Specific Plan

Here is the specific plan to handle the industry disruption:

  1. Have me use my training as an enterprise architect to gather requirements for custom indexes from several local financial advisors.
  2. Allow me to coordinate a request to CMU , Google and others to have students work on algorithms, data, and backtests, managed by me (due to my prior success).
  3. Have algorithms and indexes ready quickly using prior and new algorithms for clients, as promised. This uses my 20+ years as a computer programmer.
  4. Work on a fee basis to accomplish this, using my many years of experience as a contractor and independent contractor.
  5. Build and publish new methods for evolving the next generation of financial algorithms and custom indexes, relying on the expertise of myself and other CMU trained professionals.
  6. Have me design, manage, and program ways of evaluating companies more correctly than using raw financial data, publishing results as agreed.

That would indeed give financial advisors a simple set of indexes they can offer to clients to help them through the current market and ordinary and strange markets to come. This would be a great advance in offering financial advice, requiring only some participation from many parties.

By entrusting me with the architecture of this system, you can have confidence that careful analysis will go into every step, always to ensure it will return money and that it will work.


Financial Advisor “Disruption”

When Uber and Lyft invaded the taxi industry, Turbotax disrupted the tax industry, and Amazon disrupted retail, delivery, and many other industries, many denied their risk.

The robots are coming for financial advisors. We should try to manage risk, even embrace it. Disruption will happen, but it is survivable for those who adapt. The personal touch is what taxi drivers and tax advisors claimed would save them. It helps, but don’t feel safe.

How do we survive the robots? With some teamwork. There are many calls for regulating the industry so robot advisors cannot enter. A more promising approach is to join resources and offer better service. Back when John Bogle first created index funds, there were many questions about his sanity. Today, they are ubiquitous. Rest in peace, sir.

You may be wondering what heartless fools would dare challenge the great american way of investment advice. Let me tell you how a computer programmer thinks. Once the word “computer” referred to a profession. Now, it has been automated, and the job of doing the automation is mine, a computer programmer. It’s nothing personal, but when a job can be automated, programmers have the job of doing so. Automating people’s jobs away is what justifies a programmer’s salary.

But also, the philosophy behind it is clear – that one day there will be no un-necessary jobs and all will profit.

Here is the point: we can band together and use the knowledge we have of markets and investments to keep financial advisors employed, or be buried under a wave of investment engines that are better than humans.

True, the public is not beating down the doors to get to robot investing – yet. However, the trends are clear. In 2008 there was a surge, then a retreat, but that’s how trends usually go before they overtake a profession. Look how online sales died before Amazon became king.

My proposal is to work together to gather data and develop AI algorithms that can be sold to individuals from current financial advisors.

That will save jobs, improve service, and give better customer care. It can be a fusion of technology and empathy. Combining human knowledge with advanced technology has worked before.

If you believe in such a vision, contact me, and we can together work towards a better future for all.

This isn’t just a wish, here is my specific plan.


Market down – when and where to invest in the recovery

Many people are wondering where to invest now.
The best answer, if you don’t have the resources to do a fundamental computer analysis, would be to go for the index funds and waiting.
Many stores are falling apart, like macy’s, jcpenny, and others. Their stock prices are too low to even short sell them. It is almost a certainty that these companies, going bankrupt before social distancing and now closed in most of the country. Is short selling worth it? Many stocks, like boeing, which were expected to recover, have already fallen. Let me know in the comments if you know of stocks you believe to be handling this crisis badly which will fall through.
Many people believe it is immoral, just gambling, to short sell or purchase options. If you make money off of such a gamble, this is often said to be bad for the markets, and for society as well. This is not always true. Foreseeing a future price drop, and profiting off of it, can provide advanced warning to the market of a coming drop. In the end, the US congress who has debated this extensively has allowed this kind of futures trading specifically because it provides the market signals that can be useful to pricing the stock market, often preventing quick declines by providing warnings ahead of time as people start short selling.
Many stocks from countries just beginning to be effected by covid-19 have buying and short selling opportunities, like India and parts of Africa. Debt forgiveness would be a great step for Donald Trump to take, who has benefitted from many bankruptcies.
For stocks sure to survive this crisis, like disney, coca cola, and proctor and gamble, there are many reasons to invest for a long term gain, though short term there are no guarantees.
What is the best way to invest now? Waves of market drops in are likely to continue. It is not necessarily the case that the end of the covid-19 crisis will be the end of the financial problems. The financial problems were much deeper, and will only make it more difficult to compete for corporations to get bonds with more and more governments issuing them.
In the short term: reopening areas due to lower covid 19 cases is great for business. Local businesses in the re-opening areas are sure to be doing much better. 
In the longer term, expect the debts accrued in recent years, and especially the severe debts taken recently, to become more severe.
More and more, we will be hearing about debt forgiveness, and many will reject the idea outright. The idea deserves serious consideration, especially for countries like puerto rico, but even european nations may seriously need to consider what can be done to remove debts that are getting more and more severe. 
All options should be on the table, we do not want a full collapse of large economies.
For investors, there are great opporunities out there, but it will require patience and fortitude. Gardening might not be such a bad investment at this time, with food becoming more scarce and food waste at an all time high. Investments in gold or silver would not be highly recomended, mineral prices continuing to drop. Gold is currently high, but production is high and there isn’t much to push it higher at this time. (1730.52 last close)

Mineral price investments are inherently a losing proposition in the long term, as it cannot gain in value on its own like bonds or stocks.
Mining companies have not done well, and there is no doubt that mining companies will have to slow down some production due to covid-19. Most small oil producing companies in the USA are on the verge of bankruptcy. Expect Exxon to drop more as weak demand and falling prices continue.
Movie theaters will shrink, even a cure or a vaccine won’t be enough to make people leave their huge TVs to see a movie in a theater, the risk is too great, and the payoff is low and getting lower as new streaming services provide better value.
Bonds are not the best investment, since the federal government has been buying them, shoring them up but also removing any chance of profitable opportunities.


We Just Learned Our Lesson, But What Did We Learn?

Right now, if you ask most people, they will tell you what they think we have learned from the Covid-19 pandemic. However, if we haven’t learned as a society, then we haven’t learned at all. What could we have done better from the start? What will we do better next time?

Spoiler Alert: There will be a next time, inside a decade from now or two if we are lucky.

This pandemic didn’t come from no-where. It came from bats, and bats have 400+ coronaviruses.

At the very least, we should have better models, and we should have more data as to the spread of a virus from SARS, MERS, and now Covid-19. We should have better modelling software, and better tests. We now know, and should have known before, the importance of honesty in governments, of testing as many people as possible, of being more wary if asymptomatic spreaders exist.

That we didn’t learn this before is a shame. If we don’t learn it for next time, it will be a tragedy and a farce. We are working on vaccines, but we don’t have a rapid vaccine development program.

At the end of the day, we need to make some hard decisions, but we don’t have a model to make the decision: when do we reopen? How many lives vs. hoBuw many dollars do we spend? We should have a blue-ribbon panel discuss this and come to a reasonable conclusion. We might reasonably balk if it costs $20 million to keep one person from dying from this disease. We would be appalled if we valued a life less that $1 million. Indeed, $7 million is the number the government uses for most causes of death, this one (which spreads, so each death leads to more than one other death as well) should be higher.

But we haven’t learned that lesson, or any other. We haven’t fixed our political system, our world trade, our viral preparations, our pandemic programs, or the World Health Organization’s problems. America, the UN, and most other nations are just as unprepared for the next one as before. How deadly could the next one be? A disease can’t kill all its hosts and still spread. Some diseases have different hosts, like the black plague, and can kill every human it infects because its real host is rats (or mosquitos for malaria). For a disease to spread, it has to keep its host alive long enough to spread, and not incapacitate them. This is why the common cold and the flu still spread (and they mutate too fast for a universal vaccine). Covid-19 checked all those boxes and killed .5% -> 1% of the infected, almost as deadly as it could get. But it turns out that such a disease could kill 5%-10% of the infected and still spread. (Oh, and the next pandemic may not be from nature or an accident).

If we face the next pandemic with the same tools we used, it could kill hundreds of millions. We can’t say for sure we have bested the current disease. We shouldn’t worry too much about the next one. What should concern us today is whether we are learning.

The future could depend on it.


Unemployment – how the employed can support the unemployed

We decided for numerous reasons to respond to the pandemic by issuing stay at home orders in many states and nations. This has led to people being unable to care for family members with disabilities. Unemployment rocketed to 20% or more, levels not seen since the great depression. Many local businesses will not survive. Poor people, faced with having no savings or government help, take whatever work they can regardless of risk.

How can we help others in need? 
This is my vision for how we can get through this without starvation, especially in India and America:

Canning Food: Many Americans who worked in the food industry before have lost their jobs. Many food contracts have been canceled leaving farmers nowhere to profitably sell their produce. Cans will be marked properly so we can later tell if there was an infection in the place they were canned, so they can be returned or disposed of.

Former restaurant workers have the skills and training to make canned goods for sale, prepared meals, soups, pastas, etc. Millions of them could direct others in how to do this, leading to a cycle of learning. Truckers who would normally ship food that is currently going to waste, farmers without contracts, and millions of unemployed, stand to benefit. Each will get shares of any profits generated, and food can be stored for later sale given enough investors, this is a wise investment. You can turn a tiny amount of money into a profitable amount of canned food for next year, when we can guarantee that food will be more scarce somewhere in the world.

Canning food could be a generic solution to extreme poverty, like selling apples in the depression.

Other ideas:
Farm hands: this is a good time to get back to farming. So many farms are unable to harvest or plant due to restrictions, and they need all the help they can get. Social distancing is possible on large farms.

Virtual programming: use the social isolation as an opportunity to help others learn programming, financial advice, law, accounting, or any field that doesn’t require physical presence. 

Fighting spam calls and emails: hiring people to track down and arrest those whose response to this crisis is to prey on the weak. Having people who are scammed raise bounties, and getting people to find those responsible, force them to return their money, and having a share of the money go to those who can get it back.

Disability aid – there are many with disabilities that are having trouble finding what they need during these times. They often have money, but not enough people to help them. We should be putting out jobs on job boards looking for people willing to help. Hemophilia, lupus, autism, down syndrome, there are many who need much that is hard to get in these times. Hire people to do it, it is worth taking the small risk for the big reward of helping save somebody. That is the definition of essential work.

Virtual assistants: we can help people around the world by hiring virtual assistants. What better time then when so many have so little to do? It may not pay much, but it can be a good learning experience while making some cash. Best to hire far outside the USA, like India, the Philippines, Indonesia, Africa, or Israel. 

Contract tracing en masse: Over 1 million health care workers are out of work, but we need contact tracing. Most of them would qualify for this kind of work, tracing the contacts laboriously and looking for people who may also be infected. This can be done for covid, flu, strep, or new viruses we haven’t seen yet. It is a useful skillset for now and the future.

There are many ways to help, we need to organize these ideas and more, and do so in a better way to help those in need. For too many, social distancing is a luxury they cannot afford. We can do more than handouts and unemployment benefits. We can help others in other nations where poverty adds to their troubles.

We are not limited by our circumstance. We are also limited by how we shut ourselves away from achieving our goals. We are too often limited by avoiding learning new methods.


Covid 19 – was lockdown the right choice?

“America would have been better off if we didn’t socially distance”. This sentiment, hardly a logical or reasoned thought, has plagued all of us. Why not just take the virus dead on, and let nature take its course? Are we better off hiding from one another?
Of course almost every nation in the world has imposed severe restrictions, and those that didn’t, like sweeden, are facing questions of their own, dealing with higher fatalities than their neighbors norway and finland.
If we can get back to logic, lets figure out which was actually the better choice in retrospect.
Two different methods are typically used to evaluate the correctness of a decision: money and lives saved. This being an article for a financial advisor blog, let’s go with money.

First, we need to make some assumptions, either our own or other’s. How many more would have died without social distancing? Well, now we have 330 million Americans. Without some restrictions, epidemiologists say the total infected usually rises to 50-100% of the population.
The best estimates are 1-2% of those infected would die. This seems to be backed up by the infected vs. dead in New York City. 
So we can multiply, and for those who have their own numbers, plug them in!
Today, the U.S. Office of Management and Budget puts the value of a human life in the range of $7 million to $9 million.  

We can go all the way down to $7 million for this estimate, it won’t change the results.
We now multiply 1% * 330 million * 50% = 1.65 million people and  $11.55 trillion dollars.
America will lose 30% of its GDP over the quarter due to social distancing, but it would lose quite a bit of GDP if it didn’t, due to fear.
U.S. GDP is currently $21.43 trillion.  We would lose $6.4 trillion in a year, or $11.55 trillion in lives.

This math is that we should be willing to spend 2 years in social distancing, rather than let the disease spread. Currently, we are trying to handle a month and a half (mid march in my region) in this condition, and we are having issues. 
Play with the numbers all you like, but unless your numbers are very unrealistic, then a month and a half of social distancing is easily justified.
Forbes has their own analysis, coming to about the same conclusion:

  • If the United States were to abandon aggressive social distancing measures after 14 days, more than 125 million people will contract the virus, some 7 million could be hospitalized, and 1.9 million people will die.

If the sheer number of dead in America (and worldwide, because America will be spreading it), is not enough, remember that $7 million per person.
In short, the social distancing makes sense. But could we get the same effect for a lot less money? Yes.
Future articles will be about less expensive measures that we could take, and things we can do to reduce waste and mitigate the time and education that we are currently losing.
Where is the break-even point? It depends on how expensive the social distancing is vs. the lives that will be lost by ending it.
By my calculation, cautious reopening should be started, and it is being done.
The above is all based, of course, on the secondary effects being approximately equivalent. Letting a virus spread causes fear, panic, mutations, and makes future waves of it worse. Social distancing leads to mass unemployment, poverty, and social unrest.

Whichever way we go, we could justify it, so let’s justify staying safe and helping others to stay safe.