Its Not Harry

Comment and opinion for retail investors in the UK

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Snippets – a foggy Autumn

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All quiet on the Notharry front?

My readers may have noticed less blog posts recently. This had been deliberate on my part, for several reasons:

  • I had a few conversations with subscribers in which they confessed to not having time to read a few of my recent scribblings, sometimes I suspect for quite a few weeks. That means one of two things: I am posting too often or what I post is not useful or interesting. Now I am fairly sure that aside from the odd rant or attempt at dry humour, what I write IS useful to retail investors, so with that possibly conceited analysis, I have decided to reduce my frequency of posting to an average one longer read at the start of each month and one or two topical pieces in between.

  • Secondly, there are not many fundamental topics that I have not covered already in several ways: maybe a permanent long technical article, some reminder posts with cross references and now even maybe a video. I am therefore reluctant to write or record a piece that is just an unwanted repetition. On the other hand, as you know, I am very willing to write a piece on a subject that a particular subscriber wants explained or for me to comment on. Just tell me what you need!

  • Finally, current market conditions are so weird, so febrile and so full of risk (which last point I have made repeatedly already), that it is difficult to offer any intelligent guidance on portfolio servicing or reshaping over and above the usual basic essentials of being diversified, managing cash flows and taking the long view.

Nonetheless, I have collected quite a few thoughts on what are relevant factors that you might benefit from thinking about, or trends that need keeping an eye on, enough to make up one of my occasional ‘mish-mash’ lists of unconnected (or are they?) subjects that now follows.

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It would be hilarious, except..

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I see that hot on the heels of the OpenAI/Oracle/Nvidia deal that I wrote about yesterday, Nvidia has demonstrated that it already knows that there is no money to pay Oracle to build data centres with its GPUs, so it taking a stake in OpenAI, reported at ‘up to’ $100B.

An approach along the lines of – ‘you’re ordering our stuff through a third party. but we know you won’t be able to pay for it, so here’s enough dosh to get the process rolling. Some of your fancifully valued stock in return would be nice!’

The problem with that is Nvidia will presumably build equipment worth the money, but the shares it is getting in return (‘a major stake’) are based on a valuation of OpenAI at this rather fairy tale moment in the market concept of accurate pricing. This deal is probably made of necessity (if the whole mega project is to move forward) but looks like a potential disaster for Nvidia to me.

An aside and something not explained in the press release is that OpenAI is not currently a public company as I understand it, so I am not sure of the corporate governance implications.

Nvidia’s much smaller but likely more accurately valued investment in Intel looks a lot more prudent. At least they are diversifying while splashing the cash.

However, I will be nervous about funds that have Nvidia well up in their top 10 holdings from this point onwards. The puff of fresh air into the bubble at this stage might be close to bursting it. In fact, this whole deal is in my opinion best described as ‘bonkers’. But what would I know?

YAP – USA proposal to unilaterally raise extra taxes from overseas investors

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Sorry, there was no way I could make the title of this piece snappy!

The topic is perhaps one that will not be widely covered, if at all, in the mass media, but it is raising serious alarm bells in the investment industry outside of the USA, and may well have implications for American investors too, as I will explain.

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YAP – should we be afraid?

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Here is a ‘factoid’ from the investment trade press, commenting on AI applications:

A good example is a recently released AI product called Draft One, developed by Axon in the US. The company, previously known as TASER International after its initial product line, produces equipment used by law enforcement agencies in particular. From Tasers, it diversified into cameras and now offers bodycams, dashcams and software.
Draft One is a multimodal AI tool, meaning it can interpret words, audio and video, that can automatically generate a police report from the footage captured by an officer’s bodycam. On returning to their station, Draft One will have already drafted the vast majority of an incident report, maybe even capturing information that would otherwise have been omitted. The officer is then simply required to complete and verify the report. From field trials in the US, the product has delivered an 82% reduction in the time taken to write reports.2

Citywire Infocus

Some years ago, before AI was ‘a word in common parlance’, as lawyers like to say, the famous economics and finance professor, Dr Robert Schiller was explaining how ‘sell side’ stock brokers had learned about algorithms being used by investment researchers to glean data from mass media coverage of companies. In those days, it might have been as simple as the number of times a name was searched on Google, or scanned by Google’s ‘spider’ when collecting the data it used for searches (and we now know, rather more).

The more I read about AI, the more I want to weep.

He explained that those responsible for promoting shares (as I have explained to readers taking my investment training, shares are sold much like health food supplements) would make up superfluous press releases containing words that they expected to be searched for in the research algorithms. By that means, they increased the odds of getting their company reported to the researchers who might make it a buy recommendation. A sort of FOMO stimulus.

This produced some very amusing results on occasions, like when there was a sudden tick up in interest in the shares of Jupter Investment Management, then run by Edward Bonham-Carter. It turned out that his sister Helena was up for an acting award, but the algorithm was only set up to look for the surname, so her media coverage was assumed to represent a surge of interest in Jupiter shares!

Even simple Search Engine Optimisation (SEO), or YouTube video listing work is a form of the same process of trying to find out what feeds an algorithm and then stuffing the inputs to get a given result.

It will not be long, I anticipate with my usual sad but experienced view of humanity, before the police are pointing their body cams at just what they need to get the report written to tell the story the way they want it told. You know, officer out of shot puts the gun in the hand of the dead black guy, raising it in an aggresssive pose, then another officer turns to get a bodycam image? I hope I am wrong.