Capitalogix

Humans Need Not Apply

While we all know that pop culture representations of AI aren't accurate - I'm still surprised how often I see people who are against Artificial Intelligence. It seems that many people are focus on science fiction's dystopian depictions of sentience and omniscience, while the reality is exciting (and much less scary). 

In my office, we use a lot of what seems like "futuristic" artificial intelligence approaches to understanding financial markets and enhancing decision-making. Most of my team are technical or data-science specialists that develop and drive the systems that create our systems. Despite the exponential growth of AI and its supporting technologies, I still believe the heart of AI is human.

 

 

Of course, I'm not sure how long that will be true.  But I'd bet it remains true for the next 25 years.

The video below was shot in 2014 and gives a great perspective on how quickly automation, robots, and eventually autonomous robots, are becoming pervasive. 

 

via CGPGrey

Automation used to mean big, bulky machines doing manual and repetitive work. Today, however, automation can land an aircraft, diagnose cancer, and trade. I'm fascinated by what is becoming possible ... and how, even when the A.I. is little more than an elegant use of brute force, incredible results are becoming commonplace.

In many cases, the results coming from machines coding other machines are matching or exceeding the work done by humans. 

And it's only getting better. 

In the past, innovation created new industries or allowed increased scale ... nonetheless, people are worried that the number of jobs the internet and Artificial Intelligence create isn't matching the number of jobs they're making obsolete. 

According to this study, approximately 50% of jobs will be automated by 2034.

Personally, I believe that freeing us to elevate our perspective and do more has always been a boon to society. Electricity put a lot of people out of work as well. Nonetheless, look what it made possible.

To date, human progress has been based on the division of labor. As our society progressed, our jobs have become increasingly specialized. Now, machines will be able to break down complex jobs into simple parts and complete them faster than we can. 

So, yes, the same technology that's currently creating opportunities could eventually put you out of a job ... but it also creates an opportunity for something new.

There's a lot of change coming, and that can be scary, but there's reason to be excited as well.

We live in a golden era of innovation, and we have longer life expectancies than ever before. Humans are immensely adaptable, and I'm sure we'll continue to grow to meet the challenges and opportunities we face. 

The reality is, we've been working symbiotically with "machines" since the very beginning.  Our definition of a "machine" simply continues to improve. It's fractal, and each time the technology we're adopting gets bigger, so does the eventual positive effect on day-to-day life. 

AI adoption is a big step, but the positive effect it can have on our lives is astronomical. 

Onwards!

Here Are Some Links For Your Weekly Reading - July 11th, 2021

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

Lighter Links:

• Video: Richard Branson's Space Flight Takes Off. (Flipboard)
• Bezos and Branson are Going To Space! Or Maybe Not. (Wired)
• Kosher Lab-Grown Pork from Israel's Growing Cultured Meat Sector. (JPost)
• Death Rates are Declining For Many Common Cancers In the U.S., Report Finds. (StatNews)
• How a Lizard's Venom Inspired the Promising Weight Loss Drug Wegovy. (Vox)

 

Trading Links:

• The Meme Stock Trade is Far From Over. What Investors Need To Know. (Barrons)
• 7 Upcoming IPOs To Watch In the Second Half of 2021. (BankRate)
• For the First Time, the Fed Flags Crypto Prices as a National Financial Risk. (Fortune)
• The S&P 500 Could Drop Sharply in the 3rd Quarter as the '5 P's' Pressure Markets, Bank of America Says. (Markets)
• Shaquille O'Neal Shuts Down the Internet with His Financial Portfolio, Owns Forever 21, Elvis Presley, and Much More. (ABS)

 

An Insider's Look at Markets

Just because we perceive something, doesn't mean it's true.

Ten people can witness an accident, and all perceive different things. 

Often, our eyes see, and our ears hear, just what we expect them to see or hear.

And with news, rumors, and urban myths, it is important to remember that just because many people say something – it doesn't mean it's true either.

Confirmation bias is dangerous whether we are looking for a reason to do something or not do something.  Likewise, confirmation bias is dangerous whether you are looking to buy or sell. 

The truth is that humans can make things up ... but we also can notice things and infer meanings that aren't there. Sometimes we also assume cause when coincidence is more likely.

I suppose there was an evolutionary benefit to our ancestors who were able to infer danger before it ate them. Nowadays, it's probably better if we temper those instincts a little.

Why Do We See Patterns In Random Data?

The human mind is especially good at finding patterns in data. 

Often, I believe that I can see a pattern in random data.  OK, I understand that I don't really see patterns in random data; but to me, it seems like there are patterns in the random data. 

This happens because we don't look at data neutrally.  That means when the human eye scans a chart, not all data points get equal weight.  Instead, we tend to focus on outstanding cases, and we tend to form our opinions on the basis of these special cases. 

In other words, it is human nature to pick up the stunning successes (or failures) of the method and to overlook the more common performances. It's one of the reasons that I moved from marking up charts myself, to using computers, to leveraging a team of data scientists and advanced A.I. 

Human fear, greed, and discretionary mistakes make it hard for humans to understand or predict markets. 

Understanding Markets

In reality, there is no such thing as a "Market" ... It is really just a collection of separate traders - and only some are human.

One of the reasons that markets experience great volatility is that different groups buy or sell for different reasons at different times.

Consequently, even if one group trades using a consistent set of rules, a strategy that effectively combats it only works until that group stops trading those rules.

And though there are "patterns" in trading, they're essentially random to you or me. Because they can happen in different time frames, or scales, or orders. 

I shot a video that goes into more detail.

 

Conclusion

In trading, predicting markets is much different than using math and statistics to measure the performance of a technique (or a library of techniques). If markets are random, why waste even a minute trying to predict random. Instead, figure out something valuable that you can predict or know.

While I often believe I see patterns in markets, I know better than to make trading decisions off of those perceptions. 

The amount of traders is growing, the diversity of traders is growing, and the speed at which trades are made is growing. As a result, there's more confusion, more volatility, and more noise. 

It's all about finding the signal from the noise, and making finer distinctions - because if you don't know what your edge is, you don't have one. 

Hope that helps. 

Here Are Some Links For Your Weekly Reading - July 5th, 2021

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

Lighter Links:

• A New Study Reveals Which US City Has the Worst Traffic, and it is No Longer Los Angeles. (USAToday)
• 30 Pics Showing How Unbearable the Heat is In Part of the US and Canada Right Now.  (BoredPanda)
• The Court Decision Freeing Bill Cosby, Explained as Best We Can. (Vox)
• McDonald's is Replacing Human Drive-thru Attendants With AI. (BigThink)
• Joey Chestnut Wins 14th Nathan's Famous Fourth of July Hot Dog Eating Contest with Record 76 Franks. (USAToday)

 

 

 

Trading Links:

• Jeff Bezos Officially Retires with Twice as Much Money as the Entire British Monarchy. (Unilad)
• 130 Countries Agree to Global Minimum Corporate Tax Rate. (Axios)
• EXPLAINER: 5 Key Takeaways from the June Jobs Report. (APNews)
• Manhattan Real Estate Prices Reach New Record as Buying 'Frenzy' Takes Hold. (CNBC)
• Michael Burry, Jeremy Grantham, and Other Top Investors are Predicting an Epic Market Crash. Here are Their Gravest Warnings So Far. (Markets)

 

 

The First Website And The Spread of The World Wide Web

When people think about CERN, they generally think about nuclear research, the Large Hadron Collider, and other physics research. 

But, CERN was also where Tim Berners-Lee invented the World Wide Web. In March of 1989, he published “Information Management: A Proposal” which outlined his vision for what would soon become the World Wide Web.  CERN also had the first website to ever exist. Luckily, they kept the site up and will let you view it in the old school line mode.  

 

via CERN

It's been 32 years since the release of the World Wide Web (the internet is said to be invented 6 years earlier with the invention of TCP/IP). Think how much that one invention has had on the world. 

Information Gathering 

I remember being in law school, going to the library and scanning through microfiche (or actual books) to study or do research.

I remember reading encyclopedias (and photocopying relevant articles). 

I remember paying for newsletters that were mailed to me (or paying extra for fax delivery).

Having access to more data or faster delivery was a huge advantage.

Today, you have all the information you could ever ask for at the tip of your fingers ... Google and Wikipedia are just the tip of the iceberg.

There is almost too much information now.  It is hard to separate the signal from the noise.  It seems like anyone can find justification for almost anything.  The result is lots of data, but too little knowledge.

Part of what is needed is a way to help people make better decisions about what to trust, what it means, and what to use.

Social Interaction

People record every moment, every intimate detail of their lives online, contrasted by a fear of strangers and letting children roam. 

While riding around the neighborhood on your bike to see if your friends could come out to play is by no means outlawed - it does seem passé. 

Chat rooms, Facebook, Online multi-player ... many people's key friendships are born and kept online. 

I remember my son, 13 years old at the time, sending 10,000+ texts a month and thinking it was a phase. I was wrong. 

The internet has radically changed the structure of relationships - for better, or often worse. 

Privacy ( ... or the lack of it)

One of the biggest changes is that we as individuals have become productized. We take advantage of all these free resources at the cost of being pixeled and cookied into oblivion. We've chosen convenience over safety. 

Remember, if you’re not paying for a product - you are the product.

Little bits of our private information, demographics, and psychographics are sold to advertisers to create smarter ads, new offers, and realistically we have very little control over that.

It’s been proven time and time again that these giants like Google and Facebook will find ways to sneak your data to advertisers even when it’s “illegal” with a slap on the wrist.

Data protection is a massive issue not only for corporations but for individuals. While many companies are trying to manage your privacy while still monetizing your data, there are just as many companies who couldn’t care less.

The GPDR - while frustrating for many - is a step towards protecting individuals.

Every action has a reaction, and every benefit has a cost. The internet is an amazing tool - but it can also be a weapon. 

 

What will the next 30 years of the internet hold?

"The Internet will disappear. There will be so many IP addresses, so many devices, sensors, things that you are wearing, things that you are interacting with, that you won't even sense it. It will be part of your presence all the time. Imagine you walk into a room, and the room is dynamic. And with your permission and all of that, you are interacting with the things going on in the room." — Eric Schmidt

 

It has been 30 years since its inception, and there's still radical growth coming. 

We’ve gone from bit speeds to megabyte speeds. We’ve gone from crappy-quality video taking hours to download to streaming HD quality video live.

How do imagine that the internet will evolve?

What influence do you think the Internet of Things will have?

It’s hard to foresee how innovation and regulation will change the internet, but it’s clear there will be change.

We live in exciting times!

Here Are Some Links For Your Weekly Reading - June 27th, 2021

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

Lighter Links:

• Why is Cognitive Flexibility Important and How Can You Improve It? (WEForum)
• The Perfect Number of Hours to Work Every Day? Five. (Wired)
• Artist Sells Invisible Sculpture for Over $18K. (NYPost)
• Check Out the Rotation of the Earth from a Whole New Perspective. (Flipboard)
• CRISPR Injected into the Blood Treats a Genetic Disease for First Time. (ScienceMag)

 

 

Trading Links:

• The Global IPO Market Has Never Been Hotter Than It is Right Now. (Bloomberg)
• Banks Will Double Their Capital Return After Successful Stress Test, No. 1 Analyst Mayo Says. (CNBC)
• Hotels and Restaurants' Rebound Summer Held Back by Shortages of Everything. (Wall Street Journal)
• Feds Accelerating Crypto World Crackdown. (FoxBusiness)
• Virgin Galactic Gets Official Clearance to Start Flying Paying Customers to Space. (Gizmodo)

 

A New Experience For Me

We had Nick Nanton and his crew in our office, recently, to film for a documentary on 'Getting to Next' – How AI is transforming the world and humanizing technology. 

 

Nick has been involved with many cool projects from a documentary on Peter Diamandis to Operation Underground Railroad (and more). He's also won more than 20 Emmys. 

Nick is also working on a documentary with Chris Voss - who wrote Never Split the Difference. I spent time in D.C. watching Nick shoot with Chris and his son Brandon Voss, who is the president of Black Swan Group. 

While I've done podcasts and interviews before, this was a surprisingly fun and cool experience for me.

It was also interesting to watch some of our more introverted data scientists in front of the camera. 

The documentary just started shooting - but I look forward to showing you the finished product when it's ready. 

Inflation and Other Economic Effects: Will They Last?

I've recently posted about the rise in global & national debt and the increasing dissonance between markets and the economy. This post is about inflation and the long-term economic effects of 2020. 

We're currently operating on $6 trillion of stimulus. The Trump administration approved the first 4 trillion dollars, and Biden's administration added another $1.9 trillion. Around $3.5 trillion of that went to purchasing government securities. Meanwhile, the U.S. Treasury also printed another $2B in dollars (more than they produce in a normal year).

Here is an infographic showing the programs enacted to counteract the pandemic's economic impact.

 

via PGPF (3/15/21)

These strategies make credit easier to get by growing the money supply and lowering interest rates with banks having more reserves. Without these and the Fed's other emergency measures, the economy likely would have crashed ... but was it a "fix" ... or did it just delay the inevitable?

In the short term, the stimuli did a pretty good job of creating liquidity, preventing a substantial market crash, and increasing faith in the system. 

Markets became more erratic and harder to predict. And other ripples are starting to show in the economy. 

Inflation: Temporary?

It's not hard to tell that prices have risen recently. But, while consumer prices have risen 2%, on average, investors continue to invest in treasuries and push the price of 10-year yields down to where they were in February of last year. That seems to imply that despite inflation and stimulus, investors still have faith in the Fed. 

The hope would then be that the inflation is transitory and not a long-term effect of the stimulus. 

via Wall Street Journal

It's possible that this inflation is the result of a post-Covid demand surge (and not the beginning of a larger trend).  You can also assume that the surge in prices of airfares, hotels, and sports games will drop once they become "normal" again. And, even if they don't, if wages don't rise with that new demand, it's easy to picture demand returning to normal. 

The last time the Fed created money on a similar scale (the Great Recession), high long-term inflation didn't materialize, so it might not happen again. 

Conclusion

I think it's unlikely that we see another 1970s style surge – and I think it's equally unlikely we see major deflation. With that said, I still don't think we've seen the end of the effects of the pandemic and the pandemic stimulus either. 

One of the practical results of the Fed's bond purchases is that it creates money to finance the gigantic debt run up by Congress. With the national debt at almost $25 Trillion, it gets harder to pick a measuring rod of financial health that isn't woefully inefficient. The idea of "sound money" or a sustainable fiscal path seems increasingly questionable. But, if you believe in Modern Monetary Theory and in the United States' amazing ability to borrow, it's possible that there truly is no worry. Japan is a potential example of that - with a debt-to-GDP ratio of double the U.S.

So, even if inflation continues, it's hard to judge how bad a sign it is. 

Whether or not there's a crash tomorrow (or 7 years from now), at some point, we know there will be a "correction."

Predicting the future is hard!

Curious to hear what you think.

A Look At Trade Blocs

The Global Economy is more complex than I could ever explain in a single blog post. But one of the simplest ideas to understand is that trade and commerce are the foundation for the Global Economy. 

Trade between states, nations, and continents is how you end up with innovation, global increases in prosperity, and resistance to the consequences of famine, natural disasters, and even pandemics. 

But, the wants and power dynamics of these different entities can get complicated. There are many intergovernmental trade barriers.

That's where trade blocs come in ... Two you likely recognize would be NAFTA (now USMCA) and the EU.

Trade blocs are meant to reduce trade barriers between participating entities but are sometimes controversial for their potential consequences. For example, they can result in rival groups, overly benefit certain countries, and potentially place undue pressure on certain exports. 

In late 2020, the Regional Comprehensive Economic Partnership (RCEP) was signed and creates the largest trade bloc in history - accounting for over 30% of global GDP and population. Visual Capitalist put together an infographic about RCEP's formation and likely implications. 

 

via visualcapitalist

The agreement isn't fully ratified (it is set to be fully launched by early 2022). Regardless, it will impact the global stage and create approximately $209B of income increase per year.

Despite all the rules and benefits that RCEP will have for its 15 nations, it doesn't contain any provisions for labor unions, environmental protection, or government subsidies. 

As China continues to race against America to be the largest global superpower, the RCEP is a powerful tool in its arsenal.

Here Are Some Links For Your Weekly Reading - June 13th, 2021

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

Lighter Links:

• Blue Origin Auctions Seat on First Spaceflight with Jeff Bezos for $28 Million. (CNBC)
• This is Why There are No Mosquitoes at Disney World. (Hunker)
• There's a Stark Red-Blue Divide When It Comes to States' Vaccination Rates. (NPR)
• Vladimir Putin's Time in Power, Compared to Other World Leaders. (Barrons)
• He's Heckled Shaquille O'Neal and Kobe Bryant. Now He's the First Fan in the NBA Hall of Fame. (Vice)

 

Trading Links:

• G7 Leaders to Announce Plan to Phase Out Gasoline Cars. (Axios)
• UN Says Cost of Food at Highest Level in Over a Decade. (BBC)
• The Perfect Storm Making Everything You Need More Expensive. (CNN)
• Inflation Scare? Look At This Chart Before Freaking Out. (MarketWatch)
• Nvidia CEO: We're Moving Towards a Crypto Metaverse. (Decrypt)