The Future of Investing

Transcription

1 The Future of Investing Presented by Greg Prost, CFA Chief Investment Officer Traditional Fixed Income September 18, 2017

2 Game Changer for Me

3 Game Changer for Me

4 Game Changer for Me

5 Game Changer for Me

6 Why is it So Difficult to See What s Coming? 1. It Involves Thinking 2. Memories Stored in the Same Place 3. You Said That 50 Years Ago 4. Artificial Intelligence is Mysterious 5. It is Scary!

7 You Said That 50 Years Ago

8 Moore s Law

9 Moore s Law 10 Quadrillion FLOPS = 1% of your Brain Power

10 Why is it So Difficult to See What s Coming? Treasury Secretary Steven Mnuchin The risk of artificial intelligence is not even on our radar screen Concern might be warranted in 50 to 100 more years.

11 Why is it So Difficult to See What s Coming? An Open Letter to the United Nations Convention on Certain Conventional Weapons Lethal autonomous weapons threaten to become the third revolution in warfare. Once developed, they will permit armed conflict to be fought at a scale greater than ever, and at timescales faster than humans can comprehend. These can be weapons of terror, weapons that despots and terrorists use against innocent populations, and weapons hacked to behave in undesirable ways. We do not have long to act. Once this Pandora s box is opened, it will be hard to close.

12 Some Advancements Happen Quickly

13 Other Advancements Are Already Here

14 Some Advancements Are Already Here Disrupted by Autonomous and Electric Vehicles 1. Auto Companies/Suppliers 2. Auto Insurers 3. Truck Drivers 4. Auto Repair 5. Gas Stations 6. Tire Stores 7. Restaurants at Exits 8. Rental Car Companies 9. Airlines? 10. Funeral Homes/Ambulances/Hospitals/Organ Donation

15 3 Levels of Innovation 1. Increased Productivity Machinery/Robotics 2. Better Access/Quality Mass Produced/Longer Lasting/Safer 3. Cheaper Not Just the Products

16 All The Best Inventions Have Already Happened Internal Combustion Engine Electric Lighting

17 All The Best Inventions Have Already Happened Indoor Plumbing Appliances

18 All The Best Inventions Have Already Happened Automobile Air Conditioning

19 All The Best Inventions Have Already Happened

20 All The Best Inventions Have Already Happened

21 Latest Industrial Revolution

22 Productivity Also Began Replacing Workers

23 Worker s Share of Compensation Falling 1970

24 Past 50 Years More Choices/Better Products

25 Past 50 Years More Choices/Better Products

26 Next 20 Years Cheaper Products

27 Next 20 Years Different Products

28 Not Enough Concern Over Falling Prices

29 Technology Becomes Cheaper Every Day Sample Monthly Cell Phone Plans 1995: $50 50 Minutes of Talk 1998: $ Minutes of Talk/50 texts 2007: $51 3G and Smartphones 2008: $50 Unlimited Talk and Text 2017: $25-40 Unlimited Data 2020: Free for Amazon Prime Members??

30 Prices Falling to Zero? India 2016 A billionaire offered free voice call and texting for life, and data plans starting at $2.50 per month. He now has 1/3 of the market.

31 The Fed Chair Does Not Even Get It..... I do think there are some special one-time transitory factors. These unusual changes reflecting the move to unlimited data plans for cell phones.....

32 Technology Can Change Quickly for Firms

33 Augmented Reality Coming for Smartphones

34 Many Industries at Risk of Only One Winner VS.

35 3D Printing for the Masses

36 3D Printing

37 3D Printing for the Masses

38 3D Printing for the Masses

39 Energy

40 Land Mass Needed to Power Entire U.S. Approximately 10,000 Sq. Miles

41 Robotics

42 Healthcare

43 Healthcare

44 Direct Implications for Municipalities

45 Bitcoin and Blockchain Technology

46 Bitcoin and Blockchain Technology

47 The FAANG problem Source: NY Times, Reuters, Robinson

48 The FAANG Employee problem Source: Wikipedia, Robinson

49 The FAANG Employee problem Source: Wikipedia, Robinson

50 The Corporate Bond Has Different Problems 1. Large Tech Companies do not Need Corporate Debt 2. Small and Innovative Companies do not Need Corporate Debt 3. Generally, Issuers Have Large Sunk Costs and Thin Margins 4. The Return of Principal is in the Future

51 The Corporate Bond Index Problem Vulnerable Sectors 1. Auto Related 2. Retail 3. Energy Barclays Corporate Bond Index 4. Electric Utility 5. Healthcare/Pharma 6. Banking Source: Barclays, Robinson

52 Lack of Inflation Harming Debt Repayment Source: Bloomberg, Robinson

53 Innovation Won t Produce New Jobs This Time

54 5th Industrial Revolution and Beyond Silicon Valley Saying: We overestimate what can happen in 2 years, and underestimate what can happen in 10.

55 5th Industrial Revolution and Beyond