Investment Ideas From the Edge of the Bell Curve
ASX 200 ended Wednesday down a material 1.37% in a broad sell-off. Only 19 stocks in the index recorded a gain.
The five worst performers of the day:
Speaking of Andrej Karpathy.
Here’s the OpenAI whizz explaining what large language models do and how they work in a 1-hour YouTube video.
New YouTube video: 1hr general-audience introduction to Large Language Modelshttps://t.co/Bl4WNuNyFJ
Based on a 30min talk I gave recently; It tries to be non-technical intro, covers mental models for LLM inference, training, finetuning, the emerging LLM OS and LLM Security. pic.twitter.com/JHOa2mqjdh
— Andrej Karpathy (@karpathy) November 23, 2023
And OpenAI’s Andrej Karpathy — former director of AI at Tesla — thinks the thinking involved in the achievement may hint at what superintelligence might look like.
"After 34 Years, Someone Finally Beat Tetris"
Wow, incredible video on what it took to beat Tetris, waaay beyond the game's original design.Also a great reference for reinforcement learning and what superintelligence might look like.https://t.co/sNDzNlrTNV
— Andrej Karpathy (@karpathy) January 2, 2024
Fidelity marked down the value of its Twitter stake, a stake amassed after helping Elon Musk acquire the social media platform a few years back.
Fidelity now thinks its stake in the social media platform is worth 71.5% less than at the time of Musk’s purchase.
Woops.
In a recent piece for The Economist, Guy Scriven argued that AI will go mainstream in 2024 (if it wasn’t already mainstream last year).
Scriven thinks 2024 will be the year companies outside the tech sector benefit most:
‘In 2024 the big beneficiaries will be companies outside the technology sector, as they adopt ai in earnest with the aim of cutting costs and boosting productivity. There are three reasons to expect enterprise adoption to take off.’
Here is the Australian consumer laid bare in one chart.
Real disposable income growth negative.
Real consumption growth negligible.
Savings at multi-decade low. (That said, we are saving historically little now. But many Aussies still have excess savings built up during the pandemic).
Here’s an excerpt from Charlie Ormond’s piece on where he thinks AI will take us in 2024.
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As we start 2024, a crucial question arises: how will the next wave of AI development impact the world?
Generative AI — capable of creating new text, images and video — holds the potential to change how businesses operate in 2024.
This technology will see growth across sectors, including:
Marketing and Advertising: AI tools will analyse user data and behaviour to create relevant marketing.
Personalised marketing messages, targeted content, and dynamic ad designs tailored to individual preferences will become commonplace.
Text-to-video technology like Pika 1.0 is already available and will improve in 2024 to support this.
Privacy concerns aside, this could increase marketing efficiency and improve return on investment.
Product Development: Generative AI will design and test new products. This can optimise production processes and predict market demand more accurately.
This allows businesses to innovate faster and cheaper, providing a competitive edge to the first movers in the space.
Financial Services: Large hedge funds have used AI for years to crunch vast amounts of data behind closed doors.
Their application has expanded from high-frequency quant trading to a plethora of uses.
But the next generation of AI assistants could democratise these efforts.
AI can reshape the financial sector by automating complex financial analysis tasks. It could also assist with personalised financial reports or develop new financial products.
This will make financial services more accessible and personalised while improving customer experience.
Struggling ‘neuromorphic artificial intelligence IP’ developer Brainchip [ASX:BRN] said it amended a financing deal with LDA Capital for the third time.
Brainchip said amendment will ‘provide the company with access to capital, when necessary, until December 2024’.
Unless the new terms, Brainchip will issue 40 million collateral shares by the end of March. LDA Capital’s purchase price will be set at 91.5% of the ‘average of the daily Volume Weighted Average Price for each day shares were sold throughout the pricing period.’
Chinese automaker BYD surpassed Tesla as the world’s largest seller of electric vehicles, measured on a quarterly basis.
In the fourth quarter of 2023, BYD sold over 526,000 EVs. In the same quarter, Tesla sold about 485,000.
On a full-year basis, Tesla is still ahead.
Tesla sold 1.81 million EVs in 2023, up 38% on 2022. BYD sold 1.60 million, up 70% on 2022.
The ASX 200 is down 1.03% nearing midday.
Gold producer Gold Road Resources is the worst of the bunch, down 7.40%.
Afterpay owner Block is not far behind, down 6.60%.
Chalice Mining is the third-worst performer, down 5%.
Eight of the ten worst performing stocks on Wednesday are in the materials sector.
It’s the ‘stick your neck out’ time of the year. That is, prediction time.
Over the last week, our editors have published their predictions for 2024.
Yesterday, our editorial director Greg Canavan published his. Below, an excerpt.
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Be fearful when others are greedy and greedy when others are fearful.
This is my advice for how to think about investing in 2024.
It really is as simple as that.
I could just leave it there, wish you a Merry Christmas and Happy New Year, and head to the beach.
In fact, I may be at the beach by the time you get this. I’m heading to Adelaide with the family just after Christmas. I plan on spending most of my time at Seacliff and Brighton beaches, plus a few days at the Adelaide International tennis tournament.
Can’t wait!
But before I head off, I wanted to lay out a gameplan for how to think about markets in 2024.
Hopefully you’ll find it useful…
Whenever we think about what’s ahead, we really mean what’s ahead for ‘the market’.
But really, the market is just a bunch of individual stocks. ‘The market’ should only concern you if you invest in an ASX200 ETF, or a fund manager that ties themselves to the benchmark.
I couldn’t care less about ‘the market’, except for one important aspect.
That is, is ‘the market’ bullish or bearish. In a bear market, you can own cheap quality stocks, but they still may go down in price. In a bull market, you can own expensive, average companies and they may still go up in price.
It’s difficult to make money in a bear market. But you can plant the seeds for future growth by buying good stocks at cheap prices. You simply then wait for the bull market to return.
In 2023, you’ve seen bull and bear market conditions. More importantly, you’ve seen these conditions move to extremes.
In my view, this continues in 2024.
When there is a lot going on in the world, with much uncertainty, emotions run high. This uncertainty means most investors play ‘follow the leader’. They don’t know what to think. It’s all too confusing. So they let ‘the market’ decide and then jump on board. This fuels rallies and sell-offs, pushing prices to extremes.
When sentiment turns bullish, you see an ‘emotional premium’ factored into the price. And in bearish conditions, it’s an emotional discount. This occurs irrespective of the company’s individual situation.
Sometimes, you see an emotional premium or discount that has gone too far. Investors extrapolate good or bad news. The rubber band stretches too far and snaps back. This occurred a few times in 2023. And as I said, it will likely continue in 2024.
We’re not in a bull or bear market. We’re in an environment where uncertainty reigns.
Here are 2023’s worst performing stocks on the All Ords. The All Ords is a good barometer, made up of the 500 largest ASX stocks.
Below, the duds.
Gold producer Gold Road Resources [ASX:GOR] is down 7% at the open after annual production from its Gruyere joint venture mine came in at the lowest end of its guidance.
GOR guidance annual Gruyere production to be between 320,000 and 350,000 ounces.
Actual production was 321,978 ounces.
GOR said December quarter production was hit by ‘lower mining productivity’.
Elaborating, the producer said:
‘Production was lower quarter on quarter due to disappointing mining performance arising mainly from unexpected labour availability issues during December.’
The ASX 200 opened Wednesday 0.86% lower.
The worst out of the gate are tech and consumer discretionary stocks:
The Nasdaq’s 1.6% drop overnight was only the fifth time the index started off the year with a decline larger than 1.5%.
How much should we read into this?
Did the stellar performance last year play a part?
After all, the Nasdaq did rise almost 45% in 2023.
A cool-down — or profit taking — was inevitable. Right?
Today was just the 5th time in the Nasdaq's history that it started off the year with a decline of 1.5% or more.
— Bespoke (@bespokeinvest) January 2, 2024
The tech-laden Nasdaq didn’t start 2024 in the same spirit as it ended 2023.
The index fell 1.6%, largely due to sizeable drops by Apple and Nvidia.
The more balanced S&P 500 fell 0.6% while the Dow Jones Industrial Average held steady with a 0.07% gain. The Dow has now risen for nine consecutive weeks.
Pundits searching for a quick explanation to make the latest news bulletin blamed a rebound in bond yields.
The 10-Year US Treasury note rose to 3.944% from 3.860%.
Apple fell 3.6% overnight after analysts at Barclays issued a downgrade, pointing to weakness in iPhone sales:
”We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounceback in Macs, iPads and wearables.’
Here’s a handy market wrapup from Charlie below.
ASX 200 Futures point to a fall in the second 2024 trading session after investors saw the global end-of-year rally slow as traders pushed back their expectations of rate cuts into later in the year.
Global bond yields jumped as a response to the earlier expectations of cuts around June changing to September.
On Wall Street, heavy falls on the Nasdaq were led by Apple, which has struggled as it battles in the courts over patents for its newest smartwatch.
The company won a ruling to pause the ban temporarily, but last night, its shares fell by -4% after it faced a downgrade by Barclays. In the note, analysts pointed towards ‘lacklustre’ sales of its newest iPhone, especially in China.
Gold also fell overnight on the opening of the London exchange after nearly reaching US$2080.
Oil prices are likely to remain volatile in the new year trading as tensions in the Red Sea continue to ramp up, sending prices up, while global demand and oversupply concerns push it down.
Oil closed 2023 down -10%, its first annual loss since 2020.
Iran has now dispatched a warship into the Red Sea after the US Navy intercepted and destroyed three Houthi boats.
Currently, hundreds of ships are taking the long route around Africa as a result of Houthi Militants’ drone attacks on commercial ships in the region.
Wall Street: Dow flat, Nasdaq -1.63%, S&P 500 -0.57%.
Overseas: FTSE -0.15%, STOXX -0.20%, Nikkei -0.22%, SSE -0.43%
The Aussie dollar fell sharply -0.80% to US 67.62 cents as the USD rallied with the shifting rate cut expectations.
US 10-year bond yields gained +5bps to 3.93%. Australian 10-year bond yields +8bps to 4.03%.
Gold fell -0.19% to US$2,059.01. Silver fell sharply -0.58% to US$23.66.
Bitcoin spiked up 5.2% overnight on rumours of ETF adoption coming before Jan 10th, sending prices to their highest level since March 2022.
BTC is currently at US$44,958, and Ethereum rose by 3.4% to US$2,358.
Oil Brent fell -1.39% to US$75.97, while WTI Crude fell -1.69% to US$70.56.
Iron ore rose +2.2% at US$141.75 a tonne.
Good morning! And Happy New Year!
Kiryll here, reporting for 2024 duty.
Let’s get straight to it.
P.S. How good was the traffic this morning? Never drove to work faster. Ideal traffic conditions. Thank you, holiday goers.
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Investment ideas from the edge of the bell curve.
Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.
All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.
The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.
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