Wednesday, 22 February 2017

Together in our individuality.


I spend more of my time with creative types these days. There is something about them that makes them all identifiable as creatives. In trying to express their individuality they all look the same.

It is true for much of their output too. Though their work may be wearing cheeky coloured socks, the uniform is the same.

If this is the result of thinking outside of the box then perhaps returning inside the box would be more outside it. Their world more a Klein bottle than the free universe they perceive it to be.

It’s tribal clothing. Tribal clothing is spawned from the need to at once be both different (from other tribes) and yet the same (as the tribe).

Mr McKechnie dressed for the part. 
Architects - black round neck jumpers and Saabs, but these days it's Audi TTs. Apple adopted the architect garb for its masters as architecture is perceived to be where art meets science, the image that Apple has successfully adopted. I'm not sure if that is true but in today’s back fitting narrative world I’ll create it as a retrotruth.

Retrotruth is a term I predict will appear as the next derivative of the alternative facts. Once alt-facts have been established they can be back engineered, by the application of Determinism, to derive truths in the past that would otherwise never have been.

I was thinking about going on to talk about financial market specifics but creatives are briefed to give clear messages to influence the behaviour of the recipient. To this point the messages have to be short and to the point. No distractions. This is why adverts tend to rely on images rather than copy. It is rare to see a full page advert that is predominanyly text.

But there is a stronger driver in the fesire to keep the message brief. Extra content not only clouds the message but can be the source of disagreement that alienates the reader. A single part of a published work can undermine the faith that the reader has in the whole.

The greater the number of ideas in a piece then the more likely the reader will be alienated and the les likely they are to carry the message on. Heads or tails, where a 'tails' switches off the audience. A stream of flips is more likely to have a tail in it than a single flip. Stick to single flips.

The shorter the message the more likely it is to be broadcast by others, so the sound bite is born and Twitter booms.

Though an individual is built of many ideas and beliefs, sending ideas out one by one reduces the chance that the ideas pollute each other. The ideas are processed by the recipient in parallel rather than in series.

An author can produce two tweets. A tweet and an anti-tweet. Together they should combine to cancel each other out, just as virtual particles do in the world of physics. But separate them and they can live their own lives in their own tweetospheres, gaining the author followers from both universes.

From a primordial information soup of disparate amino acid statements, we build our own creatures of reality. Genes from different pools reassembled by us for our own bespoke purpose. Yet many of the genes are faulty, the basic news is corrupt or fake as there is no one to screen them. Building our vision of reality from these twisted facts we run the risk of creating Frankensteins of reality.

So it now lies to us to learn and question the very building blocks of our knowledge. If nothing else, the modern information revolution and the corruption of facts is driving us to learn more about the world in order to understand it. We can no longer rely upon others.

Tuesday, 21 February 2017

PMI. Unlimited Supply

If the Sex Pistols ever did monetary economics. Their epic 'EMI' would have been more like this.. PMI


Cash in unlimited supply
And now here's the reason why
It was a monetary game
All the outcomes are the same
What?

P M.I. P.M.I. P.M.I.

Too many people bought the monetary thrust
Too many people bought the ECB trust
An unlimited amount
Too many buyers on account
So?

P.M.I. P.M.I. P.M.I.

Stock bears are crucified
Deflation has all but died
QE's an addition, only ruled by one
Draghi forever, ever, ever

You thought the central banks were faking
With all that money making
You didn't believe they're for real
But look, you buy their apperel!

Don't judge a bond by its cover
It's now all about one number
And blind acceptance of a sign
inflation's just a rising line
Like

P.M.I. P.M.I. P.M.I.

Monetary expansion
With an unimited supply
That is the only reason
Any stock is a 'good buy'

French new high  P.M.I
Japan's a storming P.M.I.
I tell you this number is the game P.M.I.
Every country is the same P.M.I.
Inflation now the pressure P.M.I.
You didn't suss the monetary tool P.M.I.
Unlimited supply P.M.I.
Hallo P.M.I.
Goodbye,

Tuesday, 14 February 2017

Quincunx policy making. Quincunx markets.

It's been a while since I last posted as I have been waiting for the realisation that Trump was not going to be a shoehorn to economic prosperity to dawn, as his extremes either shock the rest of the world into moving away from buying US assets or his changes collapse in a cloud of impracticality. Neither of which has happened.

My simplistic de-Trumping plan has turned from a binary game of all on / all off into a multi-dimensional game of chess. Hard Trump and Soft Trump, to borrow a Brexit phrase, are forms of Trumpism that are swarm like and ever changing. The strength of policy swings on a Tweet. With foreign policy we have seen back peddling from 'hard' as the one China policy appears to have been acknowledged, Japan declared ‘best friend’ and Canada told that Trump is only planning ‘tweaks’ to NAFTA.

Yet the rhetoric against the likes of Basel III remains as strongly worded as ever and the deregulation of US banks could cause some of the greatest strains between the US and EU. Since the 2008 crisis regulations have been seen as much a moral crusade as one of practicality. Dodd-Frank and Volker, though nice ideas, were never fit for purpose and the laws of unforeseen consequences have produced all sorts of schisms, whether it is liquidity holes in corporate bond markets or just ridiculous generalised reporting conditions on markets that were not exchange based. So getting rid of these, or at least watering them down, would be a sensible compromise between practicality and moral protection. At least that’s the line I am willing to excuse the panel of top bankers currently advising Trump with.

Basel III is a bigger issue. If McHenry’s letter to Yellen is properly representative of new policy then it hits the EU head on. The EU has been proudly touting its new banking regulations which should identify weak banks (yes, done in style) and be part of the path towards a unified European financial system, whilst also allow the politicians to wave a huge moral flag in triumph. But what happens if the US banks are suddenly told they don't have to play by the same rules? They instantly have a competitive advantage unless the EU backtracks and loosens Basel III in response - Highly unlikely fot them to do such a massive U-Turn just because Trump has pushed them into a corner - or they immediately remove the US’s European banking licenses if they don't comply.

This is al the more interesting coming in the wake of Brexit where apparently the US banks are threatening to up-sticks for continental Europe, well let’s be honest, it’s a threat as none of them really want to go. France may well be offering sanctuary to US scientists and the world's bankers, but if it were really that great they would have gone there already.

There is a small version of the State of Liberty on the banks of the Seine in Paris and I was wondering if they should attach a plaque to it similar to the famous one in one in New York -
Give me your scientists, your bankers, your huddled masses yearning to breathe free, the wretched liberals of your teeming shore. Send these, the visa-less, Trump-tossed to me, I lift my high tax rates besides the red tape.

But if the US banks aren’t going to be playing to Basel rules there may not be that tide of bankers. Indeed, the UK would be looking pretty as an intermediary between the two. It would also support another idea I was nursing, the introduction of an offshore Euro market in line with the original Eurodollar market. If London launched such a beast the EU would not be able to control it yet it would provide a method for EU unregulated institutions to fund and lend Euros just as the Eurodollar market did for Russian held dollars when it was established. The great thing about the City is that it has thrived on bypassing regulations, or rather, creating the most efficient systems to mitigate their impacts. It's what it thrives upon.

But back to the markets, I am lost. I see risk piling up everywhere except in the markets, which are driving on upwards. I don’t need to list the European stresses but I think this sums up the EU's position pretty well.







There are so many possible outcomes to current uncertainties I am looking at the markets as a quincunx-  not a Harry Potter creature but another name for the 'bean machine' devised by Sir Francis Galton.




The box itself could even be used as a metaphor for Trump's policies. An Executive Order, or even just a tweet, is dropped in the top and it rattles down through so may deflecting processes that, though you think you have an idea where it is heading, the policy's final resting place may be some way off where it started.

Add in the rest of global politics and you end up with so many variables, or pins in the box, that the sum of paths may well mean that there are not any fat tails, but the standard deviation of the resulting distribution is a lot wider than volatility pricing is currently suggesting.

I am buying volatility now rather than direction. I was, or so far have been, wrong on that.





Tuesday, 7 February 2017

Markets move as man skis in Austria.

I'm on holiday in a ski resort in the Austrian alps. This means I have no time to read any in-depth market commentary, instead, I am glancing at twitter and headlines that are depressingly dominated by the old 'x happened as y happened' implied correlations.

So here are my own equally honest, but equally unuseful, ones describing today -



**European futures fall pre-market as tourist heard mumbling "Oh God, do I have to get up now?"**

**European equities rally on the open as porridge and coffee consumption rises.**

**US futures mirror European gains as ski boots tighten.**

**Oil falls as blazing sunshine lights up mountain tops.**

**USD/JPY rallies as snow conditions judged near perfect.**

**Turkish Lira weakens as hot chocolate and brandy sales rise.**

**Copper falls as multiple tight parallel turns impress.**

**Rio Tinto rallies as Woah, sorry mate, are you OK?**

**Gold falls as I think I’ve pulled something.**

**VIX loses ground as it's decided to have an early lunch.**

**Greek borrowing costs rise as wine, beer and pizza sales spike.**

**Austrian inflation much higher than expected as bill arrives.**

**US futures extend rallies as debate over where to go next continues.**

**USD/RUB higher as UK/Russian relations thaw on chairlift.**

**Italian stocks steady as disagreements break out as to whether you said take the red run after the pylon or turn right down the black back to the valley.**

**USD/MXN extends gains as he must be here soon, he can’t have got lost can he?**

**US treasuries slip as I do.**

**Zinc up as laughter breaks out.**

**Chicken consumption falls as thighs ache.**

**Bitcoin goes up as skiers go down.**

**Schaeuble says "We don't want to punish the British for Brexit” as British order Jagermeister and tequila yet state 'No, seriously, I'm not drinking that whatever it is’.**

**BTPs recover as ski boots discovered to be perfect dance shoes.**

**Mindspace falls in extended hours.**

**Markets close heavy as it can’t be 10pm already, can it?**

**Sterling rallies as loss of wallet is expected to restrict overseas spending**