Wednesday, 20 March 2024

By Callum Newman Editor, Small-Cap Systems and Australian Small-Cap Investigator

[5 min read]

Dear Reader,

The Godfather of Artificial Intelligence (AI) speaks!

We could call him the King of Wall Street too.

Or the King of semiconductors.

Or simply Jensen Huang.

He’s the CEO of the hottest stock in the world: Nvidia [NASDAQ:NVDA].

NVDA is now the third most valuable listed company in the world. Which is also to say, in history.

Mr Jensen just unveiled Nvidia’s latest AI superchip – known as ‘Blackwell’.

The Australian Financial Review reported…

‘The famous Moore’s law of computing power, Huang said, holds that computing power increases by 100 times every 10 years.

‘In the last eight years, he says Nvidia has increased the power of artificial intelligence by 1000 times.

‘And we have two more years to go. That puts it in perspective: the rate at which we’re advancing computing is insane, and it’s still not fast enough.’

This is not hyperbole.

I’ve been around a long time.

I can remember when NVDA was the best performing stock on Wall Street in 2016 and 2017 too.

Its expertise here is unparalleled…and has a long history to back it up. 

If Huang says their advancing computing at an ‘insane’ level, I believe him.

I’m not telling you to buy NVDA. But it’s clear to me that AI is not a flash in the pan.

This thematic is going to run for years. And the ripples now from Nvidia’s big splash will spread far and wide.

We explored last week how this could send productivity, margins and profits up right across the stock market.

You can see the impacts on the ASX already.

For example…

Did you see Myer’s
latest appointment?

It might seem bizarre to go from the hottest tech stock on the planet to a department store that’s over 100 years old.

But Myer [ASX:MYR] has been in the news lately too. They need to replace their retiring CEO, John King.

Whom did they choose?

They chose a lady called Olivia Worth.

This was notable because Worth has no direct executive retail experience.

She ran Qantas’s Loyalty (Frequent Flyer) program before this – and very successfully too.

Her strengths are ecommerce, data and – obviously – loyalty.

Myer’s board knows perfectly well that its future lies in this direction.

Myer has 4.3 million ‘active members’ as part of its Myer One membership.

Every time they make a purchase, Myer gets a look at what, how and where they buy.

In other words, they are absorbing data from 4.3 million people making multiple spending decisions.

They’re now overlaying AI on top of it.

In their latest update, Myer said…

‘Enhanced analytics, AI and machine learning models are driving greater CRM benefits and providing stronger platform for personalisation, producing highest incremental revenue on record from own channels.’

There you have it. AI leading to more profits for even the most stolid company.

Kogan.com [ASX:KGN] has said something similar. It also has a multimillion customer base.

Part of Kogan’s recent resurgence is because it’s brought its previously bloated inventory under control.

AI is going to help retailers and other firms predict demand and therefore their inventory requirements.

And that’s the key lesson here. Please remember this one point above all: AI is a prediction technology. But it needs data. The more data, the better.

That’s precisely what loyalty programs like Myer One deliver by the truckload.

This is going to make retailers more efficient.

They’ll need less working capital and, all else being equal, report higher profits and return on equity.

This is just a small hint of the efficiency that AI promises.

Kogan, by the way, is up 80% this year.

I just launched a special report on 5 ASX small caps stocks that I believe the AI megatrend will benefit.

Kogan is not one of them…and nor is Myer.

The stocks in this report sit at the riskest end of the market and carry high volatility.

I wanted stocks with more exciting potential.

Curious?

I hope so! AI is minting millionaires across America from stocks like Nvidia.

The best news for all of us is this tech doesn’t stop at the Californian border.

It’s washing over the ASX right now…ready to lift the economy to new heights.

Check out my Top 5 ‘AI’ plays here.

Best,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

Callum Newman is a real student of the markets. He’s been studying, writing about, and investing for more than 15 years. Between 2014 and 2016, he was mentored by the preeminent economist and author Phillip J Anderson. In 2015, he created The Newman Show Podcast, tapping into his network of contacts, including investing legend Jim Rogers, plus best-selling authors Jim Rickards, George Friedman, and Richard Maybury. He also launched Money Morning Trader, the popular service profiling the hottest stocks on the ASX each trading day.

Today, he helms the ultra-fast-paced stock trading service Small-Cap Systems and small-cap advisory Australian Small-Cap Investigator.

By Bill Bonner Editor, Fat Tail Daily

[3 min read]

We connect the dots. Like seeing constellations in the night sky – Orion’s Belt, the Big Dipper, Las Tres Marias – some are obvious. Others are harder to see, with faint stars…far in the distance. 

But always, there are patterns…growth and depression…bull and bear…war and peace. Decline and fall. Some of them are very long patterns. Our friend, Chad Champion:

Since the founding of the Federal Reserve in 1913, the U.S. has lived through 3,000 percent inflation. A dollar equivalent back then is worth about 3.2 cents today!     

And to make the situation worse, the ‘over-population’ of money has reached unprecedented levels since 2008. The Fed’s balance sheet has exploded.

It went from just under $1 trillion before the Panic of 2008 to just under $9 trillion after the pandemic.     

Rome wasn’t built in a day. And it will take a long time, we presume, to bring America to its knees. But the two parties – the stupid party and the evil party – are doing their best, coming up with programs that combine the worst of both. Here’s another friend, Jeffrey Tucker, explaining what happened in the crisis of 2020:

‘As for 2020, that was a disaster for the ages, the single worst policy decisions by the Fed in its entire history.     

‘In the course of a few days, the Fed eliminated reserve requirements, introduced a huge range of new lending systems, bought every dollar of debt that the Treasury could create, and, over two years, unleashed the terror of $6.5 trillion on a demoralized public that was initially excited for the benevolence.

‘That charity turned to dust once the inflation started. Now, it’s all gone, and we’re dealing with three straight years of real declines in median family incomes.’

Power and Wealth

There’s another age-old pattern. As a nation/state/empire ages its ruling elites sit at the pinnacle of power and wealth. No matter which direction they look, it’s downhill. They become fearful…everything is a threat – a virus, a bear market, Russia, China…the future itself.   

One of the funniest things to happen last week was that the free thinkers in Congress voted overwhelmingly to ban TikTok. One of the reasons given was that lawmakers thought the app was ‘dumbing down America’s youth’.

Really? Not Facebook. Not the New York Times. Not Paul Krugman. Not Morning Joe. Not the US Congress. Not the public schools. Not the parents who let their children waste their time with electronic gadgets. Neither Biden nor Trump. Nope.    

Typical of a late-stage, degenerate empire, members of Congress are eager to protect themselves from anything new. Another claim made against TikTok is that it may collect data that could be used against us. What data? Where is it kept? What do they do with it? How would it be used against us? What damage could a Chinese-owned app do that our own insipid media cannot? The politicians have no idea, but they’d send troops to TikTokLand…if they knew where to find it.

‘Throw the Bums Out’

Still another pattern: over time, ruling elites are prone to becoming corrupt and incompetent (stupid and evil). They favor war and inflation, partly as a way to keep the future from happening and partly as a way to continue to transfer more wealth and power to themselves. The increased supply of war and inflation leads to a decline in their value. Eventually, the elites cannot win a war (e.g. Vietnam, Iraq, Afghanistan, the Ukraine)…nor control inflation.

In theory, a democracy is supposed to solve the problem of decay at the top. The voters are supposed to ‘throw the bums out,’ and elect new, more vigorous leaders.  But where are these new leaders?  

In smallish communities, democracy seems to work. But in practice, in a large government, the political parties, Congress, the administration, the press, Wall Street, powerful donors, lobbyists, organised special interests, and the firepower industry all lock arms to block change. You end up with geriatric leaders and disastrous policies. 

Blow Up

Who really wants a rematch between Biden and Trump? We all know who they are…what they are…and what they will do. And what they won’t do. And neither of them, neither the fool or the knave, will face up to the most obvious crisis in America’s history…or avoid it in the most obvious way.

Here’s Bloomberg:     

‘Rogoff Says Biden, Trump Favor ‘Blowing Up’ US Debt

‘Harvard University economics professor Kenneth Rogoff said both President Joe Biden and his predecessor and challenger Donald Trump risk sending US debt levels into dangerous territory as Washington fails to grasp that the era of ultra-low interest rates won’t come back. 

‘“Biden’s speech suggested blowing up the debt... We have really no idea what Donald Trump will do, but that’s what he did last time he was president — good guess he will do it again,” Rogoff said, referring to widening fiscal deficits when Trump was president 2017-21.’

Since the last major financial crisis – 2008-2009 – the feds have added a staggering $25 trillion in new debt. And they’re on course to add another $16 trillion according to their own budget projections – over the next 10 years. If they don’t change course soon…there will be Hell to pay. What that Hell will look like, we will discover along with everyone else. But it is sure to include more inflation and more war.

Stay tuned.

Bill Bonner,
For Fat Tail Daily