Category: Uncategorized

China is the greatest growth story in history. A true triumph of market-forces. But since the boom-bust cycles of capitalism is a feature and not a bug. China will have the greatest bust in history, to match its boom. As long the government doesn’t regress to the delusions of communism, capital will move from weak hands to strong hands at vastly discounted rates. Which is the only element of trickle-down economics that truly works. Ideally, they would become more democratic (think Singapore not India). 

However, there are forces pushing the boom further. First and most importantly, the inclusion of China into the existing indices. I do not buy the argument that China is undervalued. Look at any nation with sketchy rule of law and you’ll see the markdown in valuation. Again, use a simple momentum filter and follow along. 

Opinion | China’s Bill Will Have to Be Paid – Bloomberg https://apple.news/AEmbNkGakTG6Z8CY80rK_lg

https://www.washingtonpost.com/local/trafficandcommuting/trump-advisers-call-for-selling-off-old-assets-to-build-new-infrastructure/2017/05/23/657aa2c6-2f53-11e7-9534-00e4656c22aa_story.html?utm_term=.f95f719bb1f5
The Trump administration, determined to overhaul and modernize the nation’s infrastructure, is drafting plans to privatize some public assets such as airports, bridges, highway rest stops and other facilities, according to top officials and advisers.

In his proposed budget released Tuesday, President Trump called for spending $200 billion over 10 years to “incentivize” private, state and local spending on infrastructure.

The main issue with Trump is that he’s not good at being part of an organization. He used to own everything he runs and thought he would own the US government. But it is not designed to be owned. That is why he thinks any resistance is Deep State. It’s actually Free State. 

I’m in Havana, Cuba this week. It is a continuing exhibit in alternative ways to organize a society. Like Venezuela, but climbing up rather than sliding down. Reminds me of the great Smithian quote: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” QED –capitalism works. 
Capitalism understands what communism did not: A government can steal ALL a person has… once! But a government can steal 1/3 to 1/2 of what a person produces each and every year FOREVER! It is a much better way to organize a society. 

Even without much development, smog hangs over the city. Yes, the result of beautiful old cars. 

But capitalism is coming. And with it –toilet paper I hope. Yes, the revolution comes at the expensive price of stinky butts. But the Occcupy Wall Street cultist would never chant, Liberty! Justice! Toilet Paper! 

Big Data will never replace Big Ideas: Why cultural intelligence matters – City A.M. https://apple.news/AN1uIdq17M760zBd3xq_55w 

Good article, but the thing is big data is necessarily inductive, while big ideas are nearly always deductive (because of the nature our brains). These things will compliment each other, not compete. The best combinations will create a new synergy in insight. It’s already happening. 

As someone who has been attempting to code trading systems for a rather long time, reading this article makes me think that some of these hedge funds are selling a “quant” marketing image so their clients won’t be tempted away… The quants are here. And they are very quiet. The louder these new quants talk the more desperate and behind they sound. Just my take… but it’s a great read. 

https://www.wsj.com/articles/the-quants-run-wall-street-now-1495389108

 The main things to see here are that the long-term trend remains up. Also SNP earnings are above their 12 month average. Unemployment continues downward although we are reaching the limit of what to expect. And finally that rates are still effectively stimulative in real terms. Once the fed funds rate gets close to or exceeds the two-year bond you will know that the Fed is announcing the end of the party. 

Here you see that reviewing internals through the summation indexes reveals that /nq or ndx remains the place to be.

Dow theory is really old school and I only follow it out of nostalgia. But notice the 8% difference in performance between the industrials and the transport. Hmmmm…

Finally. Yield spread. Orderly. 

Risk appetite spread…

More to come…

If Iran ever wakes up from its experiment with the 15th century. It’s going to be change the Middle East more in a decade than the west has been able to in five decades. Tremendous potential.

http://www.zerohedge.com/news/2017-05-20/rouhani-re-elected-iran-president-landslide-victory

Google’s New AI Is Better at Creating AI Than the Company’s Engineers – Futurismhttps://apple.news/AZGL3hrwTThuTdhEG_Tm3Jw

https://www.ft.com/content/4b8cd546-3bf1-11e7-821a-6027b8a20f23
The story above points out the difficulty of investing in emerging markets. But portfolio volatility maybe the necessary price we pay for Alpha going forward. A world awash in bank reserves (if not money supply, which is why no inflation and slow growth) has seemingly dampened volatility in developed the markets 

The Stock Picker Behind the S&P 500 https://www.wsj.com/articles/david-m-blitzer-stock-picker-behind-the-s-p-500-1495186202

Story above reiterates an exhausting truth –there is no passive investing. But go ahead keep deceiving  yourself

http://www.nbcnews.com/news/us-news/it-s-not-just-chris-cornell-suicide-rates-highest-among-n762221 It’s Not Just Chris Cornell: Suicide Rates Highest Among Middle-Aged Men NBCNews.com – 20m ago The news that 52-year-old Seattle grunge rock icon Chris Cornell had killed himself after a concert in Detroit shocked and saddened fans of the Soundgarden frontman.

The crisis of meaning continues. It is somewhat like a neo nihilism. As if a generation wants to say –nothing matters enough to change anything. Tragic. 

http://assets.realclear.com/files/2017/05/576_debt.pdf
Good research. The next time you hear someone say with breathless tone that household debt  is at an all-time high. Enjoy a moment of snooty insight and say to yourself “yes, but debt to income is shrinking.” Nerds just want to have fun too. 

https://www.bloomberg.com/view/articles/2017-05-18/oh-no-not-another-debt-crisis
http://blog.yardeni.com/2017/05/death-by-amazon.html

As if the last ten years of petrochemical extraction technology hasn’t shifted the supply curve enough, now we have this…

https://phys.org/news/2017-05-china-japan-combustible-ice-seafloor.html