Andy Kessler

WSJ: Ray Dalio and the Market’s Pulse

 https://www.wsj.com/articles/ray-dalio-and-the-markets-pulse-1506290859

Has Ray Dalio lost the pulse? The founder of the $160 billion hedge fund Bridgewater Associates is all over the place spouting his management philosophy of radical transparency. He has been making TV appearances, attending conferences, and whenever possible plugging his new book, “Principles.” There’s even a TED talk touting his “believability-weighted idea meritocracy”—whatever that means. And now Mr. Dalio is trying to bust into China to manage even more money.

The investment whiz lives and manages by a set of principles that employees have to memorize. The list is filled with gems you might encounter at a silent yoga retreat. “Most problems are potential improvements screaming at you.” Or this reworked cliché: “While most others seem to believe that pain is bad, I believe that pain is required to become stronger.”

Speaking of pain, Bridgewater is losing money this year. Through July its flagship fund is down 3%, while the market is up more than 10%. Does this transparency stuff even work? Bridgewater videotapes every meeting and arms workers with iPads filled with apps like the emotion-relief Pain Button and the co-worker-rating Dot Collector. Mr. Dalio must figure that only under these conditions will employees tell the truth instead of what he wants to hear. Maybe this is all a distraction. But you’ve got to be a little cuckoo to run a giant hedge fund, and I think Mr. Dalio is crazy like a fox.

The core of investing is quite simple: Determine what everyone else thinks, and then figure out in which direction they are wrong. That’s it. No one tells you what they think. You’ve got to feel it. That’s why Wall Streeters say things like, “We are lowering our above consensus expectations earnings estimates.” It’s all about figuring out what is priced into a stock right now. That’s the pulse of the market, the collective mind meld aggregated into stock prices. I know from experience this is the hardest part of running a hedge fund. You can find the greatest story ever, but if everyone already knows it, there’s no money to be made.

And the pulse changes with each government statistic, each daily ringing of cash registers and satellite images taken of parking lots. That’s why stocks trade every day. Real-world inputs and the drifting pulse drive the psychotic tick of the stock market tape. Once you feel the pulse, then and only then can you figure out how everyone’s wrong about tomorrow, next month or next year. And believe me, they’re always wrong. Stocks rarely tread water.

How do you find that pulse? It’s hard enough to invest your IRA. Can you image managing $160 billion? Wall Street analysts have earnings estimates that no one trusts. There are whisper numbers and the chaos of message boards and tweets.

WSJ: Can New York Reinvent Itself Again?

https://www.wsj.com/articles/can-new-york-reinvent-itself-again-1505073464

New York is a hell of a town, but technology is threatening its leadership in almost every category. High-speed trading and shadow banking threaten its strongholds in finance. Digital publishing and social media continue to disrupt magazines and newspapers. Streaming is upending television broadcasting, while enterprise software is displacing lawyers and accountants. New York’s public services—from schools to subways—are antiquated.

For centuries New York has evolved. With its deep port, the city dominated U.S. trade through the late 1800s. But that wasn’t enough to employ the swarms of immigrants coming through Ellis Island. So the city transformed, creating higher-paying jobs. By 1910 some 40% of all New York workers were employed in manufacturing—the garment industry, sugar refining, publishing and even bread making. My grandfather was in the millinery business. Manufacturing lasted even through the 1960s. I remember seeing shirts made in the Empire State Building. Total employment in the city peaked in 1969.

As post-World War II technology drove transportation costs down, manufacturing moved to the suburbs (and eventually Asia). Most large American cities stagnated. But New York transformed itself again, this time into a service economy with high-paying jobs in finance, media, fashion, law, accounting and health care. It also remained home to the most important stock market in the world. Today well over 90% of New York employment is in services, according to the New York state government.

But the city has arrived at a nasty inflection point again. New York risks becoming another Detroit. New York needs to embrace entrepreneurs, not repel them. No more Zuckerbergs heading west.

What form of transformation lies ahead? Some suggest New York must become the next Silicon Valley, a mecca for geeks to create the new multiprotocol routers and alternative energy processes. That’s been tried before and always fails (see Research Triangle, Bangalore, Cambridge, England, or Skolkovo, Russia). Instead New York needs to build on the technology that comes out of Silicon Valley and elsewhere, especially artificial intelligence and fintech, and use these advances to transform New York’s businesses.

Understanding these trends, then-Mayor Michael Bloomberg in 2011 launched an “applied science” competition, offering city land for a new campus. Stanford and Cornell wanted in, with the latter focused “on digital technology and its transformation of individuals, society and the economy.” This week one of the first new urban campuses in generations, Cornell Tech, opens on Roosevelt Island. As a Brooklyn-born Cornell engineer, I played a tiny role.