When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Technology Letter
September 18, 2020
Fiat Lux
Featured Trade:
(HOW WILL ARTIFICIAL INTELLIGENCE AFFECT YOUR LIFE)
(AI)
Artificial Intelligence is something we as a society, economy, and individual simply don’t talk enough about.
The point we find ourselves at today is disappointing.
Artificial intelligence is mainly controlled by the big corporations and big governments.
How is it being applied?
Largely through spying, surveillance, and digital marketing.
Digital marketing is the only one that really hits home because we are constantly bombarded with predatory ads that manipulate consumers into buying goods we don’t need.
As artificial intelligence becomes more widespread and cheaper to apply to everyday microeconomic situations, our workforce will transform into something that we could have never fathomed.
What does that mean?
Job losses and a tidal wave of automated jobs will come to the fore.
With the pandemic ravaging job prospects, white-collar professionals have lucked out being able to loaf around the office, stroke a few keys, and get paid.
Well, massive job displacement won’t come for these professionals yet, but once artificial intelligence improves by a factor of 10X,100X, 1000X, 10000X than the average human, then job losses will reach higher up the job chain and arrive like an avalanche.
There are few hideouts from the robots, examples can be found everywhere such as accountants have a 95% chance of losing jobs in 20 years and 35% of legal sector jobs could be automated in 10 years.
Intelligent agents and robots could replace 30% of the world’s current human labor.
AI systems are already replacing human stock pickers, turning banks into human-less cloud centers running on algorithms that can analyze information from markets, social media, corporate filings, and economic conditions to quickly decipher trades. These systems can trade better than any human.
A London School of Economics study showed that 40 million manufacturing jobs around the world could be replaced with robots by 2030. Each robot impacts 1.6 jobs, with lower-skilled regions seeing a higher impact.
The only way humans will be able to get a foothold in the future job market is to merge with robots and become a super worker being able to tap into the deep reservoir of knowledge that artificial intelligence pools together.
“Augmenting humans” is a scary thought in 2020 but in 10 or 20 years, it could become the only means to survive or the only way to be competitive.
Enhanced productivity leads to economic growth, which in turn can fund new job creation opportunities and this enhanced productivity will be led and influenced by AI.
A University of Tokyo study involving 1,500 companies shows that significant performance improvement is experienced by firms which combine the forces of human and robot.
Man and AI can collaborate to enhance each other’s complementary strengths: leadership, team spirit, creativity, and social skills of the former, and speed, scalability, and data crunching techniques.
Also, technological advancements are propping up new areas which did not exist before like big data analysis, data security, decision support analysis, predictive analysis.
Data scientist was a job that didn’t exist 10 years ago, but today almost every business, from consumer brands to online pharmacies, needs data scientists to interpret customer data to design product and marketing strategies.
Around 50% of surgeons will be replaced in 20 years substituted by robots who are precise to the millimeter removing any remnants of human error.
Technology is being increasingly used to support doctors – whether it is retrieving digital records or using data analysis for diagnosis.
The “human touch” could almost become completely erased in healthcare giving way to robots being the brains of the operation and humans as assistants to lend a face to the business.
Then as AI develops, it could fork into different types of AI.
At some point, AI might be able to think for themselves, achieve consciousness, conceptualize, and do complex strategic planning or make decisions based on emotional intelligence (EQ).
Robots will eventually deal with situations where there is an absence of data and feel or interact with empathy and compassion.
Granted, we are nowhere near this last developmental stage of AI but it's food for thought while humans battle the first wave of job losses with primitive AI robots who can’t understand how you feel.
The ultimate decision that humans will need to make is if they are willing to eventually become part robot to survive.
I believe young people will jump at the chance to forge ahead a new career and ride a wave of momentum to get a leg up on the competition because they have the rest of their lives ahead of them.
Pensioners might be averse to joining the youth because they rather enjoy their last years instead of hooking up to a network of infinite data.
Do not forget that when AI is finally fused with the human brains, these humans will be able to creatively think, problem-solve, collaborate on a level that the prior collection of humans together could not compete with.
In the short-term, job losses will deepen as the world becomes overpopulated and AI isn’t mature enough to offer legitimate meaningful solutions yet.
Sometimes the economy has to go 1 step backward to go 2 steps forward.
In the next few years, we will experience the full force of digital marketing as the industry milks the last drops of what it can before that industry finally changes.
The same goes for devices like smartphones and iPads, they won’t exist in 10 years because they will be replaced.
Investors need to keep in touch with the developments of AI because seismic shifts could mean certain tech companies are deemed obsolete going forward.
In either case, software is the future, and AI and whatever framework replaces physical devices will need more software and better-quality software.
Therefore, I recommended finding the best software companies and just buying and holding because they will be part of any new tech revolution and most likely an oversized participant.
“Success in creating effective AI could be the biggest event in the history of our civilization. Or the worst. We just don't know.” – Said British theoretical physicist Stephen Hawking
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
September 18, 2020
Fiat Lux
Featured Trade:
(SEPTEMBER 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(INDU), (TSLA), (DIS), (NKLA),
(GM), (PYPL), (FXI), (XOM), (KCAC),
Below please find subscribers’ Q&A for the September 16 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Is the Russian vaccine real or just a publicity stunt?
A: I would say it’s real. Russia is much more prone to experimentation, that is a luxury they have. If they kill off a million people because the vaccine is no good, there is no litigation risk. So, it may work, but it is a high-risk drug.
Q: What will a contested election mean for the markets?
A: The Dow (INDU) will be down 2,000 points in one day. But I don’t think it’s going to happen; I think the media has greatly exaggerated the chances of a Trump victory. I don’t think there are any undecided votes now. The only way you’d be undecided by now is if you’ve lived in a care for the past four years. The market has got this completely wrong, and once it’s clear who won, you’ll get a monster rally in the stock market that goes until this year’s end, and the game from here until election day is to try to get into the market as low as possible before then.
Q: Do you think big tech is a crowded trade, and what do you think will eventually happen?
A: It is an extremely crowded trade; eventually it will go down big. If you remember the Dotcom Bubble, everything dropped 80% or went to zero. Having said that, we’ve never had this amount of Fed stimulus before, so we should go higher first, especially after the election. The fact is that the big techs are growing gangbusters—30%, 40%, or 50% a year so spectacular multiples are called for. This is the argument Mad Hedge Fund Trader has been making for the last 10 years, by the way.
Q: Do you think the residential real estate market will crash before or after the election?
A: I would say well after the election because I don't think it will crash until 2030. All these millennial buyers are out there in droves, interest rates are at record lows, and you have this massive work-at-home trend going on, which is going to be largely permanent. So, all of a sudden, the demand is huge for homes that you can convert into a kitchen with 4 home offices. A lot of companies have discovered this to be a very profitable way to work. So, I don’t see any crash happening in housing, perhaps even in my lifetime. We’re not seeing all the excesses in housing now that we saw in the Great Recession 13 years ago.
Q: How will Joe Biden’s election change the wealth of America’s finances?
A: Move money from the extremely rich to the middle class. That is the one-liner. It looks like any tax increases for individuals who make less than $400,000 a year will be minimal. The big hit will be those that make over a billion a year, and that category could even see Roosevelt level tax rates of 90% or more.
Q: What do you think of the condo market in San Francisco?
A: It is terrible now with prices down about 20%. We’re seeing exactly the same thing in New York City as people flee to the suburbs, and in the meantime, we have bidding wars going on in the outer suburbs. This will continue for about another year until people pour back into the city once the pandemic all-clear signal is given. That may be in about two years.
Q: Tesla (TSLA) has retraced half of its recent losses; do you think it will go another leg higher?
A: At this point, Tesla is an extremely high-risk stock. I would only want to be day trading it. The overnight gaps are so enormous. At $500 a share, it’s discounting a best-case scenario for 2025 already, so that is kind of stretching it. Better to buy the car than the stock.
Q: Do you have any other names in the EV market to recommend?
A: Absolutely not; most of the other entrants in the market have no cars and no mass production abilities, which is the real challenge, and are lagging Tesla with terrible designs. Tesla essentially has the lock on that market, and a 10-year head start. They are accelerating their technology and the only other serious producer in volume is General Motors (GM) with their Bolt, but that hasn’t really taken off. It is cheap at $30,000 but the next thing to happen is that Tesla will drop the price of their model Y below the price of the Bolt which will kill it off. But no, I wouldn't touch any of these other things. The future is all electric. Many people also underestimate the decade-long torture Tesla had to go through to get to where they are. I remember it because I have been with Elon from day one during his PayPal (PYPL) days.
Q: Would you sell Disney (DIS) here at $130? The economic climate for 2021 doesn’t look great for public mass entertainment.
A: That is all true, but their streaming business, Disney Plus, is taking off like a rocket. They just released Mulan, which I watched over the weekend with my kids and loved it. It will undoubtedly be the largest streaming movie release in history once we get a look at the numbers next month. So, they are moving into the online business at an incredible speed, and it may be enough to offset the enormous losses they are running from their hotels, cruise ships, and parks. And also, this is a reopening play big time—one of the few quality reopening plays out there—and the only reason to sell Disney here is if you think the corona epidemic will get dramatically worse and stay worse well into next year.
Q: What about battery names?
A: Batteries are still either owned by giant companies like Tesla or they’re small startups that have a nasty habit of going bankrupt. There really aren't any good clean publicly-listed plays on batteries in the markets these days.
Q: What about a short on Nikola (NKLA)?
A: If I were an aggressive day trader, that would be right in my sights. You can expect nothing but bad news to come out about Nikola. Taking a truck with no motor and then rolling it downhill and calling it a successful trial just invites short-sellers by the hoards. It’s already off 65% from its peak.
Q: Why do you say there's no future in hydrogen?
A: You need to build a large national hydrogen distribution network to make this economically viable and it’s just too expensive. Electricity infrastructure is already in place and just needs to be upgraded and modernized. Electricity is also infinitely scalable in improvements in power output, but hydrogen is only capable of straight-line improvement. No contest.
Q: What about the Solid-State Batteries?
A: I actually wrote a piece about this earlier this week. Solid-State Batteries could allow a 20-fold increase in battery efficiency for cars and houses and that may only be 2 or 3 years off as there are several in development now. QuantumScape (KCAC) is the listed leader there. Bill Gates is a major investor (click here for the link).
Q: Can we play a short-term bounce in big oil like ExxonMobile (XOM)?
A: You can, but remember, this is a trading play only, not an investment play. The long-term future for these companies is to go to zero or to get into another line of business, like alternative energy.
Q: What will happen to the market after the Fed speaks today?
A: My guess is stocks will rally as long as Jerome doesn’t say anything horrendous like “this is your last freebie; I’m raising rates at the next meeting,” which he is not going to say at the last Fed meeting before the presidential election.
Q: I am trying to get through all the fluff of misinformation out there; I want your opinion on who is winning the US-China (FXI) trade war.
A: The simple answer is that China has been winning all along. The proof of that is that their economy is growing and ours is shrinking. That’s because China managed to cap their Corona deaths at 4,000 and ours are at 200,000. In the meantime, the technology improvements in China have been enormous over the last 4 years, so none of the trade war issues, which by the way, were all focused on the lowest margin businesses that China did, have had any effect. If anything, it’s forced China to offshore their low margin business to cheap countries like India, Vietnam, and Bangladesh so they disappear as China trade. I always thought the China trade war was a mistake—it’s always better to trade with someone than go to war with them. I’ve done both and prefer the former.
Q: Do you think Biden is bullish for stocks, considering all the regulations that will be put back?
A: I don’t think there will be many regulations put back except for the energy industry, which has essentially operated regulation-free for the last three years. All of those controls—on flaring, on pipelines, and so on—those will all get put back because they were implemented by executive order, which can be reversed with the stroke of a pen. I don’t see much regulation anywhere else in the economy coming back. And in fact, since Joe Biden pulled ahead in the polls in May, the stock market has gone up almost every day. So clearly, the market thinks Joe Biden will be positive for stocks, and the possibility that he might implement an extra $6 trillion dollars in fiscal spending once in office is the reason why. You have to look at what these people do, not what they say. And my bet is that since Trump set the precedent for record deficit spending, Biden will continue that. And we’ll only worry about things like deficits when the inflation rate tops 5%, when interest rates go back to 10% in five years—all the reasons that caused the massive rise in deficits during the late 70s and early 80s.
Good Luck and Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Sitting Pretty
“It is fine to have the longest view in the room, as long as the thing at the end of the vista is a gigantic hill of money,” said John Lanchester of the New Yorker magazine.
Mad Hedge Biotech & Healthcare Letter
September 17, 2020
Fiat Lux
Featured Trade:
(SHOULD WE CROWN PFIZER AS COVID-19 VACCINE KING NOW?)
(PFE), (BNTX), (MRNA), (AZN)