The Market Radar

We anticipate monitor and comment on market-moving global economic and geopolitical issues.  No dark side brooding, no wanting the world to end, no political rants.  Traders, investors, policymakers, or market observers can’t afford to ignore us.  In one word, perspicacity.

An educated citizenry is a vital requisite for our survival as a free people– Thomas Jefferson

By seeking and blundering, we learn. – Johann Wolfgang von Goethe

I can calculate the motion of heavenly bodies,
but not the madness of people [markets]. – Isaac Newton

     The four most dangerous words in investing are, ‘this time is different.” – Sir John Templeton

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Game On: The AI Race Enters Second Lap

We are reposting a quote that has stayed near and dear to us for the past three years. 

QOTD: Artificial Intelligentsia

Originally Posted on  by macromon

QOTD = Quote of the Day

Whoever becomes the leader in this sphere [A.I.] will become the ruler of the world – Vladimir Putin

The race to end all races (double entendre?) is starting to permeate the social psyche. 

Vlad warned us in his quote we posted almost three years prior.  He knows what is at stake.   

It’s amazing how the release of a new generative chatbot can set off such a flurry.   

Here’s the current header at the Drudge Report.

Fresh off my DALL-E 2 easel:   “An expressive oil painting of an economist getting it wrong.”

Hot off my Chat GPT press:  Who will win the AI race?

Chat GPT: 

It’s difficult to predict who will “win” the race in the development and deployment of Artificial Intelligence (AI), as the term “winning” is subjective and can mean different things to different people.

From a technological perspective, AI is a rapidly evolving field and many countries and corporations are making significant investments in research and development. As a result, there are likely to be multiple leaders in different areas of AI, such as natural language processing, computer vision, and machine learning.

From a geopolitical perspective, some countries, such as the United States, China, and Europe, are investing heavily in AI and positioning themselves as global leaders in the field. However, the competition in this area is complex and dynamic, and it is possible that new players could emerge and have a significant impact on the development and deployment of AI.

Ultimately, the “winner” of the AI race will depend on a wide range of factors, including the quality and impact of research and development, the availability of talent and resources, the strength of innovation ecosystems, and the level of investment and support from governments, corporations, and other stakeholders.

It’s also worth noting that the concept of “winning” the AI race may not be the most useful or appropriate way to think about the development and deployment of AI. Instead of focusing on who is “winning” or “losing,” it may be more productive to consider how AI can be developed and deployed in a way that benefits humanity as a whole and addresses the challenges and opportunities posed by this rapidly evolving technology.

Prepare to get nonlinear, folks.  This going to be an exciting race  Don’t miss out. 

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Global Risk Monitor: Week In Review – February 3

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Monetary Levels Matter

We hear a lot of chatter these days about how the money supply, as defined by M2, is now contracting at an unprecedented rate.  We don’t put much stock in the monetary aggregates as the functional term, and variable “money” is now very difficult to define and measure. 

Nevertheless, we don’t entirely dismiss the monetary aggregates but come on, man, they were designed for an economy and financial system in the Flinstone Age where commercial banks ran the show.  The advances in FinTech and globalization have rendered the old aggregates…well…maybe just a step above Barney Rubble.  

GMM loosely defines money as an asset that can directly or indirectly provide the firepower to purchase goods and services.  In our definition, we include changes in wealth, such as stock market capitalization, cryptocurrencies,  home equity, and stock options, to name a few.   

As a graduate student working for the US G (not quite back in the Flinstone Age), I attended seminars where policy markers contemplated including stock market mutual funds in the monetary aggregates. 

M2 Water Levels Are Still Very High

The following charts drill down on the M2 monetary aggregate so wildly touted by the financial media.  

Yes, M2 is now contracting year-on-year but from such a high and overflowing level.  In other words, measures in M2 changes are affected by a “base effect” as the dam may not be overflowing anymore, but the water (money) levels still remain incredibly high.  

Though the Fed has raised the price of money significantly in the past year, the quantity of “money” remains close to historic highs and freakishly above its long-term norm relative to the economy.  Coupled with the purchasing firepower of Chinese households, who have accumulated $2.6tn of excess savings in the form of bank deposits last year alone, we believe it’s way too early to break out in song, “Ding Dong! Inflation is dead.”  

We must learn and recognize that using flight instruments designed for the Spirit of St. Louis is not a very efficient way to navigate a modern-day F-35 fighter jet through a very foggy economy. 

Stay frosty, folks!  

ChatGPT Defines “Money”

Here is the result of our ChatGPT query,

GMM:  Define in 500 words what is money.

ChatGPT: Money is a medium of exchange, a unit of account, and a store of value that is widely used as a means of payment for goods and services. It is a fundamental concept in economics and plays a critical role in facilitating transactions in an economy.

Money serves as a medium of exchange by providing a common currency that is acceptable to both the buyer and the seller. This eliminates the need for a barter system, where goods and services are traded directly for other goods and services, and enables economic transactions to take place more efficiently.

Money also acts as a unit of account by providing a standard measure of value that is used to price goods and services. This allows for easier comparison between different goods and services and enables individuals to make informed decisions about how to allocate their resources.

Finally, money serves as a store of value by providing a way for individuals to preserve their purchasing power over time. This allows people to save for future expenditures and to invest in assets that may appreciate in value.

There are several forms of money, including physical currency, such as coins and banknotes, and digital money, such as electronic transfers and digital wallets. Central banks and governments play an important role in the supply and regulation of money in an economy.

Throughout history, different forms of money have been used, including precious metals such as gold and silver, as well as paper money and bank deposits. In modern times, most economies operate on a fiat money system, where the money is not backed by a physical commodity but is instead accepted as a means of payment by agreement within the community.

In conclusion, money is a critical component of any modern economy and plays a fundamental role in facilitating transactions, acting as a unit of account, and preserving purchasing power over time. The form of money used, as well as the mechanisms for its supply and regulation, can have a significant impact on the functioning of an economy and its overall stability.

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S&P 500 Breaks Out

All kinds of technical reasons to be bullish. 

As we noted Friday, watch for a break out above the 4100.96, the December high, and the top of the trading range. .  The index traded almost to its key .50 fib at 4155.10 before backing off into the close.

Gun to head?  Market bangs around, consolidating gains before a move to 4325, the August high.  Have mercy on us, as we have never learned predicting short-term market moves is a mug’s game.  

Dare we say…um…disinflation has bottomed?  

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QOTD: Get Freaking Real [Estate]

QOTD = Quote of the Day

Oh, dear!  I wonder if the FOMC is looking at the deflationary bust in virtual real estate?  Will Jay Powell mention it in his presser today?

Do you think real estate in the metaverse is at risk due to climate change?  After my last two homes where my family lived were incinerated in the Northern California wildfires,  I may be moving to a nice virtual beach house in the metaverse soon, and very soon. Escape to the metaverse!

By some accounts, virtual real estate in the metaverse has dropped by about 80 percent in value from its high point, more than the decline in physical real estate during the same period. – Hamza Khan, McKinsey & Co

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The Fed’s Game Of Chicken With The Stock Market

The following chart suggests the stock market still has an outsized influence on the economy.  In theory, the market capitalization to GDP ratio should be a mean reverting time series.  

We don’t know for certain, but we suspect there is still way too much liquidity/money, however loosely defined, in the system.  Markets don’t rip as they did in January with tight money.   

If the Fed downshifts too much, the stock market rips, and financial conditions will ease bigly.  Consequently, inflation will turn up from a much higher base.   

Godspeed, Jay Powell!

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Month In Review In Charts – January

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QOTD: Stock Market Logic

QOTD = Quote of the Day

What a great alt-definition of George Soros’ Reflexivity

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Weekend Chart Fest – January 28

U.S. GDP Surprises To Upside, Big Inventory Build

Global Sector PMIs & Margin Pressures

Global Shipping Costs

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Shrinking Labor Forces

Strong Labor Markets

India Rising

China’s Excess Savings Firepower

China’s Recovery Driving Base Metals

Lithium Mining

Peak Gasoline Demand

U.S. Car Efficiency 

Government Spending On Pensions

Bear Market In Beef Eaters

Expected Drivers Of The Equity Market

Profits And Wages

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Week In Review In Charts – January 27

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