Tech Letter Archives - Mad Hedge Fund Trader

The Future Is Here

The future is here.

No code or low code will bring a raft of new innovative tech companies to market, and we are in the early innings of this transformative development.

What is no code?

No-code is an approach to designing and using applications that requires zero coding or knowledge of programming languages.

This type of software hits us at a perfect time when the home office is beginning to become ubiquitous.

The self-service movement that empowers business users will support the creation, manipulation, and employment of data-driven applications.

If we turn back the pages of history, companies need an army of software programmers to develop even the measliest application.

That was then and this is now.

Fast forward to today and automated technology doesn’t only include cutting-edge industries like automotive cars, but also software on laptops that can be rejigged by individual entrepreneurs.

That’s right, one person with no coding experience will be able to design, develop, and offer a real-life application with meaningful business value without the help of expert programmers.

The research data backs up my thesis with research firms projecting a 23% increase in the global market for this type of technology.

During the pandemic, low-code/no-code tools saw steady growth due to their effectiveness in addressing some of tech’s most complicated challenges.

The essential need to digitize workflows and enhance customer and employee experiences will be a boost to the efficiency of commercial and operational teams.

No-code platforms have evolved from just facilitating mundane tasks to making it possible for a broader range of business employees to truly own their automation and build new software applications with no coding while increasing organizational capacity.

A few risks that larger companies might consider is that even for remote developers building new applications, governance is paramount.

IT staff will need to install guardrails and have those built into low-code/no-code platforms to maintain consistent levels of security across the organization.

Cybersecurity solutions need to be integrated into this workflow by training every employee at the organization on security behavior and using compartmentalization and limited access to prevent opportunities for mistakes.

Hard landings are hard to recover from and some can be crippling to the business model.

For no-code companies, harmonizing workflows is a key requirement for success.

In a low-code/no-code organization, departments should be able to work without silos and communicate freely across functions.

Elevated performance enabled by low-code/no-code tools will mean that the number of useful apps hurling toward the marketplace will be more and merrier than ever before.

Higher performance will no doubt usher in a new renaissance of efficiency and even better performance.

This also puts a 3 or even 4-day workweek squarely in play.

Many of the best tech minds in the world have supported the concept of working smarter instead of working harder.

A low code/no-code standard will allow for these achievements to take place.

The cratering of costs to start and run a tech firm is affected too.

Deploying startup capital to pay for other expenses will make it easier for successful incubation.

This will ultimately mean that this new type of tech company will need to embrace the fusion of IT and business staff, empowering them with composable applications to speed up the time to market for new solutions.

Low-code/no-code, APIs, and other tools are enabling companies to integrate new applications into their existing tech stack in a more seamless manner with a lift-and-shift approach vs. a rip-and-replace.

At the entrepreneur level, individuals will be able to harness the technology to build $100 million companies with a snap of the fingers when it wasn’t possible to do it before.

This is finally a chance for the little guy to recapture their moxie in the vast and sometimes overwhelming business world.

July 22, 2024

Tech Letter

Mad Hedge Technology Letter
July 22, 2024
Fiat Lux

Featured Trade:

(THE EV CONUNDRUM)
(TSLA), (RIVN), (TOYOTA)

The EV Conundrum

Tech Letter

Sometimes tech trends start and stop and then start again.

It certainly feels that way for the EV industry when the Chairman of Toyota Akio Toyoda threw a damp towel on the progress of EVs taking over the world.

The Japanese Chairman told the world that he thought EVs would never account for more than a third of the market and that consumers should not be forced to buy them.

These ideas definitely go against the grain of the liberal democratic order.

Listen to the bureaucrats in Brussels and the left-wing establishment in Washington and it almost seems as if they want to ban oil and gas products.

Of course, the ban is certainly hyperbole, but the green movement towards lithium battery-powered cars has become quite political and partisan.

Akio Toyoda, chairman of the world’s biggest carmaker by sales, said that electric vehicles (EVs) should not be developed to the exclusion of other technologies such as the hybrid and hydrogen-powered cars that his company has focused on.

He said he believed battery EVs will only secure a maximum of 30% of the market – less than double their current share in the UK – with the remaining 70% taken by fuel cell EVs, hybrids, and hydrogen cars.

Mr. Toyoda argued that electric cars’ appeal is limited because one billion people in the world still live without electricity, while they are also expensive and need charging infrastructure to operate.

The chairman also pointed to Toyota’s recent announcement that it was working on a new combustion engine, saying it was important to give engine factory workers a role in the green transition.

Koji Sato, the car maker’s chief executive, last year promised Toyota would sell 1.5 million battery EVs a year by 2026, and 3.5 million by 2030.

Tesla, the world’s biggest EV producer on an annual basis, reported 1.8 million deliveries last year.

Mr. Toyoda’s two cents come after electric car sales have slowed in the Western world slowed in 2024.

I am of the notion that in the short term, all the low-hanging fruit has been plucked by the EV buyers.

To find the next incremental buyer, it won’t be impossible, but that same type of excitement won’t exist.

The truth is that many consumers are still tied to the combustible engine.

On a recent trip to Japan, almost no local drove an EV and I witnessed almost no charging points.

If one of the biggest economies in the world isn’t convinced, then there is still a lot of work to do and I don’t believe that the Japanese will give up gas-powered engines so quickly.

In the short term, the demand weakness in EVs bodes ill for EV stocks like Tesla or Rivian.

Throw in the fact that EVs aren’t cheap and the cost of living crisis is forcing consumers to migrate to necessities which unfortunately doesn’t include a brand new Tesla.

Stay away from EV stocks in the short term and pile into the AI narrative.

July 22, 2024 - Quote of the Day

Tech Letter

“It doesn't make sense to hire smart people and tell them what to do. We hire smart people so they can tell us what to do.” – Said Apple Co-Founder Steve Jobs

July 19, 2024

Tech Letter

Mad Hedge Technology Letter
July 19, 2024
Fiat Lux

Featured Trade:

(FOLLOW THE CELL TOWERS IN TECH)
(CCI)

Follow The Cell Towers In Tech

Tech Letter

I will explain to everyone why the digital revolution is becoming supercharged in the blink of an eye.

Market valuations reflect the state of expected future cash flows in a company.

Under this assumption, some could argue that most big tech companies with staying power are almost a good buy at any price.

No-brainers would include a list of Microsoft, Amazon, Apple, and Netflix.

The global health scare and the carnage associated with it have brought forward revenue and expertise from the tech industry and infused the global economy with more cash.

When you mix that with the Fed playing nice, it sets up conditions for heavy buying in an industry that is going to be king of the global economy anyway.

Tech has been rampant in the first half of 2024 and the brief selloffs we get are only because we are running too hot too fast.

Doing business as we know it has been fast-forwarded by 15 years.

The change took place in a blistering 4 weeks.

The clearest signal of who is really calling the shots in the equity market is looking at which companies are dragging it up.

Technology is shouldering the responsibility of the equity market by outperforming the broader market with many software companies’ share prices higher than before the crisis.

For every Amazon or Microsoft, there is also a Macy’s or JC Pennys showing that this is really a stock pickers market.

We have not only learned that tech companies are critical to our functioning as a society, but that large tech companies will be even more central than ever before.

We are setting up for the Golden Age of tech who are earmarked to capture even more of the broader equity market.

I do agree that currently, the network effect is working in overdrive like a positive force multiplier. The US economy is riding high again, and this cannot be emphasized enough with the US economy printing growth quarter after quarter.

Digital revenue streams will effectively be pumped into every nook and crevice of the digital economy because of current modifications to the business environment.

Tech is destroying literally every sub-sector as we speak.

Take a look at commercial real estate and hotel operators; they have had to fight against the triple whammy of office sharing WeWork, short-term hotel platform Airbnb, and the coronavirus - a lethal three-part cocktail of malicious forces to the “traditional” model.

Any deep-pocketed investors should be cherry-picking every quality cell tower play possible because they are one of the various supercharged sub-sectors of tech.

Obviously, there are other no-brainers like semiconductor chips and certain software companies.

Any long-term investor with a pulse should buy Crown Castle International Corp. (REIT) (CCI) on any and all dips.

They are the largest owner of cell towers owning over 40,000 in the U.S. and the data will flow through these towers juicing the wider economy.

July 17, 2024

Tech Letter

Mad Hedge Technology Letter
July 17, 2024
Fiat Lux

Featured Trade:

(BUYER BEWARE)
(TIKTOK)

Buyer Beware

Tech Letter

Sometimes the best way to become successful at investing in technology stocks is to avoid the black swan or the big disaster.

I hate to say it but investment risk has never been higher.

One question that keeps getting rehashed that I thought I might take time to address is the rise of the TikTok influencer-adviser.

According to a brief Google search, TikTok, known in China as Douyin, is a video-sharing social networking service owned by Chinese company ByteDance.

The social media platform is used to make a variety of short-form videos, from genres like dance, comedy, and education, that have a duration from three seconds to one minute.

Unfortunately, for serious retail investors lately, content has migrated into high-stakes themes like financial education and financial advising giving rise to content that is produced by video creators to get a piece of the financial industry.

Naturally, this has brought down the quality of the financial content on the internet to historic lows simply because most of the content is marginal at best.

These promulgators often preach about their status as “trading gurus” and often leverage the hype of digital currencies to claim they are fully invested in “crypto assets” and urge anyone reading to become one of their new “cult followers.”

They are also usually paid to market a “bulletproof” financial app or certain crypto asset to avid followers without properly disclosing that they are being paid for the advertisement.

This behavior is being encouraged by the TikTok algorithms who order this type of misleading content at the top of searches simply because it gets more hits being a click-bait type of content.

The more outlandish the videos become, gloating about get-rich-quick schemes and 1,000% daily returns, the higher up in the search queries they usually populate when filtered through TikTok algorithms.

These accounts are known as financial “influencers” and post 100s of such videos every month featuring fraudulent success or minimizing the difficulty of profiting through trading and a mix or mash of everything in between.

Even some proclaim to have unlocked the holy grail of trading and “guarantee” 100% returns or your money back.

Another speaking point they like to touch on is how video watchers can “also” afford wealthy lifestyles without having to work, at least in the traditional way.

To dumb down the travails of investing and trading to something easier than pouring a glass of water is a lie.

Many of these novice investors are duped into paying for exorbitant services that are nothing more than promotional buzz offering hyped-up marketing language as specific trading advice.

Unfortunately, US regulators have turned a blind eye to what is happening on this nefarious Chinese platform, and imitators are spawned daily and are certainly incentivized to do so.

While I must admit that regulating this type of behavior on TikTok is incredibly messy, to leave this unchecked will result in massive fraud for the little guy that I try to help.

The justification for ignoring these TikTok “influencers” is because there is even worse cybercrime taking place out there and the content these influencers are peddling is straddling the gray areas of the law.

But it’s not enough, and readers need to understand the heightened risks of diving feet-first into these TikTok polar vortexes where you just get whipped around unknowingly.

Pre-emptively protect your portfolio by avoiding these TikTok trading gurus is the order of the day.

As we enter the back half of 2024, the collapse of crypto broker FTX was a reminder of the large risks associated with investing in an unknown alternative asset class.

The TikTok crypto marketers were largely being sponsored by crypto exchange FTX.

They were peddling FTX’s own digital currency that was made out of thin air.

Anyone trading in this FTX in-house digital coin known as FTT lost most of their money as the CEO of FTX Sam Bankman-Fried was extradited back to the United States and found guilty in court.

FTX’s FTT coin went from $40 at the beginning of 2022 to 80 cents on December 30, 2022, highlighting the dangers of listening to fake crypto “trading gurus” on TikTok pushing FTT coin like there is no tomorrow.

Stay vigilant and happy trading and remember, there is no free lunch in trading.

It’s hard work earning your crust of bread.

July 15, 2024

Tech Letter

Mad Hedge Technology Letter
July 15, 2024
Fiat Lux

Featured Trade:

(AI AND IMPROVED WORKFORCE EFFICIENCY IS HERE TO STAY)
(TSLA)

AI And Improved Workforce Efficiency Is Here To Stay

Tech Letter

Students hoping to become bankers shouldn’t study finance, they should dive into AI programming.

This is the big takeaway from how investment banks are run these days.

Gone are the moments when finance degrees were the hottest commodity, now it is all about generative AI.

Artificial intelligence (AI) could replace the equivalent of 300 million full-time jobs, a report by investment bank Goldman Sachs says.

It could replace a quarter of work tasks in the US and Europe but may also mean new jobs and a productivity boom.

And it could eventually increase the total annual value of goods and services produced globally by 7%.

Generative AI, able to create content indistinguishable from human work, is "a major advancement", the report says.

Silicon Valley is keen to promote investment in AI not only in the United States but in a way that will ultimately drive productivity gains across the global economy.

The report notes AI's impact will vary across different sectors - 46% of tasks in administrative and 44% in legal professions could be automated but only 6% in construction and 4% in maintenance, it says.

Journalists will therefore face more competition, which would drive down wages unless we see a very significant increase in the demand for such work.

Consider the introduction of GPS technology and platforms like Uber (UBER). Suddenly, knowing all the streets in London had much less value - and so incumbent drivers experienced large wage cuts in response, of around 10% according to our research.

The result was lower wages, not fewer drivers.

Over the next few years, generative AI is likely to have similar effects on a broader set of creative tasks.

According to research cited by the report, 60% of workers are in occupations that did not exist in 1940.

However, other research suggests technological change since the 1980s has displaced workers faster than it has created jobs.

Nobody understands how the technology will evolve or how firms will integrate it into how they work.

Lower wages and higher output are a perfect recipe for higher technology share prices and that is exactly what we will get.

Currently, we are experiencing a mild pullback from the AI mania, but that is simply because it got too far ahead of its skis.

I am quite impressed by the price action in a stock like Tesla (TSLA) which executed a major cut to their global workforce to trim costs.

The staff cut of 10% could result in exactly what I mentioned in more output for less pay, but in terms of hiring more workers, they have decided to force less workers to do more.

This type of management decision increases efficiency because it forces workers to work smarter.

It’s certain they will be a major investor in AI chips to outfit their EV cars, and much of this corporate tech business is a feedback loops involving synergies with businesses overlapping.

Tech as a whole is not in trouble, but individual companies will find an imbalanced treatment of their stock.

The AI pixie dust is still strong as many readers bought the shallow dip in Nvidia.

I do believe in the AI hype, and a lot of the price action is skewed toward just a handful of AI stocks.

My advice is to buy AI stocks on the dip and this increased efficiency will certainly filter down into the top and bottom lines.