The markets are looking for any excuse they can find to bring us into the long expected next recession. There is no better proof of that than yesterday’s bizarre news after Amazon’s earnings call.
Amazon outperformed expectations on every level. Every level. Amazon has been in a freefall since the end of the 3rd quarter of 2018 – for no obvious reason beyond a vague sense of dread at the veiled threats of President Donald Dump.
Here is the lowdown. Amazon has:
Led the way in voice devices all the way and put more Alexa devices in the world than any other company by a huge factor
AWS revenue grew by 45% – making them even more dominant in this increasingly important space
Amazon is making serious in roads into healthcare, travel, and shipping (thus reducing dependence on the USPS)
Amazon announced that in 2019 they will be putting more focus on investment in infrastructure, development, and hiring
Amazon is a world leader in AI, automation, and other technologies that are changing our world
I can go on, but I shouldn’t have to. On the challenge front, Amazon faces competition in India and China as well as regulation and economic growth issues in the same. Yesterday’s call mentioned that and mentioned the increased focus on investment – and then the shit hit the fan – Amazon briefly jumped to 1750 at the close of the market and then began a bot induced whipsaw between the 1630s and the 1730s – this was nothing more than AI bot induced fervor with hungry traders taking profits or selling in FOMO as a completely imaginary FUD took control of the stock.
The reality, is that Amazon is growing at an incomprehensible rate and expanding their reach into new sectors, new markets, and new worlds (virtual). Back in September, major investing banks were saying that any price under $2200 is too low. I still stand by that. Amazon is trading at more than 30% below value right now.
There are only three reasons Amazon could have fallen 1) irrational bot/trader interaction 2) information we don’t have access to 3) a self fulfilling recession is on its way.
I have a number of predictions for 2019. They are worth considering in any event. First a fun one – I think that in 2019, celebrity stock and crypto traders will become the new celebrity chefs. In the past most notorious traders have either been criminals or niche market – I think this year they will go mainstream. Think in terms of Rachel Ray, Anthony Bourdain, and other chefs who made the leap to stardom from the nineties to the oughts.
Alright – moving on:
1) While it sounds hard to believe in light of the ridiculous predictions, the boom and the bust, and the bear market of 2018 – I believe that Bitcoin will end 2019 worth more than $100k per coin. Adoption is happening, regulation has not killed it, and bitcoin retains the advantage of being the most useful of all cryptocurrency – and the world financial system needs it.
2) The frangmentation of the internet into national and regional separate internets will continue. We will see distinct American, European, Chinese, Japanese, and African internets emerge – it’s my belief that the I2I communication this creates (internet to internet) is going to be where the most remarkable autonomous A.I developments take place in 2019.
3) The #metoo and #blacklivesmatter movements will grow in strength – large numbers of established white dudes will be taken down for offensive and toxic past behaviour. This will lead to a bit of a backlash and two distinct movements by white groups – one inclusive which attempts to show that not all white people are bad and one that is reactive and pushes back with negativity, hate and fear.
4) Impeachment proceedings and formal charges lie ahead of Donald Trump. To distract and rally his base he will either use Taiwan or Mexico to create a distraction.
5) Marijuana will be decriminalized in the USA – this will create massive debate about those incarcerated for marijuana offenses
6) The stock market will rally in the first two quarters of 2019 breaking previous all time highs and then crashing hard and fast in the third quarter.
7) Crypto markets will skyrocket and the price of Gold will approach $2k USD again in 2019. Both Facebook and Amazon will implement their own cryptocurrencies and start gradually accepting Bitcoin for payments.
8) Amazon share prices will soar going past $1.5 trillion USD as the full scope of Amazon’s investments in health, hospitality, and transportation become known.
9) A centrist third party will appear bridging the gap between the left leaning democrats and the fascist leaning Trumpists. They will field a viable third party candidate that appeals to broad swaths of both red and blue voters.
10) The automation of fast food, self driving cars, and other A.I. driven worker replacement strategies will accelerate in 2019 leaving record numbers of low skill workers with nothing but low paying options for employement.
As a geek, a sci-fi lover, a futurist, a technology lover, a person with a fascination for humans and what makes us tick, and an investor – I am constantly on the lookout for what the next big thing, the next big disruption, or the next human-culture shattering event may be – so reading Shaping the Industrial Revolution by Klaus Schwab was a no brainer.
Klaus Schwab is the Founder and Chairman of the World Economic Forum. He wrote a book in 2016 called the Fourth Industrial Revolution – which was one ofthe first books to clearly show just how sudden, powerful, and life chainging the technology we see around us every day is. We are in the midst of the most dramatic change our species has ever encountered. To put things in perspective – let’s take a step way back. This summary is not in the book but is helpful for understanding it.
The Agricultural Revolution (12,000 years ago) turned our species from nomadic hunter gatherers to farmers and allowed for massive population growth. The Scientific Revolution (500 years ago) gave us the tools to study and change the world around us based on what we learned. The First Industrial Revolution (200 years ago) opened the world up to us and allowed us to explore, settle, and kill each other on scales never seen before. The Second Agricultural Revolution (100 years ago) allowed for mass production of food and huge expansion of population. The Second Industrial Revolution (100 years ago) gave us mass manufacturing and electricity. The Third Industrial Revolution (50 years ago) gave us computer, semi-conductors, and the internet. The Fourth Industrial Revolution (now) is changing everything across every aspect of our lives. Schwab’s book identifies the following as being the key technologies of the new world we are entering.
1) Extended Digital Tech including quantum computing, blockchain and distributed ledger tech, the internet of things, and big data crunching algorithms.
2) Changing the Physical World with artificial intelligence and robotics using advanced materials, 3-D printing, and and drones.
3) Alteration of Human Beings through biotechnologies, neurotechnologies, and through virtual and augmented realities.
4) Integrating our environment through clean energy, storage and transmission. Also geo-engineering on both Earth and other planets as well as space technology itself.
After reading this book – it becomes clear that the most immediate threat is that of social upheaval as the need for human workers becomes less through automation, artificial intelligence, and (to some extent) the problem of what to do with all the people who will be using up the resources of the planet. The intent of this book was to both show the coming technology and to let stakeholders know what they can do to make sure that the future is based on a human rights framework that has important human values built into it. We are moving very quickly and the ground we are covering is totally uncharted. We will make many mistakes. Schwab is trying to help us make less of them.
This book dovetailed nicely after reading Andrew Yang’s The War on Normal People – one thing is for sure. Automation is coming and your job is probably not going to last very much longer – no matter what your job is. We are all walking around with super computers in our pockets that are recording data all the time – that data is being used for many purposes. The way that data is used and sorted is key to what happens to us in the future – there are positive and negative outcomes attached to that. Blockchain is much more than jsut cryptocurrency and Bitcoin – it is a revolutionary tech that will change the way business gets done. In fact, it already is. The internet of things on the other hand is one of the ways that our pocket super computers and the quantum computers of the future will be gathering data about us and making decisions for us. Our shoes, clothing, cookware, and more will be gathering data – not just our phones, TVs, cars, and refrigerators.
I was pretty aware of automation technology in the form of robots and A.I. The idea of advanced materials and automated 3-D printing sort of blew my mind, however. Imagine every city or every house having a Star Trek style fabricator where you simply say ‘computer make a pork chop’ or ‘computer make a picture hook’ or ‘computer make a new part for my VW van’ and it either appears in the 3-D printer several minutes later or arrives by drone a few hours later. Not science fiction any longer. It’s happening and it is eliminating the need for warehouses, trucks and truckers, and stores on a massive scale.
The next section on biotechnology, neurotechnology and altered realities also was a bit of an eye opener. Essentially, I’ve been thinking of gene editing for a while now as a way to cure disease and fix our problems – I’ve read about the ideas of giving us new abilities and physical features but never really considered it viable – now though – these things are happening. The biggest opportunity/threat here is the integration of our minds/bodies with advanced A.I and robotics – we will, very shortly – almost certainly stop being humans as we have been. We will be something different. The perfection of artificial and augmented realities will also expand our world to horizons far beyond what that of Columbus and the colonization of the Americas did.
Finally, there are the ways we are changing the planet and our opportunities in space. We are and have been for a long time – destroying our evnvironment, wiping out the biodiversity of the planet, and giving ourselves the illusion of wealth while we destroy the only true wealth we have. The advent of the fourth industrial revolution has given us tools for accelerating this process or alternatively for reversing it. In addition the death of fossil fuels and the birth of clean, renewable energy are opportunties that can make the world a better place or a worse one. Finally, there is the development of space which the book touches on a little bit.
I bought this book to learn more about the technologies. It covered that but mostly the book was about what we as individuals, companies, governments, or individuals can do to deal with the change and to help bring it about in a way that benefits human values. I appreciated this information. I recommend that anyone read this book – it’s readable but not easy or particularly fun. It will educate you. It was compiled from over 200 individuals contributing information over an 18 month period.
This morning before the closing bell of the stock market, I released the first baseline number for the Vagorithm Index. Today on October 24, 2018 it was 381.33(+1.64) with the number in parenthesis being my societal volatility index number. On scale 381.33 is our baseline for societal change and and radical disruption. A lower number means that innovation and change are happening at a slower pace, a higher number means that change is happening at a faster pace. The volatility number is the daily deviation from a steady technological growth rate. I do not use the Dow Jones Industrial Index or any other index in determining this value. Instead, I look at the rate of change and appreciation of companies that are working within the seven sectors that I believe are shaping the future around us. We do not see how rapidly the world is changing – but from day to day – the rate of change is faster than the annual rate of change less than a hundred years ago. The sectors below are the sectors which are shaping the future.
1. Bioengineering and Genetic Engineering – At the moment, this sector is moving relatively slow in comparison with others because of the important regulation that constrains what would otherwise be volcanic growth. Our ability to change life itself is moving faster than the regulation can keep up. Not only does this affect things like disease and aging but also the ability to grow food, to repair(or destroy) the environment, and much more. Not only can we change the world, eventually when regulations are satisfied or bypassed, we will be changing ourselves and will no longer be Homo Sapiens of any kind.
2. Distributed Ledgers and Blockchain – IBM is doing amazing work with blockchain and food production – as well as many other sectors. While the jury may seem to be out on Bitcoin and other cryptocurrencies – players behind the scenes are building the future of finance, ownership, and wealth. Do not underestimate the power of distributed ledgers to topple governments and corporations.
3. Renewable Energy – our world was built on fossil fuels. It was fossil fuels that gave the greatest wealth and power to men and nations. Now, like it or not, they are being phased out. Renewable energy on a massive scale is coming and it will being new power structures, new ways of living, and new problems.
4. Artificial Intelligence (and Augmented Intelligence). We already walk around with assistants in our pockets that know everything. The interfaces are getting better. Our brains no longer function like the brains of our grandparents but we still use the same structures – not for long. And then there is the singularity – A.I. will surpass our ability to do everything – and will make everything happen much much faster than it already is.
5. Industrial and Labor Automation. In all liklihood, you are going to lose your job. We are all going to lose our jobs. Things will become cheaper and information will become more expensive. Our entire concept of economics will have to undergo a radical transformation.
6. New Materials. Nano-carbon fibres, lab grown meat, more conductive materials, better building materials. A.I. and automation along with renewable energy sources and bioengineering will change the materials we use in almost every instance. Legacy materials will be like hand made woks, a luxury or oddity – not the norm.
7. Virtual Reality, Artificial Reality, Augmented Reality, Combined Reality. In the not too distant future, you won’t have to put on a headset to enter a virtual world and there is a pretty good chance that the virtual/artificial/augmented world will spill over into the ‘real’ world. Will your self driving car be able to crash into the giant billboard – no, because it won’t physically be there – but it will be there – as real as your cousin that you have only seen on Facebook for the past ten years.
These are the main factors that I’ve incorporated into the Vagorithm. There are a couple of other factors that seem important to me. Is this a financial tool? Maybe. Over time you may be able to use it to chart good entry and exit points for the stock/forex/crypto markets – but my main purpose in creating it and sharing it, is to be able to quantify the level of future that exists in the now over time. For what it’s worth – since I began keeping track of these factors (shortly after the election of 2016) – the level of innovation has decreased by 42%. So, by my reckoning – right now – we are in a period of doldrums when heavy resistance to technological and societal change is feeling it’s power. Ignorance is at its most powerful level since the McCarthy Era when people wore blinders and feared what they didn’t understand. The good news is – when the forces of ignorance are defeated – the level of change is going to be almost blinding in its speed.
Every good investor knows that there are two keys to success in the stock market – luck and knowledge. The two are intimately connected – the luck portion comes down to being in the right place at the right time so that you can discover the knowledge. There’s a lot you can do to increase your luck – most of it consists of research, finding great news sources, being part of social networks that share infromation about the stocks or investments you are interested in, and generally just doing the work. There’s truth to the statement that luck is where opportunity meets preparedness. When you do the work, the research, the networking – it increases your odds of being lucky.
So…knowledge often leads to luck and even if it doesn’t lead to that big lucky break – you are more likely to do better in the market if you are an informed investor than if you are not. Although, lately, I’ve noticed some very disturbing patterns that require me to give some words of warning about the knowledge you gather and what you do with that knowledge.
Investors are being mentally manipulated and they don’t even know it. Many of the major news analysts, stock pickers, chartists, and news sources are being used to drive market sentiment up or down so that institutional investors can sell at ridiculous highs and scoop up bargains at incredible lows. I’ve been watching for a while now as articles on Seeking Alpha, CNBC, Investing.com, Motley Fool, Reuters, Zacks, and Business Insider all seem to be lining up with either a very negative story or a very positive story – which is then picked up and echoed by the mainstream media, thousands of twitter accounts, and other social media. The interesting thing is that these narratives usually come before earnings announcements, dividends, or other important news – and – here’s the kicker – the news is usually wrong.
I’m aware that this isn’t a new phenomenon – but the size and scope of it are much broader than previously and there is a new and explosive market dynamic which didn’t used to be an important factor. The new dynamic is the rise of instant phone trading – Robinhood alone has millions of inexperienced investors who don’t act on fundamental or technical details but instead act on their ‘gut’ and make decisions on whims. These investors are easily manipulated to buy and sell themselves out of whatever money they have put in the market. AND – and this is very important – most of the institutional big money is now being controlled by bots, roboadvisors, and algorithms – these programs are able to execute millions of trades per second.
So, let’s say IBM is about to make a big announcement that earnings were far greater than expected. Insiders want to be able to purchase shares as cheap as possible prior to the announcement. They pay a small army of analysts and financial writers to express negative opinions about IBM in the weeks running up to their earnings announcement. That negative message is then disseminated to the media, the inexperienced investors, and the public. It is amplified by the social media accounts. The gut/whim investors feel the negative force and dump IBM. The robos, algos, and bots then see this trend of IBM dumping – they follow suit. The price tanks – more negative press follows.
A few honest analysts see the negativity and call out the bad news. They generally are ignored. The insiders scoop up shares. The announcement is made. Everyone talks about what a surprise the events were. The price goes up and up.
The market has been mentally manipulated. No laws were broken. Opinions were only presented. Analysts are allowed to be wrong. The narrative changes. Wealth has shifted from the bottom to the top – again.
Do your own research my friends. Learn both technical and fundamental analysis. Look at the financials. Buy into great companies and hold. Don’t believe the hype. Good luck!
I know this week in the stock and crypto markets has been difficult for many people. I’m not one of them. My stock portfolio and my crypto portfolio both lost quite a bit of value over the past month – this week was more of the same. I feel good about every decision I made this week – with one exception – after taking sharp declines in my shares of TVIX, I sold a little above break even and missed 80% growth the past two days…in this case, I let my fear of losses outweigh my desire for gains. And, let’s be honest – I was drinking the kool-ade, I was mostly believing the narrative that the markets would simply keep going up and up and that the crash would come sometime in late 2019 or 2020.
The pullback hit a lot of the rising tech stars of 2018 the hardest. Yext, AMD, Square – along with some old favorites like Ali Baba, Amazon, Google, Netflix. Oddly, Tesla didn’t suffer much, maybe because a bottom was already in. McDonalds and Starbucks both weathered the storm nicely, with both companies actually taking gains in a sea of red. Gene editing, industrial automation, electric self-driving cars, and marijuana stocks all took hard hits.
With all the blood in the equity markets, I thought cryptocurrencies might stage a rally but there was some news timed just right – Gemini, the crypto giant created by the Winklevoss Twins, was denied their bitcoin ETF, again by the SEC. So, crypto dropped significantly.
At this point, I”m grateful to crypotcurrency for making me a better investor. Yes, my investments are down by large margins compared to a year ago, but bitcoin and alt-coin losses have made it possible for me to suffer 20% losses (or 90% losses) and not lose my head. I’ve seen the massive volatility, the rise and fall of shares and all of that has brought me back to the fundamentals. Invest in companies for the long term. Find quality companies with quality management. Watch for buying opportunities. Let winners run. Ditch losers early. Take profits when you can.
The hardest part of this week was controlling the urge to cash in my savings and invest it in more shares of Amazon, Square, AliBaba, and Yext. I’m still bullish on IBM, but sold most of my shares a few weeks ago at the highs. My investing goal right now is to take enough profits to step out of my margin account. This week demonstrated the danger of margin – luckily, I avoided a margin call, but essentially a margin call would have meant 2x the loss.
I’m still drinking the Kool-Ade, by the way. I think the markets are going to rally through the next 12 months with a couple little down turns. I’m hopeful that we’ll see a bitcoin/crypto rally in the next few months as well. The market is going to come down – but the policy makers have enough control at the moment to keep it bouncing back. The range on that is narrowing, however.
My strategy moving forward is to continue scooping up quality companies at bargain prices. I don’t think that Amazon, IBM, Editas, AliBaba, or Square are going anywhere but up from this point. I’m calling this the AIEAS strategy. I live near the town of AIEA, Hawaii. It’s the only U.S. city with no consonants.
For my consonants, my crypto strategy. Bitcoin (BTC), Cardano(ADA), Litecoin(LTC), Digibyte (DGB), Ethereum Classic (ETC), and Ripple (XRP) – or BALDER.
I’m not a classic conspiracy theorist, but I do think that there are great powers pulling the strings behind the scenes. We see some of what they are doing, but most of it is obfuscated. I believe that this past week was a test balloon to see how markets would react and what they could make them do. Yes, rising interest rates, yield curve, inflation, and more were at play – but the bottom line is – nobody that I’ve heard or read, has given a compelling arguement for why this massive crash happened – there was no obvious catalyst. More crashes will come and more bull runs. The invisible hand is at play here. We don’t know what it is heading towards, why it is making the moves it is making, or when they will happen – only that they will happen.
So, my AIEAS BALDER strategy is designed with that in mind. Quality companies and crypto projects. The bulk of my investment will be in Bitcoin and Amazon. They aren’t pure safehavens, but they are the best we have at the moment.
Fact 1: Share prices keep climbing and indexes keep hitting new all time highs
Fact 2: Past results do not guarantee future returns
Fact 3: If the price of something rises but the underlying value doesn’t increase, then the unit of monetary measure has actually decreased in value
Fact 4: As the value of the monetary measure decreases, the price of everything will rise (inflation)
Fact 5: Price and value will balance against monetary measure unless markets or currency are being manipulated with hidden actions
And now let’s get the bullshit out of the way:
BS 1: Trade wars benefit economies overe the long term
BS 2: Free markets need regulation
BS 3: Interest is ‘free’ money
BS 4: Fractional reserve creates ‘new’ money
BS 5: Equity markets can keep moving upwards indefinitely
Whew. Now that we’ve got all that out of the way, I’d simply like to point out that there is some serious bullshit going on with the United States equity markets and economy right now. Example one would be the SEC announcing after the close of trading on Friday that they were suing Elon Musk and Tesla – and then Tesla, Elon Musk, and the SEC agreeing on a settlement before the open of trading on Monday morning. This is some BULLSHIT – here’s why: the net result of all of this was to create an astounding arbitrage opportunity for massive institutional money that shifted profits from main street investors into institutional coffers. Mom and Pop investors had no opportunity to take part in this armed robbery – only to be the victims of the entire fiasco. Example 2: the fake news and FUD around the Canadian NAFTA deal and once again – the making of an announcement during closed markets which allowed insiders to profit and outsiders to lose.
Here’s what I’m getting at. The current US administration is manipulating the markets on a scale never seen before to generate massive profits for insiders. The timing of tweets, deal announcements, controversies – all of this has been carefully orchestrated to create the biggest ripoff in world history. Every day there is more evidence that this administration is robbing Peter and Paul to pay Donald and friends. Here’s what is happening: they are playing a penny slot machine and making the public into the punters who keep feeding dollars into it. Penny slots work like this – if you bet a penny, you might win 50% of the time. If you bet ten pennies your odds of winning go up to 75% of the time but the losses are heavier when you lose – so you win a penny, win a penny, lose four pennies, win a penny…and the net result is that you have won three out of four pulls of the handle but you actually lost a penny out of the deal – but you don’t notice because you still have pennies to lose – so you are winning, winning, winning – but suddenly you are out of money but as a ‘winner’ you know that you can make it back so you put more in (more on= moron) and the cycle continues until you have to go find a better job.
That is what is happening with US monetary policy, trade deals, the US equity market, and more. Is it a coincidence that Donald Trump is a casino owner? He knows that the reason the casinos are filled with penny slots is because penny slots are where the most money gets made. He and his buddies are bleeding all of us dry. You, the one reading this, might think he is on your team – but unless you are a corrupt billionaire oligarch – he isn’t on your team – he sees you as his mark. Ask the people of Atlantic City what he did to them? Here’s a great article about that:
It’s actually mindblowing how stupid we (collectively) are. Everything he has done and continues to do makes perfect sense if you look at him as what he is – a guy who is out to make money for himself and his friends – and his friends are only valuable to him as long as he sees a way to make a buck off of them. Like no other President before him, he has used and continues to use his presidential powers to make money and to create profit. He has spread out like a virus in the various departments and agencies of the United States government – while we watch distractions about immigration he filled the courts with his people. While we watch trade wars he reduced the tax burdens of his billionaire class. While we stare at election results and confirmation hearings, he takes control of the tiny capillary branches of government that make larger seats of power irrelevent. This is death by a million paper cuts.
The markets go up and up and up. Your 401k is worth more than ever. Except it’s not. Inflation is rampant and being hidden. You’ve noticed that your dollar buys less, but you don’t want to think about it. It buys a lot less but you don’t want to think about it. Those markets are going to keep rising and your dollar will keep going down…win a penny, win a penny, win a penny….and where did your money go? But it’s not that bad…it’s okay…things are prosperous and you just got a raise…and everything is so cheap on Amazon…a smart microwave for only $69!
The thing is…that microwave isn’t $69. It’s more like $1000 in labor, costs, material, shipping, the technology cost, the cost of running the companies that make it…so where is the other $931? That’s a good question and it’s one we might ask of the economy as well. Where is all this money in the markets coming from? How is it possible that the markets keep going up and up and up?
Nearly ninety years ago, prominent economist Irving Fisher exclaimed joyfully that the stock market had reached a new permanent plateau – at the time – Americans had taken on more debt than ever before to enjoy the benefits of nearly a decade of a booming economy. The same conditions were in place a decade ago before the 2008 financial collapse. They also exist now. Fisher and the talking economic heads we see today…all of them exuberant about the rising tide of success and winning. Win a penny, win a penny….
“After witnessing nearly a decade of growth, most economists, investors, and captains of industry believed that the market’s natural direction was up. The beginning of the crash struck them not as a sign of financial doom, but as an opportunity for bargains.” – http://time.com/3207128/stock-market-high-1929/
And then, on October 24, 1929 – the unthinkable happened. The markets went down and people bought. They went further down and people bought more. They crashed and people bought more and then they went into panic. Suicide, bank runs, inflation, madness.
So, all of that is something to think about. Now, where does that extra cost of the microwave come from? It comes from all the debt you and I are carrying. Americans are more indebted than EVER before. Our credit scores are higher than ever before and the amount of debt we carry is higher. The stock markets are higher than ever before. The markets are creating the illusion of complete chaos – but never before has there been as much insider regulation, insider knowledge, and orchestrated heists – this is the most controlled market in the history of the American stock markets. While it gives the illusion of chaos – it’s no more chaotic than the penny slot machines that generate billions of dollars in revenue for casinos. There is nothing random or chaotic about it. It’s a scam and if you believe the marquis in front of the casino that declares “Double Your Paycheck” then I’ve got a stock I’d love to sell you…
(full disclosure: I’m investing in this market just like everyone else…I love slot machines even if I recognize they are rigged against me)
I’m excited about a couple of sectors right now…I think that a couple of them are going to change our world before we even notice that our world has changed. I’m not sure which of these will hit – if any – but I’m putting the little bit of speculative investment money I have on these bets.
1) Industrial Automation. These two words sound simple but they represent some of the most complex changes in the history of human civilization. The industrial revolution changed the face of the globe. This was a massive shift in human civilization as humans went from hand produced items in the late 1700s to items produced by chemical, mechanical, machine, and factory production about sixty years later in the 1830s and 1840s. Everything changed and it changed because the way we make things changed. And then the second industrial revolution took place from the 1870s to the 1910s bringing railroads, electrification, telegraphs, sewage systems, and road systems. The Third Industrial Revolution was the digital wave. Now, I believe we are on the cusp of a Fourth Industrial Revolution – which can be summed up with the two words I started with – Industrial Automation. Artificial Intelligence combined with advanced robotics and machine learning are eliminating human beings from the production process. Not only the production of goods, but also the production of food, the driving of trucks and cars, legal work, medicine, and more. All the industry that has been created in the past 250 years is on the edge of running itself. In ten years, we won’t recognize most of the jobs that the labor force will choose from because most of the old jobs will be gone. Three companies that I have my eyes on are Brookstone Automation $BRKS Hollysys Automation $HOLI and ABB Ltd $ABB.
2) Gene Editing. There are already parents paying to have genetic disorders corrected in unborn children or even picking the sex of their future child – that’s old news. The near future of gene editing is much more sci-fi and it’s coming very quickly. Gene editing and splicing allows for the repair or replacement of faulty genes – and on a purely crazy note – might even allow for defeating the debilitating effects of aging. I’m not saying people will be able to live forever – but they may soon be able to live their lifespan without their bodies falling apart on them. Not to mention genetic disorders will be able to be fixed in living patients. They might even be able to turn a switch that would turn off the hair that grows on my back and turn on the switch for hair on the top of my head. There are a lot of companies working in these areas but I’m watching CRISPR Therapeutics AG $CRSP, Editas Medicine $EDIT, Intellia Therapeutics $NTLA and Sangamo Therapeutics $SGMO
3) Electric Cars. The world is going to go electric. Elon Musk saw it and unfortunately, he may have fucked himself and Tesla Motors for a while – but I still believe his company will pull through – still, I’m not putting my money there. Instead, I’m looking at Volkswagon$VWAGY, GM $GM, and Chinese upstart NIO $NIO. While the electric cars themselves are going to be taking the world by storm – the components and materials they require are also worth looking at – lithium and cobalt for batteries, new poly and nanofiber materials for bodies and tires. These are not going to be your grandfather’s Oldsmobile…and going back to industrial automation – they aren’t going to be produced on human assembly lines. Also, they will have self driving technology – Tesla already has it, VW isn’t far behind and GM is spending huge amounts to get there. Google and UBER are already running their cars – and it won’t be long before Amazon jumps in the game. Amazon is definitely going to make a car – they’ve just announced an auto enabled Alexa – the cars are next.
4) Cryptocurrency is coming back. If you haven’t already BUY BITCOIN – you won’t regret it. You may have to wait a couple of years – but it will become the defacto reserve currency if not the official reserve. Tokenization of major industries may or may not happen but block chain finance is happening and there is no going back. Overstock $OSTK and Square $SQ are the two main crypto plays I see in the stock market. IBM $IBM is the number one blockchain play that I see – not to mention a company that is rapidly developing artificial intelligence solutions, cloud computing and storage, and quantum computing.
5) Marijuana stocks (speaking of Elon Musk…)These are pure speculation at this point. There are some interesting prospects but the wild bubbles are too hard to pin down. Personally, I like Cronos Group ($CRON) and Neptune Wellness ($NEPT) but this is anyone’s guess…I’ve stayed away from Tilray and bought a little bit of Canopy Growth but these are like putting money on zero and double zero on a roulette wheel….nice payout if they hit. No payout for Elon’s hit though….
So there you have it…that’s the future I see. If a friend asked me which three companies to invest in out of the whole market my advice would be Amazon, IBM, and AliBaba – Everything else is a gamble but I feel like those three are the literal future of everything – but for you, dear reader, I suggest that you recognize that past results do not guarantee future returns and that this is not financial advice but only an opportunity for me to suggest where you might find some value if you do your own research.
I read something the other day that was very interesting. It was talking about how the trade war and tariffs and political scandals that should be rocking the market daily – simply aren’t. The reason, this article said, was that the money in the market which was scared or nervous had already left.
Think about that for a second.
It means that the money that is still in the market is either sure that the markets will recover from negative news or that it is not concerned with negative news and holding on with a longer term perspective. I’d like to offer a different and much more dangerous perspective: the violent rises and falls of the stock markets since Spring of 2018 have made many investors more gun-shy about losing out on gains following dips, than on losing out on dips. It means that the risk tolerance for the market as a whole has gone much higher. Personally, I think that the Robinhood App and the violent rise and fall of Bitcoin have a lot to do with it.
Robinhood and Bitcoin in tandem have brought an entire new generation of investors into the markets. I remember hearing a seasoned trader in January say something like “I don’t know where this volume is coming from, but these traders are absolutely stupid” because the conventional rules were being broken by a large number of traders.
Let me break it down. Bitcoin bubbling in late 2017 and early 2018 brought millions of mom and pops, college kids, mechanics, builders, waiters, house cleaners, and other non-traditional investing types into an ultra-high-risk trading environment where dreams of becoming debt free, financially independent, or filthy rich were born and crushed. For those who took part in the 80% rise and 90% fall of Bitcoin over the past year – seeing a stock swing 7% is nothing. Seeing a stock swing 20% is almost nothing.
Those same bitcoin losers (and I’m a bitcoin loser as well, but time will tell if that stays the case) probably found the Robinhood App the same way I did – through the fact that Robinhood opened up to trading cryptocurrency AND stocks on the same phone app. So, where is the money the Robinhood traders are trading with coming from…there are a few possibilities.
1) From their bitcoin gains
2) It’s what is left after their bitcoin losses
3) They have borrowed, used student loans, taken out mortgages
4) They have closed down other broker accounts, 401ks, IRAs, or are using savings
Any way you look at it – this is not the same conservative money that looks to build 6% annually and sells a loser after 7%. Because they are in the market (along with trading bots) those strategies are no longer as effective as they once were. The massive market swings trigger buy and sell orders, sweep through stop losses, and leave traders who aren’t paying attention with overpriced shit on their hands or with selling at a loss and then watching a 250% wild upward swing…which brings me to the bots.
The vast majority of trades on all of the markets today are conducted by trading bots which conduct millions of trades each minute (or faster). There is no human way to beat the bots except through playing it safe and getting lucky.
So, with all of that, what scares me about these markets?
It’s the human traders using the app with their finger on the trigger. They may be exhibiting a strong risk tolerance, but they are human and eventually…somethinig is going to collectively set them off…when it does, the bots will take over and the losses will be massive and nearly instant. Yes, the markets will shut down…but as we saw with Tilray yesterday…that doesn’t necessarily solve things. Imagine what happened there, happeneing on a market wide scale.
These markets are terrifying…but honestly, there are huge gains to be made – despite that.
I’ve shifted my investing strategy. I’m not day-trading or trying to lock in short term gains. I look at a company and try to imagine where it will be in twenty years. I look at what it offers in growth between then and now and what it currently offers in dividend and yield. That’s where my money goes. At the moment there are three very exciting places I have my money parked.
1) IBM – big blue has become a world class innovator while the innovators like Google and Facebook have become boring and conservative. IBM offers one of the best dividends out there and is constantly innovating in new areas of growth.
2) Gene editing. There are three companies leading the charge here. Crispr Therapeutics, Editas Medicine, and Intellia Therapeutics. This is the area where disease gets solved, aging gets set aside, and humans potentially take the next step in evolution
3) Industrial Automation. The workplace is being automated. There is nothing that can be done about that. Brookstone, Holisys Automation, and ABB Group are the three companies currently leading the charge on this world changing shift.
I also believe that Amazon will continue to dominate and grow like the Borg and that electric cars with self driving technology will take over the automotive industry. Tesla may be a dead man walking but GM, Volkswagon, and Toyota are stepping up and newcomer NIO out of China is one to watch closely.
I’m putting my money in these areas now and in twenty years, I expect that I won’t be disappointed.
Now, a word about Bitcoin and blockchain. I still believe in Bitcoin. I think any money put into it before 2020 will see massive returns. I also believe that there are a number of great use cases for blockchain technology – but the more I’ve learned about the current run of projects – the more I believe that there is better coming and the money I’ve put into them may never be recovered. The hype got me…now, whether I get lucky from that – that’s just a matter of luck and fortitude. I’m not going anywhere with my losses…and it would be nice to see them turn into winners. Only time will tell.
Recently, from several different sources, I have become aware of a flaw in my thinking. Ultimately, this flaw comes down to something economists call ‘Time Preference’. My own revelation came about through coversations with family and friends, watching the action of news and technology and culture on the stock and cryptocurrency markets, and then the final blow came from The Bitcoin Standard (read my review here – the book is worth reading but has some issues).
So, what is time preference?
It can be called a variety of things such as time discounting or long term vs short term world view. Ultimately, it is how much you value the present versus the future. A high time preference means you value the now most of all and a low time preference means that you value the future more than the present.
I have ALWAYS been a high time preference individual. Not just high time, but highest time. I’ve always been a grasshopper that worries about tomorrow when it comes and enjoys the present as fully as possible when it is here. As a result, I’ve spent my life hearing other people say “How have you done all you’ve done and you’re only X years old?” And all of that is pretty cool. I’m glad I’ve done the things I’ve done but lately, I find myself regretting that I didn’t have at least a little bit of low time preference. I didn’t invest, I didn’t work for the future, I didn’t save. Ultimately, I’ve been living for the now for thirty years (My adult life).
I’ll turn 47 in a few months and the funny thing is that it was right around my 46th birthday that I started investing a little bit. Since then, I’ve started a couple of IRAs, a college fund for my daughter, I have a small portfolio of stocks, and a few minor investments. The problem before was always that something would come up and I would discount the future to pay for the present. I did it with jobs. I did it with a bunch of gold coins I was buying back in the 1990s (which I sold for a loss – ouch), I did it with my education, I did it with my relationships, I did it with just about everything in my life.
My high time preference (hehe High Times) came from an early awareness of my own mortality, an early reading of Ram Dass classic Be Here Now, and a sense that was imbued in me that the destruction of the world and our civilization was imminent. Let me give an example of a high, low, and average time preference person so that you will understand.
Low Time Preference: Doesn’t go to prom because he has to study for SATs
Average Time Preference: Goes to prom and studies for SATs
High Time Preference: Doesn’t even bother going to school because they might get hit by a bus tomorrow anyway.
So…here I am. Assuming I was 16 when I began my high time preference lifestyle – I spent thirty years living like there was no tomorrow. It makes sense (now) that my worldview didn’t make sense to the women I was involved with, my family, my teachers, my employers, my friends, my co-workers. My life was seriously like this for thirty years: ‘that girl is interesting and attractive, I better fall in love now before one of us dies’, ‘I better cash in these savings bonds now because the government will probably collapse before they mature’ ‘I’d better tell this jackass boss to go fuck himself or else I may not get another chance’ ‘I’d better get rid of all my shit and travel the world before world war III happens’ “I want to learn how to do this fun thing instead of focusing on something else until I’m really good at it’ and it goes on. If it doesn’t make sense to you, that’s okay, it probably means your normal.
Anyway, at 46 it finally makes sense to me to slow down a little bit. The reason is – I can see my future and suddenly it’s becoming pretty clear what it cost me to live such an amazing life for thirty years. While other people were working towards retirement, I was trying out new careers almost yearly. While other people were buying houses, I was moving around the world. While other people were investing for retirement, I was spending my retirement. That’s what it is. My retirement might have been in the millions of dollars right now, but instead, I’m $100,000 in debt with no real material assets.
However, what I lack in assets – I feel like I make up for in experience and understanding. I’ve developed a broad understanding of this world, the cultures in it, the economic and political forces that shape it, and the interpersonal relationships that make it run. And…as a result, I’ve seen the light in regards to a lower time preference than I was running on.
Now, moving on to actuary tables. I found myself recently thinking I was getting old. A big part of that is because I am older than most people who are at this building stage of life where I find myself. I’m economically sitting where recent college graduates sit but I’ve got a wife and young child so family wise, I’m where people in the mid to late thirties are. These are the people around me who I relate to – people in their late twenties to early forties. I’m not officially in my mid-forties and usually one of the older people in the room when I attend conferences about cryptocurrency, go to school functions, or apply for jobs at start-ups (which does not work in my favor at all). So there I was, feeling old.
I began thinking about how much time I actually had left before I can’t work anymore. Before illness and death come knocking. How much time I have to prepare for retirement – since I’ve done nothing. So, having worked in insurance, I decided to look at some actuary tables. According to the Social Security Actuary Tables….I can expect to live to be 82 years old as an American. That leaves 36 years. Now here’s the thing…that means, I can actually live the same amount of time I lived high preference (30 years) an still have six years to be retired, old, or what have you.
The actuary table I used though, is flawed. I live in Hawaii, so my life expectancy is actually higher. On my father’s side upper 90’s is the norm. So, I probably (barring accidents, disease, or disaster) have closer to 46-50 years and since technology is helping people to live longer – it might be longer.
Chances are though – I probably won’t get the opportunity to try out a third time preference. So, I’d better get this right. Here is what I am going with. High time preference for letting the people I care about know that they are important to me. Low time preference for spending the money I earn. I’m loving for the moment and saving for the future. I recommend it, but not having tried it yet – you may have to experiment to find a balance which works for you.