Wednesday, October 11, 2017

Future of Capitalism

In another round of file cleaning on the old computer I found my notes taken when reading The Future of Capitalism by Lester Thurow. The book was written in 1996 and I read it in 1998.

Wikipedia - Lester Carl Thurow (May 7, 1938 – March 25, 2016) was an American political economist, former dean of the MIT Sloan School of Management.

Actually, this is kind of spooky. I made (in 2017) comments in parens places.

Surging inequality (a big political talking point)
China focus will change to India focus (not so much)
Communism had good education (don't know what this meant)
No competitor to capitalism now so it will not implode (true dat)

Economic Surface of the Earth

End of Communism (Plate 1)   (well, Cuba pushed that way a little and North Korea will if they push war)
Offers lots of cheap labor (another political talking point

Migration (plate 4) pushes unskilled workers into 1st world (ditto)

New technologies (plate 2) generates skill shift (in spades)
Need to offset this (by massive skill investment) is resisted by the elderly (plate 3)

Global economy (plate 4) forces wages down (indeed)

Without dominant power (plate 5) there is no economic locomotive. (better watch out)

Progress occurs when technology meets ideology

Inflation is extinct (true dat, too)

Japan will crack (it is number 3)
Europe is biased towards social programs so jobs will flee (Nostradamus)
Global bubbles burst together (looks like that could happen very soon)
Uncertainty breeds religious fundamentalism (its familiar in uncertain times) (O...M...G...)

Capital is human and no longer ownable

Need to spur long-term thinking and R&D - Government's only role  (we wish)

Bill Meehan in the archives

I was looking through old documents buried on my computer and found this raw text excerpts that I believe eventually made it's way into the Market Technician's Association newsletter in 2000 or 2001. It was comments about a recent MTA seminar written by Bill Meehan, whom we lost in the Towers on 9/11.
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RealMoney.com comments on the Seminar

excerpted with permission from a column written by Bill Meehan.

Voodoo, as I use it here, refers to only one of the colorful descriptors that many on Wall Street use to denigrate those who spend their waking hours devoted to the art of technical analysis. Kooks, I believe, is how academia prefers to label chart readers. However, nothing was quite so satisfying as listening to Dr. Andrew Lo of the MIT Sloan School of Management present mathematical proof at the Market Technicians Association's annual meeting that technical analysis cannot be dismissed, at least when it comes to pattern recognition, as mere voodoo practiced by kooks.

It's good to have one's belief verified by such an acclaimed professor. The work continues, especially as to why the results were so significant when looking at Nasdaq stocks and so inconclusive when looking at those traded on the New York Stock Exchange and the Amex. Perhaps readers might have some ideas after reviewing the data.

Oops! I noticed that I made a big mistake above. Having the chance to meet and spend quite a bit of time with Dick Arms, who so graciously fills in for me, was actually the highlight of the meeting for me, with all due respect for Dr. Lo and his paper. And meeting many other leaders in the field was a real thrill that alone is worth the modest cost of joining the MTA.

Passing on Wisdom

I've been a bit out of touch with the market virtually all of last week, without many of the technical tools that I rely on. Therefore, I'll relay a bit of what another presenter at the MTA meeting had to say about the current technical state of the market. In addition, I'll throw in my two cents about the Federal Reserve and some of the psychological indicators that keep me from becoming more bullish in the short term. As time allows this week, I'll also do my best to respond to readers who sent me email while I was away.

While most of the meeting's presenters were very interesting (although a few were speaking a foreign language to my mathematically challenged brain), Phil Erlanger's observations about short interest struck me as particularly important. The MTA's current president focused on adjusted short interest, a sentiment tool that he developed, which has a very strong track record. The Erlanger short interest ratios for the Dow, S&P 500 and Nasdaq Composite are all at multi-decade lows and at levels far below those generally seen at times of high market risk. The charts were startling and alone should make one pause, although relying on one technical indicator isn't wise, in my opinion.

Bill Meehan is the chief market analyst for Cantor Fitzgerald, a Manhattan-based institutional trading and research firm, and writes daily for the Cantor Morning News. He can be reached at bmeehan@thestreet.com.