Links for April 2019

We’ve talked about Data as Labour before and Bunz seems to be leading the charge:

See some video’s from RadicalXchange:

Great article on Andrew Yang:

“But the decidedly nonpartisan Yang hasn’t been hanging around on the outskirts of Congress or in a governor’s mansion waiting for his shot. He’s not in the field because he wants to make a name for himself and become a Democratic-party fixture going forward. He’s there because he thinks he actually has the substance to speak to our current moment. Plenty of people agree that we’re facing cultural disintegration, he says, but too few are proposing an actual plan for recovery.”

Another interesting candidate highlighted by Glen Weyl:

More on Hashgraph as an alternative to Blockchain:

Economic Links:

Updates on the economic cycle from ITR economics:
“While the International Monetary Fund and other observers have been relatively upbeat and are only now revising their forecasts downward, Zulauf has been expecting a slowdown in the second half of 2019 for a couple years.

“I think the consensus is moving closer to my view,” he said. “Right now, the consensus believes the world economy is bottoming out. I think that is a little bit too early.”

Instead, he expects more negative surprises ahead into Fall or later this year, which will likely produce a shock. Nominal GDP in essentially all major economies around the world could decline substantially.

He expects the U.S. could see a decline from over 5 per cent to maybe 3 percent in nominal terms. China is already at 3 percent real growth and around 2 percent inflation, and those figures could decline further as well.

“The current optimism that things are bottoming out by those who have been wrong for quite some time is premature,” Zulauf said. “I think the consensus will be disappointed again in the second half, and that will have implications for the corporate sector’s earnings situation.””
“After ugly macro data this winter, a spring rebound – led by employment and housing – is underway. A recession in 2019 looks unlikely. ”

Nordea View May 2019_Amended.pdf

Check out the notes on Felix Zulauf’s presentation:

Macrovoices Variant Perception Update Podcast
Variant Perception Simon White Chartbook

Juliette Declercq Macrovoices Podcast Chartbook May 2nd



“Yet it would be naive to deny the long awaited real estate correction has started.

You don’t need to see more graphs about Canadian consumer indebtedness. We all know what they look like. The story is so well told it’s pointless to repeat any part of it.

A correction was coming, the only question left unanswered was timing.

Well, I think it’s now obvious that we are in the midst of that adjustment.

The only help I can offer is to point out that real estate cycles are long. Really long. The mistake will be assuming it will be over quickly. It won’t.

And my favourite trade?

I love buying the short end of the yield curve in Canada against selling the US equivalent tenor.

Probably the easiest way to play it is a long BAX DEC 2019 vs ED DEC 2019 spread:”

Economic/Market Narratives:

MMT has blown up in the news media. I’ve thought about doing a post with MMT related links, instead i’ll post some key ones here. In the future, we will likely see an even larger fiscal impulse since monetary policy is limited with interest rates so low. Good or bad, a macro investor needs to consider the scenarios and consequences.


When Money Dies: The Economics of Inflation (MMT)


“I would like to reaffirm one point. There are two parts to MMT; how the modern fiat-based economy works and then the policies that are advocated to maximize output under these conditions.

You might not like the political parts of MMT. I am not trying to convert anyone. Nothing is more annoying than when your best friend discovers some keto-diet and spends all day extolling its benefits.

But I will let you in on a little secret. When I wrote my original MMT piece – “Everything you wanted to know about MMT (but were afraid to ask)”, I was shocked by the individuals who reached out to me. Really impressive people who had spent time examining MMT and concluded that it was extremely useful in their analytical thinking. They sent me papers they had written, notes they had taken from their meetings with these MMT professors and analysis they had created in their attempt to better understand the modern economy and markets. The quality of these people and their thinking astounded me.

It’s easy to dismiss MMT as the ravings of the far-left, but if you do so, you are mixing economics with politics. MMT theory is extremely useful in understanding how the economy actually works. You might not like it. You might wish it were different. But I think the hallmark of a great trader/investor is to stay open-minded. In that vein, I think the MMT framework is a most useful tool for macro trading.”

“As traders/investors our job is not to decide the best way to organize society (we leave that to the much smarter politicians and economists), but to construct portfolios that will perform best under the existing circumstances. If you want to rail against MMT, then you are free to do. But I happen to believe you are missing a valuable tool for understanding how the economy and markets behave in the post gold-standard fiat-based world.

If in the coming years politicians adopt MMT policies, your outrage will do your portfolio little good. Therefore you might as well try as best you can to unemotionally analyze the implications of these potential policy implementations.

So without further ado, let’s try to determine how best to adapt to the MMT possibility.”

“The conclusion is simple: MMT proponents know nothing about economic history, do not understand the nature of money, which is not a state monopoly but a common good, and believe unquestioningly in their theories without pursuing them to their logical conclusions.”

“A clash of generations
Analyzing theories like MMT to determine whether they represent good policy is futile for investors. Even if it turns out to be bad policy, the consequences won’t be felt for years, and investors should instead focus on the likelihood of its implementation, and its fiscal effects.

Here are two perspectives on MMT that represent some out of the box thinking. Srinivas Thiruvadanthai, Director of Research at the Jerome Levy Forecasting Center, wrote a Twitter thread that framed MMT as a generational conflict between Baby Boomers and MIllennials:

‘My pet theme: inflation is everywhere and always a political phenomenon in the current context of clash of generations, between Millennials and Boomers. In a way reflected in AOC vs Schultz.

The Boomers are entering retirement and sitting on assets that are richly valued. Inflation is poison in more ways than one. In fact, rising wages are poison because it cuts into their living standards. They want sell down their big houses and downshift.

The same thing happened in Japan but was decisively won by the retirees because they were preoponderant. In contrast, the Millennials are more or less the same size as the Boomers. So, the clash won’t be so decisively settled.

Ironically, Boomers when they were in the same position as Millennials today, i.e in the 1970s, won the battle decisively because they were dominant demographically. That is one reason why we had inflation.

The point being economic theories don’t have as much influence as people think. People use them to rationalize whatever policies favors them. Part of the reason for MMT gaining strength is it appeals to a constituency and the increasing divergence of interests.’

As Millennials grow older and participate in the political process, their influence will grow. Over time, they will flex their political muscles, and the implementation of MMT will deliver the inflation that will favor their generation at the expense of the older Boomers. Whether that happens in 2020, or in the years beyond, is an open question. The midterm election of 2018 saw more Millennials participate in the political process, and expect that generation’s political power to grow as time goes on.”

Ray Dalio on MMT

Ben Hunt (@EpsilonTheory) tweeted at 10:36 AM on Sat, Jan 19, 2019:
QE is a stagflation machine for market-world, where we’ve inflated prices for fin’l assets and crushed productive corporate growth.

MMT will be a stagflation machine for real-world, where we will inflate prices for goods/services and crush productive private sector growth.

VP on MMT:

Ben Hunt’s interesting articles:

In You Are Here, I wrote that the investment Zeitgeist is changing in three ways.

-Deflationary expectations, now 40+ years old, are becoming inflationary expectations.
-Cooperative and multi-play games in both international politics and domestic politics, now 70+ years old, are becoming competitive and single-play games.
-Modern capital markets, now 150+ years old, are becoming political utilities.
Time to add a fourth.

-Capitalist productivity, now 200+ years old, is becoming capitalist financialization.
What is financialization?Financialization is profit margin growth without labor productivity growth….Financialization is the zombiefication of an economy and the oligarchification of a society.


“The reason companies aren’t investing more aggressively in plant and equipment and technology is BECAUSE we have the most accommodative monetary policy in the history of the world, with the easiest money to borrow that corporations have ever seen. Why in the world would management take the risk — and it’s definitely a risk — of investing for real growth when they are so awash in easy money that they can beat their earnings guidance with a risk-free stock buyback? Why in the world would management take the risk — and it’s definitely a risk — of investing for GAAP earnings when they are so awash in easy money that they can hit their pro forma narrative guidance by simply buying profitless revenue? Why in the world would companies take any risk at all when the Fed has eliminated any and all negative consequences for playing it safe?”

That’s from Gradually and Then Suddenly, written in July 2017. It’s worth your time.


And then take this to heart.

-What are the Narratives (story arcs) I am being told?
-What are the Abstractions (categorizations) presented to me?
-What are the Metagames (big picture games) I am playing?
-What are the Estimations (the roles of chance) shaping outcomes here?
-Am I acting to promote Reciprocity (potentially cooperative gameplay)?
-Am I acting in a way that reflects my Identity (autonomy of mind)?”

This is older but referenced in the above article, and relates to investment outcomes:

The Three Horsemen of the Investing Semi-Apocalypse

-The Fed keeps on raising interest rates and shrinking its balance sheet, ultimately causing a nasty recession in the US and an outright depression in emerging markets.
-China drops a trade war atom bomb by letting the yuan devalue sharply, sparking a global credit freeze that makes the 1997 Asian crisis look like a mild autumn day.
-Italy and its populist government play hardball with Germany and the ECB in a way that Greece could not, leading to a Euro crisis that dwarfs the 2012 crisis.
The Fourth Horseman of the Investing Apocalypse

-Inflation is not a cyclical blip and inflationary expectations are not “controllable” by the Fed without taking politically suicidal actions. They don’t commit political suicide, and the world enters a new inflationary regime.”

It’s the only question that long-term investors MUST get right in order to minimize their maximum regret. You don’t have to get it right immediately. You don’t have to track and turn with every small perturbation in its path. But you MUST get this question roughly right.

Am I in an inflationary world or a deflationary world?

For the past 30+ years, we have been in a non-inflationary world. For the past 10 years, we have been in a deflationary world. I don’t mean that prices in lots of things haven’t gone up. I don’t mean that inflation hasn’t been a monster in many places. What I mean is that inflation expectations have been declining for 30+ years, and they have been rock-bottom for the past ten. What I mean is that for a decade now, all of our investment behaviors – and by all of us I mean everyone from the smallest individual investor to the Chair of the Federal Reserve – have been predicated on the belief that a) there’s no chance of future inflation for bad reasons (a currency that has lost the confidence of the world), and b) there’s no chance of future inflation for good reasons (robust economic growth). Instead, the most pervasive and powerful piece of common knowledge in investing is simply this: we are on a long gray slog to Nowheresville, a future of too much debt and not enough growth, a pleasant enough if thoroughly meh world.


Here’s what preparing your portfolio for an intrinsically inflationary world requires:

Zombies and Oligopolies: We are headed towards a world with increasing zombie firms due to low interest rates (described above) while simultaneously there are oligopoly structures and a lack of competition in many sectors.
“The difference with the Asian or the 2008 crisis is that this time the excess risk is hidden under central banks’ balance sheets and will continue to do so.
So, if risk is hidden under a perennial money supply-growth carpet, why should we worry? Because the endgame is not likely to be a 2008-style bang, but a slow, painful and unstoppable zombification of the global economy. As the evidence of stagnation rises, governments get more nervous. What do they do? Stop the monetary madness? Allow high productivity sectors to thrive? Promote deleveraging and prudent investment? No. More white elephants, massive unproductive spending at the expense of taxpayers and savers in what is likely to be yet another massive transfer of wealth from salaries and savers to governments with fancy names.
Investors are forced into riskier assets for lower returns and the crowding out of productive sectors in favour of government and crony subsidised sectors accelerates, sending money velocity lower, productivity growth collapses and mainstream economists hail the financial repression madness with the excuse that “there is no inflation”, while citizens all over the world complain and demonstrate -rightly- against the rise in cost of living. Intensifying financial repression under the “there is no inflation” excuse is the most ludicrous mantra ever. It is like running a car at full speed down a highway under the premise that “we have not crashed yet”.
Many economists defend the zombification of economies under a false social premise. The argument is the following: What is bad about following the example of Japan? It has low unemployment, its debt is cheap and the economy survives rather well. It is a social contract and debt does not matter.
Everything is wrong with this argument. Japan’s low unemployment has nothing to do with monetary and fiscal policy and everything to do with demographics and lack of immigration. Japan’s low cost of debt is not a blessing. It is the result of using the savings of citizens to perpetuate an almost-Ponzi scheme that does not prevent the country from spending more than 20% of its budget on interest expenses. The idea that it is irrelevant because the Treasury buys more bonds tells us how insane we are defending such policies. It is a massive kick-the-can policy transferring the risk to the next generations. It is no wonder that Japanese citizens don´t spend or invest as much as their central planners would want them too. They are not stupid. They know that the government is going to confiscate wealth via monetary and fiscal means at some point. This endless debt machine makes the economy less dynamic, and stagnation is guaranteed. But the strength of the Yen and the low cost of Japanese debt are only supported by the high level of international reserves and strong financial flows of the country. Japàn keeps its imbalances because it is one of the few that has undertaken this concerted policy of zombification. This cannot be transferred to the rest of the world, because the result would not be Japanese-style stagnation but Argentina-style crisis chain.”

Source: WSJ

“Canada’s economy is in the throes of a zombie outbreak and it’s threatening to devour the country’s productivity.

That, more or less, is the conclusion of a new report from Deloitte, which found that at least 16 per cent of publicly traded firms here could be classified as “zombies” — defined as mature firms more than 10 years old that lack sufficient revenue to cover interest payments on their debt.

The concept comes from a 2017 report by the Organization for Economic Co-operation and Development (OECD) that explored how inappropriate insolvency structures in Europe kept companies intact when a competitive marketplace would have forced them to liquidate or restructure.

In Canada, Deloitte looked at 2,274 companies listed on the TSX and TSX Venture Exchange from 2015 to 2017, and found that 350 firms fit the definition.”

Source: FP, Deloitte

Age of Monopoly/Oligopoly:

Only 30 percent of Canadian firms consider any form of innovation to be extremely or very important, according to a recent survey, and just 15 percent would assume significant financial risk to pursue it. Why? Because they don’t have to. Trying to surpass rivals and attract more customers isn’t something you knock yourself out to do when there’s not much rivalry. Six companies dominate the Canadian banking industry. Four companies dominate the Internet service provider market. Three companies dominate English-language television broadcasting, the supermarket industry and wireless telecommunications. A duopoly dominates the airline industry. And so on. (How we can win – Page 65)

Since the early 1980s, market concentration has increased severely. As we’ll document in this book:
-Two corporations control 90% of the beer Americans drink.
-Four airlines completely dominate airline traffic, often enjoying local monopolies or duopolies in their regional hubs.
-Five banks control about half of the nation’s banking assets.
-Many states have health insurance markets where the top two insurers have an 80–90% market share. For example, in Alabama one company, Blue Cross Blue Shield, has an 84% market share and in Hawaii it has 65% market share.
-When it comes to high-speed Internet access, almost all markets are local monopolies; over 75% of households have no choice with only one provider.
-Four players control the entire US beef market and have carved up the country.
-After two mergers this year, three companies will control 70% of the world’s pesticide market and 80% of the US corn-seed market.
The list of industries with dominant players is endless.
It gets even worse when you look at the world of technology. Laws are outdated to deal with the extreme winner-takes-all dynamics online. Google completely dominates internet searches with an almost 90% market share. Facebook has an almost 80% share of social networks. Both have a duopoly in advertising with no credible competition or regulation.
Amazon is crushing retailers and faces conflicts of interest as both the dominant e-commerce seller and the leading online platform for third party sellers. It can determine what products can and cannot sell on its platform, and it competes with any customer that encounters success. Apple’s iPhone and Google’s Android completely control the mobile app market in a duopoly, and they determine whether businesses can reach their customers and on what terms.
Existing laws were not even written with digital platforms in mind. So far, these platforms appear to be benign dictators, but they are dictators nonetheless. – Myth of Capitalism

These other FinancialSense Videos have been taken down unfortunately:


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