“Every kid coming out of Harvard, every kid coming out of school now thinks he can be the next Mark Zuckerberg, and with these new technologies like cloud computing, he actually has a shot.” – Said Venture Capitalist Marc Andreessen
Global Market Comments
October 14, 2022
Fiat Lux
Featured Trade:
(FRIDAY, FEBRUARY 17, 2023 HONOLULU, HAWAII STRATEGY LUNCHEON)
“If markets were rational, I would be washing dishes for a living,” said Oracle of Omaha Warren Buffet.
Mad Hedge Biotech and Healthcare Letter
October 13, 2022
Fiat Lux
Featured Trade:
(A SAFE BET IN A VOLATILE MARKET)
(AMGN), (NVO), (LLY)
The biotechnology and healthcare industry is fraught with risk. However, it’s also brimming with opportunities.
On the one hand, a new drug takes years of clinical research. On top of that, the average cost to bring each product to the market reached $1 billion between 2009 and 2018.
On the other hand, the chosen few that receive the green light from the FDA more often than not deliver on their promise to become blockbusters, raking in sales of over $1 billion every year.
This arguably justifies the risks that come with the industry.
Amgen (AMGN) has become the recent embodiment of this promise. Despite the volatility of the market in the past months, the company remains a strong player thanks to several factors that could bolster its share price.
In particular, Amgen investors are looking forward to potential gains courtesy of the pipeline of drugs slated for market release over the medium term.
The most exciting among them is its obesity drug AMG 133.
The positive data from AMG 133’s unveiling had experts excited over the drug, with many expecting it to become a multi-billion dollar revenue stream for Amgen.
As expected, Amgen will be facing stiff competition in this market, specifically between 2025 and 2030.
To date, investors have been closely monitoring the obesity segment, with two companies clearly leading the charge: Novo Nordisk (NVO) and Eli Lilly (LLY).
Novo Nordisk markets Wegovy, which is a shot that targets obesity by zeroing in on the glucagon-like peptide receptor, or GLP-1. This is also the same target for many diabetes treatments.
Meanwhile, Eli Lilly is working to integrate obesity as part of the conditions treated by its recently approved diabetes drug Mounjaro. Like Wegovy, this drug also targets GLP-1.
What makes it more potent is that it also targets glucose-dependent insulinotropic polypeptides or GIP. Both GLP-1 and GIP are hormones linked to blood sugar control.
What makes AMG 133 different from other approved and experimental treatments for obesity is that it blocks not only a particular hormone but also a specific protein involved in controlling blood sugar.
While it targets GLP-1, Amgen’s candidate works on a gut protein linked to digestion, called the gastric inhibitory polypeptide receptor, or GIPR.
The obesity market is a lucrative space since the medical world now categorizes obesity as a type of chronic illness instead of a mere consequence of lifestyle choices.
That is, obesity drugs are on the cusp of entering the mainstream primary health care system.
An apparent precedent for this opportunity is the high blood pressure sector, initially a nascent segment in the 1980s and eventually skyrocketed to a $30 billion industry by the 1990s.
In 2022, the obesity market is estimated to be worth $2.4 billion. By 2030, this space is projected to reach $54 billion.
That places all competitors in the same space, Amgen, Eli Lilly, and Novo Nordisk, in excellent positions. In fact, Novo Nordisk has been dealing with shortages of Wegovy due to rising demand.
While any upgrade or downgrade prompted by a single drug’s potential, or even multiple treatments’ potential, is exciting, it should be taken with a grain of salt.
The biotechnology and healthcare industry is continuously in flux, and any company in the sector is one major failed trial or one rival’s success away from facing trouble. Simply put, they tend to be volatile.
Amgen is not an exception to this harsh truth despite the company’s solid obesity prospects and impressive portfolio and pipeline. That means investors expecting an immediate payout following the recent developments might get disappointed.
Nonetheless, it’s also vital to remember that biotechnology and healthcare stocks tend to deliver better results than the broader market even amid the economic turmoil.
These companies seem to operate and function outside typical economic cycles, providing investors with dependable performance when most businesses are struggling.
Amgen is one of the biggest biotechnology companies in the world. It has been one of the pioneers in this segment since the 1980s. It’s also a part of the prestigious Dow 30 list of companies.
Moreover, it has a massive and diversified product portfolio, with nine treatments that individually generate more than $1 billion in sales annually.
These drugs are not only huge sellers, but also offer wide margins because of the existing restrictive and high barriers to entering the biotech world.
Hence, this enables Amgen to enjoy a remarkable pricing power and autonomy over its products while still growing its top line at a steady pace.
If you’re looking for a conservative and attractive long-term investment, then buying Amgen when the price drops wouldn’t be a bad bet.
Mad Hedge Bitcoin Letter
October 13, 2022
Fiat Lux
Featured Trade:
(LOOKING FOR A SAVIOR)
(BTC), (ETH), (CPI)
Bitcoin prices were volatile Thursday after a terrible CPI number.
The result means that a .75% rise in interest rates is 100% priced into the markets.
There was some fleeting hope that the US Central Bank wouldn’t have to raise it a full .75%, but those ideas were dashed as inflation has gone from terrible to abysmal in the United States.
Let me remind readers that the US Central Bank employs over 10,000 Ivy League-trained economists earning well over $150,000, yet they are following up a full-blown policy error with more questionable decisions.
The longer the Fed allows hyperinflation to gut the health of the US economy, it could be argued that we might be living in an America with only rich and poor people in the future.
How does this affect cryptocurrency?
In one word – devastating.
Crytpo is reliant on low rates to fuel overperformance.
High liquidity is necessary too.
However, we are diverging from those two pillars at an accelerating rate causing Bitcoin prices to falter.
Crypto like physical gold needs rates to be low to represent an attractive investment because of its speculative nature.
Even more pulsating, there is now the slight chance of a full 1% rise in the Fed Funds rates at the November 2nd meeting.
So what did the price of Bitcoin upon hearing this news?
Naturally, Bitcoin slid much lower by 4% initially to around $18,000 but rebounded later in the middle to a small loss as traders sniffed out that the .75% rate rise has been priced into the market.
Cryptocurrencies had been trading mostly sideways since the end of August, with bitcoin hovering within $19,000.
That’s been a key level and a clear move lower could lead to new lows below those hit in June when bitcoin fell below $17,800 and ether fell under $900.
Clearly, there is a lot to worry about for readers who are heavy crypto traders.
The accelerating nature of sustained high inflation means that the US economy is highly susceptible to additional higher inflation that could smack us in winter.
My guess is that the upcoming high inflation data will show up in the form of elevated utility bills, particularly in natural gas.
The sabotage of pipelines and cutting off Ukrainian energy through strategic demolition of infrastructure means that US natural gas might be allocated to the Ukraine market instead of Europe.
Removing energy from the global market just means higher energy prices for the rest of us. OPEC reducing oil supply was also another negative event for Bitcoin.
The negative events are just piling on top of each other at this point.
I just don’t see how Bitcoin sustains itself above $20,000 per coin in the short-term.
If it does surpass $20,000 per coin because of a bear market rally, traders will take profits yet again, rinse and repeat.
Although equity markets are rallying through the day, this was yet another reminder of the strategic failure of this alternative asset that offered so much hope.
Crypto has turned into nothing more than an ultra-speculative asset that when in a time of tight liquidity goes on life support.
It is indeed a poor store of value and it has failed almost every acid test badly.
Sell any rally over $20,000 because it won’t last there long.
“If the Starbucks secret is a smile when you get your latte... ours is that the Web site adapts to the individual's taste.” – Said Founder of Netflix Reed Hastings
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
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