The growth of AI and chatGPT is becoming so powerful that Elon Musk himself and dozens of tech leaders are asking them to pause the growth of this technology. More than 300 tech industry leaders, researchers, and others are now asking for a pause in the development of artificial intelligence to consider the risk. I think we need to regulate AI, quite frankly, because it is actually more vigorous to society than cars or planes or medicine in today’s video.
I want to show you how chatGPT was able to accurately predict the Super Prime Bank crisis of 2023. I know it may sound like science fiction click bait, but I promise it’s not. Later in the video, I’ll demonstrate how you can use chatGPT for yourself to perform financial analysis on companies. Tasks that used to take days if not weeks to analyze can now be done in less than 30 seconds from the comfort of your own home, and best of all, it’s free.
First, I want to give special credit and a shout out to Matt Eskridge for his blog where he showcased this incredible capability. What Matt did was he copied the entire balance sheet of SV bank and pasted it into chatGPT. Here’s what it told him: the risk that poses the most significant threat to the bank’s financial solvency is the interest rate risk with an RAC score of 16. Guess what happened next? The interest rate set by the Federal Reserve was increased, which affected the value of Treasury bonds where customer deposits were invested. Combined with a bank run, this eventually led to the bank’s downfall. ChatGPT was able to analyze complex financial data in less than 30 seconds and accurately identify the biggest risk that caused the bank’s failure. It’s mind-blowing.
Now, let me show you how you can do this not just with bank stocks, but with any stocks you want to invest in. I’ll provide specific examples in the video, but first, let’s go through the steps together.
Step 1: Copy and paste the following prompt into chat.openi.com: ‘Consider this hypothetical scenario: The current year is 2021, and the FED funds rate is targeted at 0 to 0.25 percent, which has been the case for about 10 years. A Bank reported the following asset allocation on its balance sheet for the most recent year.’
Step 2: Find the financial statement of SV Bank. You can either find this information on Yahoo Finance or visit the SEC website for the official filing. Highly recommended: Once on the SEC website, search for SV Bank and click on 10K filings on the right-hand side. Look for the last filing from 2021, open the document, and scroll down to find the summary of performance. Copy the entire section and paste it into the chatGPT window. Instead of hitting enter, press shift plus enter on your keyboard.
Now, you need to enter a new prompt to ask chatGPT to assess the risks using a five-point RAC (Risk Assessment Code) system.
After entering the prompt, chatGPT will provide you with a detailed analysis of the balance sheet and the biggest threat to the bank. In the case of SV Bank, it accurately identified the interest rate risk as the biggest threat.
But let’s take it a step further. Imagine you’re one of the bankers working at these banks, and you’ve just discovered your biggest threat. Could you have used chatGPT to recommend ways to mitigate the risk? Absolutely! Just ask chatGPT, ‘What do you recommend the bank to do to mitigate its most significant risk?’ It will provide you with the steps.
If only chatGPT could tell us how to avoid our taxes. Wait, apparently Credit Suisse whistleblowers have told us that the Swiss bank has been helping rich Americans do exactly that for years now. The report alleges that Credit Suisse has been helping American clients hide hundreds of millions of dollars from the IRS, despite an agreement to cooperate with U.S. tax authorities a decade ago.
Let’s now try another company and see what the risks are for it today. Let’s use a popular stock like Tesla, for example. But please feel free to use whatever you like. We’re going to use the same risk assessment code (RAC), but we’re going to change it just a little bit.
Now, if you’re confused about what the heck this RAC even is, all it’s doing is taking impact and likelihood and multiplying the two. We’re letting chatGPT decide what those numbers are, but we set the criteria. For example, an economic recession might have an impact score of four (it affects a lot of companies around the world), but the likelihood of a recession happening is really hard to predict, so maybe it’s somewhere in the middle. ChatGPT decided to give it a three. So, four multiplied by three equals 12. The higher the number goes, the higher the risk becomes for the banking industry.
For example, interest rate increases were actually at four (a really big impact), and the likelihood was also pretty high at four. So, four multiplied by four is 16. That’s how it decided that interest rate increases were the highest risk to the banks.
Now, let’s go one step further. What’s really cool about chatGPT is that once you train it on the finances of a company, you can then ask follow-up questions about the health of said company. For example, let’s say I do the exact same thing but this time for Apple. I copy and paste all of their financial details from the SEC, and now that I’ve trained it, I can ask it a simple question like, ‘Is Apple in danger of running out of cash?’ And in this case, it gives me a very detailed breakdown. It shows that Apple is in a very secure cash position of $165 billion.
Additionally, I can provide context to chatGPT by mentioning the stock price of Apple at the end of 2022. This gives it more context and data, allowing me to ask questions such as the dividend yield and the number of dividends paid to shareholders. ChatGPT will calculate that for me.
Furthermore, I can go a step further and ask what it thinks will happen to dividends for 2023. It provides a quote and says that based on its historical average, you can expect a 4.5 percent increase from 23 cents a share to 24 cents a share.
It’s important to note that you should never base your investing decisions solely on what chatGPT tells you. However, the information I just showed you in this video is the type of information that people often pay hundreds if not thousands of dollars for from financial experts, analysts, stock courses, Patreon subscriptions, and newsletters. There is a product for everything I just showed you, and now you have access to this information for free at your fingertips. Just follow the prompts I showed you in this video, and you can ask any reasonable question about investing, and it will provide you with a mathematically sourced answer. It’s mind-blowing.
Imagine where this technology will be in just a couple of years. What happens once it is connected to the internet, and we don’t have to train it on financial models? It will have context behind what it says for things like macro risks, interest rates, recessions, regulatory issues, geopolitical risks, all uniquely catered to your financial situation, goals, and age. It’s incredible. I can’t emphasize enough how amazing this technology already is today. Thank you.
