One of the goals of the Diary of a Mad Hedge Fund Trader is to identify major changes in the global economy early enough to get investors into the impacted shares early.
The death of the car is one of those trends, and it is still early, very early.
This is a very big deal.
Earlier in my lifetime, car production directly and indirectly accounted for about one-third of the U.S. economy.
Much of the growth during our earlier Golden Ages, in the 1920s and the 1950s, were driven by a never-ending cycle of upgrades of our favorite form of transportation and the countless ancillary products and services needed to support them.
Today, 253 million automobiles and trucks prowl America's roads, about half the world's total, with an average age of 11.4 years.
The demise of this crucial industry started during the 2008 crash, when (GM) and Chrysler (owned by Fiat) went bankrupt. Only more conservatively run, family owned Ford (F) survived on its own.
The government stepped in with massive bailouts. That was the cheaper options for the Feds, as the cost of benefits for an entire unemployed industry was far greater than the cost of the companies absorbed.
If it hadn't done so, the auto industry would have decamped for a new base near the technology hub in California, and today would be a decade closer to their futures than they are now.
And remember, the government made billions of dollars of profits from its brief foray into the auto industry. It was one of the best returns on investment in history.
I'll breakout the major directions the industry is now taking. Hint: It doesn't have much to do with traditional metal bashing.
The Car as a Peripheral
The important thing about a car today is not the car, but the various doodads, doohickeys, gizmos, and gadgets they stick in them.
In this category you can include 24/7 4G wireless, full Internet access, mapping software, artificial intelligence, and learning programs. 5G will accelerate this functionality tenfold.
(GM) is now installing more than 100 microprocessors in its vehicles to control and monitor various functions.
Good luck doing your own tune-ups.
The Car as a Service
When you think about it, automobile ownership is a wildly inefficient use of capital. It is usually a family's second-largest expense, after their home, running $30,000-$80,000.
It then sits unused in garages or public parking for 96%-98% of the day. Insurance, maintenance, and liability costs can be off the charts.
What if your car was used 24/7, as is machinery in well-run industrial plants? Your cost drops by 96%-98% to the point where it is almost free.
The sharing economy is the way to accomplish this.
We are already seeing several start-ups in major U.S. cities attempting to achieve this such as Zipcar, Car2Go, Getaround, Turo (formerly RelayRides), and City CarShare.
What happens to conventional car companies when consumers shift from ownership to sharing? Demand plunges by 96%-98%.
Perhaps that is why auto shares (GM), (F) have performed so abysmally this year relative to technology and the main market.
Self-Driving Technology
This is the hottest development area in the industry, with Apple (AAPL), Alphabet (GOOG), and the big European car makers committing thousands of engineers.
Let's say your car is now comfortably driving you to work, allowing you to read the morning papers and catch up on your email. Or maybe you're lazy and would rather watch the season finale for Game of Thrones.
What else is possible?
How about if, instead of parking, your car drops you off, saving that exorbitant fee.
Then it joins Uber, picking up local riders and paying for its own way. It then dutifully returns to pick you up at your office when it's time to go home.
Since the crash rate for computers is vastly lower than for humans, car insurance rates will collapse, gutting that industry.
Ditto for life insurance, as 35,000 people a year will no longer die in car crashes.
Half of all emergency room visits are the result of car accidents, so that business disappears too, dramatically shrinking health care costs in the process.
I have been letting my new Tesla S-1 drive me since last year, and I can assure you that the car can drive better than I can, especially at night.
What better way to get home after I have downed a bottle of Caymus cabernet at a city restaurant?
Driverless electric cars are totally silent, increasing the value of land near freeways.
Nor do they require much maintenance, as they have so few moving parts. Exit the car repair industry.
I could go on and on, but you get the general idea.
For more on the topic, please read "Test Driving Tesla's Self Driving Technology" by clicking here.
Virtual Reality
After 30 years of inadequate infrastructure budgets, trying to get into any American city center is a complete nightmare.
Only last week, a cattle truck turned over on the Golden Gate Bridge, bringing traffic to a halt. Fortunately, a cowboy traveling to a nearby rodeo was able to unload his horse and lasso the errant critters (no, it wasn't me!).
Even if you get into the city, you will be greeted by a $40 tab for a parking space. Hopefully, no one will smash your windows and steal your laptop (happened to me last year).
Why bother?
Thirty years ago, teleconferencing services pitched themselves as replacing the airplane.
Today, we are taking the next step, using Skype and GoToMeeting to conduct even local meetings, as we do at the Mad Hedge Fund Trader.
Virtual reality is clearly the next step, providing a 3-D, 360-degree experience that makes you feel like you and your products are actually there.
Better to leave that car in the garage where it can get a top up on its charge. BART is cheaper anyway, when it runs.
New Materials
We are probably five years away from adopting the carbon fiber technology now used in the aircraft industry for mass-market cars. Carbon has one-tenth the weight of steel, with five times the strength.
The next great leap forward for electric cars won't be through better batteries. It will come through a 70% reduction of the mass of a car, tripling ranges with existing technology.
San Francisco Becomes the Car Capital of the World
This will definitely NOT happen, as sky-high rents assure that the city by the bay will never attract large, labor-intensive industries.
Instead, the industry will develop much as the one for smartphones. The high value-added aspects, design and programming, will stay in California.
The assembly of the chassis, the body, and the rest of the vehicle will be best done in low-cost, tax-free states with a lot of land, such as Texas and Nevada.
What will happen to Detroit? It has already become a favored destination of new venture capital financial start-ups. The cost of offices and housing is virtually free.
Seems Alive to Me
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-08-10 01:06:262018-08-10 01:06:26The Death of the Car
Featured Trade:
(LAST CHANCE TO ATTEND THE FRIDAY, JUNE 15, 2018, DENVER, CO,
GLOBAL STRATEGY LUNCHEON),
(WILL SPACE X BE YOUR NEXT TEN BAGGER?),
(EBAY), (TSLA), (SCTY), (BA), (LMT)
I am constantly on the lookout for ten baggers, stocks that have the potential to rise tenfold over the long term.
Look at the great long-term track records compiled by the most outstanding money managers, and they always have a handful of these that account for the bulk of their outperformance, or alpha, as it is known in the industry.
I've found another live one for you.
Elon Musk's Space X is so forcefully pushing forward rocket technology that he is setting up one of the great investment opportunities of the century.
In the past decade his start-up has accomplished more breakthroughs in advanced rocket technology than seen in the last half century, since the golden age of the Apollo space program.
As a result, we are now on the threshold of another great leap forward into space. Musk's ultimate goal is to make mankind an "interplanetary species."
There is only one catch.
Space X is not yet a public company, being owned by a handful of fortunate insiders and venture capital firms. But you should get a shot at the brass ring someday.
The rocket launch and satellite industry is the biggest business you have never heard of, accounting for $200 billion a year in sales globally. This is probably because there are no pure stock market plays.
Only two major companies are public, Boeing (BA) and Lockheed Martin (LMT), and their rocket businesses are overwhelmed by other aerospace lines.
The high value-added product here is satellite design and construction, with rocket launches completing the job.
Once dominated by the U.S., the market for launches has long since been ceded to foreign competitors. The business is now captured by Europe (the Ariane 5), China (the Long March 5), and Russia (the Angara A5).
Until recently, American rocket makers were unable to compete because decades of generous government contracts enabled costs to spiral wildly out of control.
Whenever I move from the private to the governmental sphere, I am always horrified by the gross indifference to costs. This is the world of the $10,000 coffee maker and the $20,000 toilet seat.
Until 2010, there was only a single U.S. company building rockets, the United Launch Alliance (ULA), a joint venture of Boeing and Lockheed Martin. ULA builds the aging Delta IV and Atlas V rockets.
The vehicles are launched from Cape Canaveral, Florida, and Vandenberg Air Force Base in California, one of which I had the privilege to witness. They look like huge roman candles that just keep on going, until they disappear into the blackness of space.
Enter Space X.
Extreme entrepreneur Elon Musk has shown a keen interest in space travel throughout his life. The sale of his interest in PayPal, his invention, to Ebay (EBAY) in 2002 for $165 million, gave him the means to do something about it.
He then discovered Tom Mueller, a childhood rocket genius from remote Idaho who built the largest-ever amateur liquid fueled vehicle, with 13,000 pounds of thrust. Musk teamed up with Mueller to found Space X in 2002.
A decade of grinding hard work, bold experimentation, and heartrending testing ensued, made vastly more difficult by the 2008 Great Recession.
Space X's Falcon 9 first flew in June 2010, and successfully orbited earth. In December 2010, it launched the Dragon space capsule and recovered it at sea. It was the first private company ever to accomplish this feat.
Dragon successfully docked with the International Space Station (ISS) in May 2012. NASA has since provided $440 million to Space X for further Dragon development.
The result was the launch of the Dragon V2 (no doubt another historical reference) in May 2014, large enough to carry seven astronauts.
Space X conducted the first successful flight test of the new Dragon capsule on May 6 of this year.
Then Musk really upped his game by successfully pulling off the first ever landing of a booster rocket on a platform at sea in April 2016. This is crucial for his plan to dramatically cut the cost of space travel.
Commit all these names to memory. You are going to hear a lot about them.
Musk's spectacular success with Space X can be traced to several different innovations.
He has taken the Silicon Valley hyper-competitive ethos and financial model and applied it to the aerospace industry, the home of the bloated bureaucracy, the no-bid contract, and the agonizingly long-time frame.
For example, his initial avionics budget for the early Falcon 1 rocket was $10,000 and was spent on off-the-shelf consumer electronics. It turns out that their quality had improved so much in recent years that they met military standards.
But no one ever bothered to test them. The $10,000 wouldn't have covered the food at the design meetings at Boeing or Lockheed-Martin, which would have stretched over years.
Similarly, Musk sent out the specs for a third-party valve actuator no more complicated than a garage door opener, and a $120,000, one-year bid came back. He ended up building it in-house for $3,000. Musk now tries to build as many parts in-house as possible, giving it additional design and competitive advantages.
This tightwad, full speed ahead and damn the torpedoes philosophy overrides every part that goes into Space X rockets.
Amazingly, the company is using 3-D printers to make rocket parts instead of having each one custom made.
Machines guided by computers carve rocket engines out of a single block of Inconel nickel-chromium super alloy, foregoing the need for conventional welding, a frequent cause of engine failures.
Space X is using every launch to simultaneously test dozens of new parts on every flight, a huge cost saver that involves extra risks that NASA would never take. It also uses parts that are interchangeable of all its rocket types, another substantial cost saver.
Space X has effectively combined three nine-engine Falcon 9 rockets to create the 27 engine Falcon Heavy, the world's largest operational rocket. It has a load capacity of a staggering 53 metric tons, the same as a fully loaded Boeing 737 can carry. It has half the thrust of the gargantuan Saturn V moon rocket that last flew in 1973.
Musk is able to capture synergies among his three companies not available to any competitor. Space X gets the manufacturing efficiencies of a mass production carmaker.
Tesla Motors has access to the futuristic space age technology of a rocket maker. Solar City (SCTY) provides cheap solar energy to all of the above.
And herein lies the play.
As a result of all these efforts, Space X today can deliver what ULA does for 76% less money with vastly superior technology and capability. Specifically, its Falcon Heavy can deliver a 116,600-pound payload into low earth orbit for only $90 million, compared to the $380 million price tag for a ULA Delta IV 57, 156-pound launch.
In other words, Space X can deliver cargo to space for $772 a pound, compared to the $7,515 a pound UAL charges the U.S. government. That's a hell of a price advantage.
You would wonder when the free enterprise system is going to kick in and why Space X doesn't already own this market.
But selling rockets is not the same as shifting iPhones, laptops, watches, or cars. There is a large overlap with the national defense of every country involved.
Many of the satellite launches are military in nature and top secret. As the cargoes are so valuable, costing tens of millions of dollars each, reliability and long track records are big issues.
Enter the wonderful world of Washington, DC politics. UAL constructs its Delta IV rocket in Decatur, Alabama, the home state of Senator Richard Shelby, the powerful head of the Banking, Finance, and Urban Affairs Committee.
The first Delta rocket was launched in 1960, and much of its original ancient designs persist in the modern variants. It is a major job creator in the state.
Shelby has criticized President Obama's attempt to privatize and modernize the rocket business as "a faith-based initiative." ULA is a major contributor to Shelby's campaigns.
ULA has no rocket engine of its own. So, it buys engines from Russia, complete with blueprints, hardly a reliable supplier. Magically, the engines have so far been exempted from the economic and trade sanctions enforced by the U.S. against Russia for its invasion of the Ukraine.
ULA has since signed a contract with Amazon's Jeff Bezos-owned Blue Origin, which is also attempting to develop a private rocket business but is miles behind Space X.
Musk testified in front of Congress in 2014 about the viability of Space X rockets as a financially attractive, cost-saving option. His goal is to break the ULA monopoly and get the U.S. government to buy American. You wouldn't think this is such a tough job, but it is.
Musk has since sued the U.S. Air Force to open up the bidding.
He became a U.S. citizen in 2002 primarily to qualify for bidding on government rocket contracts, addressing national security concerns.
NASA did hold open bidding to build a space capsule to ferry astronauts to the International Space Station. Boeing won a $4.2 billion contract, while Space X received only $2.6 billion, despite superior technology and a lower price.
It is all part of a 50-year plan that Musk confidently outlined to a venture capital friend of mine two decades ago. So far, everything has played out as predicted.
The Holy Grail for the space industry has long been the building of reusable rockets, thought by many industry veterans to be impossible.
Imagine what the economics of the airline business would be if you threw away the airplane after every flight? It would cost $1 million for one person to fly from San Francisco to Los Angeles.
This is how the launch business has been conducted since the inception of the industry in the 1950s.
Space X is on the verge of accomplishing exactly that. It will do so by using its SuperDraco engines and thrusters to land rockets at a platform at sea. Then you just reload propellant and relaunch.
The concept has so far been successfully tested to an altitude of 1,000 meters (click here for the YouTube video.
Attempts to do this from a live launch have so far failed (click here for that video where they almost made it at and here), but Musk predicts a 50% chance of success in the next test this coming December.
Pull this off, and launch costs will plummet to pennies on the dollar. If Space X can chop payload costs to under $100, compared to ULA's $7,515, that is a savings that even Richard Shelby can't cover up.
Talk about disruptive innovation with a turbocharger!
The company is building its own spaceport in Brownsville, Texas, that will be able to launch multiple rockets a day.
The Hawthorne, CA, factory (where I charge my own Tesla S-1 when in LA) now has the capacity to build 20 rockets a year. This will eventually be ramped up to hundreds.
Space X is the only organization that offers a launch price list on its website, much as Amazon sells its books (click here for that link). The Falcon 9 will carry 28,930 pounds of cargo into low earth orbit for only $60.2 million. Sounds like a bargain to me.
Space X currently has $5 billion in contracts to fly over 50 missions for a variety of private and governmental entities, making the company cash flow positive. This includes a $1.6 billion NASA contract to supply the (ISS).
This no doubt includes an assortment of tax breaks, which Musk has proved adept at harvesting. Elon has been a quick learner with the ways of Washington.
Customers have included the Thai telecommunications firm, Rupert Murdock's Sky News Japan, an Israeli telecommunications group, and the U.S. Air Force.
So when do we mere mortals get to buy the stock? Musk estimates at 12 flights a year the company will earn a 10% return on capital, making it worth $4 billion to $5 billion.
The current exponential growth in broadband will lead to a similar growth in satellite orders, and therefore rocket launches. So, the commercial future of the company looks especially bright.
However, Musk is in no rush to go public. A permanent, viable, and sustainable colony on Mars has always been a fundamental goal of Space X. It would be a huge distraction for a publicly managed company. That makes it a tough sell to investors in the public markets.
You can well imagine that the next recession would bring cries from shareholders for cost cutting that would put the Mars program at the top of any list of projects to go on the chopping block. So, Musk prefers to wait until the Mars project is well established before entertaining an IPO.
Musk expects to launch a trip to Mars by 2025 and establish a colony that will eventually grow to 80,000. Tickets will be sold for $500,000.
There are other considerations. Many employee and early venture capital investors wish to realize their gains and move on. Public ownership would also give the company extra ammunition for cutting through Washington red tape. These factors point to an IPO that is earlier than later.
On the other hand, Musk may not care. The last net worth estimate I saw for him was $13 billion. If his three companies increase in value by 10 times over the next decade, as I expect, that would increase his wealth to $130 billion, making him the richest person in the world.
If an IPO does come, investors should jump in with both boots. While the value of the firm may already have increased tenfold by then, there may be another tenfold gain to come. Get on the Elon Musk train before it leaves the station.
To describe Musk as a larger than life figure would be something of an understatement. Musk is the person on which the fictional playboy/industrialist/technology genius, Tony Stark, in the Iron Man movies has been based.
In the recently released Tomorrowland Disney movie, a Tesla supercharging station features prominently. Elon takes all this in good humor, lending a Tesla roadster to the film producers.
Musk has said he wishes to die on Mars, but not on impact. Perhaps it would be the ideal retirement for him, say around 2045, when he will be 75.
To visit the Space X website, please click here. It offers very cool videos of rocket launches and a discussion with Elon Musk on the need for a Mars mission.
Catching a Dragon by the Tail
This Could Be the Stock Performance
Is Mars the Next Hot Retirement Spot?
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-06-13 01:06:192018-06-13 01:06:19Will Space X Be Your Next Ten Bagger?
Below please find subscribers' Q&A for the Mad Hedge Fund Trader May 23 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: Would you short Tesla here?
A: Tesla (TSLA) is on the verge of making the big leap to mass production, so they're in somewhat of an in-between time from a profit point of view, and the burden of proof is on them. Elon Musk is notorious for squeezing shorts. I would not want to bet him.
Musk has been successfully squeezing shorts for 10 years now, from the time the stock was at $16.50 all the way up to $392. So, I would not short Tesla. Buy the car but don't play in the stock; it's really a venture capital play that happens to have a stock listing because so many people are willing to back his vision of a carbon-free economy.
Q: What is your takeaway on the China trade war situation?
A: The Chinese said "no," and that is positive for economic growth. Anything that enhances international trade is good for growth and good for the stock market; anything that damages international trade is bad for corporate earnings and bad for the stock market. So, the China win in the trade war is essentially positive, but I don't think we'll see that reflected in stock prices until the end of the year.
Q: What do you think about Gilead Sciences?
A: I don't really want to touch Gilead (GILD), or the entire sector, for that matter. We shouldn't be seeing such a poor performance at this point in the market. Health care has been dead for a long time, and you would have expected a rally based purely on fundamentals; they are delivering good earnings, it's just not reflected in the price action of the stocks. I think with no new money going into the market, there's nothing to push up other sectors; it's really become a "technology on and off" market. Health care doesn't fit anywhere in that world.
Q: Do you still like Nvidia?
A: I love Nvidia (NVDA). The chip sector still has another year to go. Nvidia has the high value-added product, and I'm looking for $300 dollars a share sometime this year/next year. The reason the stock hasn't really been moving is that it's over-owned; too many people know about the Nvidia story, which continues to go "gangbusters," so to speak. The chairman has also put out negative comments on short-term inventories, which have been a drag.
Q: Treasuries (TLT) are over 3%. Will they go over 3.5% by then end of this year?
A: I would say yes. Since that is only 50 basis points away from the current market, I would say it's a pretty good bet. So, if you get any good entry points you can do LEAPS going out to next year, betting that Treasuries will not only be below $116 by the end of the year, but they'll probably be below 110. And that would give you a very good high return LEAP with a yield of 50% in the next, say 8 months. By the way, if the Treasury yield rises to 4% that takes the (TLT) down to $98!
Q: Any chance General Electric will be acquired this year?
A: Absolutely not. General Electric (GE) worth far more if you break it up into individual pieces and sell them. Some parts are very profitable like jet engines and Baker Hughes, while other parts, like their medical insurance exposure, are awful.
Q: What do you see about the India ETF?
A: The one I follow is the PowerShares India Portfolio ETF (PIN) and we love it long term. Short term, they can take some pain with the rest of the emerging markets.
Q: What should I do with my January 2019 Gold calls?
A: I would sell them. It's not worth hanging on to here with too many other better things to do in stocks.
Q: Would you continue to hold ExxonMobile?
A: I would not. If you were lucky enough to get in at the bottom on ExxonMobile (XOM). I would be taking profits here. I'm not sure how long this energy rally will last, especially if the global economic slowdown continues.
Q: Is Freeport-McMoRan (FCX) a buy?
A: Yes, but only buy the dip in the recent range, so you don't get stopped out when the price goes against you. Commodities are the best performing asset class this year and that should continue.
Q: How high is oil (USO) headed?
A: I think we're probably peaking out short of $80 a barrel currently unless we get a major geopolitical event. Then it could go up to $100 very quickly and trigger a recession.
Q: Are you looking to buy the Volatility Index here?
A: Buy the next dip, but the trick with (VIX) is buying after it sits on a bottom for about five days. You also want to buy it when stocks (SPY) are at the top of a range, like yesterday.
Q: How long do you think the market will be range-bound for?
A: My bet is at least three months, and possibly four or five. We should start to anticipate the outcome of the midterm congressional elections in September/October; that's when you get your upside breakout.
Q: Is Gold (GLD) not worth buying since Bitcoin has taken over market share from Gold buyers?
A: Essentially, yes. That's probably why you're not getting these big spikes in Gold like you're used to. Instead, you're getting them in Bitcoin. Bitcoin is clearly stealing Gold's thunder. That's a major reason why we haven't been chasing Gold this year.
Q: After the emerging market sell-off, is it a good time to go in?
A: No, I think the emerging market (EEM) sell-off is being created by rising interest rates and a strong dollar. I don't see that ending anytime soon. In a year let's take another look in emerging markets. By then overnight Fed funds should be at 2.50% to 2.75%.
AT&T (T), Verizon (VZ), and the other telecom heavies are in the process of investing $30 billion to make sure that fifth-generation wireless, or 5G, will roll out on time in 2020.
What 5G will do is improve the functionality of IoT (Internet of Things) by 10 times at one-tenth the cost, bringing a 100X increase of functionality over price.
The last time I saw a leap that great was when Intel (INTC) brought out its groundbreaking 8008 8-bit microprocessor chip in 1972. I remember it like it was yesterday.
The news that gravitational waves were discovered, as well as wrinkles in the space-time continuum, was big news in my family. 5G will be of that order.
Of course, we knew it was coming. It was just a matter of when.
I have 11- and 13-year-old girls (I can't help it if the plumbing still works!). Whenever we drive somewhere, we carry out what Einstein called "thought experiments."
They will come up with scientific questions, and I then direct them into finding their own answers through a series of prodding and hopeful questions.
It is much like how the children of royalty were tutored during the Middle Ages.
So they asked, "When will we get driverless cars?" which they had heard about on TV.
I answered in about two years, but that I had friends who run Tesla (TSLA) who already have them now.
And you know the interesting thing they discovered? After two years of beta testing, the cars are starting to develop their own personalities.
Each car has highly advanced learning software. When the mapping software requires one to take a difficult sharp left turn, the vehicle may miss it the first time.
It will then make the next legal U-turn, and then nail that turn every time in the future.
The cars are all programmed to drive like little old ladies. It will never speed, break the law, and always lets other cars cut in front. Over time, some are becoming cautious, while others are getting more aggressive depending on each individual's driving experience.
In other words, experience is turning them into "people."
I asked my daughters, "What would the world be like if everyone had driverless cars?" which will occur in about 30 years, or during their middle age.
They pondered for a moment. Then my older daughter shouted out, "There won't be car accidents anymore!" "Right!" I answered.
"But what will that mean?" I asked.
They puzzled over this.
A few seconds passed. Then it came. "The people who fix cars won't have anything to do!"
"You got it," I replied.
In fact, about 1 million people in the car repair industry will lose their jobs. A small group of vintage car fanatics will survive, much like horse and buggy hobbyists do today.
I pointed out that this is already happening because electric cars don't require any maintenance. You just rotate the tires every 6,000 miles (because electric batteries are so heavy).
I moved on. "Who else will lose their jobs when cars become self-driving?" They hit a brick wall. Then I asked "What else breaks when cars have accidents?"
A few seconds later it came. "People!"
"For sure," I shot back.
Actually, about 35,000 people die in car accidents every year in the United States, and another 500,000 are injured.
This means the demand for doctors, hospitals, and ambulances will go down. Say goodbye to another 1 million jobs.
"So, what else will self-driving cars do?" I was relentless.
My older girl was first: "If cars are driven by computers, it means they can drive closer together." I said, "That was true, but what was the consequence of that?"
The mountain scenery whizzed by. Then they got it.
"There won't be traffic jams anymore."
"Yes!" I blurted out. If a car can drive 70 miles per hour, but only needs to remain one car length behind the one in front of it, that effectively increases the capacity of freeways seven times.
We will never need to build another freeway again. Another 1 million jobs go down the drain.
"What else will self-driving cars do?" I carried on.
They hit a dead end. So, I gave a hint. "What do you see in cities?" After going through buildings, parks, roads, lots of cars, and bridges, I finally got the answer I wanted: "Parking lots."
I then posed the conundrum, "What's the connection between self-driving cars and parking lots?"
Now they were getting into the spirit of the thing. "They won't need them." I replied, "Absolutely."
Self-driving cars won't need to park. They'll just be able to drop you off and drive around the block until you are ready to go home.
This will be economical because after three decades of battery and solar improvements, energy will effectively be free, like air is today.
Oh, and at least 100,000 parking attendants might as well start joining the unemployment lines now.
It gets better.
Entrepreneurs now are developing apps for cars so they never need to park.
In an iteration of the sharing economy, and in a club or membership type format, your car will just drive person to person, selling rides, until you are ready to go home.
Think of it as Uber, without the drivers, that pays you.
Today, parking lots occupy about 15% of the land area of large cities. Self-driving cars will free up a lot of that space for other uses, such as housing and parks.
Then I asked the really big question. "What do all of these changes have in common?"
My 11-year-old picked up on this immediately. "A lot of people are going to lose their jobs!"
"For sure," I bubbled. Notice that every new technology improvement creates a lot of job losses. I went on.
"The trick for you girls is to always stay ahead of the technology curve so your job doesn't get lost, too." This is why I have been sending them to Java development school since they were 8 and 9.
They looked daunted.
And this is what 11- and 13-year-olds were able to figure out. Granted, they were MY kids.
Imagine what Google (GOOGL), Apple (AAPL), and Tesla are doing with this idea. It has become a hot bottom "next big thing." Silicon Valley is now rife with rumors of breakthrough developments and the poaching of staff.
The U.S. military and the Defense Advanced Research Projects Agency (DARPA) are involved in self-driving vehicles in a big way as well, holding regular contests with big prize money and the prospect of mammoth government contracts.
More and more generals and admirals are telling me that the wars of the future will be fought with software.
The bottom line is that things are happening much faster than we imagined possible only a few years ago.
Then my oldest daughter piped up.
"Dad, can I get my driver's license before all the cars are self-driving?" I said, "Sure. What kind of car do you want?"
"A red one."
My first car was a red 1957 Volkswagen Beetle.
On our next trip we will cover gravitational waves, Einstein's Theory of Relativity, and the significance of the clock tower in Bern, Switzerland.
By the way, these girls will be graduating from college in 2026 and 2027 and will be looking for jobs.
"Homo sapiens, the first truly free species, is about to decommission the natural selection, the force that made us," said E.O. Wilson, a Harvard University biology professor.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/John-and-car-image.jpg312553MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2018-05-25 01:05:362018-05-25 01:05:36Where 5G Connectivity Will Take Us
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