Trading the Trend

[frugal.rock]

I get a statistical "sense" that the companies with decent results tend to report earlier.
Is this just my biased thinking as it's not a formal analysis?
No doubt that some figures will be fudged, hoping to kick the can, again.

 

[ducati916]

And from my main man, flippe-floppe-flye

jog on
duc

 

[ducati916]

Well I was basically saying that whilst I agree that in theory, any fiat currency could do it, there are more conditions (significant ones) which must be met other than being a fiat currency, and no other currency even comes close, hence why the USD isn't going anywhere.

Which are?

jog on
duc

 

[over9k]

Which are?

View attachment 106125

jog on
duc

This one:

Not just anyone can float a global currency.

The volume of currency must be massive - large enough not just to lubricate trillions of dollars of economic activity that takes place on the other side of the world, but so large that ordinary transactions and business fluctuations do not effect the currency's day-to-day value. Otherwise, instability would scare users away from using it.

The provider's external trade must be so small relative to the size of its home economy that day-to-day changes in the currency's value don't dramatically upset the domestic economy.

As an extension of that, the provider must be so unconcerned about the currency's value that it doesn't (unless there's a really big disruption) intervene in currency markets to push its value up or down. Again, if people are concerned that the currency is going to be manipulated once they start using it (and therefore are reliant on its use), they aren't going to adopt it in the first place. I.e your first paragraph is correct.

The provider must be willing to let the money flow at the whim of everyone else - if they can't get their hands on it when they need it, they're not going to use it.

And last but not least: The provider must be able to secure the very global trade for which the currency is used.


Some 70% of global currency (by volume) is in some way linked to the USD. The USD is used for over 90% of global trade and of that tiny 10% left over, iirc, 90% of it done with the euro in the eurozone.

This is NOT going to change. The whole planet uses the one currency for the same reason everyone within a country uses its currency: Everyone use it, because everyone use it.

I can't remember the exact numbers off the top of my head, but there's several times as much USD in circulation as the U.S actually needs domestically. I'm exaggerating to make my point here but if we were to assume it was 20x as much (i.e that the yanks only had/used 5% of what's out there) then they could print twice what they actually have and only debase the currency by 1/20th.

Hence why they can "quantitatively ease" eye watering amounts of "stimulus" into the system and have absolutely SFA consequence for doing so. Hell, last I checked, the last batch of stimulus was overwhelmingly not even printed - it was mostly borrowed by the U.S government at rock bottom interest rates as everyone were trying to get their money out of the rest of the world anyway and so loaned it to them for peanuts. They don't even need to print most of their (massive) stimulus even now.

That is the degree of penetration & confidence the USD has and it is absolutely unique to it for a reason.

Which you replied to here:

1. In theory, any fiat currency will suffice. In practice, no not anyone has an economy large enough and stable enough.

2. The volume of any fiat currency has no physical constraints. It certainly would require 'confidence'.

3. What does that even mean?

4. Governments that have held the reserve currency status are always intervening: from Greece through to the US.

5. Banks build up reserves. Generally the higher the reserves held, the greater the use.View attachment 105906

6. Again, what do you actually mean?

7. Well reserves certainly approach 70%. The Fed. provides huge Swap lines and Eurodollars to any requiring US dollars (debtors).

8. It changes all of the time (albeit not that anyone other than historians really pay overmuch attention). International currencies in the past have included the Greek drachma, coined in the fifth century B.C., the Roman denari, the Byzantine solidus and Arab dinar of the middle-ages, the Venetian ducato and the Florentine florin of the Renaissance, the 17th century Dutch guilder and the French franc.

9. The 'money' (M2) in circulation is the tip of the ice-burg.

10. This misses the point entirely.

11. Hardly as history has demonstrated.

jog on
duc

1. yep we're in agreeance

2. Yes, but volume because of desire, not just printing the shite out of it. Hence why gold's used as wealth storage vs platinum: Much harder to get your hands on platinum.

3. It means that fluctuations in the currency don't play havok with your economy by playing havok with your imports/exports. i.e that your economy is not very sensitive to exchange rate fluctuations.

4. Yes but they don't do it unless it's a biiiig deal like what was going on with japan in I think it was the 80's? People aren't going to use a currency that is *constantly* being f***ed with.

5. Yep, because they've been able to. Their ability to do that was my point.

6. Countries use the USD to trade. If they aren't trading with each other, they don't need USD. Trade requires security of shipping lanes etc etc.

7. yep

8. Sure, but the USD is GLOBAL currency now. Kind of like how the U.S military is orders of magnitude more powerful than what's come before it, the currency penetration is the same. This is actually only going to get worse from here on out as the U.S increasingly becomes the only consumer market left due to simple demographics. Additionally, currencies like this do not just collapse overnight. Even now, with the U.S being the global epicentre of the virus, money's still rushing INTO america. Confidence in the dollar is not going anywhere for a long time yet.

9. yep another point we're in agreeance on

10. How so? The very fact that the USD is what it is is precisely why they can abuse it the way they do.

11. hardly what?

 

[over9k]

Related to thread:

Some of the markets are acting as if things are getting back to normal (maybe on news of the moderna trial moving into the next phase) and they, well, aren't. The virus case numbers are just hitting new highs day after day, the reduction in jobless claims is slowing dramatically (suggesting an end to the improvement in the unemployment rate), and we're heading into winter, a time which already results in lower economic activity/more people out of work (outside of retail).

Combine that with the fact that these reopenings are going to spread the virus further and california's just enforced school-from-home again, the american equivalent of jobkeeper ending soon and the next stimulus not being finalised yet and we're in one of those "the market can stay irrational longer than you can stay solvent" kind of moments.

This winter is going to be absolutely brutal. Stimulus is the only thing that'll get them through it.

 

[ducati916]

Related to thread:

Some of the markets are acting as if things are getting back to normal (maybe on news of the moderna trial moving into the next phase) and they, well, aren't. The virus case numbers are just hitting new highs day after day, the reduction in jobless claims is slowing dramatically (suggesting an end to the improvement in the unemployment rate), and we're heading into winter, a time which already results in lower economic activity/more people out of work (outside of retail).

Combine that with the fact that these reopenings are going to spread the virus further and california's just enforced school-from-home again, the american equivalent of jobkeeper ending soon and the next stimulus not being finalised yet and we're in one of those "the market can stay irrational longer than you can stay solvent" kind of moments.

This winter is going to be absolutely brutal. Stimulus is the only thing that'll get them through it.

jog on
duc

 

[ducati916]

Lessons from history:

jog on
duc

 

[Dark1975]

Just a general question to forum?

With out a stimulas package in america, we will likely to see a volatile market as the jobkeeper in america ends in July.
Does anyone think the stimulus we be likely to come in August?
Further note I noticed Congress are in recess till the 20th of July and have 15 days to approve a stimulas as Congress go back in recess @ the 10th of august till September!

 

[ducati916]

Just a general question to forum?

With out a stimulas package in america, we will likely to see a volatile market as the jobkeeper in america ends in July.
Does anyone think the stimulus we be likely to come in August?
Further note I noticed Congress are in recess till the 20th of July and have 15 days to approve a stimulas as Congress go back in recess @ the 10th of august till September!

A few articles on it have appeared:

https://www.nytimes.com/2020/07/16/opinion/coronavirus-economy-unemployment.html
https://slate.com/business/2020/07/600-dollar-benefits-going-away.html

jog on
duc

 

[Dark1975]

Thank you for you information duc ,

 

[over9k]

Just a general question to forum?

With out a stimulas package in america, we will likely to see a volatile market as the jobkeeper in america ends in July.
Does anyone think the stimulus we be likely to come in August?
Further note I noticed Congress are in recess till the 20th of July and have 15 days to approve a stimulas as Congress go back in recess @ the 10th of august till September!

The politicians are all on record stating they want it done before the august recess.

 

[Smurf1976]

With out a stimulas package in america, we will likely to see a volatile market as the jobkeeper in america ends in July.

They're on record saying they want it done as over9k notes.

That said, well given that issue, plus similar issues in other countries, plus whatever's going to happen with the virus, plus the upcoming US election, plus the seasonal "October" factor and so on - I think there's a reasonable chance we do see considerable volatility at some point over the next few months

 

[ducati916]

That said, well given that issue, plus similar issues in other countries, plus whatever's going to happen with the virus, plus the upcoming US election, plus the seasonal "October" factor and so on - I think there's a reasonable chance we do see considerable volatility at some point over the next few months

Volatility. I'm not going to explain the theory, I'll leave that to personal research as it would be time consuming to go into it in the detail required. Some facts:

(i) Volatility mean reverts;
(ii) The mean is stable over time;
(iii) Calculating or estimating volatility is time frame dependant and input values dependant;
(iv) Volatility exhibits serial correlation;
(v) This is (theoretically) calculated via ARCH & GARCH;
(vi) Weighting of historical volatility and implied volatility in the calculation.

Two charts. The first, shorter term (obviously) and the second longer term. The above characteristics can easily be seen. Using the above information (assuming for the moment there are no significant changes) one can calculate a volatility expectation moving forward, which, would suggest, market direction.

jog on
duc

 

[ducati916]

Lessons from history:

View attachment 106131 View attachment 106132

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duc

Shame that no-one really paid any attention to this chart. In it resides important information that frames where the markets potentially could go in a number of scenarios. It also ties in with the question of reserve currencies and their importance (critical) on again, which way markets (could) move in a number of possible scenarios. This is the 'macro'.

jog on
duc

 

[over9k]

To be fair duc, you can have massive volatility and a trend as well, they're not mutual exclusives.


Related to the thread: All the financial news is banging on about how everyone (the institutions) have serious jitters about the job support payments ending & when the next stimulus package begins (i.e if there's a gap and what will happen in it) and so are bailing/taking profits until there's some certainty.

Which makes a lot of sense.

 

[ducati916]

1. To be fair duc, you can have massive volatility and a trend as well, they're not mutual exclusives.


2. Related to the thread: All the financial news is banging on about how everyone (the institutions) have serious jitters about the job support payments ending & when the next stimulus package begins (i.e if there's a gap and what will happen in it) and so are bailing/taking profits until there's some certainty.

Which makes a lot of sense.

1. Well isn't that exactly what we have currently?

My post on volatility was something else altogether, nothing to do with [1] directly only tangentially.

2. Who cares what the media are going on about.

jog on
duc

 

[over9k]

Volatility: You said volatility means reverts. I'd assumed you meant away from where it was going (its trend) previously?

Media: I was more pointing out that this is one of those occasional times when I think they're on the, well, money.

 

[ducati916]

1. Volatility: You said volatility means reverts. I'd assumed you meant away from where it was going (its trend) previously?

2. Media: I was more pointing out that this is one of those occasional times when I think they're on the, well, money.

1. So you read (i) and ignored (ii)-(vi).

2. OMG.

jog on
duc

 

[ducati916]

Article:

“We are in the foothills of a Cold War.” Those were the words of Henry Kissinger when I interviewed him at the Bloomberg New Economy Forum in Beijing last November.

The observation in itself was not wholly startling. It had seemed obvious to me since early last year that a new Cold War — between the U.S. and China — had begun. This insight wasn’t just based on interviews with elder statesmen. Counterintuitive as it may seem, I had picked up the idea from binge-reading Chinese science fiction.

First, the history.

What had started out in early 2018 as a trade war over tariffs and intellectual property theft had by the end of the year metamorphosed into a technology war over the global dominance of the Chinese company Huawei Technologies Co. in 5G network telecommunications; an ideological confrontation in response to Beijing’s treatment of the Uighur minority in China’s Xinjiang region and the pro-democracy protesters in Hong Kong; and an escalation of old frictions over Taiwan and the South China Sea.

Nevertheless, for Kissinger, of all people, to acknowledge that we were in the opening phase of Cold War II was remarkable.

Since his first secret visit to Beijing in 1971, Kissinger has been the master-builder of that policy of U.S.-Chinese engagement which, for 45 years, was a leitmotif of U.S. foreign policy. It fundamentally altered the balance of power at the mid-point of the Cold War, to the disadvantage of the Soviet Union. It created the geopolitical conditions for China’s industrial revolution, the biggest and fastest in history. And it led, after China’s accession to the World Trade Organization, to that extraordinary financial symbiosis which Moritz Schularick and I christened “Chimerica” in 2007.

How did relations between Beijing and Washington sour so quickly that even Kissinger now speaks of Cold War?

The conventional answer to that question is that President Donald Trump has swung like a wrecking ball into the “liberal international order” and that Cold War II is only one of the adverse consequences of his “America First” strategy.

Yet that view attaches too much importance to the change in U.S. foreign policy since 2016, and not enough to the change in Chinese foreign policy that came four years earlier, when Xi Jinping became general secretary of the Chinese Communist Party. Future historians will discern that the decline and fall of Chimerica began in the wake of the global financial crisis, as a new Chinese leader drew the conclusion that there was no longer any need to hide the light of China’s ambition under the bushel that Deng Xiaoping had famously recommended.

When Middle America voted for Trump four years ago, it was partly a backlash against the asymmetric payoffs of engagement and its economic corollary, globalization. Not only had the economic benefits of Chimerica gone disproportionately to China, not only had its costs been borne disproportionately by working-class Americans, but now those same Americans saw that their elected leaders in Washington had acted as midwives at the birth of a new strategic superpower — a challenger for global predominance even more formidable, because economically stronger, than the Soviet Union.

It is not only Kissinger who recognizes that the relationship with Beijing has soured. Orville Schell, another long-time believer in engagement, recently conceded that the approach had foundered “because of the CCP’s deep ambivalence about the way engaging in a truly meaningful way might lead to demands for more reform and change and its ultimate demise.”

Conservative critics of engagement, meanwhile, are eager to dance on its grave, urging that the People’s Republic be economically “quarantined,” its role in global supply chains drastically reduced. There is a spring in the step of the more Sinophobic members of the Trump administration, notably Secretary of State Mike Pompeo, deputy National Security Adviser Matt Pottinger and trade adviser Peter Navarro. For the past three and a half years they have been arguing that the single most important thing about Trump's presidency was that he had changed the course of U.S. policy towards China, a shift from engagement to competition spelled out in the 2017 National Security Strategy. The events of 2020 would seem to have vindicated them.

The Covid-19 pandemic has done more than intensify Cold War II. It has revealed its existence to those who last year doubted it. The Chinese Communist Party caused this disaster — first by covering up how dangerous the new virus SARS-CoV-2 was, then by delaying the measures that might have prevented its worldwide spread.

Yet now China wants to claim the credit for saving the world from the crisis it caused. Liberally exporting cheap and not wholly reliable ventilators, testing kits and face masks, the Chinese government has sought to snatch victory from the jaws of a defeat it inflicted. The deputy director of the Chinese Foreign Ministry’s information department has gone so far as to endorse a conspiracy theory that the coronavirus originated in the U.S. and retweet an article claiming that an American team had brought the virus with them when they participated in the World Military Games in Wuhan last October.

Just as implausible are Chinese claims that the U.S. is somehow behind the recurrent waves of pro-democracy protest in Hong Kong. The current confrontation over the former British colony’s status is unambiguously Made in China. As Pompeo has said, the new National Security Law Beijing imposed on Hong Kong last Tuesday effectively “destroys” the territory’s semi-autonomy and tears up the 1984 Sino-British joint declaration, which guaranteed that Hong Kong would retain its own legal system for 50 years after its handover to People’s Republic in 1997.

In this context, it is not really surprising that American public sentiment towards China has become markedly more hawkish since 2017, especially among older voters. China is one of few subjects these days about which there is a genuine bipartisan consensus. It is a sign of the times that Democratic presidential candidate Joe Biden’s campaign clearly intends to portray their man as more hawkish on China than Trump. (Former National Security Adviser John Bolton’s new memoir is grist to their mill.) On Hong Kong, Nancy Pelosi, the Democratic speaker of the House, is every bit as indignant as Pompeo.

I have argued that this new Cold War is both inevitable and desirable, not least because it has jolted the U.S. out of complacency and into an earnest effort not to be surpassed by China in artificial intelligence, quantum computing and other strategically crucial technologies. Yet there remains, in academia especially, significant resistance to my view that we should stop worrying and learn to love Cold War II.

At a forum last week on World Order after Covid-19, organized by the Kissinger Center for Global Affairs at Johns Hopkins University, a clear majority of speakers warned of the perils of a new Cold War.

• Eric Schmidt, the former chairman of Google, argued instead for a “rivalry-partnership” model of “coop-etition,” in which the two nations would at once compete and cooperate in the way that Samsung and Apple have done for years.
  
  
• Harvard’s Graham Allison, the author of the bestselling "Destined for War: Can America and China Escape Thucydides's Trap?", agreed, giving as another example the 11th-century “frenmity” between the Song Emperor of China and the Liao kingdom on China’s northern border. The pandemic, Allison argued, has made “incandescent the impossibility of identifying China clearly as either foe or friend. Rivalry-partnership may sound complicated, but life is complicated.”
  
  
• “The establishment of a productive and predictable US/China relationship,” wrote John Lipsky, formerly of the International Monetary Fund, “is a sine qua non for strengthening the institutions of global governance.” The last Cold War had cast a “shadow of a global holocaust for decades,” observed James Steinberg, a former deputy secretary of state. “What can be done to create a context to limit the rivalry and create space for cooperation?”
  
  
• Elizabeth Economy, my colleague at the Hoover Institution, had an answer: “The United States and China could … partner to address a global challenge,” namely climate change. Tom Wright of the Brookings Institution took a similar line: “Focusing only on great power competition while ignoring the need for cooperation will not actually give the United States an enduring strategic advantage over China.”
  

All this sounds eminently reasonable, apart from one thing. The Chinese Communist Party isn’t Samsung, much less the Liao kingdom.

Rather — as was true in Cold War I, when (especially after 1968) academics tended to be doves rather than hawks — today’s proponents of “rivalry-partnership” are overlooking the possibility that the Chinese aren’t interested in being frenemies. They know full well this is a Cold War, because they started it.

To be sure, there are also Chinese scholars who lament the passing of engagement. The economist Yu Yongding recently joined Kevin Gallagher of Boston University to argue for reconciliation between Washington and Beijing. Yet that is no longer the official view in Beijing. When I first began talking publicly about Cold War II at conferences last year, I was surprised that no Chinese delegates contradicted me. In September, I asked one of them — the Chinese head of a major international institution — why that was. “Because I agree with you!” he replied with a smile.

As a visiting professor at Tsinghua University in Beijing, I have seen for myself the ideological turning of the tide under Xi. Academics who study taboo subjects such as the Cultural Revolution find themselves subject to investigations or worse. Those who take a more combative stance toward the West get promoted.

Yan Xuetong, dean of the Institute of International Relations at Tsinghua, recently argued that Cold War II, unlike Cold War I, will be a purely technological competition, without proxy wars and nuclear brinkmanship. Yao Yang, dean of the National School of Development at Peking University, was equally candid in an interview with the Beijing Cultural Review, published on April 28.

“To a certain degree we already find ourselves in the situation of a New Cold War," he said. “There are two basic reasons for this. The first is the need for Western politicians to play the blame game” about the origins of the pandemic.

“The next thing," he added, "is that now Westerners want to make this into a ‘systems’ question, saying that the reason that China could carry out such drastic control measures [in Hubei province] is because China is not a democratic society, and this is where the power and capacity to do this came from.”

This, however, is weak beer compared with the hard stuff regularly served up on Twitter by the pack leader of the “wolf warrior” diplomats, Zhao Lijian. “The Hong Kong Autonomy Act passed by the US Senate is nothing but a piece of scrap paper,” he tweeted on Monday, in response to the congressional retaliation against China’s new Hong Kong security law. By his standards, this was understatement.

The tone of the official Chinese communiqué released after Pompeo’s June 17 meeting in Hawaii with Yang Jiechi, the director of the Communist Party’s Office of Foreign Affairs, was vintage Cold War. On the persecution of the Uighurs, for example, it called on "the US side to respect China's counter-terrorism and de-radicalization efforts, stop applying double standards on counter-terrorism issues, and stop using Xinjiang-related issues as a pretext to interfere in China's internal affairs."

And this old shrillness, so reminiscent of the Mao Zedong era, is not reserved for the U.S. alone. The Chinese government lashes out at any country that has the temerity to criticize it, from Australia — "gum stuck to the bottom of China's shoe" according to the editor of the Party-controlled Global Times — to India to the U.K.

Those who hope to revive engagement, or at least establish frenmity with Beijing, underestimate the influence of Wang Huning, a member since 2017 of the Standing Committee of the Politburo, the most powerful body in China, and Xi’s most influential adviser. Back in August 1988, Wang spent six months in the U.S. as a visiting scholar, traveling to more than 30 cities and nearly 20 universities. His account of that trip, "America against America," (published in 1991) is a critique — in places scathing — of American democracy, capitalism and culture (racial division features prominently in the third chapter).

Yet the book that has done the most to educate me about how China views America and the world today is, as I said, not a political text, but a work of science fiction. "The Dark Forest" was Liu Cixin’s 2008 sequel to the hugely successful "Three-Body Problem." It would be hard to overstate Liu’s influence in contemporary China: He is revered by the Shenzhen and Hangzhou tech companies, and was officially endorsed as one of the faces of 21st-century Chinese creativity by none other than … Wang Huning.

"The Dark Forest," which continues the story of the invasion of Earth by the ruthless and technologically superior Trisolarans, introduces Liu’s three axioms of “cosmic sociology.”

First, “Survival is the primary need of civilization.” Second, “Civilization continuously grows and expands, but the total matter in the universe remains constant.” Third, “chains of suspicion” and the risk of a “technological explosion” in another civilization mean that in space there can only be the law of the jungle. In the words of the book’s hero, Luo Ji:

The universe is a dark forest. Every civilization is an armed hunter stalking through the trees like a ghost … trying to tread without sound … The hunter has to be careful, because everywhere in the forest are stealthy hunters like him. If he finds other life — another hunter, an angel or a demon, a delicate infant or a tottering old man, a fairy or a demigod — there’s only one thing he can do: open fire and eliminate them. In this forest, hell is other people … any life that exposes its own existence will be swiftly wiped out.

Kissinger is often thought of (in my view, wrongly) as the supreme American exponent of Realpolitik. But this is something much harsher than realism. This is intergalactic Darwinism.

Of course, you may say, it’s just sci-fi. Yes, but "The Dark Forest" gives us an insight into something we think too little about: how Xi’s China thinks. It’s not up to us whether or not we have a Cold War with China, if China has already declared Cold War on us.

Not only are we already in the foothills of that new Cold War; those foothills are also impenetrably covered in a dark forest of China’s devising.

jog on
duc

 

[over9k]

Lol no. China imports the overwhelming majority of its energy and exports the overwhelming majority of its products, both of which depend on american securance. It doesn't even have an internal consumer market.

Not sure what you mean by ignoring 2-6 when your post only had two points?