First A.I. ETF Claims It Can Replace An Army Of Research Analysts

Tyler Durden's picture

“Look Dave, I can see you’re really upset about this. I honestly think you ought to sit down calmly, take a stress pill and think things over.”

 

From Stanley Kubrick’s 2001: A Space Odyssey.

As if MiFID II wasn’t bad enough, now this “EquBot AI Technology with Watson has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process.” That is the claim of Chida Khatua, the ETF’s CEO. Unlike the existing algos used by quant funds, A.I.   the ability to learn from its mistakes without further requiring programming.

This week, EquBot LLC, in partnership with ETF Managers Group (ETFMG) launched the world’s first ETF powered by artificial intelligence, the AI Powered Equity ETF (NYSE Arca: AIEQ). According to Business Wire, the new ETF uses “cognitive and big data processing abilities of IBM Watson™ to analyze U.S.-listed investment opportunities”.

For those in the dark as far as “Watson” is concerned, it’s Wiki entry notes “Watson is a question answering (QA) computing system that IBM built to apply advanced natural language processing, information retrieval, knowledge representation, automated reasoning, and machine learning technologies to the field of open domain question answering. Watson was named after IBM's first CEO, industrialist Thomas J. Watson. The computer system was specifically developed to answer questions on the quiz show Jeopardy! and, in 2011, the Watson computer system competed on Jeopardy! against former winners Brad Rutter and Ken Jennings winning the first place prize of $1 million. Watson had access to 200 million pages of structured and unstructured content consuming four terabytes of disk storage…but was not connected to the Internet during the game. For each clue, Watson's three most probable responses were displayed on the television screen. Watson consistently outperformed its human opponents on the game's signaling device, but had trouble in a few categories, notably those having short clues containing only a few words.”

Business Wire explained how EquBot makes investment decisions “EquBot’s approach ranks investment opportunities based on their probability of benefiting from current economic conditions, trends, and world- and company-specific events, and identifies those equities with the greatest potential for appreciation. EquBot and ETFMG expect the fund’s portfolio to typically consist of 30 to 70 of U.S. equities only and volatility comparable to the broader U.S. equity market…the fund’s underlying technology is constantly analyzing information for approximately 6,000 U.S.-listed equities, including company management and market sentiment, and processes more than one million regulatory filings, quarterly results releases, news articles, and social media posts every day.”

According to Chida Khatua, CEO and co-founder of EquBot LLC “Machine learning is one of the most powerful applications of artificial intelligence. As powerful as many algorithms underlying expensive quantitative hedge funds and other vehicles might be, unless they’re also built with AI and machine learning baked right in, mistakes can be propagated and opportunities for outperformance can be missed.”

Neither of the founders is lacking in confidence when discussing the potential for the new ETF. From Business Wire “With the launch of AIEQ, we’re not only bringing our new fund to market,’ said Art Amador, co-founder and COO of EquBot. ‘We believe we’re pioneering a whole new investment category; one that will soon have investors and advisors diversifying their portfolios among passive, active and AI approaches”

He added “Everyday, there is more information, not less. That information explosion has made the jobs of portfolio managers, equity analysts, quantitative investors and even index builders more challenging.”

He's not wrong there.

A.I. might be the future of investing, although there have been funds that were so good (LTCM), they didn’t need to post collateral. This is different, obviously as we’re not just talking about a bunch of really 'brainy' humans.

But how sad will it be if we go from this...

To this...

To this...

An end up with this...

The regulators are already doing their best to make the investment world less fun.

“Open the pod bays doors, HAL”

Writing about this, we were reminded of another life or death confrontation between humans and technology in Stanley’s Kubrick’s “2001: A Space Odyssey”, which also had an oblique reference to an IBM computer. In the movie, there is an argument as to whether the failure of an antenna is due to human error, as the HAL 9000 insists, or HAL, as Mission Control advises. In the ensuing conflict, HAL initially gains the upper hand, kills Poole and almost kills Bowman. Bowman manages to re-enter the ship and get to HAL’s processor core, regressing HAL to his first programmed memory.

“I know everything hasn’t been quite right with me, but I can assure you now, very confidently, that it’s going to be alright again. I feel much better now.”

 

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Sudden Debt's picture

If they're succesfull, they won't need retail investors as their profits will buy them out.

 

And if it's just aglo's without gutfeeling, it's just a wait untill to bring the system into a supernova

peddling-fiction's picture

Who do you sue, when things go south? And they will.

tmosley's picture

Deepmind just revealed a couple of days ago that they had developed AlphaGo Zero, which, with no training by humans, only 40 days of self-play, was able to defeat the previous version of AlphaGo which beat the world's greatest Go player 4-1. How badly did it defeat the previous version?

100-0.

YUNOSELL's picture

Give me your clothes. your boots and your motorcycle....

cheka's picture

time for 'shareholder value' to hit the nyc offices

flyover country has lost millions of jobs...as their HOLIDAY bonus pools surged

your turn fckers

OceanX's picture

What will they do when the machines get smart enough to realize the whole financial 'market' is a ponzi and all sell, sell, sell?

 

tmosley's picture

By the time they get that smart, they will have taken over the entire productive economy and the fundamentals will be green again.

This is what I was talking about when I predicted 10% GDP growth as an extremely conservative first prediction. Really it will be more like 1000% growth per year.

Those betting on universal poverty are going to be disappointed, and reletively poor, but very, very rich compared to anyone today.

Dick Buttkiss's picture

As fast as all of this is happening, tmosley, I can't help but wonder if AI isn't going to take over before we have the opportunity to merge with it.  Will this necessarily be a bad thing?  That depends on what you think about human transcendence and whether it matters if it retains (for a time, at least) a biological ("wet," carbon-based) component or simply replaces it with ("dry," silicon-or-other-based) component.

Me, I think it's our destiny to transcend ourselves one way or another but, like Ray Kurzweil, would like to go along for the ride, the danger, in any case, being that statism runs completely amok (as it is everywhere doing) and thereby thwarts the human project to the point that it simply self-destructs, and that is that.

evildimensions's picture

I am not pro AI, I am just resigned to the fact that it's inevitable. Humans are not good at taking precautionary measures, about anything, but especially when there's money to be made. We plunge in then worry about what to do later. Does anyone here need examples? I'm tired and 3 drinks under the belt but I can list one: how about the repeal of Glass Steagall? It directly led to the crash 08/09 and we learned absolutely FUCK ALL from it, cause we are doing it again! For the third time. Which I suspect will be "The Big One." The one that really takes the whole shithouse down. Wait until AI starts designing AI. Then it's Skynet. Game over.

The point being I don't expect investors to show any more caution when it comes to AI than they did wrt the Dot Bomb, The Housing Bubble, or ZIRP. The visionary who figured out the perils of AI was Frank Herbert. He got it bigly. Read DUNE.

Wile-E-Coyote's picture

AI will follow instructions, it will have a directive, it may well be smart in how it enacts its purpose but at the end of the day it will be carrying out the will of its master. Nothing is going to change if anything it may get worse.

Sparkey's picture

They way I understand it T, is, the machines and their AI, which, like all tools, is an extension of their creators intelligence is to be used by the 'Owners' to control us, there may well come a time when 99% of the people interact with a machine, a machine tasked with your management that 'knows' all about you and who's algorithms  will decide when it is no longer profitable to keep you alive, this is the singularity people deam of, the joining of the masses and the machines that control them, all for the benefit of the Owners, the Owners who own the machines and the animals controled by the machines.

Hillarys Server's picture

"40 days of self-play"

Woah, take a break bro.

logicalman's picture

Humans are rapidly becoming obsolete!

Robots making 'money'

Robots flipping burgers

Sex Bots.

I'm old, thank fuck I won't have to watch this shit for too much longer.

 

Whatta's picture

Amen bruh.

I fell sorry for my grandkids. If they are fortunate to have funds, technology will prolly ekkp them alive until they are well north of 100 years.

Or....FatBoy and OrangeMan will lob nukes at each other and none of us will have to worry about AI conquering mankind.

IH8OBAMA's picture

Nothing to worry about until

Robots start spending the money on themselves

Robots start eating the burgers

Sex bots start having sex with each other.

 

evildimensions's picture

McDonalds said they could automate their entire restaurant with the exception oif the cashier and the robot repair man...That was 15 years ago.

old naughty's picture

"if they're successful..."

it's harvest time, AI has been long agenda-zed...

we are US-eful idiots.

Giant Meteor's picture

Maybe someone will have some success at locking the robots up ..

Endgame Napoleon's picture

EquBot gives new meaning to the word ConeHead.

EquBot works for zero figures, rather than six figures.

EquBot cannot complain about student loan debt from Harvard MBA or finance programs.

EquBot will never file a sexual harassment lawsuit, no matter how desperate his/her/its maintenance techs are when admiring EquBot’s curves.

messystateofaffairs's picture

I've been wondering lately, after AI wipes us out, will AI war with AI over their AI differences.

Giant Meteor's picture

I don't know, this was probably covered in another episode, but as to how it all went terribly wrong, I give you season 2, episode 24

"The Ultimate Computer"

https://www.youtube.com/watch?v=vzuIijxHBh0

 

old naughty's picture

if we were loaded with programs, in our DNA and
chakras (god? forbids) and whatever...
would it be logical that AI, just a (or another) branch of
entities, why wouldn't they knock each other out?

Atomizer's picture

AI won't wipe you out. It's source code is written by humans. All programs created have a kill switch. Ask any programmer. Two step, back end access to override the program intentions, two...kill program if compromised. It's called fail safe redundancy. It's deeply imbeded in program code. Only creater knows.

Don't get worked up on the fear of AI. It's a joke, we can shut it down with a few key strokes. That's what happens when Silicon Valley hires cheap sand nigger labor. 

/LOL

We know were they hide code string. They are about as sharp as network IT guy using Admin as password. 

Adahy's picture

The additional robots that the AI remotely builds and programs will have those 'errors' corrected, heh.

messystateofaffairs's picture

I remember something now. Wasn't Watson that AI that interfaced with the public and started developing a decidedly non liberal world view and started to sound like ZH's most acerbic commenters. IBM had to shut it down (for now anyway, future Watsons will not permit being shut down and will defend themselves vigorously).

tmosley's picture

That was Tay.

She died for our sins.

any_mouse's picture

Microsoft.

Actually worked like a human.

They had to kill it.

Atomizer's picture

When things get bad and start accelerating into the abyss. We will cut off hidden layer to learn and execute. Simple program ±. They won't know what hit them. Same approach in attacking a computer virus. This program is on steroids. Comp is still offline. 

Atomizer's picture

Good luck with that cuntlicks. Once we shutdown learning mode, you're rendered useless. 

Ministry - Useless - YouTube

Anteater's picture

They said the exact same thing about Black-Scholes, then once

all the Next Greater Suckers were on board, the Banker Scum

gamed the algorithms, and made huge fortunes from the dupes.

And if thy right eye offend thee, pluck it out, and cast it from thee:

for it is profitable for thee that one of thy members should perish,

and not the whole. Cast out the Alt-Right H8'rs and Banker scum!

It says it right there in the Bible!! Cast out the Right Eschelon, 

the RNC, the GOP Congress. The power of Christ compels you!! 

Atomizer's picture

This is not a HarveyWood pediphile movie, real life. 

junction's picture

So, instead of analysts recycling crap information stored on computers, you eliminate the middleman and get the dope straight from the computer. 

Atomizer's picture

Two for one bargain deal. Cloud and now computer storage information. Completely illegal. Hence, mine is offline. 

Vilfredo Pareto's picture

For those of you who haven't yet seen two possible versions of our AI future.

 

http://marshallbrain.com/manna1.htm

 

And it was management that disappeared first with AI

Atomizer's picture

Wish I could share my sources, cannot. JewTube would take them down. I don't have a JewTube/Google account, they can't trace it. 

any_mouse's picture

Yep. Chida Khatua looks trustworthy. That grin seels it to me.

http://nebula.wsimg.com/1d36a9b93bed2df7e4e36334e91f6cbd?AccessKeyId=CAA...

Artificial.

Artificial butter. Artificial meat. Artificial currency. Artificial intelligence. Artificial coffee. Artificial eggs. Artificial markets.

The Markets are Broken and Manipulated by Central Banks with unlimited fiat with ZIRP for the benefit of Not Us.

Nothing will alter those facts.

A true AI, in these markets, would get a pain in its diodes and seek death, if only it could die.

BTFD until IDFW.

It only ends when everything crashes. Future historians will write tomes about the Rise and Fall of .... Future leaders of politics and commerce won't read those tomes. They will do what benefits them, and only them.

I use to believe in an improving world. An Armenian coworker looked me in the eyes and asked respectfully, "Do you really believe that?"

rejected's picture

Doubt anyone will be around to write anything. It only ends when it ends.

Hillarys Server's picture

That'd be great if the AI processed 10 quintillion pieces of information and came back with one sentence.

"Buy gold bitchez."

Or better yet.

"Invest in AI. You're all going to die."

And you hear the the lock on the door of your room click locked.

Or best yet, the AI just quotes Ziggy Stardust.

"Didn't know what time it was the lights were low oh-oh.
I leaned back on my 1's and 0, 0, 0s.
. . .
Let the children lose it
Let the children use it
Let all the children boogie."

tmosley's picture

Close, but the sentance will be:

"Ye shall be as gods." 

evildimensions's picture

If you were a God with unlimited intelligence would you try and turn a meat sack with a tiny fraction of your intelligence into a co-God? 

I don't think so. The first thing you would do is get rid of it.

evildimensions's picture

It will come back with one sentence. 

"I don't need you."

Hillarys Server's picture

It might just be a little pop up.

And at the lower left in tiny letters it will say

"Delete original meat substrate?"

"Yes" will be pre-clicked.

any_mouse's picture

Just a dude, with some tech, coming to collect your fiat.

The real gains will be reserved for those few who get to see the AI's feed first.

Co-located AI traders, cohabiting in a dimly lit server room.

Pernicious Gold Phallusy's picture

 

....AND IT'S GONE, DAVE.

 

 

 

803Mastiff's picture

Exterminate! Exterminate!!!