https://www.ft.com/content/8ef7696c-4aa2-11e7-919a-1e14ce4af89b
ThinkGlobalMacro Weekly
Congrats Market Player, you have leveled up another week.
As you know by now ThinkGlobalMacro avoids trading on market opinions. We have rather dramatic and uncharitable views of arguments made against Madam Market. The wide world is filled with folly and we must be as cautious as a professor of epistemology. One need not have opinions. The market self-evaluates with implacable efficiency. One only needs intellectual humility, patience, and an ability to measure.
Relative markets:
Relative summation strength. Momentum remains in NDX.
Look at that parabolic curve. Beautiful and nerve-racking.
However, beta-rotation model votes utilities. Makes one jumpy…
Look at the neck-snapping reversion of the Nikkei and the Russell.
A few international markets here. Brazil is discounted of course. (There are other international markets with liquid futures contracts, but these markets are what we focus on due the correlation constrains of our portfolio construction)
Yield Curves:
(most yield curve charts are from investing.com)
USA:
No inversion. But clustering at the shorter maturites
China:
Notice the small 7y to 10y inversion
India:
similar 7y to 10y invert, but also a small 15y to 20y
Europe (We use Italy and Spain as canaries in the coal mine)
No inversion. No need to chart. About 300 basis points of arc.
Brazil: short rates inversion.
Other whimsical charts. The metals complex thinks that there is a greater chance of economical growth than inflation…
Here is the market’s opinion of risk:
Here is the Cleveland Fed Yield Curve GDP predictor:
And the non-existent inflation that the Fed is tightening into… also from the Cleveland Fed
The Exponential Race(AI, Cloud, Big Data, Quantum):
The biggest fight for the future is the race for AI, or machine-learning. This race includes sub-races (Big Data is needed for AI training, cloud-computing, transportation as a service or “Taas”, robotics, internet of things or “Iot”, drones, smart-devices, AI in practical uses such as biotech and security, and even quantum computing). The interesting thing is (and the reason the Nasdaq is shooting for the moon is) this race is being ran by just a handful of companies. Here is overview of the position of the racers while still in very early laps.
Finally, I will end with some great articles from around the web.
Seers:
https://www.nytimes.com/2017/06/02/opinion/donald-trump-poisons-the-world.html?
hpw&rref=opinion&action=click&pgtype=Homepage&module=well-region®ion=bottom-well&WT.nav=bottom-well&_r=0
Reflections:
https://www.ft.com/content/6563efaa-467c-11e7-8519-9f94ee97d996
Wall of worry:
https://www.bloomberg.com/news/articles/2017-05-30/new-warning-sign-as-fewer-subprime-auto-borrowers-pay-off-early
Hopeium: (could it be different now?)
https://www.ft.com/content/cd516726-46d8-11e7-8d27-59b4dd6296b8
Opec wishes, dreams, and laughter
This article is excellent, and written with so much hope. It made me lol even though I agree with it.
Today, OPEC is faced with the devil’s alternative. If it continues to limit production, the response of efficient operators in different technologies will accelerate, and if it recovers production levels prior to the cuts, it will not be able to finance the excessive expenditure to which the member countries have become accustomed.
OPEC’s response should only be one. Demonstrate that they are the most efficient and reliable operators and that their governments can stop irresponsible spending. Only in this way will these countries, full of wonderful opportunities, remain relevant and prosperous.
“Low” oil prices are a blessing in disguise to producers, even if they do not believe it. It is the shock they need to wake up from the nightmare of the petrostate, that wastes billions of oil revenues and thinks it will go on eternally. Disruptive technologies are here to stay and have only one future: brilliant.
https://app.hedgeye.com/insights/59633-opec-s-next-mistake
Visualizing the Jobs Lost to Automation
In the near-future, many of today’s most common jobs may be changed profoundly. People working as retail salespersons, cashiers, fast food counter workers, and truck drivers will likely see opportunities in those fields dry up as automation takes place.
At the same time, jobs such as those in teaching and nursing are expected to stand the test of time, as they require empathy, creativity, and a human touch not yet available through machines. In the coming decades, it’s possible that these could even be professions that employ the most people overall.
http://www.visualcapitalist.com/visualizing-jobs-lost-automation/
https://www.aei.org/publication/on-mark-zuckerberg-and-the-merits-of-univeral-basic-income/
Universal basic income will eventually happen. It’s great if a society can afford it. Fairly efficient compared to endlessly extending the wealth gap problem forwards. Also, if connected to the central banks desire to malnipulate economies, it is a great way to helicopter-drop money to the people who will actually spend it, rather than blowing bubbles in asset markets. Which is what we currently do.
Did Trump get played???
Zakaria: How Saudi Arabia played Donald Trump – CNN https://apple.news/Az9Cf12EMSgiY_jiWhhgltQ
Zakaria is one of the smartest guys on tv. He also understands the world in deep ways. Unfortunately, he is basically seen as a spokesperson for the global elite’s politics. He fears Trump was played. Zakaria is projecting… if he had been sucked into the Arabian view of the world then yes he would have been played. Zakaria is an honorable man whose words have consistency and reflect an integrated person. Trump can make 1000 agreements, and they will mean nothing. Trump needed a successful foreign trip. That’s all he needed. Whatever agreement or worldview the Saudi Arabian leaders think they have convinced Trump to adopt means nothing. Trump isn’t cynical, he is whatever Cynical was trying it’s whole life to be-when-it-grew-up.
David Brooks, dropping truth…
https://www.nytimes.com/2017/05/26/opinion/the-four-american-narratives.html?smprod=nytcore-ipad&smid=nytcore-ipad-share
The first is the mercantilist model, which sees America not as the culmination of history but as one major power in competition with rival powers, like China, Russia, Europe and so on. In this, to be American is to be a member of the tribe, and the ideal American is the burly protector of his tribe.America’s government and corporations should work closely together to “protect our jobs” and beat back rival powers. Immigration and trade should be closely controlled and foreign entanglements reduced. America’s elites would have an incentive to share wealth with America’s workers because they need them to fight off their common foes.
The second is the talented community. This story sees America as history’s greatest laboratory for the cultivation of human abilities. This model welcomes diversity, meritocracy, immigration and open trade for all the dynamism these things unleash. But this model also invests massively in human capital, especially the young and those who suffer from the downsides of creative destruction.
In this community, the poor boy and girl are enmeshed in care and cultivation. Everything is designed to arouse energy and propel social mobility.
The mercantilist model sees America as a new Rome, a mighty fortress in a dangerous world. The talented community sees America as a new Athens, a creative crossroads leading an open and fundamentally harmonious world. It’s an Exodus story for an information age.
Biotech has so much potential…
Biotechnology is like a super car forced to drive at 55 mph by regulation. And we can’t really complain because the risks are so great.
http://www.leafscience.org/treating-diseases-with-a-protein-missile-system/
Dr. Sapkota commented in a university press release “For the first time we have shown that it is possible to target endogenous proteins for complete degradation with AdPROM,” and “This is extremely exciting and has far-reaching applications and implications for both research and drug discovery. Being able to selectively degrade target proteins in cells rapidly is desirable in research and therapeutics.” he continued.
The targeting and rapid destruction of specific proteins could potentially allow scientists to determine the effect of removing these proteins and the possible reversal of disease state by doing so.
3-d printing is getting industrially significant.
https://youtu.be/V7IsFQLjRNU
http://www.engineering.com/AdvancedManufacturing/ArticleID/14968/VIDEO-Atomic-Diffusion-Additive-Manufacturing-to-Print-Metal-Parts.aspx
Here are some investment ideas. It’s isn’t an easy area to play.
http://investingnews.com/daily/tech-investing/3d-printing-investing/top-3d-printing-companies/
If you can only read one thing today, read this.
https://www.ft.com/content/8fe23470-4010-11e7-82b6-896b95f30f58
This is the issue of out times, to grapple with, and seek to understand…