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Worrying Accurately (about Economic Events)

  • LBL
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2 years 6 months ago #1 by LBL
Worrying Accurately (about Economic Events) -
Significant Econ.Events Clustered Closely Together vs. Deduction

Coming from a background in physics and engineering and 3D modelling, it is natural for me to look at our "People world" and to see systems of Equilibrium (or Dis-Equilibrium).

It is also natural to look for "markers" (canaries ?) that bespeak Bigger Tremors Ahead.

One thing I have observed is that Significant Economic Events (e.g. 2008/9 meltdown) are usually preceded by warning signs that may be deduced, and some which may simply be observed.

In 2004, I sold a condo in San Diego because I perceived that the market was based on a fallacy - that of ever-rising prices. As it turned out, I set a record for that condo complex. 6 months later, prices had fallen about 16%. This was before the 2007/8 shake-out.

I'm not sure if it's right to call that deduction. The insight that guided the timing of the sale was the realization that price strength was based on a false strength, if that makes any sense.

Now, in 2016, we all survived 20007/8/9, mostly intact, I am thinking.

Yet many of us sense a larger tidal wave on the Horizon.

One of the things that I emphasize frequently among Family & Friends is that, if they come to me worrying about something, we should worry Accurately. i.e., to worry about stuff that's Real - and to let the stuff that's not Real recede from our memory.

In a world of MOPE (Management of Perception Economics), when we have the Feeling that there is a HUUGE economic tidal wave on the horizon (or perhaps in the process of breaking on our heads), I think it is wise and natural to look for Real World indicators that help us assess what is going on, in the Real World, in Real Time.

I think one of the indicators that we had recently was the enormous shocks that accompanied the quite simple Brexit vote.

It was merely a referendum. A small but influential country sat and thought about whether they want to belong to a "larger club". 52% said no.

That this caused the major ripples it did, is itself an indicator of instability, and impending Overt Dis-Equilibrium.

I would argue that the Dis-Equilibrium is very much in-process, but more in the stage of what US Rep. Cynthis McKinney calls, "Something Crawling Underneath the Carpet." We know it's there, we know it's significant, but it's shape is a little amorphous. A Covert (hidden) Dis-Equilibrium.

So England had a vote, and the market's had a medium size earthquake.

What do we do now ?

One of things that I have observed, in both physical and social systems, is that immediately prior to collapse, things start falling. This is more obvious is you use a camera to record a game of Jenga or Pick up sticks.

In social systems, interesting data points become clustered together, closely, in time.

The 10% devaluation of the Rand that occurred about 3 months ago.

The US job numbers, indicating a manufacturing recession.

The Baltic Dry Index at an All-time Low. (The BDI started in the mid-80's, when world population was about 5 billion. In 2015/16, when the BDI hit its low, world population was 50% greater than in the mid-1980's. We had had 30 years of globalization - dis-assembling US factories and moving manufacturing facilities to offshore. Yet shipping rates are the lowest ever ? WOW.)
And so on.

BANG BANG BANG - 3+ (I wrote about on my Facebook page, I think there were about 6) incidents in a space of a week.

Hmmm. Thought provoking, if nothing else.

Anyway, that's my observation, that significant data points become clustered together more closely in time, right before the Hidden Dis-Equilibrium becomes Overt.

So, what do we use as indicators, to help us gauge our Feeling that there is an economic tidal wave on the Horizon ?

I have already suggested one indicator - the market cap of Really Big banks.

Now I'm suggesting another indicator - clustering of economic data points on a time-line.

I find this to be similar to the beginning of the movie "San Andreas", when the geologists are witnessing foreshocks. Their experience tells them that those foreshocks indicate something much bigger coming.

The overall goal is to Survive and Thrive. Especially in a world with a globalized economy, those Macro economic trends can help us achieve Return of Capital - and in some cases make BIG money (if I had only bought HUI at 100 !!!)

I know you guys don't just read Zero Hedge and read Obama's lips to make the personal forecasts that guide your own economic decision making and estate management.

You pay attention to the World around you. But - THERE'S SO MUCH DATA.

Anyway, I would like to hear more about how Macro Voices members filter that fire-hose of data to get a firm grip on what is really happening in the Macro Economy.

I will add that one other physical 'symptom' that I see repeated in Social Systems is a Toggling of States.

Like an electrical line with voltage on it, that normally sits at a ground or fixed potential. If it starts flipping between Ground and 5 Volts, quickly changing states ... that often indicates that something is about to happen.

I'm not exactly sure how a Toggling of States applies to the Macro Economy. I do observe that when it happens with a person - e.g. a neighbor who is going through a hard time, alternately coming by to argue (or start a fight), then coming back to apologize ... a few times in a row, in a period of a few days ... that often means that that person is about to undergo a "breakdown" - a falling through the cracks in some way.

In that simpler social system, the Toggling of States (of the neighbor's mood & behavior) indicates an imminent breakdown - in other words, a shift to a system with a more stable equilibrium (the neighbor moves, goes to jail, re-unites with a girl-friend, whatever the case may be).

My guess is that the Toggling of States is similar to what I have called "clusters of economic data-points."

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