Mad Hedge Technology Letter
May 13, 2022
Fiat Lux
Featured Trade:
(SPAC BUSINESS PULLS BACK)
(GS), (SEC), (SPAC), (SPXZ)
Never waste a crisis.
The SEC sure isn’t.
They are using this stock market meltdown to broaden out the risk to who is liable for special purpose acquisition companies (SPACs).
The new regulation has meant that investment bankers who do the deal then advise the companies post-IPO are bailing on this business in droves.
There have been whispers about this potential regulation for quite a while as many investment advisers were putting through low-quality companies that would never turn a profit in a million years.
Investors would be held with the bag as these SPACs were prone to severely underperforming in the stock market.
Powerful Wall Street banks like Goldman Sachs (GS) are pulling out of working with most SPACs it took public, the second-biggest underwriter of special purpose acquisition companies last year, has been telling sponsors of the vehicles it will be ending its involvement.
A SPAC works with its adviser even after going public to finish its merger with a participating firm, known as the de-SPAC transaction.
If it fails to complete that deal, it’s forced to return capital to investors. In cases where the public company is very close to completing the de-SPAC process, Goldman will fulfill its role.
SPACs were popular on Wall Street over the past couple of years, luring financiers, politicians, and celebrities who were able to profit from investors piling into the investment vehicles.
The SEC is tightening oversight of SPACs including exposing underwriters to greater liability risk.
Lawyer advocates have argued the listings were bypassing rules imposed on traditional initial public offerings and exposing retail shareholders to extra risks.
The SEC’s proposal would require SPACs to disclose more information about potential conflicts of interest and make it easier for investors to sue over false projections.
There is no visibility on what company might be acquired (this is a regulatory requirement). A SPAC’s prospectus often includes some wording about the type of company or industry it intends to focus on, but there’s nothing to stop it from going in a totally different direction.
In many cases, those same sponsors were courted by large banks to put their names behind their SPACs, with the structure allowing them to turn an initial investment of a few million dollars into many multiples of that. And their Wall Street underwriters could make more than 5% in fees for taking a SPAC public, helping the sponsor find a takeover target and complete the de-SPAC.
The SEC's concerns might be warranted just based on how awful SPAC stocks are performing.
Take for example, SPAC ETF Morgan Creek - Exos SPAC Originated ETF (SPXZ) whose shares have gone from $21 in the past year to $11 today.
There have been a few SPACs that are worth investing in partially because once the SPAC goes public, the company can turn its business 180 degrees and do something completely different.
They are not beholden to anything, unlike traditional IPOs which are strict in defining what they do and how they do it.
Naturally, a lot of fraud-type companies can go public quickly with the help of a famous celebrity marketing their SPAC and that’s exactly what has happened.
New York doesn’t need more IPOs, but it needs more high-quality IPOs and this will prevent many investors from losing all their money.
One of the big unintended consequences of this bear market is that regulation is finally focusing on the fringe elements in tech and that should mean a healthier tech sector moving forward.
Come join me for the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting on the Grand Canal in Venice, Italy. You can meet me at 12:00 PM on Thursday, July 28, 2022.
An open discussion on the crucial issues facing investors today will take place. The lunch will take place at one of the outstanding restaurants in Italy within walking distance from the Palace of the Doges. Bring a hat, expect it to be hot, but the view will be fantastic.
I’ll be giving you my up-to-date view on stocks, bonds, foreign currencies, commodities, precious metals, energy, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there too. Tickets are available for $379.
I’ll be arriving early and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets for this luncheon, please click here.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
May 13, 2022
Fiat Lux
Featured Trade:
(JULY 22 ZERMATT, SWITZERLAND STRATEGY SEMINAR)
(HOW TO GET A FREE TESLA), (TSLA),
(TESTIMONIAL)
I have assiduously instructed readers how to earn boatloads of money over the past 14 years.
Now I am going to teach you how to spend it wisely.
Tesla was once again at $680 a share at yesterday’s low and history has shown that it is time to pay attention.
How would you like to drive a vehicle whose technology is from ten years in the future, will be the envy of your neighbors, and leaves zero carbon footprint? It is also the fastest production car ever built. Sounds pretty good, doesn’t it?
I bet if I told you that the car was available for free, you’d be even more interested.
Here’s how it goes.
Buried in the tax bill signed into law in December 2017 is a provision for “bonus depreciation.” It allows companies the depreciation of the entire cost of a new car for business use over 5 years. All of this is tax deductible.
In addition, you get to deduct all of the annual interest on any loan taken out to purchase the vehicle. Also coming off the bottom line is any insurance and maintenance expenses which, in my experience, come to about $6,000 a year.
If you spend $125,000 for the new model, total deductions over a five-year period is about $155,000,
In five years, the car will have a residual value of $70,000, and the $85,000 in additional costs is covered by the tax breaks, taking the bottom-line after-tax cost of your new mid-life crisis to zero.
If all of this sounds impossible don’t worry. I’ve done it three times.
Now, here’s how to get a better deal.
Call Tesla and ask if they have any used 2022 showroom cars they want to get rid of before the new model year begins. In my case, I was able to find in Los Angeles a 2022 Model X P100 D SUV with just 800 miles on the odometer for a $25,000 discount to the $125,000 list price.
It was a total LA car, silver with black wheels and a black leather interior. They added on a $5,000 advanced navigation system and a $3,000 seven-seat configuration for free.
Tesla lists their used car inventory at https://www.tesla.com/inventory/used/ms. You may have to get a live Tesla salesman on the line to find the 2022 showroom cars.
For those of you who own your own companies or work through single-member LLCs, this is a no-brainer. If you work for a big company, it may be tougher to pull off. Talk to your accountant before you do anything.
This is exactly what I did which led me to pick up a brand-new Tesla during a torrential rainstorm. It was then that I truly learned what Elon Musk has recently referred to as “Logistics Hell.”
For a start, my car was supposed to be delivered to me at my lakefront estate in Incline Village, Nevada. But Tesla could only get it from Los Angeles to as far as the Fremont factory before the logistics system completely broke down. I agreed to pick it up at Fremont to cut a week off the delivery time and before the heavy snow hit.
When I arrived at the showroom, it was completely empty so I had to wait an hour. Out front were 100 parking spaces filled mostly with Tesla 3’s, and animated technicians showing new owners how to operate them. I was told that the parking lot is completely filled and then emptied out three times a day. (TSLA) is now producing 1,000 Tesla 3’s a day now.
When I finally got my turn, I discovered to my horror that the car was registered in the wrong name. When the Nevada Department of Motor Vehicles was told that the new registered owner was “Mad Hedge Fund Trader,” they were somewhat taken aback.
The tow hitch I ordered was missing so the tech pulled one from a back room. The same happened with the second set of keys which are very expensive. I had to Google the tire specs which required me to crawl under the car and get soaked to make sure they were all season because no one there knew.
In the end, I was sent off with my $125,000 car, a box of parts, and a vague promise that a mechanic would visit me someday and put it all together.
This was not the experience I had when I picked up my Tesla in 2010 and 2016 when I was treated like visiting royalty. But I love the car anyway.
Then it really got interesting!
What is the first thing a new Tesla owner wants to try out? The monstrous zero to 60 mph acceleration in 2.9 seconds. And they do this the second they drive out of the parking lot. So, I was treated to dozens of aspiring Indy 500 drivers with giant smiles on their faces zipping around on rain-slick roads. I felt like I was in a shooting gallery.
Thank goodness I brought an extra supply of airline airsick bags!
My 400 Bagger
Thank you for the analysis of Nvidia (NVDA). I wouldn't have looked at them without your analysis.
I got in NVDA at $69 Nov 2 after it dipped 3-5% from the recent top, it exploded up on the 11th Nov, +29% to $88, and eventually made it to $290!
More trade alerts to the people :)
Best Regards
Per
The Netherlands
Geneva, Switzerland 1968
Mad Hedge Biotech and Healthcare Letter
May 12, 2022
Fiat Lux
Featured Trade:
(AN UNDERRATED PREMIUM HEALTHCARE STOCK)
(ABT), (DXCM), (MDT)
The healthcare industry is a complex system. Nevertheless, it's an exciting space filled with opportunities valued at almost $12 trillion globally.
Healthcare needs are practically guaranteed never to disappear. Moreover, there will always be a consistent demand for expansion and innovation as patients look for more effective treatments and therapies.
This could signify several up-and-coming budding companies in the following years.
However, it's vital to keep tabs on the well-established blue-chip stocks in the healthcare world.
After all, these names have proved their worth for decades, evolving with the industry and developing innovative drugs and services to stay at the forefront of the field.
One name that fits that description is Abbott Laboratories (ABT).
There are many reasons why Abbott is an outstanding stock to buy. One excellent reason is its long history, as it goes way back to the late 1800s.
Admittedly, that reason alone isn't enough to promise a bright future. But, the fact that Abbott managed to sustain its growth and remain competitive for decades speaks volumes of the stock's quality.
Another appeal of Abbott to investors, which is unlikely to change anytime soon, is its diversified portfolio. The company produces virtually everything from COVID-19 diagnostic tools to surgical equipment and medical devices targeting diabetes.
Moreover, Abbott has developed a solid relationship with healthcare professionals and facilities. This establishes brand recognition, which arms it with a decisive competitive advantage.
With over $43 billion in trailing 12-month revenue, its portfolio of products is so extensive and popular in the healthcare field that it's difficult to imagine a future where a particular failure in any market would severely damage its share price.
That makes AbbVie a remarkably safer stock compared to many of its peers in the healthcare sector.
The first three months of 2022 saw Abbott Laboratories record $11.9 billion in revenue, showing off a 13.8% year-over-year climb.
The diagnostic sales segment grew with a 32% increase year-over-year, with roughly $3.3 billion of the amount generated from COVID-19 diagnostic tools.
Apart from this, other segments of the business posted good numbers. For instance, the company's established pharmaceuticals and medical device sector climbed by over 7% in the first quarter.
The only business arm that failed to record an increase in revenue is its nutritional segment, which fell by 7% primarily due to product recalls and the unfavorable conditions in the Chinese market.
Although the quarterly revenue of Abbott isn't growing as fast as other healthcare companies, this shouldn't be an alarming concern.
Actually, this is effectively this industry titan's norm.
Besides, the moment a company reaches a market capitalization of more than $211.6 billion, it's challenging to continue making more money at a similar rate as the years when it was a smaller firm.
Meanwhile, a key revenue growth segment for Abbott is diabetes care.
Thanks to its FreeStyle Libre franchise, Abbott has established a notable presence in the diabetes market, particularly in the glucose monitoring (CGM) systems.
Based on the first-quarter report, sales from the diabetes segment jumped by 14.9% to record $1.1 billion.
From this, the FreeStyle Libre franchise raked in $1 billion in revenue, showing off an impressive 20.4% increase year-over-year.
CGM gadgets allow diabetes patients to conveniently and automatically track their own blood glucose levels. Evidently, the fast adoption of this technology is driving sales of the FreeStyle Libre.
Thus far, Abbott Laboratories is nowhere near entirely dominating the CGM market, with the likes of DexCom (DXCM) and Medtronic (MDT) still capable of contesting its market share.
Considering that this is only the first-quarter sales, though, it's incredible to watch how far the FreeStyle Libre franchise could go.
For context, this portfolio brought in annual revenue of $2.6 billion in 2020 and grew by 35.8% the following year to bring in $3.7 billion in 2021.
Finally, Abbott is an excellent option for income-seeking investors. This business is widely considered a Dividend King, increasing its payouts for an impressive 50 years.
Looking at the past five years, Abbott's dividend was raised by over 77%. Given its rapidly increasing cash flow, it's clear that it has a strong capacity to continue paying out dividends.
The market has been experiencing stomach-churning rough patches as more and more companies struggle with supply chain disruptions and increasing interest rates. This is just the kind of environment where Abbott thrives.
This company has a 10-year return of 378% that easily beats the market's 282%, making Abbott a stock that many investors aspire to own.
Between its steadily climbing dividend payouts, consistent flow of innovative products, and the capacity to hold its title as one of the largest healthcare companies worldwide, it's clear to see the reason for investors' confidence in this stock: all these benefits could make any shareholder wealthy over time.
Mad Hedge Bitcoin Letter
May 12, 2022
Fiat Lux
Featured Trade:
(LUNA BLOWS UP)
(BTC), (ETH), (LUNA), (UST), (MSTR)