Finally Some Action

The global stock indexes have been so boring the last few months, at least for me. Finally there appears to be action, and its not only in the stock indexes it is happening in currencies and bonds as well.

I am trying not to get ahead of myself but I think finally there is some economic reality entering into the picture. Of course the market gurus are all saying that we mustn’t compare Greece to Lehman Brothers, and others are trying to dismiss all the current volatility as nothing to be alarmed about.

I have felt for some time that Hyman Minsky’s instability thesis has been gathering fragile energy. Greece in my opinion is a big story as it has archetypal connotations. Greece has been going bust and leaving the Euro forever, but the only way to treat something that is bankrupt on your balance sheet is to accept it is worthless and write it off. We know that creditors with dubious debts simply close their eyes to that reality and make as if it is ok by playing with the terms of the repayment in the hope it will all come good.

I myself have a loan to a company that I value anywhere from zero cents in the dollar to the full amount depending on my mood of the day.  We delude ourselves into believing what we want to believe and what is the most convenient to making us feel good.

Check the sell off of the Shanghai Exchange the last few weeks, I am comparing it to the S&P500 and the FTSE 100. Clearly it has been shooting the lights out over the last year, in fact the last 2 years it has been flying. Could this also be the end of a major cycle.

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The Cloud

Random thought:

The benefits of storing all ones information on the cloud are endless and I am 100% a cloud kind of guy.

Last week I noticed that my folder with all my R code was gone. I looked and looked and couldn’t find it.

Last night I went onto the Dropbox Web app and searched for it and found it. Somehow I merged all the files into an obscure directory.

This has made me a little concerned as the thought of losing all my info and pics because of an absent minded press of delete tells me I probably should be hard copying my hard drive from time to time.

Python Progress

A quick update on my Python coding progress.

I am proud to say that I am actually writing some code that is actually doing stuff in Python. Boy starting something new is time consuming, doing the most mundane tasks that one could do in Excel in a flash takes absolute hours to do in a new language.

I also constantly feel why I am doing this when I know how to code many of these functions in R.

After a couple of weeks of learning I have now accumulated some knowledge which has been further enhanced with the arrival of a few more Python textbooks last week. In summary I am fast falling in love with the Pandas data library in Python which is like learning a whole new language on its own. Pandas has one of the most comprehensive data manipulation functions a data scientist can dream of. I love it, and I am sure in the weeks and months to come if I stay with the learning I will be doing really cool things with the data I come across.

So far I haven’t come across a library like “Performance Analytics” in R, once I come into contact with this type of library in Python then I will feel complete. I believe there is a way to pass R functionality via a wrapper into a Python project. This may be something I will research later today, however my first prize is to stay completely Python native, so anyone with insights into a Performance Analytic type library in Python please let me know.

Housing Regret

Property is the national religion in Australia. Remember this is a country that has gone more than 20yrs without a recession. Remember Australians call this place the “Lucky Country”. Remember the Austrian business cycle? Well the central banks the world over would have us believe that the business cycle is no longer the force it used to be.

Today I am not going to rant on about the impotence of the central banks ability to create the stability they believe is vital to the economy. My thesis as an Austrian and as a Jungian is that the business cycle cannot be eliminated because it is natures way of dealing with excesses and inefficiencies, and slipping my Jungian hat on, the interfering with the natural order causes a displacement of the equilibrium of the psychic energy in the actors making up the economy. This displacement is what I call the “market complex”.

Zoning into my subject line. From my observation deck there is an almost hysterical narrative in the daily media relating to the booming residential property market. It is on everybody’s lips and I mean everyones. Property is flying and there is an ABSOLUTE belief that property can only go up which is creating this self-fulfilling feedback loop where people are too scared to miss out and therefore will do anything to purchase a property.

The thing is the economy is really not doing well, yes there are pockets of prosperity but with the drop in many of the core commodities making up our resource economy this has put a significant break on the economy (despite the weakening currency). Retail is doing it tough and wage growth is simply not keeping up with the cost of living. Unaffordability according to my index not the ones concocted by government mandated statisticians is growing so many of the factors required to support this dramatic rise in residential are simply not present. I see one factor doing all the heavy lifting and that is the artificially low interest rates the world over. The minute you manipulate the driving forces influencing the market you introduce the prospects of a Complex. As Jung describes the complex as a force that can erupt at any time with an intensity that is directly related to the psychic energy it constellates.

We arrived in Australia as a family in December 2007, and our extended family who had converted to the Australian property religion told us “you have to buy immediately”. I resisted and in April 2009 when the Australian property market was experiencing its first modest pullback in 30+ years I bought a great property in a good deal. The market stabilised and started climbing again and it was all happy days. My wife and I saw great potential in our large by Sydney North Bondi standards 5 bedroom house to apply for a rezoning and develop 2 smaller modern semi-detached homes on our property. It took us almost 2yrs from start to finish to get the zoning and archetictural designs to our desired standards, and then the market was soft. In all the time we had lived here it was the most negative people had been on property and the market was incredibly soft. The agents we were speaking to thought we could just get our money back despite an approved “DA” on the title deeds.

Certain things came about regarding the development specifically and my business life in general, then we were offered a great price in the current market by a developer and my wife and I decided this was a message and we should take the deal which included a nice profit on the 2009 purchase despite the costs incurred so we sold and became renters. There is no doubt that our decision was the responsible one at the time; however, I would be lying if I didn’t say that I don’t feel a certain amount of regret with the benefit of hindsight when considering how much money we left on the proverbial table. In fact the reason why I know I have developed a “complex” about this is because I can identify how my body and mind react when the subject of residential property comes up for discussion.

U.S. Housing Price Index Since 1900

In conclusion, I am a student of economic history and while I may be wrong on my timing, what is a decade here or there, I believe I will be right in the fullness of time. As you can see in the chart above residential property markets enjoyed uninterrupted positive growth of more than 100 yrs in the USA; cycles like this have a way of imbedding neural pathways into ones brain and psyche that one cannot even contemplate something to the contrary, this in my opinion is what has happened to the Australian psyche.

I am not predicting a complete bust, as there are many positive demographic drivers that will help support the property market at an unknown equilibrium clearing rate. However I will continue to stick my neck out and say that the current levels are unsustainable.

New Toy

It has been some time since I got so excited with a new toy.
Yesterday I took the plunge and bought a Macbook Pro what a beast.
My beloved Lenova Yoga reached a point where it could no longer play with the big boys with its limited specs.
The beauty with the cloud is in a short space of time my new computer is synced with my old one.
I never thought I would join the Mac crowd but so far it’s been awesome.
It’s good to know something small still has such a powerful effect on me.

Random Gym Lockers

I joked in the gym locker room this evening with a guy how Murphys Law will ensure that when you are changing and there are tons of free lockers in our section he will have his kit in the locker next to me.

The point of this post is that while it feels like it happens pretty often the truth is it is nothing more than random coincidence and all the times it doesn’t happen these occurrences simply go unnoticed. I think due to the inconvenience and the invasion of space especially when dangly bits are out in the open we tend to notice the times when the lockers are next to each other and because they make an impact it feels more often than random.

This is precisely what happens in the market place. Certain setups make a stronger impact on us and this impact leads us to believe that we have identified a new trend.

I am a very statistically aware person and I feel the jar when I observe people make these misguided statements. What is even more jarring is when I observe myself make these same mistakes. 😤

Can you Intellectualize Emotions

Before discussing the subject line, I just wanted to update you on the performance of the Sefirot Freestyle Fund. I remain very satisfied with the progress to date, and the fact that we are not making money in the current environment doesn’t bother me in the least. It does however confirm to me that managing a fund with other peoples money using my style is an exercise in masochism in the extreme.

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INSIGHT:

Yesterday in therapy I was discussing a lucid dream/feeling that has come and gone for the last 10yrs with my Jungian analyst. I raised the image/feeling not knowing exactly where it was coming from and its meaning. Dr Andre being the expert he is helped me connect the dots.

I have been intellectualizing a particular relationship lately and have repeatedly admitted that it doesn’t bother me because I know its for the best. In fact I have been quite proud of myself for being able to rise above the situation and do the “right thing”. However, this is where things get interesting as I have been experiencing these lucid image and emotional flashes and couldn’t see that in fact my unconscious was telling me that no matter how much I intellectualize the experience the emotions are real and need to be felt. If you ignore these repressed unconscious emotions then they will erupt to the surface as a complex.

I feel a million times better that I have zoned in on these feelings and now that I am acknowledging them I am feeling more centered.

This insight is equally applicable to the markets. There is no way to ignore the emotions driving the markets the primary emotions of fear and greed need to be “felt”. However, the world we live in today with news coming from every angle and mavens in their thousands writing on blogs (just like me) trying to explain each and every new data piece and its significance, are doing the markets in their genius a disservice. The market and her participants need to feel! We intellectualize emotions at our peril with market complex eruptions the likely result.

Take a step back from the markets and look at what possible emotional message could be communicated to you. If you do and experience the balance of intellect and emotion then you are likely to be in a much happier safer place.