Capitalogix

Is the Market Sell-off Going to Continue?

October has been tough on equity markets this year. 

For example, the S&P 500 opened to a sea of red this past early last week.

 

 

McDonald's was one of the few green spots on that heat map.  Which reminds me, Mickey D's is becoming a little more modern by adding online and touchscreen ordering.

For some context, the S&P is on pace for it's worst sell-off since 2010 ... while the NASDAQ hasn't been hit like this since post-Lehman in 2008. 

Is it a correction or a blip?

Historically, midterm elections inspire uncertainty among investors that dissipates quickly as soon as they're over. Once that uncertainty is resolved, the S&P gains an average of 31% the following year.

Markets exist to trade ... and confusion is a primary catalyst.  As such, many people believe the market will rally ... while others believe that the traditional midterm effect could be blunted. 

For all the confusion in today's society, it's good to see that some things don't change.

Onwards.

Farm Tank Podcast - AI Trading, The Cowboys & Pablo Escobar

I was recently on Jordan Van Trump's Farm Tank podcast. 

On the podcast, we talked about artificial intelligence & trading, the Cowboys, my trip to Columbia, and a bunch of other things. 

Worth a listen. Check it out. 

Here are some highlights:

• "You have to really enjoy the people you do business with. It's important to know who's fun to be around, who's going to be a net add, who's going to create energy, and who's going to have ideas." (5:55)
• "I had a computer. Back then, only secretaries typed. I had a lot of people telling me it looked bad for a lawyer to have a computer, but I loved it and pretty quickly it became a competitive advantage." (15:20)
• "One of the most important business lessons I learned is you have to understand what you want. So much of what I see in business is people telling me what they don't want." (19:00)
• "I found that 10 times better is often easier to achieve than 10% better. If you're going for a 10% change, then you're bringing the past forward and you're trying to figure out what you can adjust." (20:00)
• "Learning and growing are huge. For me, it's about raising the standard, getting comfortable with being uncomfortable, seeing the bigger picture, and creating breakthroughs. In order to do that I surround myself with people who think differently." (22:45)
• "There's a difference between good and great and that difference is infinitesimal. You have to find not only what you're excellent at, but also what gives you energy because every day you fight the good fight and compete with everybody else."(58:00)

 

I'll be at The Van Trump conference, in Kansas City, on November 28th. Hope to see you there.

The World's 20 Largest Tech Giants

Today, the technology universe is more uniform than you'd think.  All of the top 20 technology companies are based in America and China.

Since 2013, China has added 5 to their side and America has lost 1. 

Here is the list.

 

via Visual Capitalist

It's also interesting to note that there's a steep dropoff between the "giants" and the companies lower down the ladder. There isn't a single company with a valuation between $200 billion and $450 billion. 

To put it in a different perspective, here's a pie chart showing the market capitalization of the top 5 tech companies in comparison to the bottom 282 S&P 500 companies. 

 

via Michael Batnick

It can be hard for a tech company to break into the upper echelons.  However, with tech, change is the only constant. 

What are some of the companies you think have a chance to enter the realm of these giants?

Entrepreneur Weekly Podcast - AI and the Futures Industry

You are the average of the five people you spend the most time with.  ~ Jim Rohn

 

Surrounding yourself with the right people, and joining peer groups like Strategic Coach, Genius Network, Vistage, or the Entrepreneurs' Organization is vital to your growth. They bring together brilliant minds and industry transformers together in forums focused on innovation, creative disruption, and possibility. 

Peer groups help you set (and raise) standards. They help bring new capabilities, but also new possibilities, new found energies and a reconnection to your purpose, mission, and values. 

If you're not ready for that commitment, listening to podcasts from those people that have done what you want to do and gone where you want to go is a great step towards reaching those same goals.

In that vein, I recently went to Alaska with some friends.  While there, I got to be on Entrepreneur Weekly with some of my close friends from Genius Network.

The following podcast features me and these guys:

• Nick Nanton of DNA Films - an Emmy award-winning director and powerful storyteller
• Mike Koenigs of You Everywhere Now - a serial entrepreneur and 13-time #1 bestselling author 
• and Randy Garn, CMO of Skipio

 

The entire episode is less than 39 minutes. My piece starts around the 11:30 mark and goes for about 5 minutes.  I open with a pretty big claim ... Check it out! 

 

Pursue Passionately 

 

If you understand what you really want and if you focus on that, rather than what you don’t want or all the things that are wrong; as long as you’re moving in that direction, and you don’t give up,  the result is inevitable.  ~ Howard Getson

 

When I was a kid, I couldn't imagine being where I am today ... nor could I imagine the path that took me here. 

Looking back, it all makes sense. I didn't always know where I was going ... but I was passionate about business, and I was driven towards a greater purpose.  From selling painted sand terrariums at the farmer's market to building an artificial intelligence powered hedge fund there's a common thread and a driving force. 

Don't be afraid to take the risks that may injure your present to make way for your future. 

 

The Fourth Industrial Revolution

 

The advent of AI is going to be as dramatic for society as the invention of electricity.  ~ Howard Getson

 

Artificial intelligence will solve problems and create opportunities on a scope and scale that is beyond our current comprehension. 

I was lucky to be in the right place at the right time to build this company and capitalize on this opportunity.  Realize, however, that I had to recognize the vision before there was an opportunity to capture. 

Life is about making your future bigger than your past.  There are plenty of opportunities out there if you know what you want.

Let me know what you are passionate about.  I'd love to help.

Understanding the Scope and Scale of Humanity (and Our Impact)

"Progress is the attraction that moves humanity." ~ Marcus Garvey

Human expansion and development is without precedent. We're in an entirely new territory. People could "only imagine" many of the things we take for granted today. 

To put it in perspective. 

• There are more than 7 Billion people inhabiting our planet today. in 1950. That number was just 2.56 billion. 
• 200 years ago there were less than 1 billion people.
• We produce approximately 1.3 billion tonnes of waste in a year.
• More data was created in 2017 than in all of history combined. 
• Here's an interactive website showing our footprint, urbanization, networks etc. 

via OurWorldInData

While growth is slowing down, and we're reaching carrying capacity, the population is still on the rise.

 

Technology is Growing Exponentially 

 

“Technology goes beyond mere tool making; it is a process of creating ever more powerful technology using the tools from the previous round of innovation.” ~Ray Kurzweil

 

The only thing that's perhaps more impressive than our population growth is our technological growth. For the first ~ 64,000 years of humanity, we relied upon the verbal transfer of information. The creation of writing and the formal recording of knowledge was the tinder for a blaze of progress.

 

 

The above graph stops in 1990, and it's almost hard to quantify the growth since then.  Nonetheless, Moore's Law does a good job of adding some context (even if it is coming to an end). 

Moore's law is the observation that the number of transistors in a dense integrated circuit doubles about every two years. Extrapolated outwards, we can expect more technologies to evolve every two years, if not faster. 

Information is the fuel for so much of human progress and it most embodies the future to me. We create more data today than in all of history and digest more data today than ever before.

 

As our ability to parse information increases ... so do our capabilities. 

 

History is defined by asymmetric information, but our future may not be.  The growth in information creation and digestion - I believe -  will have massive effects on how we congregate, what we create, and how we interact with each other and the corporate world around us. 

I can't begin to imagine what my children's children will have at their disposal. 

What's the coolest future-tech you expect to see in your lifetime?

A Rennaissance in Mathematics: The Mathematician Who Cracked Wall Street

Jim Simons is a mathematician and cryptographer who realized that the complex math he used to break codes could help explain financial patterns – and he made billions because of it in his notoriously secretive hedge fund firm called Renaissance Technologies. 

He is famous not only for the duration of his success and the size of his results ... but also for the way he made his money (with much lower volatility and risk than his peers and competitors). 

His background is impressive.  Simons taught at Harvard and MIT and worked with the NSA.  Here is a video where he shares some thoughts in a 2015 TED talk interview.  It's worth a watch. 

 

TED via Youtube

Interesting stuff ... I hope you got something from it. 

Despite advanced math still being a mystery to many,  most rely on it more than ever ... for example, look at what we're seeing with the growth of machine learning and AI.

 

The Heart of AI is Still in Humans

 

Simons built a team of mathematicians whose motivation was doing exciting mathematics and science (rather than hired guns who could be lured away by money).

That doesn't mean money wasn't a motivator, but it hits on something important. 

The heart of good math and good AI will always benefit from the quality of the humans around it. You still have to champion integrity, culture, and purpose.

 

Better Math as a Competitive Advantage

 

We stayed ahead of the pack by finding other approaches and shorter-term approaches to some extent ... but the real thing was to gather a tremendous amount of data – Jim Simons

 

If you've been to our office, or heard me speak, you know how important I believe those ideas are to continuing prosperity. 

Constant innovation on a massive scope and scale create more ways to win.

Onwards!

 

Here Are Some Links For Your Weekly Reading, September 2nd, 2018

 

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

Lighter Links  

• The US Military is Funding an AI That's Learning to Write Its Own Code. (311institute)
• A Record Number of Americans Support Legalizing Marijuana, New Survey Shows. (Fool)
• These 10 Questions are Used to Test the US Public's Knowledge of Science. How Many Can You Answer?(ScienceAlert)
• Jeff Bezos: We Must Go Back to the Moon, and this Time to Stay'. (Wall Street Journal)
• Scientists Reanimate Disembodied Pigs' Brains but for a Human Mind, It Could Be a Living Hell. (The Conversation)

 

Trading Links

• If You Invested $1,000 in Apple 10 Years Ago, Here's How Much You'd Have Now. (CNBC)
• The 15 Richest Families in America. (CNW)
• Jobless Rate Looks like Old Times, but the Economy Doesn't.(New York Times)
• Facebook is Reportedly Exploring the Creation of Its Own Cryptocurrency. (BusinessInsider)
• Ninety Years of Lessons Learned: T. Boone Pickens' Letter to the Class of 2018. (Forbes)

 

AI, Investing v. Trading, Algorithms, and more at Camp Kotok.

Last month, I attended Camp Kotok, a private gathering of economists, fund managers, and other financial industry professionals. 

The mood was cautiously optimistic to bullish about the markets - while the participants were feeling a bit uneasy due to changes in the financial industry due to advanced technologies. 

Cumberland Advisors just released a video of me talking with Bob Eisenbeis - their Vice Chairman & Chief Monetary Economist. 

Check it out. 

 

Cumberland Advisors via YouTube

AI is removing the fear, greed, and discretionary mistakes from financial decision making and its power is in removing the human fully from that process. 

We’re at the beginning of a cycle of progress that is hard to imagine ... and easy to underestimate.

Ultimately, I think AI will transform the planet much like electricity did.  

What about you?

Here Are Some Links For Your Weekly Reading - August 26th, 2018

My experience is that you tend to see the same people on the way up ... as you do on the way down.

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

Lighter Links

• Anonymous Bidder Pays $3.3 Million for Lunch with Warren Buffett. (New York Times)
• What If Your Business Was So Intelligent that Nothing Came as a Surprise. (Medium)
• Here's Why You Shouldn't Multitask, According to an MIT Neuroscientist. (Southernliving)
• Why No One Answers Their Phone Anymore. (The Atlantic)
• What is the 80/20 Rule? How the Pareto Principle Will Supercharge Your Productivity. (HubSpot)

  

Trading Links

• The Stock Market is on Pace to Hit Another, More Impactful Trillion-dollar Milestone. (Finance)
• Too Little Too Late': Bankruptcy Booms among Older Americans. (New York Times)
• THE MOST AMAZING STORY about BITCOIN YOU'VE EVER HEARD. (James Altucher)
• Why AI Isn't the Death of Jobs. (McKinsey)
• Los Angeles' Median Home Price Nears $1 Million as Fierce Bidding Wars Continue. (Forbes)

 

Bulls Say They're Hesitant While Active Managers Jump In

I saw this article on SentimenTrader.  Thought it was worth sharing.

 

Maybe bulls are just superstitious

 

Even though investors are buying, they won’t say they’re bullish in sentiment surveys. The Advisor & Investor Model (AIM) is a model that averages the momentum of the four major sentiment surveys.  It has been below 50% for 6 months, one of the longest streaks since 1970.

 

via SentimenTrader

Nobody wants to short

 

Among active investment managers, even the most bearish one is betting on a rally, which is a break from other surveys which mostly show apathetic sentiment. Unlike other surveys, this one has less of a contrarian bent, however.

 

Call buyers return

 

On the ISE exchange, recently, there were more than 200 call options bought for every 100 puts. That’s typically interpreted as a sign of excessive optimism from options traders. 

 

So, how are you feeling about the markets.  Let me know.