Observe. Think. Chat. Do. Trade. Repeat…
Norman Vincent Peale was an American Protestant clergyman and an author best known for popularizing the concept of positive thinking, especially through his best-selling book The Power of Positive Thinking
This means that the purchasing power of currency increases over time, allowing you to buy more with the same amount of money. It can be as damaging to the economy as inflation.
Consumer and Asset Prices: During deflation, both consumer and asset prices decrease, which might seem like a good thing because it increases the purchasing power.
Economic Impact: However, deflation can be harmful to the economy. It often signals an impending recession or hard economic times. If people expect prices to fall further, they may delay purchases, hoping to buy later at a lower price. This leads to reduced spending, which can cause producers to earn less, potentially leading to unemployment and higher interest rates.
Measurement: Deflation is measured using economic indicators like the Consumer Price Index (CPI), which tracks the prices of commonly purchased goods and services. When the CPI shows that prices are lower than in a previous period, the economy is experiencing deflation.
Causes: The main causes of deflation include a decrease in demand or an increase in supply. A decline in aggregate demand can lead to lower prices if supply remains unchanged. Conversely, an increase in supply can also cause prices to drop if demand does not increase accordingly.
It’s important to note that deflation is different from disinflation. Disinflation refers to a slowdown in the rate of inflation, where prices are still rising but at a slower pace than before.
Deflation can have complex effects on an economy, and while it may benefit consumers in the short term, it can lead to broader economic challenges.
Deflation, often perceived as a relief during times of high prices, is a complex economic condition that presents both benefits and challenges. It is defined by a general decrease in the price level of goods and services, leading to an increase in the real value of money. This means consumers can buy more for less, but this apparent advantage masks the potential dangers lurking beneath the surface.
The immediate effect of deflation is an increase in consumer purchasing power. As prices drop, money buys more, which can be particularly beneficial for individuals on fixed incomes. However, this boon is short-lived if deflation persists. Consumers, anticipating further price drops, may postpone purchases, leading to a decrease in consumer spending, the lifeblood of any economy. This reduction in demand can force businesses to lower prices further, creating a vicious cycle that’s hard to break.
Moreover, deflation can exacerbate debt burdens. As prices and revenues fall, the real value of debt increases, making it more challenging for borrowers to repay their obligations. This can lead to increased loan defaults and financial instability. For businesses, falling prices mean reduced profit margins, leading to cost-cutting measures such as layoffs, reduced investment, and even bankruptcy.
The causes of deflation are multifaceted, often stemming from a decrease in aggregate demand or an oversupply of goods. Technological advancements, while boosting productivity, can also contribute to deflation by lowering production costs and increasing supply faster than demand. Additionally, a strong currency can make imports cheaper, contributing to lower prices domestically.
Central banks and governments typically combat deflation with monetary and fiscal policies aimed at stimulating demand. Lowering interest rates, increasing government spending, and quantitative easing are common strategies employed to inject money into the economy and encourage spending.
While deflation can initially seem like a welcome development, its long-term effects can be detrimental to economic health. It is a delicate balance that policymakers must navigate carefully to ensure stability and growth in the economy.
During this period of inflationary pressure, no country is beyond the grasp of deflation.
A message for governments and central banks around the world – don’t push too hard!
The decision, which was widely expected by financial markets, means borrowing costs will remain at their highest level for 15 years.
the Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to keep rates at a 15-year high.
There was reportedly no discussion of cutting interest rates, and it’s still concerned that price rises might be stickier in the UK economy than in the U.S. or Eurozone.
The U.S. yesterday, 13th December 2023 indicated that 2024 could see three interest rate cuts. No such indication was forthcoming from the UK.
The Dow Jones Industrial Average (DJIA) hit a new all-time high, on 13th December 2023. It closed at 36799 surpassing its previous record of 36585points that it had set on 4th January 2022. This was the fourth consecutive record close for the index.
The Dow’s record high was driven primarily by the Fed holding the interest rate at 5.5% and signalling that it expects to cut interest rates three times in 2024 to stimulate growth and inflation.
Other factors such as strong corporate earnings, optimism about the economic recovery from the COVID-19 pandemic, the emergence of AI and its effect on the economy and for a U.S. ‘soft landing’ all played their part.
The Dow is not only a measure of stock market performance, but also a reflection of the overall health and confidence of the U.S. economy. It is often used as a benchmark for investors and analysts to evaluate their portfolios and strategies. The Dow is also closely watched by policymakers and media outlets as a measure of public sentiment and expectations.
The Dow, in intraday trading, continued to climb to over 37200.
More to come?
The Federal Reserve on Wednesday 13th December 2023 held its key interest rate steady for the third time in a row and set the scene for multiple rate cuts in 2024 and 2025.
With inflation easing and the economy holding up policymakers Federal Open Market Committee policymakers voted unanimously to keep the rate in a range between 5.25%-5.5%.
Along with the decision to stay on hold, the FOMC pencilled in at least three rate cuts in 2024, assuming quarter percentage point increments. That’s less than market pricing of four, but more aggressive than what officials had previously indicated.
Markets had widely anticipated the status quo decision which could end a cycle that has seen 11 hikes, pushing the interest rate to its highest level in more than 22 years. There was uncertainty, though, about how ambitious the FOMC might be regarding policy easing.
The FOMC’s so called ‘dot plot’ of individual members’ expectations indicate another four cuts in 2025, or a full 1%. Three more reductions in 2026 would take the Fed rate down to between 2%-2.25%, close to the longer-term outlook, though there were considerable difference in the estimates for the final two years.
Following the Fed update the Dow Jones Industrial Average jumped more than 400 points, surpassing 37,000 for the first time creating a new Dow all-time high.
Rudolph the Red-Nosed Reindeer – Rudolph is usually depicted as the ninth and youngest of Santa Claus’s reindeer, using his luminous red nose to lead the reindeer team and guide Santa’s sleigh on Christmas Eve.
Though Rudolph initially receives ridicule for his bright red nose, the brightness is so powerful that it illuminates Santa’s path through dark winter weather.
The original story of Rudolph the Red-Nosed Reindeer was written by, Robert May.
First publication of the short story was in 1939.
In a significant development that has raised concerns among investors and policymakers worldwide, China’s debt outlook has been downgraded as the country grapples with a slowing economy. This move reflects growing apprehensions about the sustainability of China’s economic growth and its ability to manage its burgeoning debt.
Moody’s issued the warning as it cut its outlook on the government’s debt to negative, from stable. China said it was disappointed by the move, calling the economy resilient. China also reported to have said it is unnecessary for Moody’s to worry about China’s economic growth prospects and fiscal sustainability.
For years, China’s rapid economic expansion has been the engine of global growth, but recent trends indicate a deceleration. The once double-digit growth rates have now tapered, with projections suggesting a further slowdown in the coming years.
This deceleration is attributed to various factors, including trade tensions, demographic shifts, and a maturing economy.
The downgrade, announced by a prominent credit rating agency recently, underscores the risks associated with China’s increasing debt levels. The country’s total debt, which includes government, household, and corporate debt, has climbed to around 85%* of its GDP. This debt accumulation is partly due to the government’s efforts to stimulate the economy through infrastructure spending and lending to state-owned enterprises.
The property sector, a significant pillar of China’s economy, has also shown signs of strain. High-profile defaults and a cooling housing market have added to the concerns, prompting fears of a ripple effect across the economy. The government’s crackdown on excessive borrowing and speculative investments has further tightened liquidity, impacting developers and homeowners alike.
In response to the downgrade, China’s finance ministry has expressed confidence in the country’s economic resilience. Officials argue that the fundamentals of the Chinese economy remain strong, with continued efforts towards high-quality development and structural reforms. They assert that the concerns raised by the credit agencies are overstated and that China’s fiscal position remains robust.
Nevertheless, the downgrade should serve as a warning signal. It highlights the need for careful fiscal management and policy adjustments to navigate the challenges ahead. As the global economy faces uncertainty, the world will be closely watching how China addresses its debt dilemma and maintains its trajectory of growth.
This situation presents a complex puzzle for China’s leadership, balancing the goals of economic stability and sustainable development. The outcome will have far-reaching implications, not just for China but for the entire global economy.
The world awaits to see how China will write the next chapter in its remarkable economic story. If this goes wrong – it will go wrong in a big way.
China’s top decision-making body of the ruling Communist Party on Friday said that the country’s fiscal policy ‘must be moderately strengthened’ to stimulate economic recovery, according to state-run news outlet.
China’s debt-to-GDP ratio was recorded at around 77% of the country’s Gross Domestic Product in 2022. This ratio is an important indicator of a country’s economic health, reflecting its ability to pay back its debts. This ratio has been on the rise in recent years, indicating an increase in national debt relative to the GDP. For instance, the ratio was around 23% in 2000 and grew to 34% in 2012, with a significant jump to the current level.
Forecasts suggest that China’s debt-to-GDP ratio could reach 104% by 2028
It’s important to note that such figures can vary and should be interpreted within the context of each country’s economic structure and policies.
The UK economy shrank more than expected in October 2023, as higher interest rates hit consumers. The bad weather didn’t help either.
Household spending has been dented by rate rises as the Bank of England tries to tackle inflation. It is due to make its next rate decision on Thursday 14th December 2023. Retail and tourism were hit by severe weather hit the UK in October 2023.
Analysts had predicted that the economy would fall by just 0.1% but services, manufacturing and construction sectors all contracted more than expected.
The UK economy has been stagnating and the Prime Minister has promised to speed up economic growth. But no significant recovery is expected until January 2025.
Commenting on the latest figures, Chancellor Jeremy Hunt said it was ‘inevitable economic growth would be subdued, whilst interest rates are doing their job to bring down inflation.’
The figures underline the ongoing impact of the cost-of-living crisis and the tools employed by our ‘decision’ makers on our behalf.
Prices across a wide spectrum of goods and services moved slightly higher in November 2023 but were mostly in line with expectations, thus further easing pressure on the Federal Reserve.
The consumer price index, a closely watched inflation gauge, increased 0.1% in November, and was up 3.1% from a year ago, the U.S. Bureau of Labor Statistics reported Tuesday 12th December 2023.
While the monthly rate indicated a pickup from the flat CPI reading in October 2023, the annual rate showed another decline after hitting 3.2% a month earlier.
The EU agreed guidelines around AI in systems like ChatGPT and facial recognition.
The European Parliament will vote on the AI Act proposals early next year, but any legislation will not take effect until 2025 at the earliest. The U.S., UK and China are all rushing to publish their own guidelines.
The proposals include safeguards on the use of AI within the EU as well as limitations on its adoption into law.
European Commission President Ursula von der Leyen said the AI Act would help the development of technology that does not threaten people’s safety and rights. Consumers would have the right to launch complaints and fines could be imposed for violations.
In a social media post, she said it was a ‘unique legal framework for the development of AI you can trust’.
The European Parliament defines AI as software that can ‘for a given set of human-defined objectives, generate outputs such as content, predictions, recommendations or decisions influencing the environments they interact with.’
This is a significant step towards ensuring that AI development and deployment are aligned with ethical standards and respect for human rights.
Will the EU, UK, U.S., China and other countries AI rules conflict?
Henry Wadsworth Longfellow: (1807 – 1882) was an American poet and educator. He was a beloved American poet of the 19th century, known for his lyrical and narrative poems.
Bitcoin fell 7% Monday 11th December 2023 after touching $45,000 demonstrating its aptitude for volatility. A $5000 fall in 24 hours.
The move comes after a 12% tear for Bitcoin in December 2023 as expectations grew that the U.S. could soon approve its first spot bitcoin ETF.
Bitcoin has been on a steady climb in recent weeks, following a long period of market apathy that witnessed the price trade in a narrow range for months.
Other Altcoins such as: ADA, XRP fell in unison.
Bitcoin’s volatility will likely see it climb back to the $45,000 level quite quickly.
NOTE: Bitcoin can damage your wealth. Do your research!
Remember: RESEARCH! RESEARCH! RESEARCH!
The two most significant events for gold demand in 2023 were the collapse of Silicon Valley Bank and the Hamas attack on Israel, the World Gold Council (WGC) said, estimating that geopolitics added between 3% and 6% to gold’s performance over the year.
The WGC estimated that central bank demand added 10% or more to gold’s performance in 2023 and said even if 2024 does not reach the same heights, above-trend buying should still offer an extra boost to gold prices.
The precious metal broke through $2,100 per ounce on Monday 4th December 2023 in intra-day trading, before moderating slightly. Spot gold prices were hovering at around $2,030 per ounce Friday 8th December 2023.
The World Gold Council (WGC) is a market development organization for the gold industry. It works across all parts of the industry, from gold mining to investment, with the aim of stimulating and sustaining demand for gold. The council sets standards, strengthens markets, and shapes the global conversation about gold. It was established to promote the use of and demand for gold through marketing, research, and lobbying.
The council includes 33 members, many of which are gold mining companies.
The world’s richest 1% of people are responsible for around the same percentage of global carbon emissions as the 5 billion people who represent the 66% poorest, according to a report published by Oxfam.
In the report he wealthiest 10% were responsible for 50% of global emissions, it found, while the bottom 50% were responsible for just 8%.
The top 1% represents 77 million people and is defined in the report as having an estimated income threshold of $140,000 per year, and an average income of $310,000.
The report states that personal consumption varies depending on factors such as location, use of renewable energy and transport where the very wealthiest contribute significantly more due to the use of private jets and yachts.
It also includes between 50% and 70% of emissions by the 1% coming through investments in companies, measured by taking firms’ reported emissions and distributing that proportionate to shareholder ownership of those firms by the 1%.
See report here.
The unemployment rate has dropped to 3.7%, even as more workers entered the labour market. This points to underlying strength in the labour market and is a positive sign for the U.S. economy.
Stocks had risen as investors awaited these latest employment figures, which are closely watched as an indicator of potential moves by the central bank on interest rates.
Markets showed a mixed reaction to the report, with stock market futures modestly negative while Treasury yields surged. Job creation showed little signs of slowing as payrolls grew even faster than expected and the unemployment rate fell despite signs of a weakening economy.
Good news for the U.S. economy but Treasury yields are on the up again.
Charles John Huffam Dickens, 1812 – 1870 was an English novelist and social critic who created some of the world’s best-known fictional characters and is regarded by many as the greatest novelist of the Victorian era.
Arguably, one of his best-known novels is: A Christmas Carol.
An indication that tech companies want alternatives to the expensive Nvidia graphics processors that have been essential for artificial intelligence (AI).
If the MI300X is good enough and inexpensive enough when it starts shipping early next year, it will likely lower costs for developing AI models.
AMD CEO Lisa Su projected the market for AI chips will amount to $400 billion or more in 2027, and she said she hopes AMD has a sizable part of that market.
Wall Street resumed its rally after a short break as technology giants intensified their AI race, pushing up tech stocks.
When you witness Google launching a new AI model (Gemini) and AMD chasing a slice of the hot AI chip market, you know a pre-Christmas cheer will wash over investors.
To think, just a handful of years ago, other than in Science Fiction novels, the term ‘artificial intelligence’ didn’t exist in our vocabulary and now it is becoming more and more integrated with our day-to-day lives.
Stock markets love it. AI is fast becoming a business necessity and not just an option.
Pertaining to someone’s ability to attract another person through style, charm, or attractiveness, this term is from the middle part of the word ‘charisma’, which is an unusual word formation pattern.
This new survival game will allow players to explore vast, open worlds where the magic of LEGO building and Fortnite collide. It’s designed for people of all ages and encourages creativity, experimentation, and collaboration through play. It seems to be based on Minecraft – a Lego-style block-building and crafting game – which is the best-selling game of all time.
Additionally, there are some LEGO Fortnite-themed products available for purchase, such as realistic LEGO guns and other building sets compatible with LEGO.
Fortnite technically has multiple game modes, but its online Battle Royale is by far its most popular, where up to 100 players compete to be the last one standing.
But the extraordinary popularity of Fortnite‘s Battle Royale completely dwarfed the game’s other modes, and Fortnite is now known to most as an online ultimate shooter game with crafting elements.
Minecraft, which is owned by Microsoft, is a survival game in which players build structures as well as craft tools and weapons. When Fortnite first released it came with a similar crafting survival mode, named Fortnite: Save the World, which was released before its battle royale mode even existed.
Google has launched its largest and most capable (by its own admission) artificial intelligence (AI) model on Wednesday 6th December 2023 pressure mounts on the company to answer how it’ll monetize AI.
The large language model Gemini will include a suite of three different sizes: Gemini Ultra, its largest, most capable category; Gemini Pro, which scales across a wide range of tasks; and Gemini Nano, which it will use for specific tasks and mobile devices.
Google is reportedly planning to licence Gemini to clients through Google Cloud to use in their own applications. Developers and enterprise customers can access Gemini Pro via the Gemini API in Google AI Studio or Google Cloud Vertex AI.
Android developers will also be able to build with Gemini Nano. Gemini will also be used to power Google products like its Bard Chatbot and Search Generative Experience, which tries to answer search queries with conversational-style text.
Gemini Ultra is reportedly the first model to outperform human experts on MMLU (massive multitask language understanding), which uses a combination of 57 subjects such as math, physics, history, law, medicine and ethics for testing both world knowledge and problem-solving abilities, the company said in a blog post Wednesday 6th December 2023.
It can supposedly understand nuance and reasoning in complex subjects.
The company gave examples demonstrating Gemini being able to take a screenshot of a chart and analyse hundreds of pages from research and then updating the chart.
Another example was analyzing a photo of a person’s math homework and identifying correct answers and pointing out incorrect ones.
The future is artificial.
Definition of the word Gemini: Constellation, Astrological Sign or Twins in Latin.
The Federal Reserve’s interest rate hikes through 2023 have caused average interest rates for credit cards to spike to more than 22%. Rates on retail credit cards are even higher, nearing 29% on average.
Despite rising costs and higher borrowing rates, a record number of consumers shopped over the Thanksgiving holiday weekend. The National Retail Federation found that more than 200 million consumers went shopping that weekend, more than the 196.7 million shoppers who turned out in 2022.
Retailers Macy’s and other larger retailers have issued warnings about a slowdown in repayments on their credit cards, highlighting a potential risk to retail revenue this holiday season.
The resilience of the American consumer will continue to be tested by the still-rising costs of groceries, fuel, energy and housing.
The U.S. credit card debt is approximately equal to the size of Apple’s market cap of $1 trillion.
Its pilot will open this month in a part of Chicago, with a plan to be in about ten locations by the end of 2024. The fast-food chain also plans to open about 10,000 McDonald’s restaurants globally by 2027, with many of those in China.
The first CosMc’s is due to open in Illinois, U.S. later this week, with about 10 more to open in Texas in 2024.
The expansion would boost the number of stores to about 50,000.
X.AI, Elon Musk’s artificial intelligence (AI) startup, has filed with the SEC to raise up to $1 billion in an equity offering.
The company has already raised nearly $135 million with the first round on 29th November 2023 according to the filing.
The AI startup, which Musk announced in July 2023, seeks to ‘understand the true nature of the universe’, according to X.AI website.
According to some sources, Big Tech and AI are contributing to the water crisis by using large amounts of water to cool their data systems and AI computations.
Researchers estimate that Microsoft used 1.7 billion gallons of water for AI alone in 2022, a 34% increase from 2021. Google also reported a 20% increase in water usage, mostly due to its AI work. One of the most water-intensive AI models is ChatGPT, which is estimated to use half a litre of water for every series of prompts.
These numbers are alarming, considering that water is a finite and vital resource for humans and ecosystems.
ChatGPT is estimated to use the equivalent of one 16-ounce bottle of water (approx’ half a litre) for every 20-50 queries according to a study by Shaolei Ren, an associate professor of electrical and computer engineering at the University of California.
Some tech companies are aware of the environmental impact of their AI activities and are trying to find ways to reduce their water consumption and carbon footprint. For example, Microsoft has pledged to become water positive, carbon negative, and waste-free by 2030.
Google has also set a goal to operate on 24/7 carbon-free energy by 2030. OpenAI, the creator of ChatGPT, has stated that it is working on improving the efficiency of its AI models. Some possible solutions include using renewable energy sources, developing better algorithms and hardware, and locating data centres in colder climates.
Some argue that Big Tech and AI are using too much water, and that they should be regulated. They should be held accountable for their environmental impact.
Others may contend that Big Tech and AI are providing valuable services and innovations and they are taking steps to mitigate their water usage and become more sustainable.
Scientists believe the A23-A’s breakaway from Antarctica was a natural occurrence, but say it provides a stark reminder of the potentially disastrous implications as global sea levels rise.
It split away from the Antarctic coastline in 1986 and became an ice island in the Weddell Sea. It is about 4,000 sq km (1,500 sq miles) in area, which is more than twice the size of Greater London, and 400m (1,312 ft) thick, which is taller than the London Shard.
Recently, it has started to move at a faster pace and is now about to leave the Antarctic waters. Scientists believe it has lost its grip on the sea floor and is being pushed by winds and currents. It is likely to follow the path of other icebergs from the Weddell Sea and head towards the South Atlantic, where it will eventually melt and break apart.
Icebergs are important for the ocean ecosystem, as they carry fresh water and nutrients that support marine life. They also affect the climate, as they reflect sunlight and cool the air. Iceberg A23-A is a remarkable natural phenomenon that has been observed for decades by researchers and satellites.
This is not happening because of climate change – it is a natural process of nature.
It would be tied to the pound and have a stable value, unlike cryptocurrencies such as Bitcoin. It would be accessible through digital wallets and interchangeable with cash and bank deposits. The Treasury and the Bank of England are consulting on its launch, which could take place by 2030.
Britcoin could be used for everyday transactions, both in-store and online, and could make payments more efficient and enable innovation. However, some MPs have warned that Britcoin could cause severe financial damage and undermine the role of banks.
Some MPs have warned that Britcoin could cause severe financial damage and undermine the role of banks for several reasons.
The benefits of the currency are still unclear and there must be systems in place to protect cash access and privacy, the Treasury Committee said in a report.
The Bank of England (BoE) and the Treasury have been consulting on the idea since February 2023. They are currently designing what such a system could look like. The CBDC would be directly issued by the Bank of England (BoE), just like banknotes.
This means people would have all the same safety and security that they have with their cash currently, which is different to cryptocurrencies that fluctuate in value and are generally run by private companies.