Mad Hedge Technology Letter
December 28, 2020
Fiat Lux
Featured Trade:
(ECOMMERCE AND THE UNIVERSITY SYSTEM)
(AMZN), (APPL), (WMT), (TGT), (SHOP), (APPL), (MSFT), (GOOGL)
Tag Archive for: (AMZN)
The genie is out of the bottle and life will never go back to pre-Covid ways.
Excuse me for dashing your hopes if you assumed the economy, society, and travel rules would do a 180 on a dime.
They certainly will not.
The messiness of distributing the vaccine is already rearing its ugly head with Germany botching the BioNTech-Pfizer vaccine delivery, deploying refrigerators that weren’t cold enough.
Moving on to tomorrow’s tech and the decisive trends that will power your tech portfolio, you can’t help but think about what will happen to the American university system.
A bachelor’s degree has already been devalued as traditional academics trumped by the digital economy invading its turf.
Another unstoppable trend that shows no signs of abating is the “winner take all” mentality of the tech industry.
Tech giants will apply their huge relative gains to gut different industries and have set academics and the buildings they operate from as one of their next prey.
Recently, we got clarity on big-box malls becoming the new tech fulfillment centers with the largest mall operator in the United States, Simon Property Group (SPG), signaling they are willing to convert space leftover in malls from Sears and J.C. Penny.
The next bombshell would hit sooner rather than later.
College campuses will become the newest of the new Amazon (AMZN), Walmart (WMT), or Target (TGT) eCommerce fulfillment centers, and let me explain to you why.
When the California state college system shut down its campuses and moved classes online due to the coronavirus in March, rising sophomore Jose Antonio returned home to Vallejo, California where he expected to finish his classes and “chill” with friends and family.
Then Amazon announced plans to fill 100,000 positions across the U.S at fulfillment and distribution centers to handle the surge of online orders. A month later, the company said it needed another 75,000 positions just to keep up with demand. More than 1,000 of those jobs were added at the five local fulfillment centers. Amazon also announced it would raise the minimum wage from $15 to $17 per hour through the end of April.
Antonio, a marketing and communications major, jumped at the chance and was hired right away to work in the fulfillment center near Vacaville that mostly services the greater Bay Area. He was thrilled to earn extra spending money while he was home and doing his schoolwork online.
This was just the first wave of hiring for these fulfillment center jobs, and there will be a second, third, and fourth wave as eCommerce volumes spike.
Even college students desperate for the cash might quit academics to focus on starting from the bottom at Amazon.
Even though many of these jobs at Amazon fulfillment centers aren’t those corner office job that Ivy League graduates covet, in an economy that has had the bottom fall out from underneath, any job will do.
Chronic unemployment will be around for a while and jobs will be in short supply.
Not only is surging unemployment a problem now, but a snapshot assessment led by the U.S. Census Bureau and designed to offer less comprehensive but more immediate information on the social and economic impacts of Covid showed that as recently as the period between November 25 and December 7 (including Thanksgiving), some 27 million adults—13 percent of all adults in the country—reported their household sometimes or often didn’t have enough to eat.
Yes, it’s that bad out there right now.
When you marry that up with the boom in ecommerce, then there is an obvious need for more ecommerce fulfillment centers and college campuses would serve as the perfect launching spot for this endeavor.
The rise of ecommerce has happened at a time when the cost of a college education has risen by 250% and more often than not, doesn’t live up to the hype it sells.
Many fresh graduates are mired in $100,000 plus debt burdens that prevent them from getting a foothold on the property ladder and delay household formation.
Then consider that many of the 1000s of colleges that dot America have borrowed capital to the hills building glitzy business schools, $100 million football locker rooms, and rewarding the entrenched bureaucrats at the school management level outrageous compensation packages.
The cost of tuition has risen by 250% in a generation, but has the quality of education risen 250% during the same time as well?
The answer is a resounding no, and there is a huge reckoning about to happen in the world of college finances.
America will be saddled with scores of colleges and universities shuttering because they can’t meet their debt obligations.
The financial profiles of the prospective students have dipped by 50% or more in the short-term with their parents unable to find the money to send their kids back to college, not to mention the health risks.
Then there is the international element here with the lucrative Chinese student that added up to 500,000 total students attending American universities in the past.
They won’t come back after observing how America basically ignored the pandemic and the U.S. public health system couldn’t get out of the way of themselves after the virus was heavily politicized on a national level.
The college campuses will be carcasses with lots of meat on the bones that will let Jeff Bezos choose the prime cuts.
This will happen as Covid’s resurgence spills over into a second academic calendar and schools realize they have no pathway forward and look to liquidate their assets.
There will be a meaningful level of these college campuses that are repurposed as eCommerce delivery centers with the best candidates being near big metropolitan cities that have protected white-collar jobs the best.
The coronavirus has exposed the American college system, as university administrators assumed that tuition would never go down.
The best case is that many administrators will need to drop tuition by 50% to attract future students who will be more price-sensitive and acknowledge the diminishing returns of the diploma.
Not every college has a $40 billion endowment fund like Harvard to withstand today’s financial apocalypse.
It’s common for colleges to have too many administrators and many on multimillion-dollar packages.
These school administrators made a bet that American families would forever burden themselves with the rise in tuition prices just as the importance of a college degree has never been at a lower ebb.
Like many precarious industries such as nursing homes, commercial real estate, hospitality, and suburban malls, college campuses are now next on the chopping block.
Big tech not only will make these campuses optimized for delivery centers but also gradually dive deep into the realm of digital educational revenue, hellbent on hijacking it from the schools themselves as curriculum has essentially been digitized.
Just how Apple has announced their foray into cars, these same companies will go after education.
Colleges will now have to compete with the likes of Google (GOOGL), Facebook (FB), Amazon (AMZN), Apple (AAPL), and Microsoft (MSFT) directly in terms of quality of digital content since they have lost their physical presence advantage now that students are away from campus.
Tech companies already have an army of programmers that in an instance could be rapidly deployed against the snail-like monolith that is the U.S. university system.
The only two industries now big enough to quench big tech’s insatiable appetite for devouring revenue are health care and education.
We are seeing this play out quickly, and once tech gets a foothold literally and physically on campus, the rest of the colleges will be thrust into an existential crisis of epic proportions with the only survivors being the ones with large endowment funds and a global brand name.
It’s scary, isn’t it?
This is how tech has evolved in 2020, and the tech iteration of 2021 could be scarier and even more powerful than this year’s. Imagine that!
AMAZON PACKAGES COULD BE DELIVERED FROM HERE SOON!
Global Market Comments
December 7, 2020
Fiat Lux
FEATURED TRADE:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or A DICEY LANDING)
(SPY), (TLT), (AMZN), (TSLA), (CRM), (JPM), (CAT), (BABA),
(FCX), (GLD), (SLV), (UUP), (FXE), (FXA), (FXB), (FXY), (FXI), (EWZ), (THD), (EPU)
Landing my 1932 de Havilland Tiger Moth biplane can be dicey.
For a start, it has no brakes. That means I can only land on grass fields and hope my tail skid catches before I run out of landing strip. If it doesn’t, the plane will hit the end, nose over, and dump a fractured gas tank on top of me. Bathing in 30 gallons of 100 octane gasoline with sparks flying is definitely NOT a good long term health plan.
The stock market is starting to remind me of landing that Tiger Moth. On Friday, all four main stock indexes closed at all-time highs for the first time since pre-pandemic January. A record $115 billion poured into equity mutual funds in November. This has all been the result of multiple expansion, not newfound earnings.
Yet, stocks seem hell-bent on closing out 2020 at the highs.
And there is a major factor that the market is completely ignoring. What if the Democrats win the Senate in Georgia?
If so, Biden will have the weaponry to go bold. The economy goes from zero stimulus to maybe $6 trillion raining down upon it over the next six months. That will go crazy, possibly picking up another 10%, or 3,000 Dow points on top of the post-election 4,000 points we have seen so far.
That is definitely NOT in the market.
The other big decade-long trend that is only just starting is the weak US dollar. Lower interest rates for longer were reaffirmed by the appointment of my former economics professor Janet Yellen as Treasury Secretary.
A feeble dollar brings us a fading bond market, as half the buyers are foreigners. A sickened greenback also provides the launching pad for all non-dollar assets to take off like a rocket, including commodities (FCX), precious metals (GLD), (SLV), Bitcoin, and the currencies (UUP), (FXE), (FXA), (FXB), (FXY), and emerging stock markets like China (FXI), Brazil (EWZ), Thailand (THD), and Peru (EPU).
All of this is happening in the face of a US economy that is clearly falling apart. Weekly jobless claims for November came in at 245,000, compared to a robust 638,000 in October, taking the headline unemployment rate down to 6.9%. The real U6 unemployment rate stands at an eye-popping 12.0%, or 20 million.
Some 10.7 million remain jobless, 900,000 higher than in February. Transportation and Warehousing were up 140,000, Professional & Business Services by 60,000, and Health Care 46,000. Retail was down 35,000 as stores shut down at a record pace.
OPEC cuts a deal, adding 500,000 barrels a day to the global supply. The hopes are that a synchronized global recovery can take additional supply. Texas tea finally busts through a month's long $44 cap, the highest since March. Avoid energy. I’d rather buy more Tesla, the anti-energy.
Black Friday was a disaster, with in-store shopping down 52%. Long lines and 25% capacity restrictions kept the crowds at bay. If you don’t have an online presence, you’re dead. In the meantime, online spending surged by 26%.
Amazon (AMZN) hires 437,000 in 2020, probably the greatest hiring binge since WWII, and is continuing at the incredible rate of 3,000 a week. That takes its global workforce to 1.2 million. Most are $12 an hour warehouse and delivery positions. The company has been far and away the biggest beneficiary of the pandemic as the world rushed to online commerce.
Tesla’s (TSLA) full self-driving software may be out in two weeks, instead of the earlier indicated two years. The current version only works on freeways. The full street to street version could be worth $8,000 a car in upgrades. Another reason to go gaga over Tesla stock.
Goldman Sachs raised Tesla target to $780, the Musk increased market share to a growing market. No threat from General Motors yet, just talk. Volkswagen is on the distant horizon. In the meantime, Tesla super bear Jim Chanos announced he is finally cutting back his position. He finally came to the stunning conclusion that Tesla is not being valued as a car company. Go figure. Short interest in Tesla has plunged from a peak of 35% in March to 6% today. It’s learning the hard way.
The U.S. manufacturing sector pauses, activity in the U.S. manufacturing sector barely ticked up in November as production and new orders cratered, data from a survey compiled by the Institute for Supply Management showed on Tuesday. The ISM Manufacturing Report on Business PMI for November stood at 57.5, slipping from 59.3 in October.
Salesforce (CRM) overpays for workplace app Slack, knocking its stock down 9%. This is worth a buy the dip trade in the short-term and this is still a great tech company which is why the Mad Hedge Tech Letter sent out a tech alert on Salesforce on the dip.
Weekly Jobless Claims dive, with Americans applying for unemployment benefits falling last week to 712,000 down from 787,000 the week before. The weakness is unsurprising as we head into seasonal Christmas hiring.
The end of the tunnel for Boeing (BA) as they bring to an end an awful 2020. Irish-based airline Ryanair Holdings placed a large order for a set of brand new Boeing 737 MAX aircraft, giving the plane maker a shot in the arm as the single-aisle jet comes off an unprecedented 20-month grounding.
Ryanair, Europe’s low-cost carrier, has 135 Boeing 737 MAX jets on order and options to bring the total to 200 or more. Hopefully, they won’t crash this time around. My fingers are crossed.
Dollar Hits 2-1/2 Year Low. With global economies recovering, the next big-money move will be out of the greenback and into the Euro (FXE), the Aussie (FXA), the Looney (FXC), the Japanese yen (FXY), the British pound (FXB), and Bitcoin. Keeping interest rates lower for longer will accelerate the downtrend.
When we come out the other side of this pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Global Trading Dispatch catapulted to another new all-time high. December is up 5.34%, taking my 2020 year-to-date up to a new high of 61.78%.
That brings my eleven-year total return to 417.69% or double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.00%. My trailing one-year return exploded to 64.56%. I’m running out of superlatives, so there!
I managed to catch the 50%, two-week Tesla melt-up with a 5X long position, which is always nice for performance.
The coming week will be a slow one on the data front. We also need to keep an eye on the number of US Coronavirus cases at 14.5 million and deaths at 285,000, which you can find here.
When the market starts to focus on this, we may have a problem.
On Monday, December 7 at 4:00 PM EST, US Consumer Credit is out.
On Tuesday, December 8 at 11:00 AM, the NFIB Business Optimism Index is published.
On Wednesday, December 9 at 8:00 AM, MBA Mortgage Applications for the previous week are released.
On Thursday, December 10 at 8:30 AM, the Weekly Jobless Claims are published. At 9:30 AM, US Core Inflation is printed.
On Friday, November 11, at 9:30 AM EST, the US Producer Price Index is announced. At 2:00 PM, we learn the Baker-Hughes Rig Count.
As for me, at least there is one positive outcome from the pandemic. Boy Scout Christmas tree sales are absolutely through the roof! We took delivery of 1,300 trees from Oregon for our annual fundraiser expected to sell them in two weeks. We cleared out our entire inventory in a mere six days!
We sold trees as fast as we could load them. With the scouts tying the knots, only one fell onto the freeway on the way home. An “all hands on deck” call has gone out to shift the inventory.
It turns out that tree sales are booming nationally. The $2 billion a year market places 21 million trees annually at an average price of $8 and are important fundraisers for many non-profit organizations. It seems that people just want something to feel good about this year.
Governor Gavin Newsome’s order to go into a one-month lockdown Sunday night inspired the greatest sales effort I have ever seen, and I worked on a Morgan Stanley sales desk! We shifted the last tree hours before the deadline, which was full of mud with broken branches and had clearly been run over by a truck at a well-deserved 50% discount.
I can’t wait until next year!
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Technology Letter
November 30, 2020
Fiat Lux
Featured Trade:
(THE GREEN LIGHT FOR E-COMMERCE)
(AMZN), (W), (OSTK), (WMT), (TGT), (MELI), (EBAY), (CRM), (ADBE)
Data from Adobe Analytics is in and it suggests that e-commerce is delivering on its expected domination over retail.
I can’t ignore the helping hand of the pandemic which has deemed pedestrian shopping malls too dangerous to set foot in and for analog businesses that survive, it is essentially coming down to whether a digital footprint has been developed or not.
There is only so much a PPP loan can do to paper over the cracks of a non-digital business.
At some point, CEOs will need to wake up and understand that survival means a migration to digital.
Forecasts show that Black Friday online sales will register between $8.9 billion and $10.6 billion, which represents growth of up to 42% year over year.
The data firm expects Black Friday and Cyber Monday to become the two largest online sales days in history as consumers shift more spending toward e-commerce amid the public health crisis.
By last Friday morning, Salesforce projected online sales in the U.S. for Black Friday to spike 15% to $11.9 billion.
The truth is that many shoppers got their shopping done even before Thursday and Friday with digital sales in the U.S. spiking 72% year over year on Tuesday and were up 48% on Wednesday.
E-commerce companies front-ran the actual holidays to eke out more profit in the anticipation of competitors offering earlier sales.
According to Adobe, Thanksgiving sales hit a record $5.1 billion, up 21.5% over 2019 and this aggressive growth rate can be considered the new normal.
Smartphones continued to account for an increasing segment of online sales, with this year’s $3.6 billion up 25.3%, while alternative deliveries — a sign of the e-commerce space maturing — also continued to grow, with in-store and curbside pickup up 52% on 2019.
Shopify said that over 70% of its sales are being made using smartphones.
What are the hot gift items?
Electronics, tech, toys, and sports goods being the most popular categories — at the right price will help retailers continue to experience elevated sales volume.
Adobe said a survey of consumers found that 41% said they would start shopping earlier this year than previous years due to much earlier discounts.
This season is headed for record-breaking levels as consumers power online sales for both holiday gifts and necessities.
Not all big-box retailers were open over the holidays and getting that extra surge from the likes of daily needs such as paper towels, cleaning products, and garbage bags has boosted the top-line growth as well.
We have seen the perfect storm of elements fuse together to help the bottom line records of the likes we have never observed.
Comps will be difficult to beat next year if the vaccine solution starts coming online by next winter and considering that the worst economic damage is behind us.
Next year, the U.S. consumer will have more to spend setting up a tough but possible beat to next year’s numbers along with the high likelihood that tech stocks will experience another leg up.
There will be a lot happening in between, such as a new U.S. administration that is primed for a different economic polic; but it’s impossible not to love the narrative of certain e-commerce companies such as Shopify (SHOP), MercadoLibre (MELI), Target (TGT), Walmart (WMT), Etsy (ETSY), Wayfair (W), eBay (EBAY), Overstock.com (OSTK), Amazon (AMZN) and the companies that measure their data like Salesforce (CRM) and Adobe (ADBE).
If we ever could anoint when a year became the year of technology, then this would be it in 2020.
The base case for next year is that the borders and states will still grapple with the virus and the knock-on effects to society, economy, and politics as the capacity to produce the virus won’t meet demand for at least a year.
Tech stocks are primed to outperform non-tech next year and even though multiples are high, the momentum suggests that this group of stocks will be the gift that keeps giving as the Fed has offered generous liquidity conditions to tech investors.
Mad Hedge Technology Letter
November 23, 2020
Fiat Lux
Featured Trade:
(COMMUNICATIONS HAS NEVER BEEN MORE IMPORTANT)
(TWLO), (TWTR), (CRM), (SQ), (AMZN), (OSTK), (W)
Growth is not dead as last week’s tech rally shows that tech stocks still have their allure.
One tech growth stock that I am absolutely in-love with is communications-as-a-platform cloud stock Twilio who services Airbnb and Uber as the software that connects the users to their staff.
The ability to communicate with customers in real time has never been more urgent in a fast-paced world, especially in the software-centric economy.
From food delivery to booking hotels, from customer service to password resets, literally anything revolves around the ability to connect reliably and rapidly.
Many people in 2020 still do not even know what Twilio (TWLO) does!
They are the dark horse cloud company that nobody has heard of.
The company provides the software building blocks that lets developers embed Twilio's communication technology in their apps, messaging systems, emails, and more. It also streamlines the process so it can be accomplished in a matter of hours, rather than weeks or months.
Here’s an insanely applicable example: The update you received from Lyft regarding your ride, the text messages and reservation confirmation you got from Airbnb, the customer service interactions with Disney's Hulu, and the booking confirmation from your restaurant via Yelp? These were delivered by Twilio's technology.
In pandemic third quarter, Twilio's revenue climbed 52% year over year, while also avoiding a loss, swinging from a loss in the prior-year quarter.
The company reported 208,000 active customers, up 24% year over year.
There is no mistake that these types of cloud stocks are in the vein of Twitter (TWTR), Salesforce (CRM), Square (SQ), and so on and at the vanguard of the hullabaloo of growth stocks.
Why are growth stocks so popular?
Growth stocks are companies that increase their revenue and earnings faster than average.
A growth company relentlessly develops an innovative product or service or at the top of the pack of fastest-growing industries and unsurprisingly that is technology, and that fact won’t change for generations.
Firms growing faster than average for long periods tend to be rewarded by the market, and this is why there has been a massive migration to growth stocks that has enriched shareholders of Apple (APPL), Facebook (FB), Netflix (NFLX), and so on.
Growth also begets additional growth and the faster they grow, the bigger the returns can be.
They are also more expensive than the average stock in terms of metrics like price-to-earnings, price-to-sales, and price-to-free-cash-flow ratios, but investors look past this in an age of expanding liquidity which is the catalyst that breathes even more momentum into these stocks.
US growth stocks secure a premium just for the possibility they will fulfill their parabolic growth potential.
Capitalizing on powerful long-term trends can grow their sales and profits for many years, and the following are a list of seminal trends that all involve technology data points as the secret sauce.
- E-commerce: The massive migration to online shopping is here to stay and the coronavirus has acted like a supercharger to e-commerce company like Amazon (AMZN), Overstock (OSTK), and Wayfair (W).
- Digital advertising: The digital ad market is moving marketing budgets from TV and print to online channels.
- Digital payments: Contactless payments and fintech (through a smartphone) will eventually replace physical card transactions.
- Cloud computing: Computing power is migrating from on-premise data centers to cloud-based servers. Amazon’s (AMZN) and Alibaba’s (BABA) cloud infrastructure services help make this possible, while Salesforce.com (CRM) provides some of the best cloud-based software available.
- Cord-cutting and streaming entertainment: Millions of people are only paying for internet services that offer on-demand content and provide access to premium packages. This trend has been supercharged by the Millennial generation.
These powerful trends will last decades giving you plenty of time to claim your share of the profits they create.
Rank growth companies with strong competitive advantages. Otherwise, their business might fail.
Some competitive advantages are:
- Network effects: Facebook is a valid example that built its usership by offering other assets like WhatsApp and Instagram to snowball into a 2 billion number usership. The synergies are plentiful with the ability to cross-sell its products across platforms and aggregating data to deploy the intel in the best way it can make money.
- Scale advantages: Size can be another powerful advantage. Amazon is a great example here, as its massive global fulfillment network is something its smaller rivals will find extremely difficult to replicate.
- High switching costs: Switching costs are expenses and difficulties involved in switching to a rival product or service. Once a company begins to use e-commerce company Shopify as the core of its online operations, they are unlikely to absorb the burden of switching to another competitor.
Pinpointing large addressable markets means a larger opportunity to secure higher revenue and Twilio is occupying a spot at the intersection of generational, long-term trends and almost unfair competitive advantages.
The underlying shares have rocketed this year as communications has never been more important. This is a great buy and hold stock for the long term because trading short term is difficult with its elevated volatility.
When I was a kid, radios were built with vacuum tubes.
I remember my dad taking me to the supermarket where a large display case sporting dozens of sockets identified the tube you needed.
All you had to do then was install it without electrocuting yourself.
Then transistors were invented and everything changed overnight. Suddenly, solid-state electronics took over the market. Everything was lighter, cheaper, and much faster.
A decade later, Intel took over the computer market launching its revolutionary 4004 microprocessor.
It looks like I am going to live long enough to see another great leap forward in computing power.
Imagine a single computer that was so powerful that its processing power exceeded that of all the other computers in the world combined.
Applied to the stock market, such a machine would be able to algorithmically extract hundreds of billions of profits without anyone noticing.
It would be able to break any code in the world in seconds, rendering all security programs useless.
It would also act as an adrenaline shot for all of the artificial intelligence efforts currently out there.
Oh, and to understand how to interpret its output, we will have to invent a new form of advanced high mathematics.
You may be forgiven for thinking I spent my weekend reading science fiction.
But you would be wrong.
I actually got to see a working prototype for such a machine known as a quantum computer at the NASA Ames Research Center in nearby Mountain View, California.
Dominated by an enormous wooden airship hangar once owned by the Navy, the facility is home to a joint venture between NASA and Google to develop the next generation of supercomputers.
The machine was built by D-Wave, a small Canadian start-up in Burnaby, a suburb of Vancouver, Canada. It was founded in 1999 by a former wrestler, Geordie Rose and Haig Farris.
To understand how such a breakthrough is possible, it is necessary for me to explain some basic particle physics.
Classical computers operate through a system of silicon gates that allow electrons to pass through or not. This is expressed in computer code as a 0, a 1, or nothing at all, known as “bits.”
And yes, I am old enough to have programmed simple computers with only 0’s and 1’s.
The problem is that this technology, launched during the 1960s, is reaching its theoretical limits.
According to Moore’s law, the number of circuits squeezed on a microprocessor doubles every two years until 2015. A few ingenious tweaks and modifications by manufacturers have extended that deadline by five years to 2020.
After that, a Great Depression was supposed to hit, as all progress in technology ground to a halt.
Enter quantum computing.
Instead of only two possible choices in each code entry, the number of possible solutions becomes infinite for quantum computing.
It does this by changing the physical statue of electrons for each piece of code. Some electrons spin clockwise, others counterclockwise, while others still spin on a northeast-southwest axis, and so on.
As a result, the number of calculations that can be performed by a quantum algorithm increased exponentially, as does its speed.
The computational unit of a quantum computer is called a “quantum bit,” or “qubit.”
The machine I saw has 1,000 qubits, powered by two chips containing 500 niobium loops each, and was code-named “Washington.”
The quantum computer I saw doesn’t look anything like a computer. Instead, it looks like a small walk-in freezer.
That is essentially what it is, as 90% of the hardware is devoted to dissipating heat and shielding it from electromagnetic and magnetic interference.
There is no silicon involved in this computer. Instead, the chips are made of hundreds of 2-micron-wide threads of Niobium, a rare earth, cooled at close to absolute zero.
Gold-plated copper disks are used as heat sinks.
The next-generation quantum computer is expected to have chips made out of aluminum.
The quantum code is now so fragile that the mere presence of matter can erase it and convert it into a useless classical computer.
Its speed is measured through a process known by “entanglement” whereby distant atoms display the mirror image of nearby ones.
And now we’re over my pay grade, and probably yours too.
For that reason, its output can only be transmitted through fiber optic cable.
D-Wave is not alone in its efforts at quantum computing. Do any search on the term, and the number of research institutions involved runs into the hundreds. And who knows what is going on in China and Russia?
D-Wave is a private company. Its largest investors include venture capital firm Draper Fisher Jurvetson, Amazon’s Jeff Bezos, and In-Q-Tel, the venture capital arm of the CIA.
It is possible that D-Wave may never see the light of day as a public company in which you and I can invest. Instead, its total production may be reserved for its original investors.
However, you can invest directly into those shareholders most likely to benefit, including Amazon (AMZN) and Alphabet (GOOG).
There are other models for advanced supercomputing underway that may also reach economic viability, such as DNA-based computing. I’ll be covering those in a future letter.
One of the many goals of the Diary of a Mad Hedge Fund Trader is to discover advanced technologies early, and then get out in front of them with trading recommendations.
Ever wonder why Amazon shares have tripled this year?
This might be the reason.
To learn more about D-Wave and its amazing technology, please click here.
Global Market Comments
October 30, 2020
Fiat Lux
Featured Trade:
(OCTOBER 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(INDU), (VIX), (AMZN), (TSLA), (FEYE), (HACK), (PANW), (V), (TLT), (FXA), (FXC), (ZM), (DOCU), (RTX), (LMT), (NOC), (GD)
