(THE AI GENIE IS OUT OF THE BOTTLE – ARE HUMAN RIGHTS AT STAKE?)

June 7, 2024

Hello everyone,

A recent report from the UN is shining a spotlight on the risks of generative AI.  The report explores 10 human rights that generative AI may adversely impact.

The paper says that “the most significant harms to people related to generative AI are in fact impacts on internationally agreed human rights” and lays out several examples for each of the 10 human rights it explores:  Freedom from Physical and Psychological Harm; Right to Equality Before the Law and Protection against Discrimination; Right to Privacy; Right to Own Property; Freedom of Thought, Religion, Conscience, and Opinion; Freedom of Expression and Access to Information; Right to Take Part in Public Affairs; Right to Work and to Gain a Living; Rights of the Child; and Rights to Culture, Art, and Science.

There is already talk about generative AI’s impact on creative professions.  This report discusses this issue and how it can be used to create harmful content from political disinformation to nonconsensual pornography and CSAM (child sexual abuse material).  Over 50 examples in the report illustrate the potential human rights violations, which creates an alarming picture of what’s at stake as companies rush to develop, deploy, and commercialize AI.

The report also asserts that generative AI is both altering the current scope of existing human rights risks associated with digital technologies and has unique characteristics that are giving rise to new types of human rights risks.  For instance, the use of generative AI for armed conflict and the potential for multiple generative AI models to be fused together into larger single-layer systems that could autonomously disseminate huge quantities of disinformation.

Of some concern is the idea that “other potential risks are still emerging and, in the future, may represent some of the most serious threats to human rights linked to generative AI.

One particular risk the report brings to light surrounds the Rights of the Child.  “Generative AI models may affect or limit children’s cognitive or behavioral development where there is over-reliance on these models’ outputs, for example when children use these tools as a substitute for learning in educational settings.  These use cases may also cause children to unknowingly adopt incorrect or biased understandings of historical events, societal trends, etc.”

The report also notes that children are especially susceptible to human rights harms linked to generative AI because they are less capable of discerning between synthetic content and genuine content, identifying inaccurate information, and understanding they’re interacting with a machine.

Let’s think of children and social media for a moment.  They were given daily access to social media without virtually any transparency or research into how it might impact their development or mental well-being.  It’s well known that children have been harmed by social media companies’ apparent lack of guardrails surrounding the technology.  This issue came to light earlier this year when the CEOs of Meta, Snapchat, TikTok, X, and Discord testified before Congress in a heated hearing that looked at social media’s role in child exploitation as well as its contribution to addiction, suicide, eating disorders, unrealistic beauty standards, bullying, and sexual abuse. It’s been shown that children were treated as guinea pigs on Big Tech’s social media platforms; repeating those mistakes with generative AI would be shameful.

The Right to Work and to Gain a Living was also covered in the report and showed interesting findings.  Of note was the fact that economics, labor markets, and daily work practices could be drastically altered by Generative AI.  The future may include employers using generative AI to monitor workers, and the idea that workers engaged in labor disputes with employers may be at heightened risk of being replaced with generative AI tools.

How we implement the technology will be important as well as the guardrails – or lack thereof – we put around it.  Perhaps the most significant takeaway is the understanding that Generative AI as a technology won’t commit these human rights violations independently, but rather powerful humans acting recklessly to prioritize profit and dominance will.

The May Monthly Zoom Meeting recording will be sent out next week.

QI CORNER

Cheers,

Jacquie

(ENERGY STOCKS ARE IN CONFLICT OVER GUYANA OIL ASSETS)

June3, 2024

Hello everyone,

Week Beginning June 3

The Bank of Canada and the European Central Bank are set to kick off June’s Central bank meetings on Wednesday and Thursday, respectively.  Both are anticipated to reduce their interest rates by 25 bp.  For the ECB, this adjustment would mark its first rate cut since 2016.

Investors are heading into a seasonally weak period for the markets, and while signs of inflation easing has buoyed investors, traders will still be relying on and watching macroeconomic data closely to navigate an expected choppy market.

The week ahead calendar

Monday, June 3

9:45 a.m. Markit PMI Manufacturing final (May)

10 a.m. Construction Spending (April)

10 a.m. ISM Manufacturing (May)

Tuesday, June 4

10 a.m. Durable Orders final (April)

10 a.m. Factory Orders (April)

10 a.m. JOLTS Job Openings (April)

Australia's GDP Growth Rate

Previous: 0.2%

Time: 9:30pm ET

Earnings: Hewlett Packard Enterprise, Bath & Body Works

Wednesday, June 5

9:45 a.m. PMI Composite final (May)

9:45 a.m. Markit PMI Services final (May)

10 a.m. ISM Services PMI (May)

Canada Interest Rate Decision

Previous: 5.0%

Time: 9:45 am ET

Earnings:  Campbell Soup, Dollar Tree

Thursday, June 6

8:30 a.m. Continuing Jobless Claims (05/25)

8:30 a.m. Initial Claims (06/01)

8:30 a.m. Unit Labor Costs final (Q1)

8:30 a.m. Productivity final (Q1)

8:30 a.m. Trade Balance (April)

Euro Area Interest Rate Decision

Previous: 4.5%

Time: 8:15 am ET

Earnings: J.M. Smucker Co.

Friday, June 7

8:30 a.m. May Jobs report

Previous: 175k

10 a.m. Wholesale Inventories final (April)

12 p.m. Fed Governor Lisa Cook gives commencement address at Girls Global Academy, University of the District of Columbia, Washington, D.C.

3 p.m. Consumer Credit (April)

Exxon Mobil and Chevron are in a battle over lucrative offshore oil assets in Guyana.

Exxon has outpaced Chevron this year with the oil majors gaining roughly 15% and 6%, respectively.

But the environment for Chevron may look brighter in the second half of the year if it can exercise a favourable outcome from its feud with Exxon over an offshore oil development in Guyana called the Stabroek Block.

Exxon leads that development with a 45% stake, but Chevron is seeking to get in on the action through its pending acquisition of Hess Corp, which has a 30% holding in Stabroek.

Hess shareholders approved the Chevron merger last Tuesday, but it’s still unclear when the deal will close.

Exxon has dragged Chevron and Hess before an arbitration court to defend its claims to a right of first refusal over Hess’ Guyana assets under a joint operation agreement.

Chevron came into the year facing production issues in the Permian Basin and cost overruns at its Tengiz project in Kazakhstan that frustrated investors.  Chevron has been bouncing around in a price range between $40 and $65 for most of this year.

Exxon, on the other hand, hasn’t really faced any execution issues this year.  In fact, Exxon’s performance is a reversal from the decade leading up to the Covid-19 pandemic, when the company underperformed Chevron due to its capital expenditures during a period when oil prices were low.

Since 2020, Exxon has outperformed Chevron as the company has implemented capital discipline. Additionally, investors have noted Exxon’s lead position in the lucrative offshore oil development in Guyana.

Kevin Holt, senior portfolio manager of the Invesco Energy Fund (FSTEX) believes that the Guyana development is probably the best project the oil sector has seen in 25 years with very productive wells at a relatively low cost.  Holt goes on to say that Chevron would look very attractive if the Hess deal closes due to the latter’s large stake in Guyana.  However, if Exxon prevails in the arbitration case, the merger will terminate and Hess would remain a stand-alone company, raising questions about Chevron’s next move.

It is unclear how long the arbitration will take.  There is a possibility it may drag into 2025.

Holt sees the odds in Chevron’s favour regarding the arbitration, and points to other issues at Tengiz and in the Permian as short-term bumps in the road that will be resolved.  The resolution of all the latter will see Chevron in a very good position.

The fund manager argues that both companies are inexpensive

QI CORNER

I found this post interesting form Jason Sen.   I have underlined the parts of the post that I have recommended to other traders and investors:

Scaling into a trade or an investment – not committing all your capital at once.

Place your stop loss when you enter the trade – takes the emotion out as you now have a defined risk, and you are sticking to a plan.

Scaling out of positions – allows you to take some profits but still let part of the position run to capture further potential profits.  In other words, you can have two take profit positions set.

I refer to the scaling in and out strategy as pyramiding in and out of a position.

Monthly May Zoom Meeting

Thank you to all those who attended the May monthly meeting on Friday afternoon/evening.

We had a great turn out – subscribers from United Kingdom, Australia and the U.S. tuned in.

A recording will be sent out shortly after the presentation has been edited.

Cheers,

Jacquie

(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

(MAY 22^ND WAS WORLD BIODIVERSITY DAY)

May 24, 2024

Hello everyone,

On Wednesday – the International Day for Biological Diversity – the International Union for the Conservation of Nature released a report that found that more than half of the world’s mangrove ecosystems are at risk of collapse due to development, pollution, and sea level rise, the latest evidence of the growing threat to nature.  The United Nations Environment Programme has called for a ‘whole of society approach,’ including the private sector, to address both climate change and biodiversity loss.

While there are thousands of companies around the world that are taking action to monitor, disclose, and reduce greenhouse gas emissions, few widespread mechanisms are in place to systematically measure and reduce business impacts on nature. 

So, what are businesses doing to reduce other harms to nature?

It’s not just about the half a dozen or so gases that we measure in terms of greenhouse gases.  The rest of nature also needs attention.

The Taskforce on Nature-related Financial Disclosures (TNFD) was launched in 2021 as a partnership among financial institutions, corporations, and market service providers with the goal of developing business disclosure practices that would better account for impacts on nature.

Executive Director, Tony Goldner, said the 40 task force member organizations realize that many aspects of business and industry depend on services nature provides, from clean water to the pollination of crops.  The estimated economic value of these “ecosystem services.” as scientists call them, amounts to staggering sums.

Let’s consider the role of the humble insect.  The U.S. Department of Agriculture said the pollination of crops adds $10 billion in benefits annually just in the U.S.  Globally, pollination contributes more than $3 trillion to the world economy.

We are not looking after the insects on our planet.  In fact, they are getting a raw deal.  Several studies have documented sharply declining populations of insect pollinators in industrialized parts of the world, and scientists link those declines to business activities such as the conversion of natural areas for agriculture and heavy pesticide use.

Goldner points out that if we degrade the systems that provide these benefits to our businesses, those benefits won’t continue to flow into our business models.

At the World Economic Forum’s annual conference in January in Davos, Switzerland, TNFD announced its early adopter companies, and the list has since grown to some 370 companies that have committed to nature-related disclosures.

The task force is part of an emerging effort to get nature on the ledger sheets along with the other assets and liabilities companies track.  Proponents argue that this is not just important for environmental improvement, it is a business imperative.

“The hard business realities of the 21^st century -   you must know your impacts on climate and biodiversity or risk disruption.” (Ethan Soloviev, chief innovation officer at How Good).

Cheers,

Jacquie

(ECONOMIC DATA POINTS ARE POSITIVE FOR THE MARKET)

May 20, 2024

Hello everyone,

Week ahead calendar

Monday, May 20

Australia Consumer Confidence Chg.

Previous: -2.4%

Time: 8:30 pm ET

Earnings: Palo Alto Networks

Tuesday, May 21

Canada Inflation Rate

Previous: 2.9%

Time: 8:30 am

Earnings:  Auto Zone, Lowe’s Companies

Wednesday, May 22

10 a.m. Existing Home Sales (April)

2 p.m. FOMC Minutes

UK Inflation Rate

Previous: 3.2%

Time: 2:00 am ET

Earnings:  Nvidia, TJX Cos, Analog Devices, Target, Raymond James

Thursday, May 23

8 a.m. Building Permits

8:30 a.m. Chicago Fed National Activity Index

8:30 a.m. Continuing Jobless Claims

8:30 a.m. Initial Claims

9:45 a.m. PMI Composite preliminary

9:45 a.m. S&P PMI Manufacturing preliminary

10 a.m. New Home Sales

11 a.m. Kansas City Fed Manufacturing Index

Japan Inflation Rate

Previous: 2.7%

Time: 7:30 pm

Earnings:  Intuit, Ralph Lauren

Friday, May 24

8:30 a.m. Durable Orders

UK Retail Sales

Previous: 0%

Time: 2:00 am

Last week the Dow pushed through 40,000 for the first time ever.  The S&P500 also broke through 5,300 for the first time.  And there are higher targets ahead.

Are you going to argue with a market making new highs?   But many of you will be scratching your heads wondering how healthy this market is and how we got here in the first place.

Let’s start with aggressive market positioning at the end of the first quarter and a test of Wall Street’s faith in an ideal soft economic landing, followed closely by a friendlier set of inflation numbers, and a stellar show of earnings by big companies, and last, but not least, a reversal of the April Treasury yield surge (which I have been predicting for several months through charts on my monthly zoom meetings).

The advice here, then, is not to overthink things and look for elements that don’t fit the narrative thus far.   Many strategists conclude that record closes are more to be respected than feared when they arrive.  Records tend to persist, though one exception is the brief visit to unprecedented heights in 2007.

So, what could go wrong?

Maybe, ugly inflation reports later this month or a not-so-rosy set of numbers from Nvidia’s earnings?   This could stir up the placid landscape and place us all into rethink mode.  But the characteristics we have at the present time are not to be argued with, so let’s go with what the market is giving us – a market with “just the right mix”.

While valuations are elevated at 20.7 times forward earnings, the S&P500 P/E at 5,300 is slightly lower than it was on March 28 with the index at 5,250 because profit forecasts are up more.

The market has shown itself to be a bit more defensive lately.  Consumer cyclicals are losing steam, and transportation stocks are lagging.  The Citi U.S. Economic Surprise index has fallen into negative territory more deeply than any time since late 2022, meaning that the macro data is slipping relative to increased forecasts.  Retail sales for April were flat, too.

So, is this just about the right amount of negative data?   It could actually be seen as a welcome deceleration in the economy that could help the Fed’s disinflationary cause rather than the start of more pronounced weakness.

Lower-income spending softness is being offset by an industrial and tech-hardware capital-spending boom.

Looking more broadly gives us some insights into what is helping sustain bullish sentiment:  there were two bear markets in the past four years, the S&P500 is less than 11% higher than it was 28 months ago, and the current bull run is so far modest in both length and total appreciation compared to historical averages.   In other words, this market has further to run.

In other news:

Nvidia will be in the spotlight this week and I’m sure it will attract a lot of attention. Can Nvidia’s earnings results propel the market higher, for those that are sitting on the AI gravy train?

This week also brings inflation data releases for Canada, Japan, and the UK.   Bank of England officials and GBP/USD traders will be watching the data release closely on Wednesday, as the numbers could either solidify the likelihood of an impending rate cut, or further delay cuts. 

Market Update

S&P 500 - has rallied as anticipated. The market is undergoing a 5^th wave advance onto new highs for the year. First target lies around mid 5,400 and then next target = around 5,700.

Gold – advance in progress.Target = around $2,500.Higher targets are around $2,650 and $3,270.

Silver – advance in progress.Target = around $34.80.

Bitcoin – Uptrend has resumed. The rally will first meet resistance around $73,790 (March 14 peak).After breaking through this resistance, the next target = around the mid $80,000’s.Support is found around $63,000 max. (There is a chance that Bitcoin could retest the low $50k level at some point before continuing to rally – you are forewarned).

Cheers,

Jacquie