Category: zerohedge

Next fall more than 36 universities will be racing at the “Indy Autonomous Challenge” – an all autonomous race that will be held at Indianapolis Motor Speedway. The race is a 20 lap head to head contest with a $1.5 million cash prize at stake. The purpose of the race is to help advance autonomous driving, according to WSJ. We’ll tune in for the same reason we watch most other motor sports – to see if anyone crashes. 

Among the participants are some of the worlds most prestigious engineering schools, including the Massachusetts Institute of Technology, the Korea Advanced Institute of Science and Technology, and the Graz University of Technology in Austria.

Teams are responsible for developing their own “neural nets, computer vision and other artificial intelligence systems” for the race. All teams will be using the same, extremely badass looking Dallara Automobili IL-15 racing car, shown in the photo below. 

Matt Peak, a managing director at nonprofit Energy Systems Network, said: “Self-driving cars have so much potential, but their commercialization efforts are slow; the technologies are still expensive.” He hopes the race will help further emerging technologies in autonomous driving. 

Race speeds are expected to approach 200 mph, putting the AI responsible for driving through the test of professional racing conditions.

Dr. Madhur Behl, an assistant professor at the University of Virginia said: “To us, racing is a proving ground. It’s the stress test for AI, for autonomous vehicles.”

The teams signed up last year and are prepping for a simulation of the race in preparation for the full race in February 2021. The simulation, built by a company called Ansys, will help the teams test their software and will provide data for the teams to use to improve their AI. 

Ajei Gopal, Ansys’s president and chief executive, said: “We can create, with physics, multiple real-life scenarios that are reflective of the real world. We can use that to train the AI, so it starts to come up to speed.” 

Peak commented: “Real students are putting their minds, passions, personalities, energies into this and working behind the scenes in ways that you could not imagine. We have no doubt they are going to be the industry leaders in years to come.”

He concluded: “I certainly think this won’t be the last autonomous race that we will be seeing.”

For wider adaptation, experts still believe that autonomous driving will require faster connectivity standards than 5G and further research. But this race could be the next step in the process – or at the very least, very fun to watch. 

We wonder how long it’ll be – or how much popularity and news coverage the event will have to get – before Elon Musk finds a way to butt in to try and steal the spotlight…

Authored by Robert Aro via The Mises Institute,

Imagine if a member of the Federal Reserve’s Board of Governors said the following :

“When governments manipulate exchange rates to affect currency markets, they undermine the honest efforts of countries that wish to compete fairly in the global marketplace. Supply and demand are distorted by artificial prices conveyed through contrived exchange rates.

Or something honest like:

“The Fed should focus on stable money as a key factor in economic performance. Given that central banks today are the world’s biggest currency manipulators, it’s imperative that the next chairman prioritize the integrity of the dollar.”

And what if they showed an understanding of both history and sound money principles with something intelligent:

“For all the talk of a “rules-based” system for international trade, there are no rules when it comes to ensuring a level monetary playing field. The classical gold standard established an international benchmark for currency values, consistent with free-trade principles.

While she’s not a governor yet, the quotes were from Trump’s appointee Judy Shelton, approved this week by the Senate banking committee on party line at a vote of 13-12. To be nominated to the board of directors, Ms. Shelton will now be put forward to be voted on by the full senate, 53 of the 100 being Republicans.

Yet below, we can see everything wrong with the Mainstream Media (MSM), mainstream economists, and American politics starting with theNew York Times article entitled, God Help Us if Judy Shelton Joins the Fed. Former counselor to the Treasury secretary during the Obama administration, Steven Rattner began with :

Trump’s latest unqualified nominee to the Federal Reserve Board must be rejected.

The defaming article shows Mr. Rattner has no care nor understanding of economics. According to him, Ms. Shelton is known for taking “long-discredited positions in the monetary system,” referring to the gold standard, as he claims it was the “culprit in deepening the Great Depression.” Clearly he is no fan of (or perhaps isn’t educated enough to have heard of) Mises or Rothbard.

In what some may described as laudable on Ms. Shelton’s behalf, Mr. Rattner, fueled by ignorance, continues:

Among other heretical stances, she has supported the abolition of the Federal Reserve itself, putting her in a position to undermine the very institution she is being nominated to serve.

A similar tone was found in the National Review, a magazine which defines itself using the highly nebulous and ill-defined “modern conservative movement.” Going back several months the “controversy” surrounding Judy Shelton was shared in an oxymoronic write-up called: The Wrong Kind of ‘Intellectual Diversity’ at the Fed. It is nothing more than a rant showing the senior editor also knows little about history or economics, but being in a position to publish, does so with a vociferous opinion. He begins with the usual appeal to popularity:

First, she has been a single-minded advocate of a policy that most economists rightly reject: the revival of the gold standard.

What is popular is not always true, especially regarding economics. The article cites quotes from 2009 to the Wall Street Journal in an attempt to discredit her by showing she has not always been consistent in her stances over the span of the past decade. By contrast, the rant implies all other members of the Fed and economists have.

Unfortunately, some people claim to like diversity, but not when it’s different from their own bias. The senior editor who wrote the hit piece can be found on twitter.

Unlike the New York Times and National Review, surprising as it may seem, CNBC’s position was more neutral when discussing the senate hearing, noting :

She faced persistent and at-times hostile questions about her support for the gold standard, her beliefs on whether bank deposits should be insured and whether the Fed should be independent of political influences.

Last but not least, the Wall Street Journal wrote it best , much to the chagrin of its rivals:

the news write-ups inevitably described her with adjectives like “controversial.” She should take it as a badge of honor, given how she would provide needed intellectual diversity at the Fed.

Only in a world this backwards where, in a supposed free country, socialism is considered good and capitalism bad that Shelton could receive so much scorn. To think, 1 out of 7 members of the board could have ideas other than inflationist dogma but they would be shunned for speaking up, says a lot of the society in which we are living. Perhaps the real reason is, if appointed, it could set Judy Shelton in line to the position of Federal Reserve Chair?

Ironically enough, as long Congress stays partisan, we may see her in one of the most powerful central banking positions in the world. It won’t “End the Fed” overnight, but maybe it’s one step closer!

As we’ve observed previously, the Trump administration appears bent on framing downward spiraling American-Sino relations through a new Cold War paradigm. 

Ironically this was on display most on the occasion yesterday of Pompeo’s speech meant to commemorate when President Richard Nixon became the first US president to travel to China. Perhaps the central Cold War style rhetorical appeal to the American public which hearkens back to that 20th century period marked chiefly by “fear” when the US and Soviets had nuclear missiles pointed at each other came here: 

“If we bend the knee now, our children’s children may be at the mercy of the Chinese Communist Party, whose actions are the primary challenge today in the free world,” Pompeo said.  

And then there’s the very title of the speech given at the Nixon Library: “Communist China and the Free World’s Future,” underscoring the new Cold War mentality driving the worsening tit-for-tat.

And then this: 

“We can’t face this challenge alone….Maybe it’s time for a new grouping of like-minded nations, a new alliance of democracies…If the free world doesn’t change Communist China, Communist China will change us.”

He also openly advanced “color revolution” type appeals, a huge poke in the eye to Beijing, with talk of “empowering” the Chinese people to change the “behavior” of the tyrannical Communist Party (CCP).

The Communist Party “fears the Chinese people’s honest opinions more than any foe,” Pompeo said, therefore Washington “must also engage and empower the Chinese people.”

Speaking of the Houston consulate affair, State Dept. spokesperson Morgan Ortagus previously said that they “had to make the decision to close down this consulate due to this massive, massive theft of our research and our intellectual property.”

While the immediate driving context remains the issue of “at least $1 billion” in theft of trade secrets and research (including coronavirus data) from the United States, in remains that the US and Chinese militaries are increasingly in sharp competition. 

In this newly advanced Trump administration modern day Cold War narrative, this military expansion angle should not be forgotten (now perhaps a remote threat, soon to be more immediate).

Indeed amid this week’s huge diplomatic rift centered on Chinese diplomatic outposts as “spy centers,” there’s been little commentary on a bombshell Reuters investigation from days ago which forecasts that within the next decade, the People’s Liberation Army (PLA) will have used its amphibious forces and PLA Marines to establish itself as a serious military power far beyond Asia.

“We are currently only seeing the tip of the iceberg,” a Chinese military specialist, Ian Easton, was quoted in the report as saying.

And further:

“Ten years from now, China is almost certainly going to have marine units deployed at locations all over the world. The Chinese Communist Party’s ambitions are global. Its interests are global. It plans to send military units wherever its global strategic interests require.”

Below are some key excerpts from the lengthy report published at the start of this most tumultuous week of Washington-Beijing standoff…

* * *

Experts on amphibious forces note the PLA already has powerful army units that are trained and equipped to make the kind of landings necessary for an invasion of Taiwan. In expanding the marines, they argue, PLA military planners are looking at operations across the globe, in places where China has extensive offshore investments. These commercial interests are likely to multiply as Beijing presses ahead with its Belt and Road Initiative, an ambitious bid to put China at the center of global trading routes.

China’s marines will also be important to man what is expected to become a network of strategic military bases around the world, including fortifications on territory Beijing has seized in the South China Sea, according to Chinese and Western military commentators.

Beijing has already deployed marines and their armored vehicles to its first overseas base at Djibouti on the Horn of Africa, according to Pentagon reports. Marines are also deployed on the flotillas China sends on naval anti-piracy missions to the Gulf of Aden, these reports said.

* * *

Chinese military commentators quoted in official media say China’s shipyards are now building and launching amphibious ships so rapidly it is like “dropping dumplings” into water.

The military rivalry between China and the United States is only growing sharper. Last week, U.S. Secretary of State Mike Pompeo declared most of Beijing’s claims of sovereignty in the South China Sea illegal, throwing Washington’s weight behind the rival claims of Southeast Asian nations over territory and resources in the strategic waterway that were supported by international law. China said the U.S. position raised tensions in the region and undermined stability.

China’s nascent amphibious forces still lag far behind those of the United States, but the speed of China’s military rise has already shifted the balance of power in Asia. Over the past two decades, China has deployed an arsenal of missiles and a massive surface and sub-surface fleet to deter potential enemies from sailing in its coastal waters. Now, as part of an accelerated modernization of the PLA since Chinese President Xi Jinping came to power in 2012, these new amphibious ships and the specially trained marines they carry will boost Beijing’s firepower and political influence far from its shores, according to Chinese and Western military analysts.

* * *

As shipyards churn out amphibious vessels, China is expanding its force of marines under the command of the PLA Navy. These troops are being trained and equipped to make landings and fight their way ashore. China now has between 25,000 and 35,000 marines, according to U.S. and Japanese military estimates. That’s a sharp increase from about 10,000 in 2017.

…Short of war, capable amphibious forces will also become a powerful diplomatic or coercive tool for Beijing, military analysts say. So far, Washington has had a monopoly on this type of engagement with other governments, routinely sending marine expeditionary units abroad for port visits, joint training exercises and disaster relief.

* * *

Read the rest of the full report here.

Authored by Ryan McMaken via The Mises Institute,

Social scientists have been trying for many years to blame homicides on the presence of guns. A favorite tool in this quest is the use of studies that show a correlation between gun ownership and crime. These studies are then reported as “evidence” that the presence of guns causes crime.

But there’s always been a problem with this attempt at showing causality between guns and homicides: causality can just as plausibly go the other way. That is, in times and places where the local population feels they are in danger of being crime victims, people are more likely to purchase guns for protection. So, rather than saying “guns cause crime,” we should be saying “crime causes guns.”

New Gun Purchases Soar as Uncertainty and Violence Increase

We’re likely seeing this phenomenon at work now.

In recent months, according to the firearm industry’s trade group National Shooting Sports Foundation (NSSF), Americans have purchased millions of guns:

The early part of 2020 has been unlike any other year for firearm purchases—particularly by first-time buyers—as new NSSF® research reveals millions of people chose to purchase their first gun during the COVID-19 pandemic.

Fox News reports:

Gun sales have skyrocketed during the past three months, and a record-breaking 80.2 percent increase in sales was reported in May compared to last year, according to the shooting foundation. April’s data showed a 71.3 percent increase from 2019, and there was an 85.3 percent increase in March, according to information previously released by Small Arms Analytics and Forecasting.

Many new gun owners during this period feared general unrest as a result of the government-mandated lockdowns. Potential first-time buyers still on the fence about buying a firearm in May were perhaps confirmed in their fears by the riots that erupted after the killing of George Floyd by Minneapolis police officers. Then, in the wake of the riots, serious violent crime appeared to spike. It was widely reported, for instance, that homicides in New York City spiked “21 percent in first six months of 2020.” Crime in other cities increased as well, ranging from a jump of over 200 percent in Nashville to 23 percent in Kansas City, Missouri.

Naturally, seeing these news stories, many potential gun owners are more likely to conclude that they need a gun for personal protection. This is especially true when combined with a perception that police organizations cannot be relied upon to engage in crime prevention and enforcement. And this has indeed been the perception in many places where police have appeared unwilling to intervene in June’s riots.

Many normal people would see these events as an illustration of how gun purchases result from fears over crime and uncertainty.

But now, perhaps predictably, left-wing media organizations like the Washington Post are trying to turn this narrative around: people aren’t buying guns as a reaction to violence and social disarray, the Post insists. All those new gun purchases are what’s causing the violence in the first place.

Says the Post:

Americans purchased millions more guns than usual this spring, spurred in large part by racial animosity stoked by widespread protests over the killing of George Floyd in Minneapolis, as well as anxiety over the effects of the covid-19 pandemic.

That gun-buying binge is associated with a significant increase in gun violence across the United States.

The Post cites two new reports, one from the Brookings Institution and another from the University of California, both of which conclude that the rise in gun purchases has likely caused more “gun violence.”

Note the careful use of language here, though: the gun purchases are “associated” with an increase in gun violence, since causality cannot be established. Indeed, near the bottom of the Post article, the author admits:

The authors [of the Brookings and UC reports] caution that a study of this nature cannot prove causality, particularly at a time of massive social upheaval in a country dealing with an unprecedented public health crisis as well as a nationwide protest movement.

Of course, if one is already committed to the idea that guns cause crime, it makes perfect sense that millions of Americans in early 2020—after passing a criminal background check—will buy guns, and then almost immediately use those guns to commit crimes.

Moreover, it’s unclear that the two studies referenced by the Post article even imply that homicides result from more gun purchases.

The Brookings study, for instance, is more of an op-ed than a study. It’s simply a review of some past events which were followed by surges in gun purchases, including the Sandy Hook and Parkland shootings. This appears to be true indeed, and is a helpful reminder that people do often purchase firearms in light of concerns over personal safety, or at least in light of concerns about future access to firearms.

The UC study is a bit more specific, but even this is far too general to be of any use in concluding that gun purchases lead to violence. Because of data limitations, the UC report, of course, doesn’t establish that the people who bought firearms this year are responsible for any increase in crime that may be occurring. But it’s not even established that surges in gun purchases correlate with surges in crime at the city or neighborhood levels. This is critical, since trends in homicides are not really on a statewide or even metro-wide level. Homicide trends in the US tend to be dominated by homicides in a relatively small number of cities and neighborhoods. For example, the homicide rate in Baltimore is ten times that of the US overall. But this doesn’t mean homicides in Maryland are remarkably high.

So, have firearms purchases surged near the neighborhoods in Chicago, New York, and Kansas City where surges in crime have also occurred? It’s possible, since people bordering the most violent neighborhoods may feel the most at risk. On the other hand, it’s also entirely possible that firearms sales are occurring in places relatively distant from the places with surging homicides. The UC study only appears to give a state-level reading on this. In other words, the study really tells us very little.

President Trump sat down Dave Portnoy on Thursday after the White House reached out for an interview.

President @realDonaldTrump sat down with @stoolpresidente today to discuss the role that sports plays in the #GreatAmericanComeback. 🇺🇸

…and, of course, pizza. 🍕 pic.twitter.com/gDlRq5o1va

— Mallory Blount (@MalloryBlount45) July 24, 2020

The two covered a broad range of topics, from sports figures kneeling in support of Black Lives Matter, to Trump’s tweeting habits – which the President admitted occasional regrets over.

“It used to be, in the old days, you’d write a letter, and you’d say, ‘This letter’s really big.’ You’d put it on your desk, and then you go back tomorrow and you say, ‘Oh, I’m glad I didn’t send it.’ Right? But we don’t do that with Twitter. Right? We put it out instantaneously, we feel great, and then you start getting phone calls: ‘Did you really say this?’” -President Trump

The two then discussed Trump’s decision to leave his cushy life in the private sector and enter politics – driving many on the left to abandon support for the billionaire. 

“You’re the most famous person in the world. My guess is nobody ever said ‘Hey, I don’t like Donald Trump’ before he became president. Now everyone has an opinion, and your life has changed forever when – seemingly, you had the dream life beforehand,” said Portnoy. 

To which Trump replied: “I was in so many rap songs, like 79. This is before I did this,” adding “The best day in my life in terms of business and life and everything was the day before I announced I’m running for president.”

Watch:

(PART 1) – I did not expect to interview @realDonaldTrump at the White House yesterday but here we are pic.twitter.com/ouWDXSS62u

— Dave Portnoy (@stoolpresidente) July 24, 2020

(PART 2) – @realDonaldTrump @WhiteHouse pic.twitter.com/O8G9JPwGR3

— Dave Portnoy (@stoolpresidente) July 24, 2020

(PART 3) – @realDonaldTrump @WhiteHouse pic.twitter.com/Rx74t5OUyh

— Dave Portnoy (@stoolpresidente) July 24, 2020

Authored by Charles Hugh Smith via OfTwoMinds blog,

Sclerotic, hidebound institutions optimized for linear stability and permanent growth are simply not designed to adapt to non-linear change and disruption of permanent growth.

Since the first news of pandemic in late January, I’ve been discussing potential accelerants to the unraveling of our fragile financial system: second-order effects (initial travel restrictions and layoffs were first-order effects, new waves of layoffs are second-order effects) and the shift from linear dynamics (add 1 to inputs, that changes output by 1) to non-linear: (add 1 to inputs, that changes output by 10).

The system appears stable until a catalyst pushes it off the cliff. Catalysts come in a variety of forms, from the apparently modest “straw that breaks the came’s back” to a broad awakening that the status quo simply isn’t capable of adapting successfully to new realities.

Financial catalysts tend to result in sudden, cataclysmic collapses in liquidity, solvency and sentiment. While the Federal Reserve can “fix” liquidity crises by creating currency out of thin air, that doesn’t make bankrupt firms solvent or make employers hire employees. Once complacent confidence slides into cautious fear, massive liquidity injections to keep the system from crashing are understood as last-ditch desperation.

Social-political catalysts are slower but much more difficult to reverse. While the media’s attention has been focused on the protests stemming from long-standing institutional bias, As Mark, Jesse and I discuss in Salon #14: Jobageddon and the Coming Education Revolts, two other social-political catalysts are gathering momentum:

1. The failure of our education complex to provide workable childcare/learning solutions

2. The hope of a V-shaped recovery in employment collapses.

As I mention in the podcast, there is a class dynamic in these potential catalysts that few mainstream pundits follow to the logical conclusion. When socio-economic distress is limited to the politically powerless working class–for example, the blatant exploitation of gig-economy and contract workers–the power structure can safely ignore the brewing crisis because the distressed workforce has insufficient economic-political power to threaten the rule of the Power Elites.

But when the top 20% of the workforce that accounts for 50% of all consumer spending and 80% of the citizenry’s political voice is in distress, the Power Elites better pay attention. Nobody in power really cared if lower-income households struggled with juggling childcare and getting to work; but when Mr. and Ms. Technocrat are struggling, suddenly it’s an issue that can’t be ignored.

The same dynamic is also in play in the 21% unemployment that’s accelerating to 25% unemployment. As long as it was the marginal workforce that was losing jobs, the power structure reckoned unemployment was a solution.

But as the second-order effects gain momentum, middle-class jobs will start vanishing and unemployment won’t be enough to pay bloated mortgage payments, property tax bills, etc., and the defaults of student loans, credit cards, auto loans and mortgages will start piling up.

As people awaken to the fact that the V-shaped recovery was a fantasy, sentiment will slide from confidence to angst. The failure of institutions to adapt to new realities will be impossible to deny, and the choices may boil down to opting out (i.e. assemble informal groups of households that pool resources to hire a private tutor for home-schooling their children) to organized revolt (i.e. teachers’ union strikes).

Sclerotic, hidebound institutions optimized for linear stability and permanent growth are simply not designed to adapt to non-linear change and disruption of permanent growth. Systems stripped of buffers are fragile, systems stripped of feedback are fragile, systems that optimize doing more of what’s failed spectacularly are fragile, systems that are little more than fractals of incompetence are fragile, systems that rely on the artifice of denial and fantasy are fragile.

Fragile systems break. This is why the unraveling is accelerating.

*  *  *

My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Tropical Storm Hanna was located by satellite and weather radars to be about 230 miles east of Port Mansfield, Texas, with winds about 50 mph. The storm continues to intensify in the Gulf of Mexico as it churns west-northwest at nine mph.

Hanna is expected to make landfall along the Texas coast Saturday afternoon. Winds could increase above 50 mph with higher gusts in the overnight hours. Tropical storm warnings have been posted for Galveston Bay, including the cities of Corpus Christi, Rockport, and Victoria. As the storm makes landfall, it could bring torrential rains, which may cause flash flooding across southern Texas.

KBTX meteorologist Max Crawford provides an update on Hanna. 

#Hanna continues to strengthen as it moves west toward Texas.

Scattered to widespread rain is likely as early as this afternoon, but especially Saturday. Latest PinPoint forecast: pic.twitter.com/pMWkbyHN89

— Max Crawford (@KBTXMax) July 24, 2020

NHC’s latest update on the storm. 

Tropical Storm Gonzalo is another system heading to the Caribbean waters this weekend. Barbados and the Windward Islands are expected to see tropical storm winds and heavy rains. 

And if that isn’t enough, Hurricane Douglas is approaching Hawaii, which is currently the strongest storm on the planet, packing winds up to 120 mph. There’s also a tropical wave emerging off the west coast of Africa that could strengthen into a hurricane next week.

The 2020 hurricane season is certainly off to a busy start. 

FANG Stocks dared to have their first consecutive weekly close lower since the March collapse…

Source: Bloomberg

Which pushed Nasdaq to its second weekly loss in a row and underperformance this week… After Monday’s meltup, it was downhill (and remember this has typically been the pattern post VIX options expiry)…

Notably, Nasdaq has reversed at a key historical level of richness relative to the S&P…

Source: Bloomberg

Perfectly testing and failing at the dotcom peak…

Source: Bloomberg

AAPL was clubbed like a baby seal…

AMZN was monkeyhammered late in the week (again) but managed to cling to green on the week…

TSLA was twatted…

Boeing didn’t help as emergency FAA headlines hammered it…

Is this the start of the herd move out of the high-flyers?

And as stocks were sold, ‘safe-havens’ like bonds, bullion, and bitcoin (and ethereum) were bid…

The long-end of the yield curve dropped around 10bps on the week with the short-end flat…

Source: Bloomberg

10Y Yield back near intraday lows

Source: Bloomberg

Cryptos screamed higher this week dominated by Ethereum…

Source: Bloomberg

Pushing the biggest altcoin to February highs…

Source: Bloomberg

Gold gained notably on the week with spot back above $1900, back near 2011 record highs…

But while gold gained significantly, this week saw silver surge over 17% to $23…

Its best week in 40 years (since The Hunt Brothers tried to corner the silver market)…

Source: Bloomberg

And investors appeared to reject the USDollar (falling for the 4th straight week)…

Source: Bloomberg

Sending it lower for the year…

Source: Bloomberg

Precious metals dominated the week in commodity land with copper stalling and crude sliding as the week progressed…

Source: Bloomberg

Dr. Copper has stopped signaling a resurgence in growth, stalling at key levels once again…

Source: Bloomberg

Silver is now outperforming gold YTD…

Source: Bloomberg

Finally, WTF is going on here… (stocks at record highs, bond yields at record lows)…

Source: Bloomberg

And one has to ask what the message of the market is…

Source: Bloomberg

Are the Sino-US tensions raising doubts about the dollar and sending the world into ‘real’ money?

Authored by Eduardo Neret via Campus Reform,

After the results of a recent Fox News poll showed that Americans under the age of 30 were more likely than other age groups to describe the Founding Fathers as villains, Campus Reform asked students to weigh in.

“They accomplished a lot of things, but a lot of them were not very good,” one student said.

“Villains,” another answered when asked if he viewed the Founding Fathers as heroes or villains. “They owned slaves.”

Campus Reform also asked students if the Founding Fathers did any good, which most had trouble answering.

“No, I’m sorry, no,” one student said when asked if anything came to mind.

“I’m sure [they did some good], but that’s all I’m going to say,” another added.

“Again, I’m not the best at history.”

Campus Reform then asked who should be the nation’s heroes instead of the Founding Fathers.

“Not someone that I can really think of on the spot right now, but there are definitely better people that we could look up to.”

“Sacagawea,” a different student said.

One individual even said former President Barack Obama, because “he was our first, the first black president.”  

Watch the full video here:

Earlier this week we noted a new scientific report which confirmed what we have been saying for much of the past decade: that in the new abnormal, hedge fund flows matter more than fundamentals, data, newsflow and virtually all other market variables, with one concrete exception: central bank liquidity injections (and occasionally, drains).

As the research paper titled “Which Investors Matter for Equity Valuations and Expected Returns?” found, hedge funds exert far more power on equity prices than most other classes of investors, while the passive cohort are among the least influential. The paper’s conclusion, as per Bloomberg: “The fast money has more than three times the impact on equity valuations, per dollar under management, than long-term investors like pension funds.”

“The influence of hedge funds is remarkable given their relatively small size,” the authors wrote. Smaller  investment advisors had the second-greatest impact on price, and proved even more influential across a host of other characteristics, the authors found. “Small, active investment advisors are most important for the pricing of payout policy, cash flows, and the fraction of sales sold abroad.”

One immediate question that followed from this research is “if it is that easy to manage money, why aren’t there funds who have perfected this copycat strategy”?

As it turns out there are. As Bloomberg reported just hours after we published the above report, a machine-learning hedge fund backed by PE giant Blackstone has been on a serious growth spurt after generating a 20% gain in this year’s wild pandemic markets.

Bayforest Capital – which we regret to inform all unemployed hedge fund analysts and portfolio managers employs just five people in London – is set to oversee $235 million in managed accounts over the coming month, a remarkable, six-fold increase compared with just $45 million at the end of 2019. It also plans to launch a fund for institutional investors later this year.

The firm run by Theodoros Tsagaris, a quant who previously worked at Tudor, GSA Capital and BlueCrest Capital, has impressed outside investors with a record of positive gains every month in this year.

How does the fund do it? Simple: it figured out long ago what we confirmed earlier this week, namely that “Hedge Fund Flows Are All That Matter.” Tsagaris credits Bayforest’s success to algorithms surfing fast shifts in capital flows in real time. As Bloomberg details further, with a system trading futures based on the behavior of different investors and an average holding period of just eight days, the portfolio has managed to make money even as markets swing from despair to exuberance.

“We’re receiving billions of data points every day and we adapt our algos based on the new information,” Tsagaris told Bloomberg in an interview. Translation: ‘we are just doing whatever the price-setters are doing at any given moment.’

And since the price setters – such as Blackrock – are merely frontrunning the central banks… well, one hardly needs to be a rocket scientist to figure out how to constantly make money in this centrally-planned “market.”

Think of it as central-bank inspired momentum… on steroids.

Tsagiris’ hope is to grow his fund three more times and oversee $750 million by the end of the year, an ambitious goal for a firm that started trading in March 2018 with almost no capital. But that goal is certainly looking attainable now that the $6 billion Blackstone Alternative Multi-Strategy Fund last month announced it’s allocating to Bayforest, joining sub-advisers including D.E. Shaw and Two Sigma.

A Bayforest strategy of following capital flows holds particular appeal in a volatile market jumping from record losses to historic gains. That’s especially so for systematic investors whose directional bets have been crushed by rapid shifts in bull and bear regimes. Investing styles that follow flows can range from trading ahead of index rebalancing to buying shares touted on websites followed by day traders.

And yes, in case anyone was wondering, long-term, “buy and hold” investing is dead. Bayforest is also among a short list of quant funds this year that attribute their triumph to shorter holding periods and more adaptive trading signals, even as skeptics – i.e., those who takes PPP funds and pretend they manage money when all they really do is convince their LPs that central banks will bail them out – that constantly churning portfolios may not pay off in the long run.

Oh and yes, Tsagaris is not an actual trader: his academic training is on harnessing computing power to “decipher” noisy markets; his doctorate dissertation at Imperial College London was on building adaptive algos from data streams. Because that’s what “markets are now: algos frontrunning and adapting to other algos.

He says Bayforest’s advantage is its ability to continually suss out new patterns, allowing it to adapt even when market participants try to hide their tracks by changing how they trade.

“What we are seeing is amazing alpha in areas that were not evident before,” he said, referring to the shifts in capital flows in both investing apps like Robinhood and exchange-traded funds. Translation: with everyone else scrambling to discover the Golden Grail of manipulated, centrally-planned markets, the answer is staring everyone in the face: always do what the majority is doing… as long as it is frontrunning central banks.

Oh, and for anyone still confused, this means that traditional buy and hold, investing – value or otherwise – is long dead and buried.