Book Bits | 21 April 2018

Prediction Machines: The Simple Economics of Artificial Intelligence
By Ajay Agrawal, et al.
Essay by authors via Harvard Business Review
There is no shortage of hot takes regarding the significant impact that artificial intelligence (AI) is going to have on business in the near future. Much less has been written about how, exactly, companies should get started with it. In our research and in our book, we begin by distilling AI down to its very simplest economics, and we offer one approach to taking that first step.
We start with a simple insight: Recent developments in AI are about lowering the cost of prediction. AI makes prediction better, faster, and cheaper. Not only can you more easily predict the future (What’s the weather going to be like next week?), but you can also predict the present (what is the English translation of this Spanish website?). Prediction is about using information you have to generate information you don’t have. Anywhere you have lots of information (data) and want to filter, squeeze, or sort it into insights that will facilitate decision making, prediction will help get that done. And now machines can do it.
Continue reading

Macro Briefing: 20 April 2018

Trump’s trade policies pinch US economic optimism: Bloomberg
N. Korea drops demand that US troops withdraw ahead of talks: Time
Cuba’s new president vows to maintain communism for the island nation: DW
IMF warns of trade-war risk for global economy: The Hill
US will fine Wells Fargo $1 billion for various misdeeds: NY Times
US Leading Economic Index in March points to “robust economic growth”: WSJ
US jobless claims fell slightly last week, near 45-year low: MarketWatch
Philly Fed Mfg Index: expansion continues amid rising costs: Bond Buyer
Most ultra-rich investors expect a US recession within two years: CNBC
Hedge fund assets reach record high: Institutional Investor
US 10-year Treasury yield approaching 3.0% for 2nd time in 2018: Bloomberg

Macro Briefing: 19 April 2018

South Korea’s president: N. Korea seeking “complete denuclearization”: Reuters
Trump highlights perilous aspect of possible US-N. Korea meeting: CBS
NY attorney general investigating cryptocurrency exchanges: CNBC
Fed’s Beige Book reflects concerns about possible trade tariffs: MarketWatch
Oil prices rise to highest level since late-2014: Reuters
Policy sensitive 2yr Treasury yield ticks up to new 10yr high: 2.42%

Small Cap Stocks Top Large Cap, Value Trails Growth Year To Date

It’s been a volatile year so far for stocks, but two big-picture trends are clear in 2018 for two widely followed subsets of the broad market. First, small-cap shares are enjoying a solid run over large caps. Value stocks, by contrast, continue to suffer vs. shares of growth companies, based on year-to-date performances via a set of exchange-traded funds.
Continue reading

Macro Briefing: 18 April 2018

Drug-resistant typhoid epidemic becoming “global concern”: Ars Technica
S. Korea says it’s discussing peace deal with N. Korea: Reuters
CIA chief met with N. Korea’s Kim Jong-un: NY Times
China’s President Xi planning to visit North Korea, says Chinese official: CNN
Republicans pushing for 2nd tax vote ahead of mid-term elections: Reuters
US housing starts rebound in March, up 10.9% vs. year-earlier level: MarketWatch
Industrial output in US rose more than expected in March: RTT
Analyst says VIX index signaling US stocks will continue to rebound: MarketWatch
BofA: Money managers’ global equity allocations fell to 18-mo low in April: P&I
Over half of next year’s nearly $1 trillion federal deficit due to new laws: CRFB

Treasury Yield Curve Flattens As Retail Spending Rebounds

The difference between the 10-year and 2-year Treasury rates narrowed to 47 44 basis points on Monday (April 16) – the smallest gap since late-2007. The last time this widely followed spread was this close to zero the US economy was close to a recession. Is this indicator flashing a similar warning today? No, according to a broad reading of the economic data, which reflects a healthy trend. The question is whether the narrowing yield spread is still a reliable late-cycle warning that the macro profile will weaken in the months ahead?
Continue reading

Macro Briefing: 17 April 2018

Trump blocks Russia sanctions announced by his UN ambassador: Politico
Japan’s Abe and Trump will discuss N. Korea on Tuesday: Reuters
US retail sales rose sharply in March after 3 monthly declines: MarketWatch
NY Fed Mfg Index growth eases in April; 6-mo outlook plunges: NY Fed
China’s holdings of US Treasuries increased in February: Reuters
China’s economy grew 6.8% y-o-y in Q1, matching Q4’s pace: RTT
China says it will end foreign ownership caps on car firms by 2022: Reuters
US business inventories rose 0.6% in Feb, in line with expectations: RTT
US home builder sentiment strong but edges down in April: HousingWire
Japanese gov’t maintains moderate growth outlook for economy: MNI
Treasury 10yr/2yr yield curve continues to flatten, easing to 44 basis points: