2020_ 2020

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DATA ISSUES_

DUCK CALL

DESPITE A WHIMSICAL NAME, DUCKDUCKGO OFFERS A SERIOUS PRIVACYORIENTED ALTERNATIVE TO GOOGLE SEARCHES _ BY ED MCKINLEY

google search for “luckbox” put a betting site at the top of the results and the magazine’s homepage in the No. 2 spot. A DuckDuckGo search reversed the order, placing the magazine first and the betting site second. That was good enough for us. But the advantages of DuckDuckGo don’t end with our admittedly prejudiced preference for the results of a single search. DDG was born out of concern for data privacy, an issue of grave importance to informed internet users, says Gabriel Weinberg, the company’s founder and CEO. “Our mission is to show the world that protecting your privacy can be simple, and our North Star is to raise the standard of trust online,” Weinberg tells Luckbox. “We’re working to make privacy the rule, not the exception.” DDG promotes privacy because it doesn’t track, record, exploit or sell its users’ search results. Many other search engines, including Google, do the opposite. That penchant for privacy pits DDG, a David with 0.61% market share last year, against Google, a Goliath that controls 92.04% of the business, according to the statcounter.com website. DDG brought in $100 million in revenue last year, but Google’s dominance paid off handsomely, earning the company $181.7 billion in 2020—most of it from targeted advertising. Google can charge plenty for ads because it uses the mountain of data that’s been collected on just about everyone in the world to “customize” search results. When two people use Google to search for “luckbox,” they don’t necessarily get the same results. Google tailors the list of suggested sites to fit each user’s past online activities.

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It’s difficult to overstate the importance of that customization. For individuals, it can prove helpful, harmful or even dangerous. For society as a whole, it can change the course of history.

CUSTOM SEARCHES

First, let’s consider the innocuous or perhaps even beneficial results of a particular customized search. Suppose a young mother who enjoys gardening types the word “magazine” into the Google search field and hits enter. Google knows enough about the woman to direct her to publications devoted to parenting tips or gardening tools. A DDG search yields a magazine subscription site at the top of the list, followed by a dictionary definition of the word “magazine.” So, the user arguably benefits from the customized search. But think about what happens when a politically engaged citizen who frequents the conservative Fox News website uses Google to search for the word “magazine.” The results would tend to include an array of conservative sites but exclude nearly all liberal sites. That creates a “filter bubble” that confines the user to only one narrow view of politics. It reinforces preconceived notions and precludes consideration of anything that contradicts them. That deepens society’s polarization and can sway an election. “We believe Google is continuing to engage in personalized algorithm development that results in filter bubbles, and our research shows this to be true,” Weinberg says. In 2012, a DDG study indicated Google’s filter bubbles may have significantly influenced the presidential election by inserting tens of millions of more links for Barack Obama than for Mitt Romney. After widespread concern arose about bad actors using filter bubbles to disseminate misinformation in the 2016 elections, DDG studied the 2018 midterms and found that Google had failed to fulfill its pledge to quash filter bubbles.

BURSTING FILTER BUBBLES

With such pervasive use of personal information already occurring, some observers have opined that it’s too late and too difficult to reverse the trend. Weinberg’s not buying it. “There’s a lot of skepticism around online privacy,” he notes. Quoting the doomsayers, he says: “Isn’t it too late? Will it make everything worse and less personalized? Do I need a computer science degree to set it up? Do I have to stop using all of the services that I rely on?”

Weinberg contends that the answer is no to all of those questions. DDG is working to protect search, web browsing and email with a single download, he says. The company provides private search, encryption upgrading and tracker blocking, making it all work together to stop companies and governments from compiling detailed data profiles of internet users based on their web browsing history. DDG sees no need to collect users’ personal information because it can deliver good search responses without it, Weinberg says. Searching and browsing with the company’s apps creates an “ah-ha” moment for users who didn’t think it was possible to use the internet without enduring personalized ads and filter bubbles. Privacy also means a faster internet experience because the company blocks trackers that slow down everyday browsing. But even a company dedicated to privacy faces formidable obstacles to success in the search engine business. “Governments around the world are all saying that Google has leveraged its monopoly power in many areas, including search, Android and Chrome, to block search competition,” Weinberg maintains. Google exercises that control through default settings in browsers and operating systems, he says, describing his competitor as a master at making it difficult for users to replace Google with a competitor. Technically, users are allowed to leave Google, but it might require more than 15 clicks on an Android device, he contends. However, critics have found fault with DDG, too. Some object to the company’s practice of deleting search results for “content mills,” organizations that crank out low-quality information in search of clicks they can monetize. DDG also deletes results for sites that carry what the company judges to be too many ads. Proponents of those practices would argue that DDG is performing a function similar to newspapers’ practice of presenting what the editors view as relevant news and filtering out what they find trivial. But exercising discretion in presenting results strikes some observers as wise in light of the friction that companies like Facebook have created by allowing false information about politics and COVID-19 to find a home on their sites.

DDG’S GROWTH

Despite controversy and a tough search-engine market, DDG has grown prodigiously since its inception in 2008. In the last year, people have downloaded the app more than 50 million times, the company says. Traffic has grown enough to make the search engine No. 2 on mobile devices in the U.S., Canada, Australia and the Netherlands, according to multiple sources. The company began turning a profit in 2014, and annual revenue reached $100 million in 2020. Late last year, the company raised $100 million in mainly secondary investment from new and existing investors. Although DDG doesn’t track its customers, it does conduct national surveys to uncover clues that can help the company keep growing. The studies indicate wordof-mouth drives adoption as customers tell friends and family about online privacy. “What that says to us is that when people

DUCK MASTER _ MIT GRAD, SERIAL ENTREPRENEUR AND ANGEL INVESTOR GABRIEL WEINBERG STARTED SEARCH ENGINE PROVIDER DUCKDUCKGO IN HIS VALLEY FORGE, PENNSYLVANIA, BASEMENT IN 2008. HE’S CO-AUTHOR OF TRACTION: HOW ANY STARTUP CAN ACHIEVE EXPLOSIVE CUSTOMER GROWTH AND CO-AUTHOR OF THE FORTHCOMING BOOK SUPER THINKING: THE BIG BOOK OF MENTAL MODELS.

November 2021 | Luckbox

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DATA ISSUES_

WHAT’S IN A NAME?_ THE DUCKDUCKGO SEARCH ENGINE GOT ITS NAME FROM THE CHILDREN’S GAME DUCK, DUCK, GOOSE. FOUNDER GABRIEL WEINBERG SAYS THE NAME JUST POPPED INTO HIS HEAD AND CARRIES NO DEEP MEANING.

realize this works, they want to tell other people,” Weinberg notes. Just the same, DDG invests tens of millions of dollars a year in television, radio and billboard advertising to build brand awareness. The company uses the ad campaigns to spread the word that DDG can help users take back their online privacy, Weinberg says. Although companies can help individuals protect their privacy, they probably can’t turn back the tide of data exploitation for all of society. That will probably require government intervention, observers agree.

REGULATING PRIVACY

“There should absolutely be rules at the federal level that protect people from having their privacy abused for profit without their

HOW DUCKDUCKGO WORKS_ THE PRIVACY-ORIENTED SEARCH ENGINE PRODUCES RESULTS BY DRAWING UPON MORE THAN 400 SOURCES, INCLUDING RIVALS YAHOO!, BING AND GOOGLE. REVENUE COMES FROM ADS, AFFILIATE PROGRAMS AND THE SPONSORED LINKS THAT APPEAR ABOVE SEARCH RESULTS. IT EMPLOYS 130 PEOPLE, COMPARED WITH GOOGLE’S 142,000.

knowledge, says Weinberg. “We actively advocate for greater privacy regulation and consumer rights around the world.” Those advocacy efforts include proposing legislation and testifying before Congress. DDG has urged Congress to pass a federal privacy law and to institute antitrust reforms

like the proposed Competition and Antitrust Law Enforcement Reform Act championed by Sen. Amy Klobuchar, D-Minn. DDG is also campaigning for a House bill that would help protect people’s privacy and make the search-engine market more competitive, the company says. Meanwhile, DDG is working to promote “do not track” legislation and regulation, the online equivalent of “do not call” lists. Some refer to “do not track” by the acronym “DNT” for short. In 2019, the company launched a study of the DNT browser setting and found that about a quarter of those surveyed turned it on, yet most weren’t aware that the big sites don’t respect it.

THOSE PESKY ONLINE ADS_ FOR ADVERTISERS, THE DIFFERENCE BETWEEN GOOGLE AND DUCKDUCKGO COMES DOWN TO BEHAVIORAL ADS VERSUS CONTEXTUAL ADS. GOOGLE OFFERS CLIENTS BEHAVIORAL ADS—SOMETIMES CALLED TARGETED ADS—THAT ARE DIRECTED TOWARD CONSUMERS WHO HAVE DEMONSTRATED AN INTEREST IN A PRODUCT BASED ON THEIR WEB SEARCHES.

WHAT’S YOUR PRIMARY SEARCH ENGINE?

54.3% 34.8% 10.9%

A COMPANY THAT MAKES WORK BOOTS, FOR EXAMPLE, COULD TARGET BEHAVIORAL ADS TOWARD SOMEONE WHO’S BEEN VISITING THE SITES OF

google Duckduckgo

RETAILERS THAT SELL WORK BOOTS. THE ADS COULD APPEAR NO MATTER WHERE THE TARGETED CONSUMER GOES ONLINE. IN OTHER WORDS, SHE COULD BE ON A COOKING SITE, BUT WORK BOOT ADS

other

—Luckbox Reader Survey

WOULD APPEAR BECAUSE OF PREVIOUS SEARCHES FOR WORK BOOTS. IF THAT CONSUMER FEELS LIKE SHE’S BEING FOLLOWED, IT’S BECAUSE SHE IS BEING

That same year, DDG called attention to the fact companies were using DNT settings for “privacy washing,” the online parallel of “greenwashing” that overstates a company’s effort to do the right thing. Since then, DDG has helped create Global Privacy Control, or GPC, a proposed standard that would help consumers notify companies of their privacy preferences. “You can think of it as DNT 2.0,” Weinberg says of GPC. “Like DNT, it’s a technical standard and browser setting. But unlike DNT, it already has some regulatory teeth behind it via California’s (privacy) laws.” Global Privacy Control is enabled by default in the DDG app and automatically sends a “do not sell” signal to websites under California privacy laws, he notes, adding that he hopes DNT will combine with GPC to form the basis for new laws in the U.S. and abroad. Even if privacy measures improve through GPC and other measures, the Luckbox staff can’t help but hope one thing about DDG doesn’t change. We like seeing the magazine head the list of results when someone searches for “luckbox.”

FOLLOWED. DUCKDUCKGO OFFERS ONLY CONTEXTUAL ADS THAT AREN’T BASED ON PAST WEB SEARCHES. A CAR DEALER, FOR EXAMPLE, COULD ADVERTISE ON A CAR MAGAZINE’S WEBSITE, PLACING THE AD IN A LOGICAL CONTEXT. BUT DUCKDUCKGO DOESN’T TRACK USERS, SO THE CAR DEALER’S ADS CAN’T FOLLOW SOMEONE WHO VISITED THE CAR MAGAZINE’S SITE WHEN SHE GOES TO A SITE TO SHOP FOR PERFUME. ON ITS WEBSITE, DUCKDUCKGO SUMMARIZES THE EXPERIENCE OF USING ITS SEARCH ENGINE THIS WAY: “EACH TIME YOU SEARCH ON DUCKDUCKGO, IT’S AS IF YOU’VE NEVER BEEN THERE BEFORE.

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H T E I CR SI S N I T DA A A PRI RIVA A Y DATA ISSUES_

INTERNET USERS CASUALLY OFFER UP THEIR VALUABLE AND SENSITIVE PERSONAL DATA TO ANY ONLINE ENTITY THAT PROMISES EVEN A HINT OF CONVENIENCE IN EXCHANGE. THEIR CARELESSNESS IS GIVING RISE TO THEFT, WASTEFUL CONSUMERISM, POLITICAL POLARIZATION AND, ULTIMATELY, CHAOS. _

TO ASSESS THE DAMAGES AND SEARCH FOR ANTIDOTES, LUCKBOX CONSTRUCTED A PANEL DISCUSSION FROM THE THOUGHTS THAT FIVE DATA-SECURITY EXPERTS EXPRESSED IN SEPARATE INTERVIEWS. _

MOST FOUND HOPE IN A COMBINATION OF REGULATION AND PERSONAL INITIATIVE. _ BY ED MCKINLEY

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H N

How important is data privacy?

N I G R O : You’re being programmed by

algorithms. At some point, the line gets really blurred between what was your decision and what an algorithm has suggested for you. Suppose I’m looking for a new TV. Based on algorithms that draw upon where I live, my job, my zip code and 500 or more other data points, they may direct me toward a TV with more bells and whistles than I need because they know I can afford it. The algorithms are like a used car salesman except you don’t understand the tactics behind it.

B U T L E R : Algorithms and other automated systems tend to create echo chambers called filter bubbles that manipulate basic facts, polarize people and have an impact on mental health. The systems try to maximize engagement, which means either clicking on something or watching something for longer than a few seconds. An early version of YouTube was notorious for offering recommendation chains that sent people down these rabbit holes that led to distorted or even fictional conspiracy theories.

V É L I Z : The loss of privacy that we are suffering is having

a tremendous effect on democracy. Personal data is being used for personalized propaganda that is much more corrosive than old-fashioned mass propaganda. In the past, if the president said something, you would discuss it at the water cooler and the dinner table. Journalists and academics would publish articles about it. Now, companies create so many different ads that they’re never challenged in the public sphere because journalists can’t watch all of them.

H E R O L D : I’m an expert witness in trials. In one of my cases, a smart device helped a defendant find his intended victim hiding in a hotel. He almost beat her to death in front of their shared 4-year-old daughter. And people can copy your profile and photo and then pretend to be you. Then they try to dupe your friends into giving them money or ask them about what they have in their homes so they can be targeted for physical break-ins and assaults.

ALAN BUTLER_ IS AN ATTORNEY WHO SERVES AS PRESIDENT AND EXECUTIVE DIRECTOR OF THE ELECTRONIC PRIVACY INFORMATION CENTER. @ALANINDC

REBECCA HEROLD _ IS CEO OF PRIVACY & SECURITY BRAINIACS, BELONGS TO THE ENERGY TRENDS WORKING GROUP OF ISACA—FORMERLY KNOWN AS THE INFORMATION SYSTEMS AUDIT AND CONTROL ASSOCIATION—AND IS THE AUTHOR OF MANAGING AN INFORMATION SECURITY AND PRIVACY AWARENESS AND TRAINING PROGRAM . @PRIVACYPROF

M A L I S O W : I hate to say it, but it’s time to give up on

regaining privacy. We’re going to have to go with full transparency whether we like it or not. I suggest we come to terms with that and understand what that means before it arrives—because we’re going to have growing pains that will make the Industrial Revolution look like a joke. What happens when you find out your loved one is taking money out of your bank account without letting you know? What happens when you find out that one of your political leaders is a paid lackey of a hostile foreign government? These things are all going to cause a lot of difficulties, and it’s going to happen within 20 to 25 years.

What does the public get wrong about data privacy?

BEN MALISOW _

IS AN IT DATA SECURITY INSTRUCTOR, WRITES STUDY GUIDES FOR DATA SECURITY TESTS AND IS THE AUTHOR OF EXPOSED: HOW REVEALING YOUR DATA AND ELIMINATING PRIVACY INCREASES TRUST AND LIBERATES HUMANITY. @BENMALISOW

CARISSA VELIZ _ AN ASSOCIATE

H E R O L D : Fewer than half of all Americans think about

PROFESSOR AT THE UNIVERSITY OF OXFORD IN THE UNITED KINGDOM, WROTE PRIVACY IS POWER: WHY AND HOW YOU SHOULD TAKE BACK CONTROL OF YOUR DATA . @CARISSAVELIZ

N I G R O : We’ve equated privacy and secrecy, and they’re not

IS AN ADJUNCT PROFESSOR AT LEWIS UNIVERSITY AND SERVES AS EVERLY HEALTH SOLUTIONS’ VICE PRESIDENT OF INFORMATION TECHNOLOGY AND SECURITY OFFICER. SHE IS ISACA BOARD VICE-CHAIR. @EVERWELL_HEALTH

privacy very much. But after they find out their data has been misused, they often become some of the biggest proponents for privacy. Someone has pretended to be them, and now they have bad credit and they owe millions of dollars. Or their reputation is shot, and they can’t get a job anywhere because it looks like they’re a big crook. That’s when they start realizing data privacy’s not about hiding things. the same thing. Just because you want to keep something private doesn’t mean it’s a secret. It just means it’s nobody else’s business. There are certain things people don’t need

PAM NIGRO _

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to know, like how much is in my checking account, and what’s in my 401(k). I can provide you with information to buy your product, but I shouldn’t be on your website or in your database for the next 20 years.

V É L I Z : This idea that personal data is your own property

The scary thing is social media companies don’t need to hear your conversations to know what you’re thinking because of the amount of data they are collecting about your behavior all over the internet. —ALAN BUTLER

65%

OF AMERICAN VOTERS SAY DATA PRIVACY IS ONE OF THE BIGGEST ISSUES SOCIETY FACES —Morning Consult

and that privacy’s your personal preference is completely misleading. Privacy is collective. Rarely can we share personal data without sharing things about others. If you share your genetic data, for example, you’re sharing data not only about the obvious people—like your parents, your siblings, your kids, your cousins—but also very distant kin, whom you might have never met and never heard of. When you share location data, you’re sharing data about your neighbors and about the people you work with. When you’re sharing data about your personality, you’re sharing data about people who share those personality traits.

Are people adequately compensated when they provide their data? N I G R O : It was estimated in 2013 that Google was worth about $500 a year as a search engine service. I’m sure it would be more expensive now. You get it for free because they gather and use the data that they uncover about you. They make thousands of dollars from that data, so you have to ask yourself: Do you really want to exchange it for so little? V É L I Z : What do I care if Facebook knows who my friends

are or what kind of car I drive? People don’t realize that data is being used to infer very sensitive things, things like their sexual orientation, their IQ, their ability to pay back a loan—and that’s going to be used against them. Loss of privacy has implications for society at large, too. In the case of Cambridge Analytica, only 270,000 people agreed to give their data to the political firm. From that data, the company got access to the data of 87 million people who are friends of those 270,000 people. Those 270,000 people didn’t have the moral authority to sell their data for $1 because that had consequences for the whole of society.

How bad can data-tracking get? B U T L E R : People don’t like being tracked. It feels icky. Some are convinced Facebook is listening to their conversations through their microphone, but engineers have determined definitively that social media sites don’t actually hear the words you’re saying. The scary thing is they don’t need to hear your conversations to know what you’re thinking because of the amount of data they are collecting about your behavior all over the internet. V É L I Z : The filter bubbles that people live in on the

internet are smaller than they used to be. They used to include thousands of people, but now they’re for really, really reduced communities. Advertisers used to guess what messages would resonate with audiences, but now data scientists are getting so close to predicting responses that it’s like voodoo. We’re fighting armies of people who are trying to mess with our minds.

Does data-tracking worsen inequality? V É L I Z : We’re not being treated as equal

citizens anymore, and that should really worry us. It erodes the social fabric and our trust that the system is going to be impartial when we apply for a loan, or a job or an apartment. It means that when you call customer service, you’ll get a quicker answer if you’re likely to buy more things.

M A L I S O W : But things will change. Once

we have total access to information about everything and everyone, it’s going to become a lot more peaceful environment. If I know that the person presenting cash to me stole it, I’m going to choose not to do business with them. If I know that my stalker is in my neighborhood, I can respond before he shows up at my front door with a knife. If you’re doing something bad, you might stop because you’re going to get caught.

V É L I Z : It just doesn’t work like that.

You neglect the fact that there are so many things in life where we already have transparency. One example is race. Race is apparent to all and that doesn’t make discrimination go away.

The privacy paradox states that internet users value privacy but fail to expend the effort to protect it. What’s your reaction? B U T L E R : Since the early days of the

internet, the government has let companies drive the process of crafting and implementing privacy rules. It’s essentially a self-regulatory model. And privacy policy leaned heavily on terms of service documents that grew in length and complexity—and obfuscation. No one really reads these documents because it’s not practical. The user is put into an impossible position of having to be a lawyer, an engineer, and an expert on systems design and user interface—and it’s untenable. What’s more, studies have shown that people mistakenly assume a privacy policy is set up to protect their privacy.

V É L I Z : People say that they care about

privacy but then don’t act in a way that shows that they have concern. There’s a lot of defeatism out there. People think, “Well my data is out

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there anyway. Why am I going to inconvenience myself if I can’t fight this?” It’s like saying you’re going to drive without a seatbelt.

H E R O L D : On the 25th page of the

consumer agreement, in tiny font, it may say you’re giving us the ability to contact you about other products. And you’re going to let us share your data with “trusted third parties” that are selling that data.

What’s your view of the General Data Protection Regulation, or GDPR, that the European Union imposed in 2018?

M A L I S O W : Not being in compliance with the GDPR is

a lot more frightening to businesses than having the data exposed. If you steal my clients’ personal data, that may expose me to some repercussions. But those repercussions aren’t on the same scale as what the regulators do as a punitive measure. And the weird thing is that those punitive measures don’t make any restitution to the damaged parties.

How does the California Consumer Privacy Act, or CCPA, differ from the GDPR? B U T L E R : The California law is still very much in flux. It’s

only a couple years old and already it’s been substantially overhauled. It’s significantly narrower in scope than the GDPR. It empowers users to block the sale of their data, which is only a limited subset of the data privacy and data use ecosystem.

B U T L E R : GDPR is still very much a work in progress, and enforcement mechanisms are still being developed and implemented. What’s changed is that companies that operate in Europe now have to examine their processes and actually think through what they’re doing. Sometimes CEOs didn’t know what data their companies were collecting.

H E R O L D : California is more specific. In Europe, almost

V É L I Z : It’s been a success because it’s

at least 128 bills that either wholly or in part addressed privacy issues, and that was an 83% increase from Q4 of 2020. Then when we got to Q2 of this year there were 152 more bills.

changed the conversation forever, and it’s had a tremendous effect worldwide. It also has a lot of faults. We don’t have enough resources to police it. It says you can collect personal data if people consent, or if you have a legitimate interest. And a lot of companies have interpreted legitimate interest very, very, very broadly to cover basically anything that is convenient to them.

B U T L E R : Post-GDPR, companies are using privacy as a method of competing in the marketplace. Apple, for example, has rolled out an app that tracks transparency, severely restricts what developers can do with data and gives users the ability to prevent apps from collecting data that they don’t want collected or doing it under the radar. H E R O L D : GDPR goes beyond companies

based in Europe. If you have workers, customers, consumers or contractors in the EU whose personal data you have collected and are responsible for safeguarding, then you need to follow the EU GDPR. Some very large fines and penalties have been applied for noncompliance.

every type of organization has to comply. The California law applies only to citizens of California and only to organizations with over $25 million in annual profits. So, they’ve cut out applicability to small- and mediumsized businesses.

Will we see federal regulation of data privacy? What obstacles stand in the way?

The default is data collection, and then you have to say no if you don’t want it. That’s ridiculous.

H E R O L D : In Q1 of 2021, federal lawmakers introduced

—CARISSA VÉLIZ

B U T L E R : A comprehensive federal privacy law will be

passed—it’s just a question of when and with what format. Consumer privacy advocates have argued that the federal law should set a baseline but shouldn’t prevent states from improving regulation, especially as technologies evolve and change. Technology companies have shown an appetite for federal legislation, in part because of the problem that a patchwork of different overlapping state laws would cause.

N I G R O : The scary part is that the federal government’s National Security Agency is just as guilty as all of the businesses when it comes to collecting this data on you. What if the government classifies you as a troublemaker? You’re put into that box and they’re watching everything you do. M A L I S O W : Lawmakers in the United States are making laws with the best of intentions to protect the citizenry. But these are the people least qualified to be regulating technology because they’re the least qualified to understand it.

Should regulators enforce data privacy protection, or should regulation empower users to protect their own privacy? B U T L E R : These can’t be user-driven decisions because the users plainly don’t have sufficient information to

We need a consumer champion for privacy—like Ralph Nader was for cars. —PAM NIGRO November 2021 | Luckbox

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64%

make these choices. You often have to go to a third-party website and make decisions about turning these things on and off. It’s a recipe for disaster. We need new legal systems and new software systems that recognize that the user is not going to make a million nuanced decisions.

OF AMERICANS WOULD BLAME THE COMPANY, NOT THE HACKER, FOR THE LOSS OF PERSONAL DATA.

V É L I Z : Because GDPR relies on consent, companies use

—RSA

V É L I Z : One thing that doesn’t get enough attention is the

it to put all the burden on individuals. The default is data collection, and then you have to say no if you don’t want it. That’s ridiculous.

What aspects of data privacy don’t get enough attention? importance of forgetting. Once you’ve made a mistake and it’s on Google, you will never get over it. A society that doesn’t grant second chances is a very ruthless society. Another tricky thing about data is that it’s invisible. When somebody cuts your skin, it hurts, it bleeds. When all your data is stolen, you feel nothing. And then two years down the line, you have no way of getting a job because you’ve been blacklisted.

N I G R O : When things have changed in the United States

it has always come through grassroots critical mass. We need a consumer champion for privacy—like Ralph Nader was for cars.

Is it too late to save privacy? M A L I S O W : Yes. That ship has sailed, and we can’t close Pandora’s box.

I hate to say it, but it’s time to give up on regaining privacy. We’re going to have to go with full transparency whether we like it or not. I suggest we come to terms with that and understand what that means before it arrives. —BEN MALISOW

V É L I Z : There’s no such thing as too late because degrees

matter. At heart, I’m an optimist, so I think we’re going to end up regulating these companies. Facebook CEO Mark Zuckerberg said in 2010 that privacy norms have evolved and that people don’t care about it anymore and want to share. Many people actually bought that.

Final thoughts?

Fewer than half of all Americans think about privacy very much, but after they find out their data has been misused, they often become some of the biggest proponents for privacy. —REBECCA HEROLD

M A L I S O W : As much as I don’t like the idea of Facebook and

Apple having my data, I’m more afraid of a centralized authority being the arbiter. A demigod or tyrant will abuse his authority and use that information against you.

V É L I Z : Privacy is power. If we give up our privacy to

governments, we risk authoritarianism. If we give it up to companies, we risk corporatocracy. Try your best to protect your privacy. Even if you fail, you will leave a paper trail of trying to protect it. That matters a lot, because in a year or two, when regulators look at that company, they will see it did horrible things.

N I G R O : The Constitution doesn’t protect privacy. The

Fourth Amendment, which prohibits illegal searches and seizures, says the government can’t break down your door and search your papers. That’s it. There’s no amendment for privacy. I could legally sit out in front of your house with a cone and record everything you’re doing.

70%

OF AMERICANS BELIEVE THEIR DATA IS LESS SECURE NOW THAN FIVE YEARS AGO. —Pew Research Center

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DATA ISSUES_

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DATA BROKERS & THE MENACE OF SURVEILLANCE CAPITALISM A SECRETIVE INDUSTRY SELLS AMERICANS’ DATA TO MARKETERS, COMPANIES AND GOVERNMENTS, BOTH FOREIGN AND DOMESTIC. IS YOUR PRIVACY FOR SALE? _ BY GARRETT BALDWIN

D by entities ranging from relatively benign consumer products companies to openly hostile foreign powers like China and Russia. With mixed success, just two U.S. states have pushed back against data brokers and the risks created by their opaque business practices. It’s a daunting problem with potential roadblocks to reform, including questionable practices by the U.S. government.

DEFINING DATA BROKERS

ata has become the world’s most coveted commodity—more valuable than oil, lumber or the water drying up in the Colorado River. And it’s prized even though it’s not rare or difficult to obtain. The dizzying growth of the digital economy over the last 15 years has fueled an explosion of data touchpoints linked to every American citizen. On the surface, the volume of data may not seem like a reason for concern, but the ways it’s collected, assessed and “commoditized” can be frightening. Data brokers—companies that collect, track and sell personal consumer data—set the stage for exploitation and manipulation

Data brokers collect personal information about consumers from companies and other sources and then sell or license it for profit. The brokerage industry brings in big money, with most estimates north of $200 billion per year. Although Google and Facebook are known for collecting data used to target advertising, data brokers operate differently. They collect very specific information that they can link directly to a person’s identity. Look at websites like Spokeo. Data is readily available that includes a person’s name, address, phone numbers and location. But that’s just a taste of the public data that’s online. Brokers build profiles of people and then license or sell the information to third parties. Who are these third parties? There’s no shortage of buyers. Got a warehouse full of southpaw golf clubs and need to buy a list of left-handed retirees who are also “impulse buyers?” A data broker can identify potential customers based on their browsing history, demographics and data collected from a golfing app.

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DATA ISSUES_ Running a Catholic news outlet and looking to identify a priest’s precise location to “out” him as a predatory homosexual? That’s what investigative journalists at The Pillar did when they obtained commercially available location data to determine priests had visited gay bars and private homes while using the dating app Grindr. But this goes far beyond selling golf clubs or tracking clergymen. The national security implications are extraordinary. In December 2019, for example, New York Times writers Stuart Thompson and Charlie Warzel obtained data that tracked more than 50 billion pings from the cellular phones of more than 12 million Americans. Although it was a random dataset, the Times Privacy Project used additional public information to identify and track a Secret Service agent protecting then-President Donald Trump. One can assume that if a handful of journalists can locate the president’s guards, the nation’s adversaries could also obtain that information. And if the president of the United States isn’t safe, who is?

SURVEILLANCE CAPITALISM

Data broker LiveRamp has collected information on more than 250 million Americans, according to its website. And it’s all for sale. Many data brokers feel no compunction about peddling information to foreign governments because it’s legal and lucrative. Traversing the universe of these brokers and studying their capabilities can become downright exhausting. The rise of the digital economy and the adoption of mobile phones, which track location, browsing history, personal preferences, shopping habits and much more, have led to an explosion in available personal data points. Public policy governing data protection lags far behind the technology, according to Alan Butler, president and executive director of the Electronic Privacy Information Center, or EPIC, a nonprofit research center that strives to focus public attention on privacy litigation and policy. The explosive expansion of technology and businesses has facilitated broader collection and tracking. And with artificial intelligence and big data now mainstream, the complexity and challenges will continue to accelerate, Butler said. “A lot is changing when you think about the ubiquity of tracking technology and data analysis,” Butler noted. “It’s pretty daunting. We have to remember that the modern smartphone has only been around since

2008. It’s not only a supercomputer in your pocket, but it’s also a device with sensors and data analysis that is largely consumer-facing. These technologies provide features like GPS, cell phone tower data and more to tell me where I am.” While users find that information valuable, the underlying technology also feeds the data to brokers who exploit it. In a 2014 book, Harvard professor emerita and EPIC board member Shoshana Zuboff coined the term “surveillance capitalism” to describe a system that commoditizes consumer data for profit. “Data brokerage is one of the major proponents of surveillance capitalism,” Butler said. “In this case, data is taken away from its original context. It’s one thing for a company to identify and pinpoint where I am on a map. It’s another to sell it.”

REGULATORY REACH

The U.S. government’s focus on cybersecurity and data privacy has centered on preventing breaches and administering

$200 Billion The data brokerage industry’s annual take financial punishment to companies that are careless with consumer information. But is that the right approach? In May, the Biden administration issued an executive order for the government to “improve its efforts to identify, deter, protect against, detect, and respond to malicious cyber campaigns that threaten the public sector, the private sector, and ultimately the American people’s security and privacy.” Such attacks have become more common in recent years, with the Microsoft Exchange and SolarWinds hacks serving as two prominent examples. Former President Trump’s emphasis on data security pitted his administration against China. The White House banned ByteDance and WeChat in the United States because data gathered on those sites could end up in the hands of the Chinese Communist Party. The party could then use the information for blackmail, intimidation and other threats to national security. Unfortunately, the reality was that the U.S. acted too late.

In August, Matthew Pottinger, a deputy national security advisor to Trump, told the Senate Intelligence Committee that China had stolen enough data to build a “dossier” on every American adult. Even more disturbing, it remains unclear whether U.S. policymakers understand that hacks and app store data policies are only part of the problem. Hostile governments and other bad actors no longer have to steal information. They can simply buy it. Unfortunately, there’s a significant gap in understanding the role of data brokers. Only two states have passed laws to regulate data brokers and help customers protect their digital identities. California and Vermont require data brokers to register. Although dozens of data companies have registered with Vermont, not many of them have supplied details about their business practices, The Washington Post reports. Several missed registration deadlines and some didn’t register at all. Data broker Amerilist missed the state’s initial registration deadline by more than four months, The Post wrote in 2019. How many established or new brokerages haven’t registered as required? And how would the state even know? Lack of transparency remains a severe problem. Most Americans don’t know where the estimated 4,000 or so data brokerages are operating. The brokers rarely discuss business practices or models in public. In 2019, the Senate Committee on Banking, Housing and Urban Affairs convened a hearing to explore the data brokerage industry and potential regulation, but the data brokers invited to participate didn’t bother to show up. The Senate moved on. Meanwhile, the Freedom of Information Act offers consumers access to their personal data, but that feels like a bust. Even if a consumer tracks down the data broker and requests personal data, the amount of information would be overwhelming. “If you contacted LiveRamp and ask them for all of your historical data, you’re going to receive a data dump that will be unbelievable,” Butler says.

THE REGULATORY EFFORT

Sens. Ron Wyden (D-Ore.) and Rand Paul (R-Ky.) have been outspoken critics of the data brokering business. In May, Wyden’s office released a draft of the Protecting Americans’ Data from Foreign Surveillance Act of 2021. Wyden said in a statement that “shady data brokers shouldn’t get rich selling Amer-

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AN INVASION OF PRIVACY?_ CREDIT BUREAUS LIKE TRANSUNION, EQUIFAX, EXPERIAN AND THEIR SMALLER COMPETITORS MIGHT SOON BEGIN INCORPORATING DATA FROM BROWSERS, SEARCHES AND SHOPPING HISTORIES INTO MORE ACCURATE CREDIT SCORES, ACCORDING TO A NEW REPORT FROM THE INTERNATIONAL MONETARY FUND. THAT’S A TERRIBLE PLAN FOR TWO REASONS, SAYS ALAN BUTLER, PRESIDENT AND EXECUTIVE DIRECTOR OF THE ELECTRONIC PRIVACY INFORMATION CENTER. “FIRST, THIS CREATES NEW PROBLEMS THAT ARISE IN THE TRADITIONAL CREDIT REPORTING SYSTEM,” BUTLER TOLD LUCKBOX . “THESE INCLUDE IMPROPERLY LIMITING ACCESS TO CREDIT, MISIDENTIFYING PEOPLE AND VARIOUS BIASES (SOCIAL, POLITICAL AND FINANCIAL). IT CREATES POSSIBLE BARRIERS THAT AREN’T JUSTIFIED.” THE SECOND ISSUE IS THE SPECTER OF AN AUTHORITARIAN USING DATA SURVEILLANCE TO CONTROL THE POPULACE, HE CONTINUED. ALREADY, THE CHINESE COMMUNIST PARTY USES A SOCIAL CREDIT SYSTEM TO TRACK CITIZENS’ ACTIVITIES. IT AWARDS POINTS FOR WHAT IT CONSIDERS GOOD BEHAVIOR AND SUBTRACTS THEM FOR SUPPOSEDLY BAD BEHAVIOR. POSITIVE SCORES EARN BENEFITS, LIKE THE RIGHT TO FLY ON COMMERCIAL AIRLINES, WHILE THOSE WITH NEGATIVE SCORES COULD FIND THEMSELVES EXCLUDED FROM THE FINANCIAL SYSTEM. BUTLER DESCRIBES THE SYSTEM IN CHINA AS “DYSTOPIAN AND TERRIFYING.”

icans’ private data to foreign countries that could use it to threaten our national security.” The bill would establish rules on how foreign nations or other entities gain access to sensitive data. In addition, Wyden and Paul have introduced The Fourth Amendment is Not For Sale Act, which bars governments from purchasing Americans’ geolocation data. Legislators have proposed other bills, but selling data to foreign nations isn’t the only problem. Timing is an issue. A slow-moving bureaucracy provides only a weak defense against a powerful and agile data brokerage industry. The Federal Trade Commission, for example, is empowered to regulate data brokers under Section 5 of the FTC Act if the agency can prove the companies engage in unfair or deceptive practices. Meanwhile, the FTC and the Consumer Financial Protection Bureau can both wield powers laid out in the Fair Credit Reporting Act. But it’s not clear that the leadership at either agency is interested in regulating the industry. Butler doesn’t believe that the FTC has enough reach. Moreover, the agency lacks an understanding of brokerages’ business practices, which have been transformed by algorithmic tracking, artificial intelligence and advances in data collection, he said. Consumer privacy requires far greater oversight, according to Butler. So EPIC has pushed for creation of a data protection authority or agency with a regulatory mandate—something similar to the Securities & Exchange Commission or Human Health & Services but for data and privacy management.

THE LOBBYING ASSAULT

Even if broad support emerges for regulatory oversight, two key factors may continue to stymie reform. First, the data brokerage industry is casting aside its naturally secretive nature to spend prodigious amounts very publicly in its effort to influence regulation and legislation. Second, the U.S. government remains a large customer of the data brokerage industry. Last year, the size of the data brokerage industry’s lobbying budget rivaled those of two gargantuan companies—Facebook and Google—according to The Markup, a nonprofit investigative newsroom. Twenty-five registered data brokers in Vermont and California spent a combined $29 million on lobbying last year, the organization says. Oracle, which owns several data

collection companies, reportedly shelled out $9.57 million for lobbying efforts last year, while the three major credit bureaus, Experian, Equifax and TransUnion, each spent more than $1.35 million. The Markup contacted all 25 of the registered data brokers to ask about their lobbying activities, but a few companies—including LiveRamp and Inmar Intelligence—denied that they were data brokerages despite self-identifying as such in Vermont or California. In reality, LiveRamp, the industry’s biggest spender on lobbying, lavished $630,000 on such activities last year. Meanwhile, the fact that data brokerages have found reliable customers in the U.S. government makes it more difficult to put the genie back in the bottle through regulation. Government purchases of cell phone data and other information on Americans circumvent the Fourth Amendment, Vox and other media have reported. Although a federal judge noted in a ruling in Carpenter v. United States (2017) that the government must obtain a warrant to compel companies to hand over sensitive personal data, agencies can instead incentivize a data broker to obtain data. As the Washington Post notes, the government doesn’t need to force wireless companies like Verizon to produce geolocation data. A wealth of apps that track cell tower pings collect that information to sell. Agencies that have purchased data include the FBI, Internal Revenue Service, Department of Homeland Security and Drug Enforcement Administration, The Washington Post reported. Immigration and Customs Enforcement paid more than $1 million to data firm Venntel for mobile location data, while the Defense Department purchased location data derived from a Muslim prayer application and a Muslim dating app. Meanwhile, the government remains far behind the times when it comes to protecting data privacy, as evidenced by the fact that the 1986 Electronic Communications Privacy Act remains the most important effort to govern the sector. In the 25 years since the bill became law, cellular phones, mobile networks and digital devices have proliferated—not to mention the explosion of data. Each day that governments fail to act provides another opportunity for a new problem with data privacy to emerge. George Orwell put it this way: “If you want a picture of the future, imagine a boot stamping on a human face—forever.”

November 2021 | Luckbox

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DATA ISSUES_

BIG TECH & THE LAW OF LARGE NUMBERS HOW EXACTLY DID BIG TECH GET TO BE SO ... BIG? _ BY TOM PRESTON

o paraphrase ben franklin, those who would give up essential privacy to purchase temporary convenience deserve neither privacy nor convenience. Throughout history, humankind has used opposable thumbs and excess brain capacity to make daily existence easier. A line of convenience could be drawn from a flint hand ax to the iPhone 13. They’re both tools of immense personal utility. But people can use a sharpened rock without revealing anything about themselves to anyone. The iPhone, on the other hand, is designed to vacuum up the user’s personal activities, habits and desires. Every benefit from using an internet-connected device requires letting some organization—usually private—observe how that device is used, what it’s used for and who’s using it. Companies track that data for security and to enhance the user experience. And that personal information has become the most valuable commodity in the world. Don’t think so? The world’s trillion-dollar companies, like Apple (AAPL), Google (GOOGL), Microsoft (MSFT), Amazon (AMZN), and Facebook (FB), are worth what they are because they monetize all the information that the public gives to them—willingly and for free. The world has sacrificed privacy for consumerism. People allow tech companies to look at what they’re doing and, in exchange, the world is at their fingertips. Irresistible. That’s become a marketing strategy for just about every product, and it funnels cash to the companies that gather data. On the dark side, those companies can sell the data to governments or political organizations that use the power in the data to manipulate voting patterns, sway public opinion and punish the opposition. Those entities apply persuasion to the data. The news the public reads, the products they see in ads, and the relationships they’re encouraged to pursue are fed to them by entities looking to benefit from influencing them. Their persuasion works on only a small percentage of the people exposed to the message. But all that’s needed to tilt financial, behavioral or political results is a shift of a couple of percentage points when a few people change

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their minds. A small percentage can produce numbers big enough to move the needle. If tech companies could peer into the digital lives of only a few hundred people, the data would be worth nothing. It’s only when tech has data for hundreds of millions of people that information becomes something other companies and governments would pay to own. That’s because while an individual may make a binary choice—buy or not buy, vote for candidate A or candidate B, click or not click—a lot of individual choices can combine to resemble a normal distribution. That’s due to the law of large numbers. The law of large numbers is really handy. Some think it’s the idea that anyone who

looks at enough data will eventually find something good (or bad). But its real meaning is simpler and more powerful. The law of large numbers holds that regardless of the actual statistical distribution of the data— binomial, Poisson, Student’s T—the averages of samples from that data will be normally distributed. For example, a coin flip has a binary distribution—heads or tails—and nothing else. By attaching a numerical value to the faces of the coin—1 for heads, 0 for tails—one can calculate an average value of a series of coin flips. Flip the coin 10 times and get five heads and five tails, and the average is 0.50. Flip 10 more times and get seven heads and three tails, and the average is 0.70. Flip 10 more times and get two heads and eight tails, and the average is 0.20. Perform 1,000 of those 10-flip exercises and calculate the average of each one, and those aver-

Normally distributed data can predict people’s behavior.—Alan Butler behavior.

HOOKED ON THE MARKETS?

age numbers would approach a normal distribution. Most of the 10 flip samples would have an average of .50. Fewer would have averages of .40 and .60. Fewer still would have averages of .30 or .70. A plot of those averages would look a lot like a normal distribution. The law of large numbers says that even though each coin flip has a binary distribution, the large number of flips gives the averages a normal distribution. Data that’s normally distributed enables companies to attach probabilities to behavior. That makes people predictable and enables companies to monetize and control them. It’s almost impossible to avoid being part of that trend, unless one chooses to unplug from society. One wonders what Ben Franklin would say about that. Tom Preston, Luckbox contributing editor, is the purveyor of all things probability-based and the poster boy for a standard normal deviate. @fittypercent

Visit DailyFX.com for continuous updates on global markets in currencies, commodities, and stock indices.

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November 2021 | Luckbox

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DATA ISSUES_

THE SURVEILLANCE ECONOMY ROBS YOU OF VALUABLE PERSONAL INFORMATION. DON’T STAND FOR IT! FOLLOW THESE STEPS TO FIGHT BACK. _

TAKE BACK CONTROL OF YOUR DATA

DEVICES

Choose ‘dumb’ devices over ‘smart’ ones whenever possible. A smart kettle is not necessarily an improvement over a good old-fashioned one, and it represents a privacy risk. Anything that can connect to the internet can be hacked. If you don’t need to be heard or seen, choose products that do not have cameras or microphones.

MESSAGING APPS

Messaging apps offer end-to-end encryption, and you can trust the provider will not misuse your metadata or store messages in the cloud insecurely. Even though WhatsApp provides such encryption, its being owned by Facebook introduces privacy risks. After Facebook acquired it, Brian Acton, one of the co-founders of the app, admitted, “I sold my users’ privacy.” The safest option, from the point of view of external threats, is probably Signal. One of my favorite features is the ability to set expiry dates on your messages—you can set them to disappear after they are seen. Telegram is also worth mentioning. It has the advantage that when you delete a text, you can delete it from all phones,

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An email might feel as private as a letter, but it’s more like a postcard without an envelope. not just yours, at any time, which is a great feature protecting you from internal threats. Sometimes you realize that you shouldn’t have texted something, or that you trusted someone who was not worthy of your confidence. The ability to recall our texts at will is something every messenger app should have. Telegram has two huge disadvantages, however. The first is that cryptographers tend to distrust its encryption—it is likely less secure than Signal. Furthermore, conversations are not encrypted by default; you have to choose the ‘secret chat’ option.

Email messages are notoriously unsafe. An email might feel as private as a letter, but it’s more like a postcard without an envelope. Avoid using your work email for purposes unrelated to work (and sometimes for work, too). Your employer can access your work email, and if you work for a public institution, your email may be subject to freedom of information requests. When choosing an email provider, look for privacy perks like easy encryption, and consider the country in which it is based. At the moment, the United States has looser legal restrictions on what companies can do with your data. Some options that might be worth looking into are ProtonMail (Switzerland), Tutanota (Germany) and Runbox (Norway). If you are patient and tech-savvy, you can use PGP (Pretty Good Privacy) to encrypt your emails.

SEARCH ENGINES

Your internet searches contain some of the most sensitive information that can be collected about you. You search for things that you don’t know about, for things that you want, for things that worry you. Since you search for what is going through your mind, your searches are a glimpse into your thoughts. Stop using Google as your main search engine. Change your default search engine on your browsers to one that does not collect unnecessary data about you.

Privacy-friendly options include DuckDuckGo and Qwant. You can always go back to Google exceptionally if there is something you are having trouble finding, but in my experience, that is becoming less and less necessary.

HOW OFTEN DO YOU USE A VIRTUAL PRIVATE NETWORK (VPN) WHEN BROWSING THE WEB?

16% 18% 34% 32%

A lways often Sometimes never

—Luckbox Reader Survey USE PRIVACY EXTENSIONS AND TOOLS

Privacy extensions can complement your browser. If your browser does not automatically block trackers and ads, you can use an extension to take care of that. Adblockers are easy to find and install. About 47% of netizens are blocking ads. Once you enjoy the undisturbed peace that adblockers bring you, you will wonder how you ever put up with so many annoying ads jumping at you and distracting you for such a long time. Using adblockers also sends a clear message to companies and governments: We don’t consent to this kind of advertising culture. If you want to be fair to companies that make an effort to show only respectful ads—contextual ads

that respect your privacy and are not too jarring—you can disable your adblockers for those sites.

VIRTUAL PRIVATE NETWORKS (VPNS)

A good VPN can channel your internet traffic through an encrypted, secure, private network. VPNs are especially useful when you want to access the internet through a public network, such as the Wi-Fi you can find at an airport or other public spaces. A public Wi-Fi network makes you vulnerable to whoever set it up and to other people who are connected to it. Using a VPN protects you from everyone except the company behind it, which gets extensive access to your data. Make sure you can trust whoever is behind a VPN before using it. It is not easy to know who is trustworthy, but sometimes it is obvious who isn’t. It is not surprising, for instance, that Facebook used its VPN, Onavo Protect, to collect personal data. As a general rule, if the VPN is free, you are probably the product, so stay away.

CHANGE YOUR SETTINGS

You should assume that all settings for all products and services are privacy-unfriendly by default. Make sure you change your settings to the level of privacy you aim to achieve. Block cookies on your browser, or on some of your browsers. It is especially important to block cross-site tracking cookies. If you choose more secure and private settings, it might impact the functionality of some sites. At least some of those sites will not be worth visiting. You can start with strict settings and modify as you go along, according to your needs. Consider using your browser on a private mode (but keep in mind that such incognito modes only delete traces of your online activity on your computer; they do not protect you from external tracking). These excerpts from Privacy is Power: Why and How You Should Take Back Control of Your Data, by Carissa Véliz (June 2021) were edited for brevity and format.

November 2021 | Luckbox

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BY 1893 INSPIRED

F E W H A S T H E S P I C E . H A N D - M A D E I N S M A L L B ATC H E S, U S I N G A M A S H-B I L L INSPIRED BY WHISKEY ’S PRE-PROHIBITION GOLDEN ERA. F E W COMBINES A HIGH RYE CONTENT & PEPPERY YE A ST TO MAKE A UNIQUELY SPIC Y BOURBON.

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trends

life, luxury & the pursuit of happiness

DIVERSIONS

Tripping Over Microdosing

Taking small doses of LSD or magic mushrooms has long been a part of Silicon Valley lore, but does the research support the hype? By Mike Reddy

hen the co-founder and CEO of a $2 billion marketing startup was fired in April, the circumstances surrounding his ouster sparked a flurry of media attention. “Iterable CEO Justin Zhu says he was fired for taking LSD before investor meeting,” read an Euronews headline. Similar headlines appeared in Bloomberg, Business Insider, Forbes and Fortune, among others. It’s not surprising that Zhu’s story blew up in the press. One can’t help but wonder what would motivate someone in his position to do something so seemingly bizarre. According to Bloomberg, he was trying to take a microdose of the psychedelic drug to improve his focus and consequently enhance a pitch he had to deliver to an investor group. As it relates to psychedelics, microdosing is typically defined as taking a

November 2021 | Luckbox

6:16 AM

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trends

Classic psychedelics show robust antidepressant effects, anxiolytic effects and therapeutic benefits for people who want to overcome substance use disorders. small enough dose of LSD or mushrooms containing psilocybin (aka magic mushrooms) to derive benefits without launching into a full-blown hallucinogenic trip. Instead, Zhu took too much, struggled to deliver the pitch as intended and ultimately didn’t secure the investment. The episode would be cited later as the primary reason for his firing. But interest in psychedelic microdosing isn’t wholly unreasonable. The trend basks in the media limelight often, usually accompanied by firsthand accounts of ushering in a variety of eye-catching advantages. Consider the following headlines, for example: n “Interview With a Corporate Banker Who Microdosed His Way to the Top” —Vice (2016) n “Microdosing Psychedelics Could Make People More Creative” —The Atlantic (2018) n “Moms Who Microdose ‘Magic’ Mushrooms Say the Psychedelic Made Them Better Parents” — Insider (2021)

From increasing focus and general well-being to improving job performance and parenting, microdosing psychedelics certainly looks to be a panacea. But looks aren’t everything. Findings from a self-blinding citizen science study, for instance, cast doubts on the media hype. The study, published in the eLife scientific journal, was the largest placebo-controlled study of psychedelics to date. It found that after four weeks, psychological outcomes improved from baseline for the microdosing group, but “the placebo group also improved and no significant between-groups differences were observed.” “The findings,” it said, “suggest that anecdotal benefits of microdosing can be explained by the placebo effect.” With piqued interest, the Luckbox team started asking around about microdosing. Cardano founder Charles Hoskinson—featured in last month’s The Future of the Future of Money issue—has spoken

PSYCHEDELIC STOCKS Compass Pathways (CMPS), a U.K.-based mental health care company, is studying ways that psilocybin therapy can help people with treatment-resistant depression. MindMed (MMED), a New York-based psychedelic biotech company, develops psychedelic-inspired medicines and therapies to address addiction and mental illness. Field Trip Health Ltd. (FTRP), a Toronto-based company, specializes in treatment that combines psychedelic medicine with therapeutic processing and integration.

about psychedelics and mushrooms in podcasts and video livestreams. Before parting ways after his interview, Hoskinson shared that he was skeptical about microdosing, adding that he considered it “a fad.” “I think it’s ignoring the real value of psychedelics,” he told Luckbox. “You collect a lifetime of mental trauma and conditioning because of your lifestyle and society, and your brain gets stuck. “Counseling and therapy sometimes can’t unstick you, and so what you do is you just go in, you break the egg, you scramble everything up, and you open a beginner’s mind again. And all those cobwebs, they get cleared out.” Putting it another way, Hoskinson likened the potential of psychedelics to the magic touch of The Fonz in Happy Days. “He’d go and hit the jukebox, and then the damn thing starts playing again,” he said. “That’s what a psychedelic that’s worthwhile is going to do for you.” Hoskinson pointed to the work conducted at Johns Hopkins’ Center for Psychedelic and Consciousness Research as further evidence for the drugs’ potential. In 2000, Johns Hopkins was the first to gain regulatory approval to reinitiate research with psychedelics in healthy, psychedelic-naive volunteers, and it has published more than 60 peer-reviewed articles in the years since. Natalie Gukasyan and Albert Garcia-Romeu both study psychedelics for Johns Hopkins, and they share similar perspectives about microdosing: There just isn’t enough conclusive evidence out there to suggest it lives up to the buzz. “It might be that we haven’t done the right kind of lab study

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trends

yet to really employ a measure that would be able to accurately quantify the kinds of benefits that people are experiencing,” Gukasyan told Luckbox. “But the ones I’ve seen to date have shown pretty lackluster evidence for any kind of benefits for mood or concentration.” Garcia-Romeu, too, said that based on his reading of the studies, he doesn’t see anything that indicates there’s a benefit to microdosing. But the potential of psychedelic drugs goes beyond microdosing, he noted, with the research conducted thus far showing far more promise and straightforward results. Findings over the past two decades suggest they could be used in a variety of treatments, including for depression and smoking cessation. “The data there are, I wouldn’t say conclusive enough to get an FDA approval right now,” GarciaRomeu said, “but they’re moving in that direction with the classic psychedelics showing pretty robust antidepressant effects, anxiolytic effects—meaning reducing anxiety—and therapeutic benefits for people who would like to overcome substance use problems.” In one study, 15 longtime smokers, who had previously tried and failed to quit smoking, took psilocybin in a treatment program involving cognitive behavioral therapy. After six months, 80% hadn’t smoked again. So what does the future hold for psychedelic research? A lot of the work, according to Garcia-Romeu, is geared toward completing phase 3 clinical studies and then seeking medical approval. Gukasyan said she’s optimistic about approval for drugs like psilocybin in the next several years but that it’s not yet absolute. “I think a lot of people are expecting it to be,” she said. “There’s been millions and millions of dollars poured into infrastructure to get ready for something like that, but you never know.” Even if the research is favorable,

DAY TRIPS Asked why psychedelic research seems to focus on psilocybin mushrooms more than other psychedelics, Johns Hopkins researcher Albert Garcia-Romeu said it was mainly because of taboos and cultural baggage dating back to the ‘60s. “One of my professors joked that the reason they’re studying psilocybin is because it’s not spelled LSD,” he said. But there’s no reason to believe one would be more effective than another for any specific type of treatment. Still, psilocybin does have benefits in clinical settings due to its six- to eight-hour action time—notably shorter than LSD’s. Although experiences vary from person to person—and based on dosages—estimated trip durations for the most commonly known psychedelics are listed below.

Ayahuasca: 4-6 hours

Psilocybin: 6-8 hours

Mescaline: 8-12 hours

LSD: 8-12 hours

she noted, legislative action would still be necessary to reschedule the drugs, and it’s difficult to predict the outcome in Congress. As for the former CEO of Iterable, Justin Zhu said in a Bloomberg Technology interview that he definitely wouldn’t recommend taking LSD the way he did. But he maintained

that it helped heal trauma and stress associated with his role. “From my experience, it has changed my life,” he said. “It has changed my relationships with my mom, with our employees, and just with how I process emotions and difficulties I face as an Asian-American and also as a founder and CEO.”

November 2021 | Luckbox

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trends

SENTIMENT

SHOULD SOCIETY LEGALIZE PSYCHEDELICS? I N T E L L I G E N C E S Q U A R E D U.S. invites some of the world’s brightest thinkers to debate issues of the day. The organization was founded in New York in 2006 to promote intellectual diversity by fostering respect for differing opinions.

32 MILLION

Oxford style. The side that convinces more audience members to embrace its arguments wins. The excerpts below come from a debate in April on the legalization of psychedelic drugs.

FOR

–F1000 RESEARCH

31% 48% 21% FOR

The debates are organized in the traditional

ESTIMATED NUMBER OF AMERICANS WHO HAVE USED PSYCHEDELICS

AGAINST

UNDECIDED

–LUCKBOX READER SURVEY

66% 14% 21% FOR

AGAINST

UNDECIDED

–AUDIENCE OPINION BEFORE THE DEBATE

AGAINST

DOBLIN: The form of legalization I’m talking about is licensed legalization, where you have a license to do these drugs. And if you misbehave, you get punished for your misbehavior but not for the state of consciousness you were in or the drugs you had taken. Now, a series of policies should go with this kind of licensed legalization. The first is honest drug education. We also need access to pure drugs, and we need harm-reduction techniques. In addition to these policies, we need treatment on demand. That’s really important and that will be paid for by the taxes from people who are buying these drugs.

LIEBERMAN: Psychedelic drugs are a unique class of substances. On the good side, they have nothing to do with the drug wars. They’re not addictive drugs because they’re not euphoriants and they’re not hedonistic. They offer a subjective, altered state of consciousness that’s potentially revealing about people, the world or life in general. We don’t know the extent to which that can be put to useful purposes, both to discover human potential and for therapeutic uses. We agree 90%, and it’s really just about terminology. I’m definitely in favor of legalization for medical uses and definitely for decriminalization.

LABATE: I have studied sacred ayahuasca plants used by the indigenous peoples of the Americas. They’re said to have been known and used since time immemorial. So, we’re not inventing the wheel here. We’re talking about things that have deep roots in our nations and consciousness. Let’s remind ourselves that the current scheduling of drugs is absolutely nonscientific, and there are a lot of historical, cultural and social reasons for why the substances are divided into such categories. We all know the drug war is a moral and cultural war.

SABET: I’m just more cynical, having been in three different White House administrations and in every state capital talking specifically about cannabis policy, but also about alcohol, tobacco and other drugs like opioids. We’ve never really gotten it right. The perfect balance has not happened. In the United States, it’s about big business and addiction for profit. It’s not necessarily about the addictiveness but about people investing and making money in something harmful.

Rick Doblin executive director of the Multidisciplinary Association for Psychedelic Studies

Jeffrey Lieberman professor and chair of the Department of Psychiatry at Columbia University

Bia Labate anthropologist and drug policy expert

Kevin Sabet president and CEO of Smart Approaches to Marijuana

More Debate See who won the debate

Luckbox | November 2021

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trends

RECORD HIGH

From your most-played songs to your search results in the middle of the night, the music streaming platform knows every action you take within the app By Kendall Polidori

PHOTOGRAPH: THIAGO PRUDENCIO/SOPA IMAGES/SIPA USA

Spotify Knows More About You Than Your Taste in Music

t’s no secret that the internet created a world where digital “privacy” is practically extinct. Streaming services monitor users’ interests, habits and even the mood they’re in on a particular evening. They use that information to target suggestions for what to listen to or watch—and to choose what ads users see or hear. But in a digitally dominant society, is it really all that bad if streaming services like Spotify know when someone is feeling lonesome and listening to The Moody Blues’ Melancholy Man on repeat at 2 a.m.? At least that way the service can make some logical suggestions for what to listen to when wallowing in sorrow in the middle of the night. Like all other streaming platforms, Spotify tracks and collects personal data: sign-up information like names, usernames, email addresses, billing addresses, phone numbers, dates of birth, genders, countries and cities. Unlike other platforms that are obviously collecting data, like Facebook and Google, Spotify has a more personal insight into its users’ lives. By tracking each song a user plays, what playlists they create or what podcast topics they choose, the platform can understand the mood or mindset of a user at any point in time. Music consumption is personal and intimate, and the ability to understand users’ behavioral data is key for creating Spotify’s personal profiles. Bryan Barletta, author and host of the newsletter/podcast Sounds Profitable—which focuses on audio and podcasting advertising— said it’s easy for streaming services to cross a line when collecting data. Spotify amasses an immense amount of data, but they are “going in the right direction with it,” instead of exploiting it, he said. The situation gets tricky when third-party platforms are involved because they’re more likely than Spotify to misuse the data, Barletta noted. For example, if a user signs up for Spotify with a Facebook account, that opens up more opportunities for data sharing. “It’s important to know that as users, you gave them this information,” Barletta said, adding that Spotify users can avoid third-party access by signing up for a free account or by making sure not to link the platform to other social media accounts. Spotify has become one of the largest collectors and gatekeepers of user data, but James Shelly, head of marketing content at Ethyca—a

Luckbox | November 2021

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trends

firm that helps companies identify and organize data collection—said the platform does an impressive job of presenting its privacy policy in an easy, digestible way. Like Ethyca, Spotify has a centralized hub where users can manage their privacy rights. “For the first 15 years of the internet, people were just kind of collecting data willy nilly, and that is a technical and operational challenge. So our software automates a lot of the privacy rights fulfillment processes that companies would otherwise have to employ people to go digging around in databases for. So we eliminate the potential of human error as well,” Shelly said. Spotify, which isn’t an Ethyca client, goes “above and beyond” in terms of users’ privacy rights, he said. The company itself is not required to grant users access to their data or the right to have it deleted in the U.S., but it offers it to them anyway. Spotify reigns supreme in data collection and knows exactly how to use it for “good”— making its music experience better for users. With personalized home pages and a slew of personally curated playlists and song suggestions (Daily Mixes, Discover Weekly, Artist Radios, Jump Back In, Made For You, Your Top Mixes, Fresh Finds, Uniquely Yours, and many more), Spotify employs users’ data to keep reeling them back in for more. Outside of Ethyca, Shelly spends his free time helping local musicians get their music algorithmically playlisted on Spotify. As a former musician, he understands the difficulty in getting high engagement on songs and said it’s challenging to grow a listener base without already having an established fanbase. Artists don’t know how platforms evaluate a song’s performance or what criteria they use to choose songs for playlisting, Shelly said. “The uncertainty means that there’s lots of room for emerging artists to get conned into paying to be featured on user playlists that don’t deliver real, engaged listens, thinking it is a good way to grow their profile,” he maintained. Spotify creates more than 100 million data points every day and has 365 million monthly users, according to an article in WIRED. But laws in Europe and California restrict the use of that data. The General Data Protection Regulation, or GDPR, gives users in the European Union the right to access data Spotify processes and the right to request the company update, delete

THE GREATEST SONGS OF ALL TIME? More than 250 musicians, journalists, and music industry executives recently helped Rolling Stone magazine choose the 500 greatest songs of all time. Naturally, not everybody agreed with the resulting list. So Luckbox asked readers to pick their five favorites from the top 20 in the RS rankings. Here’s the comparison: 1. Respect, ARETHA FRANKLIN 2. Fight the Power, PUBLIC ENEMY 3. A Change is Gonna Come, SAM COOKE

4. Like a Rolling Stone, BOB DYLAN 5. Smells Like Teen Spirit, NIRVANA —Rolling Stone

or stop processing data. They can object to the processing of data, request a copy of data collected and avoid profiling. The California Consumer Privacy Act, or CCPA, protects residents of California. “Consent is probably the biggest friction point … users get frustrated by all the hoops they have to jump through, and then they end up doing something that they later regret in terms of consenting to a certain use of their data,” Shelly said. About 97% of Americans say they have been asked to approve privacy policies when signing up for a service, according to a 2019 study by Pew Research Center. But only one in five adults always or often read privacy policies before agreeing to them, while 38% of adults sometimes read policies and 36% never read them, the study found. Besides vigorous data collection, Spotify has a computer-operated algorithm that lends a hand in song or artist recommendations. Spotify’s algorithm is the AI system Bandits for Recommendations as Treatments, or BaRT. It functions on two principles: exploit and explore. The first focuses on a user’s activity and the latter on activity by all Spotify users. It creates a home screen for each user with rows of recommended playlists, radio programs and albums. Some 69% of younger consumers are willing to share personal information with an app or streaming platform in exchange for personalized services, a survey by Entrust indicates.

1. Bohemian Rhapsody, QUEEN 2. Respect, ARETHA FRANKLIN 3. Imagine, JOHN LENNON 4. Smells Like Teen Spirit, NIRVANA 5. Gimme Shelter, ROLLING STONES —Luckbox Reader Survey

Spotify gains access to extra information about its users if they sign up through thirdparty services such as Facebook. And the platform shares users’ personal data with other Spotify group companies. It also releases user data to its advertising partners. So, does it ever cross a line? In 2018, an Austrian developer named Peter Steinberger tried the GDPR data export from Spotify and received a 250MB archive with every interaction he ever had with any Spotify client. The report revealed that Spotify tracks everything users do within the app, including noting which headphones they use. But Spotify respects data privacy and remains transparent about what it collects and how it’s used, Barletta said. The company does not sell users’ data, he noted. Spotify is more upfront than other platforms that collect data and feels more private than social media like Twitter or Facebook because users are not uploading photos or posting tweets or statuses. But users are adding to its algorithm in a different way—instead of setting their status as “feeling nostalgic,” Spotify knows when a user is feeling nostalgic by simply noting that they are listening to the Best of the ‘80s playlist. “Every action you make on the app is collected, and it contributes to ad rollout and user experience,” Barletta said. “We’re not as unique as we hope we are. Actions made by users that are similar then become trends. People are only outraged [about data collection] when it is in their face.”

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The psychedelic-rock artist reimagines a ’70s-esque, soft-rock sound with guitar-driven songs. By Kendall Polidori Ty Segall & the Freedom Band ringing one guitar solo after another on Day Two of Pitchfork Music Festival.

Since 2006, the Pitchfork Music Festival that grew out of the renowned music publication has graced Chicago’s Union Park with undeniably talented bands from a range of genres. These artists aren’t necessarily the most popular—they’re often the hidden gems that represent the best of their genre and show what may lie ahead in music. It’s tempting to throw all of the bands at Pitchfork into the “indie” category, but that doesn’t recognize their diversity. The festival actually displays everything that makes great music across a wide spectrum of genres. Acts range from indiefolk rockers Phoebe Bridgers, Big Thief and Waxahatchee, to eccentric psych-rock groups like Ty Segall & Freedom Band and Divino Niño. They run the gamut from funky acidjazz artists like Thundercat, to the neo-soul of Erykah Badu. Groups like Special Interest intertwine electronic beats with a heavy punk in-your-face vibration. Even those who hesitate to venture beyond the familiar can begin their exploration of Pitchfork by listening to music from their go-to genres. They may even find themselves devoting time to a genre they’ve previously ignored or even disdained. Before performing at Pitchfork in August, Tamara Lindeman, frontwoman of the Canadian folk band The Weather Station, said she likes to know the people behind the music, which then leads her to find new music in relation to those artists. You expand your musical hori-

PHOTOGRAPHY: KENDALL POLIDORI

Ty Segall Channels Jimmy Page

The Beatles, Stones and Zeppelin were awesome, but rock lives on. Why not break out of the classic rock cocoon and give new music a chance? Rockhound is here to help. Think of it as a bridge from 1967 to today and beyond.

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KEEP ON YOUR RADAR Tamara Lindeman of The Weather Station refers to Joni Mitchell as a source of inspiration she never tries to have: “She haunts me. She’s like my aunt, or it feels like she’s a relative or something. I have been following her for a long time whether I mean to or not.” And it’s evident in her music. Lindeman’s music is lyric-led and based in folk roots, resonating with Mitchell’s lyrical genius and work on albums such as Blue. Because she leads her music with her lyrics, before her Pitchfork performance Lindeman told Luckbox that her sound has changed immensely throughout the years. If her lyrics demand a different energy or instrument, she adapts—quite often teaching herself how to play a new instrument in order to capture what her words call for. The Weather Station is more than one sound, the band is an aesthetic and resonates with other folk/rock-based names, such as Bob Dylan and Fiona Apple.

VOICE OF AN ANGEL If you had your eyes closed while listening to Some Things Cosmic by singer-songwriter and musician Angel Olsen, you’d likely assume she was from the era of Judy Garland. Her voice is angelic and can be described as vintage. Her influences have been referred back to country-pop artists Pasty Cline and country-rock icon Roy Orbison, but she also uses the influences of classic jazzy-rock to create a sound that is uniquely her own. During her set at Chicago’s Pitchfork Music Festival, Olsen performed a cover of one of jazz-folk artist Marvin Tate’s songs, nodding toward the influence of jazz.

MELDING GENRES After Philadelphia-based rock band Hop Along’s performance at Pitchfork, drummer Mark Quinlan told Luckbox that every member brings their own musical interests and inspirations to the forefront, creating a melting pot of what he said he hopes is a unique sound. For him, it’s heavy grunge, ‘60s prestige and blue note jazz; guitarist Joe Reinhart builds off of that of The Beatles and Elvis Costello; bassist Tyler Long pays tribute to classic rock Americana; and frontwoman Francis Quinlan is a little bit of everything, with an eclectic taste. “Fran

zons by building upon what you already know. More than half of Luckbox readers, 55%, said rock was their favorite genre according to our most recent reader survey. Jazz came in second with 28% and country third with 26%. So, let’s use classic rock and jazz as examples. Ty Segall, who performed at Pitchfork, favors heavy instrumentation and guitar-driven sounds that bring to mind The Black Lips, The Strokes, The Black Keys and The Beatles. Whether he’s shredding on his Fender Mustang or his touring Les Paul, the fuzz from his guitar is the essence of rock ‘n’ roll: loud, kinetic and in your face. In typical festival fashion, Pitchfork sets start while another band’s set is still wailing across the park. The results aren’t always great.

Pitchfork Music Festival had a packed lineup with acts like (clockwise) Hop Along, Angel Olsen and The Weather Station.

provides us with an idea of a structure. And we sort of use that as a dartboard that we throw things at and see what sticks. I like to think of it as a library of resources that we all have access to,” Quinlan said. The band is surely not without range, mixing Francis’ raspy vocals and acoustic guitar with electrics.

In one example, indie artist Fay Webster’s soft pop-rock melodies were drowned out by Segall’s band. But at least that made the latter impossible to ignore. Segall’s fuzzy guitar riffs seem like something out of the early repertoire of Led Zeppelin’s Jimmy Page. But Segall also displays immense range, switching from the bluesy but explosive pace of The Faker (which mirrors The Black Keys’ early sound) to an acoustic-driven vibe in The Keepers, a song that invokes the sound of The Beatles. There’s no question that today’s rock differs from classic rock of the ‘50s, ‘60s and ‘70s, and that’s why it’s vital to listen to artists like Segall. Inspired by rock, blues and jazz, Segall and other indie-rock artists are giving birth to their own versions

of rock ‘n’ roll. Although undeniably original, the sounds of the new rockers capture a hint of nostalgia that honors the gods of rock. Start with his song Whisper— close your eyes and you’ll hear a Whole Lotta Love-era Zeppelin. Pay attention to Segall’s quick transitions between smooth melodies and powerful slides on his guitar. Segall and his band were scheduled to be in Atlanta on Oct. 22 for the Shaky Knees Music Festival and will make their way to California for the remainder of the year. Keep up with him and his upcoming tour dates on his website.

More Segall Listen to his full album Manipulator

Kendall Polidori is Luckbox’s resident rock critic. Follow her reviews on Instagram @rockhound_luckbox and Twitter @rockhoundlb.

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BOOK VALUE

The Luckbox Bookshelf New and not-so-new books that captured our attention this month

The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power By Shoshana Zuboff

Shoshana Zuboff came up with the phrase “surveillance capitalism” to describe how companies accumulate wealth and amass power in the new “behavioral futures markets.” As Zuboff notes in her book The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power, companies use these markets to buy and sell predictions about people’s behavior. They also use these markets to introduce behavioral modification that can drive the production and consumption of goods and services. Zuboff, formerly a professor at Harvard Business School, outlines the recent history of U.S. tech companies that gave rise to surveillance capitalism and argues that the accompanying behavioral modification threatens the state of human nature in the 21st century, much the way industrial capitalism changed the world in the 19th and 20th centuries. Both revolutions brought new forms of oppression, she writes. Early industries were often founded on inhumane working conditions, and today’s corporate data-gathering techniques can threaten the foundation of democratic societies by contributing to political polarization. She equates the instrumentarian power of surveillance capitalism with totalitarianism and warns that the former will dominate the social order and shape the digital future. In short, her message reads: “They are watching you … with your full consent.”

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Privacy is Power: Why and How You Should Take Back Control of Your Data By Carissa Véliz

Your cell phone is safely ensconced in your back pocket while you’re talking to a friend about finding a new face wash to change up your skincare routine. Later in the evening, you’re scrolling through Instagram and an ad for a face wash product pops up. Every click, swipe or scroll you make on your phone, laptop or tablet compromises your personal data. But it gets worse. As Oxford professor Carissa Véliz notes in her book Privacy is Power: Why and How You Should Take Back Control of Your Data, technology is spying on us even when we’re not using it. In fact, privacy is nearly extinct thanks to big technology and government, Véliz writes. She also discusses why that matters and offers advice on what to do about it. To take back control, pressure policymakers to regulate data privacy and adopt privacyfriendly alternatives to Google, Facebook and other online platforms, she urges. A laid-back attitude toward data collection won’t protect privacy. (For more thoughts from Véliz, see the Luckbox Privacy Roundtable, p. 16, and an excerpt from her book, p. 28.)

The Filter Bubble: How the New Personalized Web Is Changing What We Read and How We Think

Price Is Primary: An Investment Philosophy: How To Profit With Any Asset In Any Market At Any Time

By Eli Pariser

By Jonathan Hoenig with Stuart K. Hayashi

Online platforms, including Google, began personalizing search results in the early 2000s. They customize results to match the sites that their data shows people are likely to visit. In The Filter Bubble: How the New Personalized Web Is Changing What We Read and How We Think, Eli Pariser outlines the ways personalization in the quest for information and the consumption of news can control how people view the world. He argues that personalized search results lead to an information bubble, where platforms feed users only the news and information that confirms their own beliefs. Because the filters are invisible, users have no idea what information the search engine is hiding. Pariser explains how filter bubbles polarize society and endanger democracy, while also providing advice on how to stop the practice. Readers may be familiar with Pariser’s work as board president of moveon.org, a progressive advocacy group and political action committee.

Price is everything. Or as Jonathan Hoenig would say, “Price is the market. Price is reality. Price is primary.” In his book Price Is Primary: An Investment Philosophy: How To Profit With Any Asset in Any Market at Any Time, Hoenig, manager of Capitalistpig Hedge Fund LLC and a Fox News contributor, maintains that people can trust and rely on consistent principles, especially in investing. Hoenig, who was influenced by the work of writer and philosopher Ayn Rand, presents an investment philosophy that he says has helped Capitalistpig beat the market for the past 20 years. It hinges on the importance of price and trend. And it embraces the notion that what’s important isn’t what people invest in—it’s about how they invest in it.

The Authority of the Court and the Peril of Politics By Stephen Breyer

Too many Americans have come to view U.S. Supreme Court justices as “unelected political officials, or junior varsity politicians ... rather than jurists,” according to Stephen Breyer, veteran of 27 years on the bench of the highest court in the land. In his book, The Authority of the Court and the Peril of Politics, Breyer contends that such an interpretation does not hold up upon close scrutiny. Instead, the justices apply a set of interpretive tools to decide cases. Indeed, the erroneous belief that the court operates as a political vehicle could lead to damaging reforms, he writes, suggesting that the solution lies in promoting a better understanding of how the judiciary works. Without the public’s trust, the court cannot act as a check and balance to other branches of government, seriously imperiling the constitutional system, he warns.

Far too often, book reviews drive away readers. But reviews present just one stranger’s view, and taking them to heart leaves great books undiscovered. The Luckbox Bookshelf offers profiles instead of reviews. Don’t look to these pages for opinions. Think of Bookshelf as a place to discover books that educate, entertain and challenge entrenched beliefs.

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TRADER

ALEX WEISENBACH

and the dynamics of non-linear payoffs were fascinating. Although I wasn’t learning calculus or differential equations at that age, I still think my interest in options helped me develop better intuition for math that I didn’t learn more about until college. Favorite trading strategy for what you trade most?

Home/Office location

Cornell University (Class of 2023) Age

Intro

Alex Weisenbach began investing when he was 9 years old. Upon discovering tastytrade, a network that covers stocks and options, he called in so often to express his opinion that co-CEO Tom Sosnoff invited him to appear on a show. Years trading

How did you start trading?

I became interested in invest-

1 Bloomberg watchlist 2 A trading tool that I built

Average number of trades per day?

4 7

2 3

My approach to trading differs significantly from that of most retail traders because I trade with the goal of capturing a theoretical edge. My goal is to identify options that are mispriced from theoretical value, trade the option and try to minimize my exposure to both volatility and directional risk. My ideal scenario is a trade that is absolutely delta and vega neutral. Therefore, I rarely enforce any particular risk structure. Generally, my positions include relatively complex combinations of stock and options—both long and short across tenors and strikes. However, because I am not making markets, I have the freedom to choose which positions I accumulate. I tend to accumulate very large positions relative to the size of my account if I can structure a position with an asymmetric payoff and get the edge while doing so.

ing in 2009 at the age of eight. I started following the economy and wanted to learn more about seemingly “invisible forces” that appeared to govern everybody’s lives. I started “investing” when I was nine. I told my dad I wanted to open a Uniform Gift to Minors brokerage account, and he agreed under the condition that I fund it with my own money. I spent six months saving up $500, and after my ninth birthday, I opened my first brokerage account. When I was around 11, I became fascinated with the dynamics of options trading. There was a lot more complexity in the thinking required to understand an options trade, and that seemed to catch my attention. I thought the greeks

3 Bloomberg Chat 4 Volatility term structure graphs 5 Bloomberg option chains 6 ICE chat and alert system 7 thinkorswim 8 Visual studio (c++ code)

When I am actively trading, I typically make 50-100 trades a day. In March of 2020, I was doing in excess of 1,000 trades a day. My approach to markets depends on the opportunities available on a particular day. What percentage of your outcomes do you attribute to luck?

Most of the trades I do have very uninteresting payoffs. There are a lot of small profits and losses, with perhaps 5% having larger P&L swings. Typically, my goal is to accumulate a lot of trades with a positive edge and manage the risk around those trades.

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Favorite trading moment?

Around expiration, I end up with a lot of expiring positions in random and often otherwise illiquid stocks. In one situation, someone really wanted to buy the 7.5 strike puts in a relatively illiquid biotech stock on Friday right before options expiration. This is strange behavior. The stock was trading a bit higher than $15 per share, so these options were deep out-of-the-money (OTM) and likely to expire worthless. This buyer was willing to buy the $7.5 put for five cents in size. It just so happened that the $15 put at the time was trading at a 10-cent offer. That means I could sell the $7.5 puts and buy the $15 puts (two 7.5 puts to one 15-put) and create a position that

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More Alex The Making of a “Future Rising Star”

could not lose at any stock price. This was clear arbitrage sitting on the screen and nobody was trading it! I obviously took the trade. After the market closed, the stock began to crater (trading just slightly above my short strike). As the stock dropped after the close, I had to exercise all the puts I was long because I couldn’t be sure what closing print the OCC would choose for automatic exercise. I ended up short a lot of shares of stock over the weekend because the $7.5 put was still clearly OTM. The stock opened up around maybe $8 a share on the Monday morning, and having exercised my $15 puts, I received short shares for $15 per share and I bought most of those shares back around $8.

Worst trading moment?

The worst situation I have ever been in was around the Brexit vote in 2016. I had significant short-volatility exposure in /ES futures before the upcoming Brexit event. Obviously, I was expecting that it would be a non-event and that the volatility was inflated, similar to an earnings trade. After the results of the vote, the /ES futures tanked, requiring me to short the futures to try and neutralize some of my delta risk. I essentially had to accumulate around $1 million of notional in /ES. The /ES ended up locked limit down overnight. In the morning, /ES began to rise and continued to do so for the next few days. This is the absolute worst position to be in if you were short gamma and volatility.

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FITNESS

Losing the COVID 15

A fitness expert offers advice on losing those pandemic-induced pounds By Jim Schultz

re-COVID, you were cruising: Crushing personal records in the gym and keeping the physique lean and mean. But after a brand new virus, a few citywide lockdowns, and a lengthy quarantine or two, you’re still coasting along—just at about 108% of your former self. Maybe it happened gradually, like a slow leak. Or maybe it happened all at once, like a busted pipe. Either way, you’ve been living your best life, and it shows. Your favorite white T-shirt is now off-limits, and your go-to jeans leave you looking like a busted tube of frozen biscuits. You’ve been moving less or you’ve been eating more. Or maybe you’ve been doing both and thus achieving the ultimate COVID 15 combo pack. So, how do you get back to pre-COVID levels and reclaim the fitness of days gone by? I’m going to be real with you guys. To reverse the process, you’re going to need to do the same crap you’ve heard about before. You need to tilt the energy balance equation back in your favor. You will need to consume fewer calories than you expend and start to starve out those fat cells. Put simply, you need to move more and eat less. And just like it was easy to choose immobility and ice cream, you need to make it easy to choose activities and apples now. In other words, you need to make

it mission-critical that you control your surroundings. As studies have shown, and as author James Clear hammered home quite effectively in his New York Times bestselling book, Atomic Habits, you have to equip your environment for success. Make it easy to make good choices. Make it hard to make bad choices. For instance, do you like training early in the morning? Set out all your gear the night before. Lay your training clothes out, unlace your sneakers, and place your keys next to your earbud charging station. Put your pre-workout powder in your gym bag, and put your gym bag in your trunk. At 5:30 a.m., you don’t want to be fumbling around trying to figure out what you need. You want to get up, grab your fuel and get going. Or maybe you prefer evening sessions? Four times per week you set up your den for a band and bodyweight workout. It’s set and scheduled. That’s your time to focus on fitness. Your spouse knows that from 6:00 p.m. to 6:30 p.m. you’re busy on those nights. And what about nutrition? In this new era of working from home, this one is both the simplest and most important part of the program. Keep the tasty treats out of arm’s reach, and you’ll find it easy to accomplish your goals. But if you keep those same scrumptious snacks within

Jim Schultz found a way to stay fit and competition-ready during the COVID shutdown of gyms by working out regularly at home.

Equip your environment for success. Make it easy to make good choices.

eyesight, you’ll struggle to gain any traction. It’s that simple. There’s no excuse. You can stock the cupboards with whatever you please, so if you’re stockpiling cookies within reach of the couch, that’s on you. If you’ve got a brood to nurture and feed, then it won’t be as easy. Captain Crunch will naturally take up residence at your house. That may test your willpower, but you can strive for moderation. Start small. Eat a little bit less and move a little bit more. People often overestimate what needs to be done in a day, and they underestimate what can be done in a month. Control your surroundings, prioritize your training and grab hold of your nutrition. Before you know it, you’ll be back in your favorite jeans. And not even the been-wornfor-three-weeks-and-super-loose version of those jeans. You’ll be sliding into the freshly dried, super-snug version of those jeans—no problem. Jim Schultz, Ph.D., a derivatives trader, fitness expert, owner of livefcubed.com and the daily host of From Theory to Practice on the tastytrade network, was named the North American Natural Bodybuilding Federation’s 2017 Novice Bodybuilding Champion. @jschultzf3

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CALENDAR

NOVEMBER 1 Indie Spirits Expo Chicago 4 Earnings: Spotify & NortonLifeLock 7 Daylight Saving Time Ends

9 2021-22 College Basketball Season Starts, Champions Classic New York

10 Cyber Security & Data Protection Summit Virtual

PHOTOGRAPHS: (FDR MEMORIAL) SONDER QUEST; (JUKEBOX) SCHUBINGER; (BLACK FRIDAY) REUTERS

11 Earnings: COMPASS Pathways 12-14 Day N Vegas Music Festival

13 Wall Street Crash bottomed out in 1929

15 Earnings: Palo Alto Networks

24 National Jukebox Day

25 Thanksgiving

26 Black Friday

29 Cyber Monday

Wall Street Hits Bottom The Great Depression began in 1929 when the stock market crashed from Sept. 4-Nov. 13. It included Black Thursday on Oct. 24, when the largest sell-off of shares in U.S. history sapped the market of 11% of its value. Black Monday on Oct. 28 of that year saw a record loss of 38.33 points or 12.82% in the Dow Jones Industrial Average. The next day, Black Tuesday, investors traded 16 million shares on the New York Stock Exchange, and the Dow lost 11.73% of its value. That made for a decline of 23% in just two days. The next day, Oct. 30, the Dow gained 12.34%. Stock markets now halt trading when prices decline rapidly. National Jukebox Day In 1927, the Automatic Music Instrument Co., also known as AMI, created the first electric jukebox. The new device quickly replaced live bands at bars and restaurants. It earned its name by the 1940s in juke houses and juke joints where people gathered to drink, dance and gamble. In the ‘30s and ‘40s, four companies dominated the jukebox industry: AMI, Wurlitzer, Seeburg and Rock-Ola, and the latter is still manufacturing jukeboxes to this day. The Wurlitzer model 1015 from 1946 remains the most iconic jukebox, and its rounded top and bubble tubes still feel familiar. It wasn’t until 2010 that the music and entertainment platform TouchTunes brought back the idea of the “vintage” jukebox with an interactive touch screen and mobile apps to dip into people’s music libraries. The nation began recognizing Jukebox Day in 2017, and TouchTunes holds sweepstakes to observe the occasion. It falls on the date the jukebox was invented and is coincidentally the day before Thanksgiving, when people tend to go out to bars and restaurants. Black Friday and Cyber Monday The phrase “Black Friday” came into wide use in the 1980s to describe the day after Thanksgiving. That’s when the public begins buying Christmas presents and retailers start to turn a profit for the year. Retail analysts coined “Cyber Monday” in 2005 for the beginning of the online Christmas shopping season that starts on the first workday after Thanksgiving. Last year, more Americans shopped online on Cyber Monday than in stores on Black Friday, at least partly because of the COVID-19 pandemic. Combined, 186.4 million U.S. shoppers made purchases during and immediately after the Thanksgiving weekend, down 1.7% from 2019. The trend of sales shifting online continued last year when U.S. shoppers spent $10.8 billion on the internet at the beginning of the Christmas season, a 15% increase from 2019. That migration to virtual shopping may slow this year as pandemic restrictions ease.

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Trade the Stocks Behind Crypto! Small Cryptocurrency gathers innovators in the space for a unique opportunity to invest, speculate, and manage risk in securities driven by growth in cryptocurrencies with one easy trade. GO.SMALLEXCHANGE.COM/SCCX © 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information presented here is for illustrative purposes only, and is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Trading in derivatives and other financial instruments involves risk.

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trades&tactics actionable trading ideas

THE POKER TRADE

Poker Tells 101

Keep your hole cards private by concealing your tells By Jonathan Little

oker becomes a lot simpler for players who can use tells to pinpoint the strength of an opponent’s hand. Tells can indicate when someone’s bluffing or how likely it is an opponent has a premium hand. A player who can read tells can fold bluff catchers and perhaps even some strong non-nut hands. When trying to spot poker tells, know how an opponent looks and moves in normal, less stressful situations. Then look for deviations in their behavior. Be aware of anything opponents do that deviates from their normal behavior because those actions may indicate something about the strength of his or her hand. One of the main tells that amateurs exhibit is becoming obviously attentive when they have a strong hand and obviously inattentive when they have a weak hand. When players think they have a strong hand, they tend to focus and

“get in the zone,” paying attention to each player’s actions and generally sitting up a bit more. When they don’t like their hand, they become unfocused, often slouching in their chair, watching TV or talking to someone at the table. For example, you raise with 10-9 suited from middle position and both players in the blinds call. The flop comes Q-7-2. If both players are clearly uninterested, make a continuation bet that will frequently win you the pot. However, if one of the opponents perks up and is clearly interested, check behind, conceding the pot. There’s no point in bluffing when you don’t expect opponents to fold. Take a breath Base deductions about opponents’ hand strength on how quickly they’re breathing. People tend to breathe faster when they have strong hands and more slowly when they

Dan Ott contemplates his move against Scott Blumstein during the 2017 World Series of Poker Main Event in Las Vegas.

have weak hands. That’s because most people who think they are about to win a bunch of money tend to get excited whereas those who are bluffing want to appear as innocuous as possible, resulting in holding their breath and being still. Suppose everyone folds to you in middle position and you have K-10 offsuit. If the player to your left, who has already looked at his hand, is breathing at an abnormally fast pace, you should fold because K-10 fares quite poorly against a range of premium hands. When you start focusing on breathing tells, you will find some players exhibit exactly the opposite behavior, breathing quickly when bluffing and slowly with premium hands. Figure out each player’s tendencies and adjust accordingly. Don’t make the mistake of thinking that everyone will display the same mannerisms. They definitely do not. Some players make a point of trying to look strong when they have a weak hand and weak when they have a strong hand. When they’re bluffing, they may stare you down or aggressively splash chips into the pot. When they have a strong hand, they may look away from the table or meekly slide their chips into the pot. Once you figure this out about opponents, you can easily adjust to crush them. Exercise caution Most tells are unreliable unless a player has exhibited them numerous times in similar situations. Tells are best used to sway marginal decisions one way or the other. To make a “sick read” and drastically deviate from normally sound strategy, know a specific opponent’s tendencies extremely well. Nothing’s worse than making a huge fold or an insane hero call based on a tell—only to later find out that the behavior you witnessed was irrelevant. Jonathan Little, a professional poker player and WPT Player of the Year, has amassed more than $7 million in live tournament winnings, written 14 best-selling books and teaches at pokercoaching.com. @jonathanlittle

November 2021 | Luckbox

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trades& tactics

CRYPTO CURRENTLY

T H E STAT E O F C RYPTO CU R R ENC IES AND DEC ENT RALIZED FINAN CE

The Blockchain: A New Paradigm for Data A step closer to protecting individual privacy By Mark Helfman

n April 2021, Russian hackers gained access to Colonial Pipeline’s computer network and shut it down. They demanded $4.4 million in bitcoin to turn it back on, and the company quickly paid the ransom. Within months, the FBI found and seized the hackers’ bitcoins. Because bitcoin’s blockchain records every transaction, agents could track down the wallet holding the hackers’ funds and the server that the hackers stored the wallet on. Once they had that information, they simply told the server’s hosts to transfer control of the wallet to the authorities. While the bitcoins were recovered, the hackers remain at large. How could law enforcement recover funds from hackers it still can’t find—or even identify? How could a server host criminal funds without even knowing it? After all, because cryptocurrency transactions are not linked to any identity. Instead, they use computer protocols to link transactions pseudonymously, with a long string of seemingly random characters. Nobody can see a user’s identity, even though the transaction itself is public and verifiable. This feature makes it an ideal tool for data exchange. Observers know what’s going on, but not who’s doing it. With a little engineering, they can create platforms to save data privately in encrypted files, then send it anywhere without

ever revealing its contents. A record on a blockchain assures that the data is authentic and comes from a trusted source. That enables businesses and entrepreneurs to track inventory, public health records and other data without revealing its contents. They can also create data marketplaces and sharing platforms that protect individual privacy. All of the data is saved locally and exchanged using cryptocurrency to facilitate transactions, but none of the data gets recorded in a database or on a shared computer. Already, at least a dozen startups have created distributed storage platforms that use blockchains and cryptocurrency to move data without a server or private computer network. For example, Steamr worked with Filipino fishermen to record their catches and revenue on the blockchain so banks could build credit files on them. The banks didn’t need to see the records themselves, verify the catch or ask for documentation. The blockchain confirmed the data’s authenticity. Or VeChain, which uses RFID to track goods and a cryptocurrency to settle each transaction from source to sale. Each item has “My Story,” a chronology of where it came from, where it went and what happened along the way. In that case, the contents are revealed, but the same technology can keep those contents private. Their users will never have to

Anybody can find and seize your data with the right forensic evidence.

worry about their data being hacked because no hacker can access that data. To get close, a hacker would have to get access to every computer that services the network network, which is a quite a tall task. Had Colonial Pipeline stored its data on a blockchain and secured the value of its data with cryptocurrency, perhaps it never would’ve exposed itself to a hack. After all, what hacker wants to spend time and effort getting access to a computer that doesn’t have the data they want? On the other hand, this technology comes with risks. It takes only one real-world connection to unravel all of the privacy that the networks protect. Once an individual’s data is exposed, everybody has a history of how it moved. Just like the authorities could find and seize the hackers’ bitcoin, anybody can find and seize the data with the right forensic evidence. Criminals can also use the same private channels to conspire on crimes. Because the protocols don’t have any personal information about users, no one can tell whether somebody’s doing something wrong, let alone stop them from doing so. Authorities can’t do much, either. How do you subpoena a computer protocol? Mark Helfman, crypto analyst at Hacker Noon, edits and publishes the Crypto Is Easy newsletter at cryptoiseasy.substack.com. He is the author of Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency. @mkhelfman

Luckbox | November 2021

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tactics

Cheat Sheet #18

Remo v and s e ave this p age!

Cyber Scrutiny Finding the best cyber companies to trade doesn’t have to be hard. Here’s the secret formula.

Stock or ETF

Ticker

By Mike Hart

PT Telekomunikasi

TLK

Telefonica SA

TEF

Palo Alto Networks

PANW

Fortinet

FTNT

Zscaler

Global X Data Center REITs & Digital Infrastructure, ETF

VPN

Juniper Networks

JNPR

NortonLifeLock

NLOK

Okta

OKTA

Stock or ETF

Ticker

IVR

PT Telekomunikasi

TLK

yber security companies are big and growing bigger. The industry generated $120 billion in 2020 and projections call for volume to increase substantially. Therefore, trading possibilities abound. But choosing the right strategies requires the fundamental skill of knowing how to evaluate a company. Thankfully, a step-by-step process helps traders choose options trades in this or any other industry, and this Cheat Sheet lays out the basics. First, use a quick internet search to identify stocks that trade in the industry. Keep an eye out for exchange-traded funds (ETFs). For those, do a little investigating and run a search for their holdings. Create a possibility list of companies and ETFs. For the next step, look at each company on a trading platform and record the current level of implied volatility rank (IVR). Higher premiums for higher IVRs (greater than 20) mean the company may qualify as an excellent candidate for selling options. If a company has an IVR lower than 20, consider long volatility strategies. Next, confirm liquidity. Ideally, the spread between the bid and ask is a couple of cents wide. If it’s more than 20 cents, exercise caution with trading and make sure to work entry orders carefully. With those data points, evaluate options opportunities for each company and ETF. This process not only reveals opportunities but also identifies stocks and ETFs to exclude. Mike Hart, a former floor trader at the Chicago Stock Exchange and proprietary futures trader, specializes in energy markets and interest rates. He’s a contributing member of the tastytrade research team. @mikehart79

STEP

Search and identify known stocks in the sector.

STEP

Find the implied volatility rank using a trading platform for each underlying.

STEP

Determine liquidity based on the width of the bid/ask spread of the options.

Telefonica SA

TEF

Palo Alto Networks

PANW

Fortinet

FTNT

Zscaler

Global X Data Center REITs & Digital Infrastructure, ETF

VPN

Juniper Networks

JNPR

NortonLifeLock

NLOK

Okta

OKTA

Stock or ETF

Ticker

IVR

Spread Width

PT Telekomunikasi

TLK

No Options

Telefonica SA

TEF

10 Cents

Palo Alto Networks

PANW

40 Cents

Fortinet

FTNT

50 Cents

Zscaler

15 Cents

Global X Data Center REITs & Digital Infrastructure, ETF

VPN

$1+

Juniper Networks

JNPR

5 Cents

NortonLifeLock

NLOK

10 Cents

Okta

OKTA

20 Cents

November 2021 | Luckbox

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trades& tactics

INTERMEDIATE

Cryptocurrency Futures

Digital assets have gone legit with regulated futures contracts, brokerage firm spot trading and company IPOs By Michael Gough

No relationship t’s not often that a new asset class is born, but it’s happening with cryptocurrency. Not long ago, the more successful cryptos were still developing spot markets within the walls of offshore exchanges and decentralized protocols. Now, they’ve combined to become a legitimate tradable asset class with regulated futures contracts, brokerage firm spot trading and a few crypto-specific company IPOs. That’s prompting market participants to begin learning how to invest and trade the most diverse, volatile asset class established in decades. Cryptocurrencies like bitcoin (BTC) and ethereum (ETH) boast market capitalizations of $1 trillion and $350 billion respectively, yet they move completely independent of existing and established markets. The chart called “No relationship” (right) depicts the performance of bitcoin futures against other major markets, including Small Technology, Small Dollar and crude oil. The price performances vary widely, and the correlations are minimal, indicating bitcoin moves independently of these other asset classes. That makes crypto a great portfolio diversifier for passive investors and a unique opportunity for active traders hunting for a trade. Besides moving on its own, bitcoin also moves more than other markets. The table called “Big Moves” (right) presents the daily move so far this year for the above-mentioned asset classes in dollars and percentage points. On average, bitcoin moves more

Prices of cryptocurrency futures move independently with no apparent connection to other asset classes. BTC

STIX: FX: SME SME

60000

70 160

50000

40000

155 50

30000

40 150

20000

40 145

10000 30 Jan 2019

May 2019

Sep 2019

Jan 2020

May 2020

Sep 2020

Big moves Crypto futures prices fluctuate broadly, making them more volatile than most other assets. Micro Bitcoin Futures

Small Crude Oil Futures

Small Technology Futures

Small US Dollar Futures

+/- 5.3%

+/- 2.1%

+/- 1.2%

+/- 0.3%

+/- $225

+/- $135

+/- $80

+/- $40

than the U.S. dollar, technology stocks and crude oil. That’s significant because crude oil is known for “Wild West-like” volatility. It even descended into negative numbers in April 2020, when no one had a place to store the glut. Anyway, this two-sided movement and average daily move of $225 makes bitcoin a potentially excellent scalping vehicle for day traders looking to make a quick trade.

More Crypto 17 crypto stocks, One futures contract

Jan 2021

May 2021 Unt Sep 2021 Source: voluptate sum

But newer traders should exercise caution because bitcoin futures are big and volatile, doubling and halving in 2021 alone. To realize diversification and volatility at a manageable size, consider the new Small Cryptocurrency Equity Index Futures. This new futures product from the Small Exchange combines 17 securities in the crypto sector to create the first stock index devoted to cryptocurrency. Prices on the Small Cryptocurrency futures are expected to correlate with price action in both bitcoin and ethereum, all at a smaller size and cost with existing bitcoin and micro bitcoin futures. Michael Gough enjoys retail trading and writing code. He works in business and product development at the Small Exchange, building index-based futures and professional partnerships.

November 2021 | Luckbox

2111_TACTICS_intermediate.indd 49

SOu

10/7/21 9:54 PM

trades& tactics

ADVANCED

Paper Trading Just Got Better A new free tool enables investors to see the future of their trades By Michael Rechenthin

astytrade is offering investors a new free tool called Lookback that provides a risk-free environment to test options trading strategies. New traders can use it as “paper trading” by queuing up a trading idea and seeing how it would have performed over time. Instead of learning by making mistakes—which can be costly—they learn from historical data on options and stocks that’s built right into the system. More experienced traders can use the system to understand the risk associated with a strategy. They would learn, for example, exactly how Greeks react close to expiration of a butterfly, or the historical profitability of a short strangle using 30 delta short puts and calls versus a short strangle with 10 delta short puts and calls. They would find out

what happens with 60-day expirations versus 20-day expirations. A Lookback feature for both new and advanced traders helps them see a strategy’s profit zones all the way up to expiration. They hold and click the left mouse button to view the theoretical probability of a strategy being above or below a specific price level. Traders can use the feature to obtain probabilities around “worst-case scenarios.” All were created using thousands of randomized simulations. The tool also gives traders the ability to see the cumulative probability of reaching a specific profit at any time leading up to the expiration of the options. For example, purchasing a 29 long call expiring 45 days away in November

JPNR Delta

may seem like a good idea to someone with an extremely bullish outlook on Juniper Networks (JNPR) at the last sale of 27.84. (See JNPR table, below.) But Lookback (lookback.tastytrade. com) shows that’s likely to result in a loss of $75, which is the cost of the call. The probability of making $100+ by the end of the year is only 10%. It helps to add clarity around a trading approach. With a slight adjustment, traders can buy a 28/30 call spread for the same amount and have a probability nearly three times as great of making $100. That’s still a low-probability trade but an interesting observation. Michael Rechenthin, Ph.D., aka “Dr. Data” is the head of research & development at tastytrade. @mrechenthin

$27.84 Bid

Ask

Calls

Strike

Bid

Nov 19, 2021 (45 DTE)

0.89

4.8

7.3

0.87

4.4

5.8

0.85

4.2

Ask

Delta

Puts 0.05

0.15

-0.05

0.1

0.2

-0.08

0.2

0.3

-0.13

0.8

3.1

3.3

0.3

0.4

-0.18

0.72

2.35

2.45

0.5

0.6

-0.27

0.61

1.65

1.8

0.8

0.9

-0.38

0.49

1.15

1.2

1.25

1.35

-0.51

0.37

0.7

0.8

1.8

1.95

-0.65

0.27

0.45

0.55

2.5

2.65

-0.78

0.17

0.2

0.35

3.3

3.5

-0.88

0.11

0.1

0.2

4.2

4.4

-0.96

0.06

0.15

3.4

6.9

-0.98

0.04

0.1

5.1

7.3

-0.99

P/L

$100

Cumulative %

30%

More Lookback Do your own backtesting

Luckbox | November 2021

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10/7/21 9:46 PM

trades& tactics

FUTURES

A SAV V Y F U T U R ES T RADER’S TAK E O N T HE M AR K ETS

The Wall of ‘What, Me-Worry?’ The repeated highs of recent years don’t guarantee stock prices will never again dip, crash or go sideways By Pete Mulmat

n old Wall Street adage says that the stock market “climbs a wall of worry” into bullish territory, and that “bear markets slide down a slope of hope.” Mad Magazine’s Alfred E. Neuman is known for having said, “What, me worry?” Perhaps the mixture of the Federal Reserve and monetary controls has taken the worry out of the market. Maybe S&P 500 Volatility Index readings of 30, 40 and 50 have become a thing of the past. Put options on stocks may soon be free. Well, none of that’s actually happening, but that isn’t to say fear of the end of prudence in the stock market is unwarranted. By mid-September, the S&P 500 made its 55th all-time high of the year. That said, a slew of peaks stacked on top of each other isn’t a novel idea in 2021. In fact, savvy traders have come to expect a lot of new highs every year. (See “S&P 500 Index Recent Highs.”) While selling all-time highs has been a rough strategy for the last half-decade, the cycle of stock movement that’s held for more than a century—simply put: up, sideways, down, repeat—would predict that a plateau and fall is coming. Take, for example, one of the last multi-year runs of many all-time highs: 1995-99. That five-year span saw more highs in the S&P 500 Index than in the current stretch. Are equities on the precipice of a crash? (See “S&P 500 Index Historical Highs.”) Staying small by selling stocks and futures can offer a low-cost (and, low-worry) outlet for either hedging a long stock portfolio or speculating on a crash, yet those low costs can reflect large size. Sprinkling in one or two small

S&P 500 Index Recent Highs 2021

2020

2019

2018

2017

154

S&P 500 Index Historic Highs 1999

1998

1997

1996

1995

Size of Equity Index Futures Small Stocks

E-Mini S&P 500

Micro E-Mini S&P 500

$7,800

$226,500

$22,650

stock futures might be more appropriate than a Micro E-mini or E-mini future after a dozen new highs. (See “Size of Equity Index Futures.”) There’s something enticing about selling a market that looks too expensive, and futures can help traders go down that road with relative ease. Just make sure to be able to see the end of it.

There’s something enticing about selling a market that looks too expensive.

Pete Mulmat, tastytrade chief futures strategist, hosts Splash Into Futures on the tastytrade network. @traderpetem

November 2021 | Luckbox

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trades& tactics

DO DILIGENCE

QU I E T FOU N DAT I O N HELPS INV ESTO RS FIND NEW T RADING O P P O RT UN I TI ES

Hacker Hedges The Alpha Boost system uses complex algorithms to find a mixture of strategic options trade ideas By James Blakeway

The table below shows four cybersecurity stocks with liquid options markets.

Name

James Blakeway serves as CEO of Quiet Foundation, a data science-driven subsidiary of tastytrade that provides feefree investment analysis and trade ideas for self-directed investors @jamesblakeway

12-month price change

Three-month correlation with S&P 500

Palo Alto Networks Inc

PANW

87%

0.11

Okta Inc

OKTA

-1%

0.20

71%

0.33

NLOK

15%

0.35

SPY

26%

1.00

Zscaler Inc

t feels as though a computer hack at a Fortune 500 company makes headlines about every other week. As a result, most cybersecurity stocks shrugged off the systemic selloffs of 2020 and rallied to new highs and meteoric returns. As with any investment sector, some cybersecurity companies have liquid, tradeable options markets. Trades in these stocks may be compelling, given the relatively low correlations to the S&P 500. Luckbox used the new Alpha Boost trade generation system to find both bullish and bearish trades in three of the top cybersecurity stocks.

Symbol

NortonLifeLock Inc S&P 500 ETF (benchmark)

Note: Data as of Oct. 4

Alpha Boost, a free trade idea service, delivers strategic options strategies via email three times a week. Each email includes five to 10 trade ideas for stocks and exchange-traded funds (ETFs). An algorithmic trade generation system finds the trades.

More Alpha Diversified trading ideas in your inbox

Luckbox | November 2021

2111_TRADES_dodiligence.indd 52

10/7/21 9:38 PM

trades& tactics

Bearish strategy in Palo Alto Networks, which can still

A higher probability trade in Norton LifeLock.

make money if the stock rises.

Max profit is reached if the stock stays between the upper and lower breakevens by expiration.

A cheaper long stock replacement stretegy in Norton LifeLock.

A net bullish trade in Zscaler that has an additional profit zone if the stock drops.

November 2021 | Luckbox

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10/8/21 11:40 AM

trades& tactics

THE TECHNICIAN

A V E T E RA N T RADER TAC K LES T EC HNICALS

Title Fight

Only a handful of companies dominate the real estate title insurance industry. They will need to evolve quickly to retain their reign in front of a fast-moving blockchain. By Tim Knight

lmost everyone has insurance of one kind or another. Depending on circumstances, someone might have life, fire, flood, earthquake, homeowner’s, renter’s or dental insurance—or any one of many other financial products designed to share risk. Virtually all forms of insurance are designed to protect against an uncertain future: Someone steals a laptop, a devasting illness strikes or the kitchen catches fire. But title insurance does the opposite. It’s designed to insure against unexpected circumstances that have already happened but haven’t become apparent. Anyone who has ever bought or sold property has some experience with title insurance. It can involve showing up at the title company’s office to sign a gargantuan stack of legal papers that no one in human history has ever read except for the people who composed them in the first place. Once the process reaches “the close,” an even bigger stack of papers awaits signatures. Some of the papers list financial calculations about the transaction, including the thousands of dollars paid to the title insurance company.

The history of insurance Insurance, in some form or another, has been around almost as long as the written word. The 4,000-year-old Code of Hammurabi included laws pertaining to insurance that don’t seem out of place in the modern world. It’s remarkable how sophisticated people were about risk and financial costs that long ago. Title insurance, on the other hand, is a relatively recent creation that’s rare outside North America. The general idea is to guarantee that when people buy a piece of property they actually own it free of encumbrances or errors. No one wants to spend millions on a house, only to be sued a few months later by someone

Bouncing back During the COVID crash, First American Financial Corp.’s price sliced right through the ascending trendline before rebounding strongly. 70 65 60 55 50 45 40 35 30 25 20

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Source: slopecharts.com

else who also claims to own it or be pursued by a government entity that’s owed tens of thousands of dollars in property taxes. Title insurance makes sure the purchase is “clean.” In the rest of the world—and even North America until about 150 years ago—the government keeps track of who owns what and protects new owners from legal or financial snags. These days, county governments in the United States and census geographic units in Canada keep track of ownership simply as a matter of public record, and they offer no legal protection to buyers and sellers. Instead, a $17 billion industry has been built around that function to make sure real estate purchases are free from, to use the industry term, “defects.”

The 4,000-year-old Code of Hammurabi included laws pertaining to insurance that don’t seem out of place in the modern world.

Luckbox | November 2021

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trades& tactics

Blockchain opportunity Besides its backward-looking nature, title insurance differs from almost every other kind of insurance because of the small amount it pays in claims. In the case of “normal” insurance, about 80% of the amount taken in as premiums is paid back to policyholders to cover claims. With title insurance, the amount paid out is a single-digit percentage of the amount taken in because it’s unusual for a legitimate financial surprise to crop up with property ownership. So, the main expense for these companies is research. When a property changes hands, the title search has to cover just about every entity that might come after the new property owner. That could include a contractor who wasn’t paid, a county seeking uncollected taxes, a former spouse disputing ownership or a disgruntled investor demanding restitution. The title searches are time-consuming and, except for the modern office equipment the companies use, they resemble the kinds of research performed in the late 1800s. The very heart of this entire industry comes down to several key elements: n Keeping transaction-by-transaction records n Having a means to update information as ownership changes n Knowing with certainty that the information about a property is accurate and complete This seems to be a made-to-order use case for the blockchain. In fact, enthusiastic cryptocurrency fans might conclude that the blockchain will relegate this old-fashioned, time-consuming, low-tech industry to oblivion. Title insurance companies could soon face the same sort of obsolescence that doomed buggy whip manufacturers in the early 20th century. Well, not so fast. Let’s ponder the financial health of the market leaders. The big guys The title insurance industry is extremely concentrated. Just four companies account for nearly 90% of the entire business, and the top two, Fidelity National Financial (FNF) and First American Corp. (FAF), account for about 60% of the entire sector. Their success depends upon geographic reach, accuracy and reputation. Most of all, they need to be excellent record-keepers and researchers.

Nearly full recovery Since the COVID crash, the steep trendline for First American Financial is closing the gap with the company’s longer-term trendline. 70 65 60 55 50 45

Nov 2019 Jan 2020 Mar 2020 May 2020 Jul 2020 Sep 2020 Nov 2020 Jan 2021 Mar2021 May 2021 Jul 2021

Source: slopecharts.com

Lifetime price peak First American Financial’s price plunged more deeply in the COVID crash than when the Great Recession struck. But at press time it had attained its highest point ever. 45 40 35 30 25 20 15

2005

2007

2009

2011

2013

2015

2017

2019

Source: slopecharts.com

November 2021 | Luckbox

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10/7/21 9:04 PM

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5 to 10 option trade ideas from our Alpha Boost algo 3 emails per week All the metrics needed to make informed decisions max profit & loss, breakevens, greeks, etc. SIGN UP AT:

quietfoundation.com/alphaboost Quiet Foundation, Inc. does not make trade recommendations or provide investment advice. https://quietfoundation.com contains important documentation and disclosures you must review before signing up for Quiet Foundation, Inc.’s services.

2111_TRADES_the technician.indd 56

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trades& tactics

Although local governments do track records of title, the title insurance companies themselves have their own parallel systems for doing so. That paid off as far back as 1906 when an earthquake and the resulting fires nearly destroyed San Francisco and reduced the local government’s records to ashes. The citizenry managed to solve the riddle of who owned what because title insurance companies located far from the flames had records of ownership. Respect for duplicated data goes way back. These days, the enduring value of such practices has helped the sector rebound nicely from recent setbacks. First American Financial First American Corp. has a 27% market share of the title insurance business. In general, the strength of the real estate market correlates directly with the company’s prosperity because more transactions mean more premiums. During the past decade, given the combination of easy money and low interest rates, the stock has been ascending steadily. But a fascinating pattern has occurred recently because of the trendlines shown. During the COVID crash, the price sliced right through the ascending trendline before rebounding strongly. Closer look at FAF Looking at a more detailed view of recent history, the plunge and subsequent recovery for First American Financial in 2020 and 2021 has generated a very clean pattern in the form of a wedge. Should that wedge be broken—in other words, if the green supporting trendline is fractured to the downside—it would likely put the company into a meaningful downtrend. Fidelity National Financial The largest firm in this sector, Fidelity National Financial (this is not an industry that aspires to overly creative names), has about one-third of the market. The company’s history as a public entity goes back to the days before the 2008 financial crisis, and the battering that the bear market of that time inflicted on the stock is clear. Since then, as with most stocks, the company’s share price has been ascending, and it reached its lifetime price peak just before press time.

Wedge pattern Breaking the First American Financial wedge pattern could send the company into a meaningful downtrend. 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20

Jun 2018

Dec 2018

Jun 2019

Dec 2019

Jun 2020

Dec 2020

Jun 2021

Source: slopecharts.com

Closer look at FNF Fidelity National Financial’s stock chart is sporting precisely the same wedge pattern as its competitor. Should the price slip below the green supporting trendline, it would portend bad fortune for FNF’s value. Both stocks are at the mercy of the money flow in the real estate industry in general, but the failure of the wedge patterns would be akin to the proverbial canary in the coal mine, suggesting that a general downturn is underway.

Just four companies account for nearly 90% of the title insurance business, and the top two control 60% of the entire sector.

Innovate or die Although the blockchain would seem to represent an utterly disruptive technology for the title insurance industry, a few factors seem likely to save these firms from being snuffed out swiftly. The real estate sector remains relatively conservative and slow-moving. When dealing with the largest transactions of their lives, people don’t want to experiment with new approaches just to save a relatively small amount of money. They want peace of mind, and it will take time to convince them they will be just as safe with something novel as they have been with the old-fashioned approach. Title insurance research isn’t simple. It isn’t just a matter of declaring that “A used

November 2021 | Luckbox

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10/7/21 9:04 PM

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to own it, and now B owns it.” As described above, a whole host of entities might lay claim to some kind of title defect. And there’s no single, unified database of entities that might have a lien on the property. The data required to declare a title is clean can seem highly disjointed and discontiguous. The transfer of information from existing databases to a title-focused blockchain would be a Herculean task. It will almost certainly happen, but it’s a big project involving tens of thousands of “silos” of information. But the project has begun, and an interesting startup called Ubitquity is working on it. All of that aside, the title insurance giants aren’t about to remain stuck in their ways and let blockchain take over. The First American and Fidelity National home pages carry prominent statements and images about e-signatures, electronic closings, technological

2111_TRADES_the technician.indd 59

transformation, going digital and how they intend to lead the way. The march of technology is providing an opportunity for the market leaders to transform the way they do business, as opposed to allowing breakthroughs to render them obsolete overnight. However, it appears that the premiums the title insurance companies charge will shrink dramatically as the industry proceeds from the 19th century to the 21st. These companies are, after all, rooted more firmly in the information business than in the insurance business. As such, they recognize the need to stay ahead of the technological curve. Meanwhile, the charts reflect the industry’s vulnerability to how many real estate transactions are completed. If home buying dries up, these stocks are going to be hit hard. These large firms will adapt to new technology, but they’ll also face a host of scrappy,

The transfering of information from existing databases to a title-focused blockchain would be a Herculean task. small organizations that run more cheaply while providing the same service. That could result in a new landscape where just two companies don’t control 60% of an entire industry. Tim Knight has been using technical analysis to trade the markets for 30 years. He’s the host of Trading the Close on the tastytrade network and offers free access to his charting platform at slopecharts.com. @slopeofhope

10/7/21 9:04 PM

trades& tactics

CHERRY PICKS

R I PE & J U I CY T RA D E IDEAS

Where the Action Is The volatility scale The most volatile entities are ranked near the top of the graphic, with the least volatile at the bottom. Higher volatility brings on more risk.

olatility is synonymous with the probability of movement. Consistently volatile sectors, such as oil services (OIH), oil and gas exploration (XOP) and gold miners (GDXJ), have a high probability of movement. Other sectors, including consumerstaples (XLP), utilities (XLU) and healthcare (XLV), have a lower probability of movement, meaning they’re more stable and thus more appropriate for investors who shy away from risk. Of the major market indexes, small caps (IWM) tend to be more volatile than the Nasdaq (QQQ) and the S&P 500 (SPY). Check out the following graphics to see the volatility of sectors and exchange-traded funds, or ETFs. How can investors play sectors and indexes once they know the volatility involved? Check out the Sector ETFs listed on the opposite page for answers.

Most volatile

Somewhat volatile

Least volatile

Oct 2020

Nov 2020

Dec 2020

Jan 2021

Feb 2021

Oil Services

Oil and Gas Exploration

Oil Services

Oil and Gas Exploration

Oil Services

Oil and Gas Exploration

Gold Miners

Metals and Mining

Gold Miners

Regional Banking

Gold Miners

Metals and Mining

Energy Sector

Biotech

Regional Banking

Energy Sector

Metals and Mining

Retail

Biotech

Retail

Homebuilders

Retail

Regional Banking

Tech

Biotech

Retail

Small Caps

Nasdaq

Financials

Materials

Homebuilders

Materials

Homebuilders

Tech

Small Caps

Tech

Materials

Financials

Tech

Consumer Discretionary

Financials

Materials

Industrials

Nasdaq

Industrials

Nasdaq

Financials

Consumer Discretionary

U.S. Real Estate

Consumer Discretionary

Industrials

U.S. Real Estate

Consumer Discretionary

U.S. Real Estate

Utilities

Healthcare

S&P 500

Utilities

S&P 500

U.S. Real Estate

S&P 500

Utilities

Healthcare

U.S. Real Estate

S&P 500

Utilities

Healthcare

S&P 500

Healthcare

Consumer Staples

Luckbox | November 2021

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Understanding volatility helps traders manage risk. Here’s how sectors and indexes compare for their tendency to move in price. By Michael Rechenthin

Sector ETFs

March 2021

April 2021

May 2021

June 2021

July 2021

Aug 2021

Sept 2021

Oil Services

Oil and Gas Exploration

Oil Services

Oil and Gas Exploration

Oil Services

Oil and Gas Exploration

Oil Services

Metals and Mining

Energy Sector

Metals and Mining

Gold Miners

Metals and Mining

Gold Miners

Retail

Biotech

Retail

Gold Miners

Retail

Energy Sector

Biotech

Energy Sector

Retail

Energy Sector

Retail

Energy Sector

Retail

Regional Banking

Energy Sector

Biotech

Energy Sector

Retail

Regional Banking

Homebuilders

Small Caps

Homebuilders

Small Caps

Tech

Small Caps

Homebuilders

Small Caps

Tech

Small Caps

Financials

See some trading possibilities in a particular sector? The exchangetraded funds listed below provide a diversity of holdings in a single industry or category.

Financials

Consumer Discretionary

Industrials

Materials

Nasdaq

Financials

Materials

Industrials

OIH

Oil Services

XOP

Oil and Gas Exploration

GDXJ

Gold Miners

XME

Metals and Mining

KRE

Regional Banking

XLE

Energy Sector

XBI

Biotech

XRT

Retail

XHB

Homebuilders

XLK

Tech

IWM

Small Caps

QQQ

Nasdaq

XLF

Financials

XLB

Materials

XLY

Consumer Discretionary

Financials

Nasdaq

Financials

Consumer Discretionary

Tech

Industrials

Materials

Consumer Discretionary

Tech

Consumer Discretionary

XLI

Industrials Consumer Staples

Materials

Industrials

Nasdaq

Utilities

Nasdaq

XLP

Utilities

U.S. Real Estate

Nasdaq

Utilities

SPY

S&P 500

IYR

U.S. Real Estate

Utilities

U.S. Real Estate

XLU

Utilities

S&P 500

Consumer Staples

S&P 500

Healthcare

S&P 500

XLV

Healthcare

Consumer Staples

S&P 500

Healthcare

Consumer Staples

S&P 500

Healthcare

S&P 500

Consumer Staples

November 2021 | Luckbox

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trades& tactics

FOREX

F R E E- F LOAT I N G M AC RO I N S IG HTS FRO M G LO BAL CU R R ENCY T RADERS

China Woes May Sink the Yuan Look for a breakout over a pivotal resistance point By Ilya Spivak

hat China is all but destined to overtake the United States as the global economic leader has been received wisdom for market-watchers for quite a long time now. This narrative envisions the resurgent East Asian giant in the same challenger role that the North American powerhouse took up when it displaced the U.K. from pole position. To be sure, China’s ascent has been impressive. In the past 14 years alone—starting in 2007 at the onset of the housing crisis that would trigger the Great Recession in 2008, setting the stage for much of the current economic order worldwide—the gap between Chinese and U.S. GDP shrank by a staggering 78%. Looked at another way, the U.S. lead narrowed to just $686 billion as of the second quarter of 2021. That’s a mere 14% of total output, which registered at $4.84 trillion in the same period. Economists expect Chinese growth to outpace that of the United States by an average of 2.4% through 2023, shrinking this gap further. The market-wide recovery from the lows set at the onset of the COVID-19 outbreak belies this narrative. The yuan rose against the U.S. dollar alongside the rebound in the MSCI World Stock Index from March 2020 lows, indicating that improvement in risk appetite is consistent with a preference for the supposedly growth-geared Chinese unit.

Slower growth in China A change of course over the near and longer term may be afoot. Official and private-sector PMI surveys agree that the post-COVID recovery in Chinese growth peaked in November 2020. Performance has deteriorated

Rise of the yuan The yuan rose against the U.S. dollar from March 2020 lows, implying a bigger appetite for risk. 3200 0.15600 0.15469 USD/CNH (inverted) 0.15200

MSCI World Stock Index

0.14800

3021

2800

2400

0.14400 2000

0.14000 1600 Oct 2019

Jan 2020

Apr 2020

Jul 2020

Oct 2020

Jan 2021

Apr 2021

Jul 2021

Oct 2021

Source: TradingView

since then, with a steady slowdown inching toward a contraction in manufacturing- and service-sector activity in August. The downturn has put pressure on financial stability. Credit spreads began to deteriorate rapidly in June. They are now nearly back to the strained funding conditions of March 2020, just as the worst of the pandemic struck. That property giant Evergrande suddenly seemed to be on the verge of default in September is a case in point. Economic troubles have come alongside a sterner posture from Beijing. A thaw in U.S.China relations does not seem to have materialized during the Biden administration after a tense four years under the leadership of

Market-watchers have believed for some time that China will overtake the United States as the global economic leader.

Luckbox | November 2021

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trades& tactics

Scary drop Spooked investors have caused shares in China-based companies to decline. 5800 30000 5400 CSI 300 Index

Donald Trump. Friction with Europe, Japan and Australia continues to simmer. Meanwhile, Chinese officials have taken a pointedly harder regulatory line, moving with particular zeal to clip the wings of ascendant technology companies and their high-profile bosses. That along with a seemingly tightening mainland grip on Hong Kong has spooked investors and local shares have duly dropped. Political change in China? It’s inconvenient for China’s policymakers that the world has hit COVID’s economic soft patch just as the Federal Reserve begins to reduce expansive monetary stimulus. That portends a global upshift in borrowing costs in the coming two to three years. Vast parts of a massive fiscal backstop for the COVID-struck economy are also about to expire. That reflects relative U.S. economic strength. While activity growth has slowed since peaking in May 2021, the pace of nonfarm expansion remains well above the recent average. It also amounts to stronger headwinds for China’s economy just as it can ill afford them. In the immediate term, the allure of greener pastures on the growth front and heightened worries about heavier regulation may cause a reversal of capital flows in favor of the greenback at the expense of the yuan. From a longerterm perspective, how the People’s Republic meets this moment may prove pivotal. Broadly speaking, China’s prosperity in recent years has reflected its greater openness to and parallel embrace by Western-dominated international institutions and financial markets. If Beijing continues to turn inward in response to current difficulties, a larger exodus of assets geared to the East Asian giant’s fortunes may follow. Trading USD/CNH One way to trade this narrative may be via an upturn in the U.S. dollar/Chinese yuan renminbi (USD/CNH), the United States unit’s

5000

28000

4866 4600

Hang Seng Index

4200

26000

24576 24000

3800

Oct 2019

Jan 2020

Apr 2020

Jul 2020

Oct 2020

Jan 2021

Apr 2021

Jul 2021

Oct 2021

Source: TradingView

Follow the patttern The U.S. dollar is weighing a major upturn against the Chinese yuan as a bullish Head-andShoulders pattern forms at seven-year trend support. 7.19643

7.00000 6.84570 6.80000 6.69870 6.58756 6.52851 Shoulder

6.40000 Head

Shoulder 6.20000

Trend Line from Jan 2014 6.00000 2014

2015

2016

2017

2018

2019

2020

2021

2022

Source: TradingView

pairing against the free-floating “offshore” version of the Chinese yuan (as opposed to CNY, the heavily managed “onshore” expression of China’s currency). Prices may be bottoming as a bullish head-and-shoulders pattern emerges at trend support dating back to early 2014. Overcoming initial swing-high resistance at 6.5285 and 6.5876 may amount to confir-

mation of reversal, setting the stage for a push higher to challenge the inflection zone capped near the 6.70 figure. This has been a pivotal barrier since 2015, with a break above it conjuring visions of long-lasting USD appreciation. Ilya Spivak is head strategist for Asia-Pacific markets at DailyFX, the research and analysis arm of retail trading platform IG. @ilyaspivak

November 2021 | Luckbox

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Tempering a Taper Tantrum? Fed Chair Jerome Powell looks as though he may have a lot on his mind these days. But who could blame him? COVID-19 is interrupting supply chains, hourly workers seem reluctant to return to the labor force after quarantine, and the specter of inflation is once again casting a shadow over the economy. To make matters worse, Powell’s own job

security is in question. His term in office ends in February, and progressives like Sen. Elizabeth Warren of Massachusetts are calling for President Joe Biden to find somebody new for the post. Perhaps Powell is also reconsidering his laissez-faire approach to pre-empting inflation. He may soon choose to retreat on quantitative easing as Ben Bernanke ultimately did as chair of

the Federal Reserve in 2013. That policy called for tapering off the Fed’s aggressive purchases of Treasury bonds, which had provided liquidity to the economy. The subsequent correction in stock prices and rise in bond yields was called a “taper tantrum.” Thinking about rising prices a lot these days? Check out the upcoming December issue for the Luckbox take on the perils of inflation.

PHOTOGRAPH: MATT MCCLAIN /POOL VIA REUTERS

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