The Bot Brief

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

- Victor Hugo

Bots In the News:

Some brighter economic news and attractive valuations have proven October to be a relatively good month for investors. Except for some of the larger technology companies, earnings season has likewise assisted the investment community. The Bot Index rose 5.31%, besting the S & P 500 which gained 3.96% in the final week of October.

The Bot Index held eight companies whose stocks rose into double digits. The best return came from Oceaneering International who has benefited from consistently high oil prices. The company reported earnings of $.23, well ahead of consensus expectations of $.13 on revenues that rose almost 20% year over year. The stock responded with a whopping 31% jump during the week.

Also benefitting from better earnings was Teledyne, whose stock value gained 12.74%. The third quarter earnings came in at $4.54 as compared with consensus of Wall Street analysts who were looking at $4.30.

Intuitive Surgical reported it had reached an agreement to repurchase $1 billion in its stock. The announcement drove shares higher by 11.75%. And Rockwell Automation increased its dividend to $1.18 which spurred its shares 10.87%.

Other double-digit gainers included NVDIA Corp (+11%), AeroVironment (+13.04%), Faro Technologies (+12.04%) and Keyence Corp. (+11.04%)

There were only four stocks that were down for the week and two – Google (-4.83%) and Amazon (-13.33%) had disappointing earnings while Fanuc fell 3.25%. The biggest loser was the Chinese EV company NIO. It continues to suffer from macro issues such as potential political issues from Chairman Xi and the ongoing quarantine of sections of the Chinese population due to Covid. The stock fell 13.56%.

Is the Study of the Economy Still the Dismal Science?:

If you believe Professor Charles I. Jones, you may very well think so. In an American Economic Review’s article entitled, “The End of Economic Growth? Unintended Consequences of a Declining Population”, Professor Jones discussed the impact of changing world demographics. In a follow-up to a book entitled Empty Planet that discussed the potential for future global population growth to fall, Jones correctly noted that economic growth typically goes hand-in-hand with improving lifestyles. With economic growth dependent upon labor force expansion and productivity, certainly it is logical to assume that half of that equation’s weakness would imply dire consequences. Indeed, Jones’ depiction of the Empty Planet is that the idea factory of humanity would diminish. “The ‘idea value of people’ is tied to the flow of new ideas that are created at each point in time and is, at least partially, a positive externality that would lead optimal population growth to exceed the equilibrium rate in many models. With negative population growth, however, the flow of new ideas goes to zero.”

There are several contrary opinions regarding this perceived fate of the world. Certainly, one must consider that the CIA Factbook anticipates another billion in population growth from the current eight billion by 2050. Perhaps, some of this optimism is a result of the dropping of the ‘one child’ policy by mainland China that has resulted in the stagnation of its population. In one of Jones’ graphs on the subject, China’s fertility rate went from over 6.25 in 1968 to 1.7 by 1995 and has stayed there through 2019.

Jones suggests that an Empty Planet would reduce the pool of ideas that help support lifestyle growth. To overcome that, he suggests that an alternative “Expanding Cosmos” of population would generate more advancements than a world with declining inhabitants We would argue that size does not matter when it comes to intellectual achievement. To us one Elon Musk or Albert Einstein is worth more than mere population growth in the production of disruptive ideas. The Renaissance, as an example, was limited to only a small scope of the population and yet made massive strides to benefit mankind.

To Jones’ credit, in his conclusion he notes, “There are ways in which this model could fail to predict the future even though the forces it highlights are operative. Automation and artificial intelligence could enhance our ability to produce ideas sufficiently that growth in living standards continues even with a declining population, for example. Or new discoveries could eventually reduce the mortality rate to zero, allowing the population to grow despite low fertility.” We, at The Bot Brief have always felt that productivity, due in part to automation, will likely trump pure population trends in providing economic growth for the future.

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

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 in the brief and its commentaries, analysis, opinions, and research represent the subjective view 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.