MACROECONOMIC OUTLOOK

US inflation expectations are rising. Fiscal and monetary policy means inflation will further pick up the pace

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Photo by maria pagan on Unsplash

Investors are obsessed with inflation. And with good reason.

It’s closely tied to interest rates and has ample implications for the relative valuation of current and future profits.

Shifts in the inflation outlook can cause sector rotations and shifts in Wall Street’s weighing of growth versus value, staples versus cyclical, and domestic versus foreign equities.

Inflation expectations are rising. But they could go up further.

With the reopening of the world economy over the coming six months as a catalyst, investors can face a spike in short term inflation.

The below outlines the key reasons for inflationary pressure being imminent.

TESLA, ELON MUSK, & CRYPTOCURRENCY

The same market forces that drove Tesla’s share price up will accelerate its downfall

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Picture by author

Stocks do not always go up. Once in while however, some stocks appear to be moving in one direction only.

But the higher you climb, the harder you fall. Especially if the underlying business is poor. Here’s where Tesla enters the scene.

Tesla is a legit business. For years they have benefitted from a first-mover position in the market for electric vehicles.

A competitive advantage in battery technology, government subsidies, and a drooling cult-following willing to buy shares and options contracts at almost any price or risk/reward ratio. Willing also to be diluted at insane valuations.

A generous valuation puts…

CRYPTOCURRENCY & ECONOMICS

While retail investors buy into the Bitcoin story, it’s important to remember it’s a speculative asset and should be treated as such

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Photo by Bermix Studio on Unsplash

The price of one Bitcoin is back above $40.000.

Enthusiasts have long dreamed of Bitcoin replacing government and central bank-backed currencies. The recent price movement has injected new hope into those believing Bitcoin will one day provide a valid alternative to the current monetary system.

But it’s still merely a pipe dream, despite the uptrend in price.

After an incredible run to all-time highs over the Christmas period, the most prominent cryptocurrency of them all saw an expected…

HOW CHANGES CAN FUEL A FULFILLING LIFE

And why you should do it more often

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Meme by author. Source: imgflip

We’ve all heard phrases like “never give in” or “success is measured by the number of times you are knocked down and get up again.”

In sports, in relationships, and business endeavors — especially in entrepreneurship and innovation — these are common. They glorify the fighter and equate work-ethic and success with sticking to plan no matter what.

And these may be perfectly valid in some situations. When starting a new project, we often discover a lot of bumps on the road we hadn’t thought of before getting started. …

CRYPTOCURRENCY & (UN)ETHICAL CORPORATE MANAGEMENT

From screwing investors to customers and the climate, Musk is trying to game everyone

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Photo by Dmitry Demidko on Unsplash

Manipulating the Tesla share price. Trying to game the market for cryptocurrencies. Selling customers government-subsidized climate and ESG snake oil.

Elon Musk is on a roll.

The Tesla founder and CEO recently overtook Jeff Bezos as the (estimated) highest net worth individual in the world.

He has a huge following on social media and is extremely popular amongst a part of the general public who appreciate his efforts into memes and behavior uncommon for a prominent CEO.

Large responsibilities come with the job, prominence, and popularity Musk has. He doesn’t seem to care

While all appears like innocent fun on…

DATA SCIENCE

Differences between training and post-implementation data can lead to bad model performance

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Photo by Alina Grubnyak on Unsplash

Prediction models built with machine learning algorithms often underperform in the real world.

Even AIs built by some of the world's leading experts often struggle to replicate the promising performances outside of the “laboratory”. A prominent example is the Health Care AI systems developed at Google.

The AI applications aim to assist in diagnostics. From cancer screenings to disease detection and risk profiling.

The applications were very successful when trained and assessed within the laboratory setting. But when tested in the real world, for example in clinics in Thailand, the performance couldn’t match that of the laboratory setting.

In this…

APPLIED STATISTICS — DATA SCIENCE

Improve your prediction models and data analysis by choosing an appropriate significance level in statistical tests

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Meme by author. Template source: imgflip.com

Using a fixed p-value cut-off of 0.05 to determine significance is a widespread mistake of both researchers across various fields and industry specialists who apply statistical methods.

The reason is probably obvious and the solution straight-forward.

It is more often than not a mistake to use p<0.05

When statisticians, data scientists, and economists are taught statistics, the 95 percent confidence interval, corresponding to a p-value cutoff of 0.05, is the default option when conduction hypothesis testing.

It’s also the default setting in many automated selection processes across different statistical programming packages, from SAS to R and Python (there are exceptions…

REDDITORS TURN TO COMMODITY MARKETS?

Reddit-subforum WallStreetBets is in the media attributed to the drastic spike in the price of silver. A closer look suggests they have nothing to do with it

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Spot silver price, 1-day. Source: silverprice.org

The start of February has seen silver prices on a dramatic rise. On February 1, 8.30 eastern US time, the price is up more than 8 percent.

Silver has trended upward since march when most asset markets saw drastic plunges in the wake of the COVID pandemic and worldwide lockdowns of economic activity.

Rumors of an attempted short squeeze and thus massive inflow of funds in the silver market started circulating last week.

These rumors caused the shares of several companies in the silver industry to skyrocket (see $PSLC and $ACG). …

BEHIND THE SCENES AT WALL STREET

How zero-commission trading platforms earn money behind the curtains

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Photo by Patrick Weissenberger on Unsplash

Robinhood is currently subject to a lot of criticism.

The reason is the restrictions on trading in a number of stocks pushed by the sub-Reddit (an online discussion board) WallStreetBets.

The affected stocks most notably include video-game retailer GameStop ($GME), movie-theather chain AMC Entertainment ($AMC), Finnish telecommunications and IT infrastructure giant Nokia ($NOK), and software company and former mobile phone producer BlackBerry ($BB).

Share prices of the affected companies has propelled upwards due to masses of retail investors buying large amount of stocks and call options with the aim of triggering gamma and short squeezes.

Robinhood is not the only…

INNOVATION & ENTREPRENEURSHIP

Industry-specific knowledge and skills, experience, and a network, years in the making, are invaluable if you want to innovate. Working for established firms can provide just that.

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Photo by Romain Tordo on Unsplash

Lots of people dream of starting their own business.

The desire to create innovative products and services that solve problems, remove frictions, and create value for customers is deeply rooted within many aspiring entrepreneurs.

A piece of advice often provided to them is to “just jump right into it”. The value of a regular job, or working in established companies, climbing the corporate ladder, is neglected.

Specialized knowledge is often the key to discover an unmet need

For some, jumping into it may be the right approach. …

Asger Bruhn

I’m an economist doing policy design and analysis. I write about the economy, taxation, innovation and growth, policy design, and financial markets.

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