• Are you being spied on? Check the chandelier.
  • You thought misinformation on Facebook was bad in the 2016 election? Wait until you read this…
  • This investing app is a hit with millennials. But it has a dark side

Dear Reader,

This is one of the biggest weeks of the year in the world of high tech.

Apple hosts its annual Worldwide Developers Conference (WWDC) every June, and for the first time in more than three decades, it will be held in a virtual format online.

Apple has a strong history of setting the pace for consumer electronics hardware and software, which is why this week is so important.

This year, the company will announce that it is moving away entirely from Intel-based processors for its desktops and laptops. Yes – this is bad for Intel.

The company is adopting its own processor designed on an ARM-based architecture. ARM is a semiconductor design company that licenses its technology to companies like Apple that want to make their own semiconductors. ARM, a U.K.-based company, was an odd acquisition by Japanese conglomerate Softbank back in 2016.

The WWDC, however, tends to be more heavily weighted toward Apple’s software developments. It brings developers up to speed on the latest versions of its operating systems (macOS, tvOS, iPadOS, watchOS, and iOS for its smartphones).

This gives us a view of the features and functionality that will be available on these devices. In other words, we can get a view of consumer trends happening soon.

One of the announcements that I’m keeping an eye out for is Apple AirTags. The new product leaked when an early version of iOS 14 was released to the developer community.

The product will likely be similar to the product that Tile has produced. Tile uses a plastic case with electronics and Bluetooth technology inside so we can attach it to anything that we don’t want to lose.

It is about the size of a small cracker – pretty bulky if you attach one to a keychain. If we lose something, just pull up the Tile app on our smartphone and it will help us get within range of the lost item.

AirTags won’t be a revolutionary product. They are rumored to use Bluetooth as well, but I think those rumors are wrong.

I’m interested in this product because I believe Apple will use ultra-wideband (UWB) technology, something that I have recently written a lot about in The Near Future Report. For paid subscribers who missed our recent issue on this topic, please go right here.

Unlike Bluetooth, UWB is accurate in determining location down to a few centimeters rather than pointing us to a general area. UWB technology is strategic to Apple, and I believe we’re going to see an explosion of applications using the technology.

I’ll be tuning in this week to keep an eye open for any interesting developments.

For now, our insights…

Spycraft made simple…

Let’s start off this week with a topic we don’t often cover – spycraft.

I’m sure we’ve all seen the movies…

If espionage agents know where the target will physically be, they can bug the room or wiretap the landline phone. This allows agents to listen in on everything said in the room or over that phone.

If agents don’t know where the target is going to be, they can install malware onto the target’s smartphone or computer. This allows them to tap into the phone or computer’s microphone to hear everything within range.

It’s even possible to bounce a laser off the glass window of the target’s home, hotel, or office and pick up vibrations. Those vibrations can be taken to the lab and analyzed to figure out what was said in the room.

As we can imagine, each of these tactics requires technical expertise and expensive tools. And that brings us to a new development that caught my eye…

A team of researchers from Israel just developed a simple technique for eavesdropping. They call it the lamphone. This is a device that analyzes the vibrations coming off the lightbulb of a hanging lamp to pick up the audio inside the room.

Here’s where this gets wild – all it takes is a telescope and a $400 electro-optical sensor to build a lamphone. Anyone can do it. And the device has a range of hundreds of feet. All it needs is a direct line of sight to a hanging lamp.

This is spycraft made simple. No bugs, wiretaps, malware, or lasers needed.

And unlike the laser technique I mentioned earlier, the lamphone can translate the vibrations into audio in real time. That means a lamphone can listen in on conversations as they are happening. The vibrations don’t need to be taken to a lab for analysis.

This is a really interesting application of off-the-shelf technology, but I’d offer a warning to readers…

It’s becoming more and more difficult to be sure that our conversations are private. If we want to have a truly private conversation, we must close the blinds, leave all electronic devices outside the room, and close the door. Having music or a sound machine for background noise helps also.

Then, and only then, do we have a shot at privacy.

Oh, and one other thing…

If anyone has a video camera (webcam) on a laptop or desktop computer, I highly recommend getting a lens cover to cover the lens when it isn’t in use. It is easy to use malware to tap into the camera on our phone or computer or to access the microphone.

And for those of you who work with a company-provided laptop, it is highly likely you’re being watched by your employer if your lens isn’t covered.

An update on Facebook’s deepfake challenge…

We talked about Facebook’s struggles with deepfakes last September. Today, I’ve got an update for you.

As a reminder, deepfakes are altered media content. They are fake videos or fake speeches where artificial intelligence (AI) puts a different face or voice onto the speaker. It can make people appear to say or do things they didn’t say or do. This is done to manipulate public opinion, among other things.

To tackle this problem, Facebook held a deepfake detection challenge. It invited people to submit AI models that can detect deepfakes, and it offered to pay up to $1 million in total prizes. This was a smart move for Facebook to try and crowdsource a solution.

2,114 participants submitted about 35,000 models as part of the challenge. And each of these models was trained on more than 100,000 deepfake clips. That’s a great dataset for training an AI.

But unfortunately, the results were not good, which demonstrates how hard this problem is to solve.

The best model could only detect deepfakes with 65% accuracy. That’s nowhere near good enough for social media sites like Facebook to implement it. And the implications of this are huge.

We are about five months away from a presidential election in the U.S. Can we imagine the fallout, chaos, and confusion if some kind of nasty deepfake video of Joe Biden or Donald Trump is released? The amount of media manipulation in the U.S. is at all-time highs right now, and the country is like a tinderbox.

Deepfakes are a massive problem for society and Facebook – a company with nearly unlimited resources – cannot come up with a solution for them yet.

It’s going to be very hard for us to trust most things we see on social media in the months ahead. As we talked about last week, the best we can do is make sure we are getting information from confirmed accounts of information sources that we know we can trust.

The world’s hottest startup brokerage firm has a dark secret…

Robinhood has been on fire since the COVID-19 lockdown began.

This is a venture capital-backed brokerage firm that’s geared toward millennials. It offers a smartphone app that lets users trade in the stock market easily.

And it even allows users to buy fractional shares. This is attractive for investors who want to invest in companies like Amazon but can’t afford to buy at $2,700 a share. Instead, investors can purchase 1/10th of a share for a 10th of the price.

Plus, Robinhood does not charge commissions on its trades.

This “free” smartphone trading app is targeted right at millennials. And it’s working. Robinhood signed up three million new accounts in the first quarter of this year alone.

It now has over 13 million accounts on its platform. Compare that to Schwab, which has about 12.3 million active brokerage accounts.

But Robinhood has a dark secret.

We have talked quite a bit in these pages about Google and Facebook’s business model. They offer “free” services, but the services aren’t really free. They collect our data, package it, and use it to sell advertising.

We “pay” by a complete loss of privacy and getting barraged by advertising, most of which we have no interest in seeing.

The key takeaway is this: If the product or service is free, that means the consumer is the product.

And that’s true for Robinhood as well.

If we dig into Robinhood’s legal disclosure, the company is routing most of its customers’ orders through hedge funds for execution.

In fact, 65.5% of all Robinhood orders go directly to Citadel Securities. In return, Citadel and the other hedge funds receiving orders pay Robinhood monthly commissions for that order flow.

And why do hedge funds want these orders?

Simple. They front-run them.

They buy the stock first, and then they turn around and sell it to the unsuspecting Robinhood customer at a higher price. The hedge funds only make a tiny profit on each dollar spent through a Robinhood trade, but it adds up over time – especially with Robinhood’s rapid growth.

Clearly, this is a deceptive practice. And because Robinhood’s customers are typically young, inexperienced investors, they have no idea it’s happening.

As investors, we want to get the absolute best execution on each trade we make. But anyone trading on Robinhood is likely not getting the best price on their trades.

Fortunately, we do have a tool to ensure that we can buy shares in a stock for the price that we want. That’s the “limit” order.

Limit orders tell our broker that we will only buy or sell at a price equal to or better than the price we specify. That prevents automatic front-running.

I recommend investors always use limit orders. To do so, just look for the “Order Type” tab when placing a trade. It will look slightly different across different brokerage platforms, but every platform has it. Here’s what it looks like on TD Ameritrade’s online platform:

Make Sure to Place Limit Orders

Source: TD Ameritrade

We need to make sure this tab says “limit” or “LMT” rather than “market” or “MKT.”

Then we just type in the price we want and submit the order. Our broker will only execute the trade if it can do so at the same or better price than what we submitted.

That’s how we protect ourselves from bad actors in the market.

Another way is to never enter our stop-loss orders into the market. For investors who have stop-loss strategies, it is critical to track those stop losses with software unrelated to your broker.

The moment we enter a stop-loss order into our brokerage account, a market maker can see that order, open the stock artificially low when the stock market opens, take us out of our position, and return the market price back where it was previously.

Sadly, these things have been going on for decades at the expense of retail investors. It pays to be educated about how the market works… and sadly, most of those using Robinhood have no idea.


Jeff Brown
Editor, The Bleeding Edge

Like what you’re reading? Send your thoughts to [email protected].