Tech Policy and Unintended Consequences
Investment Principles and Strategies' podcast
Release Date: 08/17/2021
Investment Principles and Strategies' podcast
Investment success combines predicting the future, the confidence to make bold choices, and the fortitude to stay with those choices. Today's volatile and uncertain world requires new knowledge and perspective and assembling relevant facts from many diverse sources to make better decisions and achieve superior returns. There is no simple formula. Thoughtful observation of complex factors, understanding their interrelation, and predicting the outcome of their interaction is challenging. Media-based quips are usually misguided, superficial, and potentially catastrophic.
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Some of the world's most important industries are being profoundly impacted by new technological innovations and platforms, such as artificial intelligence, digital assets, blockchain-based businesses, gene editing, and DNA sequencing, enabling unprecedented disruption to business and economic models. Stable predictability is increasingly anachronistic. Every company or industry will either be a disrupter or disrupted. The leading growth companies of today stand an excellent chance to be memories tomorrow.
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Distributed ledger technology (Blockchain) and digital assets have the potential to dramatically disrupt global equity and debt markets. This will decentralize critical data and enable an entirely new financial system where capital flows without the need for traditional intermediaries. It is an irreversible disruptive force transforming capital markets and the global financial system.
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Digital currencies, crypto assets, digitized securities, and distributed ledgers require an enormous amount of power. While the combination of these assets is subject to tremendous hype, the environmental impact has been mostly ignored. However, this is changing because there has been increasing alarm about crypto’s carbon footprint and environmental impact.
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Technology is facing China’s crackdown, rising resistance to social media, and government control.
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Inflation fears, currency tremors, market jitters, and emotional vacillation causing joy and terror because all these outcomes seem equally likely. No realistic gauge is showing reliable directions for key metrics. Near-term data usually predicts the near-term future, and that usually gives us a reasonable sense of comfort about the markets, and how to plan, prepare, predict, and withstand anticipated market moves. But that is not the case now.
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Drug development platforms such as mRNA, CRISPR, and gene therapies combined with cost-effective development are creating spectacular economic opportunities.
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Supply and demand aren't supposed to impact stock prices. Asset-pricing theory says prices in financial markets are determined by expected future cash flows rather than buying and selling dynamics. Therefore, stocks and bonds are mostly immune from supply and demand determining prices. This is nonsense.
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It is impossible to know the answer. This critically important metric is not knowable. There is an intelligent argument on both sides, but there is no way of knowing the outcome of the inputs we have seen over the last 16 months. So perhaps the best advice, to quote Charles Bukowski, is "don't try."
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Gold is built on a collective belief in its value. There is nothing fundamentally "inherent" other than an agreed-upon value. The same is true with Bitcoin and all asset prices.
info_outlineTechnology is facing policy changes with global resonance, such as China’s new crackdown, the rising resistance to social media, and government's desire to manage and control technological development.
"I’ll build a wall and we will be fine behind it.” This did not work for China’s First Emperor, and it will not work for its current one.
The tech crackdown, regardless of any good intentions, will bring disastrous consequences. Regardless of any good intentions, this will add friction, inefficiency, and underperformance to the most dynamic global industry. The best intentions usually bring disastrous consequences.