Artificial Intelligence Post Number 30

In past updates I suggested that the first applications of artificial intelligence would occur in the stock market, because mutual funds and hedge funds would fund the development of the required AI to beat the market. Of course these investment companies would not make their applications of AI public because that would either discount their value or make the government take action to remove these obvious advantages over the average investor.

But I believe that their trail is obvious if you look at a chart of the S&P 500 for the last five years. You will see that the character of changes in the S&P 500 have changed dramatically in recent years. Both the percent of change and the velocity of change have increased versus earlier periods. You can look at this on either a linear or log chart and you will see the same thing. Note Oct 19, 2014; Aug 16, 2015; Oct 4, 2015; and Jan 4, 2016.

This is not enough data to conclude that this is statistically significant to a 95% confidence level, but it is getting close. And it certainly is worth watching.

As I have said before, I would not try to play the general market with what is going on. Buying a specific stock for its growth potential may be valid. But in my opinion, the overall market is now being largely influenced by AI programs.

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16 Responses to “Artificial Intelligence Post Number 30”

  1. Hugh Jazole Says:

    How will this affect the bond market?

  2. Hugh Jazole Says:

    Will this affect the bond market?

  3. Bob kaufman Says:

    I agree

  4. Hugh Jazole Says:

    I shared this with some trader friends of mine. Their response was that this has been happening for some time, and regulators are fully aware of it.

  5. Albert Says:

    Warren,

    It looks more and more like Trump vs. Clinton for the office of President of the United States. Who will you be voting for? Hillary Clinton or Donald Trump? Please provide your pros and cons for each candidate.

    A few years ago you mentioned that the U.S. should increase tarriffs on Chinese made products. Do you still support that idea? If yes, doesn’t Trump also endorse those idea while Hillary Clinton is for free trade?

    • wbrussee Says:

      I hesitated to get involved in the choice between Hillary and Donald, especially since I don’t really care for either of them. But one, at least in my mind, has values that are inconsistent with our country and is generally ignorant in many areas. Donald is campaigning on hate and fear. He refuses to stand strongly against the KKK and their lot. He is alienating Muslims. He said that global warming is a hoax by China. Donald thinks that we should bring back waterboarding. He wants to expel 11 million illegals (a problem which could easily be solved if existing laws against hiring illegals would be backed by jail sentences to those doing the hiring. People won’t come here and will leave if they can’t get jobs. Of course, since Donald hired illegals, he is not considering this solution. He would rather have his “business” friends build a wall!)

      I could go on for pages. But if anyone can disregard what I have already listed, several more pages won’t help! Donald Trump is ignorant and bigoted!

      Here is an update on Elliot Wave’s prediction that the S&P 500 will drop 41.6% this year from 1880 to 1100. I said that don’t believe it! The current S&P is 1984, up 5.5% since EW’s prediction early this year.

  6. Bob Kaufman Says:

    AlphaGojust beat Lee Sedol in game one of their five game match of the game Go.

    AlphaGo is a deep learning algorithm by Deep Mind owned by Alphabet (Google) .

    General Intelligence AI is developing quickly.

  7. wbrussee Says:

    On page 22 of my book “Artificial Intelligence Newborn – It is 2025, and I Am Here,” I predicted that a computer would beat a person in GO! Here is what I said in my book:

    “This is a board game with two players that originated in China more than 2,500 years ago. Complex strategy is required, and the theoretical number of possible games is huge compared to chess. Maybe a trillion times as many possible games. To win in Go, the computer has to use a degree of intuition, not just brute computational power.”

    Another step on the journey to AI!

    • Bob Kaufman Says:

      Do you still think strong AI is only 9 years out? Are you becoming more or less optimistic concerning our abilility to produce a strong AI which is friendly?

  8. Hugh Jazole Says:

    https://twitter.com/TheLayoff

  9. wbrussee Says:

    As computers get more smarts, and are able to think and communicate much like humans, the need for manpower will diminish in many fields. No one can be sure that this is contributing to the layoffs listed, but it certainly could be. One thing is certain. Computers and their related AI software are getting more powerful, and we will begin to see there effects everywhere.

    In the short term, we have to get more infrastructure work going. That is an area of need and where computers and their required robots are not likely to have an effect for many years.

  10. Hugh Jazole Says:

    “In the short term, we have to get more infrastructure work going. That is an area of need and where computers and their required robots are not likely to have an effect for many years.” You just gave an idea regarding Trump. If you think about it, the majority of his base is lower middle class and blue collar. They are the very people who would benefit from his, “Make America Great Again” plan. Which would likely involve tons of construction projects. He will have them mobilized and highly motivated to work hard, if he becomes president. Perhaps the real power behind the scenes has this in mind.

  11. wbrussee Says:

    Bernie Sanders also supports this. Talk about opposite ends of the spectrum!

  12. Hugh Jazole Says:

    I’m not a fan of any of the candidates BTW, just a thought I had. I do tend top think the PTB get the candidate they want, more often than not.

  13. Robert Kaufman Says:

    Alphago just won the fifth game of “Go” and beat the top notch human champion 4 games to 1. I appears that strong AI is coming faster than we might have predicted. Warren’s book gives it nine years to the year 2025 and he seems to be thinking that it may be here by 2020, What do others think and what are the chances, in your opinion, that strong AI will remain friendly to human beings.

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