What's wrong with this picture?

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March 18, 2024
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The above is a snapshot of the weather forecast for Wednesday in Chamonix, here in the French Alps. Obviously high up it is below zero and we still have snow, lots of it in fact such that locals say it is the best snow high up for years, but none down in the town where it is plus 4 degrees. This is nothing unusual for March - not that you would know that from the press of course, where it is “Evidence of a Climate Crisis’ - but common sense tells us that this is what happens in the mountains.

Common sense is not so common

Voltaire

However, what is so evidently wrong with this picture is that, while it is below zero high up, the picture shows the variation between up the mountain and in town today is around 6 degrees (see small bar at the top). So what actually is the temperature in Chamonix? Common sense says that it depends, quite literally, on where you are standing. What caught the eye today though was that, by Wednesday, that spread is predicted to be enormous (over 20 degrees in fact) and even at the same altitude the difference between morning, noon and night on a single day in a single town is a forecast 19 degrees! For context that is 200x the variance that we claim to be able to measure within on a global scale. Moreover, because the morning temperature is predicted to be higher on Thursday, the average then might be even higher than Wednesday, even if the midday temperature is lower. In essence, the signal to noise ratio is so massively distorted that, as the Orwell quote goes “There are some ideas so absurd that only an intellectual could believe them.”

The idea of an average global temperature is as meaningful as an average global phone number

Anon

And yet we have assembled an entire industry and are demanding nothing short of civilisational change on the conceit that we can measure the average temperature of the entire planet to within 0.1 degrees, not only now but thousands of years into the past. And on top of that, we claim to be able to predict it a hundred years hence. It would be funny if it wasn’t so dangerous. Rubbish in equals Rubbish out and the faster our computers whir, the quicker they leap to the wrong conclusions.

The real danger though is not the dialogue of the deaf with those that will not hear any challenge to their orthodoxy, but that ‘global government’ has decreed a set of policies that are based on predictions that themselves assume a level of precision in measurement that defies common sense. But then, as Voltaire pointed out, common sense seems lacking in supply, especially in these circles. The upsurge in populist protests against these policies is hopefully forcing common sense into the policy mix…

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Political Cicadas - no change in the product, just the sales team

The habit of spending long periods underground before re-emerging is not limited to the Cicada, for while this year sees the coincidence of the 13 year year Cicada cycle and the 17 year one, something that last happened 221 years ago, it is also 17 years sine Tony Blair was last in power and 13 since Francois Holland (likely PM in the French Hung Parliament) was. Both now look to be re-emerging to ensure continuity of policies that never really went away. The key sources of protest across Europe - crippling expensive wars against Russia and Climate change as well as uncontrolled immigration have only been addressed in the doubling down - the first thing UK PM Starmer did was fly to Washington to offer more money to NATO, while his Chancellor promised more money for Net Zero. Meanwhile, the left alliance put together to thwart Le Pen is even more pro immigrant than Macron. For markets, there is no prospect of lower spending and every prospect of higher taxes - the only 'Change' visible but not the one promised. The Technocrats and Globalists expecting this 'democracy' means that the populous will go quietly will be disappointed, especially with the arrival in the Autumn (once the Cicadas have gone) of the great populist, anti open border, anti net zero and anti war populist Donald Trump.

Market Thinking July 2024

The scorecard for the first half puts Equities, commodities and Gold in the top half of the table, with cash and fixed income in the lower half. This is consistent with the steady but uninspiring macro backdrop and positioning ahead of a tricky H2 from a political perspective. The anomaly of the Market Cap weighted SPX out-performing the equal weighted SPW by over 10% points tells us both that the SPX is no longer telling us anything about the US economy and that this excess return is for taking (considerable) concentration risk. Meanwhile, with Bond analysts 'pivoting from the Pivot' the fixed income markets have calmed down a little and leaving The Donald' rather thna 'The Fed' as likely the biggest policy influence on Markets over the next 12 months. In particular, we would look out for a 'Trump Plaza Acord" early next year, 40 years after the last one- something the FX markets aren't talking about, but the asset allocators seem to be (at least subconsciously) pricing in.

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