(NVDA) Archives

October 3 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader October 3 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.

As usual, every asset class long and short was covered. You are certainly an inquisitive lot, and keep those questions coming!

Q: Will the market keep increasing for the rest of the year?

A: We haven’t had the pullback yet, so the short answer is yes. My yearend target of and S&P 500 (SPY) for the end of 2018 still stands. You can’t argue with the immediate price action. That said, the market is wildly overbought for the medium term and is approaching valuation levels we haven’t seen since the Dotcom peak in 2000. That why I am running a 70% cash trading book now.

Q: Should I be buying the Volatility Index (VIX) here?

A: Look at the bottom where we broke back in August, if we go down there and sit for a couple of days, then go out and buy the March 2019 $40 iPath S&P 500 VIX Short-Term Futures ETN (VXX) calls—way out of the money, way far in the future—and that way if you get any bounce in the (VIX) in the next 6 months, you’ll make a ton of money on that. You can buy them today for 50 cents. Plus, we could get one of these situations where there’s a major selloff once we’re into the new year, so a 6-month (VXX) call option would hedge that.

Q: Given the choice of Apple (AAPL) or Google (GOOG), which would you buy?

A: If you’re a conservative, old lady, widow and orphan type, you’d probably want to buy Apple— it’s almost turned into a utility, it’s so reliably safe, going up and has a nice dividend. If you want to be aggressive, swinging for the fences young stud and are looking for a double, I would go with Google—much higher growth pattern, pays no dividend and has had a 3-month consolidation going sideways. The only thing that could hurt this company would be government regulation, but with the Democrats possibly taking control of Congress in November, the prospect of government regulation of the entire technology sector could rapidly fade away.

Q: When should I get into Health Care (XLV)?

A: I think you have to wait at this point. To me, it’s tremendously overbought at the moment, but is still enjoying a long-term bull move. This is one of my two favorite sectors in the entire market. It has been rising for four months now, even though the Trump threat of price cuts are constantly overhanging the market.

Q: Is oil (USO) going to 100?

A: Because of the disruptions caused by the Iran sanctions and the tearing up of the Iran Nuclear Treaty, Trump has created a short squeeze in oil prices. He is threatening to boycott any country that buys oil from Iran, so Iran is shipping their oil through China, which is already under sanctions itself. However, that is easier said than done. The oil business is much more complicated than people realize. For China to take Iranian oil, they literally have to build new refineries from scratch to process the crude from Iran; no two crudes are alike. When you build a major supply, you have to build refineries to match that, and you have to get it there. This market will eventually stabilize, but in the meantime, there is a big short squeeze going on in Europe.

Q: Do you see the economy going strong into the end of the year?

A: Yes, I do—we still have the tax cuts, global liquidity, and deregulation kicking in, and those things will all work until the end of the year. I think we close at the highs of the year, and after that we’re going to have to start to work hard for our money once again in 2019. The US economy is like a supertanker; it takes a long time to turn it around.

Q: Will the interest rate spike kill the market?

You think? Investors are so used to ultra-low interest rates that a transition to normal rates will be traumatic. Next Friday, we get Core CPI, and if that comes in hot we could see another spike to 3.35% in the ten-year US Treasury bond (TLT). There are now a ton of people desperate to get out of their bond holdings at last week’s prices. This is why I have been selling short the bond market for the past three years and selling as recently as Monday. The next leg down in a 30-year bear market has begun.

Q: Advanced Micro Devices (AMD) has shot over $30—would you sell it?

A: We love the company long term but short term it is just way overdone; take the double and run, and then buy back on the next dip.

Q: Are you still bearish on the chip company?

A: Short term yes, long term no. This sector is now totally driven by the trade war with China. This includes NVIDIA (NVDA), Micron Technology (MU) and LAM Research (LRCX). Lam is particularly exposed because they had ordered to sell ten entire chip factories to China which is now on hold. That said, the day the trade way ends these stocks will all start a 50% run up. If China gets the same free pass and symbolic treaty that Canada did, that could happen sooner than later. If you can’t sleep at night until then, cut your position in half. If you still can’t sleep, cut it again.

Q: Do you think Lockheed Martin (LMT) is a buy Here at $350?

A: No, there is a double top risk for the stock right here. And if the Democrats get control of congress, the whole Trump trade could unwind. That would give the opposition the purse strings and the first thing they’ll do is cut defense spending, which Trump bumped up by $50 billion.

Q: Do you have any views on pot stocks like Aurora Cannabis (ACB), Tilray (TLRY) and (WEED)?

Stay away in droves. They’re this year’s bitcoin stocks. It’s still illegal. That’s why these companies are all based in Canada. And after all it’s a weed. How hard is it to grow? The barriers to entry are zero.

October 1, 2018

Diary, Newsletter, Summary

Global Market Comments
October 1, 2018
Fiat Lux

Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD,
or DON’T NOMINATE ME!),
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The Market Outlook for the Week Ahead, or Don’t Nominate Me!

Diary, Newsletter, Research

I have a request for all of you readers. Please do not nominate me for justice of the Supreme Court.

I have no doubt that I could handle the legal load. A $17 copy of Litigation for Dummies from Amazon would take care of that.

I just don’t think I could get through the approval process. There isn’t a room on Capitol Hill big enough to house all the people who have issues with my high school background.

In 1968, I ran away from home, hitchhiked across the Sahara Desert, was captured by the Russian Army when they invaded Czechoslovakia, and had my front teeth knocked out by a flying cobblestone during a riot in Paris. I pray what went on in Sweden never sees the light of day.

So, I’m afraid you’ll have to look elsewhere to fill a seat in the highest court in the land. Good luck with that.

The most conspicuous market action of the week took place when several broker upgrades of major technology stocks. Amazon (AMZN) was targeted for $2,525, NVIDIA (NVDA) was valued at $400, and JP Morgan, always late to the game (it’s the second mouse that gets the cheese), predicted Apple (AAPL) would hit a lofty $270.

That would make Steve Jobs’ creation worth an eye-popping $1.3 trillion.

The Mad Hedge Market Timing Index dove down to a two-month low at 46. That was enough to prompt me to jump back into the market with a few cautious longs in Amazon and Microsoft (MSFT). The fourth quarter is now upon us and the chase for performance is on. Big, safe tech stocks could well rally well into 2019.

Facebook (FB) announced a major security breach affecting 50 million accounts and the shares tanked by $5. That prompted some to recommend a name change to “Faceplant.”

The economic data is definitely moving from universally strong to mixed, with auto and home sales falling off a cliff. Those are big chunks of the economy that are missing in action. If you’re looking for another reason to lose sleep, oil prices hit a four-year high, topping $80 in Europe.

The trade wars are taking specific bites out of sections of the economy, helping some and damaging others. Expect to pay a lot more for Christmas, and farmers are going to end up with a handful of rotten soybeans in their stockings.

Barrick Gold (ABX) took over Randgold (GOLD) to create the world’s largest gold company. Such activity usually marks long-term bottoms, which has me looking at call spreads in the barbarous relic once again.

With inflation just over the horizon and commodities in general coming out of a six-year bear market, that may not be such a bad idea. Copper (FCX) saw its biggest up day in two years.

The midterms are mercifully only 29 trading days away, and their removal opens the way for a major rally in stocks. It makes no difference who wins. The mere elimination of the uncertainty is worth at least 10% in stock appreciation over the next year.

At this point, the most likely outcome is a gridlocked Congress, with the Republicans holding only two of California’s 52 House seats. And stock markets absolutely LOVE a gridlocked Congress.

Also helping is that company share buybacks are booming, hitting $189 billion in Q2, up 60% YOY, the most in history. At this rate the stock market will completely disappear in 20 years.

On Wednesday, we got our long-expected 25 basis-point interest rate rise from the Federal Reserve. Three more Fed rate hikes are promised in 2019, after a coming December hike, which will take overnight rates up to 3.00% to 3.25%. Wealth is about to transfer from borrowers to savers in a major way.

The performance of the Mad Hedge Fund Trader Alert Service eked out a 0.81% return in the final days of September. My 2018 year-to-date performance has retreated to 27.82%, and my trailing one-year return stands at 35.84%.

My nine-year return appreciated to 304.29%. The average annualized return stands at 34.40%. I hope you all feel like you’re getting your money’s worth.

This coming week will bring the jobspalooza on the data front.

On Monday, October 1, at 9:45 AM, we learn the August PMI Manufacturing Survey.

On Tuesday, October 2, nothing of note takes place.

On Wednesday October 3 at 8:15 AM, the first of the big three jobs numbers is out with the ADP Employment Report of private sector hiring. At 10:00 AM, the August PMI Services is published.

Thursday, October 4 leads with the Weekly Jobless Claims at 8:30 AM EST, which rose 13,000 last week to 214,000. At 10:00 AM, September Factory Orders is released.

On Friday, October 5, at 8:30 AM, we learn the September Nonfarm Payroll Report. The Baker Hughes Rig Count is announced at 1:00 PM EST.

As for me, it’s fire season now, and that can only mean one thing: 1,000 goats have appeared in my front yard.

The country hires them every year to eat the wild grass on the hillside leading up to my house. Five days later there is no grass left, but a mountain of goat poop and a much lesser chance that a wildfire will burn down my house.

Ah, the pleasures of owning a home in California!

Good luck and good trading.

We’re Taking Calls Now

September 24, 2018

Tech Letter

Mad Hedge Technology Letter
September 24, 2018
Fiat Lux

Featured Trade:
(BAD NEWS FROM MICRON TECHNOLOGY (MU),
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Bad News from Micron Technology (MU)

Tech Letter

If your stomach was on edge before, then you must feel quite queasy now.

That’s only if you didn’t get rid of your chip stocks when I told you to.

The chip sector has been rife with issues for quite some time now, and I’ve been firing off bearish chip stories the past few months.

Intel (INTC) was one of the last chip companies I told you to avoid like the plague, please click here to review that story.

The contagion has spread wider.

Micron (MU), the Boise, Idaho-based chip giant, delivered poor guidance from its latest earnings report, adding more carnage to this trouble sector.

It’s been rough sailing for many American-based chip companies lately that are not named Advanced Micro Devices (AMD) and Nvidia (NVDA).

The protracted ongoing trade war between America and China that sees no end in sight is the fundamental reason to stay away from these chip companies that are the meat and potatoes inside of all electronic devices.

Cofounder of Alibaba (BABA) Jack Ma, who recently stepped down from his position as chairman, told news outlets that this trade war could last “20 years” and is “going to be a mess.”

Micron is affected by this trade war more than any other American company, with half of its annual revenue derived from the Middle Kingdom.

Out of the $20.32 billion in annual revenue last year, more than $10 billion was from China alone.

Micron is a leader in selling DRAM chips, which are placed in most portable electronic devices such as smartphones, video game consoles, and laptop computers.

The commentary coming out from chip executives has been overly negative and spells doom and gloom - supporting my view to be cautious on chips through the end of the year.

At the Citi 2018 Global Technology Conference in New York, KLA-Tencor (KLAC) chief financial officer Bren Higgins characterized the winter season DRAM market as “little less than what we thought,” describing margins as “modestly weaker.”

Lam Research (LRCX), once one of my favorite chip plays, offered bearish rhetoric about the state of chip investments, saying on its earnings call that is expected “lower spending on new equipment by some of its memory customers.”

It doesn’t take a rocket scientist to know that “memory customer” is Intel, which is in the throes of a CPU chip shortage rocking the overall personal computer market.

Personal computers face a steep 7% drop in sales volume for the rest of the year, and the knock-on effect is rippling throughout the industry.

The lower volume of produced computers means less memory needed, adding up to less sales for Micron.

This rationale forced Micron to guide down its revenue growth from 22% to 16% for the last quarter of 2018.

Intel’s monumental lapse has offered a golden opportunity for competitor Advanced Micro Devices (AMD) to steal market share from Intel in broad daylight.

This was the exact thesis that provoked me to urge readers to pile into AMD shares like a Tokyo rush-hour subway car.

Shares have gone ballistic to say the least.

(AMD) is poised to seize and reposition itself in the global CPU market with a 70/30 market share, up from the paltry 90/10 market share before Intel’s debacle.

To make matters worse for Intel, widespread reports indicate its shortage problems are “worsening.”

Such is a dog-eat-dog world out there when a company can triple market share in a blink of an eye.

The rotation is real with HP (HPQ) planning to integrate AMD chips into 30% of its consumer PCs, and Dell already mentioning it will use AMD chips to make up for the shortages.

The resilience in chip demand remains the silver lining for this industry as price weakness and production shortages will be finite.

Server demand remains particularly robust.

Google, Amazon, Facebook, and Microsoft coughed up $34.7 billion on data centers to serve cloud-based operation in the first half of the year in 2018, a sharp increase of 59% YOY.

Investors have been paranoid of the boom-bust nature of the chip industry for decades.

Each cycle sees spending and chip pricing rocket, only for inventories to build up and demand to evaporate in an instant.

The beginning of the end always starts with lower guidance, followed up with missed earnings the next quarter.

This playbook has repeated itself over and over.

Micron guided first quarter revenue of 2019 in a range between $7.9 billion to $8.3 billion, lower than the consensus of $8.45 billion.

And, if all of this horrid chip news wasn’t reason to rip your hair out - here is the bombshell.

To wean itself off the reliance of American chips, Alibaba has created a subsidiary to produce its own chips called Pingtouge Semiconductor Company.

Pingtouge refers to honey badger in the Chinese language, symbolic for its tenacity in the face of adversity – perhaps a thinly-veiled dig at the American political system.

Former Chairman Ma pocketed this chip company Hangzhou C-SKY Microsystems last year. It will will be given ample leeway and resources to team up with Alibaba to roll out its first commercial chip next year.

Alibaba has rapidly grown into the third-largest cloud player in the world, and require an abundant source of chips moving forward.

Chips tricked out with artificial intelligence will be adopted by not only its data centers, but integrated with its autonomous driving technology and IoT products, which are markets that Alibaba is proud to be part.

You can find Alibaba’s cloud products present in more than 20 countries. And the company that Jack Ma built forecasts to generate more than 50% of its revenue from overseas markets soon.

It could be Jack Ma laughing all the way to the bank.

Ultimately, Micron produced fair results last quarter, but like Facebook found out, if investors believe the company is about to fall off a cliff, it offers little resistance to the share price on a short-term basis.

Could the cyclicality demons start to awake to drag this company down?

Partially, yes, but there are still many positives to take away from this leading chip company.

China will need years to remedy its addiction of American chips.

It will not be able to produce the scope of quality or quantity to just stop buying from American companies for the foreseeable future.

The authorized $10 billion share buyback gave Micron shares a nice lift earlier this year, but the industry dynamics are now deteriorating rapidly.

Chip sentiment is at its lowest ebb for some time, and I reaffirm my call to avoid this sector completely unless it’s the two cornerstone chip companies showing systematic resiliency - (AMD) or Nvidia (NVDA).

The administration initially slapped on a tariff rate of 10% on $200 billion worth of goods with intentions to scale it up.

If nothing is solved, the increase to 25% will cause another 5% to 10% drop in Micron and Intel.

Then if the administration plans to go after the rest of the $250 billion of Chinese imports, expect another dive in chip shares.

Either way, each jawboning tweet as we head deeper into this trade conflict will damage Micron’s shares.

This sector is getting squeezed from many sides now, and if you don’t go outright short chip companies, then stay away until the storm clouds pass over and you can reassess the situation.

September 21, 2018

Diary, Newsletter, Summary

Global Market Comments
September 21, 2018
Fiat Lux

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(MONDAY, OCTOBER 15, 2018, ATLANTA, GA,
GLOBAL STRATEGY LUNCHEON)

September 19 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader September 19 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.

As usual, every asset class long and short was covered. You are certainly an inquisitive lot, and keep those questions coming!

Q: Do you expect a correction in the near term?

A: Yes. In fact, we may even see it in October. Markets (SPY) have been in extreme, overbought territory for a month now, the macro background is terrible, trade wars are accelerating, and interest rates are rising sharply. The only thing holding the market up is the prospect of one more quarter of good earnings, which companies start reporting next month. So once that’s out of the way, be careful, because people are just hanging on to the last final quarter before they sell.

Q: I just got out of my cannabis stock, what should I do now?

A: Thank your lucky stars you got away with that—it was an awful trade and you made money on it anyway. Stay away in droves. After all, the cannabis industry is all about growing a weed and how hard is that? This means the barriers to entry are zero. In fact, I’m thinking of growing some in my own backyard. My tomatoes do well, so why not Mary Jane?

Q: The Volatility Index (VIX) is now at $11.79—should I buy?

A: No, the rule of thumb for the (VIX) is to wait for it to sit on a bottom for one to two weeks and let some time decay work itself out. You’ll see that in the ETF, the iPath S&P 500 VIX Short-Term Futures ETN (VXX). When it stops breaking to new lows, that means it’s ready for another bounce. I would wait.

Q: What do you think about banks here? Is it time to get in?

A: No, these are not promising charts. If anything, I’d say Goldman Sachs (GS) is getting ready to do a head and shoulders and go to new lows. I would stay away from financials unless I see more positive evidence. The industry is ripe for disruption from fintech, which has already started. That’s said, they are way overdue for a dead cat bounce. That’s a trade, not an investment.

Q: Would you short Alibaba (BABA) and Baidu (BIDU) here?

A: No. Shorting is what I would have done six months ago; now it’s far too late. If anything, I would be a buyer of those stocks here, based on the possibility that we will see progress or an end to the trade war in the next couple of months. If the trade wars continue, they will put the U.S. in recession next year, and then you don’t want to own stocks anywhere.

Q: Is Apple (AAPL) going to get hit by the trade wars?

A: So far, this has not been the case, but they are whistling past the graveyard right now—an obvious target in the trade wars from both sides. For instance, the U.S. could suddenly start applying a 25% import duty to iPhones from China, which would make your $1,000 phone a $1,250 phone. Similarly, the Chinese could hit it in China, restricting their manufacturing in one way or another. I’m being very cautious of Apple for this reason. The stock already has one $10 drop just because of this worry.

Q: Can the U.S. ban China from selling bonds?

A: No, they can’t. The global U.S. Treasury bond market (TLT) is international by nature—there is no way to stop the selling. It would take a state of war to reach the point where the Fed actually seizes China’s U.S. Treasury bond holdings. The last time that happened was when Iran seized the U.S. embassy in Tehran in 1979. Iran didn’t get its money back until the Iran Nuclear Deal in 2015. Before that you have to go back to WWII, when the U.S. seized all German and Japanese assets. They never got those back.

Q: What are your thoughts on the chip sector?

A: Stay away short-term because of the China trade war, but it’s a great buy on the long term. These stocks, like NVIDIA (NVDA) and Micron Technology (MU) have another double in them. The fundamentals are outrageously good.

Q: Is the market crazy, or what?

A: Yes, it is crazy, which is why I’m keeping 90% cash and 10% on the short side. But “Markets can remain irrational longer than you can stay liquid,” as my friend John Maynard Keynes used to say.

Q: What’s your take on the Consumer Staples sector (XLP)?

A: It will likely go up for the rest of the year, into the Christmas period; it’s a fairly safe sector. The uptrend will remain until it doesn’t.

Q: Should we buy TBT now?

A: No, the time to buy the ProShares Ultra Short 20+ Year Treasury ETF (TBT) was two months ago. Now is the time to sell and take profits. I don’t think 10-year U.S. Treasury yields (TLT) are going above 3.11% in this cycle, and we are now at 3.07%. Buy low and sell high, that’s how you make the money, not the opposite.

Q: Does this webinar get posted on the website?

A: Yes, but you have to log in to access it. Then hover your cursor over My Account and a drop-down menu magically appears. Click on Global Trading Dispatch, then the Webinars button, and the last nine years of webinars appear. Pick the webinar you want and click on the “PLAY” arrow. Just give us a couple of hours to get it up.

Q: Can Chinese companies use Southeast Asia as a conduit to export to the U.S.?

A: Yes. This is an old trick to bypass trade restrictions. For example, most of the Chinese steel coming into the U.S. is through third countries, like Singapore. Eventually they do get found out, at which point companies or imports from Vietnam will be identified as Chinese origin and get hit with the import duties anyway, but it could take a year or two for those illegal imports to get discovered. This has been going on ever since trade started.

Q: Will the currency crisis in Argentina and Turkey spread to a global contagion?

A: Yes, and this could be another cause of a global recession late next year. The canaries in the coal live there (EEM).

Q: Would you use the DOJ probe to buy into Tesla (TSLA)?

A: No, buy the car, not the stock as it is untradeable. This is in fact the third DOJ investigation Tesla has undergone since Trump came into office. The last one was over how they handled the $400 million they have in deposits for their 400,000 orders. It turns out it was all held in an escrow account. There are easier ways to make money. It’s a black swan a day with Tesla. This is what happens when you disrupt about half of the U.S. GDP all at once, including autos, the national dealer network, big oil, and advertising. All of these are among the largest campaign donors in the U.S.

Time to Bring Out the Big Guns

September 12, 2018

Diary, Newsletter, Summary

Global Market Comments
September 12, 2018
Fiat Lux

THE FUTURE OF AI ISSUE

Featured Trade:
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(GOOG), (FB), (AMZN), MSFT), (BABA), (BIDU),
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September 4, 2018

Tech Letter

Mad Hedge Technology Letter
September 4, 2018
Fiat Lux

Featured Trade:
(READY PLAYER ONE’S INSIGHT INTO THE FUTURE OF TECHNOLOGY),
(MSFT), (SQ), (TTWO), (AMD), (NVDA), (EA), (ATVI), (PYPL), (GOOGL), (FB)

Ready Player One’s Insight into the Future of Technology

Tech Letter

The technology-laced film Ready Player One gives viewers a snapshot into the future where technology, income inequality, and society have run their course, and the year 2045 looks vastly different from the world of 2018.

Set in a semi-dystopian backdrop, the movie offers us a deeper insight into how certain technology trends will permeate into everyday life.

The first and most obvious future trend is the copious use of avatars.

Avatars will become the new normal. The first place that humans will find them is through the use of social media and entertainment, as children eventually becoming a part of us like our social media profiles today.

The Mad Hedge Technology Letter has incessantly hammered home about the phenomenon of gaming, and this will incorporate virtual reality allowing gamers access to a new digital world.

This was the on show in the film where the likes of protagonist Wade Watts, played by Tye Sheridan spent most of his life playing in the virtual world of Oasis using his character Parzival.

This could be your child in the future.

Wade Watts character is the new cool for Generation Z, as they are largely unconcerned about underage drinking and partying like the generations before them.

Gaming and hanging out on their preferred social media platforms are the new cool.

The companies dictating the current video game industry will have the first crack at it to realize profits and develop new businesses such as Microsoft (MSFT), Nvidia (NVDA), Advanced Micro Devices (AMD), Electronic Arts Inc. (EA), Take-Two Interactive Software, Inc. (TTWO), and Activision Blizzard, Inc. (ATVI).

Children just aren’t going outside like they used to and per most studies, they are addicted to the smartphone you bought them at age 10.

Most studies have found that once a child becomes hooked on technology, it is hard to reverse the habit, as once they enter into adult life and start their career, they become even more reliant on the technologies that got them to that point in the first place.

If your kid is already staring at tech devices three to four hours per day now for activities other than school work, expect that to grow to a minimum of six to seven hours per day once he hits puberty and smartphone time limits begin to fade away.

This all means that VR and gaming could be the handsome winner in all this, and the use of social media platforms will reap the benefits as well.

Generation Z just surpassed Millennials in terms of population comprising 25% of the American populace.

Neither of these generations have grown up with VR in their daily lives because the technology wasn’t advanced enough to really make a dent in their lives.

More than 75% of Generation Z has access to a smartphone, and they can truly be called the first generation of digital natives.

Avatars will push deeper into everyday life because the facial tracking technology has advanced by leaps and bounds.

Instead of cartoon-like avatars, lifelike avatars have replaced the less refined versions. It will be a tough time going forward distinguishing what is real and what is fake.

If you think fake news is a problem now, imagine how fake it will become in the future.

This could devastate the news industry as news organizations run the risk of melting down at any point, or just being completely taken over by tech companies and their algorithms, which is already happening now with Alphabet (GOOGL).

The future looks bleak for all newspaper assets, and the ones with the most advanced digital strategies will survive.

Newspapers only have so much time they can hang on with digital ad revenue, the reason they are still in business.

Viewers don’t want to see ads – period. And at some point, they will be disrupted as well.

Swashbuckling youth already have downloaded ad-blockers to completely remove ads from their lives, and refuse to open any website that forces them to white list a website.

There are children in Generation Z who might never have seen an ad before because their digital native capability allows them to navigate around ads with adept skill.

Or the easy solution for many Millennials is just watch Netflix because the platform is ad-less. The aversion to ads is so strong that traditional media giants such as Fox are experimenting with six-second ads because that is all a viewer can tolerate these days.

The traditional media giants were forced to adopt this new format after Alphabet’s YouTube rolled out micro-ads.

Popular browser Mozilla announced it will block all tracking scripts by default beginning in 2019, thwarting unregulated data collection and relentless ad pop-ups.

The reason why digital ads will have an existential crisis is because companies will be able to monetize the pure data, forcing companies with huge digital ad businesses such as Facebook (FB) to battle with the new competition that only wants your data and not hawk ads.

This is already happening in the e-brokerage space with disruptors such as Robinhood, which charges no commission and is more interested in collecting data and getting by with interest payment revenue.

Let’s face it, digital ads are not a high-quality business even though they are a high-margin business. As tech moves forward, the quality of tech will rise eliminating all low-grade tech that is still profiting in 2018.

On the business side of things, automation is replacing humans faster than humans realize, and the replacement will be an avatar representing the face of a company.

For lower-end services, an avatar chosen by the customer will populate to often give better service than a human can provide.

If this type of service is scaled, it would offer a massive cut in costs for American corporations saving on employee costs.

It will have the same effect that self-checkout kiosks have at supermarkets, wiping out another position at the low-end.

The front-end avatar that will service you is all possible because of the rapid advancement of artificial intelligence.

Every possible situation will be programmed in the software and executed briskly.

If customers desire the human touch, they will have to pay up.

Human interaction will command a premium price because human interaction cannot be automated.

The financial industry has a huge target on its back, and swaths of financial advisors could be sacked in favor of avatars with the functional software behind it to produce profits.

In fact, many financial advisors are instructed to refrain from recommendations now and urged to collect input to enter into a proprietary algorithm that will decide the customers’ portfolio.

Big banks have enjoyed their time in the sun, but technology will disrupt them in the near future. This is why you have seen huge run-ups in innovative fintech companies such as Square (SQ) and PayPal (PYPL).

Many forms of outside entertainment are on the chopping block, as well as indoor entertainment such as Hollywood.

Hollywood A-list actors command hefty premiums to contract their services, and that could all crumble if younger audiences prefer avatar-based films with the human roles performed by unknowns.

Johnny Depp earns more than $50 million for one movie, and these insane amounts could deflate rapidly if human participation in films becomes marginalized.

Ready Player One was a test case for how much technology could be infused into a movie, and the audience easily absorbed it.

I could argue that audiences could argue even more in this VR format.

The movie had a budget of $175 million, and returned $582 million at the box office.

The resounding success will encourage more directors to inject technology into their movies, and they will have to, if they hope to tempt younger audiences to the movie theater.

Going to the movie theater is another activity that has struggled to cope against the rise of Netflix and technology.

Theaters have been forced to improve the overall experience of watching a film with prime seating, comfortable seats, and other extras that never existed.

Every industry is going through the same headache of competing with technological disruption.

Stagnation is akin to surrendering in 2018.

And it wasn’t just a fringe director creating Ready Player One, it was visionary director Steven Spielberg, one of the most famous movie directors to ever exist.

This will pave the way for other lesser-known movie directors relying on technology to pump out the profits.

They wouldn’t be the first people or the first industry to go down this road either.

The Avatars Used In Ready Player One

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Quote of the Day

“The worst thing a kid can say about homework is that it is too hard. The worst thing a kid can say about a game is it's too easy,” – said American media scholar Henry Jenkins III.

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The Avatars Used In Ready Player One