Category: Opinion

When OpenAI Unleashed ChatGPT, Productivity, and Efficiency Took a Giant Leap Forward

Posted on by phoffman@channelchek.com
Image Credit: Alan Levine (Flickr)

Getting to Know ChatGPT: A Shallow Dip into Its Current Functionality and Future Potential

ChatGPT and the underlying AI technology are, as near as anyone can tell, the next-level toolkit for research, communication, idea generation, and a million other uses. If you haven’t introduced yourself to it yet, leave plenty of time –  getting started is easy, but getting yourself to stop may not be. Those of us that were around pre-internet may liken the first-time experience to the first time we gained access to the world wide web. The Sudden, much easier access to a world of information, puts one in a place where you don’t know what to try first.  

Over the past couple of months, the now-familiar name, ChatGPT has made headlines. It quickly captivated the worlds imagination as an AI product that is likely to disrupt or destroy some industries while enhancing others. Obviously, this is of particular interest to investors. With this in mind, I sat down for an interview with ChatGPT; below are answers to questions that many investors are asking.

Channelchek (PH) – Am I able to interview Chatgpt?

ChatGPT – Hello! As an AI language model, I’m happy to answer any questions you may have. However, it’s important to keep in mind that I don’t have personal experiences or opinions like a human, and I can only provide information based on my training data. So feel free to ask me anything!

Channelchek (PH) – What do most users have ChatGPT to do for them?

ChatGPT – As an AI language model, ChatGPT can be used for a wide range of tasks, including:

  • Language translation: ChatGPT can be used to translate text from one language to another.
  • Content creation: ChatGPT can generate text for various types of content, such as articles, blog posts, and product descriptions.
  • Chatbot development: ChatGPT can be used to develop chatbots that can interact with users and provide information.
  • Sentiment analysis: ChatGPT can be used to analyze the sentiment of a piece of text, such as a social media post or a product review.
  • Question-answering: ChatGPT can be used to answer questions on a wide range of topics.
  • Text summarization: ChatGPT can be used to summarize long pieces of text into shorter, more manageable summaries.
  • Language modeling: ChatGPT can be used to train new models for specific domains, such as medical or legal language.

These are just a few examples of what ChatGPT can be used for. Its versatility and flexibility make it a powerful tool for many different applications.

Channelchek (PH) – From where do you pull your answers ChatGPT?

ChatGPT – As an AI language model, I don’t have pre-programmed answers. Instead, I generate responses to questions by analyzing patterns in large amounts of text data that I was trained on. Specifically, I was trained on a dataset of billions of words from various sources, including books, articles, websites, and other textual sources. During my training, I was exposed to a wide range of topics and writing styles, which helps me generate responses to many different types of questions.

When you ask me a question, I use natural language processing (NLP) techniques to analyze the question and generate a response based on patterns in the text data that I was trained on. I then use statistical models to determine the most likely response based on the context of the question and the patterns in the training data.

It’s important to note that my responses are only as accurate and reliable as the patterns that I learned during my training. While I strive to provide accurate and helpful information, I may not always get it right, and my responses may not reflect the views or opinions of OpenAI.

Channelchek (PH) – Are you at risk of having the response you generate slanted or biased based on users feedback adjusting your training ChatGPT?

ChatGPT – As an AI language model, I am designed to learn from the data that I am trained on, including the feedback that users provide to adjust my training. However, it’s important to be aware that the feedback that users provide can sometimes introduce biases into my training.

If the feedback is consistently biased in a particular direction, this could affect the accuracy and fairness of my responses. This is why it’s important to carefully monitor and evaluate any feedback that is used to adjust my training, and to ensure that it is representative of a wide range of perspectives.

To address this issue, OpenAI has implemented a number of safeguards to prevent bias and ensure that my training data is as accurate and diverse as possible. For example, the training data is carefully curated to include a wide range of sources and perspectives, and the training process is carefully monitored to ensure that biases are not introduced.

Additionally, OpenAI has implemented a number of techniques to help identify and mitigate any biases that may be present in the training data or feedback. For example, I am periodically evaluated to ensure that my responses are accurate and unbiased, and any issues that are identified are addressed through additional training or other adjustments to the model.

Channelchek (PH) – As an editor I write for Channelchek about stocks, the financial markets, the economy and business climate. Are you a good resource for current events related to these topics ChatGPT?

ChatGPT – As an AI language model, I can certainly provide you with information on current events related to stocks, financial markets, the economy, and the business climate. I have been trained on a vast amount of text data, including news articles and other sources related to these topics, so I can provide you with up-to-date information and insights on current events.

When asking me questions related to these topics, it’s important to provide me with as much context and specificity as possible so that I can provide you with the most accurate and relevant information. For example, if you are looking for information on a particular company or sector, you could provide me with the name of the company or sector, as well as any other relevant details or questions you may have.

However, it’s important to note that my responses are generated based on patterns in the text data that I was trained on, and may not reflect the views or opinions of OpenAI. Additionally, while I can provide you with information on current events and trends, I cannot provide investment advice or make predictions about future market performance. It’s always important to carefully evaluate information and seek the advice of a qualified financial professional before making investment decisions.

Channelchek (PH) – Do users ask you to forecast the stock market direction?

ChatGPT – Yes, users sometimes ask me to forecast the direction of the stock market. However, as an AI language model, I cannot make accurate predictions about future market performance. While I can provide information on current market trends and historical data, predicting the future direction of the stock market is a highly complex task that involves a range of economic, political, and social factors.

It’s important to note that investing in the stock market involves a certain degree of risk, and investors should always carefully evaluate market conditions and seek the advice of a qualified financial professional before making investment decisions. While I can provide general information and insights related to stocks and financial markets, I cannot provide investment advice or predict the future performance of individual stocks or the overall market.

Channelchek (PH) – Are you familiar with Channelchek?

ChatGPT – While I am not specifically programmed to be familiar with individual websites, I may have come across content from Channelchek during my training.

That being said, I can still provide you with general information on what Channelchek is. From my understanding, Channelchek is a financial information platform that provides independent research, analysis, and market commentary on publicly traded companies. It offers a range of tools and resources for investors and financial professionals, including market data, stock quotes, and research reports.

Channelchek’s focus is on providing unbiased and independent information to help investors make informed investment decisions.

Channelchek (PH) – Does your AI technology pose a risk to traditional internet search engines?

ChatGPT – My purpose is not to compete with traditional search engines like Google or Bing, but rather to complement them by providing an additional source of information and assistance to users. While I am capable of providing answers to a wide range of questions and generating responses to open-ended queries, I am not designed to replace traditional search engines or web browsing.

Search engines like Google and Bing are still the primary means by which users navigate the internet and find information, and they use a range of sophisticated algorithms and machine learning techniques to index and rank content on the web. While I am capable of processing natural language queries and generating responses, my training data is based on pre-existing content, which means that my responses are generated based on patterns in the text data that I was trained on, rather than direct access to the vast amounts of data on the internet.

Early Boolean Phrase Search Tool

Overall, AI language models like me are part of a larger ecosystem of tools and technologies that are designed to help users access and navigate the vast amount of information available online. While there may be some overlap between the capabilities of traditional search engines and AI language models, both serve different purposes and can work together to provide users with the most comprehensive and accurate information possible.

Channelchek (PH) – What industries are you likely to disrupt and which are you likely to augment or help build?

ChatGPT – As an AI language model, my capabilities are quite broad, and I have the potential to impact a wide range of industries and areas of society. Here are a few ways in which I could potentially disrupt or augment various industries:

Industries that could be disrupted:

  • Customer service: AI language models like me are already being used by many companies to automate and improve customer service interactions, and this trend is likely to continue. As AI technology improves, it could potentially replace many human customer service jobs.
  • Content creation: AI language models have the potential to automate certain types of content creation, such as news articles, product descriptions, and even social media posts. This could have a significant impact on the journalism and writing industries.
  • Education: AI language models could potentially disrupt the traditional education model by providing personalized learning experiences and automating certain types of teaching and grading.

Industries that could be augmented:

  • Healthcare: AI language models could help augment healthcare by providing more accurate and personalized diagnoses, and by automating certain types of administrative tasks.
  • Finance: AI language models could help augment finance by providing more accurate and data-driven investment advice, and by automating certain types of financial analysis.
  • Research: AI language models could help augment research by processing and analyzing vast amounts of data, and by identifying patterns and insights that might be difficult for humans to spot on their own.

Overall, the impact of AI language models like me on various industries will depend on a wide range of factors, including the development of the technology, the regulatory environment, and societal attitudes toward automation and AI. While there may be some industries that are more susceptible to disruption or augmentation than others, it’s important to approach these developments with a nuanced understanding of the potential benefits and risks.

Channelchek (PH) – Are users using ChatGPT to create social media bots to respond without human intervention likely to flood the internet?

ChatGPT – While it is technically possible for users to use AI language models like ChatGPT to create social media bots that can respond to messages without human intervention, I cannot speculate on whether this is likely to flood the internet.

The use of AI language models like ChatGPT could potentially make it easier and more accessible for users to create more sophisticated chatbots that can mimic human conversation more convincingly.

It’s also important to consider the potential impact of widespread use of social media bots on the quality and authenticity of online interactions. While chatbots can be useful in certain contexts, they can also be used to spread misinformation and propaganda or to manipulate public opinion. As with any technology, it’s important to approach the use of AI language models and chatbots in a responsible and ethical way, and to consider the potential risks and benefits of their use.

Channelchek (PH) – What do you call one that uses ChatGPT?

ChatGPT – There is no specific term for a person who uses ChatGPT or other AI language models, as these tools are designed to be accessible and usable by anyone with an internet connection.

However, a person who uses ChatGPT to create chatbots or other automated tools could be referred to as an AI developer or AI engineer. Similarly, a person who uses ChatGPT to conduct research or analysis in a specific field could be referred to as an AI researcher or analyst.

Channelchek (PH) – How much do you cost?

As an AI language model, I do not have a specific cost as I am not a commercial product. My purpose is to provide information and assistance to users like you, and I am freely accessible through various platforms that integrate my technology, including chatbots, voice assistants, and search engines.

Channelchek (PH) – Should I throw out the encyclopedias on my book shelf and rely instead on ChatGPT?

ChatGPT – Ultimately, whether or not to keep your encyclopedias depends on your personal preferences and how you prefer to access information. While AI language models like ChatGPT are convenient and accessible, they may not always provide the level of detail or accuracy that you require for a specific question or topic. So, it’s always a good idea to consult multiple sources of information to ensure that you have a well-rounded understanding of a given topic.

Channelchek (PH) – How does one get started using ChatGPT for research?

ChatGPT – Getting started with using ChatGPT for research can involve several steps. Here are a few basic steps you can follow:

Identify your research question or topic: Start by identifying the research question or topic you want to investigate. This will help you to focus your search and make the best use of ChatGPT.

Choose a ChatGPT platform: There are several platforms that integrate ChatGPT, including chatbots, voice assistants, and search engines. Choose a platform that best fits your needs and preferences.

Familiarize yourself with the platform: Once you have chosen a platform, take some time to explore and familiarize yourself with its features and capabilities. Many platforms offer tutorials and guides to help you get started.

Start asking questions: Once you are comfortable with the platform, start asking questions related to your research topic. Try to ask open-ended questions that will allow ChatGPT to provide more detailed and relevant answers.

Evaluate the results: As you receive answers from ChatGPT, evaluate the accuracy and relevance of the information. Keep in mind that ChatGPT is not perfect and may not always provide the most accurate or comprehensive information. Be sure to double-check any information you receive with other sources to ensure its accuracy.

Refine your search: If you are not finding the information you need, try refining your search by using more specific keywords or phrases.

Overall, using ChatGPT for research can be a valuable tool for gathering information and conducting preliminary investigations. However, it’s important to keep in mind that it is just one tool in the research process, and should be used in conjunction with other sources of information and research methods.

Wrap Up

It’s easy to comprehend how this technology, which will likely see stronger competition in the coming year, will quickly become something that is used every day to help streamline how we do our jobs, and find information in our personal lives. Unlike an internet search engine, queries produce individual results tailored to the individual question. The same question will recieve different phraseology if asked a minute later. Whereas Google or DuckDuckGo list websites that may provide the answer, ChatGPT responds using its own answer using artificial intelligence.

Getting started is as easy as going to OpenAI.com and navigating to Chat.OpenAI.com and providing an email and verification phone number. Click on my name below and write me, I’d love to hear what you are using it for.

Paul Hoffman

Managing Editor, Channelchek

Source:

OpenAI. Retrieved February 15, 2022

The Most Recent Michael Burry Holdings Have Been Reported

Posted on by phoffman@channelchek.com
Image Credit: ValueWalk (Flickr)

 Scion’s Michael Burry Owns Online Retailers, Tech Firms, a Mortgage Servicer, and a Detention Provider

GEO Group (GEO), the publicly held prison company organized as a REIT, again tops Michael Burry’s public market holdings as of the end of last year. This is one of nine holdings; a few are on-again, off-again favorites of the revered hedge fund manager. If there is one theme in his positions, it is that of select online retail merchants. While the overall size of the positions as of quarter-end is known, these positions may not represent all investments, just those that are public and reportable to the SEC on form 13F. Burry famous for his portrayal in the movie “The Big Short” was not short any publicly traded securities as 2022 drew to a close.

Below are the nine holdings, in size order, copied directy from the 13F-HR filing. GEO, Alibaba, and JD.com are familiar to followers of Dr. Burry’s holdings as this is not the first time they have appeared in his portfolio.

Source: SEC.gov

Geo Group (GEO) runs private detention systems. As shown below, at the end of the second quarter of 2022, it represented 100% of Scion Asset Management’s public market positions. The current holding is roughly half the dollar amount of what it was three months prior.

Source: SEC.gov

Black Knight (BKI) is making its first appearance in the Scion portfolio. The mid-cap company provides mortgage and loan servicing products.

Coherent Corporation (COHR) has not been in the hedge fund manager’s portfolio prior to the last quarter. The small-cap technology company is involved in communications networks for aerospace, automotive, life sciences, and various other electronics and systems.

Alibaba (BABA) is often described as the “Chinese Amazon.com”. The only other time Scion held this well-known online retailer was during the second quarter of 2019.

JD.com (JD) is China’s largest online retailer and largest internet company by revenue. Burry owned shares once before during the first quarter of 2019.

Wolverine Worldwide (WWW) makes active footwear and apparel. Brands include Sperry, Saucony, and Hush Puppies. The small-cap company has not been in the Scion portfolio previously.

MGM Resorts (MGM) is a mid-cap company that owns and manages hotels and casinos worldwide. This is the first time Michael Burry has owned this name.

 Qurante (QRTEA), formerly Liberty Interactive Corporation, is yet another direct marketer through the internet and video. The small-cap company is headquartered in Colorado.

Skywest Inc. (SKYW) is Burry’s smallest holding but still represents 4.4%. The airline has scheduled flights, including international, and also leases equipment for non-commercial flights. This is the first time the small-cap company has made an appearance in the Scion portfolio.

Take Away

Four times each year the SEC requires asset managers above a certain size to make a public filling of its portfolio.

Scion Asset Management is not exempt, but may, in addition to transacting in public securities, be creating positions in assets that are not required to be reported here. The reputation of Michael Burry has at times caused a lot of interest around less followed stocks.

Paul Hoffman

Managing Editor, Channelchek

The Record Levels of Cash Held by Investors May Not Indicate a Bear Market

Posted on by phoffman@channelchek.com
Image Credit: Pictures of Money (Flickr)

Investors Receiving a 5% Yield are Losing to Inflation

The CPI inflation report and the Fed’s relentless increases in Fed funds levels have pushed the six-month US Treasury Bill (T-Bill) above 5%. This is the first time since 2007 that this low-risk investment has topped 5%. Last year on this date, the six-month T-Bill was 0.76%. While the stock market is concerned that higher borrowing costs will have the Fed’s intended effect of slowing demand, rates are reaching a point where another concern creeps in. The concern is will traditional stock investors lay back and be satisfied getting paid interest.  

More likely, the high cash position represents “dry powder” waiting for an opportunity.

Short Term Rates

Money Market fund assets were $4.81 trillion for the week ended Wednesday, February 8, according to the Investment Company Institute. Just shy of the record MF balances reported in January. Higher than average cash levels have often been thought of as a bullish sign as it represents potential to drive stock prices up when flows toward equities increase.

This may be part of the situation as we come off a dismal 2022 for equities, but there is likely something else incentivizing the retreat to safety. The higher interest rates are in the short end of the curve, investors are getting paid to retreat. High-yielding cash equivalents with six-month T-Bills now at 5% (10-year Treasuries are only 3.75%) may be more than a parking place. It may represent an alternative investment with a much more assured return.

Ten Year Quarterly Returns S&P 500

Source: Macrotrends

Is 5% an Acceptable Return?

With inflation at 6.4%, the answer is no. But it is definitely preferable to seven of the periods on the 10-year chart above. And with January’s consumer price index (CPI) report revealing signs of sticky to reaccelerating inflation, the Federal Reserve is more likely to be hiking rates for longer than expected.

For investors looking to invest for longer periods, the stock market handily beats inflation. In other words, for the various time frames below, S&P 500 investors did not see their assets erode due to inflation.

Beating inflation is foundational to investing. Far exceeding it is the goal of many. Investors are not doing this choosing cash, in fact they are choosing to lose buying power rather than risk that the market doesn’t perform as it has historically.

S&P 500 Return for Periods 5-Years to 30-Years

Source: Macrotrends

Take Away

Data released on Tuesday February 14 showed the inflation rate (CPI) slowed to 6.4% in January. The cost of goods and services rose 0.5% during the month. The half percentage is the largest one month erosion of purchasing power in three months.

Investors content with 4%-5% returns should consider that they are losing ground to persistent inflation.

Investors with a five-year time horizon or longer should weigh the risks of earning yields below the inflation rate to the ups and downs of stocks. In fact, as more do, the 4-5 trillion in cash can make or quite a bull market.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2022

https://www.bls.gov/news.release/archives/cpi_01162008.pdf

https://www.cnbc.com/2023/01/18/investors-are-holding-near-record-levels-of-cash-and-may-be-poised-to-snap-up-stocks.html

https://www.ici.org/research/stats/mmf

https://www.nerdwallet.com/article/investing/average-stock-market-return#:~:text=The%20average%20stock%20market%20return%20is%20about%2010%25%20per%20year,other%20years%20it%20returns%20less.

Why NFL Players and Other Pros Need an Elite Money Management Team

Posted on by phoffman@channelchek.com
Image Credit: Randychiu (Flickr)

Managing Money Is as Important as Making It: The Sad Case of Athletes Going Broke

Lacking a solid team is a recipe for organizational failure, and those intending to excel in business—or any other sector—must invest in management. Considering that many professional athletes encounter bankruptcy shortly after retiring, they are a demographic that could greatly benefit from quality financial management teams. Elite athletes earn millions of dollars during a short time, but few succeed at multiplying their earnings to create wealth. An investigation by the Global Financial Literacy Center found that 16 percent of National Football League (NFL) players declare bankruptcy within twelve years of retirement. Quite startling is that some athletes report bankruptcy as early as two years after retirement.

The results of the study also showed that NFL stars were just as likely to experience bankruptcy as other NFL players. Bankruptcy figures are equally daunting for basketball players. Research reveals that National Basketball Association (NBA) players who file for bankruptcy do so within 7.3 years after retirement, and 6.1 percent of all NBA players go bankrupt within fifteen years of exiting their profession. The emotional trauma of bankruptcy can lead to distress. Research indicates that 78 percent of NFL players experience financial distress two years after retirement.

Inept management of finances is the easiest strategy for losing wealth. Professional athletes can avert financial calamities by investing in a better management team. There is a stark difference between managing a junior athlete and managing a superstar who earns millions of dollars yearly. A professional who manages a junior athlete could be an excellent manager for a player at that stage, but the transition to elite status requires people with greater expertise.

In business, a manager should possess the relevant skills. They don’t have to be your friend. Elite athletes need elite managers to help them navigate stratospheric wealth. If a manager doesn’t have expertise in managing successful athletes or businesses, then he is unfit to manage an elite athlete. Athletes who succeed at expanding their empires are reluctant to rely on the services of amateurs.

Magic Johnson credits his success to investing in capable people rather than to the “wisdom” of family members and old friends. Pablo S. Torre paints Johnson as a serious businessman in a piece highlighting the failures of professional athletes:

Johnson started out by admitting he knew nothing about business and sought counsel from . . . men such as Hollywood agent Michael Ovitzand and Peter Guber. Now, Johnson says, he gets calls from star players “every day” . . . and cuts them short if they propose relying on family and friends.

Johnson’s strategy is even more relevant in light of the recent financial scandal involving the disappearance of over twelve million dollars held by sprinting legend Usain Bolt in Jamaican investment firm Stock and Securities Limited (SSL). Venting to reporters, Bolt’s attorney Linton Gordon argues that the Financial Services Commission (FSC) should be held liable for the mishap because the agency lapsed in providing proper oversight:

They should bear responsibility to some extent, if not entirely, because all along they kept quiet and did not alert the public, including Mr. Bolt, to the fact that the company was not operating in a way compliant with the law. It’s 10 years now they say they have been red flagging this company. Had he known that he would have withdrawn his money and he would not have lodged anymore.

Blaming the regulator is easy, but the debacle reveals deficits in Bolt’s management team. Usain Bolt did not need to know that SSL was deemed unsound years ago because his management team should have furnished him with that information. Some years ago, I was at an event where fellow investors argued that SSL was irredeemable. Bolt’s managers were out of the loop. Moreover, Jamaica is known for institutional weakness and fraud, so it’s a bit weird that a man of Bolt’s stature would have so much money stored in a Jamaican institution to begin with.

Some say that the FSC must be accountable for the misappropriation of Bolt’s money, but the FSC penned a report that Bolt’s managers would have seen if they were doing research. Moreover, in a country where agencies are frequently compromised by politics, there is a possibility that the FSC did not suspend the operations of SSL because it was constrained by rogue actors. Bolt’s managers should have shown some insight by recommending that the superstar limit his Jamaican investments and by soliciting the services of leading wealth management firms like UBS Wealth Management or Baird.

The case study of Usain Bolt demonstrates that even athletes with good managers should never hesitate to upgrade when their employees are not equipped for bigger challenges. Money is hard to make, but with a bad manager, it’s easy to lose. Therefore, athletes interested in keeping their money must invest in the right team or face the consequences.

About the Author:

Lipton Matthews is a researcher, business analyst, and contributor to Merion West, The Federalist, American Thinker, Intellectual Takeout, mises.org, and Imaginative Conservative. He may be contacted at lo_matthews@yahoo.com

Twitter Data Will Now Cost its Users

Posted on by phoffman@channelchek.com
Image Credit: The Conversation (February 8, 2023)

Twitter’s New Data Fees Leave Scientists Scrambling for Funding – or Cutting Research

Twitter is ending free access to its application programming interface, or API. An API serves as a software “middleman” allowing two applications to talk to each other. An API is an accessible way to collect and share data within and across organizations. For example, researchers at universities unaffiliated with Twitter can collect tweets and other data from Twitter through their API.

Starting Feb. 9, 2023, those wanting access to Twitter’s API will have to pay. The company is looking for ways to increase revenue to reverse its financial slide, and Elon Musk claimed that the API has been abused by scammers. This cost is likely to hinder the research community that relies on the Twitter API as a data source.

The Twitter API launched in 2006, allowing those outside of Twitter access to tweets and corresponding metadata, information about each tweet such as who sent it and when and how many people liked and retweeted it. Tweets and metadata can be used to understand topics of conversation and how those conversations are “liked” and shared on the platform and by whom.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, Jon-Patrick Allem, Assistant Professor of Research in Population and Public Health Sciences, University of Southern California.

As a scientist and director of a research lab focused on collecting and analyzing posts from social media platforms, I have relied on the Twitter API to collect tweets pertinent to public health for over a decade. My team has collected more than 80 million observations over the past decade, publishing dozens of papers on topics from adolescents’ use of e-cigarettes to misinformation about COVID-19.

Twitter has announced that it will allow bots that it deems provide beneficial content to continue unpaid access to the API, and that the company will offer a “paid basic tier,” but it’s unclear whether those will be helpful to researchers.

Blocking Out and Narrowing Down

Twitter is a social media platform that hosts interesting conversations across a variety of topics. As a result of free access to the Twitter API, researchers have followed these conversations to try to better understand public attitudes and behaviors. I’ve treated Twitter as a massive focus group where observations – tweets – can be collected in near real time at relatively low cost.

The Twitter API has allowed me and other researchers to study topics of importance to society. Fees are likely to narrow the field of researchers who can conduct this work, and narrow the scope of some projects that can continue. The Coalition for Independent Technology Research issued a statement calling on Twitter to maintain free access to its API for researchers. Charging for access to the API “will disrupt critical projects from thousands of journalists, academics and civil society actors worldwide who study some of the most important issues impacting our societies today,” the coalition wrote.

@SMLabTO (Twitter)

The financial burden will not affect all academics equally. Some scientists are positioned to cover research costs as they arise in the course of a study, even unexpected or unanticipated costs. In particular, scientists at large research-heavy institutions with grant budgets in the millions of dollars are likely to be able to cover this kind of charge.

However, many researchers will be unable to cover the as yet unspecified costs of the paid service because they work on fixed or limited budgets. For example, doctoral students who rely on the Twitter API for data for their dissertations may not have additional funding to cover this charge. Charging for access to the Twitter API will ultimately reduce the number of participants working to understand the world around us.

The terms of Twitter’s paid service will require me and other researchers to narrow the scope of our work, as pricing limits will make it too expensive to continue to collect as much data as we would like. As the amount of data requested goes up, the cost goes up.

We will be forced to forgo data collection on some topic areas. For example, we collect a lot of tobacco-related conversations, and people talk about tobacco by referencing the behavior – smoking or vaping – and also by referencing a product, like JUUL or Puff Bar. I add as many terms as I can think of to cast a wide net. If I’m going to be charged per word, it will force me to rethink how wide a net I cast. This will ultimately reduce our understanding of issues important to society.

Difficult Adjustments

Costs aside, many academic institutions are likely to have a difficult time adapting to these changes. For example, most universities are slow-moving bureaucracies with a lot of red tape. To enter into a financial relationship or complete a small purchase may take weeks or months. In the face of the impending Twitter API change, this will likely delay data collection and potential knowledge.

Unfortunately, everyone relying on the Twitter API for data was given little more than a week’s notice of the impending change. This short period has researchers scrambling as we try to prepare our data infrastructures for the changes ahead and make decisions about which topics to continue studying and which topics to abandon.

If the research community fails to properly prepare, scientists are likely to face gaps in data collection that will reduce the quality of our research. And in the end that means a loss of knowledge for the world.

Michael Burry Warns Against the Market Hoping for Economic Weakness

Posted on by phoffman@channelchek.com
Image Credit: Yahoo (YouTube)

Further Evidence of his Future Outlook is Provided By “The Big Short” Michael Burry

It has been three-plus years since Michael Burry first warned that index funds’ popularity is creating distorted valuations of stocks included in the larger indexes. The reason for his warning is fund managers need to own the companies in the index. This creates buying pressure on stocks that might not otherwise be as strong of a buy candidate. In other words, investments are not being purchased on their own merit and, therefore could be thought of as overvalued. He called this the “passive investment bubble,” and he is still warning investors about a stock market investment bubble.

“Difference between now and 2000 is the passive investing bubble that inflated steadily over the last decade,” he tweeted late last year. “All theaters are overcrowded, and the only way anyone can get out is by trampling each other. And still, the door is only so big,” Burry said in October 2022. While his SEC filings show he is not opposed to owning individual stocks with a unique opportunity, he’s expecting a market collapse that dwarfs the dot-com crash because there’s so much money parked in index funds.

This week Burry provided a backup argument to his thesis in the form of a chart. The Bloomberg produced chart showed the S&P’s 40% plunge between February 2001 and October 2002. The S&P data was plotted alongside the sharp decline in the Fed Funds overnight benchmark interest rate. Burry’s latest tweet suggests a feeling of deja-vu that includes the stock market’s surge in early 2001, when rates were 6%. There seems to be concern that market participants are looking for enough weakness for the Fed to drop rates. The chart, and his written message is one to be careful what you wish for.

His tweet read, “This time is different.” This apparent sarcasm could be read, if you want lower rates, it may come at a cost.

Image: @michaeljburry (Twitter)

Burry seems to expect enough economic weakness that the Fed will again ratchet down rates in a hurry. The poor economic scenario would likely cause the S&P 500 to tumble.

Take Away

Higher rates encourage traditional savings, which then becomes money not used to stimulate the economy.  It also slows growth by making borrowing more expensive. This dampens demand and increases the risk of a bad recession. Burry, a widely followed hedge fund manager has been warning of the broader market taking a huge hit.

Burry has noted that blistering but brief rallies are common during market downturns.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.thestreet.com/investors/jim-cramer-michael-burry-tweet-seemingly-opposite-views-on-the-market-15-minutes-apart

https://markets.businessinsider.com/news/stocks/big-short-michael-burry-stock-rally-dot-com-bubble-crash-2023-2

https://nypost.com/2022/10/03/michael-burry-flags-passive-investing-bubble-as-market-risk/

Workday Commute and the Transition it Provides

Posted on by phoffman@channelchek.com
Image Credit: Luis Zambrano (Flickr)

A Journey from Work to Home is about More than Just Getting There – the Psychological Benefits of Commuting that Remote Work Doesn’t Provide

For most American workers who commute, the trip to and from the office takes nearly one full hour a day – 26 minutes each way on average, with 7.7% of workers spending two hours or more on the road.

Many people think of commuting as a chore and a waste of time. However, during the remote work surge resulting from the COVID-19 pandemic, several journalists curiously noted that people were – could it be? – missing their commutes. One woman told The Washington Post that even though she was working from home, she regularly sat in her car in the driveway at the end of the workday in an attempt to carve out some personal time and mark the transition from work to nonwork roles.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Matthew Piszczek, Assistant Professor of Management, Wayne State University, Kristie McAlpine, Assistant Professor of Management, Rutgers University.

As management scholars who study the interface between peoples’ work and personal lives, we sought to understand what it was that people missed when their commutes suddenly disappeared.

In our recently published conceptual study, we argue that commutes are a source of “liminal space” – a time free of both home and work roles that provides an opportunity to recover from work and mentally switch gears to home.

During the shift to remote work, many people lost this built-in support for these important daily processes. Without the ability to mentally shift gears, people experience role blurring, which can lead to stress. Without mentally disengaging from work, people can experience burnout.

We believe the loss of this space helps explain why many people missed their commutes.

One of the more surprising discoveries during the pandemic has been that many people who switched to remote work actually missed their commutes. Gerald Streiter (Flickr)

Commutes and Liminal Space

In our study, we wanted to learn whether the commute provides that time and space, and what the effects are when it becomes unavailable.

We reviewed research on commuting, role transitions and work recovery to develop a model of a typical American worker’s commute liminal space. We focused our research on two cognitive processes: psychological detachment from the work role – mentally disengaging from the demands of work – and psychological recovery from work – rebuilding stores of mental energy used up during work.

Based on our review, we developed a model which shows that the liminal space created in the commute created opportunities for detachment and recovery.

However, we also found that day-to-day variations may affect whether this liminal space is accessible for detachment and recovery. For instance, train commuters must devote attention to selecting their route, monitoring arrivals or departures and ensuring they get off at the right stop, whereas car commuters must devote consistent attention to driving.

We found that, on the one hand, more attention to the act of commuting means less attention that could otherwise be put toward relaxing recovery activities like listening to music and podcasts. On the other hand, longer commutes might give people more time to detach and recover.

In an unpublished follow-up study we conducted ourselves, we examined a week of commutes of 80 university employees to test our conceptual model. The employees completed morning and evening surveys asking about the characteristics of their commutes, whether they “shut off” from work and relaxed during the commute and whether they felt emotionally exhausted when they got home.

Most of the workers in this study reported using the commute’s liminal space to both mentally transition from work to home roles and to start psychologically recovering from the demands of the workday. Our study also confirms that day-to-day variations in commutes predict the ability to do so.

We found that on days with longer-than-average commutes, people reported higher levels of psychological detachment from work and were more relaxed during the commute. However, on days when commutes were more stressful than usual, they reported less psychological detachment from work and less relaxation during the commute.

Creating Liminal Space

Our findings suggest that remote workers may benefit from creating their own form of commute to provide liminal space for recovery and transition – such as a 15-minute walk to mark the beginning and end of the workday.

Our preliminary findings align with related research suggesting that those who have returned to the workplace might benefit from seeking to use their commute to relax as much as possible.

To help enhance work detachment and relaxation during the commute, commuters could try to avoid ruminating about the workday and instead focus on personally fulfilling uses of the commute time, such as listening to music or podcasts, or calling a friend. Other forms of commuting such as public transit or carpooling may also provide opportunities to socialize.

Our data shows that commute stress detracts from detachment and relaxation during the commute more than a shorter or longer commute. So some people may find it worth their time to take the “scenic route” home in order to avoid tense driving situations.

Investing in 2023 May Require Different Slices of the Market

Posted on by phoffman@channelchek.com
Image Credit: Phillip Pessar (Flickr)

Diversifying Your Diversified Portfolio

Different investing environments call for adjustments to portfolios. What’s in your equity portfolio mix? Whether you’re an index investor, stock picker, or a 60/40 with a regular rebalance investor, stocks of different companies, different sectors, and different sizes are not the same. The characteristics of each slice of your portfolio can swing performance from negative to positive. For example, the Dow Industrials have returned less than 2.50% this year, while the large-cap Nasdaq 100 and the small-cap Russell 2000 have exceeded the Dow’s performance by well over 10%.

Performance

The reason for the tech large-cap resurgence may be a reaction to last year’s sell-off, a declining dollar, some surprise strength in earnings, or any combination of things. Can the large-cap rally be trusted? Time will tell. Small-caps are also doing well; they had been running behind the other indexes in terms of performance based on price/earnings averages and overall return. The two have different forces driving the performance of each; for this reason, investors looking to diversify could find comfort in allocating to large and smaller stocks if they haven’t already. The 60% of a 60/40 mix should be mixed and varied if the investor is truly interested in diversification. Recent performance shows small-cap stocks have outperformed over the last six months with the Dow Industrials in second place and measured year-to-date with the Dow barely getting off the starting line – the small-cap index however has taken off.

Source: Koyfin

The Russell 2000 index turned around in late summer last year after it hit its low. The large-caps didn’t bottom until early winter, a little over a month ago. This discrepancy in timing shows they trade on different factors and often have very different investors. One example is large-cap stocks are in the news each day and easily driven by hype, while small-cap stocks that are out of the spotlight are driven by other factors, including growth prospects, sharp pencil analysis, and even raw speculation.

Source: Koyfin

Market Strength

The optimism that kicked off 2023, includes the Fed nearing the end of its aggressive tightening, a healthy labor market, and an economy that is still flush with capital looking for a home. Add in a weakening dollar, as US interest rates have remained stagnant, and last year’s weak markets may continue to unwind their negativity as higher highs are reached.

A Word on Diversification

An investor in a fund that tracks the S&P 500 may feel they have the diversification of 500 multi-industry stocks. They do have exposure to 500 stocks, however the top 10 of the 500 represents more than 25% of the performance of the index – and most of these would qualify as tech stocks. For this reason diversifying away and into investments that are less correlated to tech may be prudent. Small-cap stocks, especially considering the past six months, would seem to be the best offset to this concentration risk.

If an investor is astute enough to understand market dynamics, digest research on industries and companies within those industries, and know how to recognize high-quality objective research, the investor may do better hand selecting a variety of stocks rather than being an index investor or even a single index investor.

This experience doesn’t happen automatically, if you are already there, may I suggest signing up for Channelchek’s daily emails to get introduced to, and stay on top of some interesting small companies (small and microcap)? And if you don’t believe that you are at that level yet, let Channelchek build on your knowledge with exclusive video content, insightful articles, and top-tier company research?  

The year 2023 will be filled with opportunity. Let Channelchek help you explore. Complementary registration here.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.barrons.com/articles/tech-earnings-amd-intel-stock-51675279355?mod=hp_LEAD_1

Will February Follow Through On January’s Gains

Posted on by phoffman@channelchek.com
Image Credit: Ben Welsh (Flickr)

January’s Stock Market Performance Bodes Well for the Rest of 2023

The stock market has put in a solid January in terms of overall performance. Following month after negative month last year, this is a welcome relief for those with money in the market which is beginning to look welcoming to those that have been on the sidelines. While the Fed is still looming with perhaps another 50-75 basis points in rate hikes left to implement over the coming months, the market has been resilient and has already made up for some of last year’s lost ground.

Source: Koyfin

For the month (with an hour left before market close on January 31), the Nasdaq 100 is up over 10.8% for the month. Over 10%  would be a good year historically, of course averaging in last year, it is still solidly underperforming market averages. The small-cap Russell 2000 index is also above 10%. Small-caps have underperformed larger cap stocks over several years and are seen to have more attractive valuations now than large caps as well as other fundamental strengths. These include a higher domestic US customer base in the face of a strong dollar, fewer borrowings that would be more costly with the increased rate environment, and an overall expectation that the major indexes will revert to their mean performance spreads which the small-cap indexes have been lagging. The S&P 500, the most quoted stock index is up over 6% in January, and the Dow 30 Industrials are up almost 2.4%.

Rate Increases

The stock and bond markets hope for a solid sign that the FOMCs rate increases will cease. The reduced fear of an ongoing tightening cycle will calm the nervousness that comes from knowing that higher rates hurt the consumer, increases unemployment, reduces spending and therefore hurts earnings which are most closely tied to stock valuations.

January Historically

January rallies, on their own, statistically have been a good omen for the 11 months ahead.  When the S&P 500 posts a gain for the first month of the year, it goes on to rise another 8.6%, on average for the rest of the year according to statistics dating back to 1929.  In more than 75% of these January rally years, the markets further gained during the year.

Other statistics indicate a bright year to come for the market as well. Using the S&P 500, it rallied for the final five trading days of last year and the first two of 2023, it gained for first five trading days of the new year, and rallied through January. When all three of these have occurred in the past, after a bear market (20%+ decline), the index’s average gain for the rest of the year is 13.9%. In fact it posted positive returns in almost all of the 17 post-bear market years that were ushered in with similar gains.

Follow Through

Beyond history, there is a reason for the follow-through years. January rallies are signs of confidence, they indicate that self-directed investors and professional money managers are buying stocks at the lower prices. It suggests they have a strong enough belief that conditions that caused the bear market have or will soon reverse.  

And this is quite possibly where the markets are at today. The lower valuations seem attractive, this is especially true of the overly beaten down Nasdaq 100 stocks and the small-caps that had been trailing in returns since before the pandemic.

Federal Reserve Chair Powell is looking to make money more expensive in order to slow an economy that is still exhibiting inflationary pressures. He is not, however, looking to crush the stock market. Fed governors seem to be concerned that the bond market prices haven’t declined to match their tightening efforts, but a healthy stock market helps the Fed by giving it latitude to act. Powell will take the podium post FOMC meetings eight times this year.

Each time his intention will be to usher in a long term healthy economy, with reasonable growth, low inflation, and jobs levels that are in line with consumer confidence.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.ndr.com/news

https://tdameritradenetwork.com/video/how-to-read-the-technicals-before-the-market-changes

https://www.marketwatch.com/story/last-years-stock-market-volatility-has-carried-over-into-january

https://www.barrons.com/articles/stocks-january-gains-what-it-means-51675185839?mod=hp_LATEST

A Good Place to Start to Evaluate Specific Biotech Companies?  

Posted on by phoffman@channelchek.com
Image Credit: Andrea Piacquadio (Pexels)

Exploring and Discovering Biotech Stocks

When it comes to hand-selecting companies for investment, a critical ingredient for success is information. This ingredient becomes even more critical with biotech companies. Each year, many companies have been involved in medicine, medical equipment, genetics, and wellness that take off and provide investors with double or triple-digit gains. During the same years, there are stocks in the sector that, on the surface seem to have just as much going for them, yet a diligent peak below the surface demonstrates their success is less probable.

The ability to get below the surface is one reason the JPMorgan Health Symposium draws between 8,000 and 10,000 attendees each year. Attending is an expensive commitment, but firsthand information, insights from others that are in-the-know, and exposure to scientific paths, trends and research that barely existed a few years earlier, can pay off.

If you were not among the 8,000 counted as attending at the 2023 JP Morgan Health Symposium, you’ll want to know, Noble Capital Markets, teamed with Channelchek to provide a video recap with insights and key takeaways on some of the biotech trends that may be worth exploring. This takeaway, coupled with select company presentations and questions from two top equity analysts in the field is sure to build on your current health sector knowledge.  Go Here For More Information (and free access).  

Trends Worth Exploring

Molecular diagnostics, involves taking DNA or RNA which is our unique and easily obtainable genetic code, and analyzing the sequences for red flags. These markers can pinpoint the chance for emergence of specific diseases. This field has expanded rapidly in recent years, with some products now being used regularly. But the potential is for far more to be developed and approved for use. This provides for tremendous profit potential.

Alternative pain relief, non-opioid and non-NAISD pain medications for chronic sufferers, could benefit millions who suffer eah day. The potential runs the gamut from chronic headaches or back pain to situations where one is recovering from surgery, sports injuries, or accidents. Millions of prescriptions are written each year for pain medications. This has, in part fed into the opioid crisis in the U.S. It has prompted an almost emergency-level need for replacing older addictive medications with effective alternatives.  There are a number of companies making gains in this area of great need.

Gene therapy is a technique to treat or cure disease by modifying one’s genes. In many cases, the hope is that it leads to a permanent cure. New gene therapies are being developed for a wide swath of ailments including life-threatening disease. It is expected to be in many cases the next generation of cure. The methods for gene therapy include replacing a disease-causing gene with a healthy copy, or inactivating the disease-causing gene. In other cases a modified gene may be introduced to help treat the disease. The research and development include cancers, infectious disease, organ failures, and autoimmune problems. Many of these companies will be opening the door to welcome life improvements for the some people, and curing what are now incurable diseases for others.

Drilling Down at the Company Level

It may feel uncomfortable to suggest that investing in and backing the right companies that resolve health issues can be profitable to you. But, the truth is, without investments and interest in stock ownership, tomorrow’s miracle drugs would never come to exist.

Watch the Takeaway from the JP Morgan conference with an eye toward what the company presenters deem important, and then listen to the analysts that also drill deeper beyond concept and stage of development, they discuss finances, which for many less experienced biotech investors, isn’t focused on enough. The companies selected for the Noble Capital Markets Takeaway all fall within one the fields mentioned above.  Register Here.

Possible Side-Effects

The J.P. Morgan Healthcare Symposium was held in mid-January. It is one of life science’s largest and most frenzied sharing of information related to the industry. Not everyone gets to go. We’re enthusiastic to be bringing you a slice of the excitement in hopes that you deepen your understanding of not just these companies, but what to look for in others as well.

Paul Hoffman

Managing Editor, Channelchek

Source

https://www.jpmorgan.com/solutions/cib/insights/health-care-conference

https://www.sfchronicle.com/sf/article/JPMorgan-health-care-conference-brings-8-000-to-17706261.php#:~:text=The%20JPMorgan%20health%20care%20conference%2C%20the%20largest%20industry,the%20first%20time%20since%202020%2C%20drawing%208%2C000%20attendees.

Why Are Central Banks Buying Gold?

Posted on by phoffman@channelchek.com
Image Credit: Pixabay (Pexels)

Central Banks Turn to Gold as Losses Mount

In 2022, central banks purchased the largest amount of gold in recent history. According to the World Gold Council, central bank purchases of gold have reached a level not seen since 1967. The world’s central banks bought 673 metric tons in one month, and in the third quarter, the figure reached 400 metric tons. This is interesting because the flow from central banks since 2020 has been eminently net sales.

Why are global central banks adding gold to their reserves? There may be different factors.

Most central banks’ largest percentage of reserves are US dollars, which usually come in the form of US Treasury bonds. It would make sense for some of the central banks, especially China, to decide to depend less on the dollar.

China’s high foreign exchange reserves are a key source of stability for the People’s Bank of China. But the high amount of US dollars ($3.1 trillion) may have been a key stabilizing factor in 2022, but it could be too much if the next ten years bring a wave of money devaluation that has never happened before.

Central banks have been talking about the idea of issuing a digital currency, which would completely change the way money works today. By issuing a digital currency directly into a citizen’s account at the central bank, the financial institution would have all access to savers’ information and, more importantly, would be able to accelerate the transmission mechanism of monetary policy by eliminating the channels that prevent higher inflation from happening: the banking channel and the backstop of credit demand. What has kept inflation from going up much more is that the way monetary policy is passed on is always slowed down by the demand for credit in the banking system. This has obviously led to a huge rise in the prices of financial assets and still caused prices to go through the roof when the growth in the money supply was used to pay for government spending and subsidies.

If central banks start issuing digital currencies, the level of purchasing power destruction of currencies seen in the past fifty years will be exceedingly small compared with what can occur with unbridled central bank control.

In such an environment, gold’s status as a reserve of value would be unequalled.

There are more reasons why a central bank might buy gold.

Central banks need gold because they may be preparing for an unprecedented period of monetary devastation.

The Financial Times claims that central banks are already suffering significant losses as a result of the falling value of the bonds they hold on their balance sheets. By the end of the second quarter of 2022, the Federal Reserve had lost $720 billion while the Bank of England had lost £200 billion. The European Central Bank is currently having its finances reviewed, and it is predicted that it will also incur significant losses. The European Central Bank, the US Federal Reserve, the Bank of England, the Swiss National Bank, and the Australian central bank all “now face possible losses of more than $1 trillion altogether, as once-profitable bonds morph into liabilities,” according to Reuters.

If a central bank experiences a loss, it can fill the gap by using any available reserves from prior years or by requesting help from other central banks. Similar to a commercial bank, it may experience significant difficulties; nevertheless, a central bank has the option of turning to governments as a last resort. This implies that the hole will be paid for by taxpayers, and the costs are astronomical.

The wave of monetary destruction that could result from a new record in global debt, enormous losses in the central bank’s assets, and the issuance of digital currencies finds only one true safe haven with centuries of proven status as a reserve of value: Gold. This is because central banks are aware that governments are not cutting deficit spending.

These numbers highlight the enormous issue brought on by the recent overuse of quantitative easing. Because they were unaware of the reality of issuer solvency, central banks switched from purchasing low-risk assets at attractive prices to purchasing any sovereign bond at any price.

Why do central banks increase their gold purchases just as losses appear on their balance sheets? To increase their reserve level, lessen losses, and foresee how newly created digital currencies may affect inflation. Since buying European or North American sovereign bonds doesn’t lower the risk of losing money if inflation stays high, it is very likely that the only real option if to buy more gold.

The central banks of industrialized nations will make an effort to shrink their balance sheets in order to fight inflation, but they will also discover that the assets they own are continuing to depreciate in value. A central bank that is losing money cannot immediately expand its balance sheet or buy more sovereign bonds. A liquidity trap has been set. Quantitative easing and low interest rates are necessary for higher asset values, but further liquidity and financial restraint may prolong inflationary pressures, which would then increase pressure on asset prices.

The idea that printing money wouldn’t lead to inflation served as the foundation for the monetary mirage. The evidence to the contrary now demonstrates that central banks are faced with a serious challenge: they are unable to sustain multiple expansion and asset price inflation, lower consumer prices, and fund government deficit spending at the same time.

So, why do they buy gold? Because a new paradigm in policy will unavoidably emerge as a result of the disastrous economic and monetary effects of years of excessive easing, and neither our real earnings nor our deposit savings benefit from that. When given the choice between “sound money” and “financial repression,” governments have forced central banks to choose “financial repression.”

The only reason central banks buy gold is to protect their balance sheets from their own monetary destruction programs; they have no choice but to do so.

About the Author:

Daniel Lacalle, Ph.D., economist and fund manager, is the author of the bestselling books Freedom or Equality (2020), Escape from the Central Bank Trap (2017), The Energy World Is Flat (2015), and Life in the Financial Markets (2014).

Daniel is a professor of global economy at IE Business School in Madrid.

Sky High Meme Stocks Score First in 2023

Posted on by phoffman@channelchek.com
Image Background: George Larcher (Flickr)

Meme Stocks are Putting Up a Strong Offense – Is this a Positive Sign for the Broader Market?

During the first three weeks of 2023, meme stocks and crypto tokens, often viewed in the same category, have scored early. Have meme stock investors now come off the sidelines after the poor performance last year? In 2022 they completely failed to repeat their historic 2021 wins. So the current rally is a great sign.

Successful meme trading occurs when there is a mass movement by retail accounts. So far in 2023, like flipping a New Year’s switch, retail is again causing a commotion. And by looking at the trending hashtags and cashtags on Reddit and Twitter, fans are also making an increased volume of noise.

Source: Koyfin

Looking at the 2023 performance chart above, the S&P 500 ($SPY) opened the year more positively than the prior year ended. While one obviously can not extrapolate out the current 1.59% return for the year, annualizing it helps bring the short period being measured into perspective. The overall market is running at a 30.50% pace this year. Wow.

The performance of GameStop ($GME), which was one of the original and among the most recognized meme stocks, is outperforming the overall market by double. While it is well off its high reached earlier this week, the above 3% return is running well ahead of the overall stock market.

The cryptocurrency in the group, the often maligned Dogecoin (DOGE.X), which is legendary as it started as a parody token, has been tracking Bitcoins (BTC.X) rise closely. DOGE is up over 18% on the year, averaging an increase near 1% per day.

AMC Entertainment ($AMC), which is off its high of almost 50% a few days ago, now has returned over 32% to those holding the stock. To put this in perspective, it has an annualized return in 2023, so far, of 628%. This likely has gotten ahead of itself, time will tell, but it is the clear MVP among the meme stocks to date.

Source: Koyfin

Last year the overall market, despite being down near 20%,, trounced the meme stocks that have thus far put in a stellar showing in 2023.

Is Meme Rally a Reason for Optimism?

Retail dollars coming in off the sidelines and mounting enough of a drive to force values up so quickly indicates a mood change that may play out elsewhere in the financial markets. The average trade size of retail is so small that it indicates a large wave of willingness, if not outright optimism, that putting money in play will lead to gains. Similar forces are causing money to move into mutual funds and ETFs, which serves to put upward pressure on the overall market.

Wall Street’s so-called “fear gauge,” the Volatility Index ($VIX) dropped on average 1% a day since the start of the year. This is a spectacular trend. It now stands near its long-term average of 21; a reading above 30 is considered bearish. The $VIX was last near these levels in April of last year. The overall market stood 15% higher back then compared to today.  

The Volatility Index has applications across digital assets as well. On a scale of 1-100, where 100 is overly greedy, The Crypto Fear and Greed Index stands near neutral at 52. This is also the most optimistic reading since April. It may be considered even more positive since the digital asset market is still digesting the “unprecedented” bankruptcy of crypto exchange FTX.

Meme mania has never been about macro; more about crowd behavior, commitment, and momentum. But there are fundamentals that are viewed by stock investors of all varieties that likely have fed into the burst of interest.  First, economic data suggests that inflation is trending lower. This deceleration lessens the need for the Federal Reserve to put the brakes on the economy. The enthusiasm is just more pronounced among this style of retail traders that are loud and proud. They serve as cheerleaders to captivate the imagination of more traditional investors.

Take Away

The overall financial markets opened with a sigh of relief in 2023. Meme stocks and crypto opened the year with extreme optimism. The optimism isn’t without cause; a number of factors point to a much better environment than the dismal returns of last year.

Will this contagion, led by many small accounts, inspire further the larger individual and institutional investors to commit investments in the broader markets, there are many signs that suggest the year is starting that way, fear of missing out will build with each day that the markets move in a positive direction.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.barrons.com/articles/gamestop-amc-dogecoin-shiba-inu-stock-price-meme-51674062277?mod=hp_LEAD_1

https://www.barrons.com/market-data/indexes/vix

Understanding the Debt Ceiling Enough to Survive this Week

Posted on by phoffman@channelchek.com
Image Credit: Jeremy (Flickr)

Why America Has a Debt Ceiling: Five Questions Answered

The Treasury Department on Jan. 13, 2023, said it expects the U.S. to hit the current debt limit of $31.38 trillion on Jan. 19. After that, the government would take “extraordinary measures” – which could extend the deadline until May or June – to avoid default. A default, even a risk of default would drive bond prices (interest rates) much higher than they currently are.

Is the debt ceiling still a good idea?

Economist Steve Pressman is a professor at The New School in Manhattan, below he explains the debt ceiling is and why we have it – and then shares his opinion on its usefulness.

What is the Debt Ceiling?

Like the rest of us, governments must borrow when they spend more money than they receive. They do so by issuing bonds, which are IOUs that promise to repay the money in the future and make regular interest payments. Government debt is the total sum of all this borrowed money.

The debt ceiling, which Congress established a century ago, is the maximum amount the government can borrow. It’s a limit on the national debt.

What’s the National Debt?

On Jan. 10, 2023, U.S. government debt was $30.92 trillion, about 22% more than the value of all goods and services that will be produced in the U.S. economy this year.

Around one-quarter of this money the government actually owes itself. The Social Security Administration has accumulated a surplus and invests the extra money, currently $2.8 trillion, in government bonds. And the Federal Reserve holds $5.5 trillion in U.S. Treasurys.

The rest is public debt. As of October 2022, foreign countries, companies and individuals owned $7.2 trillion of U.S. government debt. Japan and China are the largest holders, with around $1 trillion each. The rest is owed to U.S. citizens and businesses, as well as state and local governments.

Source: FRED/Datawrapper

Why is There a Borrowing Limit

Before 1917, Congress would authorize the government to borrow a fixed sum of money for a specified term. When loans were repaid, the government could not borrow again without asking Congress for approval.

The Second Liberty Bond Act of 1917, which created the debt ceiling, changed this. It allowed a continual rollover of debt without congressional approval.

Congress enacted this measure to let then-President Woodrow Wilson spend the money he deemed necessary to fight World War I without waiting for often-absent lawmakers to act. Congress, however, did not want to write the president a blank check, so it limited borrowing to $11.5 billion and required legislation for any increase.

The debt ceiling has been increased dozens of times since then and suspended on several occasions. The last change occurred in December 2021, when it was raised to $31.38 trillion.

Source: Congressional Research Service/Datawrapper

What Happens When the US Hits the Ceiling?

Currently, the U.S. Treasury has under $400 billion cash on hand, and the U.S. government expects to borrow around $100 billion each month this year.

When the U.S. nears its debt limit, the Treasury secretary – currently Janet Yellen – can use “extraordinary measures” to conserve cash, which she indicated would begin on Jan. 19. One such measure is temporarily not funding retirement programs for government employees. The expectation will be that once the ceiling is raised, the government would make up the difference. But this will buy only a small amount of time.

If the debt ceiling isn’t raised before the Treasury Department exhausts its options, decisions will have to be made about who gets paid with daily tax revenues. Further borrowing will not be possible. Government employees or contractors may not be paid in full. Loans to small businesses or college students may stop.

When the government can’t pay all its bills, it is technically in default. Policymakers, economists and Wall Street are concerned about a calamitous financial and economic crisis. Many fear that a government default would have dire economic consequences – soaring interest rates, financial markets in panic and maybe an economic depression.

Under normal circumstances, once markets start panicking, Congress and the president usually act. This is what happened in 2013 when Republicans sought to use the debt ceiling to defund the Affordable Care Act.

But we no longer live in normal political times. The major political parties are more polarized than ever, and the concessions McCarthy gave Republicans may make it impossible to get a deal on the debt ceiling.

Is There a Better Way?

One possible solution is a legal loophole allowing the U.S. Treasury to mint platinum coins of any denomination. If the U.S. Treasury were to mint a $1 trillion coin and deposit it into its bank account at the Federal Reserve, the money could be used to pay for government programs or repay government bondholders. This could even be justified by appealing to Section 4 of the 14th Amendment to the U.S. Constitution: “The validity of the public debt of the United States … shall not be questioned.”

Few countries even have a debt ceiling. Other governments operate effectively without it. America could too. A debt ceiling is dysfunctional and periodically puts the U.S. economy in jeopardy because of political grandstanding.

The best solution would be to scrap the debt ceiling altogether. Congress already approved the spending and the tax laws that require more debt. Why should it also have to approve the additional borrowing?

It should be remembered that the original debt ceiling was put in place because Congress couldn’t meet quickly and approve needed spending to fight a war. In 1917 cross-country travel was by rail, requiring days to get to Washington. This made some sense then. Today, when Congress can vote online from home, this is no longer the case.