EJ: The countdown to the next crisis of The System has started.

[santafe2]

Re: EJ: The countdown to the next crisis of The System has started.

What I wonder about is how inflationary the long run effects will be as, for example, elongated "just-in-time" global supply chains are reworked to more localized, more reliable, but materially more expensive sourcing.

We're only a generation or so away from humans of any standing not building or serving stuff. Moore's Law moves forward, apparently unannounced these days. Stuff will be cheap. Global supply chains are a way-too-complex thing we invented in the 20th Century before the Internet, before mobile communication, before 3D printing, when computing was roughly 15,000X less capable. JIT, Six Sigma, GSC, etc. etc. are just stop-gaps until we reach ~mid 21st Century. When I see images of those unfortunate people locked into their CV infested buildings in Hubei or sequestered on the Diamond Princess, I see Trump voters in the US a generation removed from being, more or less, the same useless statistics.

I was traveling again this week and watched the Frontline feature on the apparently evil, Amazon.com. My favorite quote was their focus on Amazon treating their employees "like robots". While they were focused on the human suffering, possible unionization, etc., all I could think about was how Bezos was working with his developers to push these unfortunate humans to model robots, so he could understand how robotic substitutes will be much more efficient. This is where we're going. China doesn't matter.

[touchring]

Re: EJ: The countdown to the next crisis of The System has started.

this is the ka before the poom. we're in a deflationary environment in many ways, exacerbated by the developing pandemic. but i expect ENORMOUS stimulus to the the response of gov'ts all around the world, including projects which will drive up the price of commodities.

wage inflation is the tough one to predict - i expect shortened supply chains will mostly be done with automation, but to some degree with higher priced labor. the 70's, the 40's-50's are both possible models. the role of gov't is POTENTIALLY going to have enormous consequences: real efforts to control the cost of healthcare, for example, 2 years of free public college or vocational training post high school could shift big piles of money in other directions.

i've already invested about 85% of my commodities allocation- likely too early. likely way too early.

Gold is also a commodity. Hope you got some. SARS-2 is not predictable although it had been expected for sometime.

[jk]

Re: EJ: The countdown to the next crisis of The System has started.

This is where we're going. China doesn't matter.

environmentallly destructive extraction of various natural resources will still matter, and both the location of the deposits and the willingness of locals to bear the environmental costs will continue to matter. maybe we'll find substitutes, but for the moment rare earth magnets are still a big deal. copper, steel, petro still matter and are without ready substitutes.

[Down Under]

Re: EJ: The countdown to the next crisis of The System has started.

For what it's worth, there's a case to be made for $80 oil by the end of 2021. That is directing some of my ashes investigations in the burned down energy sector.

Hi GRG55,

I realise you rarely post specific investment ideas, but I know I, along with others I'm sure, would appreciate any insight you're prepared to share as to how you're going to invest in the energy sector. Add all the relevant boilerplate you like, that you're not licensed to give financial advice etc, etc, and I think most people here on iTulip are able to take responsibility for their own investment decisions.

I'd prefer to take your 'investment advice', even though I don't know you, then any financial advisor I'm likely to find.

Also, I remember EJ's post some time back:

GRG55: 1, EJ: 0

In regards to the huge drop in oil prices.

Thanks in advance, hoping you'll post some actionable advice.

[santafe2]

Re: EJ: The countdown to the next crisis of The System has started.

environmentally destructive extraction of various natural resources will still matter, and both the location of the deposits and the willingness of locals to bear the environmental costs will continue to matter. maybe we'll find substitutes, but for the moment rare earth magnets are still a big deal. copper, steel, petro still matter and are without ready substitutes.

Fair enough but resources are not countries, these resources simply exist in these states. When I say China doesn't matter, I mean the 1.4B people in China and the economic miracle China has unfolded, doesn't matter. It's a stop-gap. They haven't fixed the 20th Century problem of expensive human employment, they've just extended the value of human employment by creating a cheaper model. My point is that cheap labor vs. expensive labor is a temporary issue. Amazon uses 100,000 robots and 600,000 human employees in their warehouses. In a decade that number will reverse. Their head of robotics says no warehouse employees in a decade but that will likely take another 10 years.

Bill Joy famously wrote in Wired over 20 years ago that the future doesn't need us. People in the Western world are just now beginning to get it and they apparently want to break our democratic political systems in an effort to stop this technological onslaught. They may kill democracy but humans will matter less and less as a labor force over the next decade. In case no one has noticed, human level computing is only a decade away. And when most humans aren't required, will we care? It's unlikely. What happens then?

The next economic crisis is just a side show and will keep people busy while the real human crisis moves forward. The old joke in poker is that if you've been in the game for a half hour and you don't know who the patsy is, it's you. In our case it's the US middle class, it's not coming back but the jokers running for president all have a 20th Century solution. Good luck with that.

[touchring]

Re: EJ: The countdown to the next crisis of The System has started.

GRG55: 1, EJ: 0

In regards to the huge drop in oil prices.

Thanks in advance, hoping you'll post some actionable advice.

GRG55 spoke about XOM over SU, but I've been reading that Chevron is a better company, less financial engineering. Maybe you guys can look into this. Anyway, I've not added any oil stocks, as I expect the economic bubble in China to be unsustainable. In other words, it's still too early.

[EJ]

Re: EJ: The countdown to the next crisis of The System has started.

I've had my hands full running VirZOOM and this hasn't left me much time to elaborate. The Tweet on February 20 was intended to at least give a heads up that a correction was in the pipeline.

The antecedent is nearly a decade of capital misallocation, and the market correction proportionate in extent and speed to the level of complacency that a decade of continuous stock market growth -- with only minor corrections -- produces, but amplified by an unprecedented form of global economic shock.

The trigger could be seen coming from a mile away as COVID-19 spread from 6 to 50 countries over the past month and a half, and details of developments in Italy demonstrated that COVID-19 growth dynamics are not a phenomenon confined to densely populated Asian countries like China, Japan, and South Korea.

I'm not a medical professional so will not opine on the virus itself. There's a fair amount of misinformation out there. I recommended these sites:

Study of 72,000 COVID-19 patients finds 2.3% death rate

12 Coronavirus myths busted by science

While the COVID-19 is nowhere near as deadly as a virus like SARS, with the vast majority (81%) experiencing minor cold-like symptoms, it is far more transmissible. Infected persons can be infectious and asymptomatic for as long as a month, and spread the illness without knowing it. While not proven for COVID-19 yet, some human coronaviruses could remain infective on materials such as metal, glass, or plastic for up to nine days. As this article warns, common face masks offer little protection. If you don't happen to have access to N95 respirators, the best way to protect yourself is by keeping your distance (six feet or more) from infected persons, which is easier said than done if you're in the presence of someone who is infected but isn't presenting symptoms and doesn't know they are infectious. Combine the aforementioned with the fact of 100,000 daily flights, and you have a prescription for the world's first global pandemic.

The market correction accelerated over the course of the week as market participants observed the epidemic dynamics of COVID-19 that first occurred in Italy started to repeat independently and nearly simultaneously in Germany, Spain, and France. This implies that eventually a similar epidemic dynamic will occur in every country where COVID-19 is present, including the US, and the CDC confirmed US inevitability early this week. That in turn implies that economically disruptive steps that needed to be taken in Italy -- including public events cancellations, school and business closures, and regional population quarantines -- could be both widespread and simultaneous in major economies throughout the world.

A major global economic shock occurring after a 10-year period of a capital misallocation and asset price inflation is unprecedented, and it's the lack of precedent and fear of the unknown that is fueling a sense of panic today.

While the economic shock may be severe it may also be fairly short. Stock markets in China are starting to show signs of recovery as the rate of new COVID-19 cases levels off and declines, Chinese workers return to factories, businesses re-open, and daily life slowly returns to normal. If you consider the fact that cases in China did not start to appear until mid-January, and arguably the crisis was badly mismanaged from the beginning, the full course of the epidemic nationally start to finish may be on the order of three to four months, and perhaps shorter if well managed. Estimates of the duration, form, and intensity of the effects on the US economy and markets of the COVID-19 pandemic is the subject of the analysis that I'm working on and hope to complete when I am able to come up for air.

In the near term, I'd be surprised not to see a coordinated global central bank response next week, and expect that any hedge funds where were short stocks going into the week -- I know of at least one that took a large short position last Friday and likely had a very good week -- closed our their short positions today ahead of a possible Fed announcement on Monday.

More later...

[shiny!]

Re: EJ: The countdown to the next crisis of The System has started.

Thank you so much, EJ. Looking forward to more of your thoughts when you have time to write.

Stay well!

[jk]

Re: EJ: The countdown to the next crisis of The System has started.

ka?

[lakedaemonian]

Re: EJ: The countdown to the next crisis of The System has started.

GRG55 spoke about XOM over SU, but I've been reading that Chevron is a better company, less financial engineering. Maybe you guys can look into this. Anyway, I've not added any oil stocks, as I expect the economic bubble in China to be unsustainable. In other words, it's still too early.

Something to consider:

Zoom: NASDAQ: ZM

They’ve doubled since the Coronavirus outbreak kicked off.

The P/E is insane though.

Probably a bit too late, but it(remote meeting) and others like it in a basket might represent a bit of a portfolio hedge.

Glass half full, there’s a real possibility of distributed/remote work ratcheting up permanently in the wake of this.

[lakedaemonian]

Re: EJ: The countdown to the next crisis of The System has started.

Amazon uses 100,000 robots and 600,000 human employees in their warehouses. In a decade that number will reverse. Their head of robotics says no warehouse employees in a decade but that will likely take another 10 years.

Bill Joy famously wrote in Wired over 20 years ago that the future doesn't need us. People in the Western world are just now beginning to get it and they apparently want to break our democratic political systems in an effort to stop this technological onslaught. They may kill democracy but humans will matter less and less as a labor force over the next decade. In case no one has noticed, human level computing is only a decade away. And when most humans aren't required, will we care? It's unlikely. What happens then?

The next economic crisis is just a side show and will keep people busy while the real human crisis moves forward. The old joke in poker is that if you've been in the game for a half hour and you don't know who the patsy is, it's you. In our case it's the US middle class, it's not coming back but the jokers running for president all have a 20th Century solution. Good luck with that.

I worked for Amazon in the very early years.

I personally know many of Amazon’s senior leadership in operations.

There is simply zero risk of Amazon headcount in operations declining for the foreseeable future. Zero.

Foresight may be in decline, but Amazon’s growth is still far exceeding tech change.

Growth would have to fall off a cliff combined with radical improvements in robotic flexibility and variability.

The greatest risk is rising social discord from Amazon “Borg’ing” retail.

Every 1 Amazon hire in operations equates to 3 jobs lost in traditional retail.

That aggregate total job loss is circa 1 and 1.5 million FTEs lost due to Amazon innovation in retail efficiency.

[lakedaemonian]

Re: EJ: The countdown to the next crisis of The System has started.

I was traveling again this week and watched the Frontline feature on the apparently evil, Amazon.com. My favorite quote was their focus on Amazon treating their employees "like robots". While they were focused on the human suffering, possible unionization, etc., all I could think about was how Bezos was working with his developers to push these unfortunate humans to model robots, so he could understand how robotic substitutes will be much more efficient. This is where we're going. China doesn't matter.

I wonder if the documentary mentioned how every single unskilled Amazon associate(hourly warehouse worker) who worked between 1996-2005 and who conservatively exercised their stock options would possess $1 - $3 million in stock option value, not including future restricted stock units?

I still recall the first unionisation attempts at Amazon.

The union and its organisers did some truly horrible things like running Amazon staff off the road, intimidating, and threatening them.

The Union had a proposed plan to accept Amazon stock options as union dues.

And Amazon brought in the union busters in response.

——

I do reckon China matters, it would be nice to see a change away from a techno fascist government governing a nationalistic people who have not known war for generations.

——

What does the future look like?

Recent surveys seem to indicate rising overall feelings of wellbeing.

Part of me agrees(with Jordan Peterson), part of me is deeply concerned.

I suspect we will have a large cohort of people(likely Trump voters, but far from exclusively) who are going to be the next generation of folks displaced in tech workforce.

In the 70’s/80’s it was steelworkers turned into WalMart greeters.

I’m not sure what the next version is, but I feel pretty sure we will see another mass displacement.

If only we had a magic wand with 3 wishes:

1)wipe student debt
2)cut R/E prices in half
3)double interest rates

[Chris Coles]

Re: EJ: The countdown to the next crisis of The System has started.

If only we had a magic wand with 3 wishes:

1)wipe student debt
2)cut R/E prices in half
3)double interest rates

You do. It is titled: http://www.itulip.com/forums/showthr...light=RecapGRE

[thriftyandboringinohio]

Re: EJ: The countdown to the next crisis of The System has started.

Something to consider:

...Glass half full, there’s a real possibility of distributed/remote work ratcheting up permanently in the wake of this.

That's a good thought.

[EJ]

Re: EJ: The countdown to the next crisis of The System has started.

Something to consider:

Zoom: NASDAQ: ZM

They’ve doubled since the Coronavirus outbreak kicked off.

The P/E is insane though.

Probably a bit too late, but it(remote meeting) and others like it in a basket might represent a bit of a portfolio hedge.

Glass half full, there’s a real possibility of distributed/remote work ratcheting up permanently in the wake of this.

Here's another: In-home exercise as a substitute for health clubs.

This story behind the rise of Peloton's stock price as the markets tumbled held up for the first few days of the correction last week:

Coronavirus gives Peloton shares a workout

Then investors started to price in recession; Peloton may let you avoid the risk of infection at the gym and exercise safely at home but a $2,400 bike and $40/month subscription is not a viable substitute for the $80 initiation fee and $62/month of a typical club membership (pricing based on Lifetime Fitness, the mid-market health club leader in the US).

VirZOOM's VZfit also lets you exercise at home, and is immersive, transporting you from your location (e.g., in quarantine) and into bright VR worlds to engage in fun activities. A $75.00 motion sensor attaches to any stationary bike with a $10/mo. content access fee, is both an in-home exercise alternative to health clubs and a low cost health club substitute at once.

Our daily unit sales recently tripled. Mostly US-based customers, with a significant uptick in orders from COVID-19 effected areas: France, UK, Germany, Hong Kong, etc.