Don’t Panic

Snip20160327_1OK, so the other week everyone who was anyone was banging on about the AlphaGo programme from The Google’s DeepMind that can, so far, beat humans at Go. Baruch’s understanding is that this was a different type of AI than we’ve seen with Deep Blue and Watson kicking human butt at chess and Jeopardy. Both of those deployed the main trump card that computers have against human minds — the ability to scan, prioritise, sort and rank huge databases extremely rapidly to come up with statistically likely solutions to well defined questions. All they needed to defeat the humans were mega amounts of computer processing, clever coders, a ludic fallacy and a large, cold room to keep the servers in.

DeepMind, so far as I am told, uses something more akin to analogy in its core processing, with a feedback loop that keeps the focus on a narrowly defined and therefore manageable number of moves. Words Baruch pretends to understand but probably doesn’t, like “neural networks” and “deep learning”have been bandied about. To play Go well, you clearly have to be able to program smart. That said, AlphaGo doesn’t seem terribly parsimonious in its use of processing grunt: a “mere” 2000 CPUs, as well as 280 high end GPUs using what we experts* call parallel processing, so perhaps it’s still just the typical thing of throwing Moore’s Law at something until you have enough computing power to make it work eventually. But it probably isn’t, in which case chapeau, DeepMind.

So overall, it’s mildly interesting, and at a more mercenary level, grist to Baruch’s mill. If the advances made by DeepMind bring us one step closer to the massive disruption digital automation is going to wreak on business and society, then I’m going to be quids in. My current project is about providing investors with an opportunity to take advantage of those transformations, so this can only encourage more people to want to invest when my idea finally goes live. Yay!

We all need to hedge against the coming AI whirlwind, and this is Baruch’s plan. However, his biggest worry is resistance is futile — that even his job as a fund manager is going be replaceable by machines, like all of yours will be. So imagine his horror when he saw this (HT Alphaville) in Wired from back in January.

LAST WEEK, BEN Goertzel and his company, Aidyia, turned on a hedge fund that makes all stock trades using artificial intelligence—no human intervention required.

Oh bollocks, he thought.

But at times like this I think of Douglas Adams, and have learned not to panic.

Continue reading “Don’t Panic”


Don’t call it a comeback. . . well, actually

Drum roll. . .

Baruch is back!! Yes, he has been out of commission these past few years. You may have been annoyed by his lack of any farewell, or any information as to what he was doing or why he had quit blogging. More likely you probably in fact don’t care, but I’m going to pretend that you do, OK?

So why DID he quit blogging? Was his true identity finally discovered by his Swiss gnome employer? Did he accept a secret mission from the Mossad that led him to disappear under deep cover for years? Was he in prison? Did he drop dead? Will he stop asking these pitiful rhetorical questions?

No, no, no, no, and yes: to be honest I got a bit messed up, and took a short break from the world of the markets. When I came back, despite the fact the markets hadn’t actually stopped, the urge to blog had dried up, the energy devoted to other desires, like watching Game of Thrones and most recently, playing World of Tanks. I also thought at the time, hang on, why am I telling all these barbarians* my amazing ideas and thoughts? I’m just showing off. Isn’t it better to keep them to myself? That’s what Spinoza would do. I’m mostly wrong anyway! It was strange, but oddly the most natural thing to do was just to stop this . . . hobby, I guess, which I had previously got lots of pleasure out of.

So then, why start again? Well that’s easy: I’m on the dole and haven’t got anything better to do. Baruch parted ways with his employer about a month and a bit ago in a difference of opinion about the appropriate period to measure performance. Admittedly that performance hadn’t been very good for a while, but there are good reasons for that, too, which I can go into later if you like. It’s OK, Baruch doesn’t consider himself the victim of a conspiracy.

The other thing is, I sort of feel I have something to say again. Over the past few years I’ve been thinking more and more about the long term role of technology in business, society and the economy, and what it means for investing. I’ve got some ideas about that. Yet another thing is, I can actually write substantially about these things, name names if you like, without fear of letting something slip I shouldn’t. I no longer have investors to inadvertently betray. I can’t get fired again, can I? And thirdly, it’s not beyond the bounds of possibility that someone will see these pearls of wisdom, Baruch’s Great Thoughts, and think, aye aye, there’s a clever chap, and give him a huge wodge of cash for him to do something or other with. Spend it on more cars, hopefully: in his absence from your screens, Baruch developed an unhealthy interest in unnecessarily powerful yet beautiful German sports cars. White ones. And they don’t pay for themselves.

So what’s been going on since I was “away”? Well things got better! And now seem to be getting worse. We’ve had arguably a bubble in bonds and may still be in it, Apple got boring, Amazon is now Skynet, China lost its mojo, crude is so cheap we could wash in it, and maybe above all the world has been swimming in free money for ages without any apparent increase in inflation, or growth, tiny dragons, or any of the things people actually predicted.

The Old Times Gang is still there though: Tadas plugging away at Abnormal Returns, Josh Brown still downtown but moving uptown, Felix ecoblogging after a fashion and no doubt recovering after another strenuous Davos. The Epicurean Dealmaker, Michael Jordan-like, keeps on retiring. And Tyler Durden, whoever he may be now, is as brilliantly batshit as ever. If anything HAS actually changed in the eco-blog firmament, Baruch will probably find out as his re-entry into blogging continues but feel free to point out what he’s missed in the comments. Hmmm. I wonder if there will BE any comments?

*That’s you, by the way. “Ultimi barbarorum” was uttered by Spinoza in the vocative tense.

Econobloggers need their crisis back

I think so, dear readers. With the advent of peace and plenty, as we move to the broad sunlit uplands of The Recovery, I fear some of the spice has gone out of the commentary on sites like this one, and its friends. Where people used to read econoblogs to actually understand a crisis that CNN and Fox News soundbites didn’t seem to encompass anymore, as the meltdown recedes into the past there’s now just a dull ennui.  And with that, the econoblogosphere is moving back to where it used to be, which is to cater to a niche, broader than most, but a niche nonetheless, with a circumscribed influence.

The high point of bloggy “power”, we shall probably find in retrospect, was when a number of bloggers were invited to the US Treasury department and fed some by all accounts delicious cookies, as well as being ferociously spun to by the Goldmans guys whose turn it was to be on sabbatical at the Treasury that when it came to financial reform and what had gone wrong in the banking sector they did in fact Get It, whatever It was.

Since then, of course, we have had Obama praise the bonuses to “savvy businessman” Lloyd Blankfein, who as we all know is doing god’s work;  mind-numbingly massive “trading” profits from all the big commercial, investment, commercial investment banks at the same time as accepting government and Fed largesse*; an even more hideous clusterfuck over finance reform than exists over healthcare reform in the US; and this despite none of the proposals under discussion seeming likely to properly change anything worthwhile, other than maybe the Volcker prop trading rule and this last seems fairly dead in the water.

What really rankles this blogger is that the Great Spinozist Republic is being subverted again. Regulatory capture is one thing, the total inability of a political system to make any steps to reform itself when what is wrong is staring at you in the face, is quite another. Political money and public ignorance has corrupted civic decency in the US to such an extent that doing the right thing for the Republic appears quite impossible.

All these things should make econo-bloggers all quiver with righteous anger, which we would communicate to our readers who would then rise up en masse against the legislators captured by Big Banking, and some form of actual reform might even take place.

But something along the chain has broken. Either we have lost interest or, more likely, the world has. To be sure, there are brave souls who carry on the fight. Felix does an admirable job of keeping us up to date with the nuts and bolts of finance reform. Taibbi provides the rhetoric (“vampire squids”, indeed). Calculated Risk and Naked Capitalism carry on doing their thing, as does Zero Hedge in its batshit sawn-off shotgun way. TED gives us the lowdown and I mean low, on what it really means to be a banker (though TED’s next post is just as likely to be about his favourite type of upholstery. Thanks for including us in the list of blogs you read, BTW). There are others, and Abnormal Returns continues to aggregate them. But the rest of us seem to have stopped caring so much. The minutiae of practical policy is much less amusing than making lots of money in financial markets that really, truly appear to be on the mend.

The wider global economy seems to be much better too. Sure, the US seems a bit screwed up still, and unemployment is high, but frankly that’s not where the action is at anymore. Baruch was astonished to read that Gartner is predicting 20% year on year growth in PC units globally. We can talk about overleveraged consumers until we’re blue in the face and we’ll still be wrong. That’s a crapload of PCs, and someone’s buying them. You don’t sell craploads of PCs like that unless there was something going fundamentally right in more places than where things are going fundamentally wrong.

But a better economy just makes people fat and happy, and fat and happy people aren’t likely to be roused by righteous anger. Fat and happy people are not likely to want to change much. Fat and happy people are much more likely to assume the light at the end of the tunnel gives out onto a large outdoor buffet than the next oncoming crisis. Hell, fat and happy people are more likely to do the stuff to bring on the next crisis, to binge, to borrow more, stoke the next bubble wherever that may be and feel pretty smart doing so, just like we did in 2006 and 2007. Reformed Broker Josh captures the new Zeitgeist rather well just today when he lists the things people no longer appear to be interested in e.g. financial reform, unemployment, etc and says

most market participants have instead turned their focus to finding secular growth stories, deep-value high yielders to replace the lack of money market interest and other such assorted baskets to put their eggs in.

Fine with me.  I could use a break from the “news” myself.

I can’t say much better. Josh is saying what lots of us think.

Baruch isn’t really the person to do anything about this himself. He isn’t Spartacus. It was no co-incidence he was not invited to hob-nob at the Treasury; David at Aleph Blog was kind enough to suggest he and some others should be next time, but Baruch would probably have just eaten more of the cookies than was fair and got bored and played Homerun Battle 3D on his new iPhone until it ran out of power, annoying everyone. Baruch is one of those who likes to analyse what Is and try and make money out of it. He is not very interested in, or good at, what Should Be, though is slightly envious of those who have strong opinions in this direction. Less “designing better futures“, more buying the right ones. Even if Baruch had a prediliction to think about policy he doesn’t have time to think about more than what he writes about already; he has a day job, and a very intense one, which soaks up what mental energy he can muster these days.

But buying better futures are not what the best blogs in this space are about (and not what Nick Gogerty’s blog is either). Posts about the latest chart formation in the S&P500 are not memorable. They help no-one. Blogs about how best to trade can be interesting, but remain narrow and mercenary. So in the end are posts about how many iPads Apple will sell, the stock-in-trade of UB recently. Myself and Bento are just not that qualified to do much else and don’t have the time to post as often as we want. But there are other bloggers who are and who can. At its best, the econo-blogosphere can be the last haven of truly independent, non-captured, and crucially, informed, commentary able to affect policy and opinion makers positively. It used to do just that. It may not help in the end but let someone at least try.

Get your game back on, people. Get some fire in the belly again. A crisis is a terrible thing to waste, and it looks like we are on the verge of wasting ours.

* the irony is of course, is that the millions in banker wodge financing the lobbyists is at least partly the hot money doled out by the Fed to banks in that extraordinary money machine called ” quantitative easing”: Fed buys up at full whack the treasuries it issues to banks at a discount, financed by cheap rates set by the Fed itself. Said banks, busting out with Fed-invented cash, or more properly, “trading profits”, refuse to lend it to small businesses like they’re supposed to in the textbooks and support the economy. No, they plow it into awarding themselves big bonuses and, most pricelessly, pay lobbyists to pay off politicians to subvert both good sense and a public opinion which is as viscerally opposed to big banking as it is ignorant and pliant, and make sure the status quo ante crisum is restored. An edifying spectacle.

All about Android

Baruch is channelling Tadas Viskanta today. It’s a linkfest!

More and more datapoints are pointing in favour of his “phase transition” thesis, that the smartphone market, as it gets more software-y, eventually becomes an emergent monopoly. Did you know, for instance, that Apple has a 70% share of contract sales in France? Seventy percent market share?! How do you break that?

If we’re going to avoid that fate elsewhere, we at least need Android to stop being entirely useless. There’s really nothing else. Here are a couple of judiciously chosen links that might help:

Boy Genius, king of the smartphone bloggers, enunciates the problem. He’s had enough of Google’s operating system and unloads a can of whup ass: “Android doesn’t make sense as a whole. It’s fragmented, poorly executed, the Android Market for apps is a mess, and developers still don’t care about it”.

In a similar vein, but more constructively, Silicon Valley VC and blogger Jean Louis Gassée also sees Google’s problem; it’s Linux strategy just isn’t working. It’s creating “Babelisation” instead. He thinks Android has to become more like Microsoft if it’s going to get anywhere. Is that a good thing?

What’s an export? Seriously.

Baruch the amateur economist has been mulling this question for a while now, and still doesn’t know. Baruch was reading this World Bank blogpost (via Paul Kedrosky)* discussing how much we can rely on China to pull us out of our current funk, which we’ve just been reminded us we are sort of still in.

It makes the reassuring point that China has been the global economic growth engine for some time already, accounting for 20% of global GDP growth over the past decade, twice the contribution of the US. So presumably stagnation in the US, zero growth, would be fine for global growth, ceteris paribus everywhere else, so long as Chinese growth was to increase proportionately, and it’s supposed to. This of course is great news. Except then the blogpost then starts to cavil because the blogpost is actually called “China Can’t Do it Alone”, and then it starts a discussion on how Chinese imports aren’t actually going up very much at all:

Assuming China’s bilateral trade surpluses decline in equal measure, increasing Chinese net imports would add less than 0.1% of GDP to US final demand this year. This simply pales in comparison with the discretionary fiscal stimulus measures . . . implemented in the US (and other advanced economies).

The only way China can pull the US out of the slump is by importing more, it would seem, and it isn’t doing it. So in other words when these stimuli expire, and they will, we’ll all be stuffed again and China won’t help us at all. The authors conclude,

China is too often seen as a one-stop shop for the crisis recovery. A replacement for the US consumer? Check. A source of low-cost borrowing to stimulate your OECD economy? Check. A source of investment funds for emerging, commodity-rich economies? Check. . . Alas, if it sounds too good to be true, it probably is

As a conclusion this does sound possible. But the path the WB bloggers take to get there, viz China isn’t importing more relative to exports, doesn’t make any sense when it comes to looking at the technology sector. I think in tech at least, that discussion is pretty irrelevant.

It’s hard to talk about a trade balance between China and the US in tech hardware, when almost all the hardware, and many of the components that go into the finished good, are “made” in China itself. There isn’t any balance. It’s all “export” then. Hardware and assembly outsourcing was probably one of the key drivers of the trade imbalance between China and the developed world this decade. 

But of course it isn’t proper “exporting”, is it? It’s outsourcing. In fact I really don’t know what to call it. Let’s look at the not-so-humble iPhone. Continue reading “What’s an export? Seriously.”

Abnormal Makeover

We don’t really do blogroll around here, but Abnormal Returns is a bit special, and is basically the portal by which one navigates the econo-blogosphere. The previously anonymous Tadas Viskanta has also linked here quite often, and is one of the main reasons Ultimi Barbarorum has risen to its current level of moderate obscurity from its previous deep obscurity. Thanks, Tadas!

So this is just to say, Baruch likes the new site very much and wishes AR the best of luck in its new venture.

Peer pressure

One of the many psychological problems Baruch suffers from (in secret) is a desperate need for the respect of his peers. So when on his daily Abnormal Returns troll he saw a link to a Who’s Who of Financial Bloggers at Baruch’s now favourite blog, Reformed Broker, his heart began to beat faster. Then the memory of multiple disappointments and jealousies resurfaced (what’s that Felix Salmon got that Baruch hasn’t?) and a prophylactic, cold resignation set in. But on opening the link what should he see but his name! Right  there! Hooray! Some people actually are reading this stuff! It’s not just bear lovers, looking for pictures of bears, being diverted here by accident!

You’re there too, Bento, but I don’t know why, you are the single most useless blogging partner the world has ever seen.

Question: why the “Library”? It’s lovely being next to Footnoted and Kedrosky, of course, but Baruch was in the Library Society at school, and had he had a second go around would prefer to be with the cool kids behind the bike sheds, hopefully snogging Equity Private. One feels a bit . . . nerdy in the library.

And Broker, dude, where’s Old TED? You could put him in the category of “Kids who are grumpy but fun to hang out with”.

Belatedly, Baruch would also like to say thank you to Condor Options, who said very nice things about us last year. Apologies for being behind the curve on this but another of Baruch’s pathologies is an inability to handle compliments properly.