If you could change the system…

How often do you find something in our political system that doesn’t make sense and should be changed?  For me it’s all the time, and its especially frustrating in that most of modern politics focuses on completely different things.   I can’t expound on all of these ideas in a readable post, so I’m just going to make a list of bullet points with minimal description.  Hopefully you find this thought-provoking.

·         Deal with our monopoly/oligopoly problem

o   Most industries in the US are dominated by a small number of firms.  We have the same number of publicly listed companies that we had in the mid 1970’s with an economy that is 3 times larger.  This causes a number of problems, but fortunately there is a book by Jonathan Tepper called “The Myth of Capitalism” which clearly lays this out.

o   Ideas to fix this include using the SEC to break up large companies, making many reporting regulations size dependent in order to give small business a break, or even special taxes on companies based on market share (perhaps a special tax starting at 10% market control that starts small and gets very high as you approach 70% market control)

·       Lawsuit reforms

o   People have agreed for a long time that litigation is out of control. Many of the problems in our society stem from this, as proposed solutions fall apart due to a shift in liability. It curtails our freedoms as trampolines, merry go rounds, diving boards, and other things are no longer available. It creates a tremendous burden on business owners, particularly pressuring smaller medical practices to shut down or merge operations with a larger practice.

·         Hazardous waste disposal

o   Recycling programs have been very successful in getting people to separate out bottles, cans, paper, and other recyclable materials – yet many household items like batteries, fluorescent bulbs, paints, cleaners, oils, acids and so on contain chemicals that should not go to landfills, yet they end up in regular trashcans.  For small-time contractors its often worse as they make very little money per project and are expected to pay much larger sums than big competitors to dispose of hazardous waste. 

o   The solution here is simple: aim to make hazardous waste disposal as easy and convenient as recycling.  It should be totally free with local government collection centers, possibly paid for by taxing the initial sale of the items they collect.

·         EPA Reform – taxes over controls

o   The EPA needs to have the authority to tax to a small extent.  Many times, production of hazardous waste is a byproduct of modern society that can’t be avoided.  Currently, they try to address issues with direct controls on emissions limits of certain things, but this is often an inefficient approach that tries to limit the excess production of one thing with the direct control of another.  To put it simply, I’m merely suggesting that this policy lever would be useful.

·         Subsidize Fruits and Vegetables

o   We hear about the “obesity epidemic” all the time, yet healthy options always cost more.  Lower-middle class people in modern society live in crowded places with roommates – they often don’t have their own kitchens and refrigerators, and they find it cheaper and easier to stick with low cost fast food.  Look at any of the value menu items, however, and they are all carbs, beans, cheese, and cheap meats with no more than a sprinkling of iceberg lettuce.  Healthier choices always cost more, or at the very least are equivalent (example – get a “salad” instead of a “sandwich” at subway and you forego the bread but pay the same for the same quantity of meats and greens).  I think it should be subsidized to the point where that extra garden salad costs no more than that extra dollar for the bag of chips, particularly at low-end fast food places. 

·         Student Loans

o   Tuition has been rising in leaps and bounds while median incomes go nowhere.  Loans have become easier to get for larger amounts, and college degrees are required for more jobs than ever – many of which never required degrees in the past and don’t pay any more than they used to.  This system is very damaging to our youth, it delays and often prevents family formation, and it really needs to be addressed.

·         Affordable Housing

o   Watch the classic “It’s a Wonderful Life” and Pottersville resembles most city living today – with people paying more to rent in crummy, over-crowded housing than they paid to own a home in the “Bailey Park” alternative.  The reason is simple – housing costs have skyrocketed while median incomes went nowhere.  After the last housing bust, wall street was invited to purchase single-family homes in rental schemes for the first time – leading to a large “recovery” in housing prices that went beyond the prior peak in national terms.  Rental units are often dominated by a small number of large firms with monopoly level pricing power.  This issue needs serious attention. 

·         Federal Reserve Policy Tools

o   Current policy tools of the federal reserve are interest-rate manipulation and quantitative easing.  Both of these push money into the system by expanding debt and driving up asset prices.  These tools destabilize the system by making the rich (asset owners) ever richer while wages go nowhere, while ordinary people find retirement and large purchases ever further from their reach, and debt loads increase exponentially.   

o   Other tools I’d propose:  The ability to make direct payments to every citizen (show your social security card at a bank to redeem) which would increase consumer spending while allowing consumers to pay off debt, helping to stabilize the system.   If you don’t like that idea, perhaps allowing the federal reserve to create a “government infrastructure spending” fund which could then help much needed public improvements get built while creating jobs.  Perhaps you allow banks to borrow at a “penalty rate” so that credit would not freeze up completely yet it would not manipulate asset prices so much … my main point here is that the current tools are counter productive.

·         Government shutdown policy

o   Our current shutdown policy was set in the late 70’s and started hitting from the Reagan era onward.  It focuses all of the penalties on a small set of people from low-level government employees, to government contractors, to national parks and related businesses while the actual officials feel no pressure at all.  Whether its something as mild as freezing pay of elected officials (they’re all rich anyway) or as extreme as a cloture type system where they are literally locked in the building and remain in session until they agree on something (and the president can only veto if he’s locked in there too) – I’m not sure what the answer should be.  The current setup needs to change though.

·         Patent Reform

o   Patents should be about innovation rather than preserving monopolies.  I believe that very strict limitation on the duration of patents should be enforced … no patent lasts longer than 30 years.  If you cant make money with a 30 year exclusion, you wont be funding the project anyway – and it would unleash an enormous wave of innovation as all of that locked away knowledge would become a free public resource.  Limits like this would also curtail the efforts of “patent trolls” which don’t really innovate so much as patent everything possible in order to take control of any possible benefits that others find.

·         Wall street regulation

o   Leveraged Buy-Outs should be illegal because they take money from current stakeholders and give it to the party doing the takeover.  A company like Sears or Toys-R-Us for example would get loaded with debt that was only used to pass its control from the current owners to the new hedge fund – greatly diluting the claims of pension holders, current debt holders, and other stakeholders such as employees.  It’s a transfer of wealth plain and simple.

o   Stock buy-backs should be illegal and actually were until 1983.  They were once considered stock price manipulation, and they generally are as they load a company with debt for a rise in stock price that often proves temporary.  This can help an exiting CEO or a hedge fund with options contracts, but it actually harms the other stakeholders including debt holders, pension fund holders, and employees.

o   SEC operations.  We often hear that the “SEC is asleep at the wheel” as they allow all sorts of financial frauds to take place, often with much warning ahead of time.  Forensic accounting is an area that some short-sellers specialize in … they uncover active frauds while shorting the stock.  Unfortunately many of these active frauds are allowed to continue long after they are exposed.  The SEC needs to take these more seriously.

I’m running a bit long so I’ll stop here, but I hope that reading this will get you thinking on how the system really needs to change rather than being distracted by the latest political media fad.

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Is it a good time to go short?

Going short is always a risky bet.  The easiest way to do it as an amateur is to buy put contracts, allowing you the right to sell a stock at a given price.  If the stock drops below target, the put option has value.  If it stays above the strike price and you hold it until expiration, it becomes worthless.

I decided to make a small wager this morning, and my plan is to show what I’m thinking and why.  One blunt confession – I have not learned the tricks of the trade for technical analysis though I’ve been meaning to start.  That sets me at a disadvantage, but I’ll explain my reasoning and can judge whether its worth anything.

My bet: Purchased 5x put options of TOL June 21 puts at $1.75.  1 contract = 100 shares so the cost is 5x100x$1.75 = $875.  Options have both time value and intrinsic value.  This purchase has no intrinsic value because it is out-of-the-money, but it’s time value is significant.  If the stock stays above $32 for 6 months, then the time value will slowly drop to zero and the intrinsic value is worthless.  If the stock drops below $32, then I make money on controlling 5×100 shares, making the intrinsic value $500 for every dollar below $32.  I can exit the trade at any time by selling these options (note exercising them early is an option, but it would mean getting only the “intrinsic value” and giving up the “time value” remaining in the contract.)

Okay, enough basics.  Here’s my reasoning…

  1. In my previous post, I explain how we’re in danger of starting a bear market.  This is because the strongest buying forces of the past have dried up.  Force 1 = central banks are either slowly tightening or holding steady but not easing.  The Fed leads the pack here because other countries run into trouble if their currency falls too much too fast vs the US dollar.  Force 2 = corporate stock buybacks following the tax law change, which I believe have run their course.  If the recent rally fizzles and falls, it could be another leg down.
  2. Housing sales have been falling dramatically nationwide, particularly in the West.  Many other countries have been experiencing similar declines.  US data stopped in November because of the government shutdown.  Two months of US housing data will hit the market soon, and I expect it to continue its trend of YTD declining sales.
  3. The Federal Reserve is about to issue another press conference.  Much of wall street expects more dovish signals, but I believe Powell will surprise to the negative.  My guess is that he will hold the interest rate steady, but continue the gradual balance sheet reduction at the same pace.  I think he will talk more about normalization and a plan to return to holding only US treasuries, and shedding off the mortgage backed securities over time.

In short, the buying pressure we’ve been used to is repressed because central banks aren’t pumping more money in, and I have a couple potential short-term catalysts to get people worried about housing.  Toll Brothers is the largest homebuilder, so I expect them to get hit a bit.

You’ll note that my reasoning here is primarily macro – which is my main field of interest.  I have gaping holes on two fronts – no serious technical analysis and no serious fundamental or balance-sheet analysis on the underlying company.  I am unlikely to fill these holes in the future, as I work at a computer all day and spending more time on the computer when I return home is difficult.  I’m primarily a long-only investor, but I enjoy learning and trying new things – so I put in a wager that I can easily part with and yet still be interested in.

One last thing I should say before I sign off here … I have been following Wolfstreet.com and I’ve come to like his balance of financial news across different countries and markets.  His biggest focus is housing and autos, where he has the most experience, data, and insight.

Goodnight.

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What are the markets doing? Where do we go from here?

I’ll save you time and start with my conclusion.  My explanation (which I actually wrote first) will start below.

In summary, here is how I see things:

  1. Right now stocks are fighting the tide as central banks of the world are comparatively tightening.  Much of the money from central bank easing ends up in the stock market, and this buying power is drying up.
  2. As the stock market begins to decline, investors will start to ask questions like “does my investment make sense” or “how low can this go.”  In order to answer those, they dust off their valuation models and start using them again.
  3. As valuations become more important, the bear market gains momentum.  Valuation models that were stretched are pared back considerably.
  4. Central banks will see declining asset values and think about easing.  If economic growth slows, then zero-interest-rates, negative intertest rates, and QE (money creation) will be back on the table.  The tide of investment money will start to flow back in to investment markets.
  5. Investors will initially be wary and stick to valuation models.  They may look to alternate markets like gold or commodities for diversification.  Ultimately when stocks start to rise again, the concept of valuation will be slowly pushed aside and the up-cycle will start again.

Now back to the beginning:

It has certainly been a volatile year, with markets starting at a peak around 2,830 in Jan 2018, dropping to a low around 2,588 in Mar, then rising to a new peak of 2,930 in Sep, dropping to a low of 2,415 in Dec, then rising to 2,633 today.

The last 5 years have seen a great run in the US stock market, with the S&P 500 pulling from 1,860 in 2014 to close at 2,633 today.  That’s a 41.5% increase or about 8.3% per year.

US GDP had a low of 1.6% in 2016 with an estimated high of 2.9% anticipated for 2018 – for an average of 2.4% per year – so that doesn’t quite explain the growth.

S&P per-share earnings (which are quite volatile) have been (2.11-15.42+9.27+16.21+21.77)/5 = 6.8% per year, so that doesn’t completely explain it either.

I’m going to jump past this and just explain my narrative here…

I believe that we are in what is called the “everything bubble”, where excessive QE by the central banks of the world has led to asset price increases in nearly every investable market – from stocks and bonds to real estate.

Using the ocean as an analogy, the central banks of the world have been pushing money into the markets like crazy, causing the tide to come in and price levels to rise.  There are always waves, but the effect of the waves is negligible compared to the effect of the overall direction of tide.  What we’re beginning to see is that the tide is starting to head back out.

The Federal Reserve started the tightening cycle and took it the furthest, both with interest rate increases and balance sheet reductions.  At the beginning of this cycle, two things kept the S&P 500 rising higher – the large US tax cuts, and the money created from foreign central banks finding comparably attractive yields in US dollar assets.  A lot of corporate foreign earnings were also “repatriated” and used to fund record corporate stock buy-backs.  The US dollar started rising considerably since the Federal Reserve began to tighten.  This has pressured emerging markets quite heavily, especially those with large amounts of dollar-denominated debt.  Emerging markets had to respond with considerable interest rate hikes and still saw their currencies head lower – we saw the most news of this in Argentina and Turkey.  The European and Japanese central banks kept their low rates, but stopped easing (you may remember hearing about the “taper tantrum” when the US stock market started to turn as QE was slowing years back).  China has reduced credit growth considerably as well, leading to a slowdown in a number of different areas such as Chinese domestic auto sales.

Remember that as long as central banks are holding or tightening, you’ll be fighting the tide by buying in.  This won’t change until central banks are spooked into easing again.  In the meantime, there is significant danger that valuation will come into question.  I’ll explain…

During a bull market – particularly one driven by easy central bank policies, but any will do – valuation is continually edging higher.  Investors start throwing money in because they see things going up and they don’t want to miss the boat, so valuation models become ever more strained and price-to-earnings ratios soar.  Throw in some new technology and narrative replaces valuation entirely.  In the dot-com bubble prior to 2000, internet stocks soared to incredible highs as price-to-sales replaced price-to-earnings because it could justify negative earnings for fast-growing companies.  It ultimately crashed 90% when valuations became important again and people asked how much these things could really expect to earn.  Many companies with negative earnings died off completely because they could no longer get funding.

Compare that to today… a small number of tech stocks dominate the S&P.  Amazon has an enormous market share and P/E, but it doesn’t earn much and its pricing power is low.  If it raised prices by 10%, watch sales switch to other websites from eBay to Walmart.com.  Netflix was valued more than Disney at its peak, even though it has negative cash flow while Disney owns much more valuable content along with theme parks, hotels, major motion pictures, and a whole product array to follow them.  Tesla was valued more than GM even though it was a niche high-end EV producer struggling to make a more affordable EV while GM had international operations and a large robust product line.  I could go on but you see my point – investors going back to earnings valuation models could lead to much lower prices going forward.

Note that I picked on Tech because it was easy, but the “rising tide” lifted valuations and stretched valuation metrics everywhere.

On this note, there is one more really important trend I want to mention … the rise to dominance of ETF’s.

ETF’s – exchange traded funds – offer you both diversity and liquidity.  You can by and sell shares tracking companies in the S&P 500 and pay very little in management fees, getting your safety from diversification.  Sounds great, right?  But does it work?

Look back at the price jumps over the last year and you can see that the S&P itself can be quite volatile.  Also, consider that bear markets can take it down significantly – like the last one with a high above 1,550 in 2007 and a low below 700 in 2009.  But that is only part of the story.

ETF’s work by blindly throwing money at stocks in an index based on valuation.  Netflix is valued as much as Disney – allocate the same percentage to each.  Don’t worry about valuation, the market will sort itself out, right?  But what if everybody does that?  What if nobody is looking at valuation and it just gets more and more out of whack?  Normally if a good stock crashes too far, active value investors will pile in and create a floor.  If the stock is dominated by ETF-holders then the dropping price simply means less should be allocated to it, leading to more selling, which can reinforce itself considerably causing a significant undershoot in valuation before the few remaining value investors can start to reverse the tide.

In short, the structure of an ETF will allocate the most money to what is overvalued and the least to what is undervalued, helping you on the up-side and crushing you on the down-side.  By contrast, a good actively managed fund will aim to avoid out-of-whack valuations, which gives you less of a gain going up but a lot more protection going down.

One last thing to worry about … bond ETF’s.  High-yield bond ETF’s are popular because they offer a decent return and safety through diversification, but they have a considerable unseen danger called “liquidity mismatch”.  High yield debt is considered relatively illiquid because low amounts trade, so large sales can be difficult and move the price a lot.  If something spooks the holders of these ETF’s – such as the high-yield rate increases typical in an early bear market – investors can just sell and the fund has to cash them out.  If enough investors sell, then these ETF’s are basically forced to sell this below value to pay out those investors.  This dollar value of the ETF drops and either more people sell which could collapse the fund, or the fund stabilizes but never recovers because the fund-holders were forced to eat some of those losses when the high yield debt was sold below value.  If you individually hold a number of bonds, then you can just hold them to maturity and most likely keep the principal when these bonds pay out – but as an ETF holder you effectively lose that ability.  The credit risk – that of the individual bonds defaulting – is actually not increased in an ETF because an environment where defaults start happening is much more likely to cause a run on your “diversified” ETF fund, whereas splitting between 5-10 bonds on your own should at least get you the average rate of payoff (a 10% default-rate for high yield is considered extremely high).  However, it will likely net you better because an ETF blindly throws money into everything whereas anyone picking individual bond issues will likely show some discretion on what seems credit-worthy.  For example, the record sale of 100-year bonds to Argentina in 2017, which collapsed in value the following year, would seem a crazy deal for an individual to purchase, whereas owning some of it in a “diversified” emerging-market government bond ETF with an 8% yield would seem to make a lot of sense. (Note that Argentina didn’t default on these yet – my point is that picking your own 5-10 bonds is not that difficult and even a novice would be somewhat discerning).

I hope I gave you some food for thought. Have a good night.

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The importance of questioning our economic measures

The holidays have finally arrived! After a month of family events, Christmas preparations, gift wrapping, and custom Christmas cards wrapped around long work days, we are finally starting Christmas weekend.

It’s been a awhile since my last blog post, but certainly not from a shortage of ideas, so I’m just going to throw together a number of incomplete narratives to explore to get the seeds on paper.

I’m fascinated with economic and sociological trends. My core training from my undergrad years is Mechanical Engineering. UC San Diego would always stress the need to state and question your assumptions- something I still take very much to heart. So here goes:

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How well do the headline numbers we constantly see reflect what they are assumed to show?

1. CPI: We have heard for years about the problem of persistently low inflation because of the low CPI. Yet anyone actually struggling through today’s economy will talk about the soaring cost of living as rents, food, healthcare, tuition, fuel, electricity, etc go up in price (I know oil is down a bit now, but the gas stations in LA don’t seem to be aware of the fact).

My hypothesis is that the CPI actually measures consumer discretionary income rather that the cost of living, making it a good proxy on wage gains but little else.

2. Unemployment rate: This number suggests a very tight labor market which means it should be very easy to find a good job with solid benefits and incomes should be rising substantially. However, it is still very common for people with college degrees, particularly age 30 and older, to be chronically underemployed. People displaced from solid careers still face long periods of unemployment between jobs and end up settling for something that pays significantly less, often with minimal or no benefits.

My hypothesis is that the nature of the job market has drastically changed because of the shift from small businesses to large corporations. Small businesses were the big hiring force of the past, looking for talented and experienced individuals who could see the bigger picture, take on complex roles, and make good decisions. Large corporations work differently… they prefer to bring on younger employees who can all be trained to specific roles, while decision making is centralized. The “big picture” skill sets can get in the way… picture an experienced 50 year old following a directive from a much younger boss that he sees as needless micromanaging. He’s more likely to challenge it and make suggestions counter to the ‘corporate culture.’

This is not without historical precedent… think of the loss in wages combined with the increase in productivity when skilled manufacturing was replaced by unskilled factory work in the industrial revolution.

3. GDP: Increasing the value of this complex measure of economic spending is often treated as the end-goal of economic policy making – but should it be?

I often hear the claim that we need all the immigration we can get, because GDP = labor force times productivity, so it will help GDP rise. But do we really want this? Applying the basic law of supply and demand, increasing the supply of labor will decrease its price. This will lead to a point further down the demand curve where the number of jobs can increase simply because employers don’t have to pay as much for them. But why do we want to increase GDP so bad that we allow GDP-per-capita and the standard of living to plummet? Isn’t that just pushing us toward ‘third world country’ status?

The other peculiarities with GDP can be seen more clearly when you look at the big political fights in the 30’s for what should and shouldn’t be included in the measure. Should it include and therefore encourage government spending? (“yes” won out). Should it really measure goods as sold when they are shipped to local distributors, leading to a temporary rise in GDP from inventory buildup followed by a fall in GDP when the inventory is allowed to shrink back down?

My suggestion is that economic goals are more broadly stated in policy as things like ‘increase the standard of living’, ‘increase discretionary incomes’, ‘increase economic mobility’, and so on. GDP and other factors can be cited as measures in support of these goals, but their effectiveness should always be questioned. Arbitrary measures certainly should not be become the goal themselves, as any measure can be gamed to the detriment of the overall goal.

4. Vacancy Rate: The modern housing market is certainly peculiar. Housing prices in most major cities (not just in the US, but worldwide) are higher than ever, especially related to median incomes. The reason always quickly provided: supply shortage. The low vacancy rate makes this obvious. But how short is supply really? And what does this vacancy rate actually measure? What do we think it measures?

The vacancy rate is often thought of as the number of dwellings that have no occupants. This is generally true for apartments or hotels, but not necessarily for houses or condos. For these, an unoccupied unit that is owned but not for rent or sale is not considered vacant. I think this difference is crucial to understanding what’s going on in the market.

Consider some recent history… the housing bubble turned in 2006 and really began to collapse in 2008. The government was worried about the banks. A flurry of programs were started to stem the losses in housing. Early on, banks were encouraged to ease off on foreclosure proceedings. Sounds great, right? The problem came with the large so-called ‘shadow inventory’ of empty homes owned by the banks but treated as loan assets and kept off the market. Around 2012 they brought in the big hedge funds. Black rock started the trend which quickly grew – buy existing homes all cash and rent them out. This grew in spades and housing became a new big asset class to be filled by easy money from the central banks. Occasionally you’d see an article about areas with monopolized housing ownership, annual rent increases, and sky high rents. Usually this wasn’t considered news.

My hypothesis is that we’re seeing the classical economic situation of a monopolistic supply of housing. Big investors can focus on areas and buy enough to significantly affect the local market. They can then restrict supply by strategically keeping vacant homes and condos off the market to push rents higher. In the old system if a landlord hiked the rent, people would move elsewhere. When you control enough supply, people have nowhere else to go – they simply have to find a way to live with the higher rent. I’ve heard plenty of anecdotal stories … someone seeing a condo for lease in a big building, asking if they have anything else, and finding out that the building is mostly vacant and only a few of the places are listed at a time so as not to affect the rents.

If there is any way of measuring the actual number of housing units that are not lived in, I would really like to know. Of course this would have a lot of political implications if it showed the picture I just described.

I’m going to stop here, but I hope you’re questions keep going. What kind of future should we build? What should our economic goals be? What measures would help us get there? I caution you not to jump to conclusions and get frustrated with the answers … politically factionalized fighting benefits no one. I tend to think about these issues in the third person … assessing trends and theorizing rather than influencing decisions or changing. As you think it over, remember that the Christmas Holidays are about building positive connections with family.

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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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