Blitzkrieg Bop

Dateline: September 1, 1939. The beginning of the Nazi Blitzkrieg offensive which overran the Polish Army and ushered in World War II. Each Panzer tank had a radio operator and a two-way receiver allowing communications with reconnaissance vehicles, motorized infantry, and the Luftwaffe on a shared frequency. This was unheard of at the time. Most armies in 1939 relied on flag signals, hand signals or runner messengers between tanks. The German Army revolutionized the use of integrated radio communication, and as a result, overwhelmed their opponents in the early stages of "The Big One". 

Palmer Luckey was a technology wunderkind. In 2012 at the age of 19, he developed the mock-up for what would become the Oculus virtual reality headset. Two years after beginning construction of his prototype, he sold the finished product to Facebook for about $2 billion in cash and stock. He was 21 years old. For three more years he remained at Facebook (now Meta), as a hardware developer, until he co-founded Anduril Industries. Anduril Industries is a defense technology company which, according to Gemini, "builds autonomous surveillance systems, artificial intelligence software, and defense hardware for military applications." Fast Company recently named Anduril Industries one of the most innovative companies of 2026. 

At first blush, I considered Anduril Industries a company I should closely monitor for possible inclusion in my portfolio for whenever they go public. Andreessen/Horowitz is a big investor and they do exceptionally well with their venture capital investments. They hit paydirt more often than most. Like Palantir, Anduril Industries is a defense contractor which specializes in Artificial Intelligence.  Although both companies are disrupting traditional Military Industrial Complex suppliers, Palantir is basically an AI software business and Anduril Industries is primarily an AI hardware corporation. This is a simplistic definition, but I'm not getting into the weeds with the bits and bytes of what each company does technically even though their software offerings somewhat overlap. This can be demonstrated in their operating systems.

Lattice OS is Anduril's crown jewel. The operating system ingests data from a variety of sensors emanating from drones, radars and sentry towers to "build a unified operational picture and automate asset tracking". In other words, it's looking to find someone to kill autonomously. No human interaction required. What happens if the AI begins to hallucinate? You get a false positive. That's fertile ground for lawsuits and war crimes. Although Palantir's platform Gotham also aggregates mission data to provide an operating picture in real-time, the intelligence analysis is for commanders. There's human interaction before somebody drops a bomb or pulls a trigger.  

The hardware Anduril Industries manufactures is straight out of Flash Gordon. One of their big divisions is Autonomous Air Systems which specializes in reconnaissance drones with names such as Ghost, Roadrunner and Fury. Some carry payloads with capabilities of engaging in dogfights with enemy combatant jets and drones. They also have a "kinetic interceptor quadcopter designed to physically ram hostile drones", appropriately named Anvil. A terrestrial specialty is "solar-powered autonomous surveillance used for perimeter defense and border monitoring". In Undersea and Maritime systems, Anduril builds autonomous underwater vehicles for deep-water surveillance and "mine countermeasures". This isn't the military I grew up with, but the military has always been on the cutting edge of technology in my lifetime. 

It's a brave new world. For instance, with a side-project called Warhound, Anduril is genetically modifying attack dogs for military use. They partnered with biotech company Colossal Biosciences for this endeavor. Colossal Biosciences founder Ben Lamm is known for de-extinction projects. I've seen Jurassic Park and know how badly things can turn out. I'm a big proponent of the AI revolution with some caveats, such as the government should regulate the technology. Not enough to fall behind China or Russia, but just some guardrails. The changes in technology are moving faster than I can keep up with.

Palmer Luckey is a big time Trump supporter and contributes significant amounts of money to the Republican Party. If Luckey were a Republican Classic like Mitt Romney or John McCain, it wouldn't bother me, but he's MAGA through and through. His donations for right wing ideologies got back a decade and he's only 32 years old. The question that comes to mind is, what made him so conservative at such a young age? If you think he's going away, you're wrong. Luckey is very influential in Silicon Valley. Walter Isaacson, chronicler of all things digital has a new Podcast about AI called "The Builders" and Palmer Luckey is one of his first guests. Like Howard Hughes once said: "I'm not a paranoid deranged millionaire. Goddamit, I'm a billionaire". 

Anthropic: The Show Must Go On

On Monday, October 26th, Anthropic (ANT) filed an S-1 statement with the Securities and Exchange Commission which paved the way for an IPO in the not too distant future. The S&P 500 and NASDAQ rose on the news and although Animal Spirits haven't engulfed the market yet, it points us in an upward direction. The business press in print, broadcast, and cyberspace is saturated with news about Anthropic. I don't need to rehash yesterday's news. To put it into a nutshell, Anthropic is growing exponentially, losing considerable amounts of money, and is battling with Google's Gemini and OpenAI's ChatGPT for market supremacy in the AI arena. It's a cutthroat competition, but Anthropic is the market leader in the enterprise space.

Would I like to own shares of Anthropic? Absolutely. However, in my opinion, a big problem is that it will be one of the most oversubscribed IPOs in stock market history. This means it will probably be out of my price range once I'm able to purchase shares. Do you remember when Facebook, now called Meta, went public? The market buzzed about the prospect of quick riches, only to have the equity drop 50% soon after it began trading. Financial chatrooms were rife with stories about investors losing fortunes. Although the stock bounced back after it initiated a wireless app plan, there were months of hand wringing. They only had a desktop version of Facebook at the time of the IPO. Zuckerberg caught on quickly. "Move Fast and Break Things" is the company motto.  

The Facebook story isn't an outlier, it's very common for IPOs to fail, or do poorly. Picking stocks is a very difficult occupation. Not only do you have to buy the right stock, you have to buy it at the right time. Pay too much, you've got dead money on your hands. Plus, if you buy on the first day of trading and the stock goes up, you have to prepare for the end of the lockup period when company insiders cash in and dump their shares after working for stock options for years. The shares usually sell off during this time. 

With Anthropic, the easy money has already been made because it's been trading in the private market for a few years. Owned by the more affluent individual investors, investment banks, venture capitalists and pension funds. We're exiting the billionaire era and entering the trillionaire era. My measly portfolio doesn't pass muster to be included with the wealthy elite. That said, Anthropic will be hot on the first day of trading. We haven't had many IPOs recently and this is one of the better ones. I think it's going to be an alpha dog and propel the market higher. Especially when it's going public in the fourth quarter of this year, a historically beneficial time for equities.

I'm a big proponent of AI because I use it daily. A few years ago I installed the Perplexity app on my iPhone. Perplexity was ballyhooed as the frontrunning AI app three years ago, and although still relevant, doesn't quite stack up to the big three. I switched to Google's Gemini because I have a Chromebook and Gemini is built-in to the operating system. Your prompt history is in sync with the Gemini smartphone app if you have a Google account. It makes doing research easier and more convenient. Plus, it's free. The free versions of any of these AI applications are all you need to do the majority of your research. What used to take me an hour or two now takes minutes. 

I recently did a stock screen with Gemini. I found some gems in the Artificial Intelligence subsector of second derivative plays. UIPath (PATH), Penguin Solutions (PENG) and Tempus AI (TEM) were all added to my main watchlist. UIPath is a turnaround play that orchestrates Agentic AI bots for the Fortune 1000. No debt, a treasure trove of cash and a large client base. Penguin Solutions is a software and memory producer for Neoclouds. A Neocloud is a GPU as a service and high-performance infrastructure for Agentic AI. Tempus AI has a big moat in advanced precision drug discovery. All three stocks are beginning to run, so I'm going to sit on the sidelines for awhile and monitor them. I'll pass on them even though we're in a buy high, sell higher environment. I prefer a margin of safety. 

The Magnificent Seven

There's an old expression about Wall Street prognosticators that goes: There's those that don't know and there's those that don't know that they don't know. I know I don't know after investing for close to forty years. You can make an educated guess as to where the market is going (and it's usually up about 75% of the time), but just stick with S&P  500 index funds and you'll double your money every seven years on average. During the current bull market, your investments went up close to 100% in S&P 500 index funds in just over four years. That's a great return.  Many investors are bearish on the market and have done poorly. As John Maynard Keynes so aptly put it, "The market can stay irrational longer than you can stay solvent." 

Back in 2013 the acronym FAANG entered the lexicon of equity investors. Originated by trader Bob Lang and popularized by CNBC's Jim Cramer, it epitomized the large cap growth stocks for more than a decade. FAANG stands for Facebook, Amazon, Apple, Netflix and Google. You'll note that the majority of these stocks are still leading the market except for Netflix. Although a great company, Netflix is no longer a growth stock. Times change. For the last few years, FAANG stocks have morphed into The Magnificent Seven, or Mag 7 as they're  called. The Mag 7 consists of Apple, Alphabet, Meta, Nvidia, Microsoft, Amazon and Tesla. Many of the stocks remain the same but their names have changed.  

Most of these corporate behemoths are going to be here for the foreseeable future, but not all are going to make it. Just look at Netflix. It was supposed to grow to the sky, but the stock price has been cut in half the last couple of years. They are no longer a Wall Street darling. An option for Netflix is to buy NFL and college football broadcasting rights to goose their subscriber base, but that's going to cost money.

Currently, the Mag 7 stocks are in an enviable position. We're in an AI race with China and breaking up these conglomerates would put us behind the eight ball with the PRC. The question remains, which one or which ones are going to fall by the wayside? Many investors thought Meta would remain severely depressed, but they recently released a personal AI agent called Muse which brought the company back into the competition. With over two billion Facebook users, Meta is a formidable opponent. In addition, Meta has Mark Zuckerberg as its CEO and entrepreneurial CEOs are usually a plus. 

Although Nvidia and Apple have outperformed the S&P 500 on a year-to-date basis, the remaining members of the Mag 7 have been laggards. Tesla has negative returns for the year. Elon Musk has stated that he may merge Tesla and SpaceX next year, creating an organization that you would read about in a dystopian science fiction novel, but that is months away. Plus, it will have to get approval from the SEC (Security and Exchange Commission). 

I'm not smart enough to pick the winners and don't invest directly in the Mag 7 stocks, but I still own them in my pedestrian S&P 500 index funds. They command a huge percentage of market cap weighted S&P funds and ETFs. Approximately 35% which is a huge concentration risk. I'm willing to take that chance because historically, only a handful of stocks are big gainers in the index. That said, if you examine the top American stocks going back 50 years, the top ten equities in the index tend to change from decade to decade. Investors seem to believe that the Mag 7 gravy train is going to go on forever. It's not. It never does.

It's been about twenty years since the digital oligopoly began its ascent. What began with modest means is now a cadre of CEOs worth trillions of dollars. The law of large numbers doesn't apply. At least not yet. Which company will become the next Kodak, Xerox, GE, Blockbuster Video or Borders Books? I don't know, that's above my pay grade, but some of them are going to fall. I hope I'm wrong, but history doesn't repeat itself, but often rhymes.

Bukowski

Charles Bukowski needs little introduction to the literati of the mid to late 20th century. A prolific writer of short stories, novels and poetry,  he was the king of counterculture going back to the 1960s. Although he lived in a variety of places during the 1940s and 1950s, it was Los Angeles that he called home after the Vietnam War began. The subject matter of his work is primarily about the underbelly of the City of Angels. What Donald Goines is to Detroit, Charles Bukowski is to Los Angeles. For a five year period during the late 1980s, I read anything of his I could get my hands on. His novels were great and I particularly liked his short stories.

I had some downtime recently and was surfing Amazon Prime for a movie to watch and came across a 2003 documentary, Bukowski: Born Into This. Although critically acclaimed, I really couldn't get into it. I watched half of the presentation and then stopped streaming. I got the gist of the story but Bukowski's schtick seemed antiquated. The chain-smoking and excessive drinking are outdated and that's what he did for the first hour of the movie, if not his entire adult life.

I recently read some of his "Notes of a Dirty Old Man" columns from the Open City underground newspaper going back to the Lyndon Johnson Administration. Bukowski is very funny which is why I enjoyed reading him in the first place. It's a shame it doesn't translate well on film. 

The first book I read by Bukowski was Erections, Ejaculations, Exhibitions and General Tales of Ordinary Madness. The book is out of print, and if you want a new copy, it will set you back $1,200 or thereabouts on Amazon. The material in the book is still in circulation but published in different collections of his stories. One is titled Tales of Ordinary Madness. I prefer the original title and it irks me that everything is sanitized now. Although many writers are on television talk shows and podcasts these days, I don't think it would have been a good fit for Bukowski. If he were alive today, I believe he would have been content to remain in his hovel, hunched over a Smith-Corona typewriter, smoking roll-your-owns and drinking whiskey. 

There's not a lot more to be said about Bukowski that hasn't been said already. Just look at his Wikipedia page. He's the subject of documentary films, was influential in pop culture of the previous century, and had an enviable creative output. It's because of writers such as Bukowski, Hunter Thompson, Jim Thompson and Richard Stark (a pseudonym for Donald E. Westlake), that I have a difficult time reading fiction these days. I know that there's good if not great fiction writers out there, there has to be. For some reason, I've transitioned to nonfiction. Probably because the truth is stranger than fiction. You don't need to read Faharenheit 451, books are being banned nationwide. You want the newspeak, doublethink, thoughtcrimes or the cult-of-personality in 1984, look no further than The White House. 

When I was a kid, I collected U.S. Commemorative stamps. That's what kids did in the 1960s, stamps, coins and baseball card collecting. I had a fairly sizable collection including first-day issues in an H.E. Harris Liberty binder. Ten years ago I went to a stamp and coin dealer and tried to sell it. The proprietor told me that the entire collection was worthless. Nobody collects stamps anymore and there's not a market for them was the rationale. He had a valid point. It's basic economics. If you don't have a buyer, you can't have a seller. Bukowski died in 1994 at the age of 73 from complications of leukemia. I'm approaching that age and it makes me think. I hope Bukowski has a longer shelf life than my stamp collection. Like he said in Factotum: "The world is filled with shipping clerks who have read the Harvard Classics.".