Mad Hedge Technology Letter
January 4, 2021
Fiat Lux
Featured Trade:
(SPLINTERNET GOES FROM BAD TO WORSE IN 2021)
(AMZN), (APPL), (TIKTOK), (TWTR), (MSFT), (GOOGL), (FB)
Mad Hedge Technology Letter
January 4, 2021
Fiat Lux
Featured Trade:
(SPLINTERNET GOES FROM BAD TO WORSE IN 2021)
(AMZN), (APPL), (TIKTOK), (TWTR), (MSFT), (GOOGL), (FB)
The balkanization of the internet is exploding in the short-term, knocking off the aggregated value of U.S. Fortune 500 companies in one fell swoop.
In technology terms, this is frequently referred to as “splinternet.”
A quick explanation for the novices can be summed up by saying the splinternet is the fragmenting of the Internet, causing it to divide due to powerful forces such as technology, commerce, politics, nationalism, religion, and interests.
What investors are seeing now is a hard fork of the global tech game into a multi-pronged world of conflicting tech assets sparring for their own digital territory.
The epicenter of balkanization is the division between China and the U.S. tech economy with India as the wild card.
This is fast becoming a winner-take-all affair.
Silicon Valley is winning in India due to border conflicts along the Himalayan Corridor.
India took count of 20 dead Indian soldiers felled by the Chinese Army stoking a wave of national outcry against regional rival China.
The backlash was swift with the Indian government banning 59 premium apps developed by China citing “national security and defense.”
The ban included the short-form video platform TikTok, which counts India as its biggest overseas market.
TikTok was projected to easily breeze past 500 million Indian users by the end of 2021 and was clearly hardest hit out of all the apps.
India is the second biggest base of global internet users with nearly half of its 1.3 billion population online.
The government rolled out the typical national security playbook saying that the stockpiling of local Indian data in Chinese servers undermines national security.
China’s inroads in the Indian tech market are set to wane with recent rulings already impacting roughly one in three smartphone users in India. TikTok, Club Factory, and UC Browser among other apps in aggregate tally more than 500 million monthly active users in May 2020.
Highlighting the magnitude of this purge - 27 of these 59 apps were among the top 1,000 Android apps in India.
China dove headfirst into the Indian market with their smartphones, apps, and an array of hardware equipment. Now, that is all on hold and looks like a terrible mistake.
Chinese smartphone makers command more than 80% of the smartphone market in India, which is the world’s second largest.
One of the reasons Apple (AAPL) could never make any headway in China is because they were constantly undercut by predatory Chinese phone makers with stolen technology.
It’s also not smooth saying for domestic Chinese tech as Chinese Chairman Xi reign in the private sector with Alibaba’s founder Jack Ma’s whereabouts unknown as we start the new year.
This is happening on the heels of the Chinese Communist Party thwarting the Alipay IPO in Shenzhen which was posed to become the biggest IPO ever.
TikTok is also being eyed-up for bans in Europe and the United States recently as it constantly curries to Beijing’s every whim by banning content unfavorable to the Chinese communist party and rerouting data back to servers in China.
Chinese tech is clearly the main loser for their government’s “distract its own people at all costs” campaign to shield themselves from the epic contagion of the lingering pandemic.
What does this mean for American tech?
For one, India is strengthening ties with the U.S., being the biggest democracy in Asia, and will be a massive foreign policy loss and loss of face for the Chinese communist regime.
The resulting losses for Chinese tech will usher in a new generation of local Indian tech with Silicon Valley mopping up the leftovers.
Even though the U.S. avoided the carnage from this round of balkanization, the situation in Europe is tenuous, to say the least.
Fault lines will compound the problem of a multinational tech revenue machine and the relationship with France is on the verge of becoming fractious.
The relationship is worsening with the Europeans by a trade deal consummated between the EU and China along with Western European powers such as France, Germany, and Britain looking to add to their tax coffers by taxing big tech companies like Facebook (FB), Twitter (TWTR), Google (GOOGL) in 2021.
This would be a massive blow to not only revenue streams but also global prestige for American tech.
Not only do Silicon Valley leaders see a murky future outside its borders, but digital territories are also getting carved out as we speak domestically.
Amazon (AMZN)-owned Twitch and Twitter have clamped down on U.S. President Donald Trump’s account.
This could quickly spiral into a left-versus-right war in which there are competing apps for different political beliefs and for every subgenre of apps.
This would effectively mean a balkanization of tech assets within U.S. borders and division in 2021 is set to extend itself.
Silicon Valley wants products sold to the largest addressable market possible and that simply won’t happen in 2021.
The balkanization of the internet is now turning into an equally high risk as the antitrust and regulatory issues.
The issues keep piling up, but nothing has been able to topple big tech yet as they lead the broader market out of the pandemic.
Silicon Valley is still subsidized by ultra-low interest rates and quantitative easing by the Fed. If this changes, look for tech to roll over.
Let’s hope that never happens.
“Over the next 10 years, we’ll reach a point where nearly everything has become digitized.” – Said Current CEO of Microsoft Satya Nadella
Mad Hedge Technology Letter
December 30, 2020
Fiat Lux
Featured Trade:
(HOW NEURALINK WILL CHANGE THE WORLD)
(TSLA), (SPACEX), (NEURALINK), (BORINGCOMPANY)
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.
“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
Mad Hedge Technology Letter
December 28, 2020
Fiat Lux
Featured Trade:
(ECOMMERCE AND THE UNIVERSITY SYSTEM)
(AMZN), (APPL), (WMT), (TGT), (SHOP), (APPL), (MSFT), (GOOGL)
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!
“Life is not fair; get used to it.” Said founder of Microsoft Bill Gates.
Mad Hedge Technology Letter
December 23, 2020
Fiat Lux
Featured Trade:
(HOW SILICON VALLEY STAYS AHEAD)
(MSFT), (ORCL), (FB), (SNAP), (QCOM), (TWTR)
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