Investor Questions and Concerns Part II

I hope everyone has been having a great weekend so far. If you missed it last week, we opened up to reader comments in Part I of a question and answer series.

We’re going through our second and final round in Part II of that series this week. Topics range from investment opportunities in AI and marijuana to building protection against the devaluation of the dollar.

In case we didn’t get to your question, don’t be discouraged. We will make our best effort to get to you next time. Depending on your feedback, we can do another round of this next quarter, so please write in if you still have any comments or concerns.

For now, let’s take a look at some recent questions from our subscribers.

Dear Sirs,

I would really like to hear your views and recommendations on AI and the marijuana industries and investments.

Thank you,

— Gerald

It’s not surprising to hear from investors who want to learn more about investing in AI (artificial intelligence) and marijuana these days. Both industries are among the hottest opportunities on the market right now.

When it comes to AI, the topic can be a little tricky to talk about because it depends on how you want to define the term. A lot of people are throwing “AI” around pretty loosely these days, so it helps to be on the same page.

For businesses and marketers, AI has really morphed into a meaningless buzzword. As The Atlantic rightly puts it, AI has become “just a fancy name for a computer program.”

Facebook says it uses “AI” to detect suicidal thoughts, but it’s really just using a pattern matching filter. Google says it’s using AI to target hate speech online, but it’s really just using machine learning software programmed for a specific task.

One way or another, we can say these programs are “intelligent,” but I suspect that’s not what investors are really getting at when they ask about opportunities in AI.

In popular science fiction, AI is about our relationship with conscious, thinking machines. When most people outside of the big tech marketing machine think about AI, I assume this is where their minds are really going.

The reality, of course, is that true AI doesn’t exist, at least not yet. Computer programs are getting smarter and more dynamic, but they can’t think for themselves like humans can.

Still, application matters when we talk about investment opportunities. I think most people would agree that Siri, Alexa, and Google Assistant qualify as AI more so than Facebook’s targeted-ad algorithm, even if they don’t meet the technical definition.

This kind of “AI,” where we’re beginning to have conversations with computer programs, is synonymous with the term “personal digital assistants,” or PDAs.

You can invest in AI as it relates to PDAs in two ways. Your first option is to buy stock in tech powerhouses like Google, Apple, Amazon, Microsoft, and IBM. Five years from now, when you’re talking to your computer as if it were a longtime friend, it will very likely be a PDA developed by one of these firms.

If you’re looking for something more tangible, though, I think the only guaranteed investment in AI right now is in hardware, specifically MEMS (microelectromechanical systems) microphones.

Why MEMS microphones? Well, it’s pretty simple: The interface for AI is voice, and machines need a way to hear what you’re saying. It doesn’t really matter which major tech company comes out on top of this race; all of them are going to need more microphones, at higher average selling prices, to get there.

As for marijuana, this isn’t my area of expertise, but I do have a favorite stock and can at least point you in the right direction.

I have a couple colleagues who are heavily invested in this market right now. One of them recently tipped me off to a company at the center of a spot in California being dubbed “The Silicon Valley of Weed.” Turns out it’s the same company I’ve been following for over a year now: an emerging agriculture firm scooping up cultivation and retail space in California, Nevada, and even New Jersey.

You can get more details about that opportunity here.

How do I stay ahead of the declining US dollar?

— Anonymous

Here’s a question we’ve been seeing a lot of, and a common concern for many investors today. There’s no single answer that will suffice, but everything centers on exposure to inversely and non-correlated assets. In other words, assets that either go up when the dollar goes down or that aren’t tied to it at all.

Traditional investment wisdom tells us one surefire way to do that is by owning gold. As a general rule, gold has an inverse relationship with the dollar. The International Monetary Fund (IMF) estimates that 40–50% of price movements in gold are dollar-related.

If you’re a gold bug, you can buy physical gold, but if you just want exposure to the negative correlation, you can pick up stocks like Goldcorp, Barrick Gold, or Newmont Mining. ETFs like the SPDR Gold Trust (NYSE: GLD) and the Gold Miners Index (NYSE: GDX), though, are your best shots at diversification.

That said, the inverse relationship between gold and the dollar isn’t quite as strong as it used to be, and investors looking to defend against a falling dollar would be wise to spread their bets. Digital currencies (e.g. Bitcoin), in particular, are beginning to challenge gold as a go-to reserve and should be considered an essential (albeit minor) component of any serious investor’s portfolio.

I also highly recommend gaining some real estate exposure if you want to defend against a declining dollar. Real estate is a great weapon against inflation for two reasons.

First, fixed debt is your friend in an inflationary environment. If you sign a fixed loan for $250,000 today and the value of the dollar gets cut in half tomorrow, your monthly payment is going to stay the same while the cost of bread and milk are on the rise. In short, you’re paying the bank back with devalued dollars.

Second, inflation generally causes real estate prices, as well as average rent, to increase, as it does with most goods under a fixed supply. When you have something physically tangible under your name, you’re better protected against the falling dollar. This applies to pretty much any commodity.

Lastly, you want to stay invested in stocks. Stocks add some protection against inflation because the same factors that increase the price of goods increase the value of the companies selling them. Equity value should generally move in proportion with inflation.

In short, save less and invest more.

I’m having a hard time tripping the trigger to invest in anything I’ve been reading – I’m kind of overwhelmed. Is there someone that I can call and get some one on one guidance as to what I should do as it pertains to my plans?

— David H.

David, if you’re looking for more information on our newsletters and investment resources, you can always reach us at our customer service line here: (877) 303-4529. That said, we can’t give you individual advice. We provide research on compelling stock stories and market strategies for our half a million readers, but we don’t act as individual advisors.

My biggest concern is short term growth. I am 71 years old, so I don’t have time to wait till a slow growing stock makes me enough money to do some of the things on my bucket list. I am new at the stock game, and rely on things like your letter to give me guidance. Thanks for all your good work.

— Anonymous

We answered a similar question last week, but this one’s worth some repetition. We get a lot of retirees looking for short-term growth opportunities because of expected time constraints.

There are two points I like to stress on this topic.

First, you need to limit your risk by only allocating only a certain amount of your portfolio to growth. Retirees need to be especially cautious investing, because if you lose your nest egg, there’s no turning back.

Second, if you want exposure to growth, you absolutely have to be investing in today’s emerging technology markets. Driverless cars, 5G, AI, augmented reality, and robotics should be on the top of your list.

Decide what you’re willing to allocate and start small. Find three to five companies you like, and pull the trigger. Just make sure you have some stop losses in there for protection.

Hello,

I feel my main concern is retirement. I am a single mother who raised three children by myself. I did not have the means to save for retirement. However, I do have a pension, they are allowing us to invest half of our pensions.

I am going to meet with Vanguard as the health system hired them to help employees with this endeavor. I’m a little concerned on which way to turn. Also, I am thinking about investing in Israel Oil/Gas. They are drilling now and research shows that oil is present. They just need to find it I guess.

What is “Wealth Daily” ‘s thoughts? I haven’t seen anything in your newsletter pertaining to investments in Israel.

Thank you!!!! And thanks for all the great info you provide.

— Mary C.

Mary, big props to you on raising three kids by yourself. I was raised in a single-parent household and have a lot of respect to send your way. I’m going to bypass the retirement concern because we’ve touched on it in earlier responses, but your remarks on Israel piqued my interest.

By Israel oil and gas, I’m not sure if you’re referring to the country in general or a specific company. If you were referring to a specific company, I’ll assume you’re looking at Zion Oil & Gas (NASDAQ: ZN).

Now, this isn’t my domain of expertise, but I’ve asked a few folks who specialize in the oil and gas markets, and they said to stay away from Zion, and Israel’s drilling efforts in general. The basic sentiment is that there’s too much geopolitical risk to justify such an investment, and I have to agree that makes sense.

As for other markets, though, I can tell you Israel has a very strong tech market, which we’ve been following for years. Back in 2014, we actually tipped our readers off to self-driving Israeli tech company Mobileye leading up to its IPO. Intel scooped up the company for $15.3 billion just a few years later, netting investors a pretty solid gain.

Outside of these pages, I also cover a number of Israeli tech stocks in my investment newsletters Technology and Opportunity and The Cutting Edge. I’m not at liberty to share any specific stock recommendations (that wouldn’t be fair to paying subscribers), but some big names you’ll want to watch include Teva Pharmaceuticals (NYSE: TEVA), Ceragon (NASDAQ: CRNT), and Tower Semiconductor (NASDAQ: TSEM).

Until next time,

Jason Stutman

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