All about Cyclones

Typhoons (like Mangkhut) and Hurricanes (like Florence) are both cyclones which form in the same ways. The defining difference between the two is that hurricanes hit the Atlantic and east pacific, while typhoons hit the west pacific. They also have different naming and rating systems. Both start as tropical storms, then hurricanes are assigned as category 1 through 5, whereas typhoons become severe typhoons then super typhoons (3 categories). Part of this difference in scale systems is because typhoons tend to be lower in wind speed yet cause more flood damage than hurricanes, so a category 2 hurricane might not seem like a big deal but the equivalent winds in a typhoon would cause significant damage.

The picture above shows the historical “trade winds” produced by the Hadley Cell system of planetary atmospheres as applied on earth. Venus is smaller and has only one Hadley cell in each hemisphere, creating very strong winds in only one direction around the planet. It works from the basic system that air cools at the poles and sinks then heats at the equator and rises, which causes a north-south loop. This combines with the friction forces in the direction of planetary rotation to create these wind systems.

Earth has multiple cells, creating zones in the northern and southern hemispheres which exhibit a strong shift in wind direction. Cyclones form at both latitudes, always rotating clockwise in the southern hemisphere and counter-clockwise in the north.

Earth has a lot more land north of the equator, so a much larger body of water in the south. The southern ice cap is also larger, resulting in cooler ocean temperatures. Cyclones rely on the dynamics of water evaporation to strengthen and grow. As a result, there are about half as many tropical storms in the southern hemisphere and very few reach hurricane strength, even though the winds in this region can be quite strong and dynamic.

There is a lot more to be said about cyclone formation, and the physics behind the Hadley Cell systems is quite fascinating, so I’d encourage you to look these up as well. Have a good evening.

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Why is US freight demand spiking so high?

I’ve been seeing articles on US freight being hotter than ever – a boom in trucks, rail, shipping rates, shipping orders, etc. Here’s a chart from this article: https://wolfstreet.com/2018/09/07/update-class-8-heavy-truck-market-new-and-used/#comment-151739

Back in 2016, we had terrible trucking numbers from a significant slump. Now they can’t get enough trucks to meet demand.

I’ve read through a number of articles to help explain this phenomenon, and here’s what I came up with for reasons behind the boom:

1. Housing construction boom: lots of building as housing & rent costs are crazy high in many cities

2. Energy construction boom: Lighter regulation, more oil & gas projects onshore and offshore, as well as the push in wind and solar

3. Capex spending boom, as the tax change allows very favorable treatment for investing in property, plants & equipment.

4. Inventory buildups due to tariff/trade war threats which are exacerbated by the low inventory levels following a long trend of pushing “just in time” inventory systems.

Cycles always happen like the waves in the sea, and both can be quite large at times. I not saying prepare for disaster, just be somewhat cautiously optimistic as all of the activities I mentioned as pushing this boom are cyclical themselves. There’s no telling how long these cycles will last, or whether they’ll end at the same time – so consider this a piece of the puzzle rather than investment advice.

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Developing Auto-Focus glasses

This is an interesting idea and I really think it could work. Here are some rough ideas that come to mind…

Piezoelectric materials are commonly used in a number of applications. They produce an electric current when moved, and conversely they move when placed in an electric current. Most are opaque, but this IEEE paper describes one that is transparent:

Here’s the link for the full article: http://eprints.gla.ac.uk/110988/1/110988.pdf

Here’s a YouTube video showing piezoelectric motion: https://youtu.be/fHp95e-CwWQ

Here’s an article telling about how prescription glasses work: https://www.framesdirect.com/knowledge-center/how-do-glasses-work?affiliate=73

One rough idea is this…

Take a compound lens like the picture above with one side fixed and the other side variable.

The variable side will be an opaque piezoelectric material designed to change between a range of prescriptions. The fixed side will determine the window that the prescription range will operate in.

Alternate design (forget the piezoelectrics):

The variable lens could also be plastic. This is used in sunglasses all the time and it is flexible. That would enable a design using small mechanical actuators at key positions on the outside to shape the lens.

Heck, this might be a cheaper, easier, and more flexible solution… the frames could be designed to allow the lens to move in and out a bit, with the actuators pulling and pushing from the sides of the frame.

Electronics are cheap nowadays… we could mass-produce these things and allow prescriptions to be set using software.

Interesting idea anyways, I wonder if I could buy basic parts and build one, maybe starting with cheap sunglasses or clear eye protection glasses.

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What’s happening with Gold?

I’ve been interested in precious metals since the beginning of QE, and I’ve learned quite a bit over the past decade.  There are many underlying theories as to why these things go up or down, and it takes time to separate out the regularly repeated mantras and build your own narrative.  I’m actually at my computer, so I’ll start with some charts from https://goldprice.org/gold-price-chart.html:

Gold Chart

The top chart is the 6-month view that all the headlines are concerned about – gold is falling.

The middle chart is a 5-year view, showing gold stuck in the middle of a range.

The bottom chart is a 10 year view, showing the buildup, spike, and fall – and the bottom chart is a 10-year view.  This shows the question that gets people excited – will gold revisit those highs of 2011-2012, or will it go back to the pre-2009 days where it rallied from less than $300 over the previous decade?

Here’s my quick run-down on recent gold history.  I’m going to throw in one more chart to start so that we can get yet a bigger picture:

Gold chart full

1980-2002: After the 1980 spike in gold following the inflationary 1970’s, western central banks held vast quantities of gold.  The petro-dollar was the new game in town and they became net sellers, interested increasingly more in dollar holdings than gold holdings for transactional purposes.  Gold prices languished up until the early 2000’s.

2002-2009:  Why the change in 2002?  India and China.  These two countries have by far the largest gold demand.  As their economies began to grow, the demand for gold followed.  The price increase followed the rise of these two massive economies throughout the 2000’s.  After the 2008 recession hit, this demand was knocked back as well and the price fell until QE set gold into the next phase.

2009-2013: After 2009, quantitative easing was big news and gold investment became mainstream.  All sorts of new products were introduced – gold miner ETF’s, direct gold ETF’s, gold-linked savings accounts, etc.  In 2011 the big news was that central banks were now net-buyers of gold for the first time in 20 years ( https://www.cnbc.com/id/44574537 ).  Venezuela demanded it’s gold returned.  Then Germany.  Then something curious happened – gold started correcting.

2013: The most compelling reason I read about for this correction in gold was the rise of what they call “paper gold”.  Essentially, gold was treated like cash in a fractional-reserve banking system.  Investors bought ETF’s which focused on contracts linked to the price of gold, but didn’t require the physical presence of gold.  Essentially, a lot of investor money shifted over which reduced the need for physical gold, creating a classic blow-off top.

2014-2019:  After 2013, gold fought between two different pressures.  Big investment money required steadily less physical gold to sell, and investors became frustrated and started losing interest in gold entirely, creating downward pressure.  At the same time, gold was becoming increasingly more difficult and more expensive to mine, so mining activity would slow significantly past a certain price point.  Similarly, physical demand in Asia, particularly India and China, remained strong and would flare up when prices came down.

CURRENT SHIFT:  Right now, the biggest thing effecting the gold market is the US Dollar vs emerging market currencies.  Emerging market currencies had been strong despite the Fed’s QT and slow rate increases for a time as a world still awash with investment capital looking for a home poured into emerging markets.  A perfect example of the excitement over emerging markets in 2017 is the record demand for Argentina’s 100-year bond: ( https://www.cnbc.com/2017/06/20/argentina-sees-strong-demand-for-surprise-100-year-bond.html ).  Then the US started issuing record treasuries with the new budget while the fed rate climbed to 2%, and a lot of hot investor money found a home there.  I’m included – I just bought a 1-year CD from East-west bank at 2.45% yield using TD Ameritrade.  Emerging market currencies started to weaken considerably as this capital dried up and trade war fears set in.  Countries like India and China are not seeing gold drop in relation to their own currency moves, so they are not reacting with fierce buying.

CURRENT PHASE:  I expect weakness in India and China to show up in Gold due to their outsized demand for the physical metal.  As long as the federal reserve continues to raise rates and shed bonds from its balance sheet, emerging market currencies and gold will struggle together.  However, you still have the forces of reduced supply from expensive mines along with one other backstop for the gold price – investor demand.  Investors now have record short positions in gold, which they will ultimately have to cover by purchasing contracts back to close their positions.  So gold will struggle downward, but not too swiftly.

WHAT NEXT:  The federal reserve currently sees the economy as strong and plans to continue it’s cautious rate increases.  Gold will struggle, but I doubt it will pass the Jan 2016 low.  I expect that there will be an point (there always is) where the stock market has a significant correction and the economy turns.  After this, the federal reserve will reverse course and a new wave of investor interest will come in, pushing prices back up.

Disclosure:  I am long on both physical gold and gold-related stock investments like miners and streamers.  These positions have been built up over the last 5 years, and I tend to think I’m overweight so I’m not buying into this dip – but I’m not selling either.  From a trader standpoint I tend to think the time to add would be after seeing a significant correction in the S&P 500 – big enough to make the federal reserve change policy – not before then.  That would mark the beginning of the next bullish phase.

 

 

 

 

 

 

 

 

 

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If you could choose, what would your life’s work be?

I often wonder what I’d do if I won the lottery or something, so that I didn’t have to worry about just making ends meet. It goes without saying that I’d leave Los Angeles and my current position – I have endless ideas of how to better spend my time in more creative ways. The easy ideas are writing or politics, but my real passion has always been applied science – it’s the reason I took Mechanical Engineering back in college. It’s also the reason I focused on finance and entrepreneurship at USC – to make a mark on the world through positive change. Anyway, here’s some rough ideas I came up with – some are new and some I’ve been pondering for years. I’ll probably add more as time goes on.

1. Adopting a Robo-Tuna to do work in automated ocean cleanup. Whether it would search for toxins like mercury, radioactive materials, or recycle-able garbage, the idea would be to go out, collect items, and deposit them in a special location for processing. I would have to find environmental groups or agencies to work with, it would be a difficult but rewarding push to get this started.

2. Auto-focus eyeglasses. It sounds a bit science fiction, but with nano-technology and 3D printing I think I could come up with a viable design for an electronically integrated adjustable lens. Auto-focus cameras could be adopted and the glasses set with software to match a prescription range used in current progressive lenses. It would take considerable time and money to build, no guarantees. I wonder if I could start researching this and come up with something on the computer.

3. Solving the problem that older patients have of coordinating healthcare. Perhaps a medical consulting firm or something, would probably require more systemic, beaurocratic, political change but the need is set to skyrocket. When my grandfather and then father had cancer, they ended up with panels of disconnected specialists that had to somehow be managed, with way too many appointments recommended than they could be expected to make. Go to the oncologist, foot doctor, diabetic specialist, eye doctor, dentist, etc. As boomers age and medicine gets ever more fragmented and complex, many weakened patients will need someone to help guide them through the process. Fill in the blank for who that could be, but a professional service would be a good idea.

4. A movie about the founding of the Hahn dynasty. I’m a bit of a history-nerd, and this story seems fascinating to write about. You have the “bad guy” with the Qin dynasty. A ruthless dictator who recently fought his way to control of China, unifying the fragmented Zhou states. His underlying philosophy of “Legalism” has harsh penalties for crime as well as failure. A man gets his hand cut off for stealing food. Alternative philosophical works, including Confucian, are burned and their teachers burned with them. The “hero” is a prison guard, moving prisoners across to a new location. Some escape one night, and he knows that his punishment will be severe. Rather than face it, he brings out the prisoners, declares a revolt, and organizes them into an army. Other areas revolt as well, with a different leader beginning to get the upper hand as war continues. There are close calls, with the “underdog” hero almost defeated, but managing to escape and re-group. Ultimately he wins and creates the Hahn dynasty and the new Confucian order which lasts a long time. That is the history bit, but there’s a whole narrative and screenplay that I need to write behind it with a lot more research.

I’ll stop here for now. I hope this gets people thinking, there is a lot we could accomplish in our lifetimes if given the opportunity. I wish I could follow through on some of these on my own, but there are only so many hours in the day and I can’t get myself to stay on the computer after spending a full workday looking at that screen. I long for a creative outlet, and I’m thankful for having the blog.

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In defense of progressive tax rates

In my humble opinion, progressive taxation is much more fair for a couple of reasons.

First, the use of funds progressively changes from meeting basic needs, to meeting basic wants, then exotic wants, then merely controlling the lives of others with no real gain in personal comfort.

Second, the ease of getting the funds progressively changes. A worker will labor like crazy to meet basic needs, but work that pays more starts involving the powers of privelaged positions, the leveraged resources of others, and the scalable gains from the same work re-sold, none of which should pay as much as the initial hard work.

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In defense of Trump (a difficult task I know)

We all know that Trump is loud mouthed and tends to goad the media into attacking him, which makes him difficult to defend. However, his policies aren’t the ultimate disaster his opponents claim, and real change from our previous policies is desperately needed. We need to somehow get past the name calling to discuss what is really going on.

I’m pasting this from a Facebook post so that I don’t need to rewrite it. Ill probably update this thread if more Q&A commences. Here goes.

Original Post:

I hear constant complaints about Trump, but pick any issue and I can explain how Obama’s policy was actually worse.

Comment with issues to address:

Okay, I’ll play ball. Why not.🤓

1. Trumps tax cuts a.k.a ‘trickle down economics’ only helped corporations and millionaires. Stock buybacks at record highs with median salaries barely budging and the U.S deficit is projected to be 1 trillion in 2019.

2. Trump’s bromance with Putin. He has this odd affinity for a murderous dictator and yet he pisses off our allies.

3. The trade war. Tariffs will only raise prices on U.S consumers. That’s basically a tax. And now trump wants to aid farmers with a 12 billion dollar bailout for those affected by the tariffs? Kinda like shooting yourself in the foot and complaining and why it hurts.

4. Trump has said/tweeted over 3,000 false or misleading statements since becoming president He lies about everything. He lies about Russia collusion, lies about calling the FBI corrupt and calls legitimate news organizations ‘fake news’.

I have more to say but I’ll stop. I think he’ll go down as possibly the worst president ever elected.

Response:

Issue #1. Trump’s cuts on the individual side we’re skewed toward the working class. They increased the standard deduction which helps those who don’t itemize (lower income) more than those who do and gave renters a bigger break than homeowners. The top and bottom rates didn’t change, but the ones in the middle all went down a bit.

For the corporate side, I understand his thinking – the mercantilist idea of getting companies to relocate here by making rates competitive. Though I think stock buybacks should be illegal (as in pre-Reagan times) and I’d prefer more heavy-handed treatment of MNC’s, I believe he actually did that to try to bring good jobs back to the US.

The massive QE for the wealthy in the past decade shows that we had better get that government defecit up to absorb central bank money or labor’s return will be deminished even more than it already has in relation to capital.

Issue #2 foreign policy:

Trump is correct to note that militarily, our allies as the UK and Israel have been more consistently on our side than continental Europe.

We need Russia to secure any peace in Iraq and Syria. Russia isn’t a natural enemy if we know our history and recognize it’s national interests. You have to recognize that they are on the defensive in many ways. A warm-water port is key to Russian interest and they have held Sevestapol since the late 1700’s. Khruschev moved borders east to help cement power to the west when the Russians held Eastern Europe in their empire. It came back to bite them hard after the breakup, and they will do anything to hold Sevestapol – which became a major issue when Ukraine tried to join the EU. We can work together if we know what they can bend on and what they can’t. Our disatrous foray in Iraq shows we need them if we want to stabilize the region.

Contrast with Obama – he consistently derided the UK and Israel, and he angered US allies in the Philippines & Japan while antagonizing China, India, and many African nations through his constant moralizing and decrees in the United Nations. His “leading from behind” policy created a power vacuum in the middle East and north Africa, which still have large pockets of instability today.

Issue #3 Tariffs.

I strongly believe that free trade is a two-faced issue for the Democrats. They say they support the environment and labor, all while supporting the relocation of jobs to countries with the lowest protections for both the environment and the worker and effectively excluding many Americans from participating in the American economic system through the resulting shortage s of secure jobs.

Most of our trading partners recognize that free trade doesn’t work as it leads to labor arbitrage, the concentration of wealth at the top, and the civil unrest that ensues. Add the environmental cost in allowing the ramp-up of damaging industries in areas unwilling or unable to regulate them and it’s a real problem. I believe the EPA should have the power to apply fees, taxes and tariffs but thats just a pipe dream for now. At least we have the start of a policy which recognizes that free trade is not always good for the American people.

4. All politicians lie. Trump is abnoxious and bombastic, and he does goad the mainatrem media into hating him. However, you must understand that news in our country is not an honest enterprise bringing info to the people for viewership leading to profit. Most news agencies are money-losers which have been purchased by political interests to press their viewpoints. They don’t give an honest assessment of any of the issues affecting us and their interests clearly lie with the wealthy elites and political insiders. When the insiders start to push back on wealth inequality and support the expansion of small business and break up the larger companies I’ll take notice, but for now we need new blood from anywhere we can get it, including Ocasio Cortez and Bernie Sanders as well as the abnoxious Trump.

The worst presidents are often the best speakers.

Bill Clinton destroyed the public sector labor unions and cemented the tie between big Democrats and Wall Street through NAFTA and financial deregulation. Newt Gingrich was no help either, but he doesn’t absolve Bill Clinton.

Obama clearly supported no one but Wall Street throughout his tenure. Why do you think he did nothing when Wall Street firms bought up insulin drugs and such, increased their costs tenfold under shell corporations, and then sold them to pension funds for big gains? Why did he invite Wall Street to become the new big landlords to make the housing market stay unaffordable for median income workers? Why did he encorage vast consolidation in banking through Dodd Frank? Why did he allow the wealth of the top 1% to grow exponentially while working class people saw nothing but less stable employment, stagnant wages at best, and a skyrocketing cost of living all while being told inflation was actually low and the job market was actually improving? Headline CPI and headline unemployment are very misleading indicators by design.

In my view the reason so many people are angry is shown well in this chart:

When the wealth of the top 0.1% exceeds that of the bottom 90%, it creates artificial shortages which squeeze many out of the system.

Towns are being abandoned and homes demolished in places like Michigan where they lost all those manufacturing jobs, while people are forced to crowd into other overpriced cities to find any work at all. Any work that could have been done from home has been outsourced long ago. Part of the American dream has long been to own a home to raise a family in, which is impossible in many parts of the country due to soaring costs in the big cities and lack of jobs outside them. Most people want to be part of the system but tent cities and homeless populations are growing larger than ever, all in a country of great wealth.

Both the insider Democrats and insider Republicans live in a bubble and don’t acknowledge these problems. Outsiders like Trump and Bernie are popular because they at least know that a majority of Americans are in trouble.

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