Bill Bonner, reckoning today from Youghal, Ireland...
A shudder in the loins engenders there
The broken wall, the burning roof and tower
And Agamemnon dead.
Being so caught up,
So mastered by the brute blood of the air,
Did she put on his knowledge with his power
Before the indifferent beak could let her drop?
~ Leda and the Swan, William Butler Yeats
Poor Leda. Pinned down by a lusty bird.
The swan was hot!
Dot.coms were hot. Crypto was hot. New tech was hot. And now Artificial Intelligence; you’ll need asbestos gloves to touch it. Here’s some advertising we just received:
My favorite AI investment was created by the "father of AI" - a genius who's trained the cream of the crop in AI.
It's only 27 cents right now and has a market cap of about $322 million... which means we could see incredible gains over the coming months.
I'm targeting 10X gains over the next 18 months from this asset.
You won't want to wait on this one.
The “father of AI?” How about a paternity test!
And then, wouldn’t the inventor of AI have almost unlimited access to capital? AI is the hottest thing in the financial world; wouldn’t the monied, tech elite rush to get in on it?
Why would he try to raise money – by selling stocks at 27 cents each – from total strangers?
It doesn’t pass any test – smell, sight, sound…logic…experience…theory. But what do we know? And here’s the hottest stock on the market. Bloomberg:
Nvidia Set to Beat Apple for Record Single-Day Market Value Gain
The world’s largest semiconductor maker by market capitalization soared as much as 29% in post-market trading Wednesday…. If the gain holds, its value would rise by $219 billion to an all-time high of $974 billion.
And while its latest jump tops the US chart, it still ranks at least No. 2 globally. PetroChina Co. added nearly $600 billion in its first-day of trading in Shanghai in November 2007.
Why is Nvidia so hot? It sells chips used in AI.
Nvidia rose 80 times over the last 10 years. If that happens again, it will make the company worth more than all the companies presently traded in the USA. Won’t that be exciting.
Black Swans, Blind Men
Of course, both experience and Newton’s ‘Law of Cooling’ tell us that what is hot today is more likely to be not-so-hot tomorrow. The beak becomes ‘indifferent,’ says Yeats. And Newton’s law tells us that the hotter the object (compared to its surroundings) the faster it loses heat.
But according to the press, neither experience nor theory have anything to do with it. There is no precedent for AI, they say. Here’s the latest hype from Business Insider:
ChatGPT was a black swan event
Bill Gates says its creation is as fundamental as the computer chip, the internet, and the PC. Elon Musk wants to put the brakes on development. Warren Buffet is already comparing it to the atomic bomb.
At least 49 listed US companies have mentioned ChatGPT in quarterly earnings calls in May 2023 to date, according to an analysis of Seeking Alpha transcripts by Insider. It's a sign that corporate America is rushing to show off this new, important tech trend.
The “Black Swan” concept was made famous by our friend Nassim Taleb. He showed that just because something hasn’t happened yet doesn’t mean it’s not going to happen.
The Second Coming
Like the housing bubble blow-up in 2007, for example. ‘Who saw that coming?’, asked Ben Bernanke, then leading the Fed and holding a white cane.
‘Housing never goes down;’ remember that?
And since people don’t believe it is going to happen at all, the payoff for the people who bet on it can be high. The rest get, more or less, what happened to Leda.
A real ‘Black Swan’ is something that you think doesn’t exist. Something unexpected. And yet…you could see AI coming from miles away. The techy press has been prophesying it for many years. Now that it is here, investors and the press are whooping it up as if it were the Second Coming.
Talk about brouhaha. Whatever knowledge or power Leda got from the big bird must have been a pittance compared to what we’re getting from AI. Or so they say. In any case, we haven’t seen anything like it since, well, since the last Black Swan, when Satoshi Nakamoto released Bitcoin in 2009. Or since Tim Berners Lee cut the ribbon on the world wide web in 1989.
So, if this is another Black Swan…welcome to the bevy!
Tomorrow…we ask AI some tough questions.
Joel’s Note: The after hours A.I. affair with NVDA 0.00 appeared to have spilled over into a leisurely breakfast in bed before markets opened for trading this morning. From the Financial Times:
Shares in Nvidia were up 25 per cent in pre-market trading after its $11bn sales forecast for the three months ending in July came in more than 50 per cent ahead of Wall Street’s previous estimates.
If the move continues into regular trading hours, Nvidia could add almost $200bn to its market capitalisation, more than the entire value of Intel, AMD or Qualcomm and the biggest one-day gain ever for a US stock, according to figures from Bloomberg. The rise would put it within $50bn of joining Apple, Microsoft, Alphabet and Amazon in the elite group of companies valued at more than $1tn.
Hmm… more big numbers for merely mammalian brains. One Twitter user put the enthusiastic gush of excitement from into perspective (H/T @JaguarAnalytics). The $220 billion is roughly equal to…
1x Bernard Arnault
1x Entire German auto industry
4x Cash left in the US Treasury
Of course, that’s going by yesterday’s numbers… the US Treasury has way less money in its coffers today!
Yes, dear reader, while Artificial Intelligence whispers sweet nothings into weak-kneed investor’s ears, Human Intelligence (or lack thereof) is on full display in the hallowed halls of congress. But that is a story for another day…
Meanwhile, as the world goes gaga over shiny new A.I. gadgetry, Tom and Dan have been investing in real, old world stuff... the kind that is needed to keep lights on and facilitate global commerce. That includes in the shipping space, with which Bonner Private Research members are already well familiar.
The Official BPR Stock Watchlist currently has 11 open positions (nine rated “buy”) including one Tom added in yesterday’s May/June 2023 Monthly Strategy Report. The average return is just over 16%.
If patient, low volatility investing is more your speed than chasing high-flying black swans, you might like to take a look at becoming a Bonner Private Research member. Find a plan that suits your needs, here…
Recall in 2011 when the IBM supercomputer Watson beat the top 2 Jeopardy champions. This was AI come of age, we were told. I must admit that at the time I was a bit stunned, in a way that Deep Blue’s defeat of Garry Kasparov in 1997 failed to elicit. A computer winning at Chess was mostly number crunching, I told myself. But Jeopardy? Now that was truly impressive. The toughest Jeopardy questions require non-linear “thinking”, the ability to connect disparate dots and see similarities in dissimilar things. A top notch information store and the ability to solve a complex thought puzzle in seconds is the ticket. Few people have the ability. Computers? Forget about it! It had been long said that a computer could never win at Jeopardy because a computer could, never ever really simulate and best a human brain at precisely the thing that human brains were best at. And then it happened.
Or did it?
In 2011 it never would have occurred to me that maybe, just maybe, Watson had the answers ahead of time. I am not making that claim here. I am simply saying that what I know about the world we live in now and what I knew about it 12 years ago has undergone a kind of Bayesian inference transformation. I was never a Conspiracy theorist. In 2021 I claimed my honorary degree and went straight to Conspiracy Analyst.
AI may be many things. Among them may be the greatest PsyOps tool ever imagined by the imaginers.
While everyone is pre-occupied with AI, the debt ceiling, and the NBA/Hockey championships, as a retired nuclear engineer I focus on the impending catastrophe at the Zaporizhzhia Nuclear Power Plant in Ukraine. This is my "black swan". Since being captured by the Russians, more than half its staff have left, equipment is degrading due to lack of proper maintenance, the idiot Russian military violate safety protocols all the time, shelling occurs nearby, and there is only a single source of outside power to cool its reactors. Sooner or later luck will run out, and the world will be faced with a nuclear accident and the release of radioactivity into the environment. How bad will it be? Don't know, but it could be very bad! I don't see any evidence that Biden and his NATO are doing anything to address this concern. As for the Russians, I would not be surprised if they sabotaged the plant should they have to retreat in the upcoming Ukrainian offensive. Not really a BPR issue, but thanks anyway for letting me vent on this....