Mad Hedge Technology Alerts!
Sometimes the best way to become successful at investing in technology stocks is to avoid the black swan or the big disaster.
I hate to say it but investment risk has never been higher.
One question that keeps getting rehashed that I thought I might take time to address is the rise of the TikTok influencer-adviser.
According to a brief Google search, TikTok, known in China as Douyin, is a video-sharing social networking service owned by Chinese company ByteDance.
The social media platform is used to make a variety of short-form videos, from genres like dance, comedy, and education, that have a duration from three seconds to one minute.
Unfortunately, for serious retail investors lately, content has migrated into high-stakes themes like financial education and financial advising giving rise to content that is produced by video creators to get a piece of the financial industry.
Naturally, this has brought down the quality of the financial content on the internet to historic lows simply because most of the content is marginal at best.
These promulgators often preach about their status as “trading gurus” and often leverage the hype of digital currencies to claim they are fully invested in “crypto assets” and urge anyone reading to become one of their new “cult followers.”
They are also usually paid to market a “bulletproof” financial app or certain crypto asset to avid followers without properly disclosing that they are being paid for the advertisement.
This behavior is being encouraged by the TikTok algorithms who order this type of misleading content at the top of searches simply because it gets more hits being a click-bait type of content.
The more outlandish the videos become, gloating about get-rich-quick schemes and 1,000% daily returns, the higher up in the search queries they usually populate when filtered through TikTok algorithms.
These accounts are known as financial “influencers” and post 100s of such videos every month featuring fraudulent success or minimizing the difficulty of profiting through trading and a mix or mash of everything in between.
Even some proclaim to have unlocked the holy grail of trading and “guarantee” 100% returns or your money back.
Another speaking point they like to touch on is how video watchers can “also” afford wealthy lifestyles without having to work, at least in the traditional way.
To dumb down the travails of investing and trading to something easier than pouring a glass of water is a lie.
Many of these novice investors are duped into paying for exorbitant services that are nothing more than promotional buzz offering hyped-up marketing language as specific trading advice.
Unfortunately, US regulators have turned a blind eye to what is happening on this nefarious Chinese platform, and imitators are spawned daily and are certainly incentivized to do so.
While I must admit that regulating this type of behavior on TikTok is incredibly messy, to leave this unchecked will result in massive fraud for the little guy that I try to help.
The justification for ignoring these TikTok “influencers” is because there is even worse cybercrime taking place out there and the content these influencers are peddling is straddling the gray areas of the law.
But it’s not enough, and readers need to understand the heightened risks of diving feet-first into these TikTok polar vortexes where you just get whipped around unknowingly.
Pre-emptively protect your portfolio by avoiding these TikTok trading gurus is the order of the day.
As we enter the back half of 2024, the collapse of crypto broker FTX was a reminder of the large risks associated with investing in an unknown alternative asset class.
The TikTok crypto marketers were largely being sponsored by crypto exchange FTX.
They were peddling FTX’s own digital currency that was made out of thin air.
Anyone trading in this FTX in-house digital coin known as FTT lost most of their money as the CEO of FTX Sam Bankman-Fried was extradited back to the United States and found guilty in court.
FTX’s FTT coin went from $40 at the beginning of 2022 to 80 cents on December 30, 2022, highlighting the dangers of listening to fake crypto “trading gurus” on TikTok pushing FTT coin like there is no tomorrow.
Stay vigilant and happy trading and remember, there is no free lunch in trading.
It’s hard work earning your crust of bread.
Mad Hedge Technology Letter
July 15, 2024
Fiat Lux
Featured Trade:
(AI AND IMPROVED WORKFORCE EFFICIENCY IS HERE TO STAY)
(TSLA)
Students hoping to become bankers shouldn’t study finance, they should dive into AI programming.
This is the big takeaway from how investment banks are run these days.
Gone are the moments when finance degrees were the hottest commodity, now it is all about generative AI.
Artificial intelligence (AI) could replace the equivalent of 300 million full-time jobs, a report by investment bank Goldman Sachs says.
It could replace a quarter of work tasks in the US and Europe but may also mean new jobs and a productivity boom.
And it could eventually increase the total annual value of goods and services produced globally by 7%.
Generative AI, able to create content indistinguishable from human work, is "a major advancement", the report says.
Silicon Valley is keen to promote investment in AI not only in the United States but in a way that will ultimately drive productivity gains across the global economy.
The report notes AI's impact will vary across different sectors - 46% of tasks in administrative and 44% in legal professions could be automated but only 6% in construction and 4% in maintenance, it says.
Journalists will therefore face more competition, which would drive down wages unless we see a very significant increase in the demand for such work.
Consider the introduction of GPS technology and platforms like Uber (UBER). Suddenly, knowing all the streets in London had much less value - and so incumbent drivers experienced large wage cuts in response, of around 10% according to our research.
The result was lower wages, not fewer drivers.
Over the next few years, generative AI is likely to have similar effects on a broader set of creative tasks.
According to research cited by the report, 60% of workers are in occupations that did not exist in 1940.
However, other research suggests technological change since the 1980s has displaced workers faster than it has created jobs.
Nobody understands how the technology will evolve or how firms will integrate it into how they work.
Lower wages and higher output are a perfect recipe for higher technology share prices and that is exactly what we will get.
Currently, we are experiencing a mild pullback from the AI mania, but that is simply because it got too far ahead of its skis.
I am quite impressed by the price action in a stock like Tesla (TSLA) which executed a major cut to their global workforce to trim costs.
The staff cut of 10% could result in exactly what I mentioned in more output for less pay, but in terms of hiring more workers, they have decided to force less workers to do more.
This type of management decision increases efficiency because it forces workers to work smarter.
It’s certain they will be a major investor in AI chips to outfit their EV cars, and much of this corporate tech business is a feedback loops involving synergies with businesses overlapping.
Tech as a whole is not in trouble, but individual companies will find an imbalanced treatment of their stock.
The AI pixie dust is still strong as many readers bought the shallow dip in Nvidia.
I do believe in the AI hype, and a lot of the price action is skewed toward just a handful of AI stocks.
My advice is to buy AI stocks on the dip and this increased efficiency will certainly filter down into the top and bottom lines.
