Monday, April 22^nd, 2024

How AI Farming Is Already “TRANSFORMING” America

Go onto any American farm today, and you will see some familiar sights. Rows of crops and tractors tending to the fields.

You may even see a new machine attached to tractors today. It looks like this:

The company that manufactures this product calls it the “SEE & SPRAY” system.

It’s still in its early stages. BUT, it’s already having a “MASSIVE” impact where it’s being rolled out.

The “SEE & SPRAY” uses a combination of ROBOTICS and 36 CAMERAS that can scan 2,100 square feet at once. “MACHINE LEARNING” allows it to identify weeds.

Then, utilizing dual tanks that can be used individually or in tandem, the weeds get sprayed.

Having two (2) different tanks allows the “SEE & SPRAY” to essentially make two (2) passes at once.

BUT, the real story isn’t the “TIME SAVINGS”…. It’s the “COST SAVINGS”!!!

“BOOMTRAC” technology keeps the sprayer arm within 10 inches of the target height. This improves spray ACCURACY and reduces herbicide WASTAGE.

The “SEE & SPRAY” can reduce herbicide use by as much as two-thirds. That is a ”HUGE” cost saving for farmers.

BUT, that’s not all…

The tractor can be operated “REMOTELY”, with movement pre-programmed via AI-powered tools.

A farmer can use a computer or tablet to get a “SEAT” and monitor progress from the cameras. Or do that while being chauffeured around their field.

The “SEE & SPRAY’s” sensors allow monitoring of seed, water, fertilizer and pesticide levels while operating an “AUTONOMOUS” tractor. It’s an “INCREDIBLE” LEAP FORWARD!!!

AND, all it costs is… $25,000

That’s not “CHUMP CHANG”, by any means. It’s $14,000 for the hardware and $11,000 for the installation.

That said, the “SEE & SPRAY” is an attachment that goes onto some of today’s top-of-the-line tractor models. So it’s not a standalone cost.

BUT, this technology pays for itself quickly, especially given the costs of pesticides and herbicides.

AND, it’s easier on the land, too. Fertilizer “RUNOFF” is affecting life downstream from farms, creating unintended effects.

In Florida, FLORIDA FERTILIZER RUNOFF CREATES ALGAE BLOOMS. This makes waterways impassable and sucks out oxygen, which endangers fish and other unique species, like manatees.

All told, adding this $25,000 piece of technology to a farm is a giant leap forward for farmers, consumers and, the environment.

The “SEE & SPRAY” is a sign that a new “GREEN” revolution is already here.

AND, it’s powered by AI…

At a time when we hear so much about what AI “WILL DO” in the next five (5) or ten (10) years…

AND, about the SEMICONDUCTOR FACTORIES breaking ground today that will be making CHIPS by the end of the decade…

The “GOOD OLE” American farm is already putting this tech to work… TODAY!!!

That’s no surprise. HIStory shows that farm technology tends to lead to other innovations elsewhere.

That’s why AI farming is one of the most exciting areas investors are overlooking today.

All technologies allow people to do more work and the biggest technological benefits in human HIStory have started on the farm.

For thousands of years, simple hand tools like SCYTHES and PLOWS were used for farming. “BEASTS OF BURDEN”, such as OXEN, were used to help plow fields.

The hours could be long during planting and harvesting season.

By today’s standards, it was beyond backbreaking labor... AND, it was also the human condition for all but a few “ELITIES” for most of HIStory.

With the rise of the “INDUSTRIAL AGE”, everything CHANGED!!!

Steam-powered machines could do the work of dozens, then hundreds of humans. Gas-powered tractors eliminated much of the back-breaking labor.

HIStorians even credit farm technologies such as the COTTON GIN with ending institutionalized human slavery.

Today, fewer than 1% of Americans are employed directly on farms, and less than 2% in the broader agricultural space...

AND, the percentage of time and income that Americans have spent on food has DROPPED thanks to these technological improvements.

It’s been a true transformation in just a few generations… AND, it’s all thanks to TECHNOLOGY.

The next “TRANSFORMATION” has arrived…

Today, farming is the “VICTIM” of its success…

Thanks to so many advanced technologies, FEW FARMERS ARE NEEDED. That’s allowed for the growth of cities, modern corporations and, thriving businesses OUTSIDE of agriculture.

HOWEVER, there are times when additional physical human labor is still needed on farms. That means we have occasional LABOR SHORTAGES.

Technologies such as ROBOTICS AUTOMATION (i.e. “SEE & SPRAY” tractor) can solve this problem.

In the farming industry, AUTOMATED ROBOTS can help REDUCE harvesting costs, enhance food quality, increase yields, streamline operations and decrease waste.

Tools such as DRONES can also be helpful on the farm. They can provide a “CROW’s EYE” view of where crops are. With AI-powered “RECOGNITION SOFTWARE”, they can identify trouble spots that may need more water or fertilizer.

They can take over most of the roles still needed by human labor… AND, they can help eliminate WASTAGE.

That includes food that goes bad before it can be harvested and processed. But it can also include reduced fertilizer use.

Currently, FERTILIZER COSTS run an average of 20% of a FARM’s COSTS, according to the USDA. For some crops, such as CORN, it can be as much as 35%.

Even modest savings in this big cost can make a huge difference in a farm’s profitability.

AI-related stocks, particularly “CHIPMAKERS”, have already made a big move. BUT, NOT AI farming stocks.

Since these technologies are still so new, the market is barely aware of their potential. Only a handful of farms are using these AI-powered tools today.

And globally??? There has been no rollout yet…

So, the AI farming trend is likely to play out “MASSIVELY” over the next few years, driving billions of dollars in COST SAVINGS for farmers.

Many third-world countries didn’t get modern gas-powered equipment or start to use fertilizer until the 1970s.

The result? Global crop yields surged nearly fourfold. All without substantially increasing the amount of land or labor required.

With today’s new AI farming tools, we could see similar gains.

Today, 40% of the world’s population earns its income substantially from AGRICULTURE.

That’s incredibly different than the 2% in the U.S. If 40% of America’s workforce was on farms, we would have over 65.8 million farmers.

AI farming tools could mean the rest of the world uses far LESS human labor within just a few years. That means less back-breaking labor. And higher global incomes.

In turn, AI tools will help keep food prices from trending HIGHER and drive DOWN FOOD INFLATION over time.

That’s good news for farmers, consumers and shareholders who own the right AI FARMING COMPANIES.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Tuesday, April 23^rd, 2024

The “DANGERS” of Giving in to FOMO

Whenever there’s a hot trade in the market, whenever an asset class captures the headlines for producing HUGE gains, the automatic response for most investors is, “DAMN…I have to jump on board!!!”

To them, VALUATIONS don’t matter…. LOGIC doesn’t matter… All the time-tested market-based FUNDAMENTALS don’t matter.

All that matters is… “This asset is moving higher. My friends and neighbors are making more money than me. So, I HAVE to get on board.”

It’s a classic “FEAR OF MISSING OUT “ (FOMO) event…

“BELOVED” ATWWI FAMILY MEMBERS, I must tell you… FOMO will DESTROY you!!!

If your neighbors are getting “P.A.I.D., then GOOD for them.

If Biff and Muffy at the holiday cocktail party are bragging about their HUGE profits in cryptocurrencies, then GOOD for them.

That’s wonderful… You should be glad that your friends, neighbors, and in-laws are doing well.

“PROSPERITY” is a GOOD thing…

BUT, when logic doesn’t support the trade – or when your own financial objectives require a more conservative stance – then chasing the trade is a MISTAKE!!!

You should focus your investing and trading strategies on WHAT IS RIGHT FOR YOU. That means you will underperform your neighbors sometime.

But who cares???

As long as you meet the performance necessary to achieve your long-term goals, then it’s a “WIN”.

When I am “TRADING”, my immediate objectives are to make profits on SHORT-TERM TRADES. But my recommendations fall within the constraints of a LONGER-TERM objective… AND, in the LONGER-TERM, it’s the “CONTRARIAN” – or less popular – trades that will generate the LARGEST gains.

“LOGIC” AND “REASON” ALWAYS “WIN” OVER “EMOTION”!!!

CHASING PERFORMANCE… CHASING THE “HOT IDEA”… is almost ALWAYS a “BAD IDEA”.

Traders who RUSH to get into trades simply because it’s the “HOT IDEA” of the moment, or because their neighbors are profiting, are making a “MISTAKE”.

If the trade doesn’t have a “FUNDAMENTAL” backing… if it doesn’t fit with your overall LONGER-TERM strategy… then it’s NOT likely to turn out well.

SO, when it’s time to sit on the sidelines, I don’t mind telling people to DO SO until a better opportunity arises.

YOU, ME, WE the ATWWI FAMILY do notneed to CHASE ANY TRADES just to keep pace with the neighbors.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Friday, April 19^th, 2024

A Stock Sold in “PANIC” Is a Confession of “FOLLY”

Last night's (Thursday, April 18^th, 2024) retaliation by ISRAEL fueled a shocking selloff that abated by the sunrise. Once again, “PANIC” SELLING turned into a confession of “FOLLY” for many around the globe.

A slingshot selloff happened last night at roughly 10 pm, with futures dropping sharply, BITCOIN (BTC) crashing under $60,000, and OIL prices spiking. Markets instantly reacted NEGATIVELY to the news that ISRAEL had conducted operations in IRAN. By morning, things had abated, with prices moving back to where they started. Some traders and investors lost A LOT of money by “PANICKING”.

The RUSSELL 2000 is still very weak. The Russell 2000 ETF (IWM) has its next support level at $190. From there… it’s a steep move down to about $177. We are almost to “OVERSOLD” territory, suggesting we are heading toward a bottom.

This is a ”VITAL” LESSON on “TAMING” EMOTIONS and ensuring you have all the proper information BEFORE deciding on your money activity. The EQUITY SIGNALS are still negative as we head into the Third Friday in April (when monthly options expire).

I have a hard time imagining that too many funds will want to be “SHORT” oil over the weekend, which could force “BUYING” during today’s trading session. But stay vigilant, as any lack of action by IRAN over the weekend could fuel a resumption of SELLING next week. This is why you must willing to ride the wave of GEOPOLITICAL tensions and FED “FOLLIES” until we see action on BANKING RESERVES in May (2024).

Rushing to the “EXIT” during a market “FIRE DRILL” guarantees you will be TRAMPLED NOT SAVED!!!

BUT, most people don’t think this way…

The average trader/investor acts like a “MOVIEGOER” to a HORROR film—screaming at the first sight of trouble and spilling their popcorn long before the credits roll.

Such REACTIONS to instant “CRISES” lead to “BAD” financial decisions.

When prices rebound, PAPER LOSSES transform into REAL LOSSES!!!

We often hear three (3) “ADAGES” – two (2) anonymous and one (1) attributed to BUFFETT.

The first goes: Buy on the sound of cannons, sell on the sound of trumpets.

The BUFFETT one goes: Be greedy when others are fearful, and fearful when others are Greedy.

Or: 

“BUY” when there's "BLOOD" in the streets...

Perhaps we should have a new ATWWI version of these quotes to claim our own…

When “PANIC” hits the Street, FILL your pockets!!!

When “TRIUMPH” fills the Street, EMPTY THEM!!!

Or go even shorter…

“BUY” amid “CHAOS”... “SELL” during “APPLAUSE”!!!

A “PATIENT/DISCIPLINED” trader/investor should act more like the “STOIC” SPECTATOR who waits out the INITIAL “PANIC”.

Markets, like HIStory, tend to REPEAT themselves, often rebounding as swiftly as they fall.

Five (5) Takeaways:

• 1.“PATIENCE”/”DISCIPLINE” is/are the best way(s) to PERSERVE your PORTFOLIO and your “WEALTH”.
• 2. SHORT-TERM fluctuations are “NORMAL”; focus on LONG-TERM GOALS and STRATEGIES.
• 3. A WELL-BALANCED and DIVERSE PORTFOLIO can weather storms better than high-conviction ones.
• 4. Learn more about MARKET CYCLES and HIStorical TRENDS to eliminate “PANIC_DRIVEN” decisions.
• 5. Have “CLEAR” INVESTMENT CRITERIA to know when to ”BUY” and “SELL”. This eliminates “EMOTIONAL” decisions.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Thursday, April 18^th, 2024

Utilize The “ONE-TENTH RULE” When Buying a Vehicle

With very few exceptions, AUTOMOBILES (aka: Cars) are “GUARANTEED” to LOSE VALUE!!!

You may “LOVE” your car, BUT there is no reason to overspend on a DEPRECIATING LIABILITY, especially at a time when all other goods and services eat up so much of your income…

The 1/10th “RULE” for car buying is a budgeting strategy AND one that has been gaining traction among car buyers looking to spend as little as possible on an item that loses them money.

Often lumped in to the 20/4/10 “RULE (which adds being able to pay 20% or more of the total purchase price of the vehicle up front and being able to pay off the balance in 48 months or fewer to the mix), the 1/10th rule alone is something worth sticking to when shopping for a new ride.

The thinking behind this 10% spending suggestion is:

Too often, people will purchase a car without having a “REALISTIC” OVERSTANDING/UNDERSTANDING of how much more it will actually cost to own it. As a result, they end up spending too much and exceeding their budget.

If you earn the median per capita income of about $42,000 a year, for example, you should limit your budget to $4,200. If you earn the median household income of about $62,000 a year, don’t spend more than $6,200 on a car.

Remembering that total car costs include insurance, maintenance and gas (not to mention traffic tickets!!!), if you can manage to spend only one-tenth of your gross income on a new-to-you car, the financial benefits are plentiful.

Listed below are three (3) reasons why you should try the 1/10th “RULE” the next time you purchase a car.

1. Practice “RESPONSIBLE” Spending

There are really only two (2) questions you need to ask yourself when you are purchasing a car:

1. What kind of car do you need???

2. How much can you afford to pay???

Following the 1/10th “RULE” helps you select a vehicle that you can comfortably afford, taking into account not just the purchase price, but also ongoing expenses like insurance, maintenance and fuel.

2. Saving and Investing Opportunities

Spending more than 10% of your income on a car means you will have less money for other things, in particular, “ASSETS” that can grow your “WEALTH”. By making a modest investment in a vehicle, you can redirect funds towards savings, trading and/or investing that have the potential to grow over time, which will ultimately improve your financial future. Buying too much car is like NEGATIVE “COMPUNDING”!!!  

3. Less Ownership “STRESS” and “GUILT”

Paying over 1/10th of your income on a car causes “STRESS” because you are always thinking of what can go “WRONG” and what potential “DAMAGE” will cost. Often, when people overspend on an item they “FEAR” the money should be going toward something more important, causing “GUILT” and “RESENTMENT”. Sticking to spending 1/10th of your income on a car makes ownership and driving “STRESS” free.

PEACE & BLESSINGS

Kenneth Reaves, Ph.D.

Wednesday, April 17^th, 2024

Beware of “ANCHORING BIAS”… The U.S. Economy Is “STRONGER” Than You Think

Jobs are plentiful right now, with unemployment hovering near all-time lows. And corporate profits are up – S&P 500 earnings grew 2% in 2023 BUT, are forecast to “SOAR” 10% this year (2024) and 13% in 2025!!!

For many people, the higher costs of food, energy and especially housing are a “REAL” hardship. But many others are continuing to spend despite higher prices, and that’s what is helping businesses grow and keeping the jobs picture so robust.

So if the economy is “THRIVING”… why doesn’t it feel like it???

I believe it has to do with “ANCHORING BIAS”, a PSYCHOLOGICAL BIAS TOWARD PREVIOUS INFORMATION…

For example, a person may decide they dislike a political candidate because of something they said or did. Going forward, no matter what that politician does, the person will CONTINUE to dislike them because of their “PREVIOUS BIAS” – even if the politician does something very positive. (I know a politician doing something positive is very unlikely… but you get the idea.)

This happens all the time in financial markets. Suppose you buy a stock at $50, and then the stock falls to $25 because of a decline in the company’s business. You might continue to believe the stock is worth at least $50 despite the evidence to the contrary.

We are also seeing “ANCHORING BIAS” in the economy right now when it comes to INFLATION and INTEREST RATES…

For over a decade, society had rock-bottom INTEREST RATES and barely any INFLATION. So society got very “ACCUSTOMED” to 3% mortgages and prices not moving much.

Then, SUDDENLY, INFLATION SPIKED to nearly DOUBLE DIGITS, making everything in our lives much more EXPENSIVE and pinching household budgets.

INFLATION has since fallen back to 3.2%, which is actually slightly BELOW the long-term average of 3.3%. BUT, due to “ANCHORING BIAS”, it still feels like prices are out of control. We think that hamburger, fries and, beverage at our favorite restaurant should still cost $12 rather than the $16 it costs now.

NOTE: KEEP IN MIND THAT FALLING INFLATION DOES NOT MEAN PRICES HAVE COME DOWN…IT MEANS PRICES ARE RISING MORE SLOWLY!!!

Even though I have studied “ANCHORING BIAS” in numerous classes on BEHAVIORAL FINANCE and TECHNICAL ANALYSIS, I still fall into “OLD” patterns too.

When filling out my March Madness bracket this year, I picked the top-seeded University of Houston to win the championship. I couldn’t name one player on Houston’s team, but I remembered the great “PHI SLAMA JAMA” Houston teams that featured Clyde Drexler and Hakeem Olajuwon when I was a kid.

(My bracket fell apart when Houston ended up losing in the Sweet Sixteen last week – another sobering lesson for me about the pitfalls of “ANCHORING BIAS”.)

Here are a few ways to get past “ANCHORING BIAS”. They may or may not help you get over the higher-priced hamburger combo, BUT they will definitely make you a better trader/investor and give you a more “REALISTIC” perspective of the economy.

1. Acknowledge the “BIAS”

The best way to start “SOLVING” a problem is admitting that there “IS” a problem. When you acknowledge that you may have a “BIAS”, that can sometimes instantly help you see things more clearly.

2. Embrace the “DISCOMFORT”

It doesn’t feel good when we are presented with information that goes against our thinking. Let’s go back to the example of a political candidate. If you have an opinion about a particular candidate and then you read details that go completely against what you think, your immediate reaction might be to suspect the information is “FALSE”. After all, no one wants to admit that they are wrong.

BUT, that’s how we get “SMARTER”: by taking in more information and having to think about it “CRITICALLY”.

When I have had to completely change my opinion on something – especially a view that was deeply entrenched – it was almost like I could feel new “SYNAPSES” forming in my brain.

That’s why I actively seek out “PERSPECTIVES” that are DIFFERENT from mine. At a minimum, it helps me OVERSTAND/UNDERSTAND the other side of the argument – and sometimes it also teaches me something that changes my mind and helps me “GROW”.

This is a very useful task when it comes to trading/investing. You should always be willing to take in new information that will help you decide whether to “BUY”, “SELL” or, “HOLD”.

This one (1) skill has improved my life “DRAMATICALLY”...

Choosing not to AUTOMATICALLY DISMISS THINGS I DISAGREE WITH has improved my relationships, sharpened my problem-solving abilities and made me a better analyst, trader and, investor.

3. Use “ANCHORING” to your advantage

There is a common negotiating technique that suggests you should NEVER make the first offer… BUT, if you do, that number becomes the “ANCHOR”.

The negotiation starts from “YOUR” number, not the other person’s. All “COUNTEROFFERS” will be viewed in relation to your “INITIAL OFFER”.

When you buy a house, you negotiate “DOWN” from the listed price. Even if the house is overpriced, that listing price becomes the “ANCHOR” that helps you determine what you are willing to offer.

If the house is listed at $500,000 and you think it’s worth $450,000, you may think, “They will never accept an offer 10% lower than the listing price.” (which may or may not be the case),

So you might offer $460,000 instead.

Be aware of “ANCHORING BIAS” and how it affects your EMOTIONS and DECISION MAKING.

Do not let the past shape your thoughts on what is happening right in front of you.

In this economy, you might miss some “GREAT” trading/investing opportunities.

PEACE & BLESSINGS
Kenneth Reaves, Ph.D.