Should you trust the new AI chat bot taking the world by storm, ChatGPT?
That’s a question our tech expert, Jeff Brown, weighs in on below.
And his answer may make you pause the next time it spits out an answer.
Also, friend of Legacy Research Imre Gams reveals why he doesn’t trade based on news events at his new currency trading advisory.
But we’ll kick off this week’s mailbag edition of The Daily Cut with a big-picture question about our money system.
With inflation raging around the world, some folks believe the antidote is to return to the gold standard.
It’s a way of running a monetary system that links countries’ money supplies to their gold reserves.
This stops governments from printing too much of their currencies.
And it was the standard the U.S., Britain, and much of Europe were on from the late 1870s to the 1920s.
The world went back on a new version of the gold standard after the end of World War II – what’s known as the Bretton Woods Agreement.
This backed the U.S. dollar with gold… and fixed the value of other major currencies to the dollar.
But in 1971, President Nixon defaulted on America’s promise to convert overseas holdings of U.S. dollars to bars of gold.
As you may know, colleague Nomi Prins has been running a series of big-picture interviews with geopolitical strategist Peter Zeihan. (Catch up here, here, and here.)
And one reader has a question about Peter’s take on a return to gold as the anchor for the international money system.
Reader question: I often hear people talk about a return to a gold standard. If I read it right, Peter Zeihan noted in his book that there is not enough gold to support a gold standard. Did I read that right? What’s your take on this?
– Terry B.
Nomi’s response: Hi, Terry. Thanks for writing in.
You raise an important question. And given the level of inflation, my hunch is it’s on a lot of readers’ minds.
I can’t speak for Peter, of course. I’ll be doing another interview with him soon. And I’ll put your question to him.
But there’s certainly room for a quasi-gold standard.
Instead of every dollar – or other currency – being convertible to real gold, governments would back a portion of the value of their currencies with gold. The Fed or other central banks would have to store this gold in vaults in reserve.
That would put a cap on the amount of fiat currency the government could just create. Because they’d have to have sufficient gold backing.
Up next, we turn our attention to friend of Legacy and currency trading expert Imre Gams.
Imre has been profiting from moves in currency – or “forex” – markets for 14 years. And last October, he launched a new advisory, Currency Trader, to help readers do the same.
He’s a technical trader. He bases his trades on predictive chart patterns.
And so far, out of the 21 trades he’s shared with subscribers since the beta trial phase, 20 of them have been winners.
But one reader wants to know why he doesn’t pay more attention to news about currency moves…
Reader question: Good morning, following up on Imre’s Post-Mortem update (AUD/USD). I’m curious… Why don’t you care that there was market news that would affect the movement of the currency, and early indicators were to the negative? Even I could see that.
– Ann B.
Imre’s response: Hi, Ann. That’s a great question!
I don’t factor in the news when it comes to trading.
I just haven’t seen compelling data that paints a clear correlation between economic data reports and market movements.
News events sometimes lead to a market move that “makes sense.” For example, strong jobs numbers should result in a stronger dollar. That’s because it indicates a strong economy. But other times, the dollar will move in the opposite direction.
Another example is when a central bank raises interest rates. That should raise the value of the currency because it raises the interest rates available in that currency. But then the currency falls instead of rises.
We see this happen in the stock market all the time when earnings are released. Stocks will often fall on positive earnings news and rally on bad earnings news.
Trading is ultimately a game of probabilities. The key to good trading is knowing how and when to stack the odds in your favor as much as possible.
One of the best ways to do this is to get into a position where you have no open risk left on a trade.
We accomplished this on the AUD/USD trade when we took 50% profits and raised the stop-loss level.
Whenever we can get into this position, it’s typically best to give the trade the benefit of the doubt and see if it develops into a winner.
In the case of our AUD/USD trade, my technical read of the market led me to close the trade early. The probabilities shifted. I knew with near certainty that our stop-loss level would get hit.
So, instead of getting out at break-even, I saw a chance for us to grab a smaller win instead.
Finally, onto that question about AI.
As you likely know, OpenAI – a research and development company founded by Sam Altman, Elon Musk, and others – recently released a new version of its chat AI chat bot, ChatGPT.
It can answer just about any question you throw at it based on what it’s “learned” from ingesting the content available on the internet.
And millions of people are now using it to do everything from writing resumes, to debugging computer code, to writing high school and college essays.
And it’s gotten readers of Jeff’s Bleeding Edge tech investing e-letter thinking…
Reader question: On what kind of data has the AI been trained? Biased news articles, pundit opinions, and troll comments, which are heavily laced with logical fallacies?
How much of that training data involves a detailed analysis of the procedures and statistics in a proper scientific study? Or a literary critique that’s not simply click-bait?
BTW, is The Bleeding Edge ever written by an AI?
– Joe B.
Jeff’s response: Hi, Joe. Before we dig in, I can confirm that an AI has never written an issue of The Bleeding Edge.
But I have thought about training an AI on every issue. I’m curious if it could mimic my writing style. If so, it could be a powerful tool to help me reach as many readers as possible.
My gut tells me this year I’ll be able to experiment with just that kind of technology. And of course, if I do find something interesting, I’ll share it in The Bleeding Edge.
One of my deepest concerns about AI is its role in the dumbing down of society.
Many of us are losing the ability to read and comprehend long-form content like a book or a newsletter. That’s at least part of the reason why we’ve become so reactionary. We can no longer slow our thinking, absorb, and question new information, and view it in a calm, rational way.
Too many of us simply react to something that we see without asking ourselves the source of the information. Is it true? Is the information biased? What research or data set was the conclusion based on?
ChatGPT, and so many other AI systems that will follow this year, are the “easy button.” Like ordering food from Uber Eats, it’s just a click of a button and its done.
For that reason alone, we’ll see mass adoption of this technology. And that will make many of us lazy. And intellectual laziness is not a recipe for a peaceful and decent society.
The other thing that has me so worried is the other point that you raised. AIs can have deep biases. And yes, it depends on the data set that an AI is trained on.
Training an AI such as ChatGPT on a body of biased information will produce biased results.
Worse, these AIs ascribe confidence to answers based on how often they see the same thing on the internet. The problem with this is an obvious one…
So, we’re going to have to keep a critical eye on this and other AI implementations. We can’t automatically trust their output.
One thing I’m sure of is that the cat is out of the bag. AI chat bots such as ChatGPT can’t be stopped.
A far better use of our time is to educate people about it and show them why it’s so important to do their own research.
It is almost certainly a losing cause. But it’s still worth trying.
That’s all for today…
Write us your questions and comments at [email protected]. My team and I look forward to hearing from you.
Have a great weekend.
Regards,
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Chris Lowe
Editor, The Daily Cut