Thoughts about the markets, automated trading algorithms, artificial intelligence, and lots of other stuff

  • I’m Begrudgingly Talking About Pornhub… Again.

    I wish I could say that I'm surprised that one of the most popular articles I've written was about Pornhub … Every month I get hundreds of views on that post without having linked to it, promoted it, or put ads behind it. 

    The reality is that Pornhub does a lot right as a company. I'm going to clarify now, before we get into the real article, that I'm not advocating for Pornhub, or porn, or anything of that nature.  I am advocating for good business practices and for good case studies. 

    Cool tech often gets adopted by porn and gambling before more mainstream uses. Porn was the launchpad for video streaming, mobile-enabled sites, VR, and (unfortunately) pop-up ad technologies. It is really popular.  Check out these statistics.

    6a00e5502e47b28833022ad3ce6fa3200b-600wi

    I'm a vocal proponent of tracking, analytics, and data being the new precious commodity.

    New World Economics Data Is A Precious Commodity_GapingVoid

    Pornhub tracks data like its business depends on it, which it likely does.  A staggering 90% of all the world’s data (2.5 quintillion bytes per day) has been created in the past two years, last year, Porrnhub represented over 6597 petabytes of data of that (about 18,000 terabytes a day). 

    In 2019, over 5,824,699,200 hours of porn was watched on their site. That's over 6300 centuries of video. 

    1-2019-year-in-review-pornhub-minutevia Pornhub Insights

    Moreover, last year, it received 42 Billion views…. 10 billion more than last year.  That’s 1,332 people a second, or 115 million a day.  To put that in perspective, only 11 countries have populations greater than that.

    Here are some additional facts about its use.

    • Women typically spend 23 seconds longer on the site than men (and represent a third of users)
    • The average time spent on the site is 10 minutes and 28 seconds (older demographics spend more time on the site than younger demographics) 
    • Sunday is their most popular day

    While I would not suggest going through the full report (there's a lot of information on different pornstars) if you're interested in what platforms people use, what search engines, time of stay based on region, the effect of "events" on viewership, and more, Pornhub's insights are … robust. Here's a link to the full report. 

  • Dominance of the US

    In light of recent fears, VisualCapitalist put together an infographic on the dominance of US companies in global sectors and industries. 

    Us-companies-market-capitalization-global-sectorsvia VisualCapitalist

    The calculations reflect the market cap of the S&P Global Broad Market Index which tracks more than 11,000 stocks across 50 markets. Not all-encompassing, but a good start.

    To add some numbers to the chart, the US represents

    • 73% of IT
    • 65% of Health care
    • 51% of Real Estate and
    • 44% of Financials 

    China is closing in fast on some of these sectors, but the U.S. is still the world leader.  

  • Here Are Some Links For Your Weekly Reading – March 1st, 2020

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • Mountains Out of Molehills: Media Inflammation

    The U.S. stock market had a rough week (like most markets around the world). The Dow Jones Industrial Average (the "Dow") had one of its worst weeks since the financial crisis in 2008, losing about 12%.

    Still, the Dow is near its historical highs, and the fundamentals of our economy aren't in freefall (as one might guess with all the fearmongering). 

    As I mentioned last week, many attribute the drop to the Coronavirus and its potential effect on trade, travel, industry, etc.  For example, several prominent news sources released (hopefully erroneous) articles stating that 38% of beer drinkers wouldn't drink Corona due to the Coronavirus.  Yup!

    There are two key points I want to make. The first is that the media tends to make mountains out of molehills (because their job is to get you to pay attention to their news) and the second is that markets are random to you or me. 

    Mountains Out of Molehills

    It shouldn't come as a surprise to you that the media exacerbates situations. Whether it's a terrorist attack, a virus scare, or a bad trading day – the media posts headlines and teasers designed more to attract attention than to educate. 

    The interactive graphic below shows the news cycle for things ranging from asteroids and vaccines to ebola and zika.  An interesting reminder.

    Screen Shot 2020-03-01 at 8.26.59 PM(Click To View Interactive Infographic) via InformationIsBeautiful

    The result is hysteria, fear and greed, or discretionary mistakes … all things better avoided. 

    Regardless, when it comes to trading, if you don't know what your edge is … you don't have one.  And it's tough to find a "signal" in a sea of noise. 

    Screen Shot 2020-03-01 at 8.22.22 PMvia Gaping Void

    Markets Are Random

    Experienced traders have a saying: it isn't the news that matters … what matters is the reaction to the news.  Consequently, part of the reason that markets seem random is that you or I can't predict the market's changes (accurately and reliably) based on the information we have.  In other words, if market profits were easily captured by being smart and well informed, professors wouldn't teach because they'd be on their yachts. 

    This past week,  you could attribute the losses to fear of the Coronavirus … but there are also fears around the 2020 election, the fact that stocks were already considered overvalued, fears of recession, and more.

    You don't know how much was caused by program trading or bots reacting to bots – or by a host of less obvious potential causes or contributing factors, like businesses either liquidating or taking positions in the regular course of their business (meaning as bona fide purchasers rather than speculators).

    The truth is no one knows for sure what caused the drop.

    Nonetheless, one thing that you should know is that volatility and noise will increase.  It is almost inevitable.

    Screen Shot 2020-03-01 at 8.44.56 PM

    Humans have a need for certainty and understanding. So when we don't know why something happens we find stories to fill in those gaps. But they're just that … They're stories. We can theorize all day long about what's moving the market, but it makes no difference.

    It's not what happens that matters, it is what you do that matters. 

    Onwards!

  • Coronavirus Tracker

    Fears around the Coronavirus continue to mount. Quarantine of the superbug has been tough … the disease shows up in more countries every week, and the death toll is likely being underreported in China. 

    That being said, the death toll compared to the "recovered" toll should give you hope that if you're relatively healthy and get proper treatment, your survivability rate is very high.

    Here is an interactive tracker if you're curious to see a visual representation of it's spread.

     

    Screen Shot 2020-02-22 at 1.03.14 PM

    1hakr via Visualist.io

    Keeping yourself at a low risk of contraction is pretty simple. You know what you need to do to avoid it, but, as a reminder: wash your hands, don't share food/drinks with strangers, avoid touching your face, and don't go to China till you believe the "all clear."

    How do you believe this will affect the markets and economy?

  • Here Are Some Links For Your Weekly Reading, February 23rd, 2020

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • Is China Going to Overtake the US In Artificial Intelligence?

    Currently, the US has a stronghold on Data Science and Artificial Intelligence (collectively, "AI") innovations and advancements.

    Meanwhile, China has been creating more papers than other countries about their AI advancements and innovation … however, a closer examination of the research suggests that many of their papers are of low quality, misleading, or even fraudulent. 

    Will China overtake the US in AI supremacy? If you look at their population along with their government's intent and directive towards AI leadership, it seems possible. 

     

    via TheDataScientist

    On a superficial level, I believe that the majority of advances in AI will prove to be beneficial – but there needs to be a balance between the promise and the peril of un-checked or un-regulated AI.  In other words, AI ethics, patriotism, and global balance of power considerations apply to a powerful force likely to terraform the planet.

    Absolute power has been shown to corrupt … I worry about the types of AI applications powerful nation-states will focus on, and whether they'll be truly forthcoming with breakthroughs or whether we are approaching a new cold war based around AI and Quantum Supremacy. 

    When you're doing something new and groundbreaking, it's human nature to want to keep it to yourself. It seemingly protects your interests, it prevents competition, obstruction or poaching. As well, AI is going to create an enormous impact on economic development, the nature of work, and competitive dynamics, so many governments are rushing to establish interest, education programs, and AI frameworks within their borders.

    Screen Shot 2020-02-22 at 1.42.27 PMvia Deloitte Insights

    AI Isn't a Zero-Sum Game (Unlike Trading)

    The reality is that AI has the chance not only to transform industries but societies as well. The benefits of properly executed AI are far-reaching and global. 

    When you share, maybe not the individual application, but the over-arching lesson or breakthrough, you enable all adopters to learn and grow. 

    Internally, in starting to write my book – Next on Wall Street – I spend a lot of time talking about our approach to building the right workforce, using the right data,  overcoming challenges, approaching AI from the right perspective, and, of course, using the right tools. 

    Collaboration is an important engine for creation. Having a lead is important … but at the beginning of a long journey, making progress and building momentum is crucially important.

    Screen Shot 2020-02-22 at 1.44.01 PMvia Deloitte Insights

    AI has a lot of green fields ahead. 

    Onwards!

  • Ending The World With A Paperclip

    Every week I send out an e-mail on Fridays with 20 light links and 20 market-moving links. If you're not getting that e-mail, you can sign up here. On Sundays, I send out our weekly commentary (which this article is a part of, along with 5 new light links and 5 new market-moving links (you can sign up here).

    My son sees the links before they're posted. He was interested in one of this week's links – The Way the World Ends: Not with a Bang But A Paperclip. 

    As a result, he played the game Paperclips to completion.  While he characterizes it as “wasting a whole night,” I think it gives us insight into the addictive nature of clicker games and into how the world as we know it could end with a paperclip. 

    There are spoilers ahead, so if you intend on wasting three hours on a browser game, you may want to skip this article … no, you're good? OK, here it is. 

    Screen Shot 2020-02-03 at 1.39.21 PMFrank Lantz via Decision Problem

    The game starts with you clicking a button to create paperclips but quickly spirals from there. Through setting up automation to create paperclips and then to have it start automatically buying the wire for you, you begin focusing on other projects – specifically creating a better trading algorithm to leverage the money you're making and improving your company's AI and Quantum Computing capabilities. 

    Hmm, starting to sound familiar …

    Initially, your AI is focused purely on maximizing paper clip demand and production.  It can increase marketing to increase demand and make your autoclippers more efficient to produce more paperclips per unit wire. If you look at the projects in the above screenshot you can see projects like: 

    • Full Monopoly – Establish full control over the worldwide paperclip market
    • Global Warming – A robust solution to man-made climate change
    • HypnoDrones – Autonomous aerial brand ambassadors

    Projects like curing cancer or solving global warming gain trust and allow you to invest more money in processors and memory (which end up setting you up to take over the world.)

    Fast forward to Zach beating the game …

    Screen Shot 2020-02-03 at 2.23.47 PMFrank Lantz via Decision Problem

    When you release the HypnoDrones all of the resources become available for Paperclip production, and you gain full autonomy. Your inner benevolent dictator feels satisfied and your mother’s expectations for your potential are partially fulfilled.

    At this point in the game, Zach had created less than half a billion paperclips but was worth several billions of dollars. It took him 2 hours and 44 minutes to beat the game. 

    Is it a game, a parable, a prediction – or an advanced intelligence’s test of human nature?

     

  • Here Are Some Links For Your Weekly Reading – February 16th, 2020

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • Pay-To-Play: Bloomberg 2020

    Mike Bloomberg is spending an astonishing amount on his presidential run. Something you can do when you're a billionaire.

    Bloomberg is worth approximately $62B, so while most campaigns are being run on donations, he's outstripping them purely with his own bank account. 

    Hulfpx53laf41via theimpossiblesalad

     

    He's outspent everyone else in the Democratic field combined. His most recent stunt was a major social media push. 

    He leveraged several of the largest accounts on Instagram by collaborating with a company called – Meme2020. I wish that was a joke. 

     

     

    From the NYT, "Memers" include: 

     @MyTherapistSays, @WhitePeopleHumor, @TheFunnyIntrovert, @KaleSalad, @Sonny5ideUp, @Tank.Sinatra, @ShitheadSteve, @adam.the.creator, @moistbudda, @MrsDowJones, @TrashCanPaul, @cohmedy, @NeatDad, @FourTwenty, @GolfersDoingThings, @DrGrayFang, @MiddleClassFancy and @DoYouEvenLift.

     

    Those accounts reached a purported 60 million followers. They received $150 per post.

    The content is one of those  "stranger than fiction" experiences, where the posts are so surreal that the creators have to acknowledge "yes this is really sponsored by Mike Bloomberg."   

    This approach, and Bloomberg in general, raises several questions about running a race in 2020. 

    Astroturfing and Memes

    Remember, this is intended to sway public opinion in a political campaign. Bloomberg is a geriatric billionaire who has approximately 0% of the youth vote. While most of these memes mocked Bloomberg for being old and out of touch, the effort likely had the opposite effect. It's mildly insidious. 

    These posts have nothing to do with demonstrating Bloomberg's electability. They don't deal with stop and frisk, or any of his other policies. They're running the campaign a football player might run for student body president in high school. Luckily, there's been pushback. 

    The style of ads – astroturfing – where sponsors make their ads appear as if they're supported by grassroots participants, isn't new. But, Bernie Sanders and Donald Trump have done much better with seemingly authentic content driven by meme culture. 

    The question to ask about Bernie and Donald's success with the internet is, how much is authentic and how much is manufactured?

    Are We Creating A Plutocracy?

    Michael Bloomberg's campaign has crossed over $350MM in spending across channels. He went from a nonexistent option, to earnestly in the running through ubiquity.  

    It's worth asking the question "Can our democracy be bought?"

    presidential candidate net worth bubble chart

    via Business Insider

    A plutocracy is when a government is run by the wealthy elite. To a certain degree, money is power, and the wealthy's effect on the world is unavoidable. The inverse is also true, with influence and drive, money often follows.  The issue comes when the wealthy are the only influence, and when that money becomes the deciding factor in electability.

    It's hard to beat nearly unlimited money working in partnership with corporate support and media bias. The reality is, in the same way that corporations are people, they also have biases. Media companies undoubtedly influence the messaging you see. And, as impervious as we believe we are, the messaging we see influences the reality we perceive. 

    My takeaway for you is not to be for or against any candidate; it's to be pro-democracy and pro-meritocracy. 

    I hope we vote on the issues instead of just the personalities.

    Evaluate which issues are most important to you and which candidates best support those issues. Here's a link to Donald Trump's positions, and a link to the positions of the Democratic candidates.

    I'm curious to see who wins the Democratic primary, and what that means for the election. 

    Who you got?

    Do you think Bloomberg has a chance?