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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:

http://www.zerohedge.com/news/2017-05-28/after-47-years-stephen-lewis-calls-it-quits-scathing-critique-modern-markets

http://www.zerohedge.com/news/2017-05-29/market-crazy-hedge-fund-returns-hundreds-millions-clients-citing-imminent-calamity

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

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New technique lets researchers control brain cells without the need for surgery

http://www.wired.co.uk/article/control-brain-cells-without-surgery
Researchers have come a step closer to treating diseases like Parkinson’s and epilepsy, without the need to place an implant into the brain.
These days, many regions in the brain can be modulated by electricity to help improve brain function, in a technique already used to treat Parkinson’s and epilepsy. But because these cells tend to be deep in the brain, controlling them requires neurosurgical implants. 
“If we could noninvasively stimulate deep regions, without hitting overlying regions, we might be able to help more people because we could stimulate deep regions selectively, without needing surgery,” Ed Boyden, professor at the Massachusetts Institute of Technology and co-author of the new paper, told WIRED.

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‘Instantly rechargeable’ battery could change the future of electric and hybrid automobiles

http://www.purdue.edu/newsroom/releases/2017/Q2/instantly-rechargeable-battery-could-change-the-future-of-electric-and-hybrid-automobiles.html
WEST LAFAYETTE, Ind. – A technology developed by Purdue researchers could provide an “instantly rechargeable” method that is safe, affordable and environmentally friendly for recharging electric and hybrid vehicle batteries through a quick and easy process similar to refueling a car at a gas station.The innovation could expedite the adoption of electric and hybrid vehicles by eliminating the time needed to stop and re-charge a conventional electric car’s battery and dramatically reducing the need for new infrastructure to support re-charging stations.

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Hyper loop dreaming 

https://thenextweb.com/eu/2017/06/02/amsterdam-paris-connected-hyperloop-2021/#.tnw_ea50JDIT
The company has already set itself an ambitious goal of linking the cities of Amsterdam and Paris by 2021. If realized, this would be huge. Hyperloop can theoretically travel at 1,126 km/h. The distance between the Dutch and French capitals is about 510 km. Do the math. Or if you’re lazy, it’ll take about half an hour from city to city.
For context, flying between the two cities usually takes an hour, although when you factor in security, it takes much longer. If you take the Thalys fast train, the journey takes 3 hours and 17 minutes.
Hyperloop would offer an affordable, low-carbon, and super-fast alternative to the current systems of transportation. It also seems ideally suited to Europe, which is a small continent with dozens of large urban centers.
It’s looking less like a moonshot pipe dream, too. Other forward-thinking European countries, namely the Czech Republic and Slovakia, are serious looking at creating their own systems.
And next week, Hyperloop One, yet another hyperloop company, will host an event in Amsterdam, where it’ll showcase its technology, and its ambitions for an intra-European hyperloop network.
The future is now. We’re living it.

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Technology is making the world more unequal. Only technology can fix thisCory Doctorow (so good)

Designing systems on the assumption they’ll never fail doesn’t give you good systems, it gives you the Titanic. Smart engineers know entropy isn’t just a good idea, it’s the (second) law (of thermodynamics) and plan accordingly, designing systems that glide to a graceful halt when they go wrong – rather than exploding in a cloud of white-hot shrapnel.

https://www.reddit.com/r/Futurology/comments/6ej8xj/technology_is_making_the_world_more_unequal_only/?st=J3DTOBRN&sh=e543f6ca

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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

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Trade log 5/31

Shorted financials on today’s data drop in house buying. Remember our longs are all algo based. Our shorts are selected by algorithms but the quantity and details of the position is discretionary. Shorting financials by futures proxy may not be the most sophisticated vehicle. But it fits our current positions and tax needs the best. Makes a lower vol portfolio construction. In my guts I believe the market will test the courage of its players sometime between june-July. 

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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/