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.
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(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.
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.
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
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It's so great having John as my Personal Investment 911. Even when he was navigating the current of his excellent Summit … it took him less than 3 minutes to answer my questions & guide me on my way. I’m underway & making hay … thank you, John.
Andy
Sarasota, Florida
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With the national debt now at $36 trillion becoming a hot-button issue once again, it’s time to revisit one of my favorite stories.
When I was a little kid during the early 1950s, my grandfather used to endlessly rail against President Franklin Delano Roosevelt.
The WWI veteran, who was mustard gassed in the trenches of France and drove Red Cross ambulances with Earnest Hemingway in Northern Italy for a lifetime, died in the wool Republican. He said the former President Roosevelt was a dictator and a traitor to his class, who trampled the constitution with complete disregard by trying to pack the Supreme Court.
Republican presidential candidates Hoover, Landon, and Dewey would have done much better jobs.
What was worse, FDR had run up such enormous debts during the Great Depression, feeding the starving, that not only would my life be ruined, but so would my children’s and grandchildren’s lives.
As a six-year-old, this disturbed me deeply, as it appeared that, just out of diapers, my life was already going to be dull, brutish, and pointless.
Grandpa continued his ranting until a three-pack-a-day Lucky Strike non-filter habit finally killed him in 1977. When he was in the trenches, the Army handed them out for free, addicting him for life.
He insisted until the day he died that there was no definitive proof that cigarettes caused lung cancer, even though during his war, they referred to them as “coffin nails.”
He was stubborn as a mule to the end. And you wonder whom I got it from?
What my grandfather’s comments did spark in me a lifetime interest in the government bond markets, not only ours but everyone else’s around the world.
So, whatever happened to the despised, future-destroying Roosevelt debt?
In short, it went to money heaven.
And here, I like to use the old movie analogy. Remember when someone walked into a diner in those old black-and-white flicks? Check out the prices on the menu on the wall. It says, “Coffee: 5 cents, Hamburgers: 10 cents, Steak: 50 cents.”
That is where the Roosevelt debt went.
By the time Treasury bonds issued in the 1930s came due, WWII, Korea, and Vietnam had happened, and the great inflations that followed that wars always brought.
The purchasing power of the dollar cratered, falling roughly 90%. Coffee is now $1.00, a hamburger at MacDonald’s is $5.00, and a cheap steak at Outback costs $15.00.
The government, in effect, only had to pay back 10 cents on the dollar in terms of current purchasing power on whatever it borrowed in the thirties.
Who paid for this free lunch?
Wealthy bond owners who received minimal and often negative real, inflation-adjusted returns on fixed-income investments for three decades.
In the end, it was the risk avoiders who picked up the tab. This is why bonds became known as “certificates of confiscation” during the seventies and eighties.
This is not a new thing. About 300 years ago, governments figured out there was easy money to be had by issuing paper money, borrowing massively, stimulating the local economy, creating inflation, and then repaying the debt in devalued future paper money. The masses loved it.
This is one of the main reasons why we have governments and why they have grown so big. Unsurprisingly, France was the first, followed by England and every other major country.
Ever wonder how the new, impoverished United States paid for the Revolutionary War?
It issued paper money by the bale, which dropped in purchasing power by two-thirds by the end of the conflict in 1783. The British helped, too, by flooding the country with counterfeit paper Continental money.
Bondholders can expect to receive a long series of rude awakenings.
The scary thing is that we will soon enter a new 30-year bear market for bonds that lasts until 2053.
This is certainly what the demographics are saying, which predict an inflationary blow-off in decades to come that could take short-term Treasury yields to a nosebleed 12% high once more.
That scenario has the leveraged short Treasury bond ETF (TBT), which has just cratered from $46 down to $30. Eventually, it will soar to $200, but not now.
If you wonder how yields could get that high in a decade, consider one important fact.
The largest buyers of American bonds for the past three decades have been Japan and China. Between them, they have soaked up over $2 trillion worth of our debt, some 7% of the total outstanding.
Unfortunately, both countries have already entered very negative demographic pyramids, which will forestall any future large purchases of foreign bonds. China has already ceased buying our bonds completely. They are going to need the money at home to care for burgeoning populations of old-age pensioners.
So, who becomes the buyer of last resort? No one, unless the Federal Reserve comes back with QE IV, V, and VI.
There is a lesson to be learned today from the demise of the Roosevelt debt.
It tells us that the government should be borrowing as much as it can right now with the longest maturity possible at these ultra-low interest rates and spending it all.
With real, inflation-adjusted ten-year Treasury bonds now posting negative yields, they have a free pass to do so. Ten-year Treasuries currently yield less than 3.90% versus 5.25% for overnight money.
In effect, the government never has to pay back the money it borrows. But they do have the ability to reap immediate benefits, such as stimulating the economy with greatly increased infrastructure and defense spending.
I’m not the only one who has noticed that most of our major weapons systems are 50 years old, except for the B-52 bomber, which is 72 years old. The Air Force plans to use them until they are 100. Will you feel safe and protected by a plane that is a century old?
If I were king of the world, I would borrow $5 trillion tomorrow and disburse it only in areas that create only domestic US jobs. Not a penny should go to new social programs. Long-term capital investments should be the sole target.
Here is my shopping list:
$1 trillion – new Interstate freeway system
$1 trillion – national defense weapons upgrade
$1 trillion – conversion of our energy system to solar
$1 trillion –investment in Southern border upgrades
$1 trillion – investment in R&D for everything technology-related
The projects above would create 5 million new jobs quickly. Who would pay for all of this in terms of lost purchasing power? Today’s investors in government bonds, half of whom are foreigners.
The bottom line of all this history is that the US government isn’t borrowing too much money, it is not borrowing enough!
How did my life turn out? Was it ruined, as my grandfather predicted?
I did pretty well for myself, as did the rest of my generation, the baby boomers.
My kids did OK, too. One son just got a $2 million, two-year package at a new tech startup, and he is only 34. Another is deeply involved in the tech industry, and my oldest daughter runs Stanford’s online courses. My two youngest girls are getting straight As in Computer Science at the University of California. They complain it’s too easy.
Not too shabby.
Grandpa was always a better historian than a forecaster. But did have the last laugh. He made a fortune in real estate, betting correctly on the inflation that always follows big borrowing binges.
Do you know the five acres that sit under the Bellagio Hotel in Las Vegas today? That’s the land he bought in 1945 for $500. He sold it 32 years later for $10 million.
Not too shabby either.
40 Years of 30-Year Bond Yields
Grandpa’s Impulse Buy for $500
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“Babies born in America today are the luckiest crop in history,” said Oracle of Omaha Warren Buffett.
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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
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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
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