Weekly Bot Brief Newsletter on Robotics 9/13/2019

"There is no force on earth more powerful than an idea whose time has come."   -Victor Hugo

Bot Index Highlights:

The Bot Index substantially outperformed the broad market in last week’s trading. Robotic companies gained 4.20% as compared with the Standard and Poor’s 500’s near one percent increase. Four Bot Index components with double digit or near performances drove the outperformance. Interestingly, three of the four have been perennial laggards within the index and investors bid up the names without any significant news to stimulate incremental demand. 3D Systems led the gainers with a 14.11% jump. The company announced that its product, “D2P FDA-cleared software allows clinicians to 3D print diagnostic patient specific antonomic models.” While this announcement would probably not have much of an impact upon earnings, it may have placed the company in investor crosshairs. Textron rose 10.58% despite a plethora of lawsuits regarding the company’s 2017 purchase of Artic Cat which lawyers claim included fraudulent language. The third company experiencing a bounce was Oceaneering International who rose 9.41%. The company has experienced gains for the past four weeks.

All three of the Bot Index companies that experienced declines for the week were in the defense industry. Teledyne and Northrup Grumman each fell 1.10% while Lockheed Martin dipped only .4%. Perhaps the less bellicose verbiage regarding tariff talks during the week was indicative of a more peaceful world.

What Hollywood, The Economist and Saudi Oil Have in Common:

In the latest iteration of the Gerard Butler-Morgan Freeman movie series that started with Olympus Has Fallen, the U.S. President is subject to an assassination attempt by a swarm of drones. While Hollywood vastly exaggerated the amount of ordinance that a 15-inch drone may carry, the theory is certainly valid and, perhaps will become even more so in years to come. In fact, this week, Houthi rebel forces from Yemen, and likely backed by Iran, claimed to have launched ten small drones in an attack on the largest Saudi oil production facility. The attack occurred at 4:00 am Saturday morning and set ablaze two refineries, cutting oil production by 5.7 million barrels per day, approximately 5% of world output. If validated, the disruptive economic impact of drone warfare can have worldwide significance. Just as a result of this attack, market analysts are predicting a dramatic jump in oil prices and a substantial impact upon consumers and specific energy dependent industries.

As disturbing as the capabilities of automation warfare are currently, they are likely to become even more strategic and tactical. In this week’s The Economist, its science and technology section featured AI and War, Battle Algorithm. The article focused on the ‘race’ by nations to fully augment their defensive (and offensive) capabilities utilizing artificial intelligence. Great Britain, the U.S., China and Russia are all rapidly employing advanced machine learning into weaponry but also battlefield tactics. The development of warfare strategy employs a massive amount of data digestion and, according to America’s Department of Defense, “AI is poised to change the character of the future battlefield.” So iterative is AI that “Michael Horowitz of the University of Pennsylvania compared AI to the internal combustion engine or electricity.” The harnessing of the vast, and ever expanding, capabilities of artificial intelligence in war is the goal of each of the nations. As Vladimir Putin recently predicted, “whoever becomes the leader in this sphere will become the ruler of the world.”

Member: American Economic Association, Society of Professional Journalists, United States Press Association. Institute of Chartered Financial Analysts, Robotic Industries Association.

The Bot Brief is a weekly newsletter designed for economists, investment specialists, journalists and academicians. It receives no remuneration from any companies that may from time to time be featured and its commentaries, analysis, opinions and research represent the subjective views of Balcones Investment Research, LLC. Due to the complex and rapidly changing nature of the subject matter, the company makes no assurances as to the absolute accuracy of material presented