​It was late Sunday morning when I found myself having a slow breakfast on one of the main historic streets in Warsaw. It’s called Faubourg de Cracovie and it is one of the best-known and most prestigious streets of Poland’s capital, surrounded by historic palaces, churches and manor houses.
 It comprises part of the Royal Route that runs from Warsaw's Royal Castle and Old Town, south to King John III Sobieski’s 17th-century royal residence at Wilanow.
The King was an able military commander, most famous for his victory over the Turks at the 1683 Battle of Vienna, after which the Pope hailed him as the savior of Christendom.
Sobieski ruled over Poland and Lithuania for 22 years. 
He had a French wife - Marie d'Arquien, known in Poland by the diminutive form "Marysieńka", which actually sounds sweet if you understand the language.
The Royal couple became famous for their love letters, written from 1665 to 1683, when they were parted either due to John III Sobieski's military engagements or her travels to Paris. The letters give insight into the authentic feelings of the loving couple and also their reflections on day-to-day decisions made by the king, as he consulted his wife about them.
That late morning I was sitting outside, having a glass of hot red wine and feeding a small bird with almonds so it stayed on my rustic wooden table and kept me company. Just up the street a young blonde woman was playing violin and she was really good at it.
It was the type of a morning that is hard to recreate anywhere else.
Warsaw suffered heavy destruction at the beginning of the Second World War, in September of 1939. Then, during the uprising in August of 1944 the town was totally leveled by the Germans. It’s a shame really, because Warsaw was of the most beautiful cities in the years leading to the war. It was known as the “Paris of the North”.
After the war the Poles rebuilt the landmarks, which simply means none of these are real, just recreated. 
Interestingly, from the founding of the Poland Kingdom in 1025 through to the early years of the Polish-Lithuanian Commonwealth created in 1569, Poland was the most tolerant country in Europe, and that’s saying something given what went on in Western Europe at that time. 
For centuries it became a shelter for persecuted and expelled European Jewish communities and the home to the world's largest Jewish diaspora of the time.
As Poland regained independence in the aftermath of World War I, it became one of the world's largest Jewish centers of over 3 million people.
Later, World War II and the Nazi prosecution of the Jews ended that chapter of history, as we all know. It was the worst ending imaginable.
 
Geopolitics is like real estate, it has three important rules: location, location, location. Poland is the bridge between Germany and Russia - with wide open planes it is the narrowest place to cross east-west between the Baltic Sea and the Tatra mountains in the south. Every major European confrontation happens here, whether fought secretly (typically) or an all out war. 
 
This country is hard on people, I don’t live there anymore and need to learn to let it go. Maybe one day I will.

The Baltic Dry Index, which tracks the cost of moving bulk commodities and is considered a leading indicator of global trade, is down more than 50% since the start of the year. The Index represents the cost of renting an ocean-going container ship to move goods from, say, Chinese factories to the Port of Los Angeles.
Brokers in Singapore and London said capsize vessels, the largest ships that move bulk commodities like iron ore, coal and aluminum, were chartered in the spot market for as low as $8,200 a day on Thursday, a $500 decline from Wednesday. Break-even costs for carriers can be as high as $15,000 a day, and daily rates in the capsize market hovered above $20,000 last year. The ship executives say the bulk seaborne freight business is suffering from the lowest demand in two years, while China’s trade tussle with the U.S. is making the market more volatile.
There are some specific, possibly temporary things going on here - you may blame weak demand from China over the Lunar New Year and from Brazil after Vale SA’s iron ore disaster, in which a mining dam burst, triggering a flood. And Vale has suspended production at a number of sites, but the void will be largely covered by iron ore shipments out of Australia.
But, as they say on late night TV - wait, there’s more.
China totters precariously as signaled by abrupt slowdowns among its principal suppliers---Japan and South Korea. There are also broader forces at work. The trade war isn’t just a piece of political theatre for the US. They really do need factories to come back home if they want to avoid a populist and/or socialist revolution. 
It’s possible that the whole free trade/mobile capital/cheap labor/long supply chain Age of Globalisation, with its assumption of unlimited rich-country demand and plentiful cheap energy for transport was just an artifact of a very specific time. 
It was unsustainable to begin with. 
Thing is, that the Chinese economy is based on integration with the global system and access to hard currency paying consumer markets of mammoth size. It will only work if it’s possible to bring raw materials and energy from beyond the continent, process them at home, ship the finished product, and the whole long supply chain has no security interruptions anywhere. That is an awfully long list of requirements for a country to function, requirements that China is completely unable to guarantee on it’s own. They need US navy for security, cannot survive in anything different than the current global order. 
Which is now changing.
Most important thing to understand about China is the fact that this is not an economic entity, this is a political/military entity and it’s stability is not guaranteed. The maps they showed you at school of one big China? That’s an exception, not the rule.
In the North, the Yellow River is not navigable and the area is wide-open plains with two thousand years of history of civil conflict.
In central China the Yangtze River is navigable and Shanghai is a New York or Toronto of China – this is where the money is. Down south you have sub-tropical mountains covering most of the territory and some good ports down at the Pearl River delta. It took 2000 years for the Chinese from the north to ultimately exert control over south and they see this part of the country as a permanent secessionist problem. Think Hong-Kong.
Between Shanghai and Beijing the deal was this: you have the money, we have the guns, so to make it work they traded off leadership – one is in charge growth and one is in charge of security and unity. Until last March, when the elites made Xi a president for life in China. He now has more power in his hands than any emperor in the history of the country to face global change that is underway. 
They say that the only thing in life that never changes is constant change itself. Most people are not comfortable with it. Call it the unbearable lightness of being.
Thing is, I like it that way. 

​

​This winter is cold in the Midwest. Last week’s report said that Chicago was colder then Antarctica. They had to put the rail track switches on fire in the windy city so the ice melts and the trains can go in the right direction. 
The energy output of the sun peaked in 2015 and has been crashing faster that anyone thought possible, and this is according to NASA charts.
Toronto had temperatures so low that a new BMW X5 that serves us as a winter car gave up and now needs a new engine. The crankshaft and bearings broke in one messy spectacle just down the street from the house, in a big example of sloppy engineering. They should test the cars where they sell them, I would think. 
The enthusiasts of electric cars had a wake up call of sorts: that the battery range is temperature dependent - it shrinks dramatically when it gets cold.
On the subject of cars, electric and otherwise - one morning last November en route to Tokyo was a Gulfstream G650 with Carlos Ghosn, the charismatic executive who’d engineered the Renault-Nissan alliance and now served as chairman of both companies.
This corporate alliance struck when Renault rescued Nissan from the edge of bankruptcy in 1991 by paying $5.3 billion for about a third of its shares. 
Nissan was a financial mess at that time, but the relationship evolved in a direction that might charitably be described as awkward.
Ghosn was arrested by prosecutors upon arrival at Haneda airport in a situation that looks like more than the comeuppance of an executive who flew his Gulfstream too close to the sun. It looked like a palace coup.
Nissan has said that Ghosn engaged in a wide pattern of unethical behavior, but the criminal charges against him pertain only to some foreign exchange transaction and to allegations that he concealed the true scale of his retirement compensation—money he has yet to receive. One could say that he was arrested in anticipation of things.
French government’s response is remarkably missing, specially given the fact that it owns a majority stake in Renault and president Macron was touring an assembly plant with Ghosn not so long before the big guy’s arrest. 
Wide smiles and all that.
The Ghosn’s case will turn on a simple question: how could a sophisticated global automaker, with battalions of lawyers and auditors and abundant bureaucratic infrastructure, not know what it was paying its chairman?
In the Tokyo prison Ghosn is interrogated daily without the possibility to take notes to prepare defense with his lawyers. He also asked for blankets because it is cold in the cell and he has lost a lot of weight. 
And he is not charged with anything yet.
Try to pull this nonsense on a North American executive and see what happens to you. 
It seems the big chill is also elsewhere - the Chinese government is cracking down on capital flows from China to other countries, particularly to fund real estate projects, after a reckless binge of buying up everything in sight. 
This leaves the construction of some trophy properties in LA and San Francisco on hold for now as the Chinese developers are being forced to unload these toys.
Obviously the work stoppage due to lack funding is rattling some nerves in California.
The Chinese government is also now a net seller of US treasuries, a small thing but significant.
A new world order is taking shape.

​The Bretton Woods conference was held in New Hampshire during three weeks in July of 1944 to set the basis for the post-war financial system. Basically the idea was that the US dollar was to be backed by gold with a fixed exchange ratio and all other currencies were priced to the dollar. However, this agreement could not exist in vacuum, so obviously much more was agreed upon.
Or, to be realistic, simply because the US was the only major power standing at the end of 2nd world war, the others were made an offer they could not refuse. 
To put it in context, in times leading to the war the only way to secure supplies and markets was to take control of them, that’s why the strong countries had colonies. 
Now the Americans were offering something different – that they will secure supply lines and keep their market open for imports for the war thorn countries to get back on their feet in exchange for one thing – you have to choose sides, you need to be with us against communist Russia.
And secure the supply lines they did – the Americans have 11 super carrier battle groups and it is said that each one of those has more long range striking capability than the rest of the navy in the world combined.
As result of the free trade deal, a number of economies entered the world’s business, among them China.
Then an important thing happened – the US won the cold war, the Berlin wall went down and there was no one to protect against anymore. 
The Russian army exited Eastern Europe, and the world’s stage, in a biggest retreat of an army not beaten in a battle in all of human history. 
 But the system built since the World War II was not to facilitate trade from American perspective – it was to provide security. The Americans don’t really care about the trade – they have all they need on their continent (or within NAFTA) and they are becoming energy self-sufficient. And the more business they can bring back home, the more good jobs are created.
It’s a win-win. 
Now, if you’re China, this sets off alarm bells of high frequency. It is no accident that president Xi was granted virtual dictatorship in March of last year as “president for life”. He needs to keep the ship on an even keel and he needs all the power to do that. 
The Chinese know that something new is coming – just consider their investments in real estate in Australia and Canada. Why would you do it if things at home were going good?
The problem for the world is that the Americans don’t care anymore.
And it’s a big problem.
President Trump is extracting America from the international supply chain - that is what import tariffs mean. And it’s clear to me that we would get the same under Hilary, it would maybe take 4 – 8 years of soft talks, back room deals and whining on TV. Under Trump the same happens in maybe 4 – 8 weeks.
 So a new order is coming, I am convinced that we have passed the point of no return by now.
Just watch who came to the White House after Trump was elected to understand who gets it – Theresa May was first (and she has no authority to negotiate deals being part of EU, but she still did), Japan’s Abe was second, then Merkel and Xi. The last two visit were disasters, as you can see from the pictures.
Trump didn’t even shake Merkel’s hand and that was the piece of news that was in the media. But more remarkably, he handed her a bill for services rendered for protecting Germany all these years. 
And Germany is a place to watch – it imports 85% of its energy, their economy totally depends on access to outside markets and it doesn't have an army to speak of. 
Every time I see Angela in the news I think “there goes a woman with a serious problem.” 

The news that stroke me in recent days was that of Jeff and MacKenzie Bezos divorcing. It’s because their marriage was quite a story and it is sad to see a great thing go.
MacKenzie met Jeff after she graduated from Princeton and took a job at D. E. Shaw (a hedge fund), where Bezos worked. In 1993 they married, and by 1994 they were driving to Washington, with MacKenzie reportedly at the wheel of the car. The couple gave up a really comfortable lifestyle and successful careers to move across the country and start something on the internet. The only reason Jeff Bezos was able to do that is because he had an extremely supportive spouse. It was an incredible risk and one that they both took on jointly. There is a clip of the net where Bezos explains how he held over 60 meetings to try to rise the first million dollars. And he had to give up 20% of Amazon for that. 
It’s interesting to try to imagine the mindset behind it.
Intel’s founder Andy Grove wrote the book “Only the paranoid survives”’ with his opinion on what it takes to make it big – one needs to be a little crazy, often antisocial, and what he meant by this is not falling into cliché thinking.
If you are antisocial by the age of 5, there isn’t an intervention that is effective, they say. Male aggression peaks around the age of 15, and then declines and normalizes around the age of 27. Basically, if you have someone who is a real trouble, throw him in the prison until he is 27. Then they age out of it. Problem is, that the worst thing you can do with anti-social people is to group them together, which is what we do in prisons. 
The troubled people all show a deficit in problem solving ability, or so the thinking goes. But there is more to it – they have problems in accepting reality as they see it. They have their minds set and will not bend. Extremely successful people seem to have the same personality trait. Like a structural engineer sees his life as concrete, square walls, and everything has to fit between them. It’s for them “my way or the highway” as the American saying goes. The others will hear, and react, to what they choose and want. Which may likely define the IQ, it’s just that not everyone is comfortable with it.
If your job is simple, which means you do the same thing every day, then IQ predicts how fast you learn the job but not how well you do it. But if you job is complex, which means the demands change on a regular basis, then the best predictor of success is general cognitive ability. That’s fluid intelligence, or IQ as I understand it. Another big one is freedom from negative emotion, as is openness to experience which means creativity.
All these dynamics result in the creation of social hierarchies, which are a feature of our environment, not just purely based on social contract and this is a huge thing to understand. This is where Karl Marks and the likes of him went wrong. Our institutions may be malleable, but our biology is much less so. In every century people were surprised that the life goes on the same way – and so are many today.
Male testosterone level is about 20 times that of women, so there is no surprise that prisons are filled with mostly men. Women are wired for cooperation, men are wired for individual performance. If you find your match, you’re the luckiest guy in the world. If you don’t, life gets bumpy fast.
It’s quite possible that Bezos had his chance and just blew it big time. 

​Gold’s price in December recorded the largest jump since January 2017.
And that’s after the last quarter of 2018 that saw investors pile into exchange-traded funds backed by bullion - the biggest increase over a comparable period in more than 18 months. The critical words here are “backed by bullion”, which is a statement that could mean anything or nothing.
Since times immemorial gold is money. Based on physical ownership, not on trust in the willingness and ability of another party to honor their promises. However, gold is not freely traded, it’s the most artificial market in the world. The daily gross trading on the LBMA (London Bullion Market Association) is about 16 times annual mine production (not the settlements but trading).  So, it’s a real casino with paper claims that can never possibly be settled. The price of gold is where it is right now only because of this artificial trading.The only way the system will unravel is when people holding the paper claims will start worrying if they can take delivery. And they won’t be able to – there is just not enough physical gold to go around.
Germany has a stronger relationship with gold than most nations. The country’s experience with hyperinflation during the years of the Weimar Republic is ingrained in the national consciousness. Gold, above all, stands for stability. Today, Germany is one of the biggest holders of gold in the world: it owns 3,378 tonnes, second only to the US. 
This time the critical word is “owns”.
In the times of the Cold War, the Germans, flush with cash from their export surplus, were hesitant to hold their gold in Frankfurt, which was not far from a Russian controlled part of Europe. They moved the gold west, to Paris and New York. This practice is not unusual, the Dutch, for example keep a big chunk of their gold in Ottawa. With the fall of Soviet Union and unification of Germany everything changed. When the Bundesbank first asked the New York Fed “can we please have our gold back?” they were politely told to go focus on something else. Then they requested to at least audit their gold storage but got a similar response. Eventually, in 2012 serious negotiations began with the goal to move German gold to Frankfurt. The German negotiating position was much enhanced by the leakage of a report from the German Court of Auditors, which was very critical of the conditions under which German gold was being held in New York. 
Later, with big fanfare, Deutsche Bundesbank announced on February 9, 2017 that ahead of plan they had repatriated 300 tons of gold from New York. This put a positive spin on a rather disturbing fact: 1236 tons of gold that is supposed to be part of Germany’s currency reserve will continue to be kept outside of German control in New York. 
Having to give a rationale for the more than 1200 tons of German gold in New York, the Bundesbank came up with the fact that it is so convenient to have it at the Fed, because many other countries have gold there. That way, you do not have to move the gold around, the logic went, if you want to sell it to some other country, you just have to re-designate it inside the Fed building. 
Note, that the only situation in which it would become necessary to do this quickly and in large amounts would be when the dollar-based currency-system brakes down and countries insist on payment in gold again. 
I guess the Bundesbank is keeping its options open. 

​I went to Geneva one last time before leaving Europe for the holidays. I took the remarkably quiet Swiss train to the central station and then walked downtown. It was a stormy evening and strong wind was blowing down the Boulevard Mont Blanc.
It was getting late, but the traffic was still heavy with screaming Ferraris and booming Bentleys, stopping and going.
A Romani woman was sitting on the sidewalk beside the entrance to the Kempinski Hotel, in the warm lights and under a brightly lit display of expensive Panerai watches. When I came closer, I realized that she was quite young, in her twenties still. She was wrapped up in warm blankets and looking at me with eyes black and deep like a diamond mine.
“Un dollar pour dire votre avenir,” she said. A dollar to tell your future.
I stopped, surprised. “How did you know that I am not from here? I don’t think I ever saw you here before.”
Her dark eyes closed for a moment. “Le plus important dans la vie est invisible,” she said with a strange accent, difficult to place. The most important in life is invisible.
Then she extended her left hand, smooth and delicate, with an ancient tattoo that was disappearing under the sleeve. I gave her a ten-dollar bill, and she took it and hid it under the blanket.
“So what is in my future?” I asked. “Now I need something back from you.”
She was quiet for a long while, looking at the dark waters across the street, and I started losing interest in the answer. The woman’s piercing black eyes were now remote, as if in a different world.
I started walking away when she said it. “Ta vie va encore changer.” Your life is about to change again.
Strangely, given the time and place, it didn’t surprise me.
“No, that’s over. I settled down here for good.”
“C’est ce que vous pensez,” she said. That’s what you think.
I was walking away when she spoke again. “Attention à vous, Mister Generous.” Be careful.
“Just tonight, or all the time?”
The voice was now very faint and far behind me, lost in the blowing wind and the traffic noise of the city. And I wasn’t even sure what it was that she said at the end.
And she said, “Tous les deux.” Both.
The next day I took a flight from Frankfurt and landed in Toronto on a crisp, sunny afternoon. As I was leaving Europe, it felt like it’s the 1848 Spring of Nations again. There are now millions of people across the continent who want to re-establish the ideals of nationhood, of national sovereignty and popular democracy, against what might be viewed as the neo-monarchical structures of 21st-century technocracy. The sustained gilets jaune revolts in France capture this mood well. In recent weeks protesters in Belgium have tried to storm the European Commission – an event, which got little media coverage – while yellow vests in the Netherlands have called for a referendum on EU membership and in Italy they have gathered to express support for their Eurosceptic government. Interesting times, these.
At the airport in Toronto, I was waiting for my luggage at the carousel when my phone rang and a voice from far away made me a proposition that will be difficult to refuse.
“This witchy woman,” I thought about the lady in Geneva, “how did she know?”
Later, it took almost an hour drive from the airport, and there I was. The warm and comfortable house set against rolling hills of the Oak Ridges moraine on the north edge of Toronto looked better than ever.
I was home for Christmas.

​I was sitting comfortably in a slick new A350 flying across the world with a speed exceeding 1000 km/h at times, reading material that I downloaded in the airport lounge. It was mostly about the sad Brexit saga, which highlights the lack of leadership in a once great country. The so-called “exit negotiations” have turned into a spectacle of public humiliation for Britain.
Nelson would have been furious. Churchill would have snowballed into a spitting rage. Thatcher would have coiled to launch a counter attack.
Those were the days.  
Today, premier Theresa May is making conscious efforts, the paper says, traveling to Brussels for talks but looking like a tortured person. Perhaps Britain should hire Donald Trump to run the negotiations; he would give the unelected bureaucrats in Brussels a run for the money. And fast.
It is not difficult to see that the EU needs Britain more than the Britain needs the EU. It’s a big market, biggest one for German cars in Europe, for example. It has the strongest and most battle hardened military, with natural ties to the US and the biggest financial center in Europe. It will do fine making decisions on its own.
It is ironic, that the EU, built on the promise of universal liberal values, is teetering on the verge of collapse due to the difficulties of integration. And maybe this is the last moment for Britain to leave the union before economic issues really explode. They have been “papered over” by the European Central Bank purchases of government and corporate paper. The ECB now owns 40% of investment grade debt in Europe including that of stock listed corporations, so basically they are the market.
With the Federal Reserve unwinding the Quantitative Easing and rising interest rates how long will the ECB be able to do the opposite? The giant sucking sound you hear is the capital flight from Europe. For the ECB the problem is that if they stop, or even slow down the purchases, where will the bid come from? This is the reason why it is illegal to short government bonds in Europe.
What many don’t realize is that the European Central Bank can actually go bankrupt. In contrast to the US Fed, they can’t create elastic money as needed because Germany would never allow it. They have limits set by political powers. If there is no longer a political will to create more money, then watch out below. Central banks are not all created equal, but they all share the same flaw that feeds separatist movements worldwide. They were created with the good intention to micromanage, but morphed into something really counterproductive. My home country Canada is a good example.
The separatist movements in the province of Alberta claim that the Bank of Canada manages the economy in response to stock market trends and real estate speculation in Toronto and Vancouver, but the commodity producers in central Canada are on the opposite side of the economic cycle. High commodity prices are bad for stocks and vice versa. There is lots of merit to that - in the US they call it the Houston-New York arbitrage, meaning that high oil prices are good for Texans but bad for Wall Street stock peddlers. The Federal Reserve System was originally set up in 12 regional branches, each managing interest levels independently. This set up is long gone and doesn’t exist anywhere in the developed world.
Among the options for the Brexit resolution next year is a repeat of the vote, which will be a mockery of the democratic process. Angry reactions from the Brits may be damaging.