Today I used the downward market volatility to purchase small positions in two high profile banking stocks: Goldman Sachs (GS) and JPMorgan Chase (JPM).
Coincidently, this is directly related to yesterday’s blog, whereby I asked who could identify my favorite DOW stock that would be most favored by short/near term trends in automation. No one answered correctly. My favorite DOW robotic stock is actually a tie between: GS & JPM !!!
All of the answers I received were good choices, just not my favorite over the short to near term. In fact, over the long term, automation efficiencies will produce huge profit windfalls that will buoy all the components of the DOW. Even the doggiest of the DOW stocks like IBM are likely to reinvent themselves with automation technologies like: Big Data, the Cloud, the Internet of Things, Expert Decision Support Systems…etc.
So…how will GS and JPM benefit from robots over the near term? As I discuss in my book, robots aren’t just machines. The age of automation is a culmination of all the technologies mentioned in the previous paragraph. A computer algorithm or a smartphone app is every bit as much of a labor saving robotic device as a self-driving car. The large Banksters will profit immensely from automation technologies like artificial intelligence (AI) and blockchain. Unlike autonomous cars, AI and blockchain are fully functional today and their effectiveness will improve exponentially into the foreseeable future.
Last year GS applied for a patent to use blockchain technology for trading foreign currency. JPM is heavily involved in the crypto currency Ethereum. This is just the tip of the iceberg.
Sure, McDonalds will profit immensely from replacing minimum wage workers with robots. This is the primary reason I’m so bullish over Starbucks…robotic baristas are a reality and once implemented Starbucks’ profits will rapidly expand. But imagine the profit potential when GS fires highly compensated white collar professions with prestigious MBAs and legal degrees. It’s happening now!
The Banksters are not only eliminating employees, they’re benefiting from- lower transaction costs (e.g., blockchain money clearing), lightning speed transaction execution, undeniable traceability, and most importantly the creation of new financial products and markets. All this is turnkey, off-the-shelf, readily available technology…happening NOW!
I’ve delayed buying into the sector until this point because I didn’t want to chase the political momentum (potential for deregulation) that’s been driving the price up. However, I think today’s general market pullback provided an opportunity to shave a few percent of the price.
Will stocks get cheaper if the Trump drama continues to unfold? Probably, but GS & JPM are both currently below their 50dma & 100dma; valuations are very reasonable. My goal is to pick a good entry point, not the absolute rock bottom. I expect over the not too distant future that the Banksters will prevail. Over the long run, they always do.
The Robots are Coming: A Human’s Survival Guide to Profiting in the Age of Automation available at AMAZON and all fine bookstores.
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