Capitalogix

Coronavirus Relief: US Foreign Debt Holders

In response to COVID-19, the U.S. Government has tried numerous things to bolster the economy. 

In Q2 alone, the U.S. Treasury borrowed a record $3 trillion dollars for coronavirus relief. It's already the largest-ever borrowing for any fiscal year, and it brings our total above $26 Trillion (over $80,000 per citizen).

The concept of "Debt" can be confusing to a layman. Most people understand what it means to take on debt with a local bank, but it can be harder to understand the role debt plays in global economics. Debt often enables governments to run smoothly. But sometimes you can have too much of a good thing.

Many worry that our "excessive" government debt levels impact economic stability, the strength of our currency, and unemployment. For all the potential, it's certain that our debt with a country affects the relationship. So who "owns" most of our debt?

via HowMuch

Japan holds more U.S. debt than any other country but is followed closely by China. Both countries hold more than 6% of total foreign-held debt. 

The chart focuses on foreign debt - but only about 30% of the national debt is held by foreign countries. The rest is held by investors, the Federal Reserve, and the government. 

Taking a step back, how does our debt compare on the world stage? An important metric of debt is the debt-to-GDP ratio. It is a key indicator of the sustainability of government finance.

via OECD 

Ultimately, we're in the highest bracket, but also have a historically strong GDP to back it. It's also worth noting that lower debt levels don't necessarily translate to safety on a global scale. Yugoslavia had very low government debt until its breakup. 

In some ways, it seems like paying-off our debts seems insurmountable. Yet, our economy is reliable so we're allowed to continue borrowing. Debt is also an important part of the economic machine - it can be argued that we wouldn't have money without debt. 

While this doesn't mean we can go on borrowing forever, it does mean we have options. 

If you want to see an updated, interactive version of the U.S. Debt Clock, just click here.  It is worth spending a little time watching the pace the numbers turn.

Actions have consequences.

Something to think about. 

The Intelligent Investor

There are many different methods of investing - and I've experimented with quite a few of them (fundamental, technical, statistical, quantitative, machine learning, etc.).

Ultimately, I believe most trading techniques work until they don't. 

I don't believe that any technique always works ... but I do believe that there is always something that works. 

Likewise, I believe that there is always a best next step.

Evolutionarily, the strongest or smartest doesn't necessarily survive ... The quickest to adapt and adjust to its changing environment is the one that gains advantage.

Consequently, it makes sense to be on the lookout for sources of new learning (even if they are old).

In the same way that reading news from an opposing slant can inform your decision - studying other beliefs may help you find the underlying truths (or spark the insight you needed).

Warren Buffet is a famous value investor. He does immense research on companies, attempts to buy them at a discount and then hold on to them for long periods of time.  On some levels, our approach to the markets is radically different.  On the other hand, it would be crazy to ignore the brilliance of what he "knows" and what he does.

One of his favorite books on investing is titled The Intelligent Investor by Benjamin Graham. It's a great introduction to the basics of value investing (versus speculating) and the role of inflation, margin of safety, etc. 

It's worth a read ... but if you want to watch a good summary, here's a six-minute video. 

 

via Financial Freedom

If you aren't learning, you're dying.

What's In The Box?

“Words can be twisted into any shape. Promises can be made to lull the heart and seduce the soul. In the final analysis, words mean nothing.
They are labels we give things in an effort to wrap our puny little brains around their underlying natures,
when ninety-nine percent of the time the totality of the reality is an entirely different beast.
The wisest man is the silent one. Examine his actions. Judge him by them.”
― Karen Marie Moning

The current sociopolitical climate has me thinking about the consequences of labeling things, creating boxes, and simplifying ideas into news-ready headlines.

 

via Se7en

With more news sources than ever and less attention span than ever, you see ideas packaged into the attention-grabbing parts. The focus isn’t on education on issues anymore, but getting the click, making you stay on their page longer, sending you to a new article completely unrelated to the reason you clicked to the page.

Complex issues are simplified not even into their most basic forms – but instead into their most divisive forms because there's no money in the middle.

 

via Quote Investigator.

The amplified voices are those on the fringe of the average constituents' beliefs because those are the ones who are often the most outspoken.

Issues that should be bipartisan have been made "us" versus "them," or "liberal" versus "conservative," or "right" versus "wrong."

  

via BrainyQuotes.

In psychology, heuristics are mental models whose purpose is to help you make decisions easier. They’re a starting point to save mental bandwidth, allowing you to spend more brain cycles on the important stuff.

That’s a great use of "boxes" and "simplification" … but shouldn't preclude deeper thought on important issues.

In an ideal world, we would all have the bandwidth to view each individual case of an issue as a whole issue within itself. Most things in this world are various shades of grey, and when you change your vantage point, you can change your answer.

I recognize that’s not realistic.

Instead, I encourage you to remember to continue to think and learn ... even about things you already know.  Confirmation Bias is one of the more common forms of cognitive biases.  Here is an infographic that lists 50 common cognitive biases.  Click to explore further.

 

via VisualCapitalist.

Important issues deserve extra research. New insights happen in between the boundaries of what we know and what we don't.  Knowledge comes from truly understanding the border between what you are certain and uncertain about. 

I challenge you to look beyond the headlines, slogans, and talking points you like most. Look for dissenting opinions and understand what’s driving their dissent. Are they really blind or dumb (or are their value-systems just weighted differently)?

Not everything needs to be boxed. Not everything needs to be simple.

 

Applying This Lesson  

“I am ashamed to think how easily we capitulate to badges and names, to large societies and dead institutions.”
― Ralph Waldo Emerson, Self-Reliance

I love learning a lesson in one space and applying it to other spaces. It’s one of the cool things about AI. An algorithm can learn rules in the construction space that may help in the medicine or trading space.  Everything’s a lesson if you let it be.

In that vein, the lesson on labeling also applies to yourself and your business.

Many things are true because we believe them to be, but when we let go of the past beliefs, the impossible becomes possible, and the invisible visible.  

The past doesn’t define the future, and your personality isn’t necessarily permanent.

We are our choices ... and you can make choices today that change who you are (and what you or your business is capable of) tomorrow.

Hope that helps – Onwards!

Learning From the Renaissance (No, Not That One...)

Jim Simons is a mathematician and cryptographer who realized that the complex math he used to break codes could help explain financial patterns – and he made billions because of it in his notoriously secretive hedge fund firm called Renaissance Technologies.

He is famous not only for the duration of his success and the size of his results ... but also for the way he made his money (with much lower volatility and risk than his peers and competitors).

His flagship - the Medallion fund - has averaged a net return of 39.1% and has been closed to new investors since 1993. Even more impressive is that those results are on top of their 5% management fee and a 44% performance fee.

To put that into perspective, if you had invested $1,000 into the Medallion Fund in 1988 when it launched, your money would have grown to in excess of $23MM at the end of 2019.

His background is impressive. Simons taught at Harvard and MIT and worked with the NSA. Here is a video where he shares some thoughts in a 2015 TED talk interview. It's worth a watch.

 

via TED

Interesting stuff ... I hope you got something from it. 

His success exists at the nexus of vast amounts of data, next-level technological infrastructure, and intellectual property built by various flavors of mathematicians. A good place to be in the coming world, and a reminder that if you don't know what your edge is, you don't have one. 

Despite advanced math still being a mystery to many,  most rely on it more than ever ... for example, look at what we're seeing with the growth of machine learning and AI.

The Heartbeat of AI is Still Human

Today, the best algorithms are autonomous. They don't rely on inventors to derive novel insights from the ingested datasets. They take whatever data they can get their hands on, process it, and extract decision signals. Some don't even form hypotheses, they simply look for correlations - the data is an abstraction to be solved in the purest sense. 

You don't have to understand why the models do what they do - simply, what it's doing, and that you trust it's construction. 

Regardless of how autonomous the systems get, humans are still vital. 

Simons built a team of mathematicians whose motivation was doing exciting mathematics and science (rather than hired guns who could be lured away by money).

That doesn't mean money wasn't a motivator, but it hits on something important. 

The heart of good math and good AI will always benefit from the quality of the humans around it. You still have to champion integrity, culture, and purpose.

 

Better Math as a Competitive Advantage

We stayed ahead of the pack by finding other approaches and shorter-term approaches to some extent ... but the real thing was to gather a tremendous amount of data – Jim Simons

If you've been to our office, or heard me speak, you know how important I believe those ideas are to continuing prosperity. 

Constant innovation on a massive scope and scale creates more ways to win.

Onwards!

Here Are Some Links For Your Weekly Reading - June 28th, 2020

 

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• Air Travel Data Suggests China Had Nearly 40 Times the COVID-19 Cases They Reported. (VFTW)
• Airlines Tried Social Distancing on Board. For Many, that Experiment is Ending. (Chron)
• MLB Targets 60-Game Season Starting around July 24, Assuming Conditions Met. (ESPN)
• Doomscrolling is Slowly Eroding Your Mental Health. (Wired)
• Photos Show Devastation Unleashed on Terror Leaders by Sword-carrying Ninja Bomb'. (MilitaryTimes)

 

Trading Links:

• Delta Could Furlough More Than 2,500 Pilots, Will Close 3 Flight Attendant Bases. (ThePointsGuy)
• You Won't Believe How Many Airlines Haven't Survived Coronavirus. How Does It Affect You? (Forbes)
• These Mall Staples Announced Thousands of Store Closures in June. (CNN)
• Here's Why New Traders are Losing Money. (TheStreet)
• Warren Buffett Has Warned about the Dangers of Speculating for Years. Day Traders Aren't Listening. (BusinessInsider)

A Look At the Highest-Valued Startups in the World

Statista put together a list of the ten highest-valued unicorn startups in the world based on numbers from CBInsights. To see more information on these startups, click here. 

A unicorn startup is a private company with a valuation of over $1 billion. As of June 2020, there are more than 400 unicorns around the world. Variants include a decacorn, valued at over $10 billion, and, soon, a hectocorn, valued at over $100 billion.

 

via Statista

China had the two highest-valued startups on the list.  Both the U.S. and China each have four companies on the list of the ten highest-valued startups. The U.S. companies are easily recognizable - Stripe, SpaceX, Airbnb, and Epic Games. The Chinese companies may have slipped under your radar (but they would probably be easily recognizable to you if you lived in China). 

1. Bytedance uses machine learning to tailor newsfeeds for users on various platforms, including Toutiao in China and TikTok in the US. In May, Disney's head of streaming came on as CEO of TikTok and COO of Bytedance.
2. DiDi Chuxing provides various app-based transportation, including taxis, on-demand services, bikes, and more. They're a competitor to Uber and Lyft that has dominated the Asian market and is using AI to optimize dispatch and route planning for its services.
3. Kuaishou is a video sharing app with over 200 million active daily users. It has unusually strong support from users outside of "tier 1" cities and has received massive support from multimedia conglomerate Tencent.
4. DJI Innovations is (by a large margin) the world leader in drones and quadcopters, accounting for over 70% of the civilian market. They're also used extensively by militaries, police forces, and even terrorist groups. 

According to CB Insights, there are more than 400 unicorn startups (companies valued at US$1 billion or more) in the world as of May 2020.  Meanwhile, 24 of the companies in the ranking were valued at US$10 billion or more. 

The top 10 list of decacorns also includes Indian e-commerce platform PayTM and Singaporean ride-hailing app Grab. Further down the list, UK data center provider Global Switch (rank 19), Indonesia’s answer to WeChat, umbrella app Go-Jek (rank 20), Brazilian fintech provider Nubank (rank 21) and a second player from India, hotel startup Oyo (rank 22), make appearances.

Generations of Fathers

Happy Father's Day!

Both of my children are adults now. It's strange to consider them fully-functioning autonomous adults – because I remember their childhood like it was yesterday (like worrying whether the soft spot on their heads would ever fill in and harden up, or if they'd ever stop sleeping with a nightlight). 

Today, they're men doing great things,  and I get to be proud of them.  I also get to be proud of my role in their growth and proud of passing down the wisdom of my dad, and his father, and the rest who came before me. 

It has been 20 years since my father died ... Crazy how time flies! He was my best friend and an amazing mentor. His vision for what I could become helped shape and inform my goals, my accomplishments, and yes, me.

For example, after winning the State Championship in the shot put, my dad came down from the stands onto the field.  He hugged me and told me that he knew I could do it. Then, he looked deeply into my eyes and asked whether I was a little disappointed?  "Disappointed?" I asked. "But, Dad, I won."  He looked at me and said, "Winning is great ... but you didn't throw a personal best."   He was proud, and he loved me.   He recognized that winning was important ... but he wanted to remind me that the other throwers weren't my real competition.  

In life, to be and do your best, the competition is really with yourself; and we both knew I could do better.

My Dad believed in setting high standards.  He taught me that most people's lives are defined by their minimum standards.  Why?  Because once those standards get met, it is easy to get distracted and complacent.

One of his favorite sayings was, "The difference between good and great is infinitesimal."  This applies to many things. For example, people who are good take advantage of opportunities; people who are great create them. 

As time goes on, I recognize how much of my Dad is in me. And, likewise, how much his father was a part of him ... and how parts of all of us have somehow become a part of my children. 

 

Me, my dad, and grandfather

My Impact on My Children

I hope I've imparted many important lessons to my children - but one of the most impactful lessons was teaching them to enjoy reading. 

Some parents try to limit the amount of time their kids spend watching TV or playing video games. I tried something different.  Instead, my kids earned their games by reading books. And, they also received more books in the process. 

Here's how it worked. 

When they finished a book, it was their right, and my obligation, to take them to the bookstore for us to pick up the next book together. Likewise, when they finished ten books, it was their right, and my obligation, to take them to the computer store or game store for them to choose any game they wanted.

When they finished a hundred books, they earned a game system. 

There came a point when I wanted one of my sons to start reading grown-up books. He was comfortably reading a particular genre (teen fiction) and didn't want to read the kind of books that I thought he was ready to read (and might enjoy more).  So, I created a bonus system that counted a specific book (it might have been a Tom Clancy novel) as three books.  I didn't force him; I just let the easier path to a reward "whisper" in his ear what to read. Once he finished that, he never went back to teen fiction.

As they started to get into their teenage years, I needed to up the ante a little. So, 500 books meant they got a laptop of their choice. Both boys cashed in and probably felt like they were taking advantage of their dad.

So, Who Got the Better Bargain?

Three generations of Getsons

Fortunately, in child-rearing, everyone can win. My sons love reading to this day - and have learned that they can accomplish anything they set their minds to... one step at a time. 

My sons weren't ever forced to stop watching TV, or read a certain type of book, and always had endless things to keep them entertained. 

Win-win. 

I like to think each generation becomes better (as people and parents) due to the cumulative experience of the generations that came before them. 

We stand on the shoulders of giants. 

I look forward to seeing how my (eventual) grandchildren turn out, and how little pieces of me and their great-grandfather show up. 

Hope you had a great weekend.

Carol's Keeping Me In Shape

As I get older, I become more conscious of my mental and physical health. It's easy as an entrepreneur or business person to lose track of your health - but investing in your personal health can be the best thing you do for your business.

Many of my friends now believe that with technology and a sustained focus on health & longevity, they can live past 100. They're paying attention to genetic, physiologic & biochemical makeup, cognitive function, body composition, cardiovascular performance, hormonal status, and much more. Whether they're going to live past 100 or not, I can see the daily results in the quality of their life and the way they look. 

It's the reason I started working with APEX, Dr. Jeffrey Gladden's concierge medical wellness practice.

They've got me eating salads, taking supplements, and thinking about what it takes to be healthy, fit, and vital. 

The goal is to enjoy life though ... Not to deprive yourself as this image portrays ...

 

Exercise is also an important part of the "healthy, fit, and vital" equation.

With gyms being closed during the recent Quarantine, I found another tool that I fell in love with.

Her name is Carol; an AI fitness bike that personalizes a HIIT workout for you,  based on your fitness and your preferred workout length. It makes it way easier for me to fit workouts into my schedule (and way harder to justify skipping a session). 

 

The promise is an "hour's worth" of exercise compressed into an 8-minute workout that really only has two 20-second periods of intense effort.

The science is sound. My experience is that it works for me.  I've done it for about two months now.  The results are undeniable (in terms of muscle tone, endurance, 20% improvement on many of the metrics tracked by the bike, etc.).

The more you use it the smarter it gets. It automatically adjusts to give you exactly the resistance you need to keep you motivated and to continue making progress.

I've been impressed. Working-out at home has always been a struggle for me. I've bought other tools for lifting or cardio, but they tend to end up as coat racks or space fillers. 

Exercise has a "social" component for some people ( comes to mind). Some people need the "social" component of exercise to get through hard workouts (think Peloton or OrangeTheory.) The Carol bike doesn't fully satisfy that part of exercise ... but they do a great job of keeping the session short, fun, and gamified (so that you know where you are, how you are progressing, and where you stand in the rankings).  The combination of the efficiency of the workouts - and being able to see that you are getting fitter, objectively, has been just what I needed. 

Besides Carol's website, here is a link to check out their YouTube channel. 

Onwards. 

Sometimes, Less Is More

The idea of “less is more” was popularized in 1947 as an argument for minimalism. But today, more than ever, minimalism is important in all aspects of life. You can see it in the resurgence of simplistic design, or Marie Kondo, or in the re-popularization of stoicism. 

There’s too much competition for our attention. We can’t buy everything we see on TV, deep-dive into every interesting topic we learn about on the internet, or track everything that’s happening in the world.

Instead, we tend to focus on what is relevant or interesting to us.

In business, there are Specialists and Generalists.  It isn’t hard to imagine that their reading lists, habits, and sources of happiness or fulfillment are probably quite different.

The same is true for  Simplifiers and Multipliers (which is a concept that Dan Sullivan at Strategic Coach has written a book about).

In your business career, to get to where you are, you’ve been successful at two things. You’ve simplified things, which gave you an advantage. And you multiplied things, which gave you an advantage.  Said a different way, as a simplifier, you took something that was complex for everybody else, and you made it simple. And as a multiplier, you took something that was a new solution, and you had successes multiplying it out in the world so that a lot of people could get the advantage of your simplifications.

But the truth is most people are either primarily simplifiers or multipliers.  The best partnerships happen when you pair the two.  Amazing conversations happen when a simplifier says to a multiplier, “I’ve got this really neat solution ... What would you do with it?” Each has something the other doesn’t; and the combination is often exponential.

I am primarily a simplifier.  So, I tend to look for people or technologies to multiply what I produce.

I shot a video on the topic. Click here to watch.

 

The internet and global digital economy enable you to find an audience for almost anything. 

No matter how far you niche down to find your true calling, there are likely people who are just as excited about what you do as you. 

So, sometimes less is more.

Are you a simplifier or a multiplier?

Lessons From 2020's Markets

The idea that the market is not the economy has been made very clear over these past months. While businesses continue to shutter or (if they're lucky) slowly re-open, the stock market has rallied immensely since the initial crash - in large part due to governmental efforts. The markets are so confusing right now that CNBC has given up and created a new type of market - the kangaroo market ... I assume implying "jumpy" volatility. 

The rally has only served to increase the uncertainty as people hold their breath waiting for the drop... For all that waiting, "dumb money" has been beating a lot of "intelligent" investors.

I found an interesting visualization that shows the performance of the S&P through the performance of its underlying stocks. 

 

via Chartfleau

As you watch the video you can see that most of these underlying stocks are struggling - but they're being propped up by a relatively small number of stocks, including the likes of tech giants, the gold mining company Newmont Corporation and the HVAC company Carrier Global. 

While many funds still struggle, novice investors and day traders listening to the advice of "buy low, sell high" have made staggering gains. 

I'm not encouraging a back-to-basics approach to trading, but I think it is a good reminder that sometimes, as Da Vinci said, "simplicity is the ultimate sophistication." 

Being in Fintech, I'm always paying attention to the newest "sophisticated" technologies, looking for a new edge - and that's valuable - but you can't throw out the baby with the bathwater. 

So, I find myself looking for what's timeless (instead of timely) in what others are doing. 

At a Genius Network meeting recently, Brian Tracy mentioned two key questions he asks himself (before writing a book) that I think are very insightful. 

Would this work 20 years from now? Would this have worked 20 years ago?

Tools and techniques change... why often doesn't matter.

The truth is, if you don't know what your edge is ... then you don't have one.  

On a related note, if nothing is working ... doing nothing is an option!

Hope that helped.