U.S. Troop Levels In Iraq

Great graphic from Stratfor, who, BTW, is running a great subscription deal.  You’re gonna need some good geopolitical analysis in 2020.  That we can be certain.  See here.

It seems like Mr. Market is the only one who didn’t see the Iranian retaliation coming.

EMH* über alles!   NOT!

Godspeed to our soldiers.

* Efficient Market Hypothesis


US Troop Levels In Iraq

Posted in Uncategorized | Leave a comment

U.S. Trade Deficit Shrinking And It’s All China



JANUARY 7, 2020 — The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $43.1 billion in November, down $3.9 billion from $46.9 billion in October, revised

November exports were $208.6 billion, $1.4 billion more than October exports. November imports were $251.7 billion, $2.5 billion less than October imports.

The November decrease in the goods and services deficit reflected a decrease in the goods deficit of $3.9 billion to $63.9 billion and a decrease in the services surplus of less than $0.1 billion to $20.8 billion.

Year-to-date, the goods and services deficit decreased $3.9 billion, or 0.7 percent, from the same period in 2018. Exports decreased less than $0.1 billion or less than 0.1 percent. Imports decreased $3.9 billion or 0.1 percent. – Census Bureau


2019 Merchandise Trade Deficit (Excludes Services) To Improve By $30 BN

Interesting chart (see below) of the dynamics of the U.S. Merchandise Trade Deficit (excludes services).  Based on our December estimate, which is an extrapolation of the prior three months,  the U.S. Merchandise Trade (goods) deficit will improve by around $30 billion in 2019 from its 2018 level.

All China

All of the improvement, and then some, comes from a $100 billion reduction in the merchandise trade gap with China.   We have also included the U.S, growing trade deficit with Vietnam in the chart below, which mirrors China over the past few years and illustrates the trade diversion caused by the tariff wars.

Trade Diversion

Some believe that supply chains will move en masse out of China to other areas, such as Vietnam.   True on a relatively limited basis but these countries are too small to scale and absorb even a modest move of supply chains out of China.   The data also illustrate that tariffs, when used as a tool for import-substitution — i.e., a policy to move supply chains back onshore — are relatively ineffective.



Posted in Trade War, Uncategorized | Tagged , , | Leave a comment

The Best Gear & Gadgets From CES Unveiled 2020

Posted in Apple, Technology, Uncategorized | Tagged | Leave a comment

COTD: China’s Social Credit Score System

COTD:  Chart of the Day


The Social Credit System (Chinese社会信用体系pinyinshèhuì xìnyòng tǐxì) is a national reputation system being developed by the Chinese government. The program initiated regional trials in 2009, before launching a national pilot with eight credit scoring firms in 2014. In 2018, these efforts were centralized under the People’s Bank of China with participation from the eight firms. By 2020, it is intended to standardize the assessment of citizens’ and businesses’ economic and social reputation, or ‘Social Credit’.

The system will be one unified system and there will be a single system-wide social credit score for each citizen and business.The system is considered a form of mass surveillance which uses facial recognition system and big data analysistechnology. In 2019, it is estimated that 200 million monitoring CCTV cameras of the “Skynet” network have been put to use in mainland China, with eight Chinese cities ranked among the world’s top ten most monitored cities, while the number of surveillance cameras is expected to reach 626 million by 2020 when the Social Credit System becomes fully effective.  –  Wikipedia



Hat Tip:  Patrick Chovanec  @prchovanec


Posted in China, Uncategorized | Tagged , | 1 Comment

Stock Market Returns And Presidents – Beware Of Averaging

We have warned about looking at averages (see here), especially with such skewed distributions and how a couple outliers can greatly distort this most common statistical metric.

Real Life Macro Economy Example: 

2019 Q1:  Average U.S. Household Wealth =  $803.3K   
                  Median U.S. Household Wealth =   $112.5 K    – GMM,  Sep 2019

Even the MSM is now questioning the macroeconomic data because of our two-speed economy — one for the well-off and one for the not so — as exemplified in this New York Times headline, which we will address in a week or two.


The Average Stock Market Return of All Presidential Administrations

The same applies to average stock market returns, especially during presidential administrations, which are distorted, distributed and touted during election years.

So when we saw the following CNBC headline, which was then subsequently repeated in a presidential Tweet, we thought it necessary to dig deeper and use a little Sabermetric-esque analytics.  We even provide you with some of the raw data as not to appear too partisan.

As Always 

Just the facts ma’am  — no obfuscation, twisted reality using distorted averages with outliers, and with context.



  • The S&P 500 has returned more than 50% since President Trump was elected, more than double the average market return of presidents three years into their term, according to Bespoke Investment Group.

President Donald Trump’s stock market stacks up well against the majority of his presidential predecessors.

The S&P 500 has returned more than 50% since Trump was elected, more than double the 23% average market return of presidents three years into their term, according to data from Bespoke Investment Group dating to 1928. — CNBC, Dec 26th


We haven’t tried to replicate the data in the article and do not doubt its veracity but do believe it needs some context to reflect current reality.

Beware Of Averages

Remember, if I am having a beer with a couple buddies at our local dive bar and we’re the only customers in the joint. and in walks Bill Gates, we are all now billionaires on average.

We show below that the first three-year performance of the S&P in three out of the last four presidencies equaled or outperformed President Trump’s stock market – i.e., Bush#41 to Obama.

Presidential Stock Returns

We have posted similar data but here you go again,



Dead Ball Era v. Juiced Economy & Stock Market

First, we thought it important to look at S&P500 returns (index changes) of post-WW II presidents.   The S&P500 was created in 1957 and using the data, which was created a back history just doesn’t make us feel comfortable.  The integrity of the data is always an issue, in our book.

Second, the context of the data is important.

Just as Sabermetrics makes the distinction of, say, home runs hit during the “dead ball” era, where the home run league leader hit less than 10 home runs during the entire season in 13 of the years between 1900-1920.   Similarly, the economy and stock market are now “juiced” with large budget deficits, negative real interest rates, and quantitative easing.   It is difficult to compare today’s stock market dynamics to that of President Harry Truman, for example.


The average annual average budget deficit from Ike’s first administration to the end of the Carter administration was -1.2 percent compared to -3.3 percent from Reagan to Trump.   Even excluding the outliers of the Clinton surplus years and Obama deficits after the Great Financial Crisis (GFC), the post-Carter average annual fiscal deficit still is 3 plus percent.

Enough has been said about our super juiced monetary policy, which we believe the genesis of the moral hazard with respect to the stock market began at the October 1987 stock market crash.

The Data

The data in the above table illustrate the change in the S&P during the first three years of a first-term president, from the close on the eve of Inauguration Day to the end-of-December before the election year.  The price change has also been annualized.

We also look at the change in the S&P during the election year, from end-of-December until election day,  the difference in the popular vote and the number of electoral college votes won.    Some nice cocktail hour conversation.

Results – Outliers, Skew, and Distortions

For all first-term presidents since Ike, during their first 1070 plus days in office (Kennedy tragically cut short),  the average change in the S&P500 is 28.20 percent.    Note, however, the median change is 32.15 percent, significantly higher than the mean (average), which reflects a negative skew caused by a few negative outliers.

Given there have only been three presidencies since Teddy Roosevelt, who left office with a stock market lower than the one they inherited — Hoover, Nixon, and Bush#43 — it is also important to take these outlier data points into account, which causes significant distortions in the averages.

Results Excluding Outliers

Excluding the outliers of Nixon, Carter, Bush#43,  the average change in the S&P500 for the six presidencies (excluding Trump) increases to 40.70 percent with a median return of 43.46 percent.  The medium return exceeds Trump’s S&P,  which contradicts the impression given by the CNBC article and the President’s Tweet.

Remember, many people have drowned at Coney Island Beach, which has an average depth of water of only 11 inches.    How can that be?

This leads us to update our parable, The Central Tendency Problem Of A Seattle Dive Bar,

Central Tendency Problem & Stock Market Returns Of Last Five Presidents

Presidents Bush#41, Clinton, and Obama are sitting in a popular dive bar in Seattle after the stock market close on New Year’s Eve.  It’s relatively early and they are the only patrons in Get Shorty’s.

Joe, the bartender, is a student at the University of Washinton studying statistics. The three Presidents are boasting about the stock market returns in their first three years in office.   

President Bush#41 raises a glass to toast his stock market, “the S&P500 index was up 45.37% during my first 1,076 days in office.”

President Clinton brags, “my S&P was 41.55 percent!”

President Obama weighs in, “Gotcha all, the S&P500 was up 47.93 percent during my first three years.”

Joe, the bartender, brings out a Python program and calculates the average and median S&P500 index change of the three Presidents:

Change in S&P500 During First Three Years
 Bush#41,  Clinton, and Obama

Average = 45.95 percent 
Median  = 45.37 percent 

President Trump = 42.90 percent

Suddenly, the door swings open and in walks President Trump, who sits at the bar, orders a Cherry Cola, whips out a copy of the CNBC article citing the data, “The S&P500 during my first three years in office has more than doubled the average market return of other presidents in during the same period.”

Joe’s project starts to get interesting.   He shows President Trump the data that the S&P500 during his first 1076 days, the S&P500 actually underperformed the average of the other recent presidents sitting at the bar by more 200 basis points.

President Trump is shocked and shouts that is “fake news.”   He lashes out, “You all need to read this CNBC article.”  

Twenty minutes later,  President Bush#43 walks in to have a pop (of water) with his fellow presidents. 

Joe can’t believe all of the past five presidents are sitting at his bar.  Now relieved after W. enters,  he recalls #43 inherited a nasty bear market and left office eight years later in a nasty bear market.   Surely,  W.’s stock market return in his first three years will be such an outlier it will bring down the average S&P change for the other three presidents and calm an increasingly irritated President Trump.  

Joe asked President Bush#43 what was the change in the S&P during his first three years. 

W. responds,  “I got screwed and inherited President Clinton’s bursting dot.com bubble and bear market.  My S&P500 was down 17.18 percent. Darn it!”

Joe enters the data into his program and shows the results to President Trump, 

Change in S&P500 During First Three Years
 Bush#41,  Clinton, Bush#43, and Obama

Average = 29.42 percent 
Median  = 43.46 percent 

President Trump = 42.90 percent

President Trump begins to calm down.  He then whips out his cell phone and commences to tweet out the data that the S&P500 in his first three years was 46 percent higher than the average of his four predecessors.   


Know thy stats, especially as we enter a presidential election year and the decade of, what we believe, will be deepfakes.

Be skeptical and test all things, including our posts, folks.

More Data

Wait there is more.

The following table uses the Dow Jones Industrials to compute the returns during the various administrations going back to Teddy Roosevelt.  The Dow was created in May of 1896 and none of the original stocks are still in the index after GE was given the boot in June 2018.



We have also added some context in terms of valuations as illustrated by the last two columns.  It is our favorite stock market valuation metric — the stock market cap to GDP ratio —  using the Wilshire 5000 Total Market index in the numerator.   The Wilshire 5000 index was created in 1974.

What stands out is that both President Trump and President Bush#43  inherited an extremely overvalued stock market, 116 percent of GDP, which is why we are pretty bearish on the eventual terminal point for Mr. Trump’s S&P.  The stock market cap to GDP ended 2019 at 150 percent.  Stunning and can you say, “Yikes!”   See the Market Valuation chart below.

Are Democrats Or Republicans Better For The Stock Market? 

We will let the facts speak as not to be accused of partisanship.  We encourage you to recreate the results for yourself.   We also stress context as presidents cannot control the stock market, well, except maybe the current one, and look at the valuations each president inherited and left to his successor, for example.

Note, the data are price changes and do not include dividends.


The facts are there have been 12 Republican and 8 Democratic presidents since Teddy Roosevelt assumed office after the assassination of President McKinley.  The Republicans have held office almost 53 percent of the 43k plus calendar days.

Only three presidents have experienced negative stock markets during their entire term, all Republicans  — Hoover, Nixon, and Bush#43.

The average change in the Dow during Democrat administrations is 92 percent,  more than double the average of Republican administrations.

How could that be?  It is so the opposite to the perceived conventional wisdom?  Outliers?

Stay tuned.



Posted in Equities, Politics, President Trump, Uncategorized | Tagged , , | 1 Comment

If War Comes, It Won’t Be Your Father’s War

Just a heads up and reminder, folks.   Do some homework.

SAN JOSE, Calif. (AP) — Security researcher Brian Wallace was on the trail of hackers who had snatched a California university’s housing files when he stumbled into a larger nightmare: Cyberattackers had opened a pathway into the networks running the United States power grid.

Digital clues pointed to Iranian hackers. And Wallace found that they had already taken passwords, as well as engineering drawings of dozens of power plants, at least one with the title “Mission Critical.” The drawings were so detailed that experts say skilled attackers could have used them, along with other tools and malicious code, to knock out electricity flowing to millions of homes. – Times of Israel,  Dec 2015

You can start by reading Ted Koppel’s book on cyberattacks,

Lights Out


In this New York Times bestselling investigation, Ted Koppel reveals that a major cyberattack on America’s power grid is not only possible but likely, that it would be devastating, and that the United States is shockingly unprepared.

Imagine a blackout lasting not days, but weeks or months. Tens of millions of people over several states are affected. For those without access to a generator, there is no running water, no sewage, no refrigeration or light. Food and medical supplies are dwindling. Devices we rely on have gone dark. Banks no longer function, looting is widespread, and law and order are being tested as never before.   – Amazon

Or watch this:

Posted in Geopolitical, Uncategorized | Tagged , | Leave a comment

U.S. Manufacturing ISM At 10-year Low


December PMI registered 47.2 percent, a decrease of 0.9 percentage point from the November reading of 48.1 percent, the lowest reading since June 2009’s 46.3 percent. New Orders Index came in at 46.8 percent, a decrease of 0.4 percentage points from the November reading of 47.2 percent. The Production Index was 43.2 percent, down 5.9 percentage points compared to November. The Backlog of Orders Index posted 43.3 percent, up 0.3 percentage points. The Employment Index registered 45.1 percent, a 1.5-percentage point decrease from the November reading of 46.6 percent. The Supplier Deliveries Index was 54.6 percent, up 2.6-percentage points. The Inventories Index was 46.5 percent,  up 1 percentage point.

The Prices Index registered 51.7 percent, a 5-percentage point increase from the November reading of 46.7 percent. New Export Orders posted 47.3 percent, down 0.6-percentage point. The Imports Index came in at 48.8 percent, a 0.5-percentage point increase from the November reading of 48.3 percent.

“Comments from the panel were consistent with November, with sentiment improving compared to the third quarter. December was the fifth consecutive month of PMI® contraction, at a faster rate compared to the prior month. Demand contracted, with the New Orders Index contracting faster, the Customers’ Inventories Index remaining at `too low’ status and the Backlog of Orders Index contracting for the eighth straight month (and at similar rates to November). The New Export Orders Index contracted for the second month in a row, recording 10 months of poor performance and likely contributing to the faster contraction of the New Orders Index. Consumption (measured by the Production and Employment indexes) contracted, due primarily to lack of demand, contributing negatively (a combined 7.4-percentage point decrease) to the PMI® calculation. Inputs — expressed as supplier deliveries, inventories and imports — improved in December, due primarily to slowing contraction in inventories and supplier deliveries remaining in expansion territory. Imports contraction eased slightly. Overall, inputs indicate (1) supply chains began to stress in December and (2) companies remained cautious that materials received would be consumed by the end of the fourth quarter. Prices increased for the first time since May 2019, a positive for 2020.

“Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth,” says Fiore.  – ISM

Only Three of 18 Industries Reporting Growth

Three reported growth in December: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The 15 industries in contraction reporting are listed in order: Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Textile Mills; Primary Metals; Chemical Products; Plastics & Rubber Products; and Machinery.

China Hope

Hope remains high that the Phase 1 trade agreement with China will turn things.   We are not so sure as there was nothing in the deal to really move the economic needle with exception of a toning down of the conflict.


See the full report here


Source:  ISM

Posted in Uncategorized | Leave a comment

The August 1914 Question…

Growing complicated entanglement (even in Venezuela) and an increasingly isolated America.  Geopolitical toxic cocktail.  We are upping our concern slightly for the country’s power grid as Tehran may, though unlikely, now have the ability to turn out the lights in a major U.S. city.

Posted in Uncategorized | Leave a comment

Creative Destruction 3.0 Meets Roaring ’20s 2.0

Creative destruction refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. It was coined by Joseph Schumpeter (1942), who considered it ‘the essential fact about capitalism’.

The process of Schumpeterian creative destruction (restructuring) permeates major aspects of macroeconomic performance, not only long-run growth but also economic fluctuations, structural adjustment and the functioning of factor markets. 

At the microeconomic level, restructuring is characterized by countless decisions to create and destroy production arrangements. These decisions are often complex, involving multiple parties as well as strategic and technological considerations. The efficiency of those decisions not only depends on managerial talent but also hinges on the existence of sound institutions that provide a proper transactional framework. Failure along this dimension can have severe macroeconomic consequences once it interacts with the process of creative destruction — MIT

We are reposting our Creative Destruction 2.0. piece below for some background.

We are 100 percent for all the economic cleansing, efficiencies, and advances that creative destruction and technology brings. In fact, it is not too different from opening up industries to foreign trade competition.  The consumer gets lower prices and forces domestic producers to buck up and put out a better product at a lower price or be destroyed.  Creative destruction brings with it a tremendous amount of both positive and negative externalities, such as the companies and workers subject to creative destruction and free-trade getting hurt.

The government needs a better plan and policy to embrace it and help ease the transition of those displaced in its wake rather than trying to ignore, deny, stop, or stymie it.   The Yang Gang are the only ones, at least we see, who seem to understand what is coming.

Maybe Yang becomes Secretary of Labor if the Dems win the White House in November and maybe he does even if they don’t.

We were also a bit heartened by the following Gizmodo piece on Monday.

Of course, the blowback has already begun,  “too unrealistic, a slap in the face to coal miners…blah, blah…”   Yes, it is probably difficult for a 50-year old coal miner to learn Python (really not that hard, BTW).  But it’s a start, and better than the Luddite promise to restore their jobs, which are never coming back.

We can start by helping to train their children to be better prepared to enter the new economy.  Not endorsing Uncle Joe, here, and not saying we will or won’t vote for him.  You decide. 


By the way,  coal mining payrolls are down 70 percent since April 1985 and only 2.4K coal mining jobs have been created since President Trump took office and promised to make coal country great again.  A very Luddite and a very difficult proposition, by the way, especially for an energy sector to make it back to its glory days when its cleaner-burning competitor, natural gas, is experiencing some of its own creative destruction from the fracking boom.




Natural gas prices are scraping at the bottom of generational lows, falling 85 percent from their 2008 highs just before the Great Financial Crisis (GFC).

Our coal miner rant is in honor of our good friend and great Marine from W. Virginia – CK – who knows first hand the pain suffered in coal country.

Roaring 20’s 2.0

Our bet is the Roaring ’20’s 2.0 are going to experience creative destruction like we have never seen.  We are already experiencing the toxic cocktail of creative destruction and the failure of government policy to respond to its negative externalities resulting in economic and political populism that risks taking us back to the dark ages.  Policies based on fact based reality is our only hope.

Most of the pols will do nothing to lead on this issue but rather attempt to exploit the rage with conspiracies, blaming others, and promise a golden age of Christmas past.

Long live the Luddites!  We certainly hope not!

What camera companies?


Hat Tip:  Andrew Chen  @andrewchen




It’s the time frame, stupid.

One should always qualify returns with different time frames.

These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Eastman Kodak Company (NYSE:KODK) share price is 86% higher than it was a year ago, much better than the market return of around 29% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 71% lower than it was three years ago. – Simply Wall St., Jan. 2020


Creative Destruction 2.0

R.I.P, Eastman Kodak, may you rise like a Phoenix out of bankruptcy.   If only you were owned by the government,  Larry Wood, as pictured below, might still have his job doing the same work he was doing in 1968.

(click here if charts are not observable)

Posted in Economics, Employment, Energy, Policy, Politics, Technology | Tagged , , , | Leave a comment

GMM’s Global Reach

A special thanks to all our readers who tuned into the Global Macro Monitor in 2019.  We are stunned just how small the world has become with the advent of the internet in the past two decads.  Everybody now has the ability to communicate with anybody at anyplace during anytime. 

We had readers from almost every country and territory in the world with about 60 percent domiciled in the United States.   

Stay tuned as 2020 is sure to an exciting and watershed year for the markets and global economy. 








Posted in Readership, Uncategorized | Leave a comment