Mad Hedge Technology Letter
May 6, 2024
Fiat Lux
Featured Trade:
(BUFFETT CHIMES IN ON AI)
(BRK/A), (SMCI), (AI), ($UST10Y)
At the once-per-year shareholder meeting for Berkshire Hathaway (BRK/A) in Omaha, Nebraska, the shindig has become a caricature of itself.
A company that does so well, but the leader has self-proclaimed to understand nothing about technology.
It was fascinating to see the Oracle of Omaha Warren Buffett dabble in the cooler talk that is talk about artificial intelligence.
Ironically enough, his pep talk about AI was littered with negatives about the consequences of AI.
Warren Buffett's warning about AI’s potential harm has everything to do with his conservative risk tolerance to not beeline straight to the front of the most modern developments in the tech industry.
He’s late on most stocks but he’s right on them in the end.
It wasn’t too far back when Buffett only would invest in a company as complicated as Coca-Cola, because he famously stated that he doesn’t invest in companies that he doesn’t understand.
Insurance also made Buffett a killing pouring capital into companies like Aflac.
He finally came around to Apple which for better or worse is known as the iPhone company.
His risk tolerance of tech increasing to the almighty smartphone was quite a jump for Buffett that took many years, so don’t expect another leap of faith anytime soon.
In fact, Buffett claiming he doesn’t understand AI too well means there is a lot of capital sitting on the sidelines waiting to enter once they finally do “understand.”
I should also just note the general stockpile of money that has been waiting on the sideline since the Covid-era is enormous.
Any meaningful dip in any meaningful tech company will be met by a torrent of new buying demand.
That’s exactly what happens when the number of great tech companies can be counted on 2 hands.
Almost like what is happening with American restaurants – it’s not that American restaurants are going through a generational renaissance, no, they are packed because so many small restaurants closed after COVID.
Tech is experiencing the same playbook with investor money.
The past 7-12 years have seen the spurring on competition squelched, and the tech industry has never been closer to a full-blown monopoly in some sub-sectors.
Once the bulls get back in control, we are off to the races again, because a few companies move markets now.
That’s what I believe we are seeing in the short-term with the US 10-year inching up only for Central Bank Fed Chair Jerome Powell to deliver us a monumental dovish speech to the sticky inflation we are seeing in numbers now.
Buffett chose to talk about the darker side of AI and the potential for scamming people.
He said that scamming using AI will become a “growth industry of all time.”
Buffett pointed to the technology’s ability to reproduce realistic and misleading content in an effort to send money to bad actors.
Just because we don’t like it, we cannot write it off or afford it as investors.
Readers must deal with AI and the manifestations of it.
One of the big side effects is that it accelerates the winner-takes-all dynamics of tech.
If I were a newbie investor, Super Micro Computers (SMCI) would be on the radar as a powerful growth stock with bountiful potential and exposure to AI.
More tech companies will fail, and they will fail faster, without a trace of even existing sometimes.
It also puts extreme pressure on tech management to implement AI, lose funding, or lose the momentum the business model.
It almost makes tech management over-reliant on AI to fix any and every mess.
The reality is that there will be a lot of losers from AI and punishes companies that never figure out AI.
It is best to identify them before the stock goes to 0.
I don’t necessarily share the same dark outlook as Buffett and I commend him for doing so well on his performance, but when it comes to technology stocks, he shows up late, but it is better than never showing up.
Man is not free unless government is limited.” – Said Former US President Ronald Reagan
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
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
(“WOODSTOCK FOR CAPITALISTS” SHOWED BUFFETT IS STILL IN GOOD FORM)
May 6, 2024
Hello everyone.
Week ahead calendar
Monday, May 6
No economic data of note.
Earnings: Loews, Spirit Airlines, Tyson Foods, BioNTech, Hims & Hers, Vertex Pharmaceuticals, Lucid Group, Palantir Technologies, Simon Property Group, Aecom, Microchip Technology, Rocket lab, Goodyear Tire, Flavours & Fragrances, Marriott Vacations, Noble Corp., Vornado Realty, Coty, Bell Ring Brands, Cabot
Tuesday, May 7
3:00 pm Consumer Credit (March)
Earnings: UBS, BP, Nintendo, Squarespace, Kenvue, Aramark, Gogo, Energizer, Tempur Sealy, Bloomin’ Brands, Crocs, Datadog, Duke Energy, Rockwell Automation, Spirit AeroSystems, TransDigm, Expeditors, Nikola, Walt Disney, Ferrari, Global Foundries, NRG Energy, Perrigo, Electronic Arts, Cirrus Logic, iRobot, Redfin, Lyft, TripAdvisor, Adaptive Biotech, Arista Networks, Dutch Bros., Kyndryl, Marqeta, Oddity Tech, Olo, Sonos, Toast, Upstart Holdings, Virgin Galactic, Twilio, IAC/InterActive, Match Group, McKesson, Rivian Automative, Brighthouse, Occidental Petroleum, Assurant, Angi, Kinross Gold, Astera Labs, Diamond Offshore, Reddit.
Wednesday, May 8
10:00 a.m. Wholesale inventories (March)
Earnings: Anheuser-Busch InBev, Edgewell Personal Care, Embraer, Elanco Animal Health, United Parks & Resorts, ODP, Emerson Electric, Brookfield, New York Times, Performance Food Group, Reynolds Consumer Products, Shopify, Teva Pharma, Uber Technologies, Brink’s Tegna, Hain Celestial, Choice Hotels, Dine Brands, Liberty Broadband, Affirm Holdings, Fox Corp., Cushman & Wakefield, Liberty Media, Valvoline, Arm Holdings, Airbnb, Robinhood, Beyond Meat, Bumble, Kodiak Gas Services, NuSkin, SolarEdge Technologies, TKO Group, Vizio, AMC Entertainment, Cheesecake Factory, News Corp., Toyota Motors, Celanese, Instacart, Klaviyo.
Thursday, May 9
8:30 a.m.
Continuing jobless claims
8:30 a.m. Initial claims
Earnings: Nissan, Cedar Fair, Six Flags, Yeti, Hanesbrands, Planet Fitness, Sally Beauty, Tapestry, US Foods, Warby Parker, Krispy Kreme, Hyatt Hotels, Warner Bros, Discovery, Roblox, Viatris, Papa John’s, Hilton Grand Vacations, Warner Music Group, Solventum, DropBox, Akamai, Figs, Sweetgreen, Unity Software, Yelp, Synaptics, H&R Block, Iamgold, Fidelis Insurance, GenDigital, Savers Value Village.
Friday, May 10
10:00 a.m. Michigan sentiment (May)
2:00 p.m. Treasury budget (April)
Earnings: Honda Motor, AMC Networks.
Maybe time to start looking at Emerging Markets.
The weaker than expected employment numbers last Friday marked the first sign this year that we may just see some interest rate movement in the form of cuts toward the latter part of this year.
And if we do see a lower rate environment on the horizon, one area that will be boosted is emerging markets.
Emerging market equities are at attractive valuations presently; earnings growth too has started to accelerate.
Start looking at this ETF:
(EEM)iShares MSCI Emerging Markets ETF
Continue scooping up some Berkshire Hathaway stock.
Berkshire Hathaway’s annual general meeting on Saturday, May 4, has been dubbed “Woodstock for Capitalists.”
Analysts have a $472 price target on class B shares, and this suggest nearly 18% upside from last Thursday’s close.
I listened to several hours of the meeting and the topics covered included climate change, succession planning, artificial intelligence, the sale of a chunk of Apple shares (around 13%) - 115 million shares.
The company has approximately $200billion in cash. Greg Abel will make investing decisions for Berkshire Hathaway when Buffett passes.
Buffett spoke of “scamming” as a growth industry, which will be enabled by AI. While he didn’t see AI as all bad, he did note that the potential for AI to manipulate videos and images - to extract money from people - poses enormous harm to those who are unsophisticated in critically evaluating these types of media.
One of the best lessons from Charlie Munger.
Patience.
Munger was well known for waiting – not only when it came to building wealth, but for finding attractive investing opportunities.
In his words: “We wait for no-brainers. We’re not trying to do the difficult things. And we have the patience to wait.”
When it came to investing in what he viewed as great companies, Munger shared Buffett’s view that your best move as an investor is holding for the long term.
In Buffett’s words: “When we own portions of outstanding businesses with outstanding managements, our favourite holding period is forever.”
Warren Buffett’s insights about life.
“If you are lucky in life, make sure others in life are lucky too.”
“Be kind and the world will be better off.”
Market Update:
S&P500
It’s possible that this correction is completed to enable the resumption of uptrend in a Wave 5 advance towards the next upside target at around 5,450. If the 5th wave has begun, then support at 5,060/5,011 should now hold.
We must be aware, though that there is still risk of a final sell-off toward the low/mid 4,800’s, before the uptrend is ready to resume.
The Bigger Picture outlook remains bullish. The 5,735 mark is the potential target over the coming months.
Gold
Gold has been undergoing a 4th wave correction. A sustained break above $2,350 resistance will represent the resumption of uptrend for rally back toward the area of $2,430.
The Bigger Picture outlook remains bullish, with the next upside target at around $2,530.
Bitcoin
Bitcoin has been undergoing a 4th wave correction, and this might be completed now.
Support lies around the $59,500 level. If this area holds, we should now see rallies on to the next resistance areas at $67,240 and $73,794 levels.
Bitcoin’s bullish structure remains in place.
QI Corner
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
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
Global Market Comments
May 6, 2024
Fiat Lux
Featured Trade:
(NONE)
While swimming with the hammerhead sharks off a rocky outcrop near the Galapagos Islands in the South Pacific, John Thomas swallowed too much seawater and suffered from too much sun. He collected aloe vera leaves around his house, crushed them, and rubbed the juice over his face. It is now working its magic. Western sun blocks are no match for the equatorial sun.
Our regular service resumes tomorrow.