Investors are asking ChatGPT for stock market advice

Make Me Smart May 24, 2023 Transcript

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Kai Ryssdal 

Oh my god. I have to tell you my Charlton Thorpe story. Hey everybody I’m Kai Ryssdal. Welcome back to Make Me Smart, where we make today make sense. It is… what is today? It is Wednesday the 24th of May.

Kimberly Adams 

And I’m Kimberly Adams. This is what do you want to know Wednesday, the day when we answer your questions that come from our listeners, that come from social media, and all the various ways that people like to share their thoughts and feelings and desires. Anyway. If you have a question you want us to answer you can leave us a voicemail. I don’t know where I went there.

Kai Ryssdal 

We’re off to some kind of start. I don’t even know.

Kimberly Adams 

Okay. If you have a question you’d like us to answer you can leave us a voicemail at 508-ub-smart or email us at makemesmart@marketplace.org

Kai Ryssdal 

Dale in North Carolina has the honor today’s first question. Here is what that email says: “it seems like I’m hearing about AI being used in more and more places. So far, I’ve not heard about AI being used for stock or bond market prediction. Is anybody using AI like that?” Miss Adams?

Kimberly Adams 

Yes, they are and actually have been for some time. Investors have been using algorithms and various types of artificial intelligence systems for stock market purposes and research and sometimes even picking stocks way before this latest wave of AI. In particular, what’s been getting a lot of attention is this generative large language model AI that does like the ChatGPT and everything like that. But now those tools are getting even more popular mainly because they’re better. Marketplace Tech recently reported on how people are using ChatGPT for picking stocks. However, be cautious there. The senior analyst at The Motley Fool who Meghan McCarty Carino was talking to said that their poll of 2,000 Americans, showed that 47% of those surveyed had already used the chatbot for sock recommendations. So whether that’s maybe putting in a prompt like, “what’s the best stock pic for agriculture stocks?” Or “how is Microsoft stock, you know, projected to do in the future?” Something like that are questions that you can pose to ChatGPT. And also in that poll, 77% of high income respondents said they’d used chat GPT for investing. Men were more comfortable relying on the bot for stock tips. Which, you know, you can say whatever you want about that. But here’s the thing. Chat GPT can make stuff up. So be cautious. It is not… it can sound really smart as a market predictor, but it can hallucinate. Any of these large language models, and just like spit out things that are completely false. Yeah, you know?

Kai Ryssdal 

That’s a really good word for it.

Kimberly Adams 

Like hallucinate?

Kai Ryssdal 

Yeah, yeah. No, it’s really good, because it seemingly comes out of nowhere. And you’re like, where did that come from? And AI goes “I don’t know.” Right? That’s kind of what it is.

Kimberly Adams 

Yeah, this is, I’m not going to take credit for it and I know that it’s been kicking around for a while with a lot of researchers calling it hallucinations and things like that. But and, in addition, like… also, when you think about these models, the datasets are limited. You know, even though they are large datasets, sometimes it only goes up to a particular point in time. Sometimes it excludes certain information. And they can’t evaluate that information the way that a human being does with a healthy level of skepticism. So even though we’re not in the business here of picking stocks, if you were to ask us how a particular company is doing, we’re not just going to weigh what the company says in its press releases and what articles have been written about them. We’re probably going to do some pull in some other information that might not be quite so obvious to fully inform our picture of of how that company is doing. So, you know, this Motley Fool analyst that Meghan was talking to said that while ChatGPT might be able to read a bunch of earnings reports, it can’t watch a video of a CEO and, you know, get a sense that they’re avoiding a question or looking nervous or saying something super inappropriate about people who work from home that may affect, you know, their ability to hire in the future. So, yes, you can definitely ask these AI chat bots about stocks and picking stock. And the other versions of AI have been used for this purpose for quite some time. But you know, just be cautious with that.

Kai Ryssdal 

Yeah, and consult your own sentient financial advisor. That’s all I’m saying. Right? I mean, you know, that’s what I think.

Kimberly Adams 

Nicely done. Well, I mean, and also, you know, what if people think that the AI is sentient Kai?

Kai Ryssdal 

Yeah, that’s a whole…. Yeah. Yeah. It could happen. It could happen one day?

Kimberly Adams 

Oh, I’m not going there. All right. Next question is from Ray in California. Here’s what it says. “I recently traveled to Ecuador, and found out that they use the US Dollar as their official currency, meaning that they do not have an Ecuadorian specific currency. How does this work? Are there other countries that use the US Dollar as their official currency?”

Kai Ryssdal 

Yeah, there are. So this is what’s called dollarization. And it is not, it’s not incredibly common, but it’s not unheard of either. There are 11 foreign countries that use the US Dollar as their currency. And they do that by saying the “US dollar is our currency” and making that a law there. And it’s countries like Ecuador, El Salvador, El Salvador, by the way, also accepts Bitcoin as legal tender. So that’s a whole different thing. Panama, Zimbabwe, name a couple. Here are the statistics, and thank you Courtney for this, as of 2020, 50 billion notes of various denominations of US currency circulating outside the United States. Total value, $1 trillion. So why would countries do this? Well, number one, the US dollar is for now, he says as we look at a debt crisis, debt limit crisis, stable, the US… I’m sorry, I’m mixing my news stories. The US dollar stable, right? It is the most stable and relied upon and reserve the currency in the world, right? Everybody wants US dollars. So it’s an incredibly liquid currency, right? As opposed to say, the Chinese yuan, which is, which is not incredibly liquid, okay. So if you’re in a country with financial troubles, you want a stable and liquid currency, you go to the US dollar. The other reason you might do that is that you want to be involved in international trade and whatever your currency might be, because you’re a smaller, perhaps less globally involved country, your currency might not be good for that. And so you go to the US dollar, which is, of course, so much global trade is denominated in US dollars. I’ll give you just one example, oil is denominated in dollars, right? So that can help. But the problem is that you cannot as El Salvador or Zimbabwe, crank up the printing press and print US dollars. Well I suppose you could, but then they would be counted for US dollars. But if you want the genuine article, you have to get them from the Federal Reserve, right? Which means you no need to go to the Fed, you need to either open up a swap line with the Fed, which is where the Federal Reserve literally opens it up and says, “Give us some kind of collateral, whether it’s gold, whether it’s your national debt, your securities, whatever. We’ll hold on to that and we’ll give you these dollars. We’ll swap them out.” Or you go out and you buy them with other dollars on foreign exchange markets, right? Because the dollar is a traded currency. There are times when it’s low, and there are times when it’s high. So if you’ve got dollars that you bought at one value, and you need dollars of another value in the market, you can go ahead and do that. It’s a real challenge, though, not being able to control your own currency. And I will refer you only to the Greek debt crisis of 2015 when the Greeks got into a whole bunch of trouble, but drachmas aren’t legal currency anymore, they are on the euro. And they don’t control the euro, the European Central Bank does. And so that was a real challenge for Greece. And it got faced with a bunch of austerity budgets because the Europeans in return, the Northern Europeans, rather, in return for bailing out the Greeks in 2015, said, “Well, you need to spend less money and that’s the only way we’re gonna give you these euros that we control out of our central bank.” So it’s, it’s helpful, but it’s not without its challenges, but happens happens not infrequently. It’s called dollarization. And thank you for coming to my TED Talk.

Kimberly Adams 

Nicely done.

Kai Ryssdal 

There we go. All right. So next question. It’s, it’s actually on tape. Here you go.

Matt 

My name is Matt calling from Long Beach, California. When I go to the store and grab a bottle of juice or a can of soda, the nutritional information is printed on the side nice and big. But when I’m counting my calories, and I’m trying to decide between my ale and my rum, no clue. How did the alcohol industry get out of letting us know what’s in there? Thanks

Kimberly Adams 

The too long don’t read, it’s really bad for you. How about that? Okay, the short answer, I know that was a very short answer, but the shorter, longer but still short answer is that alcoholic beverages are regulated by the Alcohol and Tobacco Tax and Trade Bureau, which is not the FDA. And those labels that you see on your food and your medicine, and things like that are FDA labels, right? So when FDA mandated food and nutrition labels in the 90s, it didn’t apply to alcohol and the history of how this happened, it has to do with the prohibition. So after Prohibition ended in 1933, Congress passed the alcohol Administration Act, which created an early version of the Tobacco Tax and Trade Bureau, TTB. Right? Okay, so the government decided then to regulate alcohol separately from food so that it can generate more tax revenue off of it. So labeling things like calories and carbs is optional for most alcoholic drinks, but there are some labeling requirements. So bottles of distilled liquor you need a label that shows the alcohol percentage. Same thing for wine that has more than 14% alcohol. So those like real fortified wine, shall we say. And for a long time, consumer groups have pushed for nutrition labeling on alcoholic beverages, and they say that, you know, people should know how much these drinks impact their daily caloric intake. A lot, lots of calories in booze fyi. But all the attempts have been snuffed out very successfully by the alcohol industry. And the TTB has said nutrition labeling might actually deceive consumers into thinking that alcohol has a you know, positive nutritional value. Because remember, calories are the energy that you need to burn for food, to keep yourself alive, you know. Not burn for food, but you know, burn to keep yourself going. And yes, you can get those calories from alcohol, but it’s definitely not the best way to get them. However, in 2004, the TTB did decide that if beers are advertised as low carb, that they do need a nutrition label to support the claim. And I will just put out there that the latest research says there’s no amount of alcohol that is good for you, regardless of what the label says. So there’s that.

Kai Ryssdal 

Forget those glasses of red wine that you know, in the 1980s everybody was like, “oh, yeah, one glass red wine is really good for you every day.”

Kimberly Adams 

“It’s good for your heart.” No. All right, last question of the day also on tape.

Steve 

Hi, this is Steve in St. Paul. And I was wondering if you could explain the meaning and origin of the term “knock on effect.” Thanks.

Kai Ryssdal 

Wow. Okay. I cannot but Courtney Bergsieker can because she’s the one who did the research on this piece. She called an actual linguist and etymologist named Anatoly Lieberman at the University of Minnesota. And here’s what he says. As with most phrases don’t know exactly where knock on effect comes from. Right? It’s the idea by the way that one action or event has a secondary or indirect consequence, a knock on effect, right. So phrase appears to be relatively new, Professor Liberman says. It first appeared in written form in 1972 in the British newspaper The Times, which is interesting. Here’s the quote, “they would be more than willing to move toward a minimum wage of about 20 pounds a week if they could be assured that there would be no knock-on effect in the differentials demanded by the rest of the labor force.” So the secondary or indirect effect. Lieberman says most likely, the phrase was first used in physics, where knock on is often used talked about the effects of particles colliding with one another. Eventually, by the way, made it into sports. It’s popular in rugby turns out. And as such became more widely used, became part of the vernacular. There you gonna learn something new every day on this podcast? Every single day. Every day, every day. And that is it for today. No more learning for today. Back tomorrow. If you got a question or anything else related to the economy or business and technology, let us know. 508-UB-SMART. Or email us at makemesmart@marketplace.org. We’ll answer both the phone and the email. Well, maybe not the answer, but you know what I mean. You know what, I mean.

Kimberly Adams 

We will process the information. There you go. Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Our intern is Antonio Barreras. Today’s program was engineered by Charlton Thorp who gives us a hard time.

Kai Ryssdal 

Every time. Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director… of Digital and On Demand.

Kimberly Adams

I was wondering if you were gonna do it

Kai Ryssdal

I will die, I will die on this hill.