September 2021

The Best Way to Earn Passive Income in Crypto

Bitcoin Letter

So global yields are in the toilet today?

Savings accounts don’t do what they used to do, do they?

How about we try out a certificate of deposit (CD) to harvest some cash?

Are there simply no other interest-bearing vehicles one can park capital in and gain a healthy return?

I would say you are right, but then I would be the fool here and I am certainly not in that line of work.

I will tell you — there is an elixir to the anathema!

Enter Celsius.

Celsius is a crypto-based financial service hoping to disrupt traditional financial services.

They offer cryptocurrency savings accounts that yield high annual interest rates up to 17% annually. They do this by lending cryptocurrency out to institutional and retail traders who seek to leverage their positions.

Since these platforms require collateral to receive a loan, investors can be sure that the loan will be paid back one way or another.

While these rates are floating interest rates, meaning they can change with the market, they’re relatively stable month-over-month.

These loans are over-collateralized, which means the risk of default is lower than it would be for a standard loan. To this day, there has never been a default for any coin on this specific cryptocurrency lending platform.

How Do Celsius Make Money?

Celsius primarily generates revenue through its crypto lending service. The company lends assets to users at a higher interest rate than it pays them for storing their assets on the platform.

Celsius has more cryptocurrencies available for interest-bearing accounts, including BTC, ETH, SNX, CEL, LINK, UNI, and AAVE to name a few.

Payouts and Withdrawals

Celsius users can withdraw their funds at any time without incurring additional fees. Those who wish to withdraw over $50,000 with a single transaction need to wait 24 to 48 hours for it to process. The company makes its weekly interest payments on Mondays.

Let the compound interest payments pile up all while exposed to minimal market risk.

Celsius confirms its holdings of $20,366,621,718 in cryptocurrency assets as of August 13, 2021.

In less than one year, Celsius has grown its total asset holdings from $1 billion to over $20 billion.

Do you want to be part of this 20X growth story?

As part of its Proof of Community (POC) and rewards explorer, Celsius provides real-time data about its assets, loans, users, and rewards paid.

This asset growth trajectory is parabolic with Celsius confirming it is adding close to $1B a month in new assets, as the company trends towards the number one position in total asset holdings in the crypto industry.

For years the traditional banking business has conditioned us naïve folk to accept steep fees and no yield earnings on holdings as the status quo.

I will tell you right now that it’s a load of garbage and nobody should accept these pitiful offers from dinosaur banks.

There is so much more out there that we can access now because of crypto.

With that failing model ripe for disruption, Celsius was built to give consumers what banks never could — a community-oriented platform that provides income and financial independence and it delivers it with a bang.

At the start, Celsius had set a goal to bring the next 100 million people into crypto. Today, they have over 950,000 users worldwide.

Celsius has even just launched its crypto-backed lending service in California following regulatory approval.

The California expansion enables the firm to enlarge its footprint in one of the fintech capitals of the world — California.

The firm claims that it is now "one of the most accessible and affordable lenders in California."

The loans can be issued in both United States dollars and stable coin, the minimum loan value is $500, the process is instant, does not need proof of income or credit check.

They even have a real-time customer service desk — one can call 201-824-2888 for customer support.

I heard the fastest way to get a response is through the platform’s social media pages on Reddit or Twitter.

Another option is to contact support via email at newjersey@celsius.network.

You are not dreaming — this is the real deal.

Wake up to fresh crypto interest payments on Monday morning easily convertible into fiat currency.

Participate in one of the most unique crypto deals in the world.

To top it off, Celsius has poached JP Morgan executives from Rodney Sunada-Wong as Chief Risk Officer and Vijay Konduru as Chief Marketing Officer and Head of Analytics.

This is a de-facto co-signing of this operation from a proper Wall Street Bank and that pipeline of c-suite hires continues to be strong.

I know some people are shy with heart palpitations growing strong with every 10% daily move in crypto.

This does a lot to ensure a stable annuity-like income stream by just parking cash in an account and receiving generous rewards in the form of US dollars every Monday morning.

To check out this deal of a lifetime, click here to visit their website.

September 9, 2021

Diary, Newsletter, Summary

Global Market Comments
September 9, 2021
Fiat Lux

Featured Trade:

(HOW THE “UNDERGROUND” ECONOMY IS EXPLODING)

How the “Underground” Economy is Exploding

Diary, Newsletter

There is no doubt that the “underground” economy is growing.

No, I’m not talking about violent crime, drug dealing, or prostitution.

Those are all largely driven by demographics which right now are at a low ebb.

I’m referring to the portion of the economy that the government can’t see at all, and therefore is not counted in its daily data releases.

This is a big problem.

Most investors rely on economic data to dictate their trading strategies.

When the data is strong, they aggressively buy stocks, assuming that a healthy economy will boost corporate profits.

When data is weak, we get the flip side and investors bail on equities. They also sell commodities, precious metals, oil, and plow their spare cash into the bond market.

We are now more than halfway through a decade that has delivered unrelentingly low annual GDP growth, around the 2%-2.5% level.

We all know the reasons. Retiring baby boomers, some 85 million of them, are a huge drag on the system, as they save and don’t spend.

Generation Xers do spend, but there are only 58 million of them. And many Millennials are still living in their parents’ basements—broke and unable to land paying jobs in this ultra cost-conscious world.

But what if these numbers were wrong? What if the Feds were missing a big part of the picture?

I believe this is in fact what is happening.

I think the economy is now evolving so fast, thanks to the simultaneous hyper-acceleration of multiple new technologies that the government is unable to keep up.

Further complicating matters is the fact that many new internet services are FREE, and therefore are invisible to government statisticians.

They are, in effect, reading from a playbook that is a decade or more old.

What if the economy was really growing at a 3-4% pace, but we just didn’t know it?

I’ll give you a good example.

The government’s Consumer Price Index is a basket of hundreds of different prices for the things we buy. But the Index rarely changes, while we do.

The figure the Index uses for Internet connections hasn’t changed in ten years.

Gee, do you think that the price of broadband has risen in a decade with the 1,000-fold increase in speeds?

In the early 2000s, you could barely watch a snippet of video on YouTube without your computer freezing up and exploding the local server.

Now, I can download a two-hour movie in High Definition in just 10 seconds on my Xfinity 1 gigabyte per second business line.

And many people now watch movies on their iPhones. I see them in the rush hour traffic and on planes.

I’ll give you another example of the burgeoning black economy: Me.

My business shows up nowhere in the government economic data because it is entirely online. No bricks and mortar here!

Yet, I employ a dozen people, provide services to thousands of individuals, institutions, and governments in 140 countries, and take in millions of dollars in revenues in the process.

I pay a lot of American taxes too.

How many more MEs are out there? I would bet tens of millions.

If the government were understating the strength of the economy, what would the stock market look like?

It would keep going up every year like clockwork, as ever-rising profits feed into stronger share prices.

But multiples would never get very high (now at 27 times earnings) because no one believed in the rally, since the economic data was so weak.

That would leave them constantly underweight equities in a bull market.

Stocks would miraculously and eternally climb a wall of worry. Did I mention that the S&P 500 is at another all-time high?

On the other hand, bonds would remain strong as well and interest rates low because so many individuals and corporations were plowing excess, unexpected profits into fixed income securities.

Structural deflation would also give them a big tailwind.

If any of this sounds familiar, please raise your hand.

I have been analyzing economic data for a half-century, so I am used to government statistics being incorrect.

It was a particular problem in emerging economies, like Japan and China, which we're just getting a handle on what comprised their economies for the first time.

But to make this claim about the United States government, which has been counting things for 225 years, is a bit like saying the emperor has no clothes.

Sure, there has always been a lag between the government numbers and reality.

In the old days, they used horses to collect data, and during the Great Depression, numbers were kept on 3” X 5” index cards filled out with fountain pens.

But today, the disconnect is greater than it ever has been by a large margin, thanks to technology.

Is this unbelievable?

Yes, but you better get used to the unbelievable.

As for that bull market in stocks, it just might keep on going longer than anyone thinks.

There May Be More Here Than Meets the Eye

September 9, 2021 - Quote of the Day

Diary, Newsletter, Quote of the Day

“At an age when other high school kids were sneaking out of the house to go partying, Paul and I would sneak out to go use the computers in a lab at the University of Washington,” said Bill gates about his late partner, Paul Allen.

September 8, 2021

Tech Letter

Mad Hedge Technology Letter
September 8, 2021
Fiat Lux

Featured Trade:

(THE GLUE OF SILICON VALLEY)
(DDOG)

The Glue of Silicon Valley

Tech Letter

Datadog's (DDOG) platform enables IT professionals to simultaneously monitor the performance of multiple servers, databases, cloud services, applications, and mobile apps through unified dashboards.

That unified view makes it easier to diagnose problems while saving time and money.

What do these tools specifically do?

They monitor and offer analytics for information technology (IT) and DevOps teams that can be used to determine performance metrics as well as event monitoring for infrastructure and cloud services.

Every CEO I talk to tells me that the accuracy and fluidity of their data procurement is one thing they prioritize above other sets of challenges in technology.

Muddying and underutilizing these tools is really a death knell for any executive in Silicon Valley, and buying the best tools money makes is where Datadog comes into play.

The user interface includes customizable dashboards which can show graphs composed of multiple data sources in real-time. Datadog can also send users notifications of performance issues on any set metric, such as compute rates.

Some of its other features providing immense value are shooting out alerts based on critical issues, broad support for over 250 product integrations, and automatization of collecting and analyzing logs as well as latency and error rates.

Simply put on the financial side of the numbers, Datadog is in the sweet spot of growth, and their last Q2 earnings report validated that.

The quarter was stronger than expected with existing customers, as well as strong new customer sales.

Relative strength revealed itself across product lines and across customer segments.

For a quick review of the quarter, revenue was $234 million, an increase of 67% year over year and 18% quarter over quarter and above the high end of management’s guidance range.

Customers continue to pursue cloud migrations which is a global business trend.

Expansion with existing customers means rapidly standardizing with Datadog to consolidate observability tool vendors.

The stickiness of Datadog’s business is quickly becoming an x-factor with 75% of customers using two or more products, up from 68% a year ago.

Additionally, 28% of customers are now using four or more products, which is up from 15% last year.

These companies rely on Datadog log management as the platform across the organization to find the root cause of issues.

Significant increase in usage of existing products was used to better understand good performance in production.

Datadog has also upsold several massive European e-commerce companies that were using multiple commercial observability tools, and one of their 2021 strategic initiatives was to consolidate and reduce costs by standardizing Datadog to satisfy while improving their team's collaboration and communication.

The company is investing as aggressively as it can to stay ahead of the game.

Accelerating the investment in R&D is helped partly through a few acquisitions to take advantage of the opportunity across observability and security.

Another sub-sector screaming for Datadog penetration is real-time business intelligence (BI), and that will be the next sphere to be attacked by creating products that can easily integrate into their platform.

In terms of the impact on the go-to-market, management is now inclined to push the sell side of the security products more aggressively.

It hasn't happened yet, and they simply weren’t doing enough before.

Those products are just barely reaching the addressable audience it needs to, but it's something that is in the short-term pipeline.

In the long-term, they are making progress in breaking down silos between DevOps and security teams.

This foray will provide opportunities to democratize data and help customers increase visibility and manage complexity.

The world is transforming digitally so the overall market and the size of the infrastructure that will have to be monitored is likely a lot bigger than what had to be monitored five years ago.

There is just a lot more ground to cover in terms of those market penetration. So, how much can Datadog cover with infrastructure monitoring?

That’s really the main crux of piling resources into new acquisitions and the creation of new products.

In parallel to that, it's a field that is still evolving, right?

The name of the game in the cloud is that there are ways to innovate and new ways of running workloads.

Datadog has already seen that story play out multiple times and they continue to improve on their iterations with each version.

Remaining performance obligations, or RPO, was $583 million, up 103% year over year, driven by strong sales activity and increased contract duration.

A company's Remaining Performance Obligation (RPO) represents the total future performance obligations arising from contractual relationships. More specifically, RPO is the sum of the invoiced amount and the future amounts not yet invoiced for a contract with a customer.

The increase in contract duration was driven by a higher mix of annual and multi-year commitments relative to the year-ago quarter. As a reminder, multiyear commitments are billed annually, and they do not incentivize our sales force toward multiyear deals.

In terms of product resiliency and stickiness — it’s there for Datadog based on the numbers I just trotted out.

The projected third quarter still signals elevated growth — forecasting revenues of 60% year-over-year growth at the midpoint.

Essentially, the company's landscape hasn't changed, and the focus is still mostly greenfield, new environments, teams that are going to start small with DDOG and are going to grow until they standardize with them for just about everything they do.

Datadog calls this their "land and expand" model — wherein it locks in a customer with a single product to cross-sell additional ones.

The issue I have with Datadog is not the spectacular structural tailwinds and accelerating growth metrics of the company, but the pricey valuation of the stock.

Don’t get me wrong, I would love to own this company myself, it really is the glue that holds the data together for many big corporations, an important cog in the wheel, and a service that cannot be shortchanged for a tech CEO.

But I would be doing a disservice to my readers to recommend deploying capital at these prices — the stock is up over 400% in the past 2 years which is why the stock is expensive today especially for a company that is a net-loss maker.

However, this does mean the stock can’t grind up higher, but I believe the more advantageous risk-reward scenario would be to wait for a big sell-off in DDOG if searching for a meaningful profit or finding other opportunities until this one becomes cheaper.

If it simply runs away from us, we will just migrate to the next tech opportunity.

September 8, 2021

Diary, Newsletter, Summary

Global Market Comments
September 8, 2021
Fiat Lux

Featured Trade:

(A NOTE ON ASSIGNED OPTIONS, OR OPTIONS CALLED AWAY)
(SPY), (TLT)

A Note on Assigned Options, or Options Called Away

Diary, Newsletter

I know all of this may sound confusing at first. But once you get the hang of it, this is the greatest way to make money since sliced bread.

I still have two positions left in my model trading portfolio, they are all deep-in-the-money, and about to expire in seven trading days. That opens up a set of risks unique to these positions.

I call it the “Screw up risk.”

As long as the markets maintain current levels, ALL of these positions will expire at their maximum profit values.

They include:

(TLT) 9/$155-$158 put spread	10.00%
(SPY) 9/$410-$420 call spread	10.00%

With the September 17 options expirations upon us, there is a heightened probability that your short position in the options may get called away.

If it happens, there is only one thing to do: fall down on your knees and thank your lucky stars. You have just made the maximum possible profit for your position instantly.

Most of you have short option positions, although you may not realize it. For when you buy an in-the-money vertical options spread, it contains two elements: a long option and a short option.

The short options can get “assigned,” or “called away” at any time, as it is owned by a third party, the one you initially sold the put option to when you initiated the position.

You have to be careful here because the inexperienced can blow their newfound windfall if they take the wrong action, so here’s how to handle it correctly.

Let’s say you get an email from your broker telling you that your call options have been assigned away.

I’ll use the example of the S&P 500 (SPY) $410-$420 in-the-money vertical BULL CALL spread.

For what the broker had done in effect is allow you to get out of your call spread position at the maximum profit point days before the September 17 expiration date. In other words, what you bought for $8.90 on August 17 is now worth $10.00, giving you a near-instant profit of $1,210 or 12.35%!

All you have to do is call your broker and instruct them to “exercise your long position in your (SPY) September 17 $410 calls to close out your short position in the (SPY) September 17 $420 calls.”

You must do this in person. Brokers are not allowed to exercise options automatically, on their own, without your expressed permission.

This is a perfectly hedged position, with both options having the same name and the same expiration date, so there is no risk. The name, number of shares, and number of contracts are all identical, so you have no exposure at all.

Calls are a right to buy shares at a fixed price before a fixed date, and one options contract is exercisable into 100 shares.

Short positions usually only get called away for dividend-paying stocks or interest-paying ETFs like the (TLT). There are strategies out there that try to capture dividends the day before they are payable. Exercising an option is one way to do that.

Weird stuff like this happens in the run-up to options expirations like we have coming.

Adequate shares may not be available in the market, or maybe a limit order didn’t get done by the market close.

There are thousands of algorithms out there that may arrive at some twisted logic that the puts need to be exercised.

Many require a rebalancing of hedges at the close every day which can be achieved through option exercises.

And yes, options even get exercised by accident. There are still a few humans left in this market to blow it by writing shoddy algorithms.

And here’s another possible outcome in this process.

Your broker will call you to notify you of an option called away, and then give you the wrong advice on what to do about it.

There is a further annoying complication that leads to a lot of confusion. Lately brokers have resorted to sending you warnings that exercises MIGHT happen to help mitigate their own legal liability.

They do this even when such an exercise has zero probability of happening, such as with a short call option in a LEAPS that has a year or more left until expiration. Just ignore these, or call your broker and ask them to explain.

This generates tons of commissions for the broker but is a terrible thing for the trader to do from a risk point of view, such as generating a loss by the time everything is closed and netted out.

There may not even be an evil motive behind the bad advice. Brokers are not investing a lot in training staff these days. In fact, I think I’m the last one they really did train.

Avarice could have been an explanation here but I think stupidity and poor training and low wages are much more likely.

Brokers have so many ways to steal money legally that they don’t need to resort to the illegal kind.

This exercise process is now fully automated at most brokers but it never hurts to follow up with a phone call if you get an exercise notice. Mistakes do happen.

Some may also send you a link to a video of what to do about all this.

If any of you are the slightest bit worried or confused by all of this, come out of your position RIGHT NOW at a small profit! You should never be worried or confused about any position tying up YOUR money.

Professionals do these things all day long and exercises become second nature, just another cost of doing business.

If you do this long enough, eventually you get hit. I bet you don’t.

Calling All Options!

September 7, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
September 7, 2021
Fiat Lux

FEATURED TRADE:

(A LONG-TERM STOCK FOR PATIENT INVESTORS)
(REGN), (RHHBY), (BAYN), (SNY), (MRK), (BMY), (NTLA)

A Long-Term Stock for Patient Investors

Biotech Letter

While August ushered in the end of the “dog days of summer,” with temperatures generally at their highest throughout the US, some stocks might be just starting to get warmed up this September.

This is particularly true in the biotechnology industry.

Considering that the broad market indices are reaching historic highs, the biotechnology sector, caused by its relatively low valuation, is deemed one of the appealing targets for investors who truly understand the essence of the industry and can manage the potential risks associated with it.

While not all biotechnology companies are attractive opportunities, some are great long-term investments.

One of them is Regeneron (REGN).

In fact, Regeneron is the manufacturer of a treatment projected to become the top-selling drug globally by 2030.

Annual sales of the moneymaking drug, autoimmune diseases’ medication Dupixent, could hit $21 billion by the start of the next decade—an almost fourfold jump from its current sales estimate of $5.6 billion per annum.

The projection came following Regeneron’s announcement that Dupixent can also be used to treat atopic dermatitis among children aged 6 months to 5 years old.

This makes Dupixent the first-ever biologic treatment to release positive results for that population.

Evidently, the breadth of Dupixent’s indications, complemented by the long-established safety profile of the drug, contribute to its long-term success—an achievement that’s expected to multiply and be carried over to the next decade.

While the next decade is clearly exciting for Regeneron, the company is actually performing well these days.

So far, Regeneron shares are up by roughly 40% year to date—a record-breaking rise not only for the company but also in the biotech sector.

Regeneron’s revenue skyrocketed by 163% year-over-year in the second quarter, pushing its earnings per share to leap 260% higher.

Apart from Dupixent, another catalyst for Regeneron’s impressive gains is its COVID-19 cocktail: REGEN-COV.

This treatment, albeit controversial, is anticipated to make Regeneron and its partner, Roche (RHHBY), a lot of money in the following months, especially with the delta variant wreaking havoc in the world.

Moreover, sales for all six of Regeneron’s highest-selling products, such as its eye disease drug Eylea, which it developed with Bayer (BAYN), immunology drug Kevzara, which is a product of its collaboration with Sanofi (SNY), lung cancer treatment Libtayo, and cholesterol drug Praluent, have been consistently growing by double-digit percentages.

Apart from these current treatments displaying solid sales momentum, the company also has a loaded pipeline that can easily boost Regeneron’s revenue streams in the future.

In terms of the new products under development, Regeneron has partnered with Intellia Therapeutics (NTLA), one of the leaders in the CRISPR-Cas9 gene-editing sector, to come up with next-generation treatments.

Aside from developing new products, Regeneron is expanding the indications of its top-selling drugs. Just like its efforts with Dupixent, the company is also working on expanding Libtayo’s indications.

So far, Regeneron has been working to turn Libtayo into a go-to treatment for skin cancer.

This effort could open up new avenues for Regeneron, as at least 9,000 cases of skin cancer are recorded in the US annually.

Of these, approximately 3,200 fall under the category that the company is targeting for Libtayo’s expansion.

This is a strategic move if Regeneron has any hope to dethrone the most dominant players in this competitive immunology market: Merck’s (MRK) Keytruda and Bristol-Myers Squibb’s (BMY) Opdivo.

Looking at the average net price of Libtayo, which is at $130,000 per year, the expected sales for this drug could grow to $400 million by 2026 in the US alone and roughly $700 million worldwide—and these are only for the approved indications of the drug.

In addition to its current applications, Regeneron is also working to gain approval for Libtayo to be used for cervical cancer.

Overall, Regeneron is an excellent investment for patient buy-and-hold investors. Its current portfolio of products is performing well, while its pipeline programs and partnerships offer promising growth potential.