“Algorithms know everything about price but nothing about value,” said my old investor and mentor Leon Cooperman of Omega Advisors.
In a move that has sent shockwaves through the artificial intelligence (AI) landscape, Elon Musk's xAI startup has secured a staggering $6 billion in a Series B funding round. This substantial investment propels the company forward in its quest to compete with major players in the rapidly evolving AI industry, most notably OpenAI, the creator of ChatGPT. The funding, backed by prominent investors such as Andreessen Horowitz and Sequoia Capital, represents a significant step forward for xAI, which was founded just last year.
Musk's History in AI: A Complicated Relationship
Elon Musk, the visionary entrepreneur behind Tesla and SpaceX, has a complex history with AI. He co-founded OpenAI in 2015 but departed in 2018 due to disagreements over the company's direction. Musk has since been vocal about his concerns regarding AI's potential risks, advocating for ethical and responsible development. With the launch of xAI, Musk aims to steer the course of AI innovation while ensuring alignment with human values and safety considerations.
The Rise of xAI: A New Contender Emerges
Despite its relative newness, xAI has already made significant strides in the AI domain. It has introduced the Grok chatbot, designed to integrate seamlessly with the X platform, formerly known as Twitter. The chatbot has garnered attention for its advanced capabilities, including long context understanding and image recognition. With the recent infusion of capital, xAI is poised to accelerate its research and development efforts, potentially leading to groundbreaking breakthroughs in AI technology.
The AI Race: Competition Heats Up
The AI landscape has become increasingly competitive, with a slew of startups vying for dominance alongside established players like OpenAI and Google. Microsoft's substantial investment of approximately $13 billion in OpenAI and Amazon's backing of Anthropic with $4 billion underscores the high stakes involved in the race for AI supremacy. xAI's substantial funding now positions it as a formidable contender, armed with the resources to potentially disrupt the status quo.
xAI's Strategy: A Focus on Safety and Ethics
While the specifics of xAI's strategy remain under wraps, the company has emphasized its commitment to building safe and beneficial AI systems. Musk has repeatedly voiced concerns about the potential risks of unchecked AI development, including the possibility of AI surpassing human intelligence and posing existential threats. xAI aims to mitigate these risks by prioritizing transparency, accountability, and ethical considerations in its AI research and development.
The Impact of xAI: A Game Changer in AI?
The emergence of xAI as a well-funded and ambitious player in the AI race holds the potential to reshape the industry in several ways. Firstly, it could accelerate the pace of innovation, as xAI's deep pockets and talented team of researchers push the boundaries of what is possible with AI. Secondly, xAI's emphasis on safety and ethics could set a new standard for responsible AI development, influencing the practices of other companies in the field. Finally, xAI's focus on integrating AI with social media platforms like X could revolutionize the way users interact with and consume information online.
Challenges Ahead: Navigating Complex Terrain
While xAI's prospects appear bright, it faces significant challenges in its pursuit of AI dominance. The company must navigate complex technical, ethical, and regulatory landscapes. Developing cutting-edge AI models requires substantial resources, expertise, and time. Ensuring the safety and alignment of these models with human values poses a significant challenge, given the potential for unintended consequences and biases. Additionally, evolving regulatory frameworks around AI could impose constraints on xAI's operations and development.
The Future of xAI: A Promising Outlook
Despite the challenges, xAI's substantial funding and Musk's ambitious vision make it a company to watch in the AI space. The company's emphasis on safety and ethics could set a positive precedent for the industry, fostering a more responsible and sustainable approach to AI development. If xAI succeeds in achieving its goals, it could usher in a new era of AI innovation, one that prioritizes the well-being of humanity alongside technological advancement.
The Global Implications of xAI's Rise
The rise of xAI and the intensifying AI race have significant global implications. AI has the potential to transform industries, economies, and societies on a global scale. It could lead to increased productivity, efficiency, and innovation in various sectors, ranging from healthcare and education to manufacturing and transportation. However, it could also exacerbate existing inequalities, displace jobs, and pose security risks if not managed responsibly. The international community must work together to ensure that AI development proceeds in a way that benefits all of humanity, rather than exacerbating existing problems.
The Role of Government and Regulation in AI
The rapid advancement of AI technology has raised important questions about the role of government and regulation in shaping its development. Some experts advocate for a light-touch approach, allowing companies to innovate freely while relying on self-regulation and ethical guidelines. Others argue for more stringent regulations to mitigate potential risks and ensure that AI is used for the benefit of society as a whole. Striking the right balance between fostering innovation and protecting public interest is a complex challenge that requires careful consideration and collaboration between policymakers, industry leaders, and civil society.
The Ethical Imperative of AI Development
As AI becomes increasingly powerful and pervasive, the ethical implications of its development become ever more pressing. Issues such as bias, discrimination, transparency, and accountability must be addressed head-on to ensure that AI systems are fair, equitable, and trustworthy. The development of AI should be guided by a strong ethical framework that prioritizes human values, dignity, and well-being. This requires a collaborative effort between researchers, developers, policymakers, and the public to create a shared understanding of the ethical challenges and opportunities presented by AI.
Conclusion
The race for AI supremacy is in full swing, and xAI's substantial funding has catapulted it into the spotlight as a major player. With Elon Musk at the helm and a commitment to safety and ethics, xAI has the potential to disrupt the industry and set a new standard for responsible AI development. The company's progress will be closely watched by industry insiders, policymakers, and the public alike, as it navigates the complex challenges and opportunities presented by the rapidly evolving field of artificial intelligence.
Mad Hedge Technology Letter
May 29, 2024
Fiat Lux
Featured Trade:
(THE GRIND HIGHER)
(FED FUNDS RATE), ($COMPQ)
Rates will stay higher for longer and the higher income bracket will carry the US economy through any conflict with short-term inflation.
What does that mean for tech stocks?
It will trend higher for longer.
Sure, US rates will stay elevated, but tech stocks have proven they are tough to keep down with elevated inflation.
Most who buy tech stocks have done very well financially in the past 18 months.
There is a high likelihood that higher rates won’t affect their purchasing power to buy more tech stocks.
I do admit a big chunk of Americans are missing out on buying tech stocks at these current prices – I don’t diminish that.
The big spenders have utilized their 3% fixed mortgage to hunker down and continue to spend on devices, software, EVs, and other tech.
This clearly means that 5% isn’t the real neutral rate that the Fed is looking for and I view this rate as a relatively loose fiscal policy that is allowing high-income Americans to splurge on more tech products.
Don’t forget that these are the same stockholders that are reaping increasing tech dividends, higher-tech stocks, and generous shareholder returns.
Further evidence is that the $2 trillion in quantitative tightening along with a 5% Fed Funds rate has resulted in the S&P index rising 37%.
That’s not supposed to happen if rates are high above the neutral rate.
What the Fed gets wrong is that the neutral rate has moved significantly higher when we consider the trillions that were printed for the pandemic programs and stimulus checks.
The additional amount of fiat paper floating around chasing a limited amount of goods results in the neutral rate being somewhere closer to 8-10% and that development gets missed by the Fed.
Therefore, 5% Fed Funds rates are “high” and a lot higher than 0%, but the wealthy have now used this rate as a tailwind to progress their financial goals.
Wealthy households right now can earn upwards of 4.5% in a high-yield savings account, see their tech portfolios go up 20% in a year, and are watching the value of their real estate holdings surge higher.
Given the amount of wealth concentrated among a handful of US households and the skew on the income distribution in the US, just about any change in monetary policy will be regressive, advantaging those with more at the expense of those with less.
Tuesday's consumer confidence reading — while registering a three-month high — was far from a clear-cut judgment from Americans that things are looking up, economically speaking.
If the Fed holds at 5% and fails to erect rates closer to 8%, tech stocks will grind higher.
Rates would need to be at a nominal number that would give pain to higher-income buyers.
My personal view is that the Fed will stand pat at 5% interest rates and the Nasdaq should perform well in this scenario.
If we get talk of 6 or 7%, tech stocks will produce a minor pullback delivering another fabulous opportunity to buy.
The other piece here is Nvidia delivering stellar earnings and that should keep the shine on high-quality tech stocks when the market sets up to make the next move.
My bet is any dip will be bought ferociously and any “dip” could turn out to be more of a sideways time correction before we rip higher.
This is also why Nvidia is close to 81% above its 200-day moving average and boasts a current $2.7T valuation.
(BUCKLE UP WHEN FLYING - CLIMATE CHANGE MAY BE INCREASING CLEAR-AIR TURBULENCE)
May 29, 2024
Hello everyone,
Scientists at Reading University in the UK have studied clear-air turbulence.
Their research shows that severe turbulence has increased by 55% between 1979 and 2020 on a typically busy North Atlantic route.
Scientists have found that changes in wind speed at high altitudes due to warmer air from carbon emissions have played a role.
Prof. Paul Williams, an atmospheric scientist at the University of Reading has co-authored a decade-long study in this area. He argues that the focus should be on investing in improved turbulence forecasting and detection systems to prevent the rougher air from translating into bumpier flights in the coming decades.
Flight routes in the USA and North Atlantic have seen the largest increases in turbulence. Europe, the Middle East, and the South Atlantic also have seen significant increases in turbulence.
Prof Williams explained that increased turbulence was due to greater wind shear – or differences in wind speed – in the jet stream, a strong wind system blowing from west to east, about five to seven miles above the Earth’s surface. Williams further shows that it exists largely due to the difference in temperature between the world’s equator and poles.
While satellites can’t see the turbulence, they can see the structure and the shape of the jet stream, allowing it to be analysed.
Radar can pick up turbulence from storms, but clear-air turbulence is almost invisible and hard to detect.
We all know that turbulent flights are uncomfortable, but they can also cause injuries for those on the flight. Severe turbulence is very rare, but clear-air turbulence can come out of the blue when passengers are not belted in.
It is sensible to keep your seat belt fastened all the time, unless you are moving around.
The financial costs for airlines can be huge. The aviation industry loses between $150 and $500 million in the US alone annually because of turbulence, including wear and tear on aircraft. There is also an environmental cost, as pilots burn up fuel avoiding the turbulence when they can.
A case in point is the Singapore Airlines flight (SQ321) from London to Singapore on May 21. About 10 hours into the flight when the staff were serving breakfast, the airline hit severe clear air turbulence passing over the Irrawaddy Basin (Myanmar). The crew requested an emergency landing at Bangkok airport as one of the passengers had died. At least 50 people were injured including two crew members and a toddler. All were admitted to a hospital in Bangkok; some had serious injuries. More than 20 were admitted to ICU with spinal injuries. (Many people were obviously not wearing their seatbelts).
On Sunday, May 26 a Qatar Airways flight from Doha to Dublin experienced clear air turbulence but managed to land safely in Ireland. 12 people were injured and eight were taken to hospital.
In August 2023 a Delta flight hit severe turbulence about 40 miles outside of Atlanta catapulting passengers out of their seats. Another incident involving an Allegiant Air flight last July that was flying from North Carolina to Florida. One passenger described the experience like being in “The Matrix.”
NASA is working on a way to detect clear-air turbulence.
The technology, under development at NASA’s Langley Research Centre and involving government, university and private sector experts, anticipates using ground-mounted infrasonic microphones that can pick up ultralow frequencies produced by turbulence -possibly as far as 300 miles away.
Such microphones could provide an early warning for what’s known as “clear-air turbulence,” the top cause of inflight injuries and fatalities, according to researchers at the University of Reading.
Clear air turbulence differs from other forms of turbulence in several ways, and it can occur without warning at altitudes of 20,000 to 40,000 feet. The unstable air masses can be as much as 100 miles wide and 300 miles long, and they often are found just above the jet stream core, researchers say.
Turbulence is expected to get worse as the world warms.
Prof. Williams and his team at the University of Reading project that the frequency of clear-air turbulence events will double by 2050 and that the intensity of such events will increase by as much as 40%.
The NASA research effort could make flight crews, passengers, and aircraft more resilient to that future.
Market Update
The summer season is almost upon us. A retracement is imminent in the DOW and S&P500 in line with retracements in the metals sector and Bitcoin & crypto in general as well.
S&P500 – expecting a pullback to 5221 or as far as 5140.
DOW – looking for trendline support around 37810 price point. A lower price point would be 37000.
US tech 100 – looking for consolidation now towards the 18450-price level. 18085 possible support level before a further rally in the tech sector.
GOLD- looking for a correction back towards the 2275 price range and potentially as low as 2220. Subsequent profit targets for further highs sit at 2482 and 2689.
SILVER – expecting retracement towards 3050. Following correction, the metal will rally toward the longer-term target of 3470.
US dollar –expecting a short-term rise in the USD basket towards 10800 before a decline to the 10,000-price zone. So, you should be looking to short the US dollar in 4-6 weeks and buy the EURO, POUND Sterling, and Australian dollar.
Cheers,
Jacquie
Global Market Comments
May 29, 2024
Fiat Lux
Featured Trade:
(WHY THE REAL ESTATE BOOM HAS A DECADE TO RUN),
(DHI), (LEN), (PHM), (ITB)
I received a call from a real estate agent the other day asking if I wanted to sell my San Francisco home. She knew I wasn’t planning on going anywhere. But would $1 million over market tempt me?
Lately, I have been getting a lot of calls from concerned readers worried that we might be going into another 2008-2011 style real estate crash when home prices cratered by 50%-70%.
It’s not going to happen and there are a dozen reasons why. Worst case, I expect a short, shallow pause in the market, followed by a ballistic move to new all-time highs starting now. The latest S&P Case Shiller Data showing a 6.5% rise in home prices confirms my view.
Some sectors are already starting to heat up, while others, like San Diego, Miami, Tampa, and Atlanta never really cooled down.
If you have any doubt, look no further than the superheated bond market which is taking interest rates to new all-time highs. Despite a hefty 30-year fixed rate mortgage rate of 7.00%, prices are still holding up, except for San Francisco and Seattle where they have barely fallen.
You see, there is a method to my Madness.
It is all fresh fuel for a continuation in the bull market for US residential real estate, not just for this year, but for another decade, or more. More high-paying jobs means more big-spending home buyers and AI is creating those high-paying jobs at a record pace.
Although prices seem high now, I am convinced that we are only at the beginning of a long-term secular bull market in housing. If you don’t believe me check out the sky-high prices in Shanghai, Vancouver, and Sydney Australia.
Anything you purchase now is going to make you look like a genius ten years down the road.
The best is yet to come.
The big driver will be demographics, as it always is.
From 2023 onward, 65 million Gen Xers will be joined by 85 million late-blooming Millennials in a bidding war for the same houses. That will create a market of 150 million buyers, unprecedented in the history of the American real estate market.
In the meantime, 80 million baby boomers, net sellers and downsizers of homes for the past decade, will slowly die off and disappear from the scene as a negative influence. Only one-third are still working.
The first boomer, Kathleen Casey-Kirschling, born seconds after midnight on January 1, 1946, became 78 years old this year. A former schoolteacher, she took early retirement at 62.
The real fat on the fire here is that 10 million homes went missing in action this past decade, thanks to the 2008 financial crisis. They were never built.
This is the result of the bankruptcy of several homebuilding companies, and the new-found ultra-conservatism of the survivors, like DR Horton (DHI), Lennar Homes (LEN), and Pulte Group (PHM).
Did I mention that all of this makes this sector a screaming “BUY”?
Talk to any real estate agent and they will complain about the shortage of inventory (except in Chicago, the slowest growing market in the country).
Prices are so high already that flippers have been squeezed out of the market for good. Bottom feeders, like hedge funds buying at the bankruptcy auctions, are a distant memory. Some, like BlackRock (BLK) now own more than 40,000 homes and are the biggest landlords in the county.
Nobody wants to sell because it means giving up ultra-low 2.75% mortgages which they obtained during the salad days and will not see again in their lifetimes. I am one of those happy homeowners. We are prisoners of our own mortgages.
The rising rents that are turning Millennials from renters to buyers may be the first sign of real inflation beyond the increasingly dear health care and higher education that we’re already seeing.
And Millennials are having kids that demand a bigger living space! Who knew?
Have I Got a Fixer-Upper for You!
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 Biotech and Healthcare Letter
May 28, 2024
Fiat Lux
Featured Trade:
(GET YOUR GEIGER COUNTERS READY)
(NVS), (LLY), (BMY), (AZN)
