1. Huawei Is Backed by the Chinese Military. What’s in Your Cellphone?

    The race is on for dominance in the coming world of 5G smartphones and telecommunications.

    5G is an abbreviation of “fifth generation” in upload/download speeds and is the successor to the well-established 4G standard we use today. These much-higher speeds will allow more video and music streaming and downloads and enable more multitasking.

    The profits from 5G will be enormous because every smartphone user in the world will have to buy a new phone to take advantage of the new technology. It’s a windfall for manufacturers of handsets, screens, chips and other components and a gold mine for content providers.

    The winners will include a handful of companies such as Huawei and ZTE of China, Samsung in South Korea, Apple in the U.S. and Nokia from Europe. But don’t expect a level playing field in the competition. Already the world is dividing into a “China camp” consisting of Huawei and ZTE and a “Western camp” led by U.S. champions.

    As this article shows, the competition has gone far beyond quality and price. The CIA has developed evidence that Huawei is funded by China’s intelligence community and the People’s Liberation Army. It is suspected that users of Huawei 5G equipment will be targeted with “back doors” that relay sensitive information straight to Beijing and allow for other dysfunctions in the event of an all-out cyberwar.

    The U.S. is trying to rally European and other users to ban Huawei. Europe and Japan are caught in the middle between a suspicious U.S. and the jobs and generous terms offered by Huawei.

    A likely outcome will be a world divided into two mutually hostile technology platforms. For those too young to remember the Cold War (1947–1991), you may get a chance to re-live it.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  2. What Does Food Delivery Have To Do With Your Portfolio?

    This article describes the rise of the food delivery business through the use of apps and gig economy drivers from Uber and other services. The delivery services reach agreement with a wide variety of restaurants and fast-food outlets to deliver their meals. Then they create an app and distribute this to a customer base that is oriented to millennials and those in more densely populated areas. You open the app, select a restaurant, pick what you want from the menu, place your order and voilà, your food arrives quickly and still hot.

    Or not. The article describes the failures of these systems and frustrations of many users. The food is overpriced (due to delivery and service charges and other markups), the waits are inordinately long (sometimes an hour or more for restaurants that are almost within walking distance) and the food is often cold by the time it arrives (thank goodness for microwaves).

    More to the point, these services set out to solve a problem that didn’t exist. Customers have been able to get home food deliveries since the 1950s from local pizza parlors, Chinese restaurants and Jewish delis, among others.

    What does this tale of food delivery apps have to do with investing? It shows that Silicon Valley’s best and brightest are devoting substantial time and effort to fixing things that don’t need fixing. The added productivity from each such application is low at best, and may be negative (especially if the food is cold).

    Building apps just for the sake of building apps is a waste. Also, don’t underestimate the extent to which these apps have nothing to do with food delivery and everything to do with getting in your smartphone, data mining your personal preferences and selling the data to advertising giants like Google and Facebook.

    Stories like this help to illuminate the mystery of declining productivity, which has stumped economists. Enjoy your next food delivery while you ponder how much value-added the service has relative to the older alternatives. The answer is not much.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  3. Russia Sees a “New World Order” and They’re Working to Defeat It

    We’ve reported extensively on Russia’s accumulation of gold, their development efforts at a private internet and cryptocurrency to control communications and money and actions the they’ve taken to defeat U.S. economic sanctions. Where is all of this leading?

    This article provides some of the answers. At a meeting of Russian students and professors at Russia’s Diplomatic Academy, Russian Foreign Minister Sergei Lavrov flatly declared that the Western powers, led by the United States, have been developing a globalist new world order with the intention of forcing developing economies, including Russia, to give up sovereignty and submit to the U.S. model of how nations should handle their currencies and trading patterns.

    This new world order will force smaller economies such as Russia to adhere to global norms and rules imposed by the U.S. and its globalist allies in Europe, Japan and Canada. Lavrov said that these efforts are a form of “blackmail” aimed at Russia and they should be rejected and resisted. He encourages the Russian diplomats-in-training to take tough negotiating stances and use creativity in meeting this challenge of the new world order.

    This implies that Russia is free to answer with its own version of a new world order that includes gold-backed currencies, cryptocurrencies and contained forms of internet communications that limit the ability of U.S. media to influence Russian public opinion.

    This struggle is at the early stages and will not go away soon. Individuals can protect their net worth in this Russia-U.S. crossfire by acquiring the one asset that Russia is buying and the U.S. already has — gold.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  4. Guess Who Thinks Trump Will Win Again in 2020? Goldman Sachs!

    A few weeks ago, I unveiled my first forecast on the outcome of the 2020 presidential race. My estimate was that Trump had a 60% chance of winning. I was also careful to explain that my forecasting model includes constant updating (using what’s called Bayes’ rule) and would no doubt change between now and Election Day on Nov. 3, 2020. That’s normal.

    Politics is a highly volatile process and it’s foolish to put a stake in the ground this early. My model has quite a few factors, but the leading factor right now is that Trump’s chances are the inverse of the probability of a recession before the third quarter of 2020. If recession odds by 2020 are 40%, then Trump’s chances are the inverse of that, or 60%.

    With the passage of time, Trumps’ odds go up because the odds of a recession go down (a concept called “theta,” or time decay of a contingent outcome). If a recession does hit (we’re watching), then Trump’s odds go way down.

    This dynamic can be used to explain and forecast Trump’s economic policies, including calls for interest rate cuts and efforts to place close friends on the Fed board of governors. It’s all connected.

    As usual, I found myself out on a limb with my forecast; the mainstream media are sure Trump will lose in 2020, if he’s not impeached sooner. So it was nice to get some company, as revealed in this article.

    A new Goldman Sachs research report also projects that Trump will win in 2020. Goldman shows a narrower margin of victory than my model, but a win is a win.

    Of course, their forecast will be updated (as will mine) but we’re starting to see more signs from other professional analysts that Trump is a likely winner after all.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  5. It’s Musical Chairs at the Fed. Who Will Be Left Standing?

    When President Trump was sworn in on Jan. 20, 2017, he inherited two vacant seats on the seven-person board of governors of the Federal Reserve System. Holders of those two seats are also members of the Federal Open Market Committee (FOMC), the group that sets U.S. interest rates and monetary policies.

    President Obama also had the same vacancies, but he did not nominate anyone to fill the seats because he doubted his chances of getting the nominees past the Republican-controlled Senate and he was sure “President Hillary” would do the right thing and appoint pro-Democratic nominees. In the end, Trump beat Clinton and the vacancies fell to Trump.

    Then Trump got another windfall. Within 14 months of becoming president, three additional Fed governors resigned (Dan Tarullo, Stan Fischer and Janet Yellen), and Trump suddenly had five vacancies to fill, or 70% of the entire Fed board.

    Trump promoted Jay Powell to chair and appointed Richard Clarida as vice chair, Randy Quarles as vice chair for regulation and Michelle Bowman to fill a seat reserved for community bankers. All of those appointments were well regarded by Wall Street and the media. But that still left Trump with the two original vacancies.

    As discussed in this article, Trump has indicated he wants to appoint Herman Cain and Steve Moore to fill those seats. Cain is a former presidential candidate, chair of the board of the Federal Reserve Bank of Kansas City and CEO of the Godfather’s Pizza chain. Moore is a think tank analyst, founder of the Club for Growth and a former member of the editorial board of The Wall Street Journal.

    Cain has run into opposition from Senate Republicans based in part on old allegations of sexual misconduct. Moore is also being opposed by those who fault him for not having a Ph.D. in economics. Whatever the merits, the real reason they are being opposed by monetary elites is that they are “friends of Trump” and will hold Jay Powell’s feet to the fire to cut interest rates and keep the economic expansion going ahead of the 2020 election.

    No worries. If Cain and Moore are withdrawn, (and breaking news is indicating that Cain is withdrawing from consideration to be nominated), there’s some indication that Trump’s next nominee will be Judy Shelton. She does have a Ph.D. and is a well-known advocate of a new gold standard.

    For those who want Cain and Moore to step aside, the best advice may be “Be careful what you wish for.”

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  6. Dollar Dominance Under Multiple, Converging Threats

    For years, currency analysts have looked for signs of an international monetary “reset” that would diminish the dollar’s role as the leading reserve currency and replace it with a substitute agreed upon at some Bretton Woods-style monetary conference.

    That push has been accelerated by Washington’s use of the dollar as a weapon of financial warfare, including the application of sanctions. The U.S. uses the dollar strategically to reward friends and punish enemies.

    The use of the dollar as a weapon is not limited to trade wars and currency wars, although the dollar is used tactically in those disputes. The dollar is much more powerful than that.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  7. Japan on a Larger Scale

     

    In my 2014 book, The Death of Money, I wrote, “The United States is Japan on a larger scale.” That was five years ago.

    Last week, prominent economist Mohamed A. El-Erian, formerly CEO of PIMCO and now with Allianz, wrote, “With the return of Europe’s economic doldrums and signs of a coming growth slowdown in the United States, advanced economies could be at risk of falling into the same kind of long-term rut that has captured Japan.”

    Better late than never! Welcome to the club, Mohamed.

    To read the rest of this article, click here.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  8. Are the Central Banks out of Bullets?

     

    We all know the outlines of how the Fed and other central banks responded to the financial crisis in 2008.

    First the Fed cut interest rates to zero and held them there for seven years. Then the Fed guaranteed every bank deposit in America regardless of the $250,000 limit on FDIC insurance. Next the Fed guaranteed every money market fund in America, even though such funds are not entitled to insurance or guarantees. Finally, the Fed did $10 trillion of currency swaps with the European Central Bank (to bail out Europe) and printed almost $4 trillion of new money under QE1, QE2 and QE3 to subsidize U.S. banks with risk-free profits.

    This extravaganza of zero rates, guarantees, swaps and money printing worked to ease the panic and prop up the financial system. But it did nothing to restore growth to its long-term trend or to improve personal income at a pace that usually occurs in an economic expansion.

    Now, after a 10-year expansion, policymakers are considering the implications of a new recession. There’s only one problem: Central banks have not removed the supports they put in place during the last recession.

    Interest rates are up to 2.5%, but that’s far lower than the 5% rates that will be needed so the Fed can cut enough to cure the next recession. The Fed has reduced its balance sheet from $4.5 trillion to $3.8 trillion, but that’s still well above the $800 billion level that existed before QE1.

    In short, the Fed (and other central banks) have only partly normalized and are far from being able to cure a new recession or panic if one were to arise tomorrow. This article puts the Fed’s situation in the context of a global slowdown and increasing odds of a recession.

    It will takes years for the Fed to get interest rates and its balance sheet back to “normal.” Until they do, the next recession may be impossible to get out of.

    The odds of avoiding a recession until the Fed normalizes are low. The Fed cannot escape the corner they have painted themselves into.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  9. Trump Continues to Show Who’s Boss at the Federal Reserve

    Almost two years ago, not long after Donald Trump was sworn in, I wrote several articles on the theme that “Trump owns the Fed.”

    The logic behind this claim was simple. There are seven members on the board of governors of the Federal Reserve System. When Trump came into office, only five of those seats were filled and there were two vacancies.

    Those vacancies represented a political miscalculation on the part of President Obama. The Obama administration would have had difficulty filling those two seats during Obama’s last year in office because of opposition from the Republican-controlled Senate. Obama didn’t worry because he liked the five members who were already on the board and was confident that Hillary Clinton would win the 2016 election and would fill the vacancies with safe hands.

    Trump’s shock victory handed the vacancies to Trump. It gets better.

    Within Trump’s first thirteen months in office, three other governors either retired or resigned. These three were Janet Yellen (resigned Feb. 3, 2018), Stan Fischer (resigned Oct. 16, 2017) and Dan Tarullo (resigned April 5, 2017). Those three resignations combined with the two vacancies left Trump in the position of being able to fill five of the seven seats on the board.

    One of the holdovers was Jay Powell, the current chair and a loyal Republican. This left Lael Brainard as the only Democrat on the board of governors — a lonely position indeed.

    Trump has filled three of the five vacancies by appointing Richard Clarida (the new vice chair), Michelle W. Bowman (filling the “community bank” seat) and Randy Quarles (the new vice chair for regulation). This still leaves the two original vacancies.

    As explained in this article, Trump’s prospective nominees are Herman Cain (founder of Godfather’s Pizza and a former presidential candidate) and Steve Moore (a supply-sider and think-tank head). The article’s author points out that a Ph.D. in Economics is not a requirement for membership on the board and too many Ph.D.s may actually be detrimental because of groupthink and lack of cognitive diversity.

    The latest reports show that Cain may have to withdraw his name because of opposition by Republican senators to claims of sexual harassment. In that case, Trump is sure to nominate another close ally with similar views and no personal baggage.

    The point is to nominate governors who favor lower interest rates and will hold Jay Powell’s feet to the fire to make sure that rates are not raised. The object is to avoid a recession and pump up the stock market in the run-up to the 2020 presidential election.

    We’ll see if Trump’s strategy works. Meanwhile, there’s no question about the long shadow that Trump casts over the mighty Fed.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  10. Dollar Threats Are Coming From All Directions as Russia, China Buy Gold

    Attacks on the dollar are not limited to SDRs. The most imminent threat comes from the oldest form of money — gold. Specifically, a combination of gold and digital currency may constitute a potent alternative to the dollar.

    The fact that Russia and China have been acquiring gold is old news. Both countries have more than tripled their gold reserves since 2009. In addition to buying gold, Russia has been dumping U.S. Treasuries and has reduced its dollar asset position to almost zero.

    Still, there are practical problems with using gold as a form of currency, including storage and transportation costs. As explained in this article, Russia is solving these transactional hurdles by combining its gold position with distributed ledger technology.

    Russia and China could develop a new cryptocurrency that would be transferred on a proprietary encrypted ledger with message traffic moving through an internet-type system not connected to the existing internet. Other countries could be allowed into this new system with permission from Russia or China.

    The new cryptocurrency would be a so-called “stable coin,” where the value was fixed with reference either to a weight of gold or another standard unit such as the SDR. Goods and services would be priced in this new unit of account. Periodically, surpluses and deficits would be settled up in physical gold.

    Such net settlements would require far less gold than gross settlements (where every transaction had to be paid for in real-time). This type of system (also called a “permissioned blockchain”) is not pie-in-the-sky, but is already under development and will be deployed soon.

    Apparently, the U.S. government will be the last to know.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.