Global Market Comments
December 19, 2024
Fiat Lux
Featured Trade:
(A CHRISTMAS STORY),
(THE U-HAUL INDICATOR)
When I was growing up in Los Angeles during the fifties, the most exciting day of the year was when my dad took me to buy a Christmas tree.
With its semi-desert climate, Southern California offered pine trees that were thin and scraggly at best, and we didn’t want to chop down the view that we had.
So, the Southern Pacific Railroad made a big deal out of bringing trees down from much better-endowed Oregon to supply local holiday revelers.
You had to go down to the freight yard at Union Station on Alameda Street in downtown LA to pick them up.
I remember a jolly Santa standing in a box car with trees piled high to the ceiling, pungent with seasonal evergreen smells, handing them out to crowds of eager, smiling buyers for a buck apiece.
Watching great lumbering steam engines as big as houses whistling and belching smoke was enthralling. We took our prize home to be decorated by seven kids hyped on adrenalin, chugging eggnog.
A half-century later, the Southern Pacific is gone, the steam engines are in museums, anyone going near a rail yard would be mugged or arrested for vagrancy, and Dad long ago passed away. Dried-out trees at Target for $60 didn’t strike the right chord.
So, I bundled the kids into the SUV and drove to the Eastern shore of Lake Tahoe, on the Nevada side, a $10 US Forest Service tree-cutting permit in hand.
Deep in the forest at 8,000 feet, the kids, hyped on adrenalin, made the decision about which perfect 12-footer to take home. I personally chopped it down and dragged it along the ridge, huffing and pugging all the way. I then tied it to the roof and drove us home. Lifting a 200-pound tree gets tougher every year. Thank goodness the kids are getting bigger.
I netted three trees that day, one for each home and one for my oldest daughter. I figure I saved myself $600.
With any luck, these memories will last until the next century, long outlasting me.
Now, the story really comes full circle. I was in Portland, Oregon, a few years ago and had some free time to kill. So, I wandered across the river to the Oregon Rail Heritage Center.
What do I see, but Southern Pacific engine no. 4449, the exact same locomotive I marveled at in LA 65 years ago, all decked out in its glorious orange and red paint.
It was like discovering a long-lost family member. The 435-ton, 72-year-old behemoth was recently rebuilt from the ground up by a dedicated team of similarly aged volunteers to serve as the city’s Polar Express train in 2014.
For the link to the museum, please click here.
Union Pacific still maintains in running condition some of the largest steam engines ever built for historical and public relations purposes.
One, the “Old 844,” once steamed its way over the High Sierras to San Francisco on a nostalgia tour. The 120-ton monster was built during WWII to haul heavy loads of steel, ammunition, and armaments to California ports to fight the war against Japan. The 4-8-4-class engine could pull 26 passenger cars at 100 mph.
When the engine passed, I felt the blast of heat of the boiler singe my face. No wonder people love these things! To watch the video, please click here and hit the “PLAY” arrow in the lower left-hand corner.
Please excuse the shaky picture. I shot this with one hand while using my other hand to restrain my over-excited kids from running onto the tracks to touch the laboring beast.
Merry Christmas
John Thomas
Long Time No See, Old Friend
It is the end of the semester at the University of California, and as a single parent, the unenviable task of retrieving my daughters out of the dorms for the holidays fell to me.
When I arrived, I was stunned to find nothing less than a war zone. Both sides of every street were lined with mountains of trash, the unwanted flotsam and jetsam cast aside by departing students.
Computer desk, embarrassingly stained mattresses, broken lava lamps, and an assortment of heavily worn Ikea furniture were there for the taking. Newly arriving students were sifting through the piles, looking for that reusable gem.
Diminutive Chinese teenagers were seen pushing massive suitcases on wheels down the sidewalk on their way back to Shanghai, Beijing, and Hong Kong. The university attempted to bring order to the chaos by strategically placing dumpsters on every block, but they were rapidly filled to overflowing.
It was all worth it because of the insight it gave me into one of my favorite, least-known leading economic indicators. When I picked up the truck at U-HAUL, the lot was absolutely packed with returned vehicles, and there were more parked on both sides of the streets.
The booking agent told me there is a massive influx of people moving into California from the Midwest and the Northwest, with the result that lots all over the San Francisco Bay Area are filled to capacity.
I love this company because, in addition to providing a great service, they get the first indication of any changes to the migratory habits of Americans. The last time I saw this happen was after the dotcom bust when thousands of tech-savvy, newly unemployed pulled up stakes in the foggy city and moved to Lake Tahoe to work in “the cloud.”
Bottom line: California is enjoying a resurgence of hiring and new economic growth, most likely driven by Artificial Intelligence. This is what the stock market is screaming at us right now.
Want a Great Deal on a Used Lava Lamp?
“This isn’t a choice between vanilla and chocolate, folks! It’s all rocky road: a few marshmallows to get you excited before the elections, but with a lot of nuts to ruin the aftermath,” said the ever insightful Bill Gross at PIMCO.
For decades, unsolved crimes have cast long shadows, leaving families and communities grappling with unanswered questions and a lingering sense of injustice. But a new era of crime-solving is dawning, one where artificial intelligence (AI) is stepping in to assist investigators in cracking cold cases that have baffled detectives for years.
From analyzing vast troves of data to identifying patterns invisible to the human eye, AI is proving to be a game-changer in the pursuit of justice. This technology is not just a futuristic fantasy; it's being deployed right now, helping to bring closure to victims' families and hold perpetrators accountable.
The AI Detective's Toolkit
AI's role in crime-solving is multifaceted, with algorithms and machine learning models being utilized in a variety of ways:
- Facial Recognition: AI-powered facial recognition systems can analyze images and videos from crime scenes, comparing them to vast databases of faces to identify potential suspects. This technology has already been instrumental in solving cases where the only evidence was a grainy photograph or a fleeting glimpse of the perpetrator.
- DNA Analysis: Traditional DNA analysis can be time-consuming and complex. AI algorithms can expedite this process, quickly identifying matches and predicting potential familial relationships, leading to breakthroughs in cases where DNA evidence is limited or degraded.
- Predictive Policing: By analyzing crime data, AI can identify patterns and predict where future crimes are likely to occur. This allows law enforcement to allocate resources more effectively and potentially prevent crimes before they happen. While this application of AI raises ethical concerns about bias and profiling, its proponents argue that it can be a valuable tool for proactive policing.
- Natural Language Processing (NLP): NLP algorithms can analyze vast quantities of text data, such as police reports, witness statements, and social media posts, to identify connections and extract crucial information that might have been overlooked by human investigators.
- Pattern Identification: AI excels at identifying patterns and anomalies that humans might miss. By analyzing crime scene data, phone records, and other digital footprints, AI can uncover hidden connections and generate new leads.
Real-World Success Stories
The impact of AI in solving unsolved crimes is not just theoretical; it's already making a tangible difference:
- The Case of the Golden State Killer: One of the most notorious cold cases in American history, the Golden State Killer case, was finally cracked in 2018 with the help of AI. Investigators used a genealogy website to compare DNA from crime scenes to publicly available genetic data, ultimately leading them to Joseph James DeAngelo, a former police officer who was convicted of 13 murders and dozens of rapes.
- Identifying Child Predators: AI is being used to analyze online activity and identify individuals who are sharing or seeking child sexual abuse material. This technology can detect patterns of behavior and language that indicate predatory intent, helping law enforcement apprehend offenders and protect vulnerable children.
- Cold Case Units: Law enforcement agencies across the country are establishing dedicated cold case units that utilize AI tools to re-examine old evidence and generate new leads. These units are bringing closure to families who have waited years for answers and ensuring that justice is served, no matter how much time has passed.
The Ethical Considerations
While the potential benefits of AI in crime-solving are undeniable, it's crucial to address the ethical considerations surrounding its use:
- Bias and Discrimination: AI algorithms are trained on data, and if that data reflects existing biases, the algorithms can perpetuate those biases in their predictions and analyses. This can lead to unfair targeting of certain groups, particularly minorities who are already disproportionately represented in the criminal justice system.
- Privacy Concerns: The use of facial recognition and other AI-powered surveillance technologies raises serious concerns about privacy and civil liberties. Striking the right balance between public safety and individual rights is a complex challenge that requires careful consideration.
- Transparency and Accountability: It's important for AI algorithms used in crime-solving to be transparent and explainable. This allows investigators to understand how the AI arrived at its conclusions and ensures that the technology is not being used in a biased or discriminatory manner.
The Future of AI in Law Enforcement
The use of AI in law enforcement is still in its early stages, but its potential is vast. As technology continues to evolve, we can expect to see even more innovative applications of AI in the fight against crime:
- Crime Scene Reconstruction: AI could be used to create virtual crime scenes, allowing investigators to explore different scenarios and test hypotheses in a safe and controlled environment.
- Enhanced Interrogation Techniques: AI could analyze micro-expressions and other nonverbal cues during interrogations, helping investigators detect deception and extract more accurate information.
- Personalized Risk Assessments: AI could be used to assess the risk of recidivism for individuals who have been convicted of crimes, helping to inform sentencing decisions and rehabilitation programs.
Conclusion
AI is transforming the landscape of crime-solving, offering new tools and capabilities that were once unimaginable. While it's essential to address the ethical concerns and ensure responsible use, the potential of AI to bring justice and closure to victims and their families is undeniable. As technology continues to advance, we can expect AI to play an even greater role in the pursuit of justice, ensuring that no crime goes unsolved and no perpetrator escapes accountability.
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
December 18, 2024
Fiat Lux
Featured Trade:
(UNLOCKING THE FUTURE OF TECH)
(TSLA), (NVDA), (AMZN)
Unshackling the restraints on human labor – that is where tech is headed.
I’m talking about AI.
Robots aren’t able to perform complicated tasks, and that is the holy grail of AI.
If headway is made just on this one issue, then the sky is the limit.
Profits are then unlimited, and the world will change into something we could have never imagined.
If stakes weren’t high enough, the next explosive leg up in tech shares is now centered on this concept.
There is only so much balance sheet maneuvering can add to the bottom line.
Magnificent 7 stocks who are experts are juicing up the balance sheet will gradually run out of levers to pull.
Technology stocks demand that management move the needle along because the alternative is that the company will get left behind.
When the Department of Defense commenced its robotics challenge in 2015, the stated goal was to develop ground robots that can aid in disaster recovery with the help of human operators.
Nearly a decade later, generative AI is accelerating that learning curve, pushing human-like machines to pick up new tasks in real-time.
And in June, Tesla (TSLA) presented an updated version of its Optimus robot at Tesla’s Investor Day and showed it roaming a factory floor. CEO Elon Musk touted the robot’s potential, saying it had the ability to push the company’s market cap to $25 trillion.
Humanoids that can adapt to existing environments have long been seen as the ultimate test if they can work alongside humans in spaces built for them.
Nvidia (NVDA) is driving rapid development through an ecosystem built specifically for humanoids. It combines high-powered chips that process data at high speeds with a digital world that allows users to train robots on skills applied in the real world.
Nvidia has already unveiled “NIM Microservices,” a visual training ground that allows generative AI models to visually interpret their surroundings in 3D.
Nvidia’s ecosystem now enables robots to train using text and speech input in addition to live demonstrations.
Humanoids have already begun taking their first steps into reality. Musk has said two Optimus robots are working at Tesla’s Fremont factory, and he expects a few thousand to be deployed by next year. Amazon (AMZN) has partnered with Oregon-based Agility to utilize its Digit robot at a test facility. Apptronik is working with Mercedes-Benz to integrate Apollo into its manufacturing line.
The goal is to adapt humanoid for the future, which will allow them to operate beyond industrial use. They could become as ubiquitous if companies are able to scale and bring costs down to $10,000 per machine.
Technology is still in the stage of calculating how they bring the expenses under control.
It is not very cost-effective if a company needs to spend 5 times the actual cost of running the AI division on retrofitting the environment for a humanoid and resetting the language models for different tasks.
Much of these technical aspects are being worked out, and these companies are inching their way closer to a day when companies might be able to work fully without a human worker or alongside a minimum amount of workers.
Tesla is a company long-term that needs to be looked at, and this assumption is solely based on their robotics and humanoid business. It is highly plausible that Elon Musk is at peace with sacrificing his EV business in the medium time as long as moving up the value chain to become the leader of what is next, which is looking more like robotics using AI.
Musk is skating to where the puck is next, and that is where the future will be.
(PATIENCE IS UNDERRATED WHEN YOU BECOME AN INVESTOR)
December 18, 2024
Hello everyone
It’s the final week before Christmas. The market has been pausing before the Fed’s final meeting of 2024, which may be the catalyst for a year end rally. We will wait and see.
First, let’s look at the difference between patience and impatience. Warren Buffet reminds us that:
“The Stock market is a device for transferring money from the impatient to the patient.”
THIS IS WHAT IMPATIENCE LOOKS LIKE IN THE INVESTMENT WORLD
When I was reviewing the portfolio and wanted to slim it down earlier this year, I recommended to sell this stock as it was underperforming at the time. The lesson here -it is a mistake to interpret a period of underperformance as a reason to sell a stock. My patience hat must have been missing that day.
AND THIS IS WHAT PATIENCE LOOKS LIKE IN THE INVESTMENT WORLD
CrowdStrike (CRWD) suffered a severe crash in August due to a routine update to its cybersecurity software which had a malfunction. It sent around 8.5 million Windows-based computers crashing. The outage cost its largest customers around $5.8 billion. But (CRWD) has recovered.
And we see a similar recovery taking place in Snowflake, after its stock dropped from $240 down to $110 in 2024. In the spring of 2024, a string of data breaches linked to Snowflake sent a shudder through the cybersecurity community. The breach resulted in the theft of a significant volume of sensitive data from various high-profile companies. Analysts have also argued that (SNOW) lags rivals in developing AI related products. Add to this, a new CEO stepped into the company earlier this year. The stock has jumped since November when investors were surprised by the financial results it reported for its fiscal third quarter of 2025. The company had some big customer wins during Q3, which was an encouraging sign. Its customers signed longer-term contracts, and this is something that will continue to provide strong financial results in coming years.
WHERE BITCOIN COULD BE HEADING NEXT
Targets are $109k, $115k, $124k, $127k, $129k right up to $153k
THE PRO-BITCOIN NARRATIVE
Trump’s election promise was to establish a BTC strategic reserve and end Operation Chokepoint 2.0. Gensler has been replaced at the SEC with a pro-crypto Chair, Other sovereign’s/nation states expected to follow suit.
The corporates have dived into Bitcoin. Larry Fink, CEO of BlackRock, who originally ignored Bitcoin, is now a convert and sees it as an asset class. His ETF (IBIT) was launched in January this year and had around $10 billion under management after just a few weeks. Many tech companies are now considering treasury investment, along with 88% of S&P500 companies.
We are seeing more institutional investment in Bitcoin, and this should continue in 2025. Pension funds, Asset Consultants, and Global Asset Managers are now allocating to BTC to diversity Alternatives Exposure – so we could see 3% AuM as an average.
Family Offices and Retail Investors will continue to grow their exposure to BTC, either directly or via ETFs as part of a balanced portfolio included in pensions and endowments.
Crypto and Digital Assets have been legitimized as an asset class and are on track to be included across all investor portfolios.
Consider this:
Corporate Treasuries: S&P500 – 5% allocation => $40,000 increase in Bitcoin price
Institutions: Pensions & Insurance Co’s – 2.5% allocation = > $200,000 increase in BTC.
Sovereign Wealth Funds: 3% allocation => $500,000 + increase in BTC price.
AND WHAT ABOUT GOLD
While Bitcoin is rallying, gold is retracing. As bond yields move up, we tend to see a retracement in gold prices, so, in general, they historically have an inverse relationship.
Inside Edge Capital chart
As I have been saying gold has entered a correction and this could continue for some time. We could easily see the metal drop below $2600 and move toward $2400 area and below. I have suggested selling calls on precious metals’ stocks. Another way to play the bearish move is to buy the DB Gold Short ETF (DGZ).
QI CORNER
MARY ANN BARTELS BELIEVES WE ARE IN “THE GOLDEN AGE OF INVESTING”.
Sanctuary Wealth’s chief investment strategist thinks the market could grow by 20% next year and the S&P500 could be at around 13,000 by the end of the decade. Below I share parts of an interview she gave at the Barron’s Women’s Advisor Summit in December at The Breakers in Palm Beach.
Why stocks can gain 20% next year. “What I’ve studied in my 40 years is that markets don’t make a major peak until all investors are in and the market is levered. I find that through the New York Stock Exchange margin debt and we’re not even close. I believe between now and the end of the decade, we’re still in a secular bull market. My forecast for next year on the S&P 500 is pretty aggressive at 7,200 to 7,400. We can get 10% or 15% pullbacks.”
Super bullish through 2030. “I think the environment is still very bullish for the market to go up. I also introduced a target for the end of the decade for the S&P500 between 10,000 and 13,000. And that’s what I want clients and investors to focus on. I believe between today and the end of the decade, it will be one of the most profitable investment opportunities of our lifetime.”
Reasons for optimism. “At the end of the day, what drives stock prices is earnings, and earnings have been stronger than what most people have even anticipated. I think we’re still trying to figure out how AI is going to impact earnings. I think corporate profit margins will continue to grow. The other amazing thing and why I am so bullish on technology is return on equity. Warren Buffett always talks about return on equity, but Wall Street tends to talk more about P/E ratios. When we look at technology versus the S&P500, the broader index has an ROE of about 18% while tech and tech related stocks’ ROE is growing 30%.”
Favourite and least favourite sectors. “I’m very bullish on bans and capital markets. The Trump administration is expected to have more of a deregulated environment. M&A activity should pick up, particularly in the banks. I think banks will do well, but I’m more positive on capital markets. I’m negative on healthcare…Consumer staples look very weak. But cyclicals look good and that’s a sign that the economy’s going to grow in 2025.”
Expecting more gains for Bitcoin. “Longer term, if we create (government) reserves and make it a true form of a digital asset, it’s going significantly higher, even from where we are today…A hundred thousand dollars was where you kind of bob and weave. Now we’ve busted through that. So, the next target is $113,000 and the target above that is $150,000. Those are my near-term targets.”
Advice for individual investors. “For my entire career there’s always been some concern and what is perceived to be a reason not to invest in markets. And history has shown that staying out of markets is not what you want to do. If you want to grow your wealth, you have to stay invested…If you want to have retirement funds when you retire, you need to invest now and you need to stay invested. Dollar cost average over your lifetime.”
(It seems to me that Mary Ann and I have something in common in relation to our thoughts on the markets, on staying invested and dollar cost averaging).
SOMETHING TO THINK ABOUT
A HACKER’S ADVICE ON PROTECTING YOURSELF ONLINE
Keep all sensitive information (Passwords, seed phrases and so on) on paper and away from online 3rd party digital storage. Don’t click on random links or download random files.
Cheers
Jacquie
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