Trade update

Just to be clear, I am still long NDX. Yes, yesterday hurt. And yes the system is very close to selling. But to be fair the system has had such a good year I’ve been expecting pain. It’s just an exististial truth. There is no easy money in this game. 

I expect a puke is yet to come. Probably another 100-200 or more points down. But it will be intraday I suspect. 

Battery overinvestment

Over investment is part of capitalism. Remember global Crossing? Remember when they were laying fiber everywhere? The boom-bust cycle of capitalism is inevitable and ultimately accures benefit to the middle class

An estimate by Bloomberg Intelligence says that battery factories on the drawing boards and under construction by in China could have a production capacity of more than 120 GWh annually by 2021 — enough to power 1.5-2 million electric vehicles.
Elon Musk has estimated that the world will require the equivalent battery production capacity of 100 Gigafactories.

In Euorpe a consortium of companies headed by the German company TerraE Holding GmbH has plans to build a 34 GWh lithium-ion battery factory in response to Tesla’s Gigafactory.
“There’s a kind of arms race on batteries around the world. We know that Elon Musk with Tesla has got this Gigafactory. The Chinese are racing to overtake him; they’ll have three times the capacity.” Giles Keating, chairman of the Werthstein Institute, told CNBC.

Giles Keating believes that the major automakers have been “in denial” about the future of electric cars.
“I think Tesla was always all about electric cars, whereas I think the conventional auto manufacturers, they were in denial. They just kind of almost wanted batteries to be weak so that they wouldn’t have to go that route so that their existing route of business can continue, if I’m brutal about it,” Keating told CNBC.

Trade update 8/6/17

Closed 10y bond long

Closed oil short

Close hogs short at open

Currently long ndx

I tend to trade the intermediate term setups. That means my commodity trades are fairly active, days to weeks in duration. My equity setups are somewhat longer in duration. The reason is that that is the time duration where I can find actionable algorithms.
I do not believe anyone can predict the market, not Warren Buffet, not George Soros, and certainly not the banks and institutions. Technicians, nor fundamentals, nor Elliot Wave wonks, nor Wychoffians. No one can predict it. It is folly to try. I want to position myself to follow the market, not predict the market. However, I love to read/listen to people who think they can predict the market –that strengthens the philosopher within.

Slow mo money is still in Europe

Fast money is seeing China A50 and Indian Nifty with a little more push than Nasdaq, I’m sticking with NDX for many reasons, including liquidity

Nvidia is still smashing the AI race, with twice the return of other companies.

According to the St Louis Fed Stress Index there is essentially no clearing or liquidity stress in the market. The bears rightly point out, OMG IT CAN ONLY GO BAD FROM HERE!!! Yawn. I have no opinion.

The term structure on the VIX is orderly, showing some flattening in Dec, which is to say, nothing bad happens in December.

The velocity of M2 money just keeps going down. Which probably says as much about demographics as it does economic growth or monetary policy. And the monetary base is going down also, which means it is going to be tough to Make America’s Growth Great Again!

The Cleveland Fed Yield-Curve GDP predictor has GDP growth at 1.7ish% Seems reasonable to me. No opinion.

If you like to play sectors, Financials just overtook Technology on my momentum models.

Have a good week.


Hydrogen on demand? The possibilities leave us swooning…

The accidental discovery of a novel aluminium alloy that reacts with water in a highly unusual way may be the first step to reviving the struggling hydrogen economy. It could offer a convenient and portable source of hydrogen for fuel cells and other applications, potentially transforming the energy market and providing an alternative to batteries and liquid fuels.
“The important aspect of the approach is that it lets you make very compact systems,” says Anthony Kucernak, who studies fuel cells at Imperial College London and wasn’t involved with the research. “That would be very useful for systems which need to be very light or operate for long periods on hydrogen, where the use of hydrogen stored in a cylinder is prohibitive.”
The discovery came in January, when researchers at the US Army Research Laboratory at Aberdeen Proving Ground, Maryland, were working on a new, high-strength alloy, says physicist Anit Giri. When they poured water on it during routine testing, it started bubbling as it gave off hydrogen.
That doesn’t normally happen to aluminium. Usually, when exposed to water, it quickly oxidises, forming a protective barrier that puts a stop to any further reaction. But this alloy just kept reacting. The team had stumbled across the solution to a decades-old problem.
Hydrogen has long been touted as a clean, green fuel, but it is difficult to store and move around because of its bulk. “The problem with hydrogen is always transportation and pressurisation,” says Giri.
Slow reaction

If aluminium could be made to effectively react with water, it would mean hydrogen on demand. Unlike hydrogen, aluminium and water are easy to carry – and both are stable. But previous attempts to drive the reaction required high temperatures or catalysts, and were slow: obtaining the hydrogen took hours and was around 50 per cent efficient.
The new alloy, which the team is in the process of patenting, is made of a dense powder of micron-scale grains of aluminum and one or more other metals arranged in a particular nanostructure. Adding water to the mix produces aluminium oxide or hydroxide and hydrogen – lots of it. “Ours does it to nearly 100 per cent efficiency in less than 3 minutes,” says team leader Scott Grendahl. Moreover, the new material offers at least an order of magnitude more energy than lithium batteries of the same weight. And unlike batteries, it can remain stable and ready for use indefinitely.
The army team has used the material to power a small, radio-controlled tank. Grendahl doesn’t see any practical issues with scaling up production to produce hundreds of tonnes of the stuff as it can be made from scrap aluminium, which is relatively cheap. The new material could power everything from laptops to buses and cars.
“In principle, the process should work,” says Robert Steinberger-Wilckens, who directs a fuel cell programme at the University of Birmingham, UK.
But he cautions that a repeat experiment is needed to show that the reaction works the way it should. “There’s a lot of stuff that works in the laboratory but not in the field.”
If it does pan out, the powder could also be used as the raw material for 3D printing. The researchers have put forward proposals – now being considered by the army – for small air or ground robots that use their own structure as fuel. These self-cannibalising machines would be useful for one-way intelligence-gathering missions, burning themselves up at the end to leave no trace.

More here

AEI wishes upon a productivity star…

As much as I love this article, it is just an interesting way of saying maybe cool things will happen in the future.

Fresh off their failure to repeal Obamacare, Republicans are eager to pivot to tax reform. Of course they are. Tax reform is what they do. It’s been their policy safe space for 40 years. Targaryens ride dragons, Lannisters pay their debts, and Republicans cut taxes. 

But Republicans’ tax reform effort may collapse, too. The GOP has reached agreement on only broad goals. And the tax code is arguably just as complicated at the health-care system, if not more so. Both are full of economically thorny and politically unpalatable trade-offs. Republicans might have to settle for a temporary corporate tax cut, which might have little long-term impact on economic growth. Or maybe nothing.
And that might be okay — not optimal, but tolerable. After all, the U.S. is not in economic crisis. The current expansion is the third-longest ever, the economy grew at a solid-if-unspectacular 2.6 percent last quarter, and job gains continue to average nearly 200,000 a month. Policymakers don’t need to scramble to juice growth through quickie tax cuts that reduce marginal rates but also revenues.
Actually, Washington might not need to do much of anything for the economy to grow at 3 percent annually on a sustained basis — a stated GOP goal — versus the 2 percent average of the 2000s. One reason growth pessimists think the economy is stuck permanently in a low-gear New Normal is that productivity has been historically weak, both since the Great Recession and just before. If workers fail to become more productive, the economy and living standards will stagnate. And if America isn’t technologically innovative, workers won’t become more productive.
Yet America sure looks pretty innovative, at least if you pay attention to what’s happening in places like Silicon Valley, Seattle, and New York. Indeed, there’s reason to believe official stats are underestimating tech-driven innovation. As my AEI colleague Stephen Oliner, the Federal Reserve’s David Byrne, and Daniel Sichel of Wellesley College write in their new paper, “Prices of high-tech products, mismeasurement, and pace of innovation”: “We believe that these faster rates of growth in high-tech could presage a second wave of higher productivity growth spurred by the digital revolution.”
Here’s the problem: The IT revolution seems confined to a narrow group of superstar tech firms and isn’t spreading throughout corporate America. For innovation to lift productivity and the broader economy, new technologies must be broadly and efficiently used. We must spread the innovation wealth.
Of course, that still might happen. Economic history suggests such “diffusion” typically takes time. It took decades for factories to figure out how to use electric dynamos rather than steam. Likewise, economists in the 1980s wondered why the arrival of PCs wasn’t transforming firms — until that 1990s productivity boom happened.
And in the same way, “the rapid innovation and robust investment of recent years will eventually have an impact, but it could take some time for the next wave of productivity growth to become visible at the aggregate level,” concludes a new Peterson Institute paper, “The Case for an American Productivity Revival.” A similar argument is made in “The Coming Productivity Boom” by the Progressive Policy Institute’s Michael Mandel and AEI Fellow Bret Swanson: “The 10-year productivity drought is almost over. The next waves of the information revolution — where we connect the physical world and infuse it with intelligence — are beginning to emerge.”
Some researchers think the widespread and innovative use of big data, AI, and robotics in areas such as health care, education, and the service sector could eventually boost productivity growth high enough that overall 3 percent growth is doable. And this tech wave may be unstoppable as long as government doesn’t do something profoundly dumb such as banning or taxing new technologies. Instead, policymakers should be trying to hasten, enhance, and spread this transformation through a variety of public policies, such as making it easier for global tech talent to work in America, reducing regulatory barriers to the adoption of new technologies, boosting competition, and more generously funding science research.
More here

Trade update 8/2/17

Long 10y bonds again. Yes, system is whipping us around. That’s the price of trading in really efficient markets. There is lots of confusion, cross-currents, bond markets disagreeing with stock markets. Current position, including commodities:

  • Long nq (ndx)
  • Long zn (10y bonds)
  • short qm (oil)
  • short he (lean hogs)
  • very small short volatility position


neuro-lance cometh…

Neuroprostheses show promise in the treatment of Alzheimer’s Disease, Parkinson’s Disease, epilepsy, traumatic brain injury and for the creation of brain-machine interfaces such as the neural lace, but a major stumbling block for researchers has been the propensity of these implants to induce an immune response, inflammation and scaring in the brain, severely limiting their potential use.

The Harvard team’s new neuromorphic mesh is delivered to specific brain regions via syringe injection and overcomes the problem of immune response in the brain. Their observations of the brain’s of the injected mice showed little to no immune response and they found the neuromorphic mesh had merged with the brain tissue.