The Arrow Theorem
“Of mankind we may say in general they are fickle, hypocritical, and greedy of gain.” - Niccolo Machiavelli
We watched with interest Bank of Japan ending its 8 years of Negative Interest Rate Policy (NIRP) and first hike in 17 years as well as suspending its Yield Curve Control (YCC) and ETF purchases and REITs but maintained its policy of buying around $40 billion a month of Japanese government bonds. We also watched the results of the Russian presidential elections and given the anticipation surrounding the most contentious upcoming US elections ever, when it came to selecting our title analogy we decided to go for the “Arrow Theorem”. The Arrow’s impossibility theorem was named after economist Kenneth J. Arrow and is also known as the general impossibility theorem. It was introduced in his doctoral thesis and later popularized in his 1951 book entitled “Social Choice and Individual Values”. It is illustrating the impossibility of having an ideal voting structure. Although Arrow's theorem is a mathematical result, it is often expressed in a non-mathematical way with a statement such as no voting method is fair, every ranked voting method is flawed, or the only voting method that is not flawed is a dictatorship but we ramble again…
In this conversation we would like to look at the recent price action in BitCoin and Bank of Japan’s policy shift and implications in terms of global asset allocations. As well we want to look at the unfolding rally we are seeing in industrial metals (copper comes to mind) following a strong rally seen in some parts of “soft” commodities (such as Cocoa and Sugar) and what it entices.
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