Trading

  • A Look At Last Week’s Tech Breakthroughs

    We live in exciting times!

    No, I'm not talking about how fast the DOGE team is terraforming government.

    I'm talking about how fast the insights of exponential technologies are compounding the real-world implications of where we are and where we are going.

    In past issues, we've talked about how quickly the world is changing, how fast innovations happen, and why it's not about today's tools but rather the value and capabilities of the foundational assets we build upon … and, ultimately, the things that makes possible.

    Today's commentary is different from our usual posts. Yes, the inspiration came from my weekly curation of links selected based on what captured my attention or imagination. However, today's post is about the sheer volume and density of groundbreaking innovations competing for mindshare and investment dollars. And while commercial success is a great way to keep score, we'll explore what this accelerating pace of innovation means for our future and the world.

     

    In-a-fast-changing-world-focus-on-the-customer-problem

    So, here is a list of some of the things that made headlines this week.

    Some may not matter to you now. Try re-reading the list while letting yourself be amazed at what is happening!

    Any one of these is a momentous achievement that would have sounded like science fiction even 10 years ago. Now, that's one week of achievement. 

    As someone whose company invents things for a living, I understand that none of these breakthroughs were actually invented last week. Obviously, a long and winding road leads to each of those announcements. However, it's remarkable to see so many significant innovations reaching the stage of public announcement simultaneously.

    It's hard to quantify the impact of these innovations on not only the tech industry – but the world. 

    Think about the implications. Google's co-scientist is already solving problems that humans haven't been able to solve for decades. Clone is building robots that will use the next generations of AI to transform how we think about what artificial intelligence looks like. 

    Not to mention the improvement in quantum computing and nuclear fusion, industries that I've been paying attention to since the 90s. 

    While any of these topics would have made a good article, in my opinion, the whole is more impressive than the sum of its parts.

    If I had to pick one of those topics to highlight, I think it's now time to start focusing more on quantum computing. 

    To start, here's an hour-long interview with Satya Nadella about Microsoft's new quantum chip – and what it means for AI & business. 

     

    via Dwarkesh Patel

    Most of you probably aren't interested in watching the whole thing, but here are some of the highlights. 

    • They've created a new state of matter called a topological superconductor.
    • The qubits created with topological superconductors are fast, reliable, and small … very small.
    • These new qubits are 1/100th of a millimeter, meaning we now have a clear path to a million-qubit processor.
    • To put that in perspective, imagine a chip that can fit in the palm of your hand yet can solve problems that even all the computers on Earth today combined can't! 
    • Satya doesn't believe in making claims about how quickly AGI is coming.
    • However, he believes it is useful and productive to set a benchmark of making the world 10% better.
    • He also believes the topological superconductor breakthrough makes quantum computing a practical reality that can happen in a few years – not decades +.

    Prepare for things to get more interesting.

    We do live in exciting times!

  • Investment in AI is Rising …

    It’s no surprise that capital raising is moving toward AI – and often generative AI. 

     

    Proportional bubbles chart showing the capital flows into AI, using data from Pitchbook and Bloomberg

    via visualcapitalist

    From 2023-2024, over $26 billion flowed into the sector – including big deals like Inflection, xAI, and Anthropic. 

    While many of the biggest investments were in foundational models and infrastructure, some money is now moving into targeted AI applications. 

    AI isn’t just for researchers and the tech giants anymore … it’s becoming more commercial.

    Realistically, AI is overhyped – and there is a lot of competition. Yet, few firms have operationalized AI in a meaningful way. 

    With that said, here is a question worth considering.

    Where are the AI applications capable of generating returns that justify the infrastructure, investment, and focus?

    The next battle will likely be in the AI Applications space. To keep it short, why hasn’t it happened yet … and what will likely create the value we’re looking for?

     

    Why Haven’t AI Apps Taken Off Yet?

      •  Cost vs. Value Gap: Many AI applications are still experimental or add only incremental value.

      •  Compute Bottlenecks: AI compute costs remain expensive, limiting broader adoption.

      •  Enterprise Hesitation: Many companies are still figuring out how to integrate AI into their operations in a way that delivers real ROI.

     

    Where Might the Value Come From?

    For AI investments to pay off, applications must solve big problems, not just serve as experimental tools. The highest-value areas likely include:

      •  AI copilots and automation (Enterprise AI reducing labor costs and bottlenecks)

      •  Autonomous systems (AI for analytics, compliance, and logistics)

      •  AI-driven discovery (Accelerating breakthroughs in capabilities and performance)

      •  Next-gen digital assistants (LLMs with memory, context, and long-term utility)

     

    Right now, AI apps are where mobile apps were in 2008 — there is plenty of potential, but only a handful of genuinely indispensable use cases. 

    Companies like Capitalogix that crack the code on industrial-grade AI applications, will drive the next wave of value creation.

    It’s fun and rewarding to watch artificial intelligence become available to everyone.

    As the cost of “intelligence” decreases, let’s hope more people take advantage of the opportunity.

    However, the sad truth is the opposite is also more likely. As AI becomes more available, it becomes easier for it to become a distraction. 

    Remember the Internet? When it first started, most of the uses were academic. Now, despite there being functionally infinite ways to use the internet to improve your life and make you smarter, most people use it for memes and distractions. 

    When you think about AI, don’t just think about artificial intelligence … Think about amplified intelligence. That is the term I use to distinguish between the technology and what people really want … which is the ability to make better decisions, take smarter actions, and continuously improve performance.

    AI isn’t about taking away the humanity from your business or automating away the things you love. It’s about allowing you to be more human – doing more of the things you’re best at – that give you energy and bring you joy.

  • How Americans Spend Their Money

    I’m sure you remember  James Carville’s famous line, “It's the economy, stupid.”

    Seasons come and go, as do political regimes, but one constant remains: people focus on the economy … and their wallets.

    Recently, my inbox has seen a deluge of wild claims about spending, waste, inflation … and worse.

    This morning,  I saw several sources citing Robert Kiyosaki’s recent warnings of an impending market crash, massive layoffs, depression, and even war.

    Mass market hype aside, I thought it would be interesting to examine these issues and how typical Americans spend their money.

    A quick glance shows that household debt recently approached $18 trillion, and credit card debt surpassed $1 trillion. 

    But, why? 

    The chart below came from VisualCapitalist. It shows “How Americans Spend Their Money.”

     

    How-Americans-Spend-their-Money_website_Jan14via visualcapitalist

    Unsurprisingly, almost half of consumer spending goes toward housing and transportation. 

    While this has slightly outpaced inflation, it hasn’t by much. 

    Meanwhile, spending in some areas surged well beyond wage and overall inflation levels. For example, Americans spend 21% more on food than in 2021. A closer look shows that the cause isn’t just inflation. Food and beverage companies increased their operating profits by 79% from 2019-2023. 

    Educational spending and healthcare spending are also rising.

    How do you think the Trump administration’s actions will impact the economy and the wallets of typical Americans?

    Many of my close friends and advisors are optimistic about the Trump administration’s actions and expected impacts. However, as I’ve often noted regarding technological change, people are good at noticing big turning points – but struggle with predictions about the second and third-order consequences of these shifts.

    How do you see this playing out?

  • Here Are Some Links For Your Weekly Reading – February 9th, 2025

    Coming together for Super Bowl Sunday: Political Cartoons – Daily Bulletin

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

    Lighter Links:

    Trading Links:

  • Betting On The Super Bowl Champion …

    Are you trying to get rich quickly? Do you want to know if the markets will be bull or bear this year?

    Look no further than the “Super Bowl Indicator”. It has to be real; the winning percentage is high, and there’s even a Wikipedia page about it.

     

    image from us-east.storage.cloudconvert.comImage via NFL/Getty Images.

    The theory is that a Super Bowl win for a team from the AFC foretells a decline in the stock market, and a win for the NFC means the stock market will rise in the coming year. So, for those who care more about markets than football, you’d be rooting for the Philadelphia Eagles. 

    There is one big caveat (among lots of others) … it counts the Pittsburgh Steelers as NFC because that’s where they got their start. 

    If you accept that, the Super Bowl Indicator has about a 68% success rate. Sounds good, right?

    Come on … you know better.

    Here are some other “fun” stock market indicators:

     

    Back to Reality

    Rationally, we understand that football and the stock market have nothing in common. We also probably intuitively understand correlation ≠ causation. Yet, we crave order, and look for signs that make markets seem slightly more predictable.

    The problem with randomness is that it can appear meaningful. 

    Wall Street is, unfortunately, inundated with theories that attempt to predict the performance of the stock market and the economy. The only difference between this and other theories is that we openly recognize the ridiculousness of this indicator.

    More people than you would hope (or guess) attempt to forecast the market based on gut instinct, ancient wisdom, or prayers.

    While hope and prayer are good things … they aren’t good trading strategies.

    As goofy as it sounds, some of these “far-fetched” theories perform better than professional money managers with immense capital, research teams, and decades of experience.

    To get a better perspective, here is a thought experiment to try. 

    What percentage of active managers beat the S&P 500 in any given year?

    … Then, what percentage beat the S&P 500 over 15 years?

    The answer is that, on average, less than 33% of active managers beat the S&P in any given year. Last year, 43% beat the Index. Even more interesting is that over a 15-year period, the numbers drop much further. Depending on who is measured, only 12% of active managers and about 5% of U.S. Equity Funds beat the S&P over a 15-year period.

    Here are a couple of things to consider when you evaluate those statistics. First, market statistics represent predominantly bull market periods (and underperformance tends to spike during bear markets). Second, the statistics mentioned were for professional traders and funds (and most retail traders do considerably worse than that). Third, and perhaps most importantly, the implication is that professional traders’ “intelligent” choices often turn out worse than chance. That means something they’re doing is hurting performance (rather than helping it). 

    Screen Shot 2019-01-30 at 1.22.32 PM

    via Gaping Void

    There’s simply too much information out there for us to digest, process, rank, and use appropriately.

    There will never be less data or slower markets.

    The only thing you can predict confidently about the markets is that volatility and noise will increase.

    There are people beating the markets — not by using the Super Bowl Indicator … they’re doing it with more algorithms and better technology.

    Let me know if you want to learn more about that.

    Onwards.

  • My Thoughts on Deepseek as an AI Entrepreneur & Hedge Fund Manager

    Every now and then, a moment comes along that forces everyone to stop and rethink what they thought they knew. DeepSeek—a relatively unknown AI startup—just delivered one of those moments.

    DeepSeek (The Chinese Ai Company) Is Closing The Gap With OpenAi - 9meters

    Imagine this: last week, a company most people had never heard of claimed to have built a cutting-edge AI model for just $5.6 million – and they made it open source. Meanwhile, industry giants like Meta, Google, and OpenAI spend hundreds of millions—sometimes billions—on similar efforts. The implications are massive, and investors felt it immediately.

    Within hours, Nvidia’s stock price plunged 16.86%, wiping out over $600 billion in market value. Other AI-heavy stocks followed suit. The reaction? Panic, speculation, and a flood of questions:

    • Have we been overpaying for AI development?
    • Is brute-force scaling the wrong path?
    • What does this mean for the balance of power in the AI world?

    What’s happening here isn’t just a new startup making waves. It’s a fundamental shift in how AI is built—and it could change the competitive landscape for years to come.

    What makes DeepSeek different?

    To me, the main point is that, until recently, AI companies have been treating LLMs like an arms race—the more GPUs, the better. That’s part of why LLMs have become so expensive. Meanwhile, DeepSeek took an efficiency-first approach that reduced computational waste and more efficiently used GPU resources.

    This type of disruption will become increasingly frequent across all industries. Exponential technologies are accelerating innovation cycles and opening unexpected development paths. While these discontinuous innovations may seem like isolated surprises, they’re becoming a fundamental part of the competitive landscape. The key isn’t to react to each disruption individually – it’s to develop better strategies for operating in this rapidly evolving environment.

    In this case, Deepseek’s breakthrough wasn’t about doing more of what its competitors were good at. Instead, they thought of something else they could do to well to compete. Their breakthrough wasn’t about power … it was about perspective. It is a good reminder and blueprint to study.

    Some think the key message is that businesses no longer need to stock up on Nvidia’s best GPUs to have an advantage. Even if that is true, it begs the question: Will the demand for high-end GPUs decline if AI processing needs start shrinking? Asked another way, if other AI companies also use efficiency-first architecture, will Nvidia’s dominance weaken?

    From my perspective, the answer is that Nvidia will continue to grow. I’m excited about a world where the companies that can afford to spend the most money don’t necessarily win. Increased accessibility to high-performing AI models means more entrepreneurs can join the space and create new businesses with novel approaches. Ultimately, many more businesses will build AI into their infrastructure, and chip sales will continue to expand.

    AI isn’t just about computing power anymore – it’s about creativity and utility, too. Constraints have always bred innovation, and as companies begin to do more with less, I think you’ll see a shift in the balance of power.

    What about America and data privacy?

    Despite my excitement about the AI boom, there are valid privacy fears. When I discussed TikTok a few weeks ago, it was clear that the U.S. was taking a stronger stand on protecting its citizens from foreign interference. DeepSeek presents challenges.

    To start, it does censor content deemed sensitive by the Chinese government – that also means that particular historical and political topics are met with ambiguous or sanitized responses.

    It collects all of your user inputs, any personal information you share, and technical details like your keystroke patterns. They do explicitly tell you this in their Terms of Service. The data is stored in China, raising concerns about legal oversight and privacy laws.

    You likely have very little recourse if your data is accessed by or shared with external entities.

    My Thoughts

    First, DeepSeek is undoubtedly exciting. Even if they’ve embellished their story, the result is impressive. However, it’s also not the end of Nvidia or American-based AI companies. 

    Knowing when to sprint and when to jog is an important skill.

    AI is shaping our digital world, and DeepSeek is a massive force function in the industry. It is ultimately a good thing for AI (yes, even the Chinese competition).

    However, you should probably ask yourself if the benefits of using Deepseek outweigh the risks.

    When I coach people on using generative AI, I’ve always urged caution about sharing your sensitive IP with publicly hosted GPTs. Even with OpenAI or Meta, there are clear risks.

    It’s also clear that China isn’t the only entity trying to track you or better use your data. As a reminder, if you don’t know how someone is making money off a product … you’re the product. They’re commoditizing you and your data.

    That being said, It’s important to be proactive, and it seems to become even more important every week. The landscape is shifting so quickly.

    Even so, you have time.

    Being proactive also means being smart. As a user of the tools, you don’t need to switch to DeepSeek. Even as a non-tech entrepreneur, now is the time to explore the AI uses that excite you, not to force big leaps. 

    If you’re like me and are an entrepreneur in the space, you should certainly take the lessons from DeepSeek and think about how to apply these ideas in your ecosystem.

    But my #1 lesson for AI adoption is the same as my #1 lesson for building any habit: Start small – and start in a way that gives you energy.

    Humans are good at seeing big changes on the horizon but notoriously bad at predicting what those changes will be.

    The goal isn’t to be so fast that you beat everyone else … just to be fast enough not to be left behind.

    Onwards!

  • Here Are Some Links For Your Weekly Reading – January 12th, 2024

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

    Lighter Links:

    Trading Links:

  • How’d Markets Do In 2024

    At the beginning of 2024, I asked the question – how did markets do in 2023?

    It makes sense to ask the same question as we start 2025. 

    Before I get started, it’s worth stating that the market is not the economy … but with Trump about to step into office, I know people are wondering. 

    I still think about the often-quoted quip “It's the economy, stupid” – coined by James Carville, a strategist in Bill Clinton’s successful 1992 U.S. presidential election against incumbent George H. W. Bush.

    2022 was the worst year for the U.S. stock market since the 2008 financial crisis.

    2023 was much better, but much of the gains came in concentrated sectors.  

    2024 saw nearly every sector posting gains – driven primarily by AI enthusiasm and a robust U.S. economy. 

    To help you get a sense of 2024 returns, VisualCapitalist put together a few helpful infographics.

     

    via visualcapitalist

    66% of companies on the S&P ended up in positive territory this year. The S&P also had its best two-year stretch since the late 90s. 

    Communication Services usurped IT’s #1 spot, driven primarily by Meta & Google. Strong consumer spending and digital ad revenue brought ad spending to almost $400 billion. 

    Materials was the only sector to see negative returns, hampered by China’s economic slowdown and increased interest rates. 

    Here is a more global look at return by asset class.

     

    Vertical graphic with icons showing asset class returns in 2024.

    via visualcapitalist

    Driven by that end-of-year run, Bitcoin surged to all-time highs, and gold also saw its best performance in 14 years. Meanwhile, bonds suffered heavily amid reflationary concerns and a potential widening deficit under the Trump administration.

    In 2024, I predicted a brief market correction, blamed on various geopolitical instabilities and partisan weaknesses, followed by a long and steady push higher as the November elections approached.

    How did that prediction hold up? I'd say pretty well. 

    On one level, I try not to think about or predict markets (because I know better). On another level, sometimes I can’t help myself …

    Part of me is so bullish about AI (and its impact on other things) that it’s hard to maintain objectivity. With that said, I think we’ll have another decent year. However, I expect increased volatility and noise.

    What do you expect for 2025?

    Do you think the continued investment into generative AI will impact these trends?

    Will cryptocurrency continue to explode? What scenarios do you think have the potential to be force multipliers?

  • The World Economy Going Into 2025 …

    Are you a glass half full or a glass half empty person? The recent economic news cycle has certainly been playing on people's fears.

    There is a lot of good news and reasons to be confident and excited about what's to come.

    Sure, you can focus on the $100 trillion global debt … but you could also focus on how U.S. states' GDPs compare to global GDPs.

    Today, let's look at the $115 trillion global economy. For what it's worth, America is still the dominant force.

     

    20241228 World Economy in 2025 Infographic

    via VisualCapitalist

    America has topped the list for over 100 years and will comfortably continue that reign in 2025. China comes in second, and together, they account for approximately two-fifths of global GDP. That said, China is comparatively a newcomer to their spot – with about 15 years here. 

    While we top the list, the fastest-growing economies would go to countries like India, Australia, and Brazil – which are all expected to rise the ranks in the coming years. 

    The trend to watch here is what will happen in the Middle East, with Syria overthrowing their government and the Israel-Palestine conflict continuing and impacting the supply chain of surrounding countries as well. 

    It will also be interesting to see how Trump's re-election and the continuing Russia-Ukraine conflict affect global trends.

    Looking beyond traditional economic metrics, I believe artificial intelligence will emerge as one of the most critical factors driving power, progress, and wealth creation in the coming years. It's likely to become both the most coveted resource and the capability we'll most actively seek to deny our adversaries.

    The real story of 2025's global economy isn't just told with GDP rankings. While America and China dominate those numbers, traditional economic metrics are becoming less relevant in a world where regional conflicts, supply chain dynamics, and technological innovation can reshape global power dynamics overnight. In the longer term, birth rates and the growth of middle-class infrastructure are strong predictors of what lies ahead. GDP alone doesn't measure what truly matters in the modern global economy.

    What indicators are you watching?

  • Why Leave The House When You Can Shop Online …

    The holidays are almost here! Time's running out to get your gifts in time. 

    Luckily, it's never been easier to get stuff. On top of online shopping, Amazon has stewarded the switch to almost instantaneous shipping. 

    I remember when malls were filled to the brim, and Black Friday led to stampedes and people dying. Now, it's brick-and-mortar stores that are dying.

    Not only are the in-store deals not as good, but the best deals are online. Here's a chart showing the surge of online shopping.

     

    A dumbbell chart showing that online shopping as a percentage of total retail sales had climbed over time and spike in Q4 every year.

    via visualcapitalist

    Online shopping now accounts for about 15% of consumer spending, up from 4.1% in 2010. 

    In addition, Q4 always sees a massive spike, with online spending accounting for 17.1% of consumer spending in 2023. 

    This year, Cyber Monday attracted over 64 million U.S. shoppers, three times the number who shopped in stores. 

    You can find change everywhere, but one place to look hasn't changed. Amazon is all about infrastructure and disruption. 

    It's interesting to consider how drastically this changes supply chain management. People now expect free and fast shipping and the ability to return items if they don't work out (instead of trying them in-store). Meanwhile, brands have high fixed costs due to their existing retail locations, yet they need to keep most of their stock in warehouses instead of their box stores to deal with the surplus of online orders. 

    We're already seeing the failure of malls and the bust of commercial real estate. If this trend continues of work-from-home and online shopping, we could see a $250 billion decrease in commercial property value by 2026.  

    What do you think it would take to stop the bleeding and encourage both consumers and employees to leave their homes?