Mad Hedge Technology Letter
November 16, 2022
Fiat Lux
Featured Trade:
(CONTENT IS KING)
(AMZN), (GOOGL), (AAPL)
It’s the death of websites.
I love doing presentations to small businesses in my free time, partly to stay in touch with the pulse of the industry’s minnows that have the unenviable task of fighting uphill against the behemoths.
It’s bad enough that the tech giants have scaled locally turning one’s local playground into a disadvantage.
The presentation is aptly titled "Content is King... But Only Through One’s Ownership" where the same parallels are explored and unpacked for my audience.
Proprietary Content – must be yours and you must own it on your own turf - your blog, your vlog, your app, and so on, it goes for everything.
Repurposing content on other platforms as a supplement to your own is one thing, but the moment you adopt an enemy platform as your main platform, that’s your coup de grâce.
SMEs (small businesses enterprise) believe it’s plausible to work with the higher-ups, but don’t forget the higher-ups have every incentive to cut you off from the fountain of youth.
One could say the best skill big tech has today is undermining its competition.
Facebook doesn’t allow posting content that criticizes Facebook, have you ever wondered why?
Website innovation has ground to a halt because of the PageRank algorithm from Google - everybody is making websites the same, a top nav, descriptive text, a smattering of images, and a handful of other elements arranged similarly.
Google’s algorithms and the self-regulating nature of its ecosystem have perverted the chance to have a unique online experience.
Most internet users have discovered that most websites don’t work well and the execution is lousy.
Silicon Valley now has a monopoly on websites.
Because websites are the key to building businesses, Silicon Valley is now using the concept of websites and their position as de-facto moderators to prevent others from developing proper websites, killing off the competition.
Alphabet is notorious for ranking in-house products at the top of page one of any Google search.
Amazon has followed the same practice by sticking its in-house brands at the top of any Amazon search on Amazon.com.
Websites are used to give businesses a chance.
What’s next?
Once we migrate the lion’s share of content to voice platforms over the next 15 years, Google Home, Apple HomePod, or Amazon Alexa could easily choose to remove Joe’s Furniture Moving Business information because they aren’t following arbitrary “policies.”
Big tech will be the gatekeepers of all global information, business, and development in the world and we will need to satisfy their algorithms to get our own content uploaded on their voice platforms.
And because of the nature of voice, users cannot see what else is out there, users will only hear what these companies tell us offering an outsized opportunity to manipulate the user experience generating more dollars for these powerful platforms.
As we inch towards the day the US Central Bank will drop the Federal Funds rate, minus Facebook, readers must load up the truck and pile into these monopolistic tech stocks.
“If you are a big company, a big website, and lots of users come to your website, you will have attacks, and you have to deal with that.” – Said Founder and CEO of Baidu Robin Li
Global Market Comments
November 16, 2022
Fiat Lux
Featured Trade:
(THEY’RE NOT MAKING AMERICANS ANYMORE)
Tuesday morning
November 15, 2022
Hello everyone,
I trust you are all in good form.
You’ve learned (or are learning how to make money) with John’s help. Now you must learn how to keep it.
It’s no good making a great trade, taking the money off the table, and then ego getting in the way and ploughing it all back in the next trade and possibly losing it all. Nobody gets it right 100% of the time. John is right 80%-90% of the time. But he does have losing trades and you don’t want to be wiped out during one of those trades.
What to do:
Trade the number of contracts you’re comfortable with (and allow you to sleep at night).
Never bet the ranch.
Set a stop loss.
Don’t overtrade.
If you are learning, start with paper trading.
Household debt jumps
Debt has surged over the past year due to inflation running near its highest pace in more than 40 years and amid rising interest rates and strong consumer demand.
The biggest contributors to that debt load came from mortgage balances, which rose $1 trillion from over a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.
Credit card balances collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed.
What to do:
Do I really need to tell you? Pay off your credit card. Do you want to make the banks wealthier by virtue of your money?
What is Cathie Wood up to?
The Ark Next Generation ETF bought 315,259 shares of the Grayscale Bitcoin Trust on Monday. The trust now accounts for 4.6% of the Ark fund’s holdings.
The price of the trust has dropped more than 80% over the past year, and the fund trades well below the value of the bitcoin it holds.
The collapse of FTX has bruised the crypto industry and many of its participants. Bitcoin has dropped more than 18% since the end of October.
But after the washout, there are often silver linings. ARK believes in the long-term viability of public blockchains across money, finance, and the internet. There may be short-term pain, but in the long-term, ARK believes that this “crisis is purging bad actors and will enhance the health of the crypto ecosystem with more transparency and decentralization in the longer term.”
Wishing you all a wonderful day.
All the best.
Cheers,
Jacque
Life is either a daring adventure or nothing at all. - Helen Keller
Mad Hedge Biotech and Healthcare Letter
November 15, 2022
Fiat Lux
Featured Trade:
(A FAIL-SAFE PASSIVE INCOME BIOTECH)
(AMGN), (AZN)
Loading up on high-quality stocks, particularly those that deliver passive income, is an excellent strategy to ride out this bearish market. This all but guarantees a dependable cash flow and offers a way for investors to limit losses.
Obviously, blue chip stocks tend to be among the first businesses to rally after marketwide crashes.
Among the top-tier passive income stocks in the biotechnology and healthcare industry, one of the names that stand out is Amgen (AMGN).
This blue chip biopharmaceutical business prides itself on consistent free cash flow and a solid track record of boosting its dividends on a regular basis.
So far this year, Amgen’s shares have climbed by an impressive 30.6%. This led to the biotech’s stock rising and surpassing its 52-week highs. For a bit of background, the S&P 500 has declined by 20.3% to date, while the Nasdaq Composite has fallen by a disappointing 32.9%.
Clearly, Amgen’s shares are beating the broader market this year.
Moreover, the company is currently trading at $291 per share, breaking through a resistance level set at a high 250s earlier in 2022.
A key reason for Amgen’s ability to defy this challenging bear market is its strategy to focus on the business of developing and selling critical, life-saving treatments.
One of the most exciting drugs in its portfolio is AMG-133, which is a new obesity drug. This is estimated to enter Phase 2 trials by 2023, with shareholders anticipating approval soon since the drug’s latest data showed “impressive efficacy.”
In terms of sales opportunity, AMG-133 can target a lucrative sector. The total market for this drug is estimated to be worth over $10 billion every year. This would translate to a multibillion-dollar revenue stream for Amgen.
Another promising drug in Amgen’s portfolio is asthma medication Tezspire, which it developed with AstraZeneca (AZN). This treatment holds considerable potential, showing off a 300% growth from its first-quarter sales to record $29 million in revenue in the second quarter.
So, even if some products, such as the white blood cell treatment Neulasta, tend to weigh on the company’s top line, Amgen still manages to generate massive free cash flow every quarter and annually.
To illustrate this point, Amgen’s free cash flow in the third quarter of 2022 reached a whopping $2.8 billion. Meanwhile, the company’s sales hit $6.65 billion, beating analysts' expectations, while its earnings per share were at $4.70
What does this imply?
It means Amgen is an ultra-safe passive income investment. The biotech’s substantial free cash flow can easily cover its annual dividend yield of 2.88%.
Since it first started distributing quarterly dividends back in 2011, Amgen has boosted it annually.
The company’s management has been consistent in its commitment to boost the dividend yield, rewarding shareholders with a jaw-dropping 1,257% increase over the last 10 years.
In 2022, Amgen announced a 10% increase in its dividend to reach $1.94 per share. At its current figure, Amgen’s yield is 3.08%. That’s almost double the S&P 500 average dividend yield of 1.82%.
More importantly, Amgen has a slew of new drugs that look incredibly promising. As of the last update, there are 40 candidates queued for Phase 2 and 3 trials.
This is crucial because several existing drugs in its portfolio are anticipated to experience a decline in sales over the following years due to patent exclusivity losses and the entry of more competitors.
All in all, Amgen is proving itself to be quite the recession-proof biotech thanks to its stellar free cash flow and heavily dependable dividend program. Needless to say, it is an excellent stock to own, particularly in a brutal bear market.
Global Market Comments
November 15, 2022
Fiat Lux
Featured Trade:
(LEARNING THE ART OF RISK CONTROL)
Mad Hedge Technology Letter
November 14, 2022
Fiat Lux
Featured Trade:
(LOW BAR HAS BEEN SET)
(COIN), (HOOD), (MSTR)
It’s been a historic and unprecedented last few weeks in the world of technology.
99.9% of crypto projects are effectively a zero after this weekend.
Cryptocurrency has now descended into a death spiral due to a fraud so large that it makes many who got caught up in the mess sick to their stomach.
This “trigger” event has massive ramifications for the technology industry and is highly positive for the health of the tech sector.
Enter Former CEO of FTX, the former second biggest crypto exchange, Sam Bankman-Fried or SBF.
His crypto exchange FTX filed for bankruptcy just days ago.
SBF was stealing customer deposits to invest in his lifestyle and bought off everyone he thought was useful, including politicians, regulators, sports athletes, and famous actors.
SBF even bailed out many crypto-related companies during the recent downturn that were confirmed Ponzi schemes or frauds just to onboard them onto an even bigger scam.
In the end, a bank run collapsed SBF’s crypto empire and exchange.
It was only after the house was on fire that normal investors found out that his business was rotten to the core.
How did SBF hide this?
FTX and SBF literally replaced these funds on their balance sheet with their own in-house crypto coin that was produced and created by FTX.
This self-made coin was called FTT and FTT represented $7.4 billion of “liquid” funds for FTX on their balance sheet.
Therefore, when mass demands for withdrawals took place, FTX didn’t have the capital to distribute back to account holders because the value of FTT had sunk 95%.
The $18 billion in liabilities was only propped up by $900 million of real liquidity with $470 million comprising of Robinhood (HOOD) stock shares.
Ultimately, FTX faced an $8 billion shortfall to fill in short notice or go under.
Any reader holding any crypto on any exchange should request immediate withdrawal of funds as soon as possible.
Don’t be the last one to ask for your money back. Get out while you can!
There is a good chance that every crypto exchange was faking their balance sheet with fake coins that have fake values while claiming these coins are liquid as US dollars.
That means weak balance sheets could plant the seeds of more bank runs putting extreme stress on liquidity and forcing them to halt withdrawals.
Any project related to FTX is now a zero.
This industry is truly broken and will take a generation to heal itself or might never come back.
I understand the FTX debacle as a highly positive event for the tech sector and tech stocks moving forward because it makes legitimate tech stocks look great.
FTX has set a low bar for tech stocks to jump over.
The Nasdaq market needed the fluff removed after the tech bubble had a 2-year accelerated bull market until 2022 and that came after a 10-year garden variety bull market in tech stocks.
FTX was the fluff. Avoid stocks such as Coinbase (COIN), Robinhood (HOOD), and MicroStrategy (MSTR).
Normal tech stocks will benefit after many incremental investors now believe crypto is completely fake.
This will forever be known as the colossal event that brought crypto to its knees.
I do believe that many of the leftover Bitcoin survivors will migrate into tech stocks moving forward because that’s the closest derivative to crypto.
Tech companies need to go through a lot of soul-searching to get their mojo back and a recession is always a good time to separate the good from the bad. Now, this is even better.
Crypto’s demise means venture capitalists will start to open the checkbook for non-crypto tech instead of spilling their money down a black hole.
