End of era of aircraft carriers?

Are aircraft carriers becoming obsolete?

The new Jerry Ford carrier just launched. Aircraft carriers supplanted destroyers a generation ago because carriers had airplanes that could fly farther than the big guns on destroyers could lob a shell. Destroyers could hit targets up to a few miles away. Aircraft carriers could reach 50X farther with better accuracy and cause more damage.

My guess is that the next generation will be missile carriers. Instead of one ship with dozens of planes, the new missile carriers will have 100s of missiles that launch faster and covers more territory than planes launched from an aircraft carrier.

My expectation is that the current Ford class carriers will be the end of the line. The will still be used for decades but the ships that replace aircraft carriers will be quite different. Instead of a floating city of 1,000s of sailors, the next navy will have aircraft carriers for reconnaissance drones and electronics planes, not loaded with fighter planes. A strike force will be several missile carriers and several aircraft carriers as a coordinated group instead of one huge aircraft carrier (and dozens of support ships).

Economic generations

Economics change its central beliefs about every 30-50 years. I guess that is the length of a generation of economists who start with the standard thinking and then are replaced by the next generation who have a new standard.

Two generations ago (~1900-1930s): Economists used Victorian thinking and followed classical theories about human behavior. Rigid, predictable models. Sociological and historical theories formed the basis of economic thinking. People were driven by "animal spirits".

One generation ago (~1950-1970s): Lots of math and physics influenced the models. Some results seemed bizarre from everyday assumptions. Statistical models of crowds drove economic thinking. "Aggregate demand" was measured and predicted.

Now (~1990-?) Models of randomness and risk are now getting more attention. Instead of Guassian probabilities, the new theories refer to Levy processes and Doob's martindale. This is like quantum physics instead of Newtonian. Models look at game theory and probabilistic outcomes.

Next generation? Who knows. Maybe machine learning combined with behavioral economics will drive new theories where people are not 100% rational agents that decide based on marginal utility.

2014 pivot to Asia?

Will the emphasis be on Asia in 2014? I expect the Obama admin will soon talk up a "pivot" in foreign policy that focuses on Asia.

The recent Iran agreement was, on its face, a horrible deal for the US. The Afghan deal was another bad deal for the US. Why? Is this incompetence or a strategy change?

The only positive conclusion I reach is that the US is washing its hands of everything in the Middle East in preparation for looking elsewhere. Probably towards Asian countries.

Maybe the success of fracking means that Middle East oil isn't as crucial as it was even a few years ago. Maybe they now realize that the problems are intractable. Maybe domestic politics has changed (the pro-Israel bloc was frustrated by Clinton so they became the neo-cons)

If this view of a foreign policy shift is true, then Israel's position is weakened if the US views the region as non-primary.

Lots of investing ramifications...

Deflation?

After trillions of dollars/yen/euros over the past decades, is the next risk from deflation?

In Europe, inflation has been below expectation. Latest measurement is 0.7% that's below last year's 1.1%.

In Japan, the result of Abe-nomics is still unclear but Japan has had weak GDP growth for two decades while experiencing slight deflation.

In the US, the Fed has been targeting 2% inflation and inflation has been about that level. However, the latest number was below the target. The November 2013 Consumer Price Index for Urban Consumers (CPI-U) showed an annual inflation rate of under 1%. Something to fear?

The enormous progression of computing power has been endlessly reported. But how does it affect cloud computing? An amazing statistic was given in an article about IBM's Watson project.

“It’s now $90 an hour to rent 10,000 computers.”

As the 50th anniversary of JFK's assassination approaches, the media is re-telling conspiracy theories and urban myths. What does this relate to markets? For investing, the assumption has been that humans are rational thinkers that assess the worth and utility of their purchases. But that assumption is being pushed aside by the field of behavioral economics. People are not lacking in biases, prejudices, and faulty thinking. I may turn out that a better assumption is that people are story-tellers. Given facts without a narrative, people will construct a story to bind the facts. Some stories are good; many are not. For investing, stories are everywhere and influence market decisions.