David Collum: 2019 Year in Review
Excerpts
Excerpts that caught my attention appear below.
Note: the Endnotes Section contains an introductory exploration of "vol trader" Chris Cole's work which leads to a discussion of the Global Economic Policy Uncertainty Index, including deteriorating trends.
Table of Contents for My Excerpts
Outline of Collum's Review
Note: the Endnotes Section contains an introductory exploration of "vol trader" Chris Cole's work which leads to a discussion of the Global Economic Policy Uncertainty Index, including deteriorating trends.
Table of Contents for My Excerpts
- Outline of Collum's Review
- Overview
- Making Complex Things Simple
- Interesting Way of Looking at the Stock Market
- Conspiracy Theorists, Cowards, and Idiots
- Federal reserve Appointee comments on Gold
- Gold returns over the past 1 & 20 Years
- Gold Manipulation
- Quantitative Tightening
- Monetary Policy
- Federal Reserve Irony
- Central Bank Insanity
- MMT (Modern Monetary Theory)
- MMT's Major Advocates
- Climate Change
- Overpopulation
- Science vs Religion
- Jeffrey Epstein
- $240 trillion in Liabilities, Jimmy Carter & Politics
- Big Government
- Mainstream Media
- Very Last Paragraph in the Review: What's Trending?
- Footnotes
- My Stand-alone Tweets on the Review
- Endnotes
- Doug Noland
- "Vol Trader" Chris Chole
- Global Economic Policy Uncertainty Index
Outline of Collum's Review
Footnotes
1) Link to Grant Williams' talk. Dated Nov. 2019. This is the best bullish case for gold that David Collum has seen. I listened to this talk on Jan. 9, 2020 and posted a few chart in a separate blogpost.
My Stand-alone Tweets on the Review
- Chart of Central Bank Gold Reserves, 2000-2019. They're increasing (except for Turkey.) Link.
- On the safety of Safe Deposit Boxes at Banks. They're not. Link.
- Observation from 1929 from Fed official saying that the difference between Credit Expansion and GDP Growth is what has to be Inflation. Link.
- David Collum's definition of the Banking System as a Metastable Emergent System. Link.
- I pointed out that although venerable Ray Dalio may not be a die hard MMT advocate, he nevertheless sees MMT as the only way out of our indebtedness. Link. (I follow Dalio closely, so it was important to point out his opinion of MMT. This linkage was a surprise to me.)
I have referenced these Tweets because they round out everything that caught my attention about the Review. I will point out that the sections on "political correctness" were somewhat outside of my realm of interest, meaning that nothing in those sections caught my attention ...
Endnotes
Things that caught my attention and which I'd like to explore further:
1) Doug Noland's Credit Bubble Bulletin. Here's the quote from Doug which had caught my attention.
“The Fed’s balance sheet could swell to $10 TN during the next crisis. When the current bubble bursts, the Fed and global central bankers will see no alternative than to flood the global financial system with central bank Credit. This is a terrible, reprehensible prospect.”
~ Doug Noland, Credit Bubble Bulletin, elite credit analyst, ex-Federated Investors
2) MacroVoices interview with Chris Cole: Volatility the 'Big One' (Jan 2019). I listened to this interview and continued exploring as follows, as of Dec. 28, 2019:
- Checked out Chris Cole's Artemis Capital's website. Learnt about "one of the best macro-economic thought pieces of the last decade" entitled Volatility at World's End. Noteworthy:
- Vol chart 1928-2012 shows 6 occurrences of very high volatility; see bottom of page 4.
- Dynamics of how Hyperinflation takes hold starts with a rising Stock Market; see text-box at top of page 10.
- Searched YouTube for videos featuring Chris Cole. Watched the RealVision interview dated Feb. 2017 (published Feb. 2018). Which led to Chris' paper entitled Volatility and The Prisoner's Dilemma (slide deck alone). Noteworthy:
- Effect of Federal Reserve Intervention on Volatility has been to suppress it; see bottom of page 7 in paper or slides 11 &12 in slide deck.
- Historical Correlation between Stocks & Bonds is time-varying and not always negative; see bottom of page 16 in paper or slide 19 in slide deck.
- I hadn't read the paper as of this writing. Just skimmed the slide deck.
- Made a note to review Chris Cole's Other Research Papers at a later time.
- The take-home message is as follows.
- Chris finds it very risky for investors to be shorting volatility, a practice which is quite prevalent. He prefers to go long volatility. The difference is as follows. With a short vol strategy, you earn cents on the dollar for a long period of time and then there's a vol spike where you'll lose everything and more. With a long vol strategy, you have to pay a small amount over and over again to "carry" the position and then the day when there's a vol spike, you'll have a big payday. (Chris' fund follows a long vol strategy that strives to minimize this cost of carry ...)
- There are two ways that a vol spike can occur. One is if the stock market crashes ("left tail" event) and the other is when the stock market melts up ("right tail" event). People link a crash to deflation whereas a melt-up is linked to hyperinflation.
- Paraphrasing Chris Cole: The world may look peaceful on the surface and in appearance, but that doesn't mean that there isn't increasing risk under the surface.
- To this effect, here's a chart that I found at https://fred.stlouisfed.org/. It's called the Global Economic Policy Uncertainty Index and shows a trend of increasing Economic Policy uncertainty starting in 2008. Reading off the chart and calculating simple ratios,
- The uncertainty level today (Dec. 2019) is 3.5 to 5.6 times higher than 2006-2007 (before the GFC). GFC = Global Financial Crisis
- It is currently 1.5 to 1.7 times higher than its peak level during the GFC (in 2008-2009).
- It has increased by 2.5 times since early 2018 (almost 2 years ago). (Trump was elected president in Nov 2016, which caused the Uncertainty Level to drop by half until early 2018 when it turned around and increased 2.5 times.)
- Live version of this chart.
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