Thursday, May 28, 2020

The Economy after COVID-19

This is a shot taken by yours truly over 43 years ago, entering Wyoming on a trip lasting 3 weeks, camping in a beloved 1970 VW camper bus. I show this picture as entry point to an insightful article by a good friend who happens to know a great deal about finance and the economy and how it may spin out vis a vis COVID-19. We all know economics is not a science, never has been, never will be but it can be really valuable when practiced by guys as smart and humane as Dan. Enjoy. 

State of Play

What we are witnessing is the ongoing saga of how a solitary case of COVID 19, imported from China into Washington state, cascaded into a pandemic of epic proportions, triggered an economic crisis on a  Depression-era  scale, and continues to inflict human suffering on millions of Americans. Our fellow citizens are dying left and right, struggling to deal with the loss of their jobs and how to feed their families. Millions are experiencing a total collapse of everything they had only a couple of months ago. 

The Federal Reserve has unleashed everything in its arsenal: reducing interest rates to zero and declaring availability of unlimited liquidity in order to forestall a collapse of the financial system. Congress has declared a panoply of multi-trillion dollar emergency programs with acronyms that read like an alphabet soup.  

So where do we go from here?

An honest assessment of what we know and what we don’t, will give us some clues on where the economy is headed.  

What we know: a) according to scientists, a second wave of infection is certain to happen, b) a therapeutic drug will show up, we don’t know when, possibly after a year, c) a vaccine available on large scale is estimated to arrive late next year at earliest, and d) lack of observance of distancing in many states will prolong the duration of the pandemic.

What we don’t know is too numerous to list. Among the imponderables: how many will die before it’s over; when will the second wave hit and with what severity; when will safe and effective therapeutics and vaccines be available on a mass scale; will our medical infrastructure be able to cope with the next outbreak; how long will it take to test a large percentage of the population? The list goes on. 

Basically, we are in a highly volatile and unpredictable environment. Compounding the problem, management of the crisis by the Administration has been confused, conflicting and uncoordinated. Hence the variability of outcomes can be extremely wide; statisticians would call this a classic high standard deviation situation. That caveat notwithstanding, I will venture several observations: 

Given that unemployment claims to-date (mid-May) are approaching 40 million, or 26% of our workforce, we can safely assume that we are deep in the bowels of a depression rivaling the Great Depression when the unemployment rate peaked at 25%. 

The Office of Management and Budget and several branches of the Federal Reserve have estimated a 2nd quarter decline in GDP of around 40% annualized - the highest in decades. This is a stark reaffirmation of the severity of the trouble we are in.  

As months pass – how many months, is undeterminable - we will gradually creep out of a total shutdown and become semi functional again. At that point, statistics will show a deceleration in the rate of economic decline (as distinct from positive growth). In this phase, unemployment will “improve” from double digits with a 2 handle to something in the teens. At this point the President will no doubt cite the slowing in rate of decline as proof positive that his leadership is working and will restore the country to its former glory.

Overall, the economy will take a minimum of 3 – 5 years to stabilize and create meaningful job growth again. Jobs will come back excruciatingly slowly, and only when consumers build up enough confidence to consume again. Keep in mind that 70% of all economic activity is consumer based. The recovery will be slow and lengthy. Predictions of a V shape recovery are unfounded and unrealistic. Untold hardship will befall millions for years. Social programs will be needed to enable families to feed themselves. 

At the macro-economic level, the effects of trillions of dollars of spending on emergency aid will be felt for many years to come. Taxes will certainly rise. As they say, the piper must eventually be paid. Interest rates will initially remain low (a challenge to pensioners depending on interest income) as the Fed keeps financial markets flooded with funds. Over the longer term however, with the national debt far exceeding 100% of GDP, investors in Treasuries will demand higher yields on their investment.

Certain industries will never be the same again. Airlines will be nationalized, go bankrupt or keep struggling financially indefinitely. Many brick and mortar retailers will go the way of JC Penny and file Chapter 11. The cruise business will be decimated, becoming a shadow of its former self. Hotel chains will have to downsize or merge to survive. Office buildings will be financially challenged. Some will go bust as occupancy rates fall precipitously as a result of stay-at-home work becoming the norm for many workers. Many shopping malls will close for good due to lack of shoppers. Tens of thousands of restaurants have already closed and many will be shuttered forever. Note that restaurants are the second largest private employer with 15.6 million workers. 

Group-oriented activities will be hard hit, particularly sporting events. The NBA, NFL, AFL and the two baseball leagues will take a long time to recover, resorting to alternative non-audience formats in the meantime. 

Not since the Spanish flu have so many depended on the vagaries of a virus for their financial future.

The consequences of COVID 19 will reach far and wide. It will affect every aspect of human activity: from education to travel, from business conferences to contact sports, from grocery shopping to attending social gatherings. Only time will tell to what extent our lives will be modified.   


In physics, Newton tells us that every action causes a reaction. All human activity constitutes a collective action that affects the ecosystem. Now we are witnessing the reaction to our action. We cannot encroach on the animal world (bats included) with impunity. We cannot engage in human action that damages the environment and expect no reaction. Unless and until Newton’s Law is repealed, such human behavior is not sustainable.  Mother Nature will nurture and sustain us. But we abuse her blessings at our own peril. 

Arcline 1975

Saturday, May 23, 2020

Selfie 101

What's your take on this guy? Sinister, serious, direct, intense, take your pick as the human face both reveals and conceals our innermost feelings 24/7 to the outside world. Up to now, this eval was done by us rubes, now there's a new evaluator on the scene that does it better than we can.

To whit ...

Russian researchers from HSE University and Open University for the Humanities and Economics have demonstrated that artificial intelligence is able to infer people's personality from 'selfie' photographs better than human raters do. Conscientiousness emerged to be more easily recognizable than the other four traits. Personality predictions based on female faces appeared to be more reliable than those for male faces. The technology can be used to find the 'best matches' in customer service, dating or online tutoring.

The article, "Assessing the Big Five personality traits using real-life static facial images," will be published on May 22 in Scientific Reports.

It's just a matter of time ... 

Intensity +

Things get crazed in the center of our galaxy.

The center of our Galaxy hosts a supermassive black hole of 4 million times the mass of the Sun. A great number of stars spin around it at very high speed. The UCLA Galactic Center Group discovered another class of objects orbiting the black hole: the G objects. These peculiar objects look like gas clouds but behave like stars. G objects are likely stars that are hidden in a thick envelope of gas and dust. They may have formed as the result of the merger of a pair of stars. This animation is a visualization of the orbital motion of G objects and stars in the Galactic Center. The G objects are shown in magenta, young stars in green and old stars in orange. The orbits are based on the Keck data obtained between 1995 and 2019. 

It gets better.

Intensity +  without a doubt. :)

HK ... We hardly knew ye.

I have a close friend who's a native Hong Konger, a guy who loves his city beyond words and who now inwardly weeps as to what is happening to her as China begins to extinguish a truly international environment that benefitted the world in so many ways.

Read the detailed NYTimes piece, it's the right thing to do.

HK ... we hardly knew ye ... indeed.

Friday, May 22, 2020

3 into 2

Creativity to the max, this time layering 3 dimensions into 2, in this case, using time to enable code to correct errors in quantum systems at a rate thought impossible until now.

3 into 2 without question. :)

The last piece ...

AI, no longer controlled by us rubes in many disciplines given the fact real-time analysis of incoming data requires software able to update itself in real-time, cannot be done by humans in any way, shape or fashion, could not process symbolic math, until now.

But a problem remained.

Soon, he and Lample plan to feed mathematical expressions into their networks and trace the way the program responds to small changes in the expressions. Mapping how changes in the input trigger changes in the output might help expose how the neural nets operate.

Zaremba sees that kind of understanding as a potential step toward teaching neural nets to reason and to actually understand the questions they’re answering. “It’s easy in math to move the needle and see how well [the neural network] works if expressions are becoming different. We might truly learn the reasoning, instead of just the answer,” he said. “The results would be quite powerful.”

An understatement to say the least.

Read the rest of the excellent Quanta's Magazine piece to see why the last piece ... of developing truly intelligent AI is now in place to enable this tech to become ... truly intelligent.

Tuesday, May 19, 2020

A treaty to live by without question ...

The Artemis Accords, NASA's take on how man should cooperate in space, is similar in scope to the Antarctic Treaty System as Antarctica is also a hostile place requiring everybody to play nice as both environments can kill in an instant thus requiring everyone to work together to limit that grim possibility as much as possible.

A treaty to live by without question ...

My take without question: :)

Boston Tea Party, among significant others ...
As for Calvin's non-answer... AWESOME!!! :)

Monday, May 18, 2020

The hidden view ...

All of humanity resides on top of huge, invisible plates, constantly moving due to the internal heat engine of earth.

Researchers want to simulate the behaviour of the mantle.

This solid rock layer, which resides between the planet's core and crust, moves very slowly over time - roughly at the speed that a fingernail grows.

The scientists will investigate its complex pattern of upwellings and downwellings.

The team hopes its new circulation models will provide fresh insights into how the mantle has influenced the Earth's surface over hundreds of millions of years.

The impact of the constant motion of these plates goes beyond imagination.

A key target is to understand the upwellings that ultimately result in "hotspots" at the Earth's surface - the places where there have been colossal outpourings of lava and gas through geologic history.

"These are what we call the Large Igneous Provinces, or LIPs," explained Prof Davies.

"There hasn't been anything like this since the Columbia River flood basalts in North America just over 10 million years ago. So, they're rare. And thank goodness, because they can be absolutely catastrophic.

"The Siberian Traps which cover a large part of west Siberia match up with the largest extinction on Earth. A lot of the great extinction events are linked to these LIPs."

Seen below is a Cardiff University graphic detailing the 
heat distribution of earth driving the motion of plate since the beginning of time.

The hidden view indeed.

Thursday, May 14, 2020

Upsetting the apple cart ...

BRT has discussed the negative impact of man's activities on planet earth for years with an emphasis on the Anthropocene, the era of man, the only species capable of changing how earth does business through the use of fossil fuels, a polluting energy source, if continued unabated, promises to compromise the future of civilization as we move further into the 21st century.

To whit

IT IS ALL, in the end, a matter of chemistry. Carbon dioxide is a form of what chemists call inorganic carbon—a simple molecule that is pretty inert. Fossil fuels are made of carbon in its organic form—often complex molecules that are far from inert. Combustion turns these organic complexities into inorganic simplicities: carbon dioxide, water vapour and heat.

Of the energy that people pay for (as opposed to the energy that comes from burning firewood) 34% comes from burning oil, 27% from coal and 24% from gas. Nuclear power, hydroelectric power and all other renewables combined provide just 15%. The result of all this fossil fuel use is a modern industrial economy and an annual flow of 9.5bn tonnes of carbon out of the ground and into the atmosphere.

Through its effects on the plants, animals and microbes which make up the biosphere, on the climate and on the oceans, this industrial flow of carbon links the Earth’s distant geological past to its future over millennia to come. It is the single clearest piece of evidence for the idea that humans now have a power over the Earth as great as the forces of nature, and that their use of this power has opened up a new geological epoch that some scientists call the Anthropocene.

Read the Economist piece in its entirety. Detailed to a fault IMHO.

Friday, May 08, 2020

Cat 10 & rising ...

Jove looks calm and majestic ... but under thermal infrared imaging, it's a whole different story.