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We’ve been talking about pirates the last couple of issues – stock market pirates, how they make money, and how looking at what they do can be hugely profitable for us.

Well, so far, the pirates are staying in port.

Both private equity funds and corporate activists were very quiet in the first quarter of 2023, and they have yet to do much since the quarter’s end.

With the exception of banks, energy, and real estate investment trusts (REITs), insider buying has also been relatively light.

Even buying in the sexiest story on Wall Street right now – AI stocks – is light.

Here’s why…

Of course, getting folks to buy banks and REITs at bargain basement prices, or energy on a pullback, is like pulling the rotten teeth of someone with an unnatural fear of dentists. This is to say: it is the right thing to do, and in the long run, you will be much better off for having done so.

However, the fear of short-term pain prevents most people from doing the right thing. Buying into all the hype about artificial intelligence is far more exciting—it is going to change the world, after all. It will take everyone’s jobs, won’t it?

The only way to defend against the economic destruction of AI and robotics is to buy the AI and robotics stocks with the sexiest stories so you can be so rich in a few weeks that you will not have to care about what happens.

That is one version of the story.

The other version says that artificial intelligence will drive economic growth and creates a new nirvana on earth, especially for those who own shares, so the tiny AI companies that will outmaneuver Alphabet (GOOG), Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT), and turn you into one of the wealthiest people in the world by this time next Tuesday afternoon.

It is exciting stuff.

You can make it even more exciting by buying those magical fortune-building devices known to the ultra-elite as call options.

There is some truth to it all. Artificial intelligence is going to be huge. Combined with robotics, it will change some industries dramatically, and for the better. And it will change the nature of some segments of the job market.

That is not the end of the world.

The invention and eventual widespread acceptance of the personal computer eliminated hundreds of occupations. So did the internet. And railroads and automobiles did away with a host of jobs related to travel by horse and buggy.

The economy and workforce adapted. Fortunes were made by those who invested in a handful of companies. Fortunes were lost by those who could not execute their vision or needed more capital to see a good idea to the finish line.

The AI gold rush is going to look a lot like the last one, with the internet: larger, better-funded companies will be the biggest winners. One or two of the newcomers will also make it, but dozens more will be bought out or tossed onto the graveyard of corporate history.

The people who bought into internet stocks when it was the most exciting lost enormous sums of money.

The peak-to-valley drawdown of internet stocks was roughly 90%. A significant number of companies simply ceased to exist. Others got bought out for a fraction of the most exciting stock price.

The people who bout the market leaders, the technology leaders like Microsoft (MSFT), Apple (AAPL), and others made a fortune. Those who wanted to wait and see who would win the e-commerce battle and waited a year or two after the bubble burst to start buying still got rich by owning companies like Booking.com (BKNG) and Amazon (AMZN).

Artificial intelligence will make many people rich. These will be those who invested in dozens of startups at pennies on the dollar and had one or two hit it big—venture capitalists. But, unless you are already rich, you are not invited to that party.

Those who wait until the markets have had a monstrous selloff when no one wants to buy any stocks, and then start buying technology and AI leaders, will find the party will be open to all, but most people will be too afraid to attend. But investors who do drop in to do some shopping will make massive profits.

Please note that I do not include those who speculate on those magical call option instruments among those who make big money in AI. The most significant profits money in options is, and has always been, made by those professionals (and computers) who sell options to speculators for more than fair value.

The ultra-elite do not have secret call trading formulas unavailable to the public until just this very minute. They simply own businesses and real estate and harvest long-term capital gains.

The AI profit party has yet to start. It is still too exciting, and people are rushing to throw money at AI stocks with little to no regard for financial conditions or prospects.

It will start eventually, just not yet. However, the party for banks and real estate is just getting started.

The blood is in the streets—what’s your next move?

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