Tuesday, November 3, 2015

Self driving cars and the market

Earlier this summer I was having a conversation with my father, the topic was self driving cars.  I though that within a few years self driving cars would begin as a solution to gridlock and the complete absence of parking spaces in large cities.  My estimate that "in the next 10 years" experiments would start.  My dad was far more pessimistic, he thought that the Americans would never be able to get around the liability issues (then again 30,000 people die from guns and that doesn't appear to be a problem, but I digress).  

Imagine our surprise when Tesla unveiled its latest software update which allows limited automatic driving on motorway.  Furthermore two guys drove across the country with a Tesla; 99% of motorway driving was automatic driving.  It gets better, last week I learned that machine learning was involved!   That every time an American (because the software is so far only available in the US) takes his tesla on the road and activate the automatic driving, the entire Tesla network learns how to better drive -- talk about Science Fiction -- OK so maybe I don't have my jetpack, but my self driving car is here.

Now, what does all this mean for the automobile market?  First off, the "big three"  (aka the legacy manufacturers -- BMW, Ford, Merc, GM etc) were once again caught flat footed.  The self driving explains why the new Tesla (4x4) is built the way it is built.  With machine learning taxi (electric) could soon be driverless -- imagine a Uber with no driver.  The car picks you up, and brings you to your destination... Do you need to own a car, could you be part of a pool of cars?  Will "mini-uber" be created?  If you live in a large city the whole issue of parking your car may have gone away!  You live in Manhattan and your car is parked in New Jersey!  

I never anticipated that the US would be the first market to have automatic cars -- really for such a litigious country its a little surprising.  Still for the past two months they have been there.

As for the great market crash of 2015, lets be clear it has not happened, sur stocks are not going anywhere fast, but they are not sinking.  Stocks today opened within a margin of error of where the were at the very beginning of 2015!  Granted, its not the 7-10% yield that investors have come to expect, but with interest so low, equity market investors still got their dividend (around 1% on average).  Every morning I wake up to some more doom and gloom (I'm usually Mr Doom and Gloom) and while I agree that the world economy is not firing on all cylinders its really not crashing yet.  There are "black swan" signs out there, China is a real worry -- its economy seems to be in stall speed, and the government seems to be out of stimulus tools -- Russia is very aggressive although I think the entire world wishes them luck in Syria (rather them than us mentality) Honestly, none of the G7 countries has any idea how to deal with Syria!  

Still there's nothing on the horizon that would suggest that changes are afoot.  


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