Investing in AI: What you NEED to know
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Oh, everything you wanted to know about investing in AI, but we’re afraid to ask. Last week, as we got the podcast, we took about talked about the the job situation and you get this collective freak out about jobs that are going to be destroyed. They took their jabs like they did at South Park. And and it’s interesting story today. And I see Steve Cohen, the
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hedge fund managers actually chiming in in regards to this. Not doing a very good job with the Mets right now, Steve. But anyway, talked about the productivity gains that are going to be achieved with AI, which is going to lead to much better margins for many companies out there. Now I want you to put that into your head, okay?
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Companies using artificial intelligence in any way that they choose to do so, whether it be, I mean, I’m talking fast food joints, you could be talking about Home Depot, whatever it may be, whatever it may be, they’re going to see massive productivity gains, which is going to turn into better profit margins, which are gonna be great for these companies. Again, think as an investor,
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put that into a box. Okay. There’s many ways that there’s many ways you can play the latest. You want to call it? I’ll call it the next hype cycle. The next type cycle. And I’ve been through many hype cycles. We had a big dot com hype cycle. We had the pre-construction condo real estate hype cycle, which lay it led to the great session.
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blockchain hype cycle. We go through a myriad of different hype cycles. Again, COVID induced hype cycles in regards to all of these new tech companies that stay at home stuff. And some companies won and some, many, most companies are gonna lose. The same thing is going to hold true with artificial intelligence.
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when I’m asked, I said, you know, how did, how’d Markowski Investments, how did we handle the whole dot com run up? How did we invest in this new, you don’t want to avoid it, okay? You don’t want to avoid a new technology, you want to take advantage of it. But again, one of our rules is not to lose money, don’t want to lose money. So how do you go about doing that? Well, back in, back in the 1990s, we looked at it as an approach, a couple of, two different ways. We looked at it as an approach where,
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What companies, what companies out there were going to benefit from the internet? What companies are going to become more profitable due to technology? And pretty much cross the board. You could, you could play tech. You could play tech by owning a bank. You could play tech by owning.
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An oil company, if you really want to, it’s a much more conservative way. But again, you start taking a look at the technology and productivity and margins. The other approach we had was we looked at it as more or less the, um, uh, the parts companies, the, the, the stuff that you needed to have to build out the internet, even some of the companies in of themselves, call them toll keeper companies. Um, I didn’t know what, what.com retailers we’re going to end up.
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making it. There were so many of them. And again, I want to remind everybody Amazon, for you kids out there, Amazon started out just selling books online. That’s it. That’s all they sold. They’re just going to replace Barnes and Noble everywhere. No, no, no, no, no, no. That’s all they did. And there was plenty of other online retailers that just did one thing and we knew that they wouldn’t be able to survive. Amazon eventually figured it out. Once they figured it out, hey, that’s when we decided to get involved in it.
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Why throw darts at a board? You don’t have to. Again, getting greedy rather than being smart, not a good investment strategy by any stretchy imagination that leads to ruin. Anyway, neither here nor there. All right, talking about dot coms, how we went about getting involved in that AI. I mean, I’m gonna lay out what’s gonna happen over the next, it’s gonna be not over,
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next year, not six months, eight months, it’s gonna be next several years. First and foremost, we talked about jobs, and we told you, there’s gonna be massive job losses. Massive job loss, I mean Goldman Sachs is predicting the loss of 300 million jobs in the United States in Europe due to artificial intelligence. However, however, I’ll look into my crystal ball. Again, my crystal ball is telling me that, guess what?
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higher paying jobs jobs are gonna have job loss there’s absolutely gonna happen, but we’re gonna create new jobs and We’re gonna create higher paying jobs prediction right there Watchdogs crystal ball Let me tell you what else is going to happen Take a look at the valuations of many of the companies that are in AI Right now and they’re they’re bigger. They’re established companies
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Guess what? Compared to the valuations and new technologies, going back to the dot com, these companies, quite frankly, are cheap. Cheap, they’re not into the hype cycle bit. Will there be new companies? Absolutely, absolutely. And what I’m here to tell you is that few and far between will make it. Few and far between will make it in this scenario.
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Right now we have an FTC that is out of control, making mergers and acquisitions more difficult, but that will go by the wayside. It will. And if it doesn’t go by the wayside, you’re gonna see a proponents of initial public offerings coming out. That will come back to some degree. I don’t think that, I don’t think many of the venture capital firms will be able to incubate companies over an extended period of time.
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So you’re gonna be looking at a situation in this industry where you’re gonna have another hype cycle. You’re gonna have many companies skyrocket, go through the roof and again, you’re not gonna know which ones are gonna make it and which ones aren’t. Again, like I said, go back and follow our strategy. Look at the kind of a toll keeper type of approach. Look at the companies are gonna benefit from this. Not to mention the fact it is different this time.
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in the sense that you have already well established companies, well capitalized companies that are really making inroads in this technology. And quite frankly, if you take a look, based upon the hype cycle we’re going into, because it’s going to be another hype cycle, many of them, quite frankly, in relation to other hype cycles are cheap. Again, we talked about being greedy.
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not being a pig, what was that whole line I said, you know, bulls and bears, making a difference, pigs get slaughtered, whatever it may be, I neither here nor there, neither here nor there. Take that put that aside. Take profits along the way. Some of some of your foundational, you know, solid tech companies, tech companies that you have in your portfolio that are cornerstones, they’re gonna, they’re gonna grow.
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and this with this tech down there and they’re gonna grow like gangbusters. Okay, they’re still solid companies. Again, there’ll be a reckoning and things will come back down. But this is why along the way you rebalance your portfolio and you take some profits. So again, insight into my crystal ball. If you notice, my crystal ball can harkens back to the past. I look at situations and how they’ve played out time and time again in the past.
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they’re never going to be exactly the same. The situations are not the same, but guess what, they’re going to be close. Again, hype cycle coming. You just have to know how to play it. Watchdog on wallstreet.com.