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I apologise for my absence. The week has been a tale of dramatic life events. Firstly, our nearly 16-year-old Spoodle is in the final stage of kidney failure, and we are all taking turns being a full-time nurse as we prepare her for the ultimate kennel in the sky. HoMore about Honey when the time comes.

My wife had a quite dramatic shoulder reconstruction, so I am running to the hospital daily, which is over the Sydney bridge.

Finally, probably the most ill, at least that is how it feels, is me with man flu, tennis elbow, and a frozen shoulder. Otherwise your favourite macro strategist is doing great.

On a more serious note, I am in heavy product development mode, and taking some time away from looking at the repetitive news headlines has been a good circuit breaker for me. I regard myself as a flaneur. I have been indulging this passion, both on a real and virtual level. I inherited this skill from my mother. I can see someone walk 5 metres, and I can tell you half the person’s life story. Similar to most market forecasters who read a headline and predict the future with remarkable inaccuracy.

S2N Spotlight

I am currently writing a long-form article on this subject for a publication, but I thought I would share the gist of it here, as it will mark a trilogy of me discussing the golden cross.

What I have done is I have applied a 50-day cross of a 200-day simple moving average across 7 world stock indices. The choice of the indices is instructive, not complete. My thesis is that almost all the people I come across think they can pick and choose the index that works best for them after doing a backtest. This is a mistake; Taleb would describe it as fragile. It is not research; it is wishful thinking.

You will be hearing more from me on this subject in the coming weeks and months. The way to approach strategy development is to make the strategies anti-fragile, quoting Taleb again.

What you see below is the portfolio return of a moving average cross strategy. Most people will choose the individual backtest, i.e., the S&P 500, and say they have a strategy that makes an excellent return. Most don’t realise they have been fooled by randomness. Taleb quote number 3.

S2N Observations

I have not changed my views on stagflation. I see higher inflation and weaker growth.

Facts don’t care about my opinion, but they are starting to line up in the numbers, slowly but surely.

In the name of contradiction, I thought I must share a chart that paints a completely different picture. The Bloomberg Commodity Index is in a multi-decade bear market and continues to look weak. It looks like inflation is coming from other places, such as wages, services, housing, weaker currencies, etc...