Google’s potential in the investment industry

Google has a very large numbers of users who use its search engine, YouTube and other services. Almost everyone around the world (except China mainland) who has access to the Internet has ever used Google’s service. Those who have used YouTube might find YouTube is trying to ask you some questions about some brands. Many of people cannot be bother doing these surveys seriously, they may just randomly pick one answer since they will not receive any award by doing these surveys seriously. However, some people may sometimes answer these surveys accurately. As long as some people answer these surveys accurately, then the surveys can provide some useful information by using data analysis.

When some people are answering Google’s surveys accurately and some people are answering these survey incorrectly and some are not answering, Google can apply a censored data analysis approach to find useful information as long as Google can estimate each answer’s probabilities of the listed above behaviours, which is not a difficult task for Google at all given it has collected so many user data. I think that if Google wants to be an investment firm, it can be very successful because they can conduct market surveys across its Internet platforms which can provide relatively more accurate information about firms which Google is interested in than the information released by the firms and the media. It is highly possible that Google can know the firms much better than these firms themselves via this method.

Moreover, it can even figure out the buy side as well as the sell side opinions and weights on the financial market. With enough information about the both sides’ opinions, it is not even that difficult to predict the market trend.

Overall, Google is currently interested in investing in tech related startups and relatively small companies in the VC market, but its potential in the broad financial market cannot be ignored.

The rising probability of a no-deal Brexit

The British Parliament is thinking about reopening the negotiation with the European Union after rejecting May’s proposed Brexit plan, which has been agreed with by the European Union. However, Jean-Claude Juncker, the president of the European Comission, told the European Parliament that, “we have to prepare for the worst”. The problem at the moment is that it is unclear what the UK does not want but it is unclear what the UK does want. Moreover, the European Union seems reluctant to renegotiate the Withdrawal Agreement. The uncertainty is increasing as long as the UK cannot unite under one single guidance for Brexit that prepares the UK for all possible outcomes with the negotiation with the European Union.

Barclays has moves over £160 billion assets to Dublin to counter the risk coming from the Brexit and the Bank of England showed that the consumer borrowing growth fell in December due to the household confidence. The car builder, Jaguar Land Rover, is planning to cut up to 5000 jobs in the UK because of the risk of the Brexit. These are not good signs. The problem in the UK I think is that there is no single guidance that can dominate any other proposal. I always think that maybe the UK has a common agreement that the UK needs to leave the European Union, but there is not any agreement about how the UK leaves the EU and what is the new relationship between the UK and the EU after Britain leaves the EU. People have very diversive thoughts about how the UK should leave the EU and how the UK should see the EU. Even one thing that many people are crying for, the single market, is not wanted by all the UK population, some people believe that it would hurt them when facing competitions from the continent and they want to live in a market without the European market.

Overall, when the time is passing and the problem surrounding the Brexit is not resolved, the uncertainty is rising and causing more and more downside impacts on the UK economy.

Why does the market stay low when waiting for big companies' earnings?

The US stock market was slightly lower today while investors are waiting for the earning reports coming from several large tech companies, such as Microsoft, eBay and Advanced Micro Devices (AMD). It has not been a great time for the tech industry that many big names from the tech industry have suffered sharp slides. Currently the market has been cautious about the performance of the tech industry. A year ago, Nvidia was the rising star in the tech industry, its share price was pushed up by the rising game businesses and cryptocurrency mining businesses; however, this year, the magic has gone, the share price approximately halved. Moreover, many investors are worrying about the possibility of the market's entering a bear market. When investors in the market are more cautious, they will not make rush decisions before earnings, when fewer trade decisions are made, the market become less active. When the market is less active, the market price will also seem inactive and have very limited change.

This is not always the case that sometimes the market can be very excited about the upcoming earning reports when the time is good. At the moment, the time is not good and investors are slightly panic about the earnings. However, the investors are not too depressive or too worried, they are still hoping something fantastic that can happen in the tech industry, so they are still waiting instead of acting. The market was lower today, but not crucially lower; the market is still stable, but at its edge of falling if no good news is coming out.

How should CEOs participate in politics?

It seems that CEOs become more and more interested in participating in politics. After Trump successfully won the presidential election in 2016, the former CEO and the founder of Starbucks, Howard Schultz, said he is "seriously considering" running for president in 2020. Many people do not think that it is a wise plan for Mr Schultz to run for president in 2020, including the Washington State Democrats posted a photograph of a Starbucks cup with "Don't do it Howard" written on it. The current president, Donald Trump, also attacked this potential competitor in the 2020 US presidential election on Twitter.

It is unavoidable for CEOs of big companies to participate in politics to some degree; the chairman of Alibaba, Jack Ma, said that he needed to meet thousands of government officers in order to gain public support for his company. However, participating in an election is different. In terms of business, participating in a major election has its pros and cons. It can certainly help companies to gain more public attention and use media to make advertise for free. Moreover, participating in an election, these businessmen have to express their opinions and beliefs, if their opinions and beliefs are very positive, this would certainly help to raise companies' images. However, participating in an election is very risky, because their opponents are very likely to dig dirt out of them, which can damage their own images and their companies' images.

Of course, some businessmen participate in elections because they have some personal ambitions; however, in terms of their carerer in the private sector or their personal wealth, such move is very risky.

Is the fight going on?

On Friday, the US President, Donald Trump, announced an agreement to end the longest government shutdown in American history. He agrees to sign a funding package that allows the government to temporarily reopen for three weeks and excludes the funding for his wall. At this moment, the market and many US federal workers should have a big relief from the longest government shutdown. However, this package only allows the government to reopen for three weeks, so how likely is the government shutdown to reappear in three weeks?

Donald Trump is a not predictable person; therefore, no one is possible to say that Trump will end the shutdown forever or he will restart the shutdown at this moment or even in three weeks from now. What we can be sure about is that Trump is definitely going to continue to fight against the House and the Democratic Party, this is what he has been doing since day one. The wall is only one of many battlefields where Trump is fighting against the Democratic party; however, this one is a very important one that the Wall is claimed by Trump and his team as one of his many campaign promises. The GOP is not necessarily backing Trump in this matter, as we saw from the voting of two bills which were separately proposed by Trump and the Democratic party, though both bills were rejected, the bill proposed by the Democratic party gained more votes. The government shutdown has brought some negative impacts on the American society, including airlines delays. If the government shut down again in three weeks, the supporting rate for the GOP is likely to drop since Trump himself first claimed that he would take full responsibility for the shutdown, if this theory is true, the GOP will pressure Trump to keep the government open after the three weeks. However, if Trump and his team believe after reopening the government they can get rid of Trump's responsibility for shutting the government down and blame the Democratic party, then the probability of another government shutdown in three weeks is significantly high.

Overall, with this president, no one is certain about what will happen to the US government in three weeks.

The AI versus Human

DeepMind and Blizzard cooperate and develop an AI to play Starcraft II. Today they live steamed a demonstration about the performance of their AI, Alphastar. They showed replays of AlphaStar playing against two professional players. There are three races in Starcraft II, at the moment, AlphaStar can only play Protoss against Protoss at the moment. In general, AlphaStar can play Starcraft well; however, it is not invincible like AlphaGo, in the live game, the human professional player defeated AlphaStar and the game was not a very close game either.

Training AI to play Starcraft is a very interesting topic that attracts, not because I like playing the game, but more importantly because it create an environment that can show how an AI solves a problem with imperfect information. Starcraft is a very complex game that has fog of war that creates an environment with imperfect information. In he human world, when people are playing a game with imperfect information, they design their strategies based on their expectations about other players in the game, including other players' expectations about themselves, and other players' expectations about their expectations about other players and so on. It would be interesting to how an AI forms its expectations about its human opponents. To be invincible, AlphaStar has to form an algorithm that precisely make an estimation about its human opponent's expectation. It is a great experiment for people to study human behaivours, especially the patterns about how people form their expectations.

Really? The economic risk is not significant in 2019?

Several days ago, I was discussing the Davos 2019 Global Risks Report might underestimate the economic risk the asset bubble risk is listed as the 10th risk in terms of likelihood and no economy or finance relating risk is listed on the top 10 risks in terms of impact. Maybe we are facing too many and too significant risks that relatively the economic risk seems not very significant; or the significance and the likelihood of the economic are underestimated; or the estimation is accurate and the economic risk is not significant in fact.

I still think the significance and the likelihood of the economy relating risks are underestimated in the Report. In Davos, Wang Qishan, China's vice-president, acknowledged the Chinese economy was facing risks including unilateralism, protection and populism, just like other major economies but insisted that the sustainable growth in the economy can be maintained that though 'speed does matter', the 'quality and efficiency; of growth is more important. Though the statement is very positive about the Chinese economy, it shows that the Chinese government realises the panic about the slowdown and unsustainable growth in the emerging markets has brought negative impacts on the Chinese economy and it is necessary to calm the market.

In addition, China is not the only country that dismisses the downside of its economy, the prime minister of Japan, Shinzo Abe, dismissed the defeatism about Japan and laid out two main priorities for the G20 which will host a summit in Osaka in June: the international governance of data flows and the promotion of technological innovation to tackle environmental issues. However, Japanese exports shrank at the fastest pace in two years and the year-on-year drop was 3.8 per cent, and Japanese exports to China dropped by 7 per cent.

Britain is stuck in Brexit chaos and the US government is experiencing the longest shutdown in its history. I cannot see why more economic risks are not significant enough to be listed on the Top 10 in the Risks Report.

How likely is the US-China trade negotiation to reach an agreement by March 1?

Previously Mr Trump tweeted on social media and made public claims and comments about the ongoing the US-China trade negotiation, he has claiming that the negotiation is going well and a deal 'could very well happen' by the first of March. The market has been relatively optimistic about the ongoing negotiation. However, there has been some negative information about the ongoing trade negotiation. According to people briefed on the negotiation, the Trump administration rejected an offer by two Chinese vice-ministers to travel to the US for preparatory trade talks because of a lack of progress.

Trump and his administration still claim that the negotiation is going well and deny any there is any scheduled intermediate meeting or cancellation. However, a US senator said that according to the briefing he received from Mr Lighthizer, 'there has not been any progress made on structural changes that need to be made'. In addition, Trump has also made some bold claim about the negotiation that he will more than double the punitive tariffs on half of all Chinese exports to the US from 10 per cent to 25 per cent if an agreement is not reached by the 1st of March. Such claim can be seen as a threat that tries to force China to accept whatever the US offers; however, so far China does not seem to be soft in the negotiation and it is not likely for China to accept any outraging offer or deal. Trump cannot always get his way by using such strategy, not with the Democratic party domestically, nor with China overseas.

To conclude, I am not very optimistic about the US-China negotiation, the trade negotiation can be just a copy of the shutdown negotiation happening in the US that either side is willing to give up anything.

The Davos 2019 Global Risk Report

The 2019 World Economic Forum has started in Davos. The Americans are highly likely to be absent from this year's Davos due to the ongoing government shutdown, not only Mr Trump has cancelled his trip to Davos, their top officials in Trump's administration are not coming to Davos either. With the absence of the Americans, it could be a great chance for China to further spread its influence. One of the most interesting topics so far I think is the Davos 2019 Global Risk Report (https://ftalphaville.ft.com/2019/01/21/1548075481000/Davos-has-produced-an-amazing-new-guide-on-precisely-how-not-to-think-about-risk/).

In the list, the risk that can potentially cause the risk is weapons of mass destruction relating to geopolitical conflict and the risks which have the highest likelihood are extreme weather events and failure of climate-change mitigation and adaptation and natural disasters. From the Report, we can see that environmental risk has been the most significant risk ahead of us in 2019, since the environment-relating risks are on the top of both two lists, showing that people are really concerning the environment issue at the moment. Since Trump became the US president, the US administration has been drifting away from its previous policy and withdrawn America out of the Paris Agreement, as Trump himself never believes the theory of climate change. Furthermore, the Report does not see economic risk as a major risk. The likelihood of asset bubbles in a major economy is at the bottom of the list and there is no economic risk on the list of the significance of the risks. Are these analysts accurate about their forecast of economic risk?

Overall, I agree with the Report on the environment-relating risks; however, I think the Report might underestimate the economic risk.

How can the government shutdown affect the economy?

The head of the New York Fed, John William, was the most high-profile in the Fed to officially announce and see the shutdown as a drag of the US economy. Last week, the Fed chairman, Jay Powell, said that the shutdown would not cause any lasting damage; however, since there is no sign showing the government shutdown is near its end.

The House Speaker, Nancy Pelosi, demanded Trump to delay his speech to the State of the Union then Trump grounded Pelosi's troop visit by restricting her using a military plane. It seems that either side is willing to make any degree of compromise; therefore, it is extremely difficult to predict when the government shutdown will stop. So far, the financial market has not been significantly affected by the shutdown, instead the market is much more excited about the progress happening to the trade talk between the US and China. The most direct effect from the government shutdown is that some government workers do not receive their pay cheques. This will hurt their living and this could have multiply effects. However, such effect is not going to be a significant damage, since the US economy is so massive. The real problem is the political uncertainty rising surrounding this government shutdown. The US government and the US Congress are fighting over the government shutdown and they are not going to focus on their job as the market regulator.

From the current stage, it is hard to see the real significant impact of the government shutdown on the US economy.

How to meddle an election?

The politics in the US is getting more and more exciting and juicy everyday that the government shutdown is still continuing while the Russian probe is still ongoing despite the government shutdown. More and more information about the Russian probe and the 2016 US presidential election is made public and reported across social media. It seems that the Russians tried to meddle the 2016 election. I would like to use my knowledge to try to guess how an election can be meddled.

Our society is built by networks that we are building or maintaining networks while making interaction with others. I think that it is okay to say that any two people are connected in some way and two strangers are two people who are connected significantly weak. The relationship between two people can affect these two people with different weights, one can have significantly greater influence over the other. There are several ways to calculate one's influence power (also called centrality). To meddle an election or manipulate an election result, the target is to convince more people agree on something and get their votes. When we have enough data (Facebook certainly has such power), we can study how to spread one opinion across the society. It is impossible to target all individuals, but once if we are able to find some people with significantly centrality, we can target these influential people, which is the most efficient way to influence the entire society. This is not a new idea that similar methods are used in marketing. However, what makes an election meddling is spreading false or made-up information. Election meddling uses made-up information to influence the targeted people or platforms then spread the false information across the society to affect the election results.

Overall, once someone can have an access to a massive database about social networks, spreading false information is not a very difficult or costly project at all.

Is no-deal Brexit so frightening?

2019 seems already getting very exciting. The US government is experiencing the longest government shutdown in the US history and the UK Prime Minister merely survived the no confidence vote today with a tiny majority of 19 (325 to 306). May just suffered an embarrassing defeat in her Brexit plan and she has to re-negotiate with the political parties in the UK and the leaders of the EU about the Brexit issue. From her speech after her survival in the UK Parliament, I think that she is doing what she was always doing over the past weeks, which is seeking support from her party and her opposite parties, since she said she would start to have individual talks about other party leaders; however, I do not think that this will work because this has been proven to be not working by her defeat in her Brexit deal. If she continues this path and assumes that she cannot get a better deal from the EU, then it is highly likely to lead the UK to a no-Brexit situation or a no-deal Brexit. The UK population voted for Brexit, so the Parliament does not want a no-Brexit situation unless there is another referendum that the British people vote for staying in the EU. Therefore, it seems that no-deal Brexit is the most likely to happen. 

Many people are frightened about a no-deal Brexit that the House of Parliament strongly opposes a no-deal Brexit. However, how harmful would a no-deal Brexit be for the British economy? I think that there is some chance that the UK can still enjoy free trade with the EU even with a no-deal Brexit. If the UK and the EU place tariffs on each other after a no-deal Brexit, both sides will suffer economic damage. The UK is the largest exporting market for many European car makers, because they have manufactures in China and the US. Even some car makers have their factory plants in the UK, these plants still rely on importing parts from their European manufactures. For other industries, similar problems will also occur. Therefore, it seems that it is mutually beneficial for both sides not to place tariffs on each other. Moreover, though no-deal Brexit will hurt the UK financial industry, with the help of technology, it is possible to limit the damage. 

The Big Vote in the UK

Today (15th Jan, 2019) the UK parliament voted on May's proposed Brexit plan and the Prime Minister, May, suffered an enormous and almost humiliating defeat by 24 to 600 for the Baron amendment and 202 to 432 for her Brexit deal. Before the vote, there was a debate held indicating that May had had a bad chance to win this vote since a significantly greater proportion of the MPs (who spoke during the debate) opposed the plan. As before, May this time did not only face the opposition from her opposite parties including Labour Party, Scottish National Party and others, she also faced the opposition from her own party. I was too optimistic about her situation that I overestimated the chance of the Parliament passing her proposed plan. During the debate, it was disappointing to see that almost no one from the opposition proposed anything specifically useful to amend the plan and make the plan better. However, there were some bold arguments and the leader of the Labour Party, Jeremy Corbyn, triggered a vote of no confidence to attempt to force a general election. 

  

At the moment, the UK Prime Minister, May, has to work hard to restore the support for her in the Parliament, especially from her own party before the no confidence vote. May cannot afford another defeat in the Parliament and I expect she might consider resigning if she suffers another defeat in the Parliament even after surviving the no confidence vote. How like does May survive the no confidence vote? To be honest, under such circumstance, I do not think that she has a good chance to survive the vote, maybe half to half. Her party may largely support May in the no confidence vote, not because they would like to support her as their party leader or the Prime Minister, but because the Tory party would not go to the election this early. If the Tory party is largely confident that they can still win a general election at this moment (they are actually leading the polls), then the chance of May being voted out can be very significant. If May cannot survive the no confidence vote, then who will be the next Prime Minister. If the Labour Party wins, the Prime Minister is very likely to be Jeremy Corbyn. However, if the Conservative party wins, the answer is not very clear right now. 

  

When the UK has a new Prime Minister, how will he or she make his or her Brexit plan? And how well is he or she going to do the work relating to Brexit? The Brexit problem is an extremely difficult and complicated problem that the UK government and the EU government have to estimate the economic impacts from many different aspects and weight the benefits and the costs as well as many other impacts including political and national security measures. Being the UK Prime Minister is an extremely challenging job, may be not easier than being a war time Prime Minister. Towards the Brexit issue, the UK is very divided, even the opposition against May's proposed Brexit deal is divided within them as well. 

The world is affected by the Chinese performance

The Chinese economic slowdown has started and is still continuing for some time and it is hurting other economies as well. The Chinese economy is dependent of exporting to some degree, but the export suffered the biggest drop in two years, which is definitely a piece of bad news for the economy. The export drop was largely contributed by the trade tension between China and the US; furthermore, the weakening world demand only contributed to the export drop. In addition, the car sales in China dropped for the first time since early 1990s, signalling slowing consumption or even consumption reduction. These are really bad stories for the Chinese economy; however, the world also suffers the Chinese economic slowdown. 

Apple, one of the largest smartphone producer and the most valuable companies (Amazon is now the most valuable company), deeply suffers the Chinese economic slowdown. The Chinese market has been a significantly important market for Apple since iPhone was first launched. The Chinese economic slowdown makes Chinese people more cautious when making their consumption decisions and expensive iPhones are crossed on many Chinese people's shopping lists. Furthermore, many car makers are hurt by the Chinese economic slowdown, especially the car sale drop in China. Moreover, the investment in the US from China has hit the lowest over the last 7 years. The fall in the investment is contributed by the Chinese capital control as well as the US restricting deal making. When the investment falls, it will drag down the US economic growth as well. 

When the Chinese economy is not doing great, it does not necessarily mean that other countries will have more opportunities. 

Is it wise for the Republican party to stand with Trump?

The Trump administration is not likely to make any compromise in any near future while the Democratic party does not want to make any compromise by giving any fund for the president's wall. Under such circumstance, the US government shutdown will continue for more days or even weeks. When we see the voting in the US Congress, it is clear that the Democratic party is uniting to fight against Trump's idea of a border wall and the Republican party is fighting against the Democratic party. According the polls, shutting down the government for building a border wall is not a popular move and most people blame the Trump administration for the government shutdown, though the polls do not always accurately show the population opinion. Let's assume the polls correctly show the public opinion this time, why is the Republican party supporting President Trump in the Congress?

The politicians elected by the people should serve the interests of their constituencies; however, some constituencies which have Republican politicians elected also suffer the US government shutdown, and their representing politicians  in the Congress do not seem to protect their interests. There are various reasons to explain this. On one hand, it could be just a play of pure bipartisan politics that one party agrees and the other party disagrees. On the other hand, it could serve the best interest of the Republican party. First, if the bill cannot be passed by the Congress, then the president does not need to reject the bill, this will reduce the criticism about their Republican president, Trump. Secondly, when the two parties are fighting in the Congress, people may not take a side and blame the other side, since the chaotic situation makes everyone responsible for the government shutdown. Thirdly, though we see some people suffer the government shutdown, there could be a lot more people supporting Trump's wall plan or simply supporting Trump, this person, then it makes a lot of sense for the Republican party to support the president and back the wall plan. Fourthly, though the wall plan may not be popular, it does not mean standing with the Democratic party in these Republican controlled constituencies is popular.

Overall, the tension between the Republican party and the Democratic party is mostly about the bipartisan politics, and could serve the interests of the Republican party, though it seems unpopular.

What will be discussed in this year's Davos?

The World Economic Forum Annual Meeting will take place between 22th and 25th January, and is also known as Davos which is the place where the Forum takes place every year. Davos is a very influential event that many world leaders from many countries including China, the US, Russia, these powerful nations, many top scholars and many business leaders come to Davos and give speeches to express their opinions and thoughts about the world economy as well as how the future we should head to. Last year, a substantial number of speeches were about females' importance in the modern society and many female leaders provided their own inspiring stories. Of course, globalisation and technology were also discussed last year, these topics are never too outdated to be discussed. Since this year's Davos is so close, what will be discussed this year?

It is reported that Trump cancels his trip to Davos because of the government shutdown. Does this mean that the Trump administration does not expect that the government shutdown will be resolved by the end of this month? If so, it means that the Trump administration will not accept any bill that is passed by the House and the Senate if the bill does not include the funding for Trump's wall. This year, globalisation might be discussed even more, because of the tension between China and the US. Of course, if China and the US can make a deal before Davos which might change the story; however, globalisation is always an interesting topic to discuss. Moreover, technology will also be discussed, though cryptocurrency is highly unlikely to be discussed this year. AI I think will still be discussed. Climate change might be another topic that may be discussed in Davos, because the issue is getting worse when the US administration shows no interest in believing in climate change theory. Furthermore, Brexit can be another topic that can be discussed in Davos. Theresa May may come to Davos and give a speech to seek support for her Brexit plan; however, Davos may be too late for May because she is facing the Parliament a lot earlier than that. In addition, there is another topic that might be good to be discussed in Davos, which is how vulnerable the world economy is when facing a possible economic crisis. There are some people arguing that the world economy is not ready for another economic crisis, though there is no guarantee that if an economic crisis will hit the world economy in the near future. Given the sharp drop we saw in many financial markets around the world in the last quarter of 2018, this can be a topic that people want to hear some opinions shared by the influential people.

Overall, I do not know what will be discussed in this year's Davos, even Trump will come to Davos and surprise us. I am really looking forward to this year's Davos.