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Artificial Intelligence Changes the Finance Game

AMA5-22-15As far back as 1990, financial experts were predicting that in the not too distant future, investment and money management would be aided by sophisticated computer technologies. Flash forward a couple of decades, and that future is here.

Robotics experts predict that by 2025, robots and other kinds of “smart” digital technology will have achieved processing power equal to that of the human brain: an achievement of true artificial intelligence that promises to change our world in countless ways. Among them: investing, financial services and the global money markets.

The use of automated technologies in banking and finance isn’t new, of course; ATMs, so common now that we don’t even remember what the letters stand for, complex spreadsheet and asset management software, and even ebanking have been around for so long that these technologies are simply a part of everyday financial management for everyone from individuals to big corporations.

But true artificial intelligence takes those functions much farther, with the promise of making financial dealings of all kinds faster, cheaper and more accurate – as well as more user friendly. But experts warn that there are downsides to the onrush of AI technology, too.

What is artificial intelligence? It’s computing technology that’s several generations removed from simple automation. AI refers to the ability of a computer to understand questions, provide answers and offer options based on available information. With rapid advances in computing speed, AIs can sort information, make decisions based on branching options, and handle complex sequences o tasks in the same ay every time, removing the risk of human error.

The power of this kind of “smart” computer was once a novelty, trotted out to amuse and astound people with feats like beating a chess master at his game, writing poetry or predicting the future. But behind the scenes, supercomputers have been directing missiles, assisting in surgeries and medical research – and even acting as monitors and companions for the elderly.

Now, advances in artificial intelligence and other digital technologies affect just about every aspect of human life. Robots routinely assist nurses in hospitals. Artificial animals have been developed to move just like living ones, capable of traveling where humans can never go. AIs enable space probes to land on comets and visit Pluto.

These technologies also help to move money all around the globe. From the early days of ATMS and electronic transfers, financial experts now envision a world in which virtual financial advisors help with investment management and conduct transactions. Digital currencies can be kept and tracked in virtual “wallets” for transactions conducted at any hour, from anywhere.

AI technology will help investors calculate risk, make adjustments based on current conditions, and evaluate new opportunities. On the real estate front, these technologies let potential homebuyers take virtual tours of properties they’re interested in, “decorate’ them at the click of a mouse, and complete the purchase all in one interface.

It’s obvious that in a world where AIs are assuming more and more tasks normally carried out by people, some jobs filled by people would no longer be heeded. In this brave new world, financial planners, investment advisers, real estate agents and a variety of other professions would disappear.

Losing human jobs to technology is only one of the risks of runaway AI technology that worry many economists and market watchers. A world increasingly reliant on AI technology could be crushed if those systems were hacked or if they failed. And the increasing use of AI technology for military and defense purposes raises the specter of a global disaster arising from a system failure or other glitch.

Still, the shadow side of the advancing wave of AI technology is, as Jason Hartman points out, more of an opportunity, rich with benefits, than a threat. AI applications have the potential to revolutionize the way we do business and live our lives. And if you own a smartphone, use a GPS or boost your fitness regimen with a Fitbit, you know the AI revolution is already underway. (Top image: Flickr/ju-x)

Read more from The American Monetary Association:

Fannie Mae and Freddie Mac: Still On top In Home Loans?

The Digital Revolution: A New World in 2025?

The American Monetary Association Team




Fannie Mae and Freddie Mac: Still On Top in Home Loans?

AMA5-16-15Ever since the great housing collapse of 2008, legislators and regulators have tried to scale back – or even eliminate – federal mortgage megalenders Fannie Mae and Freddie Mac. But as new regulations n private lenders, the agencies everyone loves to hate just keep on ticking.

Fannie Mae and Freddie Mac collectively account for the majority of residential home loans serviced in the US. But even as their much publicized troubles fuel calls for their demise, financial experts worry: if they’re gone, will the scandal ridden private lenders be able to step up?

Fannie Mae (real name: the Federal National Mortgage Association) is an old lady now – and one with a colorful past. Fannie Mae was first created in 1938 as part of President Franklin Delano Roosevelt’s post-Depression New Deal. Fannie’s original mission was to help boost home ownership by providing local banks with federal money to finance home mortgages.

Fannie Mae would do this alone as a government backed entity for the next thirty years. But in 1968 Fannie Mae was restructured, splitting into two separate entities: a new version o Fannie Mae that was placed into private ownership to keep it off federal budget rolls, and a new entity, the Government National Mortgage Bureau, or Ginnie Mae, which remained under government ownership. It dodged the post crash chaos and is still the only home loan agency that’s fully backed by the US government.

Freddie Mac, or the Federal Home Loan Mortgage Corporation, came along in 1970 and was originally intended to be a competitor of Fannie Mae, in order to create a more robust secondary mortgage market and remove Fannie’s monopoly. But as the housing market balloon swelled and eventually burst in 2008, Fannie and Freddie both faced the same troubles.

Facing massive losses after the housing crash, they were bailed out by the government to the tune of $188 billion and eventually placed into conservatorship under the regulation of the Federal Housing Finance Agency. They’re still under that conservatorship today. But both Fannie and Freddie continue to originate the mortgage-backed securities that back home loans serviced by a host of private lenders such as banks, credit unions and other kinds of financial institutions.

Amid calls for ways to impose better oversight on mortgage lending and protect consumers from becoming victims of predatory lending practices, lawmakers from both parties began to explore ways to phase out Fannie and Freddie. Possible scenarios included greater privatization, complete dissolution, and tighter regulation.

But in the meantime, new laws targeting the banking industry and private mortgage lenders were tightening mortgage lending standards and making it harder for marginally qualified buyers to get mortgages.

In the scandal ridden years after the crash, virtually all of the nation’s leading banks fell under investigation for charges of fraud, misrepresentation and other illegal activities. So the Dodd Frank Wall Street Reform and Consumer Protection Act became law in 2011, ushering in a number of new rules that banks and other private lenders had to follow in order to avoid penalties.

The new regulations included the creation of the Consumer Federal Protection Bureau, which promptly imposed the Qualified Mortgage Rule on new loans serviced by most banks and other institutions. In order to avoid penalty and major losses, banks had to ensure that the mortgages they serviced conformed to the tighter standards of the QMR, which included such things as higher credit scores, a stricter debt to income ratio, and larger down payments for home purchases.

But the new regulations meant many potential buyers couldn’t qualify for a mortgage, which threatened to stifle the already struggling housing market. In a time when home ownership was already at the lowest rates in over two decades, the new regulations designed to restore order in the housing market appeared to be stifling it instead.

In the meantime, Fannie and Freddie instituted new policies of their own, restructuring the loan securitization process and relaxing down payment and credit score requirements for mortgages they sponsored. These were steps aimed at supporting a housing recovery facing a slowdown because of the very regulations aimed at preventing another crash.

With the mortgage lending industry in flux and would be buyers locked out of the lending process, Fannie Mae and Freddie Mac continue to dominate the US home loan landscape And although they’re still in the crosshairs of legislation aiming to reform the mortgage markets, they won’t be going away any time soon. (Top image: Flickr/futureatlas)

Read more from The American Monetary Association:

The Digital Revolution: A New World in 2025?

How Does the Fed Manage Inflation?

The American Monetary Association Team


The Digital Revolution: A New World in 2025?

AMA5-11-15Computers that move at the speed of the human brain. A world where every human being can know anything, anywhere, any time. Data streaming through a trillion sensors to connect the whole world. Though these things sound like part of a science fiction movie about the far future, that future is now.

Experts from a variety of fields including economics, robotics and psychology predict that those extravagant predictions of a sci fi future will become everyday reality in just one short decade. From modest beginnings in single computer chips, the digital revolution is expanding exponentially – and it has the potential to reshape life as we know it.

Robotics experts have long predicted that robots and other kinds of artificial intelligences will achieve the level of human intelligence, and that milestone is expected to come within the next decade. By 2025, a computer costing just $1000 will be abl3e to process data at 10,000 trillion bytes per second. If that sounds stunning, consider that it’s the speed at which the human brain already works.

Armed with that new level of intelligence, robots and other kinds of smart technology will play a much larger role in complex fields like medicine, with the potential to revolutionize healthcare. With greater precision and wider application, AIs could push health care costs down and give ordinary people far greater control over their own health.

These technologies are already in use in healthcare settings ranging from the operating room to assisted living facilities. Robots perform routine nursing tasks such as dispensing medicines and delivering meals, act as companions and monitors to the frail elderly, and conduct diagnostic exams. All these applications could streamline the healthcare industry and substantially reduce costs.

This brave new world of 2025 is also one of global connectivity and shared knowledge – the Internet of Everything. Within a decade, the world will be connected by a network of over 100 trillion networked devices. And those devices all have multiple sensors, working ceaselessly to collect data from multiple sources. The result? A multi-trillion dollar economy driven by an unprecedented flow of data from all over the world – and beyond it.

This massive, ceaseless flow of data collected by and streaming from cheaply produced and easily available devices could create a world of “perfect knowledge” in which anybody could in theory find out anything, anywhere, any time. For the first time in human history, knowledge is available to anyone who seeks it.

That puts unprecedented power in the hands of individuals rather than the gatekeepers society designates, such as schools, publishers and government entities. People who can’t afford expensive educations can learn from anywhere. Anyone with an idea can share it – and it becomes harder to hide institutional blunders and abuses from a watching world.

This world of perfect knowledge driven by the Internet of Everything also brings that knowledge and connectedness to virtually every corner of the world, creating new opportunities for people in impoverished and isolated areas of the world to connect with others and create new things.

Without realizing it, we’ve already stepped into that future world. Smart technologies, virtual reality applications and robotic assistance for a variety of tasks are relatively commonplace today. But those applications and many others are developing at exponential rates – and could do so virtually indefinitely.

That’s the prediction at the core of Moore’s Law, coined by Intel CEO Gordon Moore nearly half a century ago to describe what happens to computer transistors over time. According to Moore, the number of transistors that could be placed on a computer microchip would double every year – and that the trend would continue indefinitely.

Since then, Moore’s Law has been used in a broader way to describe the exponential growth of all kinds of industries and enterprises such as the current digital revolution, which is characterized by dramatic increases in power along with a corresponding decrease in cost, just as Moore predicted.

As Jason Hartman points out, we’re living in the most exciting time ever, a time when change is the only constant. And as digital technology advances at light speed in every area, change is coming faster and faster, with the potential to transform life as we know it in just ten short years. (Top image: Flickr/ju-x)

Read more from The American Monetary Association:

Will Robots Steal Your Job?

AMA 119: The Truth About Real Estate Hard Money Lending with Salvatore Buscemi

The American Monetary Association Team

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AMA 119 – The Truth about Real Estate Hard Money Lending with Salvatore Buscemi



Salvatore Buscemi is the author of Making the Yield: Real Estate Hard Money Lending Uncovered as well as the Managing Director for Dandrew Partners New York. He talks to Jason Hartman on the subject of finding experienced fund managers, the problems with crowd funding, dealing with inexperienced investors, and much more on today’s show.


Key Takeaways:

[1:45] Salvatore talks about his book, Making The Yield: Real Estate Hard Money Lending Uncovered.

[2:50] You can’t take $2,000 from someone and really invest or place that capital meaningfully.

[9:00] People are going to real estate fund managers who have no experienced and are losing their money.

[19:45] Real estate crowd funding deals are tricky, because now the developer is dealing with less experienced investors.

[27:20] You can’t make accurate predictions in an era where government and central banks intervene.

[35:50] People want more control over their investments and rather invest in someone who they have a good relationship with.

[39:30] Ask the hard questions first before you invest.



There will be many problems in the world of crowd funding. Many lawsuits, many frauds. Get ready. They’re coming.

What’s great about real estate is it’s an imperfect market and that imperfection is what breeds opportunity.

When you do qualify these fund managers, you do have to look at their track record.




Mentioned In This Episode:




Making the Yield by Salvatore Buscemi



Will Robots Steal Your Job?

AMA5-5-15The Second Machine Age has arrived. Tech experts now predict that by 2025, robots will have reached the level of human intelligence – and they’re poised to claim at least a third of the jobs done by humans.

Economists and job seekers have been worrying about the steady encroaching of machines into the working world for some time. ATMs were blamed for eliminating bank tellers. Self-serve checkouts took the jobs of grocery and department store checkers. Automated assembly lines put low-paid workers out of a job.

Add to that the steadily expanding use of smart software that conducts surveillance, navigation, and a host of other small and large functions, and it seems those worries are pretty well founded. But those early efforts to automate various functions for human convenience were only the beginning.

Robots and other kinds of automated machinery were originally developed to do the kinds of tasks humans wouldn’t, couldn’t or shouldn’t do – what a recent article from Business Insider calls the “dirty, dangerous and dull” work tasks. But as artificial intelligence technology moves forward, that’s changed.

Robots now assist surgeons in the operating room and nurses on hospital floors. They deliver meals in high security prisons and conduct medical exams and broker purchases. They even routinely beat humans at a variety of games and logic challenges. From simple automated technology, these mechanical workers are truly becoming another kind of intelligence, and their emergence in the white-collar workplace is making jobholders – and seekers – nervous.

Whether they should be nervous is a matter of debate. In an economy that’s driven by “job creation,” it’s ironic that existing jobs could disappear thanks to automation. But some economists argue that the jobs that could be lost to robots and smart software are largely ones that aren’t needed anyway – outmoded and irrelevant in rapidly advancing fields.

While that may be small comfort to the workers losing those jobs, some market watchers predict that the Second Machine Age will actually create more jobs, at least in the sectors related to the care and feeding of robots and AIs: design, development and maintenance. But those jobs usually come with a steep learning curve and require skills that displaced workers just don’t have – which in turn leads to a greater demand for training.

This Second Machine Age threatens to do for intelligence what the First Machine Age did for physical strength and endurance. That was ushered in by the Industrial Revolution, which saw the creation of machines that could work harder, longer and faster than any human could. Workers did lose jobs in the aftermath of that revolution, as industrial and commercial machines outperformed them at a fraction of the cost.

The possibility of a repeat of that scenario is what worries some experts, while others envision a future straight out of many science fiction novels, where robots rule and humans have either been relegated to machine serving slaves or eliminated altogether.

But just as in the First Machine Age, there are things that even today’s smartest machines just can’t do. They’re very good at performing linear, structured tasks and making decisions based on mathematical constructs and logic. But, experts say, they fail at some very human skills.

Artificial intelligences don’t work well when it comes to making judgment calls, responding to unexpected changes in sequences, and human interactions involving emotions like empathy. Fort hose reasons, trend watchers say, these evolving artificial intelligences will always need human overseers and colleagues to carry out those more complex tasks.

In any case, say futurists, there’s no need to worry about the coming of the Second Machine Age. It’s already here, sneaking up on us in many small ways we’re already used to: smartphones, virtual reality technologies, and GPS. Those things have become a part of life in less than a decade – and the coming decade will see much faster advances.

The Second Machine Age ushers in a new, exciting and uncertain future, with profound implications for the world of work. Whether jobs will be lost or eventually gained, it promises to have as much impact as the advent of the steam engine did a couple of centuries ago. (Top image: Flickr/PaulKeller)

Read more from The American Monetary Association:

How Does the Fed Manage Inflation?

The Wizard of Oz: An Economic Fairy Tale?

The American Monetary Association Team

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