A 9.6% Yield, No K-1, Record Earnings Again For Niche Leader

Looking for a solid, high-yield niche play? Maybe you should consider Hoegh LNG Partners LP (HMLP), the only publicly traded pure play on FSRUs.

FSRU stands for “Floating Storage & Regasification Unit,” and it’s a rapidly growing presence in the LNG shipping industry. HMLP’s parent/sponsor, Höegh LNG Holdings Ltd., is the largest provider of FSRUs in the market.

FSRU leasing/chartering solves many problems for charterer companies and countries. It’s slow and expensive to build an LNG import terminal, so FSRUs are being increasingly used to give countries access to LNG.

Like many of the firms we cover, HMLP operates on long-term contracts – its current average is 10.75 years for its five-vessel fleet, which includes two JV vessels. This is among the longest contract tenures that we’ve run across in the shipping industry.

(Source: HMLP site)

Common Distributions:

HMLP pays in a Feb-May-Aug-Nov. cycle and should go ex-dividend again in early November. At $18.25, the common units yield 9.64%.

Common unit coverage rose to 1.22X in Q2 ’18, which is the highest coverage level since HMLP’s IPO. Coverage has averaged 1.16X over the past four quarters:


Since it’s a C-Corp, HMLP issues a 1099 at tax time:

“The Partnership has elected to be treated as a C-Corporation for tax purposes (our investors receive the standard 1099 form and not a K-1 form).”

“Distributions we pay to U.S. unit holders will be treated as a dividend for U.S. federal income tax purposes, to the extent the distributions come from earnings and profits (“E&P”) and as a non-dividend distribution or a return of capital (“ROC”) to the extent the distributions exceed E&P.” (Source: HMLP site)

In 2017, HMLP’s ROC ranged between $.188 and $.1979 per quarterly payout. Investors get the benefit of sheltered income, but ROC does decrease your basis, so take a look at this if you’re thinking of selling at some point down the road.

Management has had distribution increases of 4.2% and 2.3% over the past two years, while coverage has been over 1X since Q2 ’16:

(Source: HMLP site)

Preferred Distributions:

HMLP also has a preferred series, Hoegh LNG Partners LP 8.75% Cumulative Perpetual Redeemable Units Series A (HMLP.PA). These are cumulative preferred units which offer you the additional protection of knowing that management must pay you any skipped distributions before it pays the common units. These units also rank senior to the common units in the event of a liquidation.

At $25.55, these preferred units yield 8.56%.

There’s no maturity date, but the call date is 10/5/22, after which HMLP can redeem if they so desire. This table details the annualized yield to this call date, if they were to be redeemed on 10/5/22. That yield is 7.79%, a bit lower than the current yield, since these units are $.55 above the $25.00 call value:

As is usually the case, these preferred units have a much higher coverage factor than the common units. Coverage has averaged 7.59 so far in 2018, on a net income basis, and 6.42X on a DCF basis:


HMLP has had strong growth in EBITDA, DCF, and net income over the past three quarters, with EBITDA up 24.72%, DCF up 17.81%, and net income up 56.07% in Q2 ’18. The 56% jump in net income is due to HMLP owning 100% of the Höegh Grace vessel in 2018, vs. only 51% in 2017.

Sequentially, HMLP also had record EBITDA, in Q2 ’18, Q1 ’18, and Q4 ’17, with DCF hitting records in Q3 ’17 through Q2 ’18:

With the unit count flat, and distributions/unit rising just 3.24%, HMLP’s coverage expanded by 9.11% over the past four quarters, as DCF grew 21.34%:

HMLP has two operating segments – majority held FSRUs, which contributed $58.58M in segment EBITDA for Q1 -2 ’18; and joint venture FSRUs, which contributed $16.39M in segment EBITDA for the same period.


Boil-off issue – As we reported previously, HMLP has a “boil-off” problem. This still hadn’t been resolved, as of 5/31/18, when they reported Q1 2018 earnings. The charterer of the Neptune and Suez Cape Ann vessels filed a claim vs. these vessels, for excessive, past “boil-off.” The vessels are allowed a certain amount of LNG boil-off, (it’s related to gas which is ultimately being lost during a passage – in this case, it was when the vessels were being used for LNG transport years ago, before they were converted to FSRUs), but the charterer claims that they didn’t meet the performance standards for their contracts. HMLP’s 50% share of the accrual was approximately $11.9 million as of June 30, 2018.

However, HMLP is being indemnified by its parent company HLNG.

Management updated this info on the Q2 ’18 earnings call:

“The process has been a bit in limbo during the transition between NG and Total, but I think now Total have closed that transaction. We should be able to come to some kind of agreement on that in relatively short order.

But just to repeat again it’s not something will have an impact on the MLP.”

EGAS Gallant contract:

“EGAS has requested to start a discussion with Hoegh LNG over terms for the termination of the Gallant contract in advance of its April 2020 maturity. And that’s something that would require HLNG consent and compensation. From an HMLP point of view, should HLNG discontinue the charter of Gallant through its Egyptian subsidiary for the purposes of serving the EGAS contract, HMLP has the options to charter the Gallant to HLNG until 2025 at a rate, which is equal to 90% of its current rate. Whether it would in April 2020 or sooner, HMLP current exercised its options. If it does, the impact would negatively impact results over the current levels of distributable cash flow of over $17 million per quarter. The impact will be small enough to maintain a comfortable coverage ratio.”

Management updated this issue on the Q2 earnings call:

“I’d say that at least at the moment the discussions are quite good spirited. And I’m sure we’ll come to something, some kind of agreement. I mean they – I do want to take down to one FSRU that was clear they have got a lot of gas coming online. So that’s their need. And we’ve obviously got a contract in place.”


HMLP’s parent, HLNG, has additional FSRUs which it could eventually drop down to HMLP. However, it has been involved in lengthy contracting talks for some of its vessels. Management has previously indicated that they’d like to acquire a dropdown asset at least once each year.

The Independence vessel appears to be the next dropdown candidate. However, on the Q2 ’18 call, management said that,

“it’s difficult to see another drop down this year, not impossible, but difficult. Beyond that we’re obviously working very hard to make a few things come together. The Independence is possible. The projects in Australia, which the parents have been working on, that one solidifies, is possible. And then there is also a few other things out there which aren’t in the public domain that also would be possible.”

(Source: HMLP site)

Analysts’ Price Targets:

At $18.25, HMLP common units are 4.45% below the lowest price target of $19.10, and 12.09% below the average $20.76 price target.


Like many other shipping stocks, HMLP has been underperforming the market in 2018, although it has outperformed the benchmark Claymore/Delta Global Shipping ETF (SEA).


HMLP has a slightly lower, but still very attractive yield, and better distribution coverage than other LNG carriers. It seems to be getting a slight premium for its better coverage in its price/DCF and price/book valuations.


This is good to see – HMLP’s ROA, ROE, current ratio, and operating margin have all improved over the past few quarters, while its debt leverage has become much lower.

Management has chopped net debt/EBITDA down from a 5.1X level as of 9/30/17, to a 3.5X level, which is much lower than the 5.41X industry average.

Debt and Liquidity:

The balance on HMLP’s revolving credit facility line will be further reduced in Q3 ’18, as a result of a $6M repayment made after the close of Q2 ’18.

As of June 30, 2018, HMLP had cash and cash equivalents of $21.0M and an undrawn portion of $39.7M of the $85M revolving credit facility.

(The left column is as of 6/30/18, and the right column is as of 12/31/17.)

(Source: HMLP site)


HMLP doesn’t have options, but you can see over 25 other trades daily in our public Covered Calls Table and over 30 trades in our Cash Secured Puts Table.


We rate HMLP a buy, based upon its attractive, well-covered yield, and conservative debt management.

All tables furnished by DoubleDividendStocks.com, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

CLARIFICATION: We have two investing services. Our legacy service, DoubleDividendStocks, has focused on selling options on dividend stocks since 2009.

Disclosure: I am/we are long HMLP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

6 Elements of Today's Customer Buying Journey That Can Make or Break Your Business

In today’s totally interconnected world with its abundance of information, choices, and marketing, how your customers buy has drastically changed. Buying has evolved from a simple transaction decision to multi-faceted experience.

Whether you are an executive, an entrepreneur, a marketer, or a salesperson, it’s time to look beyond how you sell, and focus on how your customers buy.

For example, you may think that buying a commodity like bottled water is still all about price, yet buyers today check their smartphones first for positive brand reviews, environmentally friendly bottles, positive buzz from social media, and the nearest outlet for purchasing.

Think about how much Starbucks customers have changed what you need to consider to sell a cup of coffee.

I found a good outline of the key elements involved in today’s customer buying experience in a new book How Customers Buy…& Why They Don’t by Martyn R. Lewis. With his two decades of experience as an entrepreneur and a sales and marketing consultant across a broad range of businesses, he has some good insights on what works with customers today, and what doesn’t.

In my own recent experiences advising small business owners and entrepreneurs, I have seen the same six elements of the customer buying journey many times, especially as they relate to selling in consumer environments:

1. First you need a trigger to start the buying journey.

You may believe your product or service is very attractive, but you won’t get a customer until someone decides to act on an unsatisfied need. These days, that trigger is much more likely to come from a friend’s experience, social media, or a memorable website, rather than conventional advertising.

2. Understand all steps required to complete the experience.

The sales steps may seem simple to you, but customers today are quick to abort if they get confused, encounter redundancy, or the process takes longer than expected. Make sure you listen carefully to online feedback and reviews, and personally check competitor’s processes.

How many times have you been frustrated, or even given up, on businesses that make returns and exchanges more complex than competitors, or can’t handle transactions and discounts quickly?

The bar is constantly moving up, so don’t get caught at the bottom.

3. Target the key players in the buy decision and process.

In the world of millennials, parents may be doing the buying, but the kids are driving the decisions. In business, buying decisions are now often made by a network of highly connected individuals across a virtual world through instant messaging. Target the players as well as the process.

4. Market to the dominant buying style of your customer.

On one end of the spectrum, people now buy solutions, rather than products. On the other end, many people look for personalized choices, versus value received. There is no right or wrong buying style, and it’s up to you to market and sell according to the style of your target market demographic.

For example, some customer segments prefer the one-size-fits-all approach, for speed and simplicity, while others want the solution to be customized for them, even if it costs more. You need to constantly talk to your target demographic and adapt to their style.

5. Capitalize on key value drivers that motivate your buyer.

The value drivers have to be sufficiently compelling to your customers to outweigh the costs, risks, and change associated with completing the buying process and using your offering. I still remember switching to a personal computer at work, which was a huge change and risk for me, but I desperately needed the productivity boost promised.

I have recently seen an increase in social drivers, including peer pressure, prestige, or environmental impact. For example, I know many people who shop at Whole Foods due to their focus on environmental sustainability, despite somewhat higher prices.

6. Eliminate buying concerns that can slow or stop the sale.

These are the opposite of value drivers. Concerns might include complexity of the process, priority of the need, decision scope required, implications of the solution, and many more. It’s up to you to anticipate and alleviate these concerns in your marketing before they even come up.

For example, in recent surveys, over 50 percent of online shoppers have admitted to abandoning their carts, causing you lost revenue, at least once in the last three months. Most of the reasons given could be fixed purely through simple design changes.

From a big picture standpoint, what you need today is a market engagement strategy, rather than just the traditional sales funnel that focuses on completing transactions. Your selling process has to harmonize with how the market is buying, or tackle the more difficult challenge of changing how the market buys.

Engaging your market is eminently doable with the online and social tools available today, but it takes effort and change on your part to meet your customers, rather than wait forever for them to meet you. It’s time to get started today.

Amazon Is Paying Twitter 'Ambassadors' to Combat Negative Stories About Working Conditions

Clone warriors

Someone on Twitter first noticed the program.

TechCrunch followed up on it, finding a dozen of the accounts, all supposedly belonging to “real” Amazon workers, all using the same template and Amazon smiley logo.

My immediate impression — and I saw later some used the same metaphor — was that the Stepford Wives took jobs at Amazon and continued to work in lockstep. But to understand the how badly this program has been designed, you need context, so it’s time for a trip down memory lane.

Ugly stories

  • Fear of being disciplined for not working hard enough.
  • Workers claiming to have been penalized for not showing up even though they were sick.
  • Some feeling so pressured that they urinated in bottles to avoid taking off the time to get to a bathroom.

One temporary worker said her vision got blurry, she had trouble standing and couldn’t concentrate one shift when heat in some parts of the warehouse exceeded 110 degrees. She went to a nurse station in the warehouse because she was feeling dizzy.

Within minutes of her arrival at the nurse station, an ISS manager asked her to sign a paper saying her symptoms were not related to work, she said.

The employee takes medication for hypertension and signing the papers, she said, would allow her to return to work after cooling off.

I spent five weeks at the firm’s newest warehouse in Tilbury, Essex, armed with a secret camera bought from Amazon’s own website.

I found staff asleep on their feet, exhausted from toiling for up to 55 hours a week.

Those who could not keep up with the punishing targets faced the sack – and some who buckled under the strain had to be attended to by ambulance crews.

Employees say that things like spending time talking to coworkers, going to get a drink, or even taking too long to find a package are billed as “time off task,” too much of which leads to penalty points for an employee. Get enough of those, and you’re fired.

And, among other things, more stories of no time for the bathroom.

Bring on the happy faces

PR people are often called on to spin stories to keep clients or employers from looking bad. To say the equivalent of “false news” about a long string of stories over the years doesn’t do the job.

But that is how Amazon is trying to manage its reputation now. And it’s using people who the company claims to be regular employees who aren’t all that good at addressing criticism. (By the way, all emojis are stripped out of the tweets for technical reasons. Messages were otherwise unchanged.)

It certainly sounds as though FC Ambassadors are full-time positions and the people are no longer in a warehouse. (I have questions in with Amazon and will post answers if I get them.)

What makes this such a bad approach is that the entire thing screams fake, even if it isn’t. You have people whose new job is to say nice things about the company. By focusing on only their past experiences, Amazon effectively tries to pretend that others might not have faced something much more unpleasant and even dangerous.

Part of the campaign apparently is to tout chances to visit an Amazon fulfillment center. Preferably one with A/C.

Here come the mockers

It’s bad enough to try and pretend that any criticism is 180 degrees from reality. That demands a suspension of disbelief and the assumption that every current or former employee who talks about bad conditions is lying. Perhaps the world is always ready for another conspiracy theory.

On top of the inept structure, the approach also begs for people to mock it, including some who have pretended to be with the program. Here are some examples:

Entrepreneurial takeaway

Amazon does many things well. Crisis PR is not one of them. If there are unflattering stories coming out about your operation, do the following:

  1. Examine them and your operation for any truth. If there is any, figure out how to solve the problem.
  2. Work with a crisis communications expert and listen to the advice. You don’t know better.
  3. Implement the recommended communications plan, including addressing real problems and proving if charges are utterly false.
  4. Use transparency to work with the media. If they can see that everything is fine, it deflates additional stories and maybe creates some good earned media.
  5. Do not try to pretend everything is fine. You will only have people mercilessly mocking you on social media.

Cutting Bird’s Wings? Cease and Desist Letters Might Be Coming For Electric Scooter Companies

Scooters are all the rage—but they also seem to be incurring the rage of city officials across the U.S.

In the last several months, cities like Los Angeles and San Francisco have moved to ban the dockless electric scooters, citing problems such as people riding illegally on sidewalks and parking scooters illegally.

Now it looks like a temporary ban might actually be implemented in LA. According to Curbed Los Angeles, the LA transportation department has plans to begin issuing cease-and-desist letters “to companies placing dockless scooters in areas where they haven’t been given explicit permission to operate.”

Curbed notes that the letters could come as soon as next week.

The move follows a complaint made by the chair of the L.A. City Council’s public safety committee Mitchell Englander, who questioned why a cease-and-desist letter had only been issued to scooter maker Bird.

In March, the council had unanimously backed a moratorium on electric scooters, to give the city time to determine laws around their use. Yet while the vote has been referenced since, including in the cease-and-desist letter sent to Bird, the city has struggled to streamline and enforce its policies.

Even if the letters are issued, the transportation department does not have the authority to impound the vehicles. As such, Marcel Porras, the transportation department’s chief sustainability officer, has reportedly asked city council for further guidance on how to enforce the existing rules. But no reason to stress yet—in the meantime, it is unlikely that your favorite electric scooter will disappear from the streets entirely.

Apple CEO Tim Cook Says Working for Steve Jobs Was ‘Liberating’

Apple CEO Tim Cook is clear about one thing: Apple co-founder Steve Jobs was a great person to work for.

Speaking to Bloomberg in an interview published in June (but resurfaced on Thursday), Cook said that working for Jobs was “liberating.” He described how he would approach his former boss with a “really big” idea. And if Jobs found the idea to be a good one, he’d simply say, “OK” and let Cook run with it.

“It was like a total revelation for me that a company could run like this, because I was used to these layers and bureaucracies and studies—the sort of paralysis that companies could get into—and Apple was totally different,” he said, according to a transcript from 9to5Mac.

Cook’s comment comes on the eve of his seventh anniversary as Apple’s chief executive. He took over the company in 2011 when Jobs was ill and has presided over its continual growth.

Jobs, who died in 2011 after a long battle with cancer, had a reputation for being very clear in how he managed the company. Some have said he was at times a tough boss. Cook, along with many of Apple’s current and former employees, found him to be inspirational.

Cook was one of Jobs’ chief lieutenants and Jobs’ choice to run Apple follow his resignation and death. In the last seven years, Cook has proven to be an exceedingly effective chief executive, who has swelled the company’s profits. He’s also presided over Apple being the first American company to reach $1 trillion in value.

Correction, Aug. 23, 2018: An earlier version of this article misstated the publication date of Cook’s interview with Bloomberg. It occurred in June.

The Rebirth of Radio Astronomy

In the early 1930s, Bell Labs was experimenting with making wireless transatlantic calls. The communications goliath wanted to understand the static that might crackle across the ocean, so the organization asked an engineer named Karl Jansky to investigate its sources. He found three: nearby thunderstorms, distant thunderstorms, and a steady hiss, coming from … somewhere.

Jansky studied the hiss for a year, using a rudimentary antenna that looks like toppled scaffolding, before announcing its origin: The static was coming from the the galaxy itself. “Radio waves heard from remote space,” announced the New York Times in May 1933. “Sound like steam from a radiator after traveling 30,000 light-years.” Janksy had unwittingly spawned the field of radio astronomy.

Today, a replica of Jansky’s scope sits on the lawn in front of Green Bank Observatory, one of the four world-class, public radio telescopes inside the US. Along with the Very Large Array, Arecibo Observatory, and the Very Long Baseline Array, it is the legacy of a boom time in federal investment in the field that began in earnest after World War II.

In the past several years, though, the National Science Foundation has backed away from three of those instruments. In 2012, the National Science Foundation published a review recommending that the foundation ramp down funding to Green Bank—just 11 years after it had been finished—as well as the VLBA, which can resolve a penny around 960 miles away. Three years later, the foundation asked Arecibo for management proposals that “involve a substantially reduced funding commitment from NSF.”

Now, the future of those scopes—instruments that map the gaseous threads that connect cosmic neighborhoods, penetrate the dust shrouds surrounding not-yet stars, and probe way-warped spacetime—is in question. “Radio astronomy is really, really unique in the kinds of astrophysics that we can study,” says Brian Kent, an astronomer at the National Radio Astronomy Observatory.

That work is far from stopping. But support for pure science in the US is always complicated, since it relies on the good graces of federal agencies and annual budgets. As funders balance building and operating new scopes with the old, while giving grants to the astronomers who actually use those instruments, something’s gotta give. And no matter what it is, the science will not be the same.

Building massive radio telescopes—which today cost anywhere from around $100 million to more than $1 billion—actually began as a cost-sharing measure. In the 1950s, the nascent radio-astronomy community realized universities couldn’t afford to build their own scopes—at least not ones of high enough quality to drive the field forward. So in 1956, the United States formed the National Radio Astronomy Observatory, building a succession of telescopes in Green Bank that it could loan out to scientists from around the country. In Puerto Rico, construction on the 300-meter Arecibo observatory began in the 1960s, and it became the National Astronomy and Ionosphere Center. In the 1970s, the NRAO started building the Very Large Array in New Mexico.

Most recently, NRAO helped create the Atacama Large Millimeter/Submillimeter Array, or ALMA, in Chile. It cost more than a billion dollars to build, with the NSF contributing around $500 million, and another approximately $40 million per year to operate it. But it’s worth it: In US astronomy, interferometers, or telescopes like ALMA made of many smaller antennas, are currently more popular with scientists than big single-dish scopes, says NSF astronomy division director Richard Green. “We really try to be responsive to community interest,” he says. Interferometers provide higher resolution—crisper pictures of smaller areas—and can investigate many of the same celestial phenomena.

Giant single dishes do still hold astronomers’ interest—especially those that want to map large gassy portions of the sky, find and monitor pulsars, and catch the faint emissions that interferometers, less sensitive, can miss. Still, when push came to budget cut, the big single dishes, Arecibo and Green Bank, were the ones to go.

Now, as the NSF gradually decreases funding to Green Bank and Arecibo, the observatories have had to solicit support elsewhere—primarily through pay-to-play private partnerships. A SETI project and a collaboration of pulsar astronomers searching for gravitational waves are helping to keep Green Bank afloat. The Russians are ponying up to communicate with their science spacecraft. And the VLBA has netted Navy money, partly to keep track of Earth’s tilt.

This, a different kind of cost sharing, is a business model the agency can turn to to keep older telescopes online. The NSF still, for the moment, funds part of their time—“open skies” hours available to anyone’s good ideas; the rest of the time, the scopes are subject to their customers’ whims. That’s the tradeoff right now, says Joseph Pesce, NSF’s program director for NRAO (NSF split Green Bank and the VLBA off from the observatory in 2016). “We are able to keep the facilities running,” he says. “That’s a good solution to this problem.”

And it could leave room—ideally—for building up other resources astronomers are interested in, like array-based scopes.

There is a new facility potentially on the horizon: The Next-Generation VLA (the VLA itself, while upgraded, is 40 years old). As currently envisioned, the ngVLA’s many antennas will together have 10 times the sensitivity and resolution as the VLA, at a wider range of frequencies. The primary array will have 214 18-meter antennas, spiraled across New Mexico, Texas, Arizona, and Mexico. Nineteen smaller ones will sit close to the center, and 30 eighteen-meterers will constellate the continent.

With the ngVLA, the hypothetical instrument’s project scientist Eric Murphy says astronomers could make high-def movies of solar systems as they come together—something previously out of reach because the dust surrounding the baby planets obscured their birth, and because radio images weren’t sharp enough. They could capture the collisions that cause gravitational-wave events, up to 650,000,000 light-years away. They could find more molecules that precurse biology in still-forming star systems.

The conditional tense, though, is key. Before it can be realized, a committee has to deem it important in the 2020 “decadal survey,” a priority-plan astronomers make every decade. If it gets a high ranking, and then funding, construction would start around 2025.

But it’s…expensive: $1.5 billion just for construction, of which the US would pay half. Green Bank’s construction, meanwhile, cost about $135 million in today’s dollars, and around $10 million a year to operate, compared to the ngVLA’s $75 million. “It might all get shot down tomorrow, but for now, it’s fun,” says Murphy.

If it does get shot down, he says, the team could scale the plans back, or just keep running the VLA. At the other sites, members of the radio astronomy community are helping make older telescopes new again: They are developing a new Arecibo receiver that would game-change its view, and a Green Bank collaboration is working on a receiver called Argus+ to make, among other things, fast, detailed maps of molecules in galaxies and places where new stars are forming. In 2011, the VLA got a $94 million electronics upgrade and a new name that no one uses: the Expanded Very Large Array. “But 40-year-old dishes become 50 years old,” says Murphy, “and things become more difficult.”

In a hypothetical future in which the US has a 50-year-old VLA—and a partially or fully privatized Green Bank, VLBA, and Arecibo—American radio astronomers will have less they can do from their own backyard. “There is only one Green Bank; there is only one Arecibo; there is only one VLA,” says Kent. “Without those facilities working together in concert, we don’t have the kinds of tools scientists, engineers, and educators need.”

But radio astronomers—always kind of a scrappy, rogue element within the cosmic establishment—will likely continue to find ways to keep their telescopes open, operating, and updated. It’s part of their scientific heritage.

See, after Karl Jansky did his phone project, Bell didn’t care so much about this astronomy stuff. The lab moved Jansky on to other projects. But in Wheaton, Illinois, a guy named Grote Reber became obsessed.

In his backyard, Reber began to build his own radio telescope. Its dish, completed in 1937, was 31 feet across—a length dictated by the boards available at the local hardware store. He published the first map of the galaxy’s radio emissions, a contour plot that looks like a sky cephalopod. For around a decade, Reber was the world’s only active radio astronomer.

When the National Radio Astronomy Observatory started up, in the 1950s, it bought Reber’s telescope and relocated it to Green Bank, right across the street from Jansky’s duplicate—a reminder to support each other’s science, in the face of establishment adversity or ambivalence.

More Great WIRED Stories

Investors in Tesla bonds show skepticism on buyout

NEW YORK (Reuters) – Investors in the debt of electric carmaker Tesla (TSLA.O) are betting the take-private deal described by Chief Executive Elon Musk will not materialize.

FILE PHOTO: A Tesla electric car supercharger station is seen in Los Angeles, California, U.S. August 2, 2018. REUTERS/Lucy Nicholson/FIle Photo

Like its stock price, Tesla bonds have given up all of the gains they made after Musk tweeted he had “secured” funding to take the company private, suggesting the credit market has scaled back the chances of a deal.

Tesla’s high-yield debt now trades at around 87.5 cents on the dollar, down from 93.0 cents on the dollar on August 7, according to Thomson Reuters data. Tesla’s convertible bonds due in 2021 88160RAC5=RRPS are trading around 107.20 cents on the dollar, down from 120.46 cents on the dollar on August 7.

Convertible bonds give bondholders the right to trade their debt for equity after shares rise over a certain price.

Bondholders are paid back in full in the event of a buyout – at 101 cents on the dollar for the junk bond coming due in 2025 88160RAE1=RRPS if certain conditions are met. The company’s longer-dated convertible debt would earn an additional premium above par if Tesla were taken private.

“The smart trade at the moment is to short the converts and go long the high-yield bonds, because that spread will collapse” in the event Tesla files for bankruptcy, said Lawrence McDonald, founder of the Bear Traps Report. McDonald believes bankruptcy is the path for Tesla if it does not find a buyer because of the company’s high leverage compared to its earnings before interest, taxes, depreciation and amortization.

A Tesla spokesperson declined to comment. Musk said in his second-quarter shareholder letter that the company can be sustainably profitable from the third quarter onwards.

McDonald contends, there continues to be a spread between the convertible and junk bonds because, despite falling prices, convertible bonds still trade at a bit of a premium because of the volatility of the equity.

Tesla investors have raised their bets against the convertible bonds: short positions in the three converts have risen, from $38.14 million on August 6 to $49.47 million on August 16, according to IHS Markit.

Tesla’s convertible bonds coming due in 2021 are currently trading around 107.20 cents on the dollar – roughly 20.8 cents on the dollar away from where they should trade if a deal at $420 was fully priced, said Geoffrey Dancey, managing partner and portfolio manager at Cutler Capital Management. Musk shocked investors with a tweet on August 7, saying he had “funding secured” for a possible buyout deal at $420 per share.

“If these bonds were priced for a takeover, they would trade at a serious premium to the conversion value compared to when the deal was announced,” said Dancey. “The convertibles are certainly not trading as if this company is going to be taken private at $420 and they never did.”

Longer-dated convertible bonds benefit from take-private deals as bondholders receive additional shares per bond in the event of an acquisition. In a $420 per share deal, the 2021 convertible bond would receive an additional 11 percent above face value, or 11 percent more stock.

On the day of Musk’s buyout tweet, when the share price hit an 11-month high of $387.46, more than $27 dollars above the 2021 conversion rate, the highest the 2021 note traded was 120.46 cents on the dollar.

That the debt is trading below the price prior to the deal tweet suggests the deal was never priced in. That it trades below its price before its solid second-quarter earnings call on August 1, suggests the tweet’s damage was more widespread.

Reporting by Kate Duguid; Editing by Jennifer Ablan and Nick Zieminski

Jeff Bezos Has a Bulletproof Hiring Strategy That All Comes Down to 3 Profound Questions

If you’re an entrepreneur, there’s also a good chance you’ve hired someone who you later had to let go for similar reasons. 

So the questions remain:

Why do the wrong people so frequently end up in the wrong positions? Is the hiring process broken? What’s going on? 

For some jobs, it’s not as important. non-intensive skill requirements often have a high turnover rate by their very nature, so hiring the perfect employee becomes less of a priority. But when extensive training is required, or valuable information is being passed on, you want to make sure it’s going to someone who is truly right for the job. 

So, how do we make that happen? 

Like many questions of the digital age, this one can be answered (succinctly, if not definitively) by looking through the lens of Amazon, one of the global economy’s most powerful forces, and its leader, Jeff Bezos.

Let’s start by rewinding a bit: 

Bezos got a lot of his inspiration and instruction on hiring from his experience with investment-management firm D.E. Shaw, where recruits were often asked seemingly random questions like, “how many fax machines are there in the United States?” 

Why? The goal wasn’t to get precise answers but to identify the candidates who had the best problem-solving skills.

Moving on to Amazon, in 1998, Bezos brought it full circle, and explained exactly how he selects new hires in a letter to shareholders, challenging hiring executives to consider 3  questions about the candidate: 

  1. Will this person raise the average level of effectiveness of the group they’re entering?
  2. Will you admire this person?
  3. Along what dimension might this person be a superstar? 

This sort of approach might be more common today than it used to be, but there’s certainly no doubt that businesses continue to under-utilize the entire interview process as a way of finding employees who identify most with the company’s core needs and values, while simultaneously challenging your hiring executives to think about the candidate’s true potential in a way they most likely did not. 

Storytime: I know of one small-town movie rental store that’s still in business, despite over 95% of similar businesses closing down in the last 10 years. Their resilience is multi-faceted, without a doubt, but one thing about them stands out to me: their paper application consists of questions like

  1. What is your favorite movie? 
  2. What is the Fermi paradox?
  3. Calculate the area of this triangle.

Is it peculiar? Sure. But there’s more to it than eccentricity — there’s a clear attempt to employ only the people whom the management has determined are most likely to fit in with their business, and this type of outside-the-box thinking is a big part of Bezos’ and Amazon’s success. 

Whether it’s during the interview or after, the lesson here is to peel the layers back even further about a candidate’s potential, and challenge yourself to gauge their long-term fit & impact. During the interview, if you ask candidates those same, tired questions, ‘what are your strengths,’ or ‘what are your goals for the next five years,’ a huge opportunity is missed to ask them much more telling questions — questions that will let us know whether they are going to be dead weight or visionaries inside our organization. Which do you want?

The 2 Words You Need to Eliminate From Your Vocabulary Right Now if You Want to Meet Your Goals

I hear so many entrepreneurs, marketing managers, even vice presidents and CEO say things like, “I hope we get that new account, I hope we hit our sales goal, I hope we make our budget.”

The first question that comes to my mind is, “What are you hoping for? Make it happen.”

When someone says the words, “I hope,” a red light goes off in my mind letting me know they don’t have a plan. They are hoping for an outcome because they aren’t sure of how they’re going to get there–and hoping is always easier than digging into the work.

There’s a famous quote by Stephen Ambrose that says, “Where there is a will, there’s a way.” He’s also known for his quote, “Plan your work and work your plan.” The first time I heard this advice was when Ross Perot was running for President in 1992. As an independent candidate, winning was an uphill battle–and yet he still won 18.9 percent of the popular vote. His no-nonsense business approach to running the country was something that resonated with me for years.

In every one of my companies, I work hard to remove “I hope” statements from our culture, and focus more on cultivating an environment where “Here’s how” statements can lead the way. In order to do that, I’ve had to really nurture employees and fellow leadership team members to not just think or talk about executing, but to actually dig their heels in and get things done. 

The key to creating a culture of “does” and not “wishers” is to measure as many things as possible within your business. Not to the point where people are spending more time filling out excel spreadsheets than they are making productive strides forward, but enough to know whether you’re in “hope” territory or on the path to success. As the old saying goes, “What gets measured, gets done.”

I share a wide variety of examples in my book, All In. One very clear measure-for-success example is something I’m currently experiencing with my most recent company, LendingOne. In our industry, there are many other private lenders and competitors, so we’ve continuously had to ask how to get real estate investors to call us. If we were to just send out advertisements, invest in some marketing and hope for them to call, we’d be doing ourselves a great disservice. That’s not a business strategy, because most of the time you end up sitting around, waiting.

Instead, we’ve had to build very clear systems to build leads. We go so far as to monitor and measure daily and weekly performance against our sales plan. If something doesn’t seem to be working, we change our plan. And sometimes, even if things aren’t working, we fix it anyway–because we want to know if there’s an even better way of doing things.

Most businesses love the planning part. They love brainstorming all the things they “could” do. Some make it to the execution phase, where those plans are beginning to materialize and generate some sort of movement forward for the business. But the truth is, most businesses fail at the third part, which comes down to measuring their own success–and then iterating from there. 

Without measurement, your efforts are no better than shooting in the dark. You don’t know what’s working, what isn’t, and by how much. You don’t know what’s worked in the past, and it becomes tremendously difficult to make assumptions of what would work better moving forward. 

Putting a plan in place and “hoping” for an outcome isn’t a strategy. It’s an excuse.

Netflix Has Turned Off—And Deleted—User Reviews

The peer-to-peer recommendation has taken another hit.

Netflix has deleted all user reviews from its streaming service, the company confirmed to Vanity Fair on Sunday. The move means users will no longer have the ability to see what friends liked and didn’t and choose films based on those recommendations.

Netflix turned off the ability to post reviews to its service on July 30. In a support page announcing its decision, Netflix said that it’s removed user reviews because of “declining use” among its membership. Netflix added that it still allows users to give movies and TV series a “thumbs up” or “thumbs down.” It then provides a list of suggested content users would like based on their viewing history and the content they’ve rated highly with a “thumbs up.”

User reviews have long provided Netflix users an opportunity to see what others thought of a movie or series and gain some insight into content before they committed time to watching a program. However, the reviews did little to enhance the broader Netflix viewing experience. And, in a statement to Vanity Fair, a Netflix spokesperson said that it never incorporated good or bad reviews into its suggestion algorithm.

“Recommendations to members are always personalized based on what we think that specific member will enjoy watching based on what they have watched before,” the spokesperson said.

So, nothing will change in the Netflix viewing experience now that user reviews are gone. But the Netflix suggestion algorithm—and its accuracy—might be even more important than ever.