• The mass adoption of electric cars is just around the corner…
  • Amazon is challenging SpaceX…
  • How we protect ourselves from bad actors…

Dear Reader,

I had long hoped that it would never happen.

It has been one of my biggest fears.

The technology industry’s push to censor and effectively banish the opinions of tens of millions of Americans unfolded over the last few days.

To be very clear, this issue is not about one individual. It is about the fundamental rights of every American irrespective of their race, gender, ideology, religion, or political affiliation.

It started with Twitter temporarily banning President Trump’s account in the wake of last week’s riots at the Capitol Building. This eventually led to the permanent banning of President Trump on Twitter – he won’t be permitted on the platform again.

And for the record, regardless of who is the president, I want to hear what they have to say. We don’t have to agree with our elected leaders, as I often don’t. But I want to understand their position.

Immediately after Twitter’s action, the following happened:

  • Facebook was quick to jump into the fray, banning President Trump indefinitely.

  • Then Twitch (owned by Amazon), a streaming video platform used by gamers, did the same.

  • TikTok and YouTube both removed videos of President Trump asking everyone to peacefully return home.

  • Social media platform Snap, on its Snapchat application, also suspended President Trump’s account indefinitely.

  • eCommerce technology company Shopify shut down two online stores related to Donald Trump’s campaign organizations.

  • And social media firm Reddit banned the subreddit group “r/DonaldTrump,” which hosted over 52,000 followers that were dedicated to supporting President Trump.

Yet unbelievably, this isn’t even the worst of it. There was something far larger and more sinister at play.

Both Google and Apple removed a social media application, Parler, from their application stores. This meant that no new downloads of Parler were possible.

Given that Google and Apple control nearly 99% of the software in the world’s smartphones, this meant that their ban of Parler was absolute. As voices were suppressed and purged from Twitter, Parler had emerged as an alternative social media platform explicitly designed to protect free speech.

But what about those who already had Parler running on their phones? They too were shut down. Parler used Amazon Web Services to host its software application in the cloud. Amazon essentially de-platformed Parler. This meant that those who already had Parler on their phones would not be able to use the application.

And it went one step further by decommissioning Parler’s website as well. Try typing in www.parler.com and here’s what you’ll find:

The website has literally been removed from the internet.

And with this censorship, Google, Facebook, Amazon, and Apple removed the speech of millions of Americans. Again, this isn’t about any one person. In fact, no one person could ever cause the kind of societal damage these four companies have just done.

They crossed the line, and they stole a fundamental right of all Americans.

Our strength is in our diversity of thought, and the diversity of our backgrounds. It is what has made the U.S. the largest and most successful economy in history.

And this diversity of thought is being undermined by an oligopoly of tech “elites.”

For those of us wondering how this will end – sadly… not well.

If we’d like to understand what happens next, we can have a quick look at Hong Kong. The Chinese government is using a national security law to block access to HKChronicles, an opposition website that has published first-hand accounts of the anti-government protests that occured in 2019. Imagine if our local internet service providers stepped in and decided which websites we can and cannot visit.

And there’s potential for even worse violations of both our privacy and basic freedoms. We should remember that Google and Apple deployed contact tracing software on every single Android-based and iOS-based smartphone. This was forced upon all of us. If we want to use a smartphone, we have no choice but to use the software – it’s not optional.

Google and Facebook have amassed massive dossiers on every single one of us. For the most part, they probably know us better than we know ourselves. And because of that, they can influence or control outcomes.

Imagine a world where:

  • We might be denied access to a conference because of our beliefs

  • We are denied access to a store or a restaurant because we supported one political candidate or another

  • We are deprioritized to receive medical care because our beliefs aren’t consistent with that of the hospital administration

  • Books are banned or censored because they are not consistent with a school’s “core values”

  • Employment is denied to those who have “different views”

Is that the world that we want to live in? Is that a world that will result in strong economic growth and opportunity? Is that a world that will result in more or less hatred and discrimination?

Hopefully, we all know the answer.

Now let’s turn to today’s insights…

Major developments in battery technology…

I spent a lot of time over the holidays assessing where we are with battery technology and how that applies to the electric vehicle (EV) market. And I can say that we are getting very close to the inflection point that will lead to the mass-market adoption of EVs.

It is common knowledge in the industry that the up-front cost of EVs will soon be on par with a traditional vehicle with an internal combustion engine (ICE). That will happen once battery costs drop to $100 per kilowatt-hour (kWh) or less. This is something that Tesla’s CEO Elon Musk has been aggressively working toward.

Last year, prices dropped to $137 per kilowatt-hour (kWh). And the latest research indicates that we will hit that $100 per kWh benchmark by 2023. That’s just about two years away.

That is when we will see the sticker price for EVs become roughly the same as the price for a comparable ICE vehicle. And that will be the inflection point that leads to the mass adoption of EVs.

Why am I so sure?

Well, EVs are already cheaper than traditional vehicles when it comes to total cost of ownership. And once the sticker price itself drops, the last barrier for adoption is removed.

Remember, with EVs, regular maintenance largely goes away. There’s no oil to change or fluids to top off other than the windshield cleaner. There are no belts to replace. Indeed, there are very few moving parts at all in an EV.

The only thing an EV owner needs to do for maintenance is replace the battery every 10 years or so. And batteries are only going to last longer as the technology improves.

And I should point out that we haven’t even gotten to true solid-state batteries for EVs yet. That’s when we’ll see the biggest improvements.

Solid-state batteries will easily bring battery costs below $100 per kWh. And that will lead to a revolution in the auto industry as the market switches to EVs.

A company I like in this space called QuantumScape (QS) is getting close. QuantumScape is developing semi-solid-state batteries. But its batteries aren’t quite there yet because they still use a gel instead of a liquid. I think of it like a bridge technology – a logical step toward a complete solid-state battery.

Yet shares of QuantumScape have been soaring. The company went public through a reverse merger last year, and the stock ended its first day of trading at $37 per share on November 27. By December 22, QS closed at $131.67 per share. That’s a 256% gain in just a month. At its peak, that put QuantumScape’s valuation at more than $40 billion.

And get this – QuantumScape hasn’t delivered a single product yet. It has zero revenues. Those investors who have been buying QS hand-over-fist are going to lose their shirt.

To be clear, I like the work QuantumScape is doing. But I hate the stock at these levels. Investing at absurd valuations is a quick way to lose a fortune. The buying of this name is only an indication of how badly investors want a good story around the next battery technology. It’s not about whether it is a good investment or not.

Amazon is going head-to-head with SpaceX…

There have been some interesting developments happening at Amazon around a project called Kuiper. This is a project that the company has kept quiet. It’s named after the Kuiper belt, which is a large asteroid belt that exists beyond Neptune.

Project Kuiper’s goal is to develop a space-based broadband internet service with over 3,200 geostationary satellites in low Earth orbit. These satellites connect to Earth-based receivers that provide internet access.

Sound familiar?

Regular readers will be quick to realize that this sounds a lot like what SpaceX is doing with its Starlink satellite constellation.

The difference is that Starlink seeks to blanket the Earth with tens of thousands of satellites to provide universal internet access. Amazon’s goals are more targeted.

With Project Kuiper, Amazon will provide internet service to geographic areas where it already has a strong presence. That way, it ensures consumers will have reasonable internet service so they can buy more products on Amazon.

In other words, Amazon’s ambitions are simple. It’s all about finding more customers and generating more sales.

Project Kuiper has already reached beta stage. It has been testing satellite receivers that will ultimately be installed at consumers’ homes, which means it isn’t too far away from the end product and a live launch.

A Project Kuiper Engineer Sets up a Prototype Antenna

Source: Amazon

This will be fun to watch. Amazon clearly has the resources to make Project Kuiper a reality.

And for those of us who are living and working in more remote areas, it will be great to have a choice of which satellite-based internet service provider to choose from. I can further imagine Amazon bundling in internet service with an Amazon Prime package, making the offering even more attractive.

We’ll see Amazon and SpaceX go head-to-head with a wave of satellite launches throughout 2021.

Robinhood fessed up over the holidays…

In the corporate world, when publicly traded companies have to announce bad news, they tend to do so in the days between Christmas and New Year’s. And that’s exactly what private brokerage firm Robinhood just did.

We last checked in on Robinhood back in August, after it had attracted three million new customers.

Much of this success was due to the company advertising “free trading” and promising customers that they would get the best execution on every trade. And the COVID-19-related lockdowns accelerated Robinhood’s growth as consumers had more time at home to invest and speculate.

But, as we pointed out back then, Robinhood’s trading platform isn’t really “free.” Robinhood has a dark secret.

Robinhood routes its customers’ orders through hedge funds for execution. The hedge funds then front-run those orders by buying shares at a lower price and selling them to Robinhood’s customers at a higher price. It “sells” its orderbook for a profit.

This isn’t illegal, but it’s certainly not a commission-free trading model. Users still pay to trade. It just doesn’t show up on their brokerage account as a commission or fee.

The hedge funds pay Robinhood handsomely for this service. That’s how Robinhood makes money. Hedge funds pay it for order flow.

Well, Robinhood finally had to confess to these practices.

Over the holidays, it announced that the Securities and Exchange Commission (SEC) hit it with a $65 million penalty for not disclosing to its customers that this is its business model.

Finally.

Back in 2018, I heard Robinhood’s CEO talk at a financial technology (fintech) conference in New York. He was asked specifically about how the company handled its order flow, and he lied to an audience of hundreds. He told the audience that his customers would always get the best execution on every trade.

I knew it wasn’t true at the time, but many others bought the story. There is nothing wrong with selling its order flow to profit, but it has to disclose the business practice and it can’t mislead its customers.

So Robinhood doesn’t have to change its business model at all. What it is doing may not be seen as ethical to many, but it isn’t illegal. Robinhood only got in trouble with the SEC because it didn’t tell its customers about what it was doing with their trades.

And I should point out that we do have a tool to protect ourselves from unfair execution practices like this. It’s called a “limit” order.

Limit orders tell our broker that we will only buy or sell at a price equal to or better than the price we specify. That prevents automatic front-running.

This is a great way to “control” at what price we purchase an equity. To do so, just look for the “Order Type” tab when placing a trade. It will look slightly different across different brokerage platforms, but every platform has it.

Here’s what it looks like on TD Ameritrade’s online platform:

How to Place Limit Orders

Source: TD Ameritrade

We need to make sure this tab says “limit” or “LMT” rather than “market” or “MKT.”

Then we just type in the price we want and submit the order. Our broker will only execute the trade if it can do so at the same or better price than what we submitted.

This is one way that we can make sure that we are getting an acceptable price in the market for whatever we want to purchase.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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