In this edition of Market Factors we\u2019ll show some great guidance for markets and life from venture capitalist Morgan Housel. Then I move on to how one ethically challenged industry is becoming even more cutthroat. The diversion covers a disturbing new trend of AI-assisted madness and as always we\u2019ll look ahead to important data releases for the coming week. <\/p>\n
LessonsBad advice brings useful warnings<\/p>\n
There are few finance writers with better perspective than Collaborative Fund\u2019s Morgan Housel and he proved it again with the recent post<\/a> called Very Bad Advice. Mr. Housel\u2019s goal is to underscore the complexity of success versus the simplicity of self-destruction. <\/p>\n The bulk of the piece is a very long list of beliefs that can undermine success in both investing and life. One example is \u201cAssume learning is complete upon your last day of school,\u201d an obvious tongue-in-cheek warning to keep learning throughout life. There are a few points of bad advice that struck me as extremely important for investors. <\/p>\n The first is \u201cForecast with precision, certainty, and confidence.\u201d This is a reminder that any market-related predictions are just loose hypotheses and will almost certainly be wrong. All forecasts are to be held lightly and completely unrelated to an investor\u2019s ego. George Soros prot\u00e9g\u00e9 Stan Druckenmiller once noted that Mr. Soros is the best trader alive because he knows when to abandon an investment thesis. <\/p>\n I am guilty of \u201cBelieve that the past was golden, the present is crazy, and the future is destined for decline\u201d to the point I\u2019m considering buying defence stocks, which I describe as put options on human psychology. Things are crazier than usual where politics are concerned but investors should not fall victim to fatalism. <\/p>\n I also found \u201cView patience as laziness\u201d as an important reminder for investors. Finance research shows conclusively that portfolio returns decline as the number of transactions increases. There are many times that the best thing to do in a portfolio is nothing. <\/p>\n \u201cAdjust your willingness to believe something by how much you want and need it to be true\u201d is another good one. I take this in a specific way that guards against a mistake I\u2019ve made in the past, when I convinced myself an investment idea was great just because it was time to buy something. <\/p>\n Readers can judge for themselves but I find Mr. Housel one of the few finance writers who is truly wise and his bad advice in this column is helpful during market hours and beyond.<\/p>\n Open this photo in gallery:<\/a>Stock pickingAI well-suited to health care<\/p>\n In what could be interpreted as a case of evil companies becoming even more evil, U.S. health insurers are implementing AI to streamline hospital operations and eventually cut jobs. <\/p>\n BofA Securities analyst Alec Stranahan reports that the U.S. health-care system is a jumble of administration for patients, insurers and hospitals that often requires manual input of data. The opportunity for efficiencies is widespread and some insurers and large hospital systems are already implementing AI applications to tackle them. <\/p>\n The stocks mentioned are new names for me. Doximity Inc. (DOCS-N<\/a>), with AI applications to draft medical letters and appeals and communicate with patients, is one. Waystar Holding Inc (WAY-Q<\/a>), with software to help simplify payment processing and claims denials, is another. Nashville-based hospital network HCA Holdings Inc. (HCA-N<\/a>) is a leader in AI implementation in its own operations. <\/p>\n DiversionsAI\u2019s potential bad effects on mental health<\/p>\n News that an unstable teen had been dragged into madness by an AI companion would be lamentable but not surprising. Futurism\u2019s description<\/a> of venture capitalist Geoff Lewis\u2019 apparent AI-assisted descent into mental illness, however, is eyebrow raising. <\/p>\n Mr. Lewis was an investor in machine learning and AI expansion for a multi-billion dollar investment firm until a series of social media posts led to concerns about his health. The posts suggested that Mr. Lewis had used ChatGPT to uncover a shadowy organization that was negatively affecting 7,000 people and had killed more than ten people. <\/p>\n The story is the continuation of a trend of AI encouraging users\u2019 delusional thinking to extremes that are being blamed for involuntary stays at psychiatric facilities, homelessness and even suicide. <\/p>\n Mr. Lewis did not respond to requests for information for the story so we\u2019ll have to be careful in assuming AI\u2019s role in his difficulties. If it turns out that AI did play a significant role, it is alarming as Mr. Lewis has a clear idea of AI\u2019s inner workings. <\/p>\n The essentials<\/p>\n Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here<\/a> to visit our Inside the Market page.<\/p>\n The Rundown<\/p>\n Norman Rothery hunts for the best measures<\/a> of quality for both large and small Canadian stocks<\/p>\n Ian McGugan looks at the staggering amounts<\/a> companies are spending on AI and what it may mean for investors. Meanwhile, Jamie McGeever asks<\/a>, Is the U.S. stock rally near a \u2018Mag 7\u2019 turning point?<\/p>\n