AI versus Heuristics
Waking Up is Hard to Do
I am finding that methods employed by J.M. Keynes (the great economist), turn out to be probably the most effective trading strategies that individual investors can deploy. As I indicated at the time, in these running-notes, I (we) remained long and basically - all-in long - thru the Christmas 2018 meltdown, driven by the gross miss-steps of the US Fed. (What data are those guys actually looking at, anyway?). A real slowdown started showing up around September - Asian exports started tanking, and the Baltic Dry index started heading south with a vengence. The comment by Powell ("We are a long way from neutral") scared the hell out of everyone, and provoked the equity sell off, it appears, and yet, the reactive-response to this slowdown (which really started to become visible in the soggy Christmas retail numbers), meant it was probably easy to fix - ie. just recognize that we are in a world of "Steam-punk interest rates" - ie. the Victorian model of 2% on the Gilts - which for the Vic's, (and even the Edwardians) was a nice trade -they would buy them at a discount, and then harvest them, when they came due, and were refunded at par + the yields owing. It wasn't until the post-WW2 socialist idiocy in the UK, that the wheels fell off.
And as long as the USA avoids the toxic miasma of "socialism" (the worst, most tragic and grotesque stupidity the world has ever seen), things American will be OK, fine. And it's little brother Canada should do OK too, since we are running a TW3 low-val currency economy, which keeps the whole place buzzing like a little beehive. Anyone who wants a job here can get multiple offers, it turns out. Retirements are causing rolling labour shortages in many areas - both skilled and unskilled. Keynes traded in a similar world, and did just fine, too. His algos are documented in several books. And they seem to work better than the AI's (which actually work OK. But execution turns out to be difficult). So, full-disclosure: The trading portfolio is well into the black, by a non-trivial amount, the low-risk yielder in LIC is holding its own, and throwing off it's 5%.
The Fed guys need to realize, we are in a Steam-Punk world, where 2% is a *big yield*, and that the job of the central bank should be to keep inflation at zero. If the cen-bankers want 2% inflation, then they are being unwise and wrong, and don't understand what the heck is happening. Inflation - ie. ANY INFLATION AT ALL - is a bad, toxic device phenomenon which is used to impoverish investors and wage-earners, and if the money-brains at the Central Banks can't learn this simple truth, then these folks need to be replaced by people who have some skills in actual business, as well as academic economics so they have some understranding of how business process unfolds thru time. Inflation is like cancer - even a little is bad. I grow weary with the group-motion of the old suit-and-tie guys who have never taken a real risk in their entire lives. They have dangerously limited understanding of how the economic world actually works. I would prefer they be replaced by a heuristic AI, truth be told, and the gov-boys sent out to find some productive employment.
Heurisitcs are basically "Rules of Thumb", guidelines for decision-making under uncertainty. They work - not great - but in the words of my Economics Prof. at Waterloo, "it is better to approximately right, than be exactly wrong". Why do people (especially smart people) have so much trouble with this simple idea?
I asked a wise friend who has been very successful in the stock market "What is your opinion of the market?" His response: "Well, it's going up, isn't it...?"
Telegram-Sam - You're My Main Man... not
Don't need TV, I've got T-Wrecks!...
(or "The Stain of Gram Negative"...)
Curious about the Telegram ICO (Initial Coin Offering)? Surprised that there seems to be no public information on available? Surprised that the "public" portion of the ICO was cancelled? Jesus H., people. They got $1.7 billion USD. The company consists of 15 guys, operating about 5 inches away from being rogue. Good gracious, is everyone complete insane? Telegram was an interesting business model, which now appears to have reached it's end point. I've been reading about it, and it is just brilliant. The Spirit of John Law is not dead - he was just resting, like the Norwegian Blue. Just review my "Economics 2019". Don't even read anything, just look at the pictures. Oh my, my. If you are hoping to "spend your Grams", then I wish you well. Will TON ever actually exist? Why should they even bother, now? Come on, people.
I see France wants to introduce a "Digital Tax" and assess Google and Facebook and such, on their worldwide digital income. This should be amusing... "French Econ. 101: How to Blow Up Your Economy". Brexit will be seen to be a fine, wise idea, as Europe begins to tear itself apart (again). History is not dead...
<begin> Hey, Telegram me all your money! Ah, there we go. That's nice... </end>
Where Should We Invest the Cash?
Mother of Pearl - Lustrous Lady in a Shrinking World...
On the "real investments" front: No ICO's, no Bitcoin in our portfolios. (My J-cutie walked by wearing her new bathing suit - she's off to the "Y" to go swimming... amazing Asian bod, and at her age. We should be writing a Diet+Fitness Book. But so boring, it's a solved problem, right? Eat *lots* of good food, stay *really* active, and get good sleep, and do work that you really enjoy. Result? Health & a thin body. Solved problem, until it isn't eh? and the "reaper" drops by for a chat, with a bottle of "Black Star"... <sigh>)
Anyway, here is the market observation for today: (I will have to start doing an Investment Letter or some such thing. Samuel Johnson was right - writing for free is wrong.): I am fully long again, as I have never seen a market with such resilience. This market has had everything but the kitchen-sink thrown at it, and thrown by big people throwing *hard*.
And yet it keeps ticking along. Not a ripping great runaway boom, just a solid 2.9% GDP growth last year in good, old USAland. Goddamn good. Impressive, really. What it comes down to, is that North America is still a fortress of sanity - more or less. Europe (really just the funny-talking French), want to impose a 3% "Digital Tax" on Google, Facebook and Amazon's world-wide income, if they do business in France. This is so crazy-stupid, that I just laughed out loud, for a long, long time.
Why don't they just take a few of those lovely old St. Etienne revolvers, (one of the most beautiful production handguns ever made - some of them are just fine works of art!), and start shooting at each other's toes? After a while, they might figure out that this is not really a good idea, right? Would it not also be fine, if they could learn to *shrink* (instead of constantly expanding) the great bloated beast that is their State-expenditure "trudeau", as well? (A "trudeau" is a "water-hole" - ie. you are "in the hole", and "underwater", as a "mountain of debt" actually grows downward...) Could they not just *shrink* that stinking great slug of socialist-state-failure, and give their "Gillet Jaunes" and other French citizens, who actually do the real work in the country, a chance to live, buy and sell, without being tax-assaulted all the time?
Poor France. They keep re-writing their same history, without really learning too much from it. But my, those St. Etienne's are pretty...
And the French also made one of the most beautiful cars in all of history - the Talbot-Lago, of 1937. The "Goutte d'eau" (tear-drop) car, with it's use of smooth reverse-curves at a time when automobiles were still mostly box-on-box designs, was revolutionary in both engineering and as pure artwork.
I have a great love for France, a country where love & passion are respected and valued, and reasonable time is scheduled for meals (instead of Japan, for example, which flips it the other way around...). Hang in there, France. Of Course, We Still Love You! Without your scientists, our doctors would still be treating tropical disease with air-freshener, and probably not even washing their hands before operations - like they did in England for hundred of years - until the "germ theory of disease" was proven by Louis Pastuer in 1864. If you could just back off on that routinely-exploding *taxation* machine that your Enarchist's are so in love with, eh? Pull the plug on the filthy, soul-destroying State-sanctioned "tax monster", and free the working people from their "economic Bastille".
For the rest of us, just invest in North-Am Co's in either "BAMA" - (the Boston-Atlanta Metro Axis), the "Golden Horseshoe" around Ontario Lacus, or the "People's Republic of Califoxico". You'll probably do just fine. Sometimes it will hurt a bit, but if you stick with quality, and make sure to read the back-pages of those annual and quarterly reports, and dump the skanky gunk that fails to make money, obfuscates results or uses fibrillated language, you will likely live long and prosper.
In the far-future, things will probably not change much. (see sci-fi image at upper-right...)