Q: What do you get if take a pee and see, then put in an n and a k?
A: if you start with SPACE, you get SNAKE.
The IPO of Space X is one of the most blatant corruptions of the regulations and institutions supposedly there to protect the public, a set of maneuvres akin to the trickery of the snake oil salesman. That is not my sole opinion, but one of many independent professional commentators and publishers.
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In his most satirical book, ‘The Way We Live Now’ (1875), Anthony Trollope outlines in some detail, showing his personal expertise in matters of business, the working of the financial markets in Victorian London and the personal characters of his model participants. The book is far from flattering, any more than his portrayal of the church was in The Barchester Chronicles.
Early on in the book, a rather innocent English businessman, whom one might today call a venture capitalist, is suddenly called upon by his American partner to come up with a few wealthy investors to finance the launch of a company that will ostensibly fund a new railway across a large swathe of the still undeveloped USA. The young Englishman naturally makes logical enquiries about the likely success of the project, what stage the planning is at, risks and so on.
These enquiries are brushed aside by the American (co-incidentally called Fisker – a more recent Fisker has managed to lose around $0.5 Billion of US tax payers money), who states that the present objective is not to build a railway, but to promote and float a company. Building the railway will be someone else’s problem.
If they can raise £3 million (a pretty massive sum at the time, of course) and promote the project with glossy literature touting the support of the government and the massive potential in a new untapped market, they ought to be able to get the share price up 10% in short order after ‘subscription’ (no listing rules then) and the initial investors can sell out and bank £300,000 (around £40 million today) between them for very little work!
Best not to get too wound up at my age…
Apart from highlighting the point that trading in shares is often very little to do with actual capitalism, the account highlights that those who are already rich can usually get richer without having to undertake anything more than some promotional activity that pulls in the naive, usually using the psychological trick of what we now call the ‘fear of missing out..
Now
Very recently, Open AI, a company that has no money from retained profits, has never even made a profit and which expects to burn through billions of dollars over the next few years, placed an order with Oracle, the data handling business, that was so large, the Oracle share price was pushed up over 45%, making its principle share holder even richer than Elon Musk.
Musk was obviously peeved by this, so he bought a large block of Tesla shares, causing the ‘Teslarati’ (not the brightest investors in the world) to pile in too and thereby boost the Tesla share price and put Musk ahead again. The very fact that Musk needed to do that tells you so much about his character.
It is said that Oracle has an advantage in that it can gets its hands on a larger share of the critical Nvidia GPU chips than some competitors in the AI supercomputer space. However, Oracle would of course have to pay for these processors and build the datacenters/supercomputers for OpenAI to be able to play with them. Who fronts up money first is an open question.
In essence the valuation of Oracle went up billions (and Nvidias share price was helped too) because an order was placed for services that some believe may never even be required (one survey shows that 95% of AI projects to date are not traditionally profitable) by a company that has no money until the market chooses to suppy it.
Many business writers and media content makers have pointed out that this is serious evidence of an AI sector bubble. That is hardly an intellectual stretch. My observation is at a more ethical level – two of the richest men in the world can get to be billions of dollars richer without any actual work being done, no improvement in the human condition, no employment opportunities created, in fact no enterprise and arguably not even any capitalism!
To repeat Trollope: it’s the way we live now. Or, as was recorded by the scribe of the Old Testament – there is nothing new under the sun.
Readers will know that Trump’s cuts to USAID have been savage, amounting to 98% plus of funding for conservation, biodiversity and climate-related programs. One project severely impacted is the Jane Goodall Institute Tanzania project which had been expecting nearly $30M over 5 years that it will not now get.
Jane Goodall is perhaps best known as the ‘chimpanzee’ member of Louis Leakey’s 3 muses, the scientists he mentoured and commissioned to help the great Apes. Dian Fossey was of course murdered working with gorillas. Birute Galdikas, a Canadian with Lithuanian roots, is the orang utan specialist and I often visit a planting of historic oak species named in her honour at the botanical gardens in Kaunas.
A charity that I support at absolutely no cost to me, but which is hugely effective in planting trees, is Ecosia, a search engine that behaves exactly like all others (although with better ethics) and delivers responses that at the moment come from Google or Bing, but will eventually come from a home-grown European search engine.
Ecosia will give $100,000 to the Jane Goodall project which they say will save 360,000 seedlings that might otherwise have been lost and sustain 20 local nurseries. They will also supply other logistical and local support, being experienced opeartors globally in reforestation.
Personally, I cannot see why anyone who cares about sustainability and has the opportunity to do something positive at no personal cost would not use Ecosia at least as one of a suite of search platforms. I have for years and it’s the default on all my devices. Please give it some thought.
In my earlier post today, I mentioned the 4 old men of the current apocalypse, to adapt St John, and as I wrote the words about at least a couple of them being potentially voted out of office, I felt uncomfortable. It just does not feel like that’s going to happen.
Most people know that if Netanyahu loses office, he will almost certainly go to prison on corruption charges. So he will do anything to stay in power. Trump maybe more ‘Teflon coated’ but no-one is going to argue that he does not want to hang on to power until his dying day.
I think I know how he will at least try to do that.
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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.
I was today referred from the New York Times to an article in the New Yorker, published under their Financial Page and entitled ‘Inflation – why almost everybody got it wrong’
In a short piece the writer points out why attempting to deal with inflation by referencing, amongst others, these factors, was not useful: the Philips curve; expecting unemployment to rise dramatically before inflation came under control; ignoring the ending of the Covid-19 consumer restrictions and the global container shortage that more or less co-incided with that; and above all the oil and gas price shocks triggered by mad Vlad’s horrific adventures in Ukraine.
These were all blunders made by government economists and central bankers. They treated inflation as a purely demand led issue and sought to strangle demand with interest rates. In fact the issue was mainly a supply shock. That was obvious, in my opinion.
As the article puts it, central bankers got lucky that inflation came down while interest rates were still high and they may have by a whisker avoided generating a totally uneccesary recession. They didn’t bring inflation down, but they can say that they did – I exactly predicted that a while ago.
Led by donkeys? That’s unfair to donkeys!
Wage growth followed inflation – it did not cause it – and wages are still now growing while inflation is falling. That trend will need to stall if inflation is to stay low, but it almost cerainly will. That is because demand is slowing and consumption is lethargic is some large market segments. The interest rate measures – a blunt implement – may start working (by throttling demand) when the inflation problem has already gone way. That is why the markets are talking about a ‘bumper’ cut from the US Fed.
Inflation in the last cycle was a supply led problem, given an extra push by consumers (especially in the USA) returning to doing what they do best after saving up money when they were locked into their homes, consuming prolifically!
Economics textbooks are no doubt being updated with an extra chapter and some new ‘magic maths’ of the type economists love to use.
As the writer at The New Yorker said – almost everyone got it wrong. Those of us who looked at the facts, applied some logic and came to rational conclusions did not! There is a lesson in that which you will find repeats constantly: the tendency of the people in power to follow ‘conventional wisdom’, even when an ordinary educated person would suggest that it is foolish in the light of the actual current facts. Possibly the new UK government is doing just that with its fiscal plans? It looks like it to me. Aaargh! Lady Thatcher would approve!
As investors, we can likely see what the implications of wrong headed policy will be and protect our portfolios. Avoiding fixed income coming up to October 2021 and the repurchasing that asset class after its inevitable rebasing are a great example.
I will await Ms Reeves Budget before pontification about how the UK economy might develop.
As a bonus aside, I saw a chart this week which showed that the last Conservative government increased taxation as a percentage of GDP by a rate not seen for decades. So any more taxes, allied with the very poor productivity gains (virtually nil), suggest record levels of taxation (in terms of GDP share) in recent times might be awaiting my readers. That is not necessarily bad for the UK equity market, because the UK government is actually more likely to spend the money in the UK than its own citizens!
