Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.
Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
As a reminder, I held a very special event this past Wednesday. It was an absolute blast. And it’s something that I have been working towards in the background for the last couple of years…
I’ve shared this week how Brownstone Research plans to adapt to the changing market circumstances we’re facing…
For some time, we’ve been seeing stocks outpace their valuations. Think of the “meme” stocks like GameStop and AMC… as well as overpriced tech stocks like Snowflake.
That was possible with the bull market conditions we were in.
But circumstances have changed now.
With a war in eastern Europe… inflation and sky-high gas prices… China up to no good… and a shaky market, we need to look at valuations again… and find where the real opportunities exist.
As I shared on Wednesday, one of the most profitable sectors right now is cryptocurrencies.
It’s true that this asset class can experience high volatility… And that’s one reason I built the Perceptron…
It’s a “neural network” capable of digesting tons of data in order to tell us where the best moves are. This artificial intelligence is incredible… and in testing, it’s been able to identify six-figure returns.
It does this by identifying the precise moments we should enter and exit a position. Often, this occurs within a 60-day window.
So Brownstone Research has begun offering shorter-term trades as of Wednesday… which are a powerful way to play the ups and downs we’ve been experiencing lately.
If you missed this announcement on Wednesday, please don’t delay. Go right here to catch up with the replay.
During this reveal, I shared one of the Perceptron’s latest crypto plays… and it could take off in the next 60 days. That means right now is the perfect time to get in position.
And to all who tuned in, I sincerely appreciate the time that you took to join me. Thanks again.
Let’s begin with a question on the Central Intelligence Agency’s (CIA) investing arm…
Good morning,
The Bleeding Edge recently mentioned Automata, the company that makes lab robots and is sponsored by the CIA. This shocked me.
You said, “There is obviously a vested interest in accelerating drug discovery, diagnostic testing, and even molecular sampling for an organization like the CIA.”
It is far from obvious to me that this has anything to do with what I think of as the bread and butter of the CIA. That would be spying on (hopefully foreign) governments and military targets, and influencing events by blackmail, murder, and so on.
If the CIA is interested in industrial volumes of lab work, to me it would mean they are planning to use the result on large numbers of people, not just a few selected targets. Possibilities that occur to me are designing germs or poisons that target individuals, families, or whole ethnic groups.
The most benign explanation I can think of is that they are investing to raise money outside the government, as they did by smuggling drugs in the Vietnam era.
– Mike L.
Hi, Mike, and thanks for writing in. You’ve really touched on one heck of a topic. The history of the CIA is certainly checkered with a wide range of activities that might come as a surprise to many of us.
For new readers, In-Q-Tel is the CIA’s venture capital (VC) fund. In-Q-Tel typically funds companies in their seed and earlier rounds to help them get off the ground.
That also gives the CIA early insight into the key technologies being developed. One way I like to think about this strategy is as intelligence gathering. That makes perfect sense if we think about it in the context of the CIA.
The information and insights that the CIA gathers through its investments may or may not be relevant to its direct mission.
But I’m pretty sure that if the interest is not meant for offensive purposes, it may be for the purpose of being prepared for what might come from bad actors.
And while the CIA has certainly been involved in nefarious activities in the past, I don’t believe we need to be overly alarmed about In-Q-Tel’s investment in Automata.
As I wrote recently, Automata is a robotics company aiming to automate many laboratory tasks – especially repetitive labor like filling, testing, and analyzing pipettes or moving samples among different stations.
In-Q-Tel aims to address potential national security threats with its investments.
And with COVID-19 in the rearview mirror for most of us (some still want to hang on tight…), we can see why it might be interested in advancing lab work efficiency.
As we saw during the beginning of the pandemic, our country needs a far better response system to identify who is actually infected AND infectious, and who is not.
In the event that we experience another pandemic or a biological threat, the government will need much better testing and analyzing capabilities.
That’s something Automata could certainly help with – as well as the development and preparation of vaccines or other therapies.
And on a broader scale, we can see that In-Q-Tel also has its fingers in a number of different pies…
In these pages alone, I’ve written about its investments in Nozomi Networks, a cybersecurity firm…
Narrative Science, which has developed artificial intelligence (AI) technology that can produce financial reports and other editorial content…
Sila Nanotechnologies, which is developing new battery technology for electric vehicles (EVs)…
D-Wave, a firm working on quantum computing technology…
Hermeus, which is working on a hypersonic cargo and, eventually, passenger aircraft…
And Palantir Technologies, a now-public company that does advanced data analysis with AI and machine learning…
In-Q-Tel helps the CIA stay competitive with the rapid pace of innovation we’re seeing. The government runs notoriously behind the private sector… but when it comes to matters of national security and intelligence, the U.S. can’t afford to fall behind the curve.
And over its decades in operation, In-Q-Tel has also helped support and bring about technologies like the touch screens on our phones and tablets… Google Earth imagery and maps… holographic displays… and much more.
Mike, I certainly share your skepticism about what the CIA may be getting up to. There are certainly some dark arts that come along with espionage.
It must be very difficult work, especially in these times with the level of sophistication in technology and the employment of technologies like artificial intelligence. I can empathize with the complexity that the world today must entail.
I can imagine that if I were on the inside, I’d want every edge that I could find to keep the bad actors at bay. And I suspect that is what In-Q-Tel’s mission is when it invests in early stage, bleeding edge companies.
Next, a reader wants to know more about quantum technology…
Hi Jeff, This wouldn’t surprise me if you were already aware of this. But quantum computing is really the wave of the future.
Inside a chamber at minus 459 degrees sits a perfect conductor. I think you need to look into this technology. This makes what China and Intel have look like the covered wagon versus magnetic trains.
– Ray B.
Hi, Ray – thanks for writing in. You’re absolutely correct. Quantum computing will be one of the most transformative technologies of our lifetimes.
And the most exciting, or scariest part, is that it is coming much more quickly than most of us think.
The pace of progress right now in quantum computing is exponential. And there have been some major developments in the last 12 months.
Furthermore, I believe 2022 will be a transformational year. I have predicted that one of the major players in quantum computing will announce a 256-qubit quantum computer. And in theory, this kind of power has the ability to crack the most common encryption standards in no time (that’s the scary part).
In classical computing, the “language” is the “bit.” It’s represented as either a 0 or a 1. And everything – from our smartphone to the most advanced classical supercomputer – relies on bits flipping from one state to the other.
That’s how classical computers calculate, process instructions, and deliver results.
Yet quantum computing machines speak an entirely different “language” compared to classical computers.
Rather than bits, quantum computers use “quantum bits,” or “qubits.” And while a bit can represent either 0 or 1, a qubit can represent a “superposition” of 0 and 1.
In other words, a qubit can be in multiple states at the same time.
I know that this might be a hard concept to understand. But the most important thing to grasp is the implications of this technology.
To your point, the speed and power of quantum computing already make today’s supercomputers look quaint, even antiquated.
But quantum computers will be used for very complex problems, not for our day-to-day computational needs. They need to be maintained in an extremely cold dilution refrigerator in order to establish the right conditions for operating at a quantum level.
In time, extremely complex models can be better understood like the global climate and weather patterns.
Likewise, a quantum computer could be “unleashed” on molecular analysis and protein folding to find cures for diseases previously thought incurable…
It could help us develop the materials and energy technology we’ll need to explore deep space…
And there are other ripple effects…
For example, quantum computing will lead to the next evolution in cybersecurity. We’re already on the cusp of quantum computing being able to challenge “military-grade” encryption. That’s why we’re working on upgrading to new “quantum-proof” encryption and security systems.
All told, it’s difficult for us to predict precisely how our lives will change thanks to this technology, but we know that they will.
Yet years from now, I think we’ll look back on this time as the period when quantum computing began to transform our world for the better.
Let’s conclude with a question about special purpose acquisition corporations (SPACs)…
Jeff, I am a lifetime member and appreciate your commitment to help the “little guy.”
As stated in previous publications, the SPAC organizers are required to put the funds from the “units” in escrow in the event the deal does not materialize. The investors are supposed to get the base cost, $10.00 minus the administrative fee, back if the deal does not go through.
The question is, what happens after the split and the units are exchanged for shares and warrants? Are the escrow funds still available for the shares if the merger fails at that point or not?
– Bob M.
Hi, Bob – thanks for being a lifetime member and for the kind words. I really appreciate the question as well. This is a bit of a nuance with regards to investing in SPACs.
As a reminder to new readers, SPACs are publicly-traded holding companies. Their sole purpose is to find a business combination with a private company in order to take it public.
This allows investors the rare opportunity to effectively invest in private companies at some of their earliest stages, when the greatest gains are possible.
And SPACs are a very special asset class. All their capital sits in a trust until they do their business combination. The SPAC can’t use those funds for anything else.
If a SPAC can’t find a target company within its required time frame (usually 18–24 months), investors get all their money back, less a small amount deducted for management fees.
Before a SPAC affects its business combination, it usually trades near $10 per unit because that’s backed by the amount of money it has in its trust account. That generally puts a bottom floor on the price.
And to answer your question, Bob… In Blank Check Speculator, we often buy SPACs while they are trading as “units.” After 52 days or less, these units split into shares and a fraction of a warrant, as you mentioned.
But don’t worry – even once we hold shares and warrants, we are covered by the funds in the trust.
If the SPAC announces a deal we don’t like, we can redeem our shares for cash instead of receiving shares in the company the SPAC is combining with.
And in the very rare event that no deal is made before the deadline, we are still beneficiaries of the trust and are entitled to our pro rata share of the amount held, which will still be close to $10 a share.
And of course, if there is no business combination, the warrants will essentially become worthless.
Either way, we are still covered. That’s one of the features that makes SPACs such a special investment opportunity. They have very limited downside, yet have the kind of upside that we might find in investing in pre-IPO companies with fantastic growth potential.
Thanks for writing in.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
