Sunday, April 29, 2018

The Artificial Intelligence Bubble Is Bursting

I think we all see where I'm going with this. The Idiocracy likes outsourcing so much that they outsourced thinking. Artificial Intelligence is now heading for its biggest system test, as the iPhoney era is now over...

TMX announced its decision to shut down all markets for the remainder of the session with about an hour left of regular trading...TMX Group’s tech problems come just days after The New York Stock Exchange on Wednesday suspended trading in the shares of five Nasdaq-listed companies including Google and Inc. AMZN, due to a what was initially referred to as “a price scale code’ issue"

Any questions?

As I've said many times recently, there is really only one bubble left:

From dumbphones to driverless cars and HFT algos, computers have taken over the thinking from humans. There's only one problem, they don't think. The multitude of casino flash crashes should have been a warning to zombies that momentum-based algorithms are not a replacement for traditional market making. They work the exact opposite. Traditional market making places buyers below the market, and sellers above the market. Whereas momentum algos, force-in buyers above the market, thus leaving only sellers below the market. We've only seen this in several dozen asset classes in the past number of years. 

Now, the dumbphone era is ending. Apple bet that a $1200 phone would be the next big thing, only to find out that no one wants one. Shocking. Suppliers are warning that orders are continuing to slow. 

The fourth quarter is where Apple gets its biggest bang for the buck from a new product launch:

Connecting these various themes - HFT algos imploding markets, driverless cars running people over, 1300+ Crypto-based ponzi schemes, Social Media data used to rig elections, and smartphones making everyone as dumb as a fucking brick, it's not hard to see why semiconductor stocks are starting to implode.

Nvidia, the company that dominates in almost all segments of the semiconductor market, is up 1000% in just two years. It comprises 10% of the A.I. ETF, the largest holding. 

It's at the intersection of all of these bubbles where it gets interesting. Because the momentum algos are about to get stress tested in a way no one had previously envisioned. Ironically due to Tech earnings season.

As fund managers sold down their tech holdings to a five year low recently, the places to hide dwindled to a handful of well-known names.

It was right after the big cap techs reported earnings in January/early February, when the wheels came off the bus.

So far, Netflix, Google, Facebook, Microsoft, and Amazon have reported. Three failed moonshots have left the Nasdaq below where it was when Netflix reported, having already passed through the obligatory 50-dma rinse cycle.

Leaving Apple and Nvidia to report this coming week. 

This should be interesting.

"In the broadening top formation five minor reversals are followed by a substantial decline.

It is a common saying that smart money is out of market in such formation and market is out of control"


I think we all see where I'm going with this...

The irony