Capitalogix

It's a Quant World

Just finished speaking at an algorithmic trading conference, called QuantWorld, in Toronto.

 

AI, big data, and high-performance computing are getting cooler ... in a nerdy way.

At this show, data and methods were the focus ... showing a shift from hardware and low-latency. 

Skynet is turning on!

Woo Hoo!

Eight Major Forces Shaping Our Global Economy

In trading, the holding period (or "time in trade") is shrinking.  Consequently, there is less focus on predicting markets ... and more focus on determining which techniques are making money most predictably.

Markets are not the same as the economy ... and on a macro scale, it is possible to understand and predict the major forces shaping our global economy.

Jeff Desjardins, of the Visual Capitalist, recently highlighted some of the major forces that are changing our global economy.  Here is a summary.

 

The Tech Invasion ... and its Accelerating Progress

 

If you were to look at the biggest companies globally - almost all of them are in tech. Fifty years ago, the largest companies were in commodities (like oil, steel, etc.). Even 5 years ago, the biggest companies were widely "goods" centric. 

 

via Visual Capitalist

But it's more than just the biggest companies. We're experiencing a technological revolution in many subspaces - AI, 3D printing, gene editing, quantum computing, etc.   

Yet, for all the change and disruption we've experienced until today - understand that it is going to get faster, and more pronounced, in the future. 

And, it isn't just the tech that is new.  The pace of its adoption across industries is a game-changer as well.

 

via Visual Capitalist

We are at a point where new technology often gets released before the previous iteration can fully take hold and mature.

It is not just trading that is getting faster, product cycles are compressing, and foundational technologies are disrupted and replaced (or made obsolete) faster than ever as well.

Even global adoption cycles have become viral and near instantaneous.  Think about how fast Pokemon Go (AR) got adopted, or new Smartphones became mainstream.

 

The Evolution of Money, a Changing Wealth Landscape, ... and China

 

Money's definition is changing.  Cash is becoming less common (with the increasing use of credit cards, electronic payments, and payment services like Paypal, Venmo, and ApplePay).  In addition, the public has maintained its interest in cryptocurrencies.

Ultimately, our perception of money may radically change how global economies work. 

On top of that, money is changing hands, the ultra-wealthy are from different industries than before, and the wealthiest countries & companies widely influence politics. 

 

via Visual Capitalist

Consider the economic rise of China. Even though we've been watching China grow for decades, the scope of its population and economic impact can still be difficult to understand. China has over 100 cities with more than 1,000,000 inhabitants.  Even scarier, perhaps, is that China now has more honor students than we have students. 

 

Conclusion

 

Obviously, the global economy is changing.  To see more about the eight forces shaping it, read this.

We live in interesting times.

Onwards.

Visualizing the Global Economy

I've recently been spending more time with economists, while we're not always on the same page when it comes to the interplay with trading, I still find economics interesting. 

Trump's impact on global trade and politics will also be interesting to quantify. 

Take a look at the world economy divided by region (Mexico is part of Latin America for the sake of this graphic). 

 

via howmuch

Some thoughts: 

• Russia probably has the biggest disparity between GDP and land mass.
• This doesn't tell us anything about economic growth, would be interesting to compare this five years ago, and five years from now.  
• Global GDP isn't zero-sum, so this circle can theoretically grow.
• Top 3 economies were the U.S., China, and then Japan (with a large drop between each economy).
• The top 4 countries account for over 50% of GDP.

It will be interesting to see the way Trump's tariffs will affect the world. There are potentially hundreds of billions in annual revenue that would be affected. 

 

 

Here Are Some Links For Your Weekly Reading - November 4th, 2018

Reminder: election day is this Tuesday. 

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

Lighter Links  

• Radical Candor the Surprising Secret to Being a Good Boss. (FirstRound)
• 21 Lessons from Jeff Bezos' Annual Letters to Shareholders. (CBInsights)
• When the 80/20 Rule Fails: the Downside of Being Effective. (JamesClear)
• Stephen Hawking's Final Book Tackles the Big Questions. (BigThink)
• This Chart Shows How Everything Has Changed since Trump Became President. (CNBC)

 

Trading Links

• What Investors Can Learn from Gamblers. (Wall Street Journal)
• A Wealth Management Point of View on Blockchain and Bitcoin.(TheReformedBroker)
• Google Drops out of Pentagon's $10 Billion Cloud Competition.(Bloomberg)
• Bezos Sets New Wealth Record, Losing $19.2 Billion over Two Days.(Bloomberg)
• Godfather' of Chart Analysis Says Damage Done to the Stock Market' is Much, Much Worse' Than Anyone is Talking About. (MarketWatch)

Real or Fake? Data Science Debunks Internet Rumors

A French team, Escalenta, put together a series of debunking videos called "DATA SCIENCE vs. FAKE". 

Here are five that are short, educational, and entertaining. 

• Is cancer the world's first cause of mortality?
• Would cockroaches be the only survivors in the event of a nuclear war?
• Will the world soon run out of oil?
• Will our planet be able to sustain its 9 billion inhabitants in 2050?
• Will China still be the world's most densely populated country in 2100?

These days, it's easy to be confused by fake news, misleading statistics, and hyperbole. 

Hope this serves as a reminder to check your sources and remain healthily skeptical of random factoids delivered through the intertubes. 

Is the Market Sell-off Going to Continue?

October has been tough on equity markets this year. 

For example, the S&P 500 opened to a sea of red this past early last week.

 

 

McDonald's was one of the few green spots on that heat map.  Which reminds me, Mickey D's is becoming a little more modern by adding online and touchscreen ordering.

For some context, the S&P is on pace for it's worst sell-off since 2010 ... while the NASDAQ hasn't been hit like this since post-Lehman in 2008. 

Is it a correction or a blip?

Historically, midterm elections inspire uncertainty among investors that dissipates quickly as soon as they're over. Once that uncertainty is resolved, the S&P gains an average of 31% the following year.

Markets exist to trade ... and confusion is a primary catalyst.  As such, many people believe the market will rally ... while others believe that the traditional midterm effect could be blunted. 

For all the confusion in today's society, it's good to see that some things don't change.

Onwards.

Vote, Vote, Vote!

It is election season again.

 

The process doesn't work properly if you don't vote.

 

Gandhi once said “Be the change you wish to see in the world." This wasn't exactly what he meant … nevertheless, one of ways you can impact the world is by impacting the choice of its leaders.

 

I have friends on both sides of the political spectrum, and I hear complaints from both sides. The one thing we all can agree upon is that not enough people (who claim to care) actually get out and vote.

 

It is one thing to whine about the status quo … It is quite another get up get out and do something about it.

 

Combat fake news and media sensationalism by doing some research choosing candidates you think will leave us better than they found us.

If you're not sure if you're registered to vote, check here. If you're not sure where your polling location is, check here. 

Farm Tank Podcast - AI Trading, The Cowboys & Pablo Escobar

I was recently on Jordan Van Trump's Farm Tank podcast. 

On the podcast, we talked about artificial intelligence & trading, the Cowboys, my trip to Columbia, and a bunch of other things. 

Worth a listen. Check it out. 

Here are some highlights:

• "You have to really enjoy the people you do business with. It's important to know who's fun to be around, who's going to be a net add, who's going to create energy, and who's going to have ideas." (5:55)
• "I had a computer. Back then, only secretaries typed. I had a lot of people telling me it looked bad for a lawyer to have a computer, but I loved it and pretty quickly it became a competitive advantage." (15:20)
• "One of the most important business lessons I learned is you have to understand what you want. So much of what I see in business is people telling me what they don't want." (19:00)
• "I found that 10 times better is often easier to achieve than 10% better. If you're going for a 10% change, then you're bringing the past forward and you're trying to figure out what you can adjust." (20:00)
• "Learning and growing are huge. For me, it's about raising the standard, getting comfortable with being uncomfortable, seeing the bigger picture, and creating breakthroughs. In order to do that I surround myself with people who think differently." (22:45)
• "There's a difference between good and great and that difference is infinitesimal. You have to find not only what you're excellent at, but also what gives you energy because every day you fight the good fight and compete with everybody else."(58:00)

 

I'll be at The Van Trump conference, in Kansas City, on November 28th. Hope to see you there.

This Year's Most Brutal Campaign Ad

2018 has been stranger than fiction in many regards ... Regardless of your political leanings, some of the recent news has seemed more like a sitcom than usual. 

For all the different ridiculous headlines, this still stands out. 

Six siblings are running campaign ads against their brother. 

Yes ... You read that right. 

Check it out. 

 

Brill For Congress via Youtube

Here are some quotes from Congressperson Paul Gosar's (R-Arizona) siblings.

• "He just doesn't appear to be well"
• "It would be difficult to see my brother as anything but a racist"
• "Where is his integrity? I don't know"
• “There isn’t a kooky, crazy, nutty thing that he isn’t a part of ...What are we supposed to do?”

 

Weird. 

Make sure you're registered to vote in the upcoming madness (sorry, I mean midterms). 

Does Entry Level Still Mean Entry Level?

We often hear millennials complaining about today's job climate.

How can I get job experience if I can't even get a job to get experience?

 Is there any validity to that belief system?

Apparently, yes. 

According to TalentWorks, after analyzing a random sample of over 95,000 job listings they discovered that 61% of full-time "entry-level" jobs require 3+ years of experience. 

 

via TalentWorks

Turns out "Experience Inflation" is a real thing.  Brings context towards the shift away from traditional education I mentioned a couple months ago. 

TalentWorks also found that three, five, and eight years are the magic numbers for upgrading your job title.

Mid-level jobs open up to you after five years, and senior level jobs open up after eight.

I guess Millennials get a pass on this one ... just this once. 

With that said, we've had great success with the few high school interns we hired.  Perhaps the passion and interest that caused them to look for serious work, so early,  was a great way for them to get experience (and an early indicator of true talent)?