Tag Archives: Economics

ChatGPT for Medicine

February 9, 2023 tremendousblog 2 Comments

What if you could ask the best scientists on earth any question you want, any time? New chatbots are making that a reality.

Get the blog before anyone else…subscribe!

Consensus searches 200 million scholarly publications to answer questions on medicine, science, and even economics. Let’s give it a try!

I love going outside in the morning with my coffee. I get a little sun, which I vaguely suspect is good for me, and look at the sky.

On a day like today with a calendar full of meetings, is this still worth doing? Let’s find out what the science says about the benefits of sunlight:

Instantly, Consensus pulls up an answer to my question. It explains how morning sunlight can help circadian rhythms.

It also cites a specific source, and notes the quality of the journal. This result comes from a top publication.

So cool! Let’s compare that to Google Scholar:

Google Scholar just gives me the traditional page of links. I get weird, context-less snippets of text that only kinda sorta answer my question.

Better than nothing, but nowhere near as useful as Consensus. Now let’s try ChatGPT.

ChatGPT’s answer is pretty good and well-organized. But since it has no citations, we have no idea if the information is reliable.

ChatGPT simply isn’t designed to answer scientific questions.

It was trained on data including books and Reddit posts. But as far as we know, it hasn’t been trained on scientific papers.

Consensus isn’t the only chatbot for science. Microsoft recently released BioGPT, a chatbot trained on biomedical literature.

Will these bots replace doctors? I don’t think so.

Instead, doctors, scientists, and curious laymen will use these tools to make research easier. With better access to the latest data, they can make better decisions.

After all, nail guns didn’t replace carpenters.

I’m very bullish on AI chatbots trained on niche data sets. That data could be scientific papers, court cases, or computer code, just to name a few.

I’m also excited about data brokers. Someone has to collect all this data and get it to the people who need it.

If you’re working on such a company, I want to hear from you!

In just a few weeks, we’ve gone from general purpose chatbots to a profusion of tools for science, medicine, and more. We are living through a Cambrian explosion of technology.

I’m here for it!

How do you think AI will change science? Leave a comment at the bottom and let me know!

Why High Oil Prices May Not Matter for Stocks

March 10, 2022 tremendousblog Leave a comment

Never miss a post…subscribe!

You don’t need me to tell you that oil and gas prices are through the roof these days.

Gas stations are changing numbers faster than slot machines. And the explosion in prices is sowing fear in the stock market.

But I think this huge spike in oil prices won’t matter much for stocks in the long term.

Looking at some historical data today, I noticed that big advances in oil prices are actually associated with above average returns for stocks.

Let’s look back at some major oil price spikes and see what happened to stocks.

A Trip Down Memory Lane

Our first stop takes us back to the late nineties. That was the last time I saw gas under a dollar!

Indeed, oil was a mere $12.36 a barrel in February of 1999. Just one year later, it had shot up to $28.28, a 128% increase.

Surely a stock market crash was next, right?

Wrong. Stocks increased 11% that year, an above average return.

Our next stop takes us to the depths of the financial crisis. At the beginning of 2009, oil traded for $46.17.

By April of 2011, the price had jumped to $107.55, an advance of 133%.

Market meltdown? Hardly.

Stocks surged 48% as the economy rose again from the ashes.

Why would stocks go up even as oil, a major cost center, rises?

Both are responding to an improving economy. Stronger economic growth means better prospects for companies, raising stock prices.

A stronger economy also means more demand for oil as families go on vacations again and buy bigger and shinier SUV’s. That increases oil prices.

Indeed, you’ll notice that during periods of increasing oil prices, economic growth also increased rapidly:

What About Today?

In April 2020, oil prices stood at just $20.28 a barrel, the lowest in over 20 years. Today, West Texas Intermediate oil has increased to $119.26 a barrel, a staggering 488%.

Sure enough, a similarly massive upshift in economic growth happened during that time. US GDP went from falling 31% year over year to growing 34% year over year, as lockdowns were implemented and then lifted.

Since lockdowns began to ease in later 2020, economic growth has remained strong, routinely clocking around 7%.

That roller coaster for growth resulted in a roller coaster for oil prices as well. We shouldn’t be unduly alarmed that oil is recovering along with the economy as a whole.

While geopolitical events have contributed to higher prices this year, you’ll note that most of the increase in oil prices happened well before Russia’s invasion of Ukraine.

High prices or no, I’ll be holding my stocks.

China’s Tech Crackdown Means Economic Decline

August 17, 2021 tremendousblog 1 Comment

Imagine you’re running a marathon. You’ve led the whole race. But a strong runner is coming up on your right. The finish line approaches.

Suddenly, there is a loud “crack.” The other runner has been shot in the head. You win.

This is essentially what has happened to the Chinese tech sector in recent months. The Chinese government has cracked down on major companies like Alibaba, Didi Chuxing, and Meituan. It has also regulated its substantial ed tech sector out of existence.

China used to be the US’s leading competition in technology. Now it looks like an also-ran.

Leaders of Alibaba and Didi angering Xi Jinping is one reason for the crackdown. Another appears to be China’s desire to refocus from software to hardware. The Party seems to think microchips, batteries and advanced materials are critical to economic leadership, while consumer software is a distraction.

One problem: semiconductors and most other manufacturing industries are a lot less profitable than software companies like Alibaba or Didi. And all of China’s net job growth since 2012 has been in services, not manufacturing.

Even with that growth, well educated Chinese youth often struggle to find decent jobs. Severely curtailing one of the most vibrant sectors of the economy will only make it worse.

China has lost sight of what those microchips and batteries are supposed to do: run software! They are not ends in themselves.

What’s more, the threat of sudden crackdowns will make it harder for all Chinese companies to raise money and grow. Maybe the hammer is landing on tech now, but investors will wonder, “Who’s next?”

Forget GameStop, Treasury Yields Are The Thing to Watch

February 25, 2021 tremendousblog Leave a comment

Treasury bonds have been falling hard lately. Their interest rates are up significantly as a result:

The yield on the 10-year note, a bellwether for borrowing costs on everything from mortgages to corporate loans, has jumped to near 1.5% from around 1% in a matter of weeks, lifted by increased expectations that vaccines and government stimulus efforts will accelerate growth and inflation.

And the sell-off is making its way into the stock market today:

The sell-off in the bond market ricocheted into equities, pushing the broad S&P 500 down 2.3 per cent and the tech-heavy Nasdaq Composite down 3.3 per cent by afternoon on Wall Street.

A lot of this is the side effect of something good: people are getting vaccinated, new vaccines are coming, and economic stimulus could boost the economy further. That picture is leading investors to expect greater economic growth in the future, along with greater inflation (see the Feb 22 post):

Signs of a renewed economic boom, in tandem with pockets of price pressure, color that move in rates. Bianco Research notes today that Wall Street economists now expect U.S. real GDP growth of nearly 5% this year

But higher rates on Treasury bonds could affect other markets negatively in several ways:

Higher Treasury yields tend to mean higher rates in other areas. This could make it more expensive for companies to borrow to fund expansion, etc. That would hurt their shares.
If Treasuries offer more interest, that makes stocks less attractive by comparison.
Treasury yields, especially the 10 year note, tend to drive mortgage rates. Higher mortgage rates mean a weaker real estate market.

Nonetheless, the Fed remains committed to low interest rates and a loose monetary policy:

In his remarks to the House Financial Services Committee, [Federal Reserve Chairman Jerome] Powell said it could take more than three years before inflation reached the Fed’s target of 2%. That helped to reiterate the message that the central bank was in no rush to pare back on stimulus anytime soon, Deutsche’s Reid said.

I think that if rates spike too high, Powell will probably get the Fed in there buying lots of bonds (with printed money, if necessary) to get the rates back down. He doesn’t want to see higher rates derailing the economic recovery.

A slower rate rise may be less problematic:

“If it is stable and steady, it is easier for equities to digest,” O’Rourke said in an interview. “A quick spike has the potential to create a shock.”

Overall, this situation concerns me and it’s one I’m going to watch. But I am pretty confident that Powell will put a stop to extreme increases in Treasury yields.

For more on recent developments in financial markets, check out these posts:

If you found this post interesting, please share it on Twitter/LinkedIn/email using the buttons below. This helps more people find the blog! And please leave a comment at the bottom of the page letting me know what you think and what other information you’re interested in!

Photo: “Jerome H. Powell, governor of the Federal Reserve Board, discusses how markets currently function” by BrookingsInst is licensed under CC BY-NC-ND 2.0

Business

This One Trend is Driving Every Financial Market

February 5, 2021 tremendousblog 1 Comment

Regardless of which market we look at, we see a similar trend: skyrocketing prices since the beginning of the pandemic. You can see this in the S&P 500, a broad measure of stocks:

In commodities:

In the increase in real estate prices and the corresponding decrease in capitalization rates (this chart is from Dallas…see similar trends in other cities in the research papers linked in this post):

And even in Treasury bonds (recall that the yield moves in the opposite direction from the price, so a lower yield means a higher price):

Why are all these markets looking the same? The likeliest cause is a huge jump in the money supply. The Federal Reserve has aggressively printed money since the beginning of the pandemic, looking to counter the seismic economic shock. I think this is probably appropriate. In any case, the effect is unmistakable, however you measure money supply.

Here’s how the “monetary base,” or “the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve),” has expanded:

If you look at another definition of the money supply, M1 (“the sum of currency held by the public and transaction deposits at depository institutions”), it looks like this:

And if you broaden your definition of money supply to M2 (“M1 plus savings deposits, small-denomination time deposits (those issued in amounts of less than $100,000), and retail money market mutual fund shares”), you see the same familiar pattern:

Whichever way you slice it, there’s a lot more money out there than there used to be. That money can be used to bid up stocks, bonds, real estate, commodities, bitcoin, Gamestop, or whatever you like.

There is some debate in the literature about whether you can draw a correlation between the money supply and increasing stock prices. This study sounds a cautionary note:

future profits may not change, if interest rates decline at the same time that demand for firms’ products, and thus their sales, decline.

This could be relevant for companies that can’t deliver their products in a contactless manner. But companies that can have been thriving.

In all, it appears that the massive increase in the money supply is driving financial markets of every stripe in one direction: up. Until the Fed changes policy, I suspect the bias is likely to be toward buoyant markets, especially with vaccines coming on line and the pandemic’s end in sight.

Have a great weekend, everyone!

If you found this post interesting, please share it on Twitter/LinkedIn/email using the buttons below. This helps more people find the blog! And please leave a comment at the bottom of the page letting me know what you think and what other information you’re interested in!

Photo: “Governor Jerome Powell speaks at Brookings panel, ‘Are there structural issues in U.S. bond markets?'” by BrookingsInst is licensed under CC BY-NC-ND 2.0

Tremendous