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☕ Buy this, not that when it comes to AI

Jan 23, 2024

Good morning! 👋

The Dow hit 38,000 for the first time ever.

Hooyah!

The much broader S&P 500 rose 0.2% to close at 4,850.43, also a new record high. The tech-laden Nazzy closed at 15,360.29.

The bulls want to run, at least for now.

Naturally, the clickbait artists are already out in full force this morning... can it last?... will tech retreat?... is the market too narrow?

It’s so predictable.

Bearish views sound “smarter” because the unspoken message is that pessimists, contrarians, skeptics – whatever term you want to use – have peered around the corner to develop a nuanced view of what’s next.

Pay attention at your own risk.

Pessimism only sounds intelligent because the people reading it subconsciously interpret it as a protective reflex – and here’s the important part – even when the data shows beyond any shadow of a doubt that staying the course if you can is the far more profitable course of action.

The markets have a very pronounced upside bias over time.

Many investors have a hard time believing this because they are focused at moments in time but true investing success comes from learning how to focus on what happens over time.

Here’s my playbook.

1 – Can you imagine if Wall Street actually said what it meant?

Gus Richard, an analyst at Northland Capital Markets, made headlines by downgrading AMD from market perform to “heck if I know.” (Read)

And that got me thinkin’.

Can you imagine if Wall Street actually said what it means??!!

Buy (because our biggest most valuable clients need to sell a few shares)
Hold (because we think the stock is a worthy investment)
Sell (because our private traders missed the rally and our prop desk wants to accumulate shares for the next big run by scaring individual investors into unloading)

The sad thing is that most sell-side research is totally unsuitable for long-term investing and long-term investors even though it rockets around the Internet every earnings season. It’s focused on what happens next week and the week after that.

I’m more interested in what happens 3, 5, 10 years from now.

Especially when it comes to stocks like AMD.

You know what to do.

And if you don’t, you can find me right here. I’d love to help.

2 – United: Yep, having planes on the ground bites

UAL turned in solid Q4 numbers this morning and shares popped. (Read)

What the company said next is important.

Management stated that groundings related to the recent incident in which an Alaska Air door panel tore away in flight will result in an “impact of approximately 3 percentage points of incremental [adjusted unit costs] based on the fleet being grounded January 6, 2024 through January 31, 2024.”

Translation... higher costs will result in lower profits because our planes were forced to sit on the ground while safety inspections were conducted.

I’m not a fan of airlines in general and haven’t been for a long time.

They're n+1 businesses with very little upside.

I prefer “Zero to 1” choices.

Meanwhile, some putskies could work nicely for traders wanting to fade this morning’s gains.

3 – Meta: Is Zucko adulting?

Meta says it’s getting out of the news business after a long-running series of gaffs, screw-ups and mismanagement. (Read)

Apparently, news organizations are scrambling.

Chartbeat data shows that Facebook accounts for roughly 33% of overall social traffic, down from 50% a year earlier.

Good.

Perhaps we can return to real journalism and quality writing!

I might actually have to re-examine Meta even though El Zucko is still in the driver’s seat.

Hmmm.

4 – Gemini is Google’s best AI yet, and almost nobody cares

Google got caught flatfooted when Microsoft unleashed ChatGPT and it’s still playing catch-up.

Don’t get me wrong.

Google’s latest Gemini is impressive and, according to experts like Tim Keary, actually is better than ChatGPT in several areas particularly when it comes to what are called “like for like” scenarios. It’s also multimodal which means – in plain English – that it can take text, images, audio, and other sources into account as part of its reasoning.

Still, GPT-4 leads the way.

Mindshare + Marketshare = Microsoft.

5 – In-N-Out Burger is outta here

In-N-Out Burger – which, by the way, is a California institution and a long time favorite of mine when my bride and I are motorcycling - is closing its only Oakland California location because customers and workers are regularly subject to armed robbery, car prowls, and property damage.

What a sad state of affairs.

The location has been there 18 years, is profitable and busy... clearly a valuable part of the community.

Two things come to mind.

First, the “deretailization” of America continues which makes any retailer in any industry a suspect investment, particularly if the company has stores concentrated in challenging urban areas.

And second, the prospect of modern ghost towns is very real. High income earners are migrating away from large cities and taking their disposable income with ‘em, likely never to return. At the same time, people don’t want to work in stores that remain; a recent McKinsey report found that a jaw-dropping 76% of people who quit retail jobs did not return.

Long robotics, online logistics, remote power generation where reverse migration is evident