October 2024

HOW TWO EGGHEADS SCRAMBLED THE STOCK MARKET

(NVDA), (GOOGL), (MSFT), (AMZN), (INTC), (PLTR), (AI), (BIDU), (BABA), (ASML), (SAP), (MBLY), (CGNT)

Talk about a wake-up call for anyone still sleeping on AI.

The 2024 Nobel Prize in Physics just went to John Hopfield and Geoffrey Hinton, two guys who've been tinkering with artificial brains since before most of us knew what a smartphone was.

This isn't just some ivory tower pat on the back - it's a flashing neon sign pointing to where the real action is in the stock market.

Let's break it down. Hopfield, the Princeton brainiac, cooked up something called the Hopfield Network back in '82. Think of it as the great-granddaddy of today's neural networks.

It showed how these artificial neurons could play catch with patterns, storing and spitting them back out. Fast forward to now, and this is behind practically everything from your phone's face recognition to Wall Street's algorithmic trading.

Then there's Hinton, the guy they call the "Godfather of AI." He's the reason your Netflix knows what you want to watch before you do.

His work on deep learning and those back-propagation algorithms? That's what's powering the chatbots that are making customer service reps sweat and the AI that's reading X-rays faster than radiologists.

So, why should we care? Because this Nobel nod isn't just about science. It's about cold, hard cash. The global AI market? It's not just growing; it's exploding.

We're talking $207.9 billion in 2023, and it's gunning for $1.8 trillion by 2030. That's a 36.2% compound annual growth rate.

Need more proof? Chew on this: 85% of enterprises are already knee-deep in AI. That's up from 77% just two years ago.

And the money pouring into AI? Corporate bigwigs dumped $94 billion into it last year alone, a 13% jump from the year before.

But here's where it gets real for us regular folks - AI isn't just some back-office tech anymore. We're looking at 75 billion devices worldwide using AI. That's your phone, your car, maybe even your toaster. AI is everywhere, and it's only getting started.

So, where's the smart money going? Let’s take a look at some of the front runners.

First up, NVIDIA (NVDA). Its inclusion in this list is no surprise. After all, these guys are the picks and shovels of the AI gold rush. Their GPUs are the muscle behind AI computations. Q2 2024 numbers? Revenue hit $13.51 billion, more than doubling year-over-year. The stock's up 120% year-to-date.

Next is Alphabet (GOOGL). Google's parent company isn't just a search engine anymore. They're AI heavyweights, with Google Assistant in millions of homes and DeepMind pushing the boundaries of what's possible. Q2 2024 saw them rake in $74.6 billion, with their cloud segment (read: AI services) growing 22%. The stock's up 30% over the year.

As for Microsoft (MSFT), their OpenAI partnership and Azure integration are game-changers. Intelligent Cloud brought in $23.4 billion in Q4 2023, up 15% year-over-year. The stock? Up 35% year-to-date. Ballmer might be gone, but the money machine keeps humming.

Meanwhile, Amazon (AMZN) isn't just about two-day shipping anymore. Amazon Web Services is a beast, offering AI and machine learning services that are printing money. AWS pulled in $21.4 billion in Q2 2024. After a rough patch, the stock's bounced back, up 25% in six months.

Even old-school Intel (INTC) is getting in on the action. They're pushing hard into AI accelerators and neural network processors. Their Data Center and AI group brought in $4.0 billion in Q2 2024. The stock's up a modest 10% year-to-date, but they're just getting started.

But don't just stick to the big boys. Keep an eye on the up-and-comers.

Palantir Technologies (PLTR) is doing big things with big data and AI-driven decision-making. They saw a 49% jump in government contracts last year.

Then there's C3.ai (AI), pushing AI applications for enterprises. Their subscription revenues grew 34% last fiscal year.

Now, before you mortgage the house to buy AI stocks, remember - this isn't a get-rich-quick scheme. The AI market is definitely hot, but it's not without risks. Regulatory headwinds, ethical concerns, and good old-fashioned competition could throw some curveballs.

The smart play? Diversify. Mix some established tech giants with a sprinkle of AI pure-plays. And here's a pro tip: don't just stick to home turf. AI is a global game, and some of the most exciting innovations are happening beyond Silicon Valley.

In fact, it's turning into a full-blown international AI arms race. Some of the most mind-bending breakthroughs are popping up in places you might not expect.

For one, China's not messing around. They're gunning to be the world's AI superpower by 2030, and they're throwing everything but the kitchen sink at it.

Baidu (BIDU), China's answer to Google, is knee-deep in AI. Their autonomous driving platform, Apollo, is giving Tesla a run for its money. And let's not forget about their ChatGPT rival, ERNIE Bot. Baidu's stock? It's been a rollercoaster, but their AI chops are undeniable.

Then there's Alibaba (BABA). Jack Ma might be keeping a low profile these days, but Alibaba's AI game is loud and clear.

Their cloud computing arm is second only to Amazon in Asia, and they're pumping out AI solutions faster than you can say "e-commerce." From smart cities to healthcare AI, Alibaba's fingerprints are all over China's tech scene.

Hop over to South Korea, and you'll find Samsung (KRX: 005930) doing more than just making your phone. They're pouring billions into AI research, focusing on everything from smartphone chips to advanced semiconductors.

Their AI assistant, Bixby, might not be a household name like Siri, but don't count them out. Samsung's got the deep pockets and the tech savvy to be a major AI player.

In Japan, SoftBank Group (TYO: 9984) is making waves. Yeah, the same folks who had that WeWork debacle.

But here's the thing - their Vision Fund has its fingers in AI pies all over the world. From robotics to fintech, SoftBank's betting big on AI-driven startups. It's a high-risk, high-reward play, but that's Masayoshi Son's style.

Let's not forget Europe. DeepMind, now under Alphabet's umbrella, started life in London. But there's more brewing across the pond. Take ASML Holding (ASML) in the Netherlands.

They're not an AI company per se, but their extreme ultraviolet (EUV) lithography machines are crucial for making the advanced chips that power AI. Without ASML, a lot of AI dreams would still be just that - dreams.

In Germany, SAP (SAP) is bringing AI to enterprise software. They're not as flashy as some AI pure-plays, but they're embedding machine learning and AI into the backbone of how businesses operate. It's not sexy, but it's where the rubber meets the road for AI in the corporate world.

And let's give a nod to Israel, the "Startup Nation." They're punching well above their weight in AI.

Companies like Mobileye (MBLY), now part of Intel, are leading the charge in autonomous driving tech. Or take a look at Cognyte Software (CGNT), using AI for security analytics. These folks are turning Israel into an AI powerhouse.

Even in India, which you might think of more for IT outsourcing, AI is taking off.

Reliance Industries (NSE: RELIANCE) is pouring money into AI research, looking to transform everything from retail to telecom. And then there’s Tata Consultancy Services (NSE: TCS), quietly becoming an AI consulting giant.

Clearly, this AI boom isn't just about individual companies anymore. It's spawning entire ecosystems. Shenzhen, Tel Aviv, Bengaluru - these are the new AI breeding grounds.

For us, it means more opportunities. Forget just watching the Nasdaq. You've also got to eyeball exchanges from Shanghai to Frankfurt and navigate regulatory minefields from Beijing to Brussels.

And here's the kicker - this global race is innovation on steroids. It's not about the biggest tech giant anymore, but who can innovate fastest and scale smartest.

Bottom line? Those two eggheads didn't just scramble the stock market - they whisked up a global AI omelet. So, I suggest you do your homework, spread your bets, and maybe learn some Mandarin. After all, the AI world's your oyster, and it’s time to go pearl hunting.

October 14, 2024

Tech Letter

Mad Hedge Technology Letter
October 14, 2024
Fiat Lux

Featured Trade:

(GREAT POTENTIAL FOR A TECH SUB-SECTOR)
(CIBR)

Great Potential For A Tech Sub-Sector

Tech Letter

I know many people don’t talk about this, but they should.

Much of the insurance industry has been lapping up the profits, because of cataclysmic hurricanes, floods, earthquakes, tsunamis, and mudslides.

Why not do the same with tech?

Now there is a new insurance sub-sector that could become equally as expensive for companies protecting against cybersecurity risks.

The demand for cyber insurance is set to grow amid a series of high-profile cyber-attacks and this trend is unrelenting.

From my channel checks, the cyber insurance industry is set to expand at an 18% compound annual growth for the next 5 years.

Instead of physically robbing a bank and exposing oneself to the violent harm, cyber criminals are sitting behind computers in remote parts of the world digitally looting from their laptops.

Even if they do get caught, they are often in countries that have no extradition agreements with victims from the nation state.

The low risk nature of the heist and asymmetrical gains are almost like options trading.

Let’s see some of the instance of recent cyber fraud.

United Healthcare’s Change Healthcare medical billing processor, which links one third of Americans to health-insurance payments, suffered a cyber-attack in February, crippling the payments systems of a significant number of hospitals.

The May attack on Ticketmaster compromising 560 million customer records was another win for the cyber bullies.

An estimated $8 trillion was lost globally to cybercrime in 2023, a significant increase vs. the $600 billion estimated in 2018.

This industry pays and a time will come when Fortune 500 companies will become the main target.

Some of these far flung places that have major cyber hacking operations are little known places in South East Asia where they took in over $200 billion last year.

Malware, generative AI, and deepfakes have been integrated into their operations while opening up new underground markets and cryptocurrency solutions for their money laundering needs.

As a result cyber frauds have continued to intensify from East and Southeast Asia.

This is just the tip of the iceberg, but the message is clear.

If funds are illegal taken, it is almost impossible to recover them when they are funneled into China then laundered into a 3^rd party jurisdiction.

Much of this type of cybercrime is now professionalized.

Ultimately, cybersecurity insurance is a variable that is set to mushroom in the coming years.

Cybercriminals are not only in the widely active East Asia, but many more from Eastern Europe and Africa, and each region is imitating each other as they see strategies succeed.

Ironically, according to the data, the only companies that feel it is worth paying up for cybercrime insurance and companies in North America and Europe.

If this starts to become a drag on the earnings, it could really drag down some smaller companies.

As what is usual for bigger companies, these types of costs are usually passed down to the end consumer and their pricing power allows big tech to do it.

Many have not heard of insurance in tech, and it might be the new tail risk to monitor moving forward in tech, because the monetary rewards for starting a hacking ring in a foreign country is too great to ignore.

I predict that in the next few years, one big tech name will fall due to a run on its security integrity creating a new massive windfall into cybersecurity firms.

Readers should not fall asleep at the wheel and invest in First Trust Nasdaq Cybersecurity ETF (CIBR).

October 14, 2024 - Quote of the Day

Tech Letter

“Rule No. 1: Never lose money.” – Said Warren Buffett

October 14, 2024

Jacque's Post

(BIG BROTHER IS WATCHING YOU IN YOUR CAR)

October 14, 2024

Hello everyone

This week we will see:

Many corporate earnings

US Retail Sales & industrial production data

Eurozone Inflation & UK Inflation data

China’s GDP & trade data

WEEK AHEAD CALENDAR

MONDAY, OCT 14

Columbus Day

Bond market closed

9:00 a.m. US Fed Speeches

TUESDAY, OCT 15

8:30 a.m. Empire State Index (October)

8:30 a.m. Canada Inflation Rate

Earnings: United Airlines, J.B. Hunt Transport Services, Citigroup, State Street, Goldman Sachs Group, Walgreens Boots Alliance, Johnson & Johnson, Bank of America, PNC Financial Services Group, United Health Group, Charles Schwab.

WEDNESDAY, OCT 16

2:00 a.m. UK Inflation Rate

8:30 a.m. Export Price Index (September)

8:30 a.m. Import Price Index (September)

Earnings: PPG Industries, Steel Dynamics, Discover Financial Services, CSX, Prologis, Morgan Stanley, Abbott Laboratories, U.S. Bancorp, Citizens Financial Group, Synchrony Financial.

THURSDAY, OCT 17

8:15 a.m. Euro Area Rate Decision

8:30 a.m. Continuing Jobless Claims (10/05)

8:30 a.m. Initial Claims (10/12)

8:30 a.m. Philadelphia Fed Index (October)

8:30 a.m. Retail Sales (September)

9:15 a.m. Capacity Utilization (September)

9:15 a.m. Industrial Production (September)

9:15 Manufacturing Production (September)

10 a.m. NAHB Housing Market Index (October)

Earnings: Intuitive Surgical, Netflix, KeyCorp, M & T Bank Corp., Elevance Health, Truist Financial, Huntington Bancshares, Blackstone.

FRIDAY, OCT 18

8:30 a.m. Building Permits preliminary (September)

8:30 a.m. Housing Starts (September)

Earnings: Schlumberger NV, Procter & Gamble, Fifth Third Bancorp, Regions Financial, American Express, Ally Financial.

Driving your car is no longer a private experience – data is being shared with x, y, and z when you purchase new car brands.

Do you want companies/people to know your location when you are driving?

Do you want companies/people to know the way you drive?

Do you speed? Do you brake heavily? Do you tailgate?

More data than you can imagine is being recorded and shared with third parties in new cars produced today.

Microphones, sensors, and other internet-connected features mean cars have become all-seeing data harvesting machines dubbed “smartphones on wheels.”

Most consumers are unaware of this as car makers are not very upfront about data collection and often keep the fine print in their privacy policies vaguely worded.

Hyundai, Kia, and Tesla seem to be the worst culprits at selling data on to third parties, according to Choice Magazine.

A Choice investigation found that Kia and Hyundai, which have the same parent company, collect voice recognition data from inside their cars and sell this to the artificial intelligence (AI)software training company Credence.

Kia and Hyundai drivers – have you consented to your voice being used to train AI models?

If you are a Tesla owner, you really need to be aware of this. Images and videos from cameras inside Teslas, which have been shared with third parties, have shown Tesla customers in the nude, as well as images of crashes and road-rage incidents.

The privacy policies seem to be incredibly vague. In other words, they provide no clear guidelines on what data is being collected, how it’s being collected, and where the data is going.

Perhaps it is ambiguous for good reason – it clearly keeps the customer on the back foot while the car company and third parties are in control.

The findings by Choice investigation are like those of the US-based Mozilla Foundation, which last year found 25 car brands collected customer data ranging from facial expressions to sexual activity and where and how people drive.

Cars are no longer just transport getting you from A to B. The inbuilt technology is invasive and being shared with third parties we are not aware of.

One Queensland man backed out of purchasing a Toyota Ute earlier this year after he learned about the company’s data collection practices. Toyota collects and shares vehicle location and driver behaviour data, including scoring a driver’s acceleration, braking, and cornering behaviour during each trip.

The privacy policies that you find totally bewildering have often given car brands the option of sharing data with insurers.

Get back in control – what can you do?

If you use an app for your car, head into the app’s settings and look for any sort of data sharing options, usually named “data privacy” or data usage.”

Where possible, opt out of sharing any data with third parties and see if you can disable GPS location tracking when not in use for navigation.

Do you connect your phone to the car’s infotainment system? Be cautious. Limit the permissions you grant the car's system.

I would expect the process of deleting any data collected is unique to most car models and types.

Check out the free online resource Privacy4Cars. It offers step-by-step delete instructions for thousands of vehicles.

The website covers the UK, EU, US, and Canada. Some Australian models may not be included. The site is not perfect, but it’s better than nothing.

Governments and car buyers – their reactions.

Last month, the US moved to ban a vast array of Chinese-made cars over fears the Chinese government could spy on their drivers.

Data gathered by Chinese-made cars is the same as other car brands, but there could be a higher potential for misuse.

A double level of surveillance – commercial and government – seems rather invasive. George Orwell’s book 1984 is a stark reminder of what is happening in our modern world. Orwell certainly was a visionary and gave us all something to think about – even though we might not have given his concepts much attention at the time.

About three in four Australians disagree or strongly disagree with video or audio recordings from inside a car being collected by car companies, according to a nationally representative Choice survey conducted in June 2024.

Support services for domestic violence victims are also increasingly concerned.

Domestic violence perpetrators are using connected cars to track those who are trying to escape them.

We need to remember a car is now “a computer on wheels.”

California recently introduced legislation requiring car makers selling internet-connected cars to do more to protect domestic abuse survivors, including enabling drivers to easily turn off location access from inside the vehicle.

Last year, a woman unsuccessfully sued Tesla, alleging the company failed to act after she repeatedly complained that her husband was stalking and harassing her using the car maker’s technology, despite a restraining order.

While there are obviously some apparent negative elements to driving “a computer on wheels,” it is also clear that the utilization of data in vehicles, including both connected and autonomous vehicles, provides consumers with benefits through improvements in safety, performance, and navigation as well as supporting general user experience and servicing improvements.

Car makers and privacy laws need to be monitored closely. Make sure you read the fine print and ask questions.

MARKET UPDATE

S&P 500

The rally is still on track, with no signs of exhaustion yet.

Next target = ~5,930

Support = ~5790/5760

GOLD

Uptrend still intact.

Next target = ~$2,770/$2,800

Support = ~$2,630/$2605

BITCOIN

Potential for a good upside rally after Bitcoin formed a wave ii correction, which completed an (a b c) corrective move.

Next target = ~ $68,000/$73,800

Support = ~ $60,500/$58,800

QI CORNER

This graphic compares the countries and regions with the highest nominal GDP per capita in 2024 to those in 2014, based on data from the International Monetary Fund.

SOMETHING TO THINK ABOUT

Cheers

Jacquie

Trade Alert - (TSLA) October 14, 2024 - TAKE PROFITS - SELL

Trade Alert

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

October 14, 2024

Diary, Newsletter, Summary

Global Market Comments
October 14, 2024
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD or BUY NOW AND BEAT THE POST ELECTION RUSH)

The Market Outlook for the Week Ahead, or Buy Now and Beat the Post Election Rush

Diary, Newsletter

This certainly is an October without stock market precedence.

Instead of a crash and revisit to a Volatility Index ($VIX) in the thirties, here we are at all-time highs for the Dow ($INDU), the S&P 500 (SPY), and the ($VIX) at $20. NASDAQ is a hair’s breadth from new highs. All indexes are on track to meet my lofty one-year targets.

So why is this happening? Why did the perennial October crash do a no-show?

My argument all along has been that the investor base is wildly underestimating the impact of technology in general and AI specifically. It seems that every earnings announcement in the industries I care about delivers an upside surprise.

But there is another factor.

The Great Unknown in 2024 is the presidential election, with the public polls in a dead heat. The closer this election gets, the more this uncertainty disappears. The great majority of investing institutions are holding on to usual amounts of cash, which they will not commit until the election is decided, whenever that is.

With the data undeniably showing that the US has the strongest major economy in the world, there may be a post-election melt-up in share prices. And let me tell you one more thing. Of the 6,000 followers of the Mad Hedge Fund Trader that I speak to on a daily basis, some 90% are Republican. I can pass on to you what they are telling me, and that is that the election was actually decided months ago.

No uncertainty here.

We are starting to see the election having an actual impact on the economy. Delta Airlines (DAL) last week gave a warning that earnings would be impaired this quarter due to an election-driven postponement of travel. Companies are delaying action on capital spending as well. With the policies between the two parties so diametrically opposed, the election outcome can make a big difference whether you invest or not.

What this sets up is a slowdown now and a speedup post-election. The stock market is watching this carefully.

In what was the most hyped corporate event of the year, Elon Musk finally brought out his Tesla Robotaxi (TSLA). The shares had risen 40% in expectation of the show.

For sheer entertainment value, he did not disappoint, delivering a sophisticated production worthy of the Hollywood where it took place. He brought 50 Robotaxis with him to give rides to party guests in a Warner Brothers simulated city. Musk, who arrived at the stage in one of the robotaxis - called a Cybercab - said production will start in 2027.

They will cost 20 cents a mile to operate. The vehicle will eventually be for sale for under $30,000. Optimus robots served drinks, and the entire event was covered by video drones. The Robotaxis uses Inductive charging, where they just park over the pad, and it gets wirelessly recharged.

While Elon certainly can put on a show, hard data on future sales and profits were completely missing in action. Nor was there any news about the next generation Model 2, thought to be the next leapfrog in Tesla profits. With profits for the project not arriving until 2028, it all amounted to a 19% SELL from the recent $265 high.

This sets up a new test of the $202 moving average best case and the old $170 low worse case. Long term, we go to new highs as the AI value of the company is realized. The company is making progress on all its products. One drag on the stock will be Musk’s new bromance with Donald Trump. Your classic Tesla EV buyer is not exactly a Trump supporter.

We closed out September with a blockbuster +10.28% profit. So far in October, we have given back -1.49%. My 2024 year-to-date performance is at +43.75%. The S&P 500 (SPY) is up +21.59% so far in 2024. My trailing one-year return reached a nosebleed +62.24. That brings my 16-year total return to +720.38%. My average annualized return has recovered to +52.06%.

With my Mad Hedge Market Timing Index at the 70 handles for the first time in five months, I am remaining cautious with 50% and 50% cash. I added a new long in (TSLA) on the post-Robotaxi 15% selloff. I also added a new long in (JPM) in the wake of their blockbuster earnings report. Some three of my five positions expire on the Friday, October 18 options expiration.

Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 58 of 74 trades have been profitable so far in 2024, and several of those losses were really break-even. Some 16 out of the last 19 trade alerts were profitable. That is a success rate of +78.78%.

Try beating that anywhere.

Risk On

(NEM) 10/$47-$50 call spread 10.00%

(TSLA) 10/$200-$210 call spread 10.00%

(DHI) 10/$165-$175 call spread 10.00%

(TSLA) 11/$165-$175 call spread 10.00%

(JPM) 11/$195-$205 call spread 10.00%

Risk Off

NO POSITIONS 0.00%

Total Net Position 50.00%

Total Aggregate Position 50.00%

CPI Comes in Warm at 0.3% for September and 2.4% YOY. Food was up, and shelter was down. Inflation is dying, but not dead. Coming on the heels of the surprisingly strong September employment data, this report encourages the Fed to maintain a cautious stance with the pace of the easing cycle. The likely path is still a quarter-point rate cut in November and another December quarter-point cut.

PPI Comes in Flat and up 1.8% YOY. A 0.2% decline in final demand goods prices offset a 0.2% increase in services. The release indicates that inflation is off its blistering pace that peaked more than two years ago but still mostly holds slightly above the Federal Reserve’s 2% target.

Weekly Jobless Claims Come in Hot at 258,000, the biggest weekly jump in three years. Initial claims for state unemployment benefits increased 33,000 last week to a seasonally adjusted 258,000 for the week ended October. 5, the Labor Department said. The number of Americans filing new applications for unemployment benefits surged last week, partially boosted by Hurricane Helene and furloughs at Boeing (BA) amid a nearly four-week-old strike at the U.S. planemaker. It’s a very pro-interest rate cut number.

Hurricane Milton Damage Estimated at $75 billion, less than expected. The storm backed off to a category 3 just before it hit land. Tampa lost its football stadium. The shutdown of the Florida economy, 5% of the US total, will likely shave a couple of basis points off Q3 GDP.

Junk Bond Yields Hit 17-Year Low, on top of a monster rally this year powered by yield-hungry investors. Default rates on this misnamed asset class are generally less than 2%.

Rio Tinto Buys Arcadium for $6.7 Billion in a bid to become one of the world’s largest lithium producers. The deal delivers a suite of lithium filtration technologies that are poised to revolutionize how the metal is produced for the electronics and electric vehicle industries. It’s a big bet on the recovery of fading EV sales. Follow the big money,

Money Pours into Gold ETFs, with five consecutive months of inflows. Gold ETFs store bullion for investors and account for a significant amount of investment demand for the precious metal that touched a record high of $2,685.42 an ounce on Sept. 26, buoyed by the start of U.S. interest rate cuts. Buy (GLD) and (NEM) on dips.

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy is decarbonizing, and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.

Dow 240,000, here we come!

On Monday, October 14 at 8:30 AM EST, the New York Empire State Manufacturing Index is out

On Tuesday, October 15 at 6:00 AM, the New York Empire State Manufacturing Index is out.

On Wednesday, October 16 at 11:00 PM, the MBA 30-Year Mortgage Rate is printed.

On Thursday, October 17 at 8:30 AM, the Weekly Jobless Claims are announced. We also get US Retail Sales.

On Friday, October 18 at 8:30 AM, the US Building Permits are announced. At 2:00 PM the Baker Hughes Rig Count is printed.

As for me, I was recently in Los Angeles visiting old friends, and I am reminded of one of the weirdest chapters of my life.

There were not a lot of jobs in the summer of 1971, but Thomas Noguchi, the LA County Coroner, was hiring. The famed USC student jobs board had delivered! Better yet, the job included hours at night and free housing at the coroner's department.

I got the graveyard shift from midnight to 8:00 AM. All I had to do was buy a black suit from Robert Halls, for $25.

Noguchi was known as the “coroner to the stars” having famously done the autopsies on Marilyn Monroe and Jane Mansfield. He did not disappoint.

For three months, whenever there was a death from unnatural causes, I was there to pick up the bodies. If there was a suicide, gangland shooting, or horrific car accident, I was your man.

Charles Manson had recently been arrested, and I was tasked with digging up the victims. One cowboy stuntman, Shorty Shay, had his head cut off and neatly placed in between his ankles.

The first time I ever saw a full set of women’s underclothing, a girdle, and pantyhose was when I excavated a desert roadside grave that the coyotes had dug up. She was pretty far gone.

Once, me and another driver were sent to pick up a teenage boy who had committed suicide in Beverly Hills. The father came out and asked us to take the mattress as well. I regretted that we were not allowed to do favors on city time. He then said, “Can you take it for $200?”, then an astronomical sum.

A few minutes later found a hearse driving down the Santa Monica Freeway on the way to the dump with a double mattress expertly tied on the roof with Boy Scout knots with a giant blood spot in the middle.

Once, I was sent to a cheap motel where a drug deal gone wrong had produced several shootings. I found $10,000 in a brown paper bag under the bed. The other driver found another ten grand and a bag of drugs and kept them. He went to jail. I didn’t.

The worst pick-up of the summer was also the most disgusting and even made the old veterans sick. A 300-pound man had died of a heart attack and was not discovered for a month. We decided to each grab an arm or leg and all tug on the count of three. One, two, three, and all four limbs came off!

Eventually, I figured out that handling dead bodies could be hazardous to your health, so I asked for rubber gloves. I was fired.

Still, I ended up with some of the best summer job stories ever.

Good Luck and Good Trading,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

LET’S TALK ABOUT THE LLAMA IN THE ROOM

Mad Hedge AI

(META), (GOOGL)

Remember when Zuckerberg was just that kid in a hoodie, helping college students rate hotness online? Well, those days are as dead as my AOL account and just as likely to make a comeback.

Meta Platforms (META) has morphed from a digital popularity contest into a tech juggernaut that's gunning for the future. And believe me, I've seen my share of tech revolutions - from the first clunky PCs that were about as user-friendly as an angry porcupine, to smartphones that outsmart most people I know.

But what Meta's cooking up? It might make those look like stone tools compared to a laser beam.

Let's dive into Meta's AI strategy, shall we? At the heart of it is Llama, their open-source AI model. Now, you might think, "Has this company lost it? They're giving away their secret code?" But before you judge them too quickly, let me say this is where it actually gets pretty interesting.

By making Llama open-source, Meta's essentially turned the entire tech world into their R&D department. It's like they've invited every code jockey with a laptop to help build their empire.

And boy, are people biting - Llama's been downloaded 400 million times. That's not just a number, folks - that's a revolution in the making.

Meanwhile, Meta's been quietly slipping AI into every nook and cranny of their platforms faster than a squirrel hoarding nuts for winter.

The result? An AI assistant with 500 million monthly users. That's more people than you'd find in the US, Canada, and the UK combined - talk about a captive audience.

It's like they've built a digital nation overnight, and every citizen is carrying around a piece of Meta's AI in their pocket.

Now, let's talk turkey. These AI shenanigans aren't just for show - they're fattening Meta's bottom line as well.

Ad click-through rates are up 11%, conversions have jumped 7.6%, and ad revenue surged 22% year-over-year in Q2.

To put that in perspective, Google (GOOGL) only managed 11% growth. Looks like the student's becoming the master, eh?

But Meta's not content with ruling the digital roost - they're eyeing the real world too.

Their Reality Labs is betting big on augmented reality (AR). Sure, it's been a money pit so far, burning cash faster than a pyromaniac at a match factory. But remember when people thought the iPhone was just a fancy toy? If AR becomes the next must-have gadget, Meta could be sitting on another gold mine.

Despite these moonshots, Meta's core business remains a cash-printing machine. We're looking at 20% revenue growth for 2024, operating margins north of 40%, and a Return on Equity above 35%.

In Q2 alone, income from operations skyrocketed 58% year-over-year to $14.9 billion. That's $60 billion annualized, for those of you keeping score at home.

But here's where it gets even more interesting. Meta's not just playing for next quarter's earnings like some Wall Street short-timers. They're positioning themselves for the next decade and beyond.

Their massive user base in emerging markets is like a ticking time bomb of potential ad revenue. As these economies grow, so will ad spending, and Meta's perfectly positioned to capture that growth like a spider waiting for flies.

And the beauty of Meta's platform model? It scales like nobody's business. They can serve billions more users without the kind of massive investments that traditional businesses need.

It's like they've built a perpetual motion machine for the digital age.

So what’s the bottom line? Meta's not just some social media company anymore. They're a full-fledged tech titan, pushing the boundaries of AI and AR like a bull in a china shop - except this bull knows exactly which pieces it wants to break.

Sure, there are risks. The tech world moves fast, and today's innovation can be tomorrow's old news quicker than you can update your status. But Meta's shown they're not afraid to bet big on the future.

For those with a long-term outlook and nerves of steel, Meta offers a unique combo platter: visionary innovation with a side of rock-solid financials. With projections pointing towards a $2 trillion-plus valuation in the coming years, Meta's looking less like a risky bet and more like a calculated move for those willing to play the long game. I suggest you buy the dip.

October 11, 2024

Tech Letter

Mad Hedge Technology Letter
October 11, 2024
Fiat Lux

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