Favorite Stand Up Monday – Mike Birbiglia “You’d Be Surprised”


For my 100th (technically 101st) post, one of the comic’s I haven’t posted about yet is Mike Birbiglia. He’s not only a great comedy writer, but also has a knack for acting and filmmaking. If you’re looking for a brutally honest, yet funny movie, I highly recommend his 2012 movie “Sleepwalk with Me”; which is an intimate look into a young comic doing anything he can to make it big.

This whole clip is great, but my favorite joke I’ve heard in a while starts at the 3:30 mark.

 

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Stock Market Update: Locating the Nearest Exit


I had a post two months back that highlighted how I was worried about the health of the market. Well, that view continues and my assumptions have been correct so far. The one addition I would add to that post, in which I discussed how few stocks are participating in these new highs, is that there are fewer stocks participating in the all-time highs. On top of that, most of the names that are holding up are large caps, whereas small/mid-caps were leading up until the end of 2013. This is usually a tall tale sign that the market has gotten too risky to be in “speculative” names and participants are “hiding” their money in “safe” large caps. To top this all off, volatility has been extremely low, and I’m sorry to say, but historically, these long/low volatility periods don’t last for long. Just like the small/mid-caps have gotten crushed in the past few months, I’m expecting large caps to do the same. To dig further into why this divergence in large caps and small/mid-caps is disheartening, read this brilliant post. To highlight, an old client and good friend of mine, Craig Johnson, does a great dissection of why what we’ve seen over the last few months, historically bodes to a large pullback, usually 15-20%. You’ve been warned!

My prediction was a choppy/poor performance through the end of September, then Q4 the market would finish with a rally. At this point, I still stand by that prediction. To position myself to take advantage of that prediction, I’ve increased my positions in TLT, XLU, XLP, GLD, UUP, and SH.

I haven’t left the building, but I’ve identified where the nearest exits are.

“The continued divergence between the Russell2000 index and the popular large-cap indices (DJIA and SPX) is a clear indication of weakening breadth and slowing momentum, and suggests investors are making an attempt to reduce portfolio risk by rotating assets toward the traditionally defensive area of the market.

To gauge the size of a possible decline we have identified years where the DJIA outperformed the RUT (a strong possibility for 2014), and measure the size of the market pullbacks that occurred in these years…..Thus, should the median pullback unfold this year, it would suggest a deeper correction in the broader market back towards 1,600-1,650 on the S&P500 Index.”

The Singularity (Robots Take Over) and Artificial Intelligence


The Wikipedia definition of “The Singularity”:  “is a hypothetical moment in time when artificial intelligence will have progressed to the point of a greater-than-human intelligence, radically changing civilization, and perhaps human nature.[1] Because the capabilities of such an intelligence may be difficult for a human to comprehend, the technological singularity is often seen as an occurrence (akin to agravitational singularity) beyond which the future course of human history is unpredictable or even unfathomable.”

What most people think of when they think of situations like The Singularity, many people think of movies or fiction books (Skynet, The Matrix, 1984, etc.). Each envision a world where “the machines” are smarter than us and think on their own, without regard for the human condition, well-being. Famous entrepreneur and investor Peter Thiel, has  a particularly interesting take on all of this, much of which I agree with. To save you the time of watching the link, he says “all we [humanity] needs is The Singularity.” The reason I agree with the fundamental point of his message is that technology “usually” makes our lives easier, more efficient. More importantly, a new advancement in artificial intelligence would create new jobs where humans control the “smart machines”. Think of it as when machinery was first introduced to factories during the Industrial Revolution. The advent of machines in factories lowered the barrier to entry to the industry and encouraged new competition. For example, it took less “man-power” to produce thousands of garments in a day. Curating and maintaining a machine’s artificial intelligence will be the “factory job” of the future. This may sound odd, but that may be because artificial intelligence is commonly misunderstood.

By working at a startup that gets looped into the “artificial intelligence” realm/discussions, I’m well aware of its recent resurgence, popularity. And what’s comical/frustrating is the public’s view of what artificial intelligence is. We’ve made it a point in sales meetings to explain the different “flavors” of artificial intelligence. So let me set the record straight, artificial intelligence by and large can be: 1.) self-learning (machine-learning), 2.) mimick current human behavior, or 3.)  deep-learning. [Head over to the Narrative Science blog for more interesting pieces on this discussion.]

My larger point about point about all three types of AI is that, despite what you may think, all of these take human interaction and intervention. A computer has no sense of what is right and what is wrong, unless verified by a human. Computers can find interesting things in data (machine-learning), but only a human can verify that correlation equals causation. For example, a computer might find that the number of kiwis harvested increases fairly linearly with the number of deer killed each season in Wisconsin. This is useless, spurious correlation that we wouldn’t want computers to identify as significant.

Sure, there are ways to program and help a computer dictate with metadata what could be true/false. But don’t believe that these machines are learning all on their own, they need validation, which usually happens “off-line”, aka by humans (including Watson and every other piece of AI). That’s where jobs are created by artificial intelligence, as opposed to consuming the very jobs that people are concerned they’d be replacing.

My Latest Stock Picks…..Q1 Update


With Q1 coming to a close, it’s time to figure out what’s going on in the markets and where might be some good places to be over the next 6 months.

The markets have been choppy year-to-date, but have managed to hit new all-time highs in the last week or two. The particularly discouraging part of the new all-time highs was that not very many stocks made their own new highs. Meaning this all-time high is weak and only a few stocks pushed it to these new highs. That’s NOT good.

And there are some bubbles that are forming (man do I hate that word, “bubble”). In particular, IBB (a Biotech ETF) has been pushing the NASDAQ to all-time highs. Volume in penny stocks (stocks under $5) have hit a high since the tech bubble in ’99/2000. Below is a checklist that I saw in the Wall Street Journal a while back. I’ve been updating it as this bull market gets older. Hopefully by my holdings you’ll notice I’ve been getting more defensive, out of high-growth tech and in broader ETFs and more defensive names. My latest moves have been into TLT, XLP, and EGPT. For me, I’m starting to get defensive for 2014, hopefully by 2015 we’ll be back to 2013 returns. My price target on the S&P 500 for the end of the year is 1,925. Assuming a pull back over the next 6 months with strength returning the end of the year. Momentum is starting to turn negative, leading to the pullback in the near-term.

2014-03-25 20_37_32-Scott (kohl_in_one) on Twitter

Current Holdings:

Ticker Price Bought
BRK/B $76.22
XLB $42.03
XLK $33.14
WDAY $106.71
AAPL $460.88
JCI $37.50
V $183.12
TCPC $15.12
EBAY $54.46
DDD $54.55
SPY $182.05
XOM $95.47
SH $25.10
XLP $42.05
TLT $108.02
EGPT $70.01

Move out of these positions over the last few months:

– Sold GDXJ – Junior Gold Miners ETF – Liked this play in the fall, and starting to like it again.  If markets stall and/or tank in the next few months (which I think is possible), I might be in this again.

– Sold DTYS – Inverse 10+ Yr. Yield – I like this play over the next 15 years, but in the short term, not going much of anywhere.

– Sold YHOO – Yahoo! – Took my nice gain and cashed it in. Also, all of Yahoo! acquisitions seem to be fruitless thus far.

 

Revolution in Batteries and Wireless Charging


If you didn’t know that the ‘battery revolution’ was upon us, then let Tesla’s announcement of its plan to build a multi-billion dollar battery factory be your wake up call.  The lithium-ion batteries that are in our always-on  phones are now moving to cars, as movement away from non-renewable resources grows.

Although this push for longer-lasting, more efficient batteries is the next logical step in the world’s dependency on energy everywhere, 24/7. But  I think the inevitable next step after “super” batteries would be no batteries at all, via wireless charging. Let me explain a little more.

There is a company that is keeping its technology close to the vest about wireless charging, a company called uBeam (there’s not much to the site). They’re aiming to build new infrastructure and networks that work much like cell towers and cell signals work today. Except they’d be emitting a certain frequency that a special sensor in your device can detect and initiates a charging-like actions. So batteries wouldn’t necessarily go away, but you’d be less tied to your power cord and a wall.

It makes sense that they may roll out an “in-house” product first, so you can wirelessly charge items in your house (and keep them charged, even with a weaker battery). At that point, a high-end battery would be rather useless if you could essentially be “plugged into the wall” 100% of the time.

How the Tech World Turns


With Facebook buying Oculus Rift (a virtual reality startup that produces virtual reality “goggles”), it’s apparent that Zuckerberg is trying to stay ahead of the tech curve. What FB will do with Oculus remains slightly unknown, but the Oculus team has up to $300 million in incentives to hit certain milestones. I’m imagining that FB will attempt to capitalize on virtual reality as the new platform and its social and advertising revenue opportunities, while still keeping users active on PCs and on mobile.

This seems outlandish and slightly far-fetched, but after working at a tech startup for over the last year, you start to understand how quickly tech evolves. From the creation to testing to market acceptance or denial of a new technology can be a relatively short time. We at Narrative Science have been working to perfect artificial intelligence for years. The advances we’ve made have been astounding, all while getting a fair amount of press. But if people can’t use your product everyday, they assume you’ve failed. Until one day your product ends up in the hands of consumers who finally understand how they leverage your technology. My point, because people haven’t been able to use the Oculus Rift or Narrative Science for that matter, it’s easy to scrutinize the technology.

The second industrial age in upon and the rate that software is progressing is astonishing, rates we’ve never seen before. At the beginning of this second machine age, FB realizes how important it is to have a hand in the latest, possibly game-changing tech. Although people can’t see it now, FB will help bring this technology to the masses, while putting a few dollars in its pocket.