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From Gig Economy to Creator Economy

The Dow Jones Industrial Average (DJIA) continued to pull away this week as the rotation out of growth and into value continues.  While we recognize the trend, by its very nature, it is self-limiting in that as money flows into value stocks, its price goes up and no longer represent “value.”  How long this trend continues is anyone’s guess, but I wouldn’t count growth stocks as down for the count just yet.  I expect as interest rates slowly drift higher we will continue to see churn both between growth and value, as well as, between cyclicals and more defensive sectors.  Eventually, we anticipate the markets will settle down and a positive trend will emerge alongside robust economic growth.

Let’s begin with the big news this week.  Congress passed the sixth and latest stimulus package.  Cutting through the hyperbole, it is neither the reformation of the social safety net that democrats would have you believe, nor does it spell imminent hyperinflation and doom as the republicans insist.  The bill includes one-time provisions that will help 85% of this country and spark robust growth that we haven’t experienced in over a decade.  The package includes $1,400 checks for every American making less than $75K per person or $150K per couple based on your 2019 income.  It includes an extension of the $300 per week federal jobless benefit through Labor Day.  It increases the child tax credit from $2,000 to $3,000 for those with children over the age of 6 and $3,600 for those with children under the age of 6.  When we add up all the stimulus, both republican and democrat administrations have spent roughly $6 trillion in the past twelve months to overcome the economic impact of the pandemic which is an order of magnitude higher than what was done during the financial crisis in 2008.  With the end of the pandemic in sight, we believe this latest stimulus package will help accelerate growth in the months ahead.

With that out of the way, let’s talk about something less controversial: artificial intelligence.  Is it here to kill us or will it be our savior?  A consortium of prominent CEOs from the technology sector was tasked in 2019 with looking where we are and where things are headed.  This National Security Commission, led by former Google CEO Eric Schmidt, concluded in a report this week that the U.S. is drastically underprepared for the age of artificial intelligence and that China will soon replace the U.S. as the world’s “AI superpower,” which has serious implications.  The report urges President Biden to reject calls for a global ban on highly controversial AI-powered autonomous weapons, saying China and Russia are unlikely to abide by any treaty.  Thousands of AI researchers and computer scientists signed an open letter that calls for a ban on offensive autonomous weapons.  While I’ve often reported on how technology has seeped into our daily lives via consumer products or EV cars, I haven’t talked about a sea change happening within our military.  Although I am dubious we can control AI once it becomes autonomous, perhaps I’ve watched one too many sci-fi movies, it seems inevitable that soon AI will serve a large role in many aspects of our lives.

In closing, I’d be remiss if I didn’t acknowledge that the many stimulus packages are creating bubbles in various parts of the economy.  To a large extent, the gamification craze with stocks such as GameStop and AMC Entertainment, is possible due to advances in technology but exacerbated by large amounts of money with no place to go.  In similar fashion, we’ve watched Bitcoin go from $20,000 to $57,000 in less than three months.  In recent weeks another tulip emerged in the form of an NFT (aka a non-fungible token).  It first came to my attention when Jack Dorsey, the CEO of Twitter, decided to auction off his first tweet and currently stands at $2.5 million.  A few weeks ago, a gif of an animated cat with a Pop-Tart body, called the Nyan Cat, sold for $600,000.  And this week an artist, who goes by the name Beeple, sold a piece of digital art called ‘The First 5000 Days’ at Christie’s for $69 million.  As one person explained it, “You can go in the Louvre and take a picture of the Mona Lisa and you can have it there, but it doesn’t have any value because it doesn’t have the provenance or the history of the work.”  I’m not sure I buy the distinction, but then again, I am not in the market for digital art.  Now you know.

Bruce J. Mason, MBA