Students prefer socialism, but what if they were the ones who had to pay for it?

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According to a recent Gallup poll, more young Americans would prefer living in a socialist country than a capitalist one.They like the idea of free education, free healthcare, and even free income. To receive these benefits students are increasingly supportive of higher taxes on the wealthy in order to pay for these progressive policies. But would they be supportive of similar policies if they were the ones paying for it?

Campus Reform‘s Cabot Phillips went to Florida International University in Miami to ask the students if they would support a “Socialist GPA” policy in which students with higher GPAs would be forced to “spread the wealth” and give some of their GPA points to students with lower GPAs.

Check it out!

Why should I care if the yield curve inverts?

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On Wednesday last week the US Federal Reserve announced the expected, saying they were not raising rates at this time. Voting members also changed their outlook for 2019 from the two increases predicted in December to no movement. At first the stock market loved the news, but as the day went on investors started to digest why the Fed was not raising rates – a slowing global economy. Then on Friday we got the news that the 10 year/3 month yield curve had inverted.

What is the yield curve?

The yield curve is a way to show the difference in the compensation investors are getting for choosing to buy shorter – or longer-term debt. Typically an investor would  expect more return for lending their money for longer periods, with the greater uncertainty that brings. So yield curves usually slope upward.

A yield curve goes flat when the premium, or spread, for longer-term bonds drops to zero – when, for example, the rate on 30-year bonds is no different than the rate on two-year notes. If the spread turns negative, the curve is considered “inverted.”

Why should I care?

The yield curve generally reflects the market’s assessment of the economy, especially related to inflation. If investors believe inflation will increase they will demand higher yields to offset its effect. Given that inflation usually comes from strong economic growth, a sharply upward-sloping yield curve generally means that investors have bullish (positive) expectations. An inverted yield curve, by contrast, has been a reliable indicator of impending economic slowdowns, often alerting to a coming stock market top and recession, like we saw in 2007.  Every recession has been preceded by an inverted yield curve.

Last week we saw the 10-year/3-month yield curve invert which is our first official key warning of a looming stock market top and recession..

But we have not yet seen the more watched 10-year/2-year yield curve invert. When we see the 10/2 year invert then the clock will start ticking to a stock market top and a recession.  On January 24th we posted a blog on how an inverted yield curve and a top in the Confidence Board Leading Economic Indicator (LEI) are great tools to alert us to a looming stock market top.

Luckily for our subscribers, back in November, while the mainstream media was calling for a steep bond market sell-off,  our models projected that we would see a significant short-term bond rally. On November 12/18 we entered  a trade using an Exchange Traded Fund  (ETF) and that trade is up over 20% in just over 4 months.  Make no mistake, long-term we will see the bond market sell-off, but according to our models that scenario is a ways off.

Stay tuned!

 

 

 

Will AMAZON be in every room of your house?

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There are many companies working diligently on interesting Artificial Intelligence (AI) projects, ranging from medical imaging to autonomous vehicles and advanced robotics. We see AI as being a disruptive technology that will have long term and far reaching impacts, and the changes envisioned will be evolutionary rather than revolutionary.  Machine learning is an iterative process, and each iteration takes time, as well as careful monitoring and tweaking by software engineers.  Often these advances spawn ethical and moral questions, generating lots of lengthy discussion, as well as legislative and regulatory concerns that need to be sorted out.  It is no wonder that AI projects are indeed evolutionary, and for the most part – unstoppable.

In the world of AI, one of the most poorly kept secrets is Amazon’s VESTA Project, which Amazon is not talking about, but lots of others are.  VESTA is the kind of initiative that illustrates many facets of AI. The VESTA idea is to integrate smart robots into the AMAZON smart home environment, interacting with ECHO and ALEXA devices in your home.  Interesting, and very cute, that VESTA is the Roman Goddess of hearth, home, and family.  These domestic robots will be much different from their workhorse robots that automate AMAZON warehouses.  VESTA is being developed by the Lab126 division, which is not part of the industrial robot division.  VESTA may be able to integrate household chores, entertainment, information, and home systems management all within the AMAZON smart home systems environment.

It is anticipated that the Amazon VESTA robot will be mobile enough to guide itself to every room in your house, as needed or as commanded.  The use of cameras and sensors would be similar to those used in autonomous vehicles.  Other domestic robots have been tried, with the most successful to date being ROOMBA, which has a very limited scope of duties – vacuuming and parking.  However, ROOMBA sales are impressive and the shopping public certainly likes the idea of machines taking on boring chores around the house.  Other domestic robots, like SONY’S barking dog “AIBO” and the dancing “QRIO” have proven to be just expensive novelty items that did not conquer the domestic robot market.  Success in the domestic robot market will depend on the machines having desirable features that are easy to use in an attractive package.  Easy to say, but still a little elusive – for now.

There will be many challenges to these developments, as there is growing concern with technology infiltrating so many areas of our lives.  Concerns range from invasion of privacy, loss of autonomy, protection of personal information, and a general fear and mistrust of technology that we do not fully understand.  And of course there is the fear brought on by all those chilling, and perhaps silly, sci-fi movies with titles like “Revenge of the Killer Robots”.

Trend Disruptors is watching this sector closely, as we perceive great profit potential when these AI devices come to market and succeed.  There are many technology companies that could play a pivotal role in providing specific expertise and/or specialized products to make domestic robots a huge success – and a welcome addition to our homes.

Stay tuned!

Market Notes

Two indicators showing stock market is overbought

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The S&P 500 is attempting to break through its key near-term resistance range but as of today it is also getting overbought. While we remain long-term bullish for the equity markets, we note that two key technical indicators are signaling that the stock market is getting overbought in the near-term.  On the chart below we show how the Bollinger Bands (set of blue wavy lines) and the Relative Strength Index (lower chart) are very close to signalling the market is overbought. As highlighted by the red arrows, when we get both the Bollinger Bands and the RSI are indicating an overbought status, we typically see a pullback.  This does not mean the high is in, but it does warn that we should see a pullback soon.

The red shaded area has been our model’s near-term target high for the S&P so the timing here would fit our model’s call for a pullback in March. The green shaded area was the previous resistance range and is now the near-term support level.

The US Fed is having its FOMC meeting Tuesday and Wednesday and the market is expecting to hear Fed chair Powell step up to the microphone on Wednesday and say they are going to “wait and see,” meaning they will wait to see how the economic data evolves before making any interest rate decisions.  Any message suggesting a potential rate hike would spook the market.

Stay tuned!

Will CRISPR be an accepted Solution?

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Health care costs and budgets are ballooning all around the world as we see global populations moving into higher and higher age brackets.  With so much health care research going on, doctors are challenged to keep up with new drugs and their side effects, as well as new procedures and tools that deliver more accurate and timely diagnoses and remedies.  Once in a while a new technology will emerge that has the potential to dramatically alter the status quo.  CRISPR has that potential, as it may be a way to end all disease – wow – a very BOLD statement indeed, but could it be true?

CRISPR (pronounced crisper) is a simple and powerful tool for editing genomes, allowing researchers to alter DNA sequences and modify gene function.  There have been DNA editing tools before, such as TALENS, but CRISPR is about 4 times more efficient.  The term CRISPR is the short form for describing CRISPR-Cas9, a specialized stretch of DNA.  Cas9 is an enzyme that acts like a pair of molecular scissors, able to cut strands of DNA.  CRISPR itself stands for “Clusters of Regularly Interspaced Short Palendromic Repeats.” The process was first fully described in a paper published by researchers at Kanazawa University and Tokyo University in 2017, although research reports and papers go back as far as 2007 by Danisco A/S in Denmark, 2012 in the National Institute of Health and PNAS , and 2013 (MIT and Harvard).  These studies and papers all help to pave the way forward for many possible therapeutic applications in humans.

Editing DNA has many potential applications, such as correcting genetic defects, treating and preventing disease, and improving food crops. There is of course vigorous debate about the ethics of genetic modification, in humans, in other animals, and in food.  Although the really exciting potential may be in disease eradication, there are current uses of CRISPR in the food and agriculture industries, such as the engineering of probiotic yoghurt cultures and vaccinating industrial cultures against viruses.  We currently also have in place the genetic engineering of crops to improve yield, drought tolerance, and nutritional properties, all with attendant controversy.

Another promising facet to CRISPR technology is the ability to create gene drives, which are genetic systems that increase the chance of a specific trait being spread generationally to a large population, such as increased sterilization among the female mosquitoes that carry malaria.

There are certainly many positive-sounding potential benefits for using CRISPR technology.  It’s relatively easy to get excited about eradicating a disease like cystic fibrosis, and it is hard to deny that global populations would benefit from increased food production and nutrition … but the big questions and debates centre around –  – is DNA editing safe and ethical.  Academic researchers are generally cautious and wary of proceeding too quickly, wanting to establish ethical standards, safety procedures, and eventually achieve public acceptance through long term trials.  Virtually no one wants to proceed without caution, but capitalism has a need to push hard in generating gains and profits for companies and shareholders.  DNA editing, in any organism, has great potential, but there are many perceived risks and questions, such as:

  • will it be ok to eradicate disease viruses along with the animal species carrying them around?
  • -will there be unintended ecological impacts, such as a gene drive trait spreading beyond its target group?
  • will modifying human eggs, sperm, embryos, (known as “germline” editing) be safe, given that our knowledge of how it all really works in the long term is still somewhat limited (Are we now smart enough and ready to “play God”?)
  • how do we control germline editing and prevent it from veering off into human enhancements, beyond disease eradication?
  • how do we rationalize the perhaps unknown consequences for future generations without their consent?

The debate will be a struggle, and probably a long one.  In the USA the National Academies of Sciences, Engineering, and Medicine have put together a comprehensive report with guidelines and recommendations. Meanwhile, research will continue and Trend Disruptors will monitor progress, looking for opportunities to invest in companies that we perceive to be a good bet.  As well as investment potential, our analysis of this disruptive area of health care technology must include extra large doses of other considerations, such as ethics, safety, and ecological ramifications.

Stay tuned!