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Weekly Bot Brief Newsletter on Robotics 2/8/2019

POSTED 02/10/2019

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

Bot Index Highlights:Bot Index vs. S & P 500, 2-8-2019

The Bot Index rose 1.49% while the broad market was virtually flat for the first full week of February trading. Helping to propel the bots were IRobot Corp. and Accuray Inc. who each experienced double-digit gain. Accuray reported it had entered into a joint venture with China Isotope and Radiation Corp. to sell radiation oncology systems in China. The stock was further promoted in a Simply Wall Street article where the author suggested the company’s earnings could increase 67% in the coming year. IRobot’s jump was in direct response to its 4th quarter earnings report. On record revenues of $384.7 million (+17.7%) the company registered earnings per share of $.84 versus last year’s comparable quarter of $.54 and analysts’ expectations of a down quarter of $.51. Full year eps came in at $2.84, a 60.5% gain over the prior year. Immersion Corp. added 5% while Ekso Bionics continued to glow from its joint venture to sell exoskeleton devices in Asia. The stock gained 4.76% this week, following its 12 ½% increase of the prior period.

There were only three marginally weak companies in the Bot Index two of which were impacted by Friday’s 2% decline in the NIKKEI. Yasakawa Electric fell 6.77% and Fanuc Corp. declined 4.10%. Shares of Oceaneering International slid 6.61% following a Zachs article entitled, “Oceaneering International’s Q4 Earnings Expected to Decline”.

Bots in The News:

The Washington think-tank, The Brookings Institute, has devoted considerable energies in reviewing the impact of robotics and AI on the economy in past years. In its latest article released in January 2019, “Automation and Artificial Intelligence, how machines are affecting people and places.” the Institute provides its insight on a variety of implications which the robotic revolution is likely to deliver. While the article has a conceptionally favorable viewpoint on the integration of robotics to enhance productivity and its positive stimulus to the progress of mankind, their assumptions on how best that progress should be managed may be in contention. Specifically, the Institute recommends five governmental initiatives which they contend that, “If the nation can commit to its people in these ways, an uncertain future full of machines will seem much more tolerable.”

The first of the Brooking’s recommended initiatives is logical in that governments should embrace growth and technology. Certainly, growth is important in the development of job opportunities which contribute to the welfare of the public. The Institute does make a bold statement that the government should appoint FRB governors that focus on full employment with a lesser emphasis on inflation containment. These are principles that The Bot Brief would, likewise, espouse in that growth, and the growth of productivity in particular, is a concept that tends to lift more people out of poverty and into prosperity.

The second recommendation by Brookings is to promote a constant learning mindset. Again, this is a theory that makes sense and has been the bellwether of futurists in how to deal with a labor force that will need to adapt to changing employment circumstances. The Bot Brief has devoted many pages on how early education will shape the role of the human/machine relationship in the future.

The third, fourth and fifth recommendations from the Brooking’s monograph deal with facilitating a smooth transition of displaced workers, to reduce financial hardships by expanding income supports and finally to ‘future proof vulnerable regional economies,’ As in many policy-making entities, The Brookings Institute’s viewpoint is that governments provide all the answers to economic conundrums. Within its extensive set of recommended governmental control activities are the creation of a universal adjustment benefit (essentially a universal income) which would be extremely difficult to administer (aka. are bank tellers displaced currently by ATM’s?), an expansion in the Earned Income Credit and the development of a government mandated and administered IRA program together with a plethora of subsidies funded by the tax-payer.

It occurs to The Bot Brief that the primary beneficiary the robotic revolution will accrue to consumers who will benefit from superior products at lower prices and the companies that produce those products. If that is a logical conclusion, would it not make sense to promote the ownership of stock in those beneficiary companies by the displaced workers. Could the Brooking’s recommendation of a government sponsored IRA be an opportunity to share the wealth that will invariably benefit robotically mechanized corporations? Certainly, solutions will emerge to allow world economies to cope with the new technological revolution. It would be a mistake to assume that governments and their policy-makers have all the answers for the trials and opportunities to come. It will take sound governmental policies together with business and individual initiatives to mitigate the disruptions and accentuate the positives of what is to come.

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.