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Investors showing ‘breathtaking complacency’

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

The Financial Times details five new technologies that are set to "change how we live" – biotechnology , artificial intelligence, renewable energy , connectivity and smart appliances. The section on biotech was interesting,

"The most radical branch of this new technology is 'gene editing' — a process by which our DNA code can be cut and pasted using molecular 'scissors' for a variety of applications, including curing diseases such as cancers and HIV. Until recently, swapping the code was an arduous process. A new DNA cut-and-paste tool known as Crispr has made the process unexpectedly simple. Crispr has been used to create disease-resistant strains of wheat and rice, alter yeast to make biofuels and reverse blindness in animals. Ultimately, it could be used to edit defects out of human embryos."

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As it happens, I've been doing a lot of reading on artificial intelligence. There are some truly tremendous breakthroughs.

OrCam, an Israeli company, has developed an application that provides man of the benefits of sight to the blind. There are also some really disquieting advancement, including a complete cubicle monitoring system allowing management to track their employees' every move and keystroke.

For investors, RBC research expects that Google and Facebook will dominate the development of AI.

"Five technologies that will change how we live" – Financial Times
"The Dawn of the Age of Artificial Intelligence" – The Atlantic (February 2014)
"Your Cubicle Has Ears—and Eyes, and a Brain" – M.I.T. Technology Review
"Who should own the robots?" – Marginal Revolution
"@SBarlow_ROB Why Googabet will dominate AI (RBC)" – (research excerpt) Twitter

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Thousands of trees have been killed to present speculation on how a U.S. border tax adjustment (BTA) will affect the domestic and American economies. Bloomberg reports, however, that support for the BTA in U.S. congress has all-but evaporated,

" So far, the opponents are winning, interviews with lawmakers, lobbyists and tax specialists show. As Congress prepares to depart Washington for a one-week break, Cornyn said he didn't see the votes lining up for the House leaders' plan. 'The hard reality is the border tax is on life support, and given the imperative of 51 senators and 218 House members and one president, I think we need to look for other options,' he said."

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"Ryan Makes Emphatic Plea for Tax Plan Seen 'on Life Support'" – Bloomberg

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The Gadfly site (from Bloomberg) identifies evidence that global investors are far too confident,

"This divergence has pushed the so-called complacency index, which relates the ratio between enterprise value and Ebitda in the MSCI World Index to the VIX, to its highest level in at least two decades. The gauge peaked on Jan. 27 at 1.145, but the 1.139 it logged on Tuesday is the third highest since at least 1997. The benchmark has been unusually high over the past two years thanks to the endless generosity of central banks, as I have written about before."

"Stock Investors' Breathtaking Complacency" – Gadfly

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Tweet of the Day: "@TeaAndCopy: Even bathroom handwashes are telling me to visit a psychiatrist." – Twitter

Diversion: "Comparing current automation to the Industrial Revolution isn't actually so comforting" – Marginal Revolution

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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