Tech Letter Archives

How Neuralink Will Change the World

Founder of Tesla Elon Musk tweeted a few days ago that it would be a “good idea” to bring his four businesses — Tesla, SpaceX, Neuralink, and The Boring Company — under a giant holding company.

Doing this would encourage more talented engineers to work for Musk and allow the four companies to combine human-resources and marketing departments.

Most of you know three of the four, so let me explain to you about Neuralink.

In short, Neuralink Corporation is an American neurotechnology company developing implantable brain-machine interfaces.

You would think this is straight out of science fiction, but mark my words that in our lifetime, we could all be operating digital devices from our heads if Musk gets his way.

Scary as it does seem now, this will probably be the first of many artificial intelligence procedures to infuse humans with more artificial intelligence.

Musk believes humans will go the way of robot hybrid in the future because the natural development of competition is trending in that way and sadly, this direction in humanity is ultimately existential.

Improvements in technology will periodically be announced, but we are nowhere close to the actual implementation of these neuro devices into a human brain let alone the consumer and economic implications to this technology.

As for today and now, we are in the early innings and testing it out on pigs.

Better them and not me.

Neuralink’s dramatically simplified design for an implant that hopes to create brain-to-machine interfaces is a big deal and partly because of the star power backing the project, which can literally move mountains.

The previous design consisted of a bean-shaped device that would sit behind the ear, but now it is the size of a large coin, and it goes in your skull.

I expect the final iteration to be a millimeter wide.

The in-brain device could enable humans with neurological conditions to control technology, such as phones or computers, with mere thoughts.

The other use case is solving neurological disorders from memory, hearing loss, and blindness to paralysis, depression, and brain damage.

The current prototype – referred to as version 0.9 – measures at 23 millimeters by eight millimeters, and has 1024 electrode "threads" attached to it that are implanted into the brain.

It is designed to replace a coin-sized portion of the skull and sit flush so it would be physically unnoticeable. It would be inductively charged the same way you would wirelessly charge a smartwatch or a phone.

The surgical robot, which is programmed to insert the neural threads safely into the brain, was done by US design company Woke Studios.

Woke Studio’s robot would be able to insert the link in under an hour without general anesthesia, with the patient able to leave the hospital right away.

The robot will eventually do the entire surgery – so everything from incision, removing the skull, inserting electrodes, placing the device, and then closing things up.

It will be completely automated.

Test pigs are being used to test the device which offers important insights into the process of inserting a chip into a brain.

The implant sends real-time signals from the pig’s brain whenever it touches something with its snout.

Described as "healthy and happy", one of the pigs was given an implant two months ago, while another pig has dual Neuralink implants, demonstrating that it is possible to have multiple chips in your head at one time.

A third pig has no implant. According to Musk, each of the animals are "indistinguishable" from each other.

Musk also showed a pig that previously had a chip inserted into its brain, but had since been removed, to show that the procedure is reversible without any serious side-effects.

Neuralink’s Breakthrough Device designation by FDA supports Musk’s neuroscience objectives. The startup is now preparing for its first human test case, pending required approvals, and further safety testing.

If and when and if this technology is green-lighted by the U.S. Federal Government, I envision a free for all into this technology from the likes of Facebook, Google, Apple, and Microsoft, and so on.

If you think “tracking” is bad now, then once tech firms are granted access to consumer’s brains, it could open up a pandora's box of moral conflicts of interest as well as an avalanche of revenue opportunities.

Will American society really get to the point where Facebook is selling your “thoughts” to neural advertisers?

It’s scary to think about but that is the direction we are headed down.

If you view this through the lens of big tech, battering down the hatches to get access to consumer’s “thoughts” is the holy grail of access points and revenue flow.

In 2021, humans still need to digest thoughts and carry out functions through fingers into a phone interface.

Getting rid of all that “fluff” and extracting data and behavioral results from the original source are worth multiple trillions of dollars.

Not only will physical devices be useless at that point, it will spawn a mega cloud storage business that is hooked straight to the mind.

An economic analyst can digest how cloud companies like Amazon and Google would rake in the trillions by storing libraries of data that a mind can tap in at any time.

It really is a gigantic step to the computerization of humans - big tech is first in line to reap the profits and literally control our brains.

Welcome to the future – a future where we coexist with artificial intelligence.

December 30, 2020 - Quote of the Day

Tech Letter

“When something is important enough, you do it even if the odds are not in your favor.” – Said Founder and CEO of Tesla and Neuralink Elon Musk

December 28, 2020

Tech Letter

Mad Hedge Technology Letter
December 28, 2020
Fiat Lux

Featured Trade:

(ECOMMERCE AND THE UNIVERSITY SYSTEM)
(AMZN), (APPL), (WMT), (TGT), (SHOP), (APPL), (MSFT), (GOOGL)

Ecommerce and the University System

Tech Letter

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!

December 28, 2020 - Quote of the Day

Tech Letter

“Life is not fair; get used to it.” Said founder of Microsoft Bill Gates.

December 23, 2020

Tech Letter

Mad Hedge Technology Letter
December 23, 2020
Fiat Lux

Featured Trade:

(HOW SILICON VALLEY STAYS AHEAD)
(MSFT), (ORCL), (FB), (SNAP), (QCOM), (TWTR)

How Silicon Valley Stays Ahead

Tech Letter

Northern Californian tech companies stopped innovating because of the monopolistic nature of their current business models.

They keep one principle close to their vest – to crush anything that remotely resembles competition.

This has been going on in Silicon Valley for years and the government still hasn’t taken their finger out to do much about it.

The end result is an ever-growing impoverished U.S. middle class and bleak prospects for their children.

Why does the U.S. government largely sit on the sidelines and turn a blind eye?

If I deploy the concept of Occam's razor to this situation, a philosophical rule that entities should not be multiplied unnecessarily which is interpreted as requiring that the simplest of competing theories be preferred, my bet is that most of U.S. Congress own stock portfolios and these portfolios are spearheaded by the likes of Apple (AAPL), Facebook (FB), Amazon (AMZN), Google (GOOGL), Netflix (NFLX), and of course Tesla (TSLA).

This has come into the open frequently with members of Congress even front-running the March sell-off with their own portfolios like U.S. senator Kelly Loeffler from Georgia selling $20 million in stock after attending special intelligence briefings in the weeks building up to the coronavirus pandemic.

It’s a direct conflict of interest, but that's not surprising for politics in 2020, is it?

It’s also why Congress hasn’t acted on Silicon Valley’s excessive abuse of power.

The government likes to jawbone to the public saying they will make competition a level playing field, but actions show they are doing the opposite.

The Silicon Valley oligarchs are whispering in the ear of Congress and they listen.

Well, what now?

Fast forward to the future – and it was only in mid-September, TikTok — the Chinese-owned, video-sharing phenomenon — was being forced to sell its U.S. operations.

The situation is still pending, and TikTok has asked for extensions hoping to arrive at the next administration.

Given the app’s 100 million U.S. users, this forced divestment by President Trump triggered a delirious auction pitting tech giants Microsoft (MSFT), Oracle (ORCL), and Twitter (TWTR) against one another.

The White House and Big Tech are boiling the free for all down to a combined story of national security and opportunistic capitalism amid unfortunate geopolitical tension between the U.S. and China.

But the ultimatum for ByteDance, TikTok’s Chinese Mainland owner, is more accurately understood as a dark window into Silicon Valley’s utter failure to innovate, and a warning signal of its transformation into a mere protector of long-established turf.

If you don’t have it, claim national security threats, and steal it.

Silicon Valley has long adhered to the motto, “Move fast and break things” – but that was long ago when Steve Jobs was busy making the first iPod and iPhone.

That was a time when Silicon Valley headed by luminaries like Jobs was actually innovating.

Tech has now turned mostly into a digital marketing lovefest with cheap shortcuts and big swaths of the internet corrupted.

The truth is Silicon Valley couldn’t be more corporate and monolithic than it is now, and they use the corporate machine to serve the ends they desire for their shareholders to the devastation of the majority of U.S. society.

Big Tech is just in love with buybacks like the rest of corporate America and the only reason they avoid it now is to appear as if they are in tune with public discourse and not tone-deaf.

I believe that once 2021 rolls around, a floor will be set with U.S. tech because they will initiate a new wave of buybacks.

Huawei, another punching bag of the Trump administration’s tech war with China, is just an externality to Silicon Valley’s inability to innovate.

In remarks to reporters in March 2019, Chinese politician Guo Ping said, “The U.S. government has a loser’s attitude. They want to smear Huawei because they can’t compete with us.”

It’s sadly true that the U.S. has fallen so far behind the Chinese in 5G development that they have opted to scratch and claw back their position through geopolitics.

Huawei not only possesses more 5G-related patents than any other company (some 13,474). It also holds a larger share of standard-essential patents (or SEPs) – about 19% of them to be precise versus 15% for Samsung, 14% for LG, 12% for each of Nokia and Qualcomm, and just 9% for Ericsson.

The writing is on the wall that Silicon Valley is falling behind and that gap is accelerating.

ByteDance produced the hottest new social media platform on a global scale, and Facebook, in typical fashion, responded by brazenly copying TikTok, adding a feature called Reels to Instagram.

Facebook has also tapped the political back channels to encourage the U.S. government to ban TikTok not because it threatens Facebook’s model but because Facebook is concerned about national security.

What a joke.

Don’t forget that Mark Zuckerberg has been attempting to destroy Snapchat (SNAP) for years after CEO Evan Spiegel refused to sell it to Zuckerberg.

The rest of the tech ecosphere has given a free pass to the anti-trust violations because they don’t want to be the next takeout target.

Make no bones about it, Silicon Valley, aided by the Trump administration, is about to do a smash and grab job on China’s best tech growth asset then do the same thing to Huawei’s 5G apparatus.

This cunning maneuver alone has the knock-on effect of not only extending the tech rally in U.S. public markets but increasing the scarcity value and emboldening the Silicon Valley oligarchs.

The de-facto robbing of Chinese tech in broad daylight is overwhelmingly bullish for the U.S. tech sector and that is why no foreign tech player will be able to compete again in the U.S.

So why innovate? Why deploy capital into research and development when you can just nick a foreign company's crown jewel?

Exactly, so innovation does not happen and will not happen.

We, as consumers, have been thrust into the cluster of ever-degrading smartphone apps that offer less and less utility.

But ultimately, even if you hate Silicon Valley at a personal level, it is literally impossible to short them, and now they are resorting to adding foreign companies on the cheap, what other passes will government, society, and corporate America give American tech?

In either case, it’s not for me to judge, and as a technology analyst - I am bullish U.S. tech because love it or hate it, revenue is still growing and relative to the rest of the U.S. economy, they are still growth dominators.

However, one must ponder when these actions will come back to bite, if it ever does. Even though integrity has been sacrificed for profits, 2021 is poised to be the most exciting tech year with the sector usurping an even bigger portion of the broader U.S. economy.

US tech

December 23, 2020 - Quote of the Day

Tech Letter

“A good boss is better than a good company.” – Said Founder of Alibaba Jack Ma

December 21, 2020

Tech Letter

Mad Hedge Technology Letter
December 21, 2020
Fiat Lux

Featured Trade:

(THE BEST WAY TO SUPERCHARGE YOUR TECH PORTFOLIO)
(NVDA), (PLTR), (AMD), (APPL), (OTC:SFTBF), (INTC), (QCOM)

The Best Way to Supercharge Your Tech Portfolio

Tech Letter

Superiority is mainly about taking complicated data and finding perfect solutions for it. Trading in technology stocks is no different.

Investing in software-based cloud stocks has been one of the seminal themes I have promulgated since the launch of the Mad Hedge Technology Letter way back in February 2018.

Well, if you thought every tech letter until now has been useless, this is the one that should whet your appetite.

Instead of racking your brain to find the optimal cloud stock to invest in, I have a quick fix for you and your friends.

Invest in The WisdomTree Cloud Computing Fund (WCLD) which aims to track the price and yield performance, before fees and expenses, of the BVP Nasdaq Emerging Cloud Index (EMCLOUD).

What Is Cloud Computing?

The “cloud” refers to the aggregation of information online that can be accessed from anywhere, on any device remotely.

Yes, something like this does exist and we have been chronicling the development of the cloud since this tech letter’s launch.

The cloud is the concept powering the “shelter-at-home” trade which has been hotter than hot in 2020.

Cloud companies provide on-demand services to a centralized pool of information technology (IT) resources via a network connection.

Even though cloud computing already touches a significant portion of our everyday lives, the adoption is on the verge of overwhelming the rest of the business world due to advancements in artificial intelligence and the Internet of Things (IoT) hyper-improving efficiencies.

The Cloud Software Advantage

Cloud computing has particularly transformed the software industry.

Over the last decade, cloud Software-as-a-Service (SaaS) businesses have dominated traditional software companies as the new industry standard for deploying and updating software. Cloud-based SaaS companies provide software applications and services via a network connection from a remote location, whereas traditional software is delivered and supported on-premise and often manually. I will give you a list of differences to several distinct fundamental advantages for cloud versus traditional software.

Product Advantages

Speed, Ease, and Low Cost of Implementation – cloud software is installed via a network connection; it doesn’t require the higher cost of on-premise infrastructure setup and installation.

Efficient Software Updates – upgrades and support are deployed via a network connection, which shifts the burden of software maintenance from the client to the software provider.

Easily Scalable – deploying via a network connection allows cloud SaaS businesses to grow as their units increase, with the ability to expand services to more users or add product enhancements with ease. Client acquisition can happen 24/7 and cloud SaaS companies can more easily expand into international markets.

Business Model Advantages

High Recurring Revenue – cloud SaaS companies enjoy a subscription-based revenue model with smaller and more frequent transactions, while traditional software businesses rely on a single, large, upfront transaction. This model can result in a more predictable, annuity-like revenue streams making it easy for CFOs to solve long-term financial solutions.

High Client Retention with Longer Revenue Periods – cloud software becomes embedded in client workflow, resulting in higher switching costs and client retention. Importantly, many clients prefer the pay-as-you-go transaction model, which can lead to longer periods of recurring revenue as upselling product enhancements does not require an additional sales cycle.

Lower Expenses – cloud SaaS companies can have lower R&D costs because they don’t need to support various types of networking infrastructure at each client location.

I believe the product and business model advantages of cloud SaaS companies have historically led to better margins, growth, higher free cash flow, and efficiency characteristics as compared to non-cloud software companies.

How does the WCLD ETF select its indexed cloud companies?

Each company must satisfy critical criteria such as they must derive the majority of revenue from business-oriented software products, as determined by the following checklist.

+ Provided to customers through a cloud delivery model – e.g., hosted on remote and multi-tenant server architecture, accessed through a web browser or mobile device, or consumed as an application programming interface (API).

+ Provided to customers through a cloud economic model – e.g., as a subscription-based, volume-based, or transaction-based offering Annual revenue growth, of at least:

+ 15% in each of the last two years for new additions

+ 7% for current securities in at least one of the last two years

Some of the stocks that would epitomize the characteristics of a WCLD stock are Salesforce, Microsoft, Amazon-- I mean, they are all up, you know, well over 100% from the nadir we saw in March and contain the emerging growth traits that make this ETF so robust.

If you peel back the label and you look at the contents of many tech portfolios, they tend to favor some of the large-cap names like Amazon, not because they are “big” but because the numbers behave like emerging growth companies even when the law of large numbers indicate that to push the needle that far in the short-term is a gravity-defying endeavor.

We all know quite well that Amazon isn't necessarily a direct play on cloud computing, but the elements of its cloud business are nothing short of brilliant.

But ETF funds like WCLD, what they look to do is to cue off of pure plays and include pure plays that are growing faster than the broader tech market at large. So you're not going to necessarily see the vanilla tech of the world in that portfolio. You're going to see a portfolio that's going to have a little bit more sort of explosive nature to it, names with a little more mojo, a little bit more risk because you're focusing on smaller names that have the possibility to go parabolic and gift you a 10-bagger.

One stock that has the chance of a 10-bagger is my call on Palantir (PLTR).

Palantir is a tech firm that builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations, and my call was to buy them at $10 after it’s IPO, it's up to $26 and has an easy pathway to $50.

This is one of the no-brainers that procure revenue from Democrat and Republican administrations even though its CEO Alex Karp has been caught on video making fun of the current administration’s leaders.

In a global market where the search for yield couldn’t be tougher right now, right-sizing a tech portfolio to target those extraordinary, extra-salacious tech growth companies is one of the few ways to produce alpha without overleveraging.

No doubt there will be periods of volatility, but if a long-term horizon is something suited for you, this super-growth strategy is a winner and don’t forget about PLTR while you’re at it.