Thursday Musings

Good Morning... I'm watching the stock market this morning, and I suppose the thing that is driving it higher (and higher) is the news that Berkshire is buying Heinz.  Our new Secretary of State, John Kerry, should feel much wealthier this morning.  

I cannot help but share with you my thoughts on artificial intelligence and robots.  As you may know, IBM built Watson (a set of computers that worked together) to compete in Chess.  If you are a Jeopardy fan you will recall that the IBM supercomputer crushed the humanoid competition.  The original Watson was fairly large as it consisted of 90 IBM 750s and took up 10 full racks of space (created lots of heat).  It had 3,000 CPUs and 15 terrabytes of RAM.  Recently, IBM showed a new Watson, that can fit in one rack and is 240% more powerful (in petaflops - Cray against IBM/China) than the 90 750s.   Wow...

Then we can read on IBM's web site about entering into an arrangement to apply Watson's expertise to the medical field.  The institute will provide giant amounts of medical data, and Watson will provide suggestions to doctors on possible treatments.  WellPoint writes that doctors miss early state of lung cancer about 1/2 the time.  Watson, however, provides the correct diagnosis on the same cases 90% of the time.  Oh and by the way, the results are delivered to the doctor's iPad in about 30 seconds with possible treatment action sorted by confidence level. (You gentle reader will recognize this approach when you use Google for searching where you get the highest confidence level response first - unless someone pays Google to be placed higher on the search results -- which I hope does not happen with Medical).

There will be a huge number of new consumer facing applications coming based on Watson's compute power and AI.  Privacy?  What privacy?  http://www.extremetech.com/extreme/148220-ibm-makes-watson-the-size-of-a-pizza-box-starts-offering-cloud-access-to-doctors.

Oh course I could not help but think of ObamaCare.  Maybe all these robots will bring the Medical Costs down.  Robots will happen, but the Insurance companies, HMOs and all the other medical consortiums lowering medical costs  - NEVER HAPPEN...

The medical field is totally out of control on every level, and as far as I'm concerned it is because of Insurance companies and the elimination of the fiduciary relationship of the human doctor with human patient.   For those of you that are wealthy, you may not observe the problems, but we continually fight the problem of the doctors asking for tests and the hospitals coding it incorrectly to make us pay instead of the insurance company. (Medicare in the case of our parents, insurance for our employees and so-on.)  Or even more frustrating is the doctors being graded on how many tests they recommend and being disconnected on whether the patient can afford that or not.  There is a total disconnect between doctors, how they understand (or don't understand) billing, and the patient's deductible.  If you are fairly wealthy, the amount you pay (say $1,000 for a colonoscopy) is not much of your earnings.  But if you earn $40,000 per year and have 2 kids and covered by Obamacare, and you have to pay that $1,000  within your deductible it hurts big time.

By the WAY -- news

1. The big news -- Germany 4th QTR GDP contracted ( -.6%) and the rest of the Eurozone was even weaker.  And then this morning a small-brained lip-flapper, VP Constancio ECB, "negative interest rates are a possibility.   No decision has been made."  Result - Euro got taken to the woodshed.  That kind of lip-flapping was out of left field and totally unexpected.  Negative interest rates are unlikely to happen in my opinion.
2. The G-20 meeting is going to cause lots of consternation over the Currency Wars.  Russia is making more waves than most over some kind of policy to police the devaluation of currency. Well, who knows.  I think Germany's economy will improve this year, but real economists will point out I'm wrong.  However, those are the same economists that call for the collapse of the Euro and the breakup of the Eurozone.  They forecast-ed it would happen in 2012.  Just saying...
3. Japanese Yen is now the whipping boy.  For years no matter what the Japanese attempted to do to drive the currency lower, it went higher.  Well, everyone seems to want to short the Yen, but it  has stabilized temporarily.  
4. The Chinese are moving to widen the distribution of their currency.  For those that have read my newsletters (not this blog), this should come as no surprise.  Banks in Hong Kong and Taiwan are now offering deposit accounts in renminbi / yaun. 
5. Look for the New Zealand dollar to appreciate as their PMI (manufacturing index) increased substantially.  Also their consumer confidence has increased.  Of course the Kiwi took a jump, and then some profit taking overtook it.  A very impressive move overnight I can tell you.  
6. By the way, currencies have a tendency to trend regularly.  For short term traders, you can use ETFs to trade currencies, but warning: you need a very good money management and risk management approach to be at all successful.  Also, lip flapping can move currencies exactly opposite of the trend, creating high-volatility.  I would not encourage anyone to trade in the FOREX market directly.  Leverage is very high, and lip-flapping can cost you a fortune in the blink of an eye.  

Let me opine something that could be disturbing to you.  The currency wars are real, and it is all about nationalistic policies to provide markets for goods (and employment for the citizens).  [Read that again if you don't understand.  The political belief is that if you devalue your currency, your exports will be sold increasing jobs.  The Labor Unions all believe this, and they push for lower dollar value and protection all the time.] This war in the Western countries has become about maintaining the banks at all costs.  This results not in real employment, but beggaring the middle-class.  It is about "POWER".  It is about China wanting to regain their historical role as an economic powerhouse, and that China (and Russia) know that gold is sovereignty and power.  The Western nations Central Banks believe gold is archaic and really worthless:  that the rules of currency supply/demand no longer are applicable.  I mentioned Russia yesterday.  Well, China and Russia (Iran and others) on one side, and the debt ridden Western Nations on the other.  (Israel and Tawain beware, and if you think about that beware statement, then Israel, until Obama, had really only one ally -- the USA.)

Gold, Oil, water and the success or failure of the Yaun as a reserve currency is the only game that matters in the struggle for Global Power.  As investors we can only step back and accumulate what the powerful desire -- which leads us to energy and precious metals.  They will have intrinsic value in whatever comes next.

Fiat currencies can deteriorate overnight, and until I started following currencies (and bonds) to understand the economics of countries, I did not realize how quickly a country could get into trouble.  The US dollar is in the race to be the ugliest currency in the ugly race to the bottom.  For 90 years it has depreciated slowly, and it has accelerated downward very rapidly in the last 10 years.

Good day to all...