Three things you need to know today…

1)

Today’s Fat Tail Daily begins with a hat tip to small-cap fund manager Chris Stott. He appeared in the Australian Financial Review earlier in the week.

The report said, in part:

‘It’s a very difficult backdrop to invest right now with the volatility in the president’s decision-making’,

he says from 1851 Capital’s Sydney offices.

‘I’ve been doing this for almost 20 years, there’s always something going on in the world that creates volatility, it’s just about sticking to your process and holding your nerve and navigating your way through.’

It goes on…

‘Stott says he and Hickson are “leaning into” the chaos, buying up stocks that have been battered by the broader sell-off.’

I agree with this approach wholeheartedly. I’m not saying it’s without risk, or easy. But volatility like we’re seeing now always creates opportunities.

Yes, Trump creates uncertainty. So did Covid. So did inflation and rising interest rates. So did Ukraine.

Eventually, share prices can break through these kinds of issues — as long as the earnings growth, (or at least the prospect of it) is there to push them through.

That’s when time in the market can become your friend, ups and downs included.

That reminds me.

My colleague James Altucher, a technology and investing veteran, was recently down in Texas for a major meet-up on the biggest trends forming in the global markets.

What’s one of them…?

2) …It’s cybersecurity in an AI world!

My colleague Charlie Ormond and I were chatting on this yesterday.

While the promise of AI is huge, there are some massive problems coming with it.

That’s great in one way. Problems mean that we can invest in solutions.

For example…

Access to data gets problematic quickly as businesses adopt AI.

Think about it this way: AI runs on data. To make an organisation more efficient it will need access to all of a business’s data.

Big companies run into big problems here.

Most businesses today have their data scattered between different departments. Trying to bundle all that together and make sense of it will need a significant amount of AI compute.

That’s an opportunity for someone to help with all this…but also the beginning of an even bigger problem.

How?

Think of the theory behind the Titanic. The idea was to create different, secured sections of the ship. If one took on water, the whole boat wouldn’t go down.

But the boat did go down! That’s because there was a flaw in the design. Each section of the boat got swamped with water after hitting the iceberg.

AI could do the same thing to businesses. If it has access to all data, then a malicious AI can also bring that whole business down.

But it’s not just big banks and business that could face threats like this.

There are weak spots for cyber attacks in AI too.

ChatGPT has something called a ‘Prompt injection attack’. It’s a way to steal sensitive information.

Simple customer service chatbots get attacked like this all the time.

Another method is called ‘Training data poisoning’. Hackers use dodgy data to manipulate an AI in some way. Think of a con man on steroids.

Yep, the rapid advance of AI is creating a whole host of problems. You, me and Donald Trump will be scrabbling to catch up for years to come.

But remember, problems need solutions!

There will be a river of money flowing into ways to protect businesses from all this.

Cybersecurity, for one, looks like being a slam dunk for the next decade.

You could pick and choose individual firms across the industry. The easiest way, however, is to grab a basket of leading firms via an ETF like Betashares’s HACK ETF.

That’s not a recommendation, just an idea.

Point being: this industry should be heading north for years. We’ll have more on this in Altucher’s Investment Network Australia up ahead.

For the latest, go here.

3)

Yesterday I sat down for an exclusive chat with resource fund manager Hedley Widdup in the Fat Tail office. He had a buzz about him.

That’s no surprise when you run a $100 million fund, specialising in gold… and gold is booming!

We were chatting about a very niche opportunity, out in the Simpson Desert of all places. It was an exciting tale of adventure, chance and potential riches.

Stay tuned for more.

Best wishes,

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

***

Murray’s Chart of the Day
— Copper

By Murray Dawes, Thursday, 20 March 2025

At the risk of sounding like a broken record, do you have enough exposure to copper?

The area around US$5.00/lb has been incredibly stiff resistance for the past 15 years.

One of these days copper will finally overcome resistance and trend higher in a straight line, rallying further than anyone expects.

There is talk of the current run being caused by attempts to front run the start of tariffs in April.

That may very well be the case. If so there should be a wall of selling arriving over the next couple of weeks and prices will once again retreat from this key zone.

But if we are on the cusp of an almighty breakout in copper you don’t want to be left watching others make money while you sit on the sidelines because you didn’t think the rally was real.

I would prefer to trust the trend and go with it for now, with the view of running away from positions if prices fail to carry on in April.

In my trading service Retirement Trader, we doubled our position in a copper ETF two weeks ago and that position is already up 7%.

If the breakout is happening, the upside might be so great that you should be exposed to the possibility and ready to take action to lower risk at a later date if necessary.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps