July 2023

July 28, 2023

(2008, AN INVESTMENT BANK AND MY FINANCIAL EDUCATIONAL JOURNEY)

July 28, 2023

Hello everyone,

Today, I want to tell you a story about how I came to manage my own funds.

It’s something everybody should learn to do, as it’s your money at stake. I learned the hard way to realize the importance of this, and by sharing my experience, I am hoping to save some of you a lot of money and emotional turmoil.

Before I joined John’s product and began working for his company, a lot of my funds were managed by an investment bank. (I did have and still do have a private personal portfolio I managed myself). I paid this bank $30,000 per year to manage my funds. This was pre-2008. I paid this for a couple of years but became quite suspicious of their tactics and processes when it became clear to me that they weren’t really investing the funds so I would make money in the long term, but rather were buying and selling the shares I owned several times a year, so they made brokerage commission from the entries and exits. So, as well as paying the bank for managing my funds they were also making money from me on the brokerage side. (My personal portfolio was unaffected by this as it was kept separate).

Just prior to the 2008 crash, I received a letter from the investment bank saying they planned to have me fully invested in the market by mid 2008. Call it intuition, but that made me feel very uncomfortable and unsettled, so I decided to visit the Sydney office of the investment bank and told them that I would no longer need their service. I was promptly given a few documents to sign and I then left their office very happily free of their clutches. From that day onwards, I have been the manager of my own funds.

I carefully went through all the stocks and bonds the investment bank had me invested in and made some immediate adjustments to the portfolio. I sold all the high-risk investments and made sure I had a balanced portfolio of good quality stocks in the financial, commodity, and property sectors. Though most of these stocks fell heavily in the 2008 crash. I was able to invest more into these stocks at a very cheap price as the companies sent share offers to customers to purchase more shares in early 2009 free of brokerage costs. I took up the opportunity on many of these share offers.

This investment bank had no clue that the 2008 crash was coming. They had all their clients fully invested at the time of the crash.

Investment bank marketing makes managing your own money look overwhelming and very difficult. Originally, I was presented with several glossy graphs and long-term growth projections and other written data that were neatly presented in ring binders with lots of colour photos and fancy financial language. At the time, it made me feel out of my depth, and I was convinced that I would need to take a financial degree to develop the knowledge needed to manage my funds. How could I be made to feel like this? I already had my MBA by then and yet this is how the “salesman” or so-called financial analyst of this investment bank made me feel at this time – completely bereft of any financial savvy at all. I fell for it at the beginning of my financial journey, but very quickly became wise to what was happening.

With my funds safely invested and regular consistent investments made, and my bank accounts in place, I began searching online for a quality financial advisor who would not charge an arm and a leg. I came across John Thomas, who originally worked under the umbrella of Macro Millionaire. I joined his product and watched him for a year or more before I did anything. He then ventured out as Mad Hedge Fund Trader creating his own product leaving the Macro Millionaire company behind. He was consistent with his profits, and he provided helpful education to the average investor or to those who wanted to get started. He was also accessible and eager to help. Furthermore, his background as a trader at Morgan Stanley gave me more confidence in his abilities and longevity. Many other investment letters at the time fell by the wayside as they couldn’t compete with John’s results.

What I have learned from John Thomas has been priceless.

Brokers exist to make money for themselves and their company.

Learn to trade how the professionals do and you will never have to work again.

Invest in yourself – in your financial education - and never doubt your ability.

Invest small amounts consistently to build a portfolio of stocks for the long term.

Wishing you all a wonderful weekend.

Be healthy, wealthy, and wise.

Cheers,

Jacquie

MACHINES AS MAESTROS

Mad Hedge AI

(GOOGL), (META), (MSFT), (NVDA), (SSTK), (ADBE)

In the 17th century, Dutch maestro Rembrandt brought the world to life through his brushes. Fast-forward to 2016, and a team of art enthusiasts used computers to digitally distill and replicate his artistic style.

This marked the dawn of a revolution that has brought us to a world where AI-powered art is no longer the preserve of tech-savvy enthusiasts but an easily accessible tool for anyone, even your next-door neighbor. The power of creativity is now available to many through a simple text prompt, and the results have been nothing short of extraordinary.

But AI's reach extends far beyond the canvas.

On a gloomy Monday morning in May, an AI-forged image showing a smoke plume near the Pentagon caused panic, triggering a 0.3% tumble in the S&P 500. Though quickly debunked and the markets rebounded, this episode painted a vivid picture of the potential for misuse and chaos that comes with AI, adding a shade of grey to an otherwise vibrant palette.

At the same time, Sam Altman, CEO of OpenAI, forewarned that AI could achieve "superintelligence" within a decade. The rapid advancements in AI demand oversight and control. Altman's proposal for an AI regulator akin to the International Atomic Energy Agency could help paint within the lines, mitigating risks without stifling creativity.

Nevertheless, the canvas of AI isn't only painted with concerns. The broad strokes of investment have been rewarding, with the likes of Alphabet (GOOGL), Meta (META), Microsoft (MSFT), and chipmaker Nvidia (NVDA) seeing their market caps skyrocket—a testament to investor enthusiasm for AI-powered progress.

In a fusion of technology and creativity, AI has changed the art landscape.

AI-generated art tools like DALL-E 2, Midjourney, and Stable Diffusion have empowered novices and experts alike to create intricate, abstract, and photorealistic artworks with a few keystrokes.

In this new reality, the stock image industry has been forced to adapt and evolve.

Shutterstock (SSTK), the stock image behemoth, partnered with OpenAI to launch Shutterstock Generate, a tool that harnesses the power of AI to create images. It uses the vast richness of Shutterstock's content library, bringing with it a fresh wave of legal clarity, transparency, and an innovative way of compensating artists for the utilization of their work.

Adobe (ADBE) has also joined this revolution, launching Adobe Firefly, an AI-driven image generator and editor that integrates seamlessly with Adobe's ecosystem. They're also teasing future updates that promise sketch-to-vector translation and AI 3D model generation.

The art of photography hasn't been left untouched either.

Creating human images, traditionally a Herculean task fraught with legal encumbrances, has been revolutionized with AI-engineered photos of non-existent yet convincingly real people. Firms like vAIsual and Generated.Photos are leading this wave of synthetic human imagery, enabling creatives to tailor-make faces and emotions.

However, with great power comes great responsibility.

Recognizing the need to differentiate between AI-generated and real-life images, companies like V7 Labs and Spawning.ai are developing tools to detect AI images and ensure copyright protection. The burgeoning field of AI picture policing demonstrates the industry's commitment to maintaining the integrity of art and creativity while embracing AI's transformative capabilities.

Art, throughout history, has always been intertwined with technological advancements. From oil painting to electronic music synthesizers, each new technology initially threatened to eclipse their predecessors, but they instead birthed fresh perspectives and expressions.

Similarly, as AI blends with art and photography, it will bring about new debates around copyright, payments, and ethics. But art, being the resilient entity it is, will find a way to blossom anew.

Art and AI are now inseparable, moving beyond the confines of specialized tools and into our everyday lives, from social media to personal communications. Yet, this technological disruption isn't signaling the end of human creativity.

Just as fine art photographers are artists not despite, but because of their tools, the emergence of AI in the art world doesn't diminish human ingenuity—it merely adds a new layer of potential.

Over the next decade, these tools will evolve, becoming more accessible and cost-effective, blurring the line between AI and human creation. The question isn't whether AI will replace artists but how artists will use AI to redefine the boundaries of art.

After all, art doesn't bow out when threatened—it reinvents, pushing the boundaries of human imagination to greater heights.

July 28, 2023

Tech Letter

Mad Hedge Technology Letter
July 28, 2023
Fiat Lux

Featured Trade:

(ANOTHER IMPLOSION BEGGING TO HAPPEN)
(RAPPI), (SOFTBANK)

Another Implosion Begging To Happen

Tech Letter

There’s a reason why Softbank lost $32 billion in technology investments last quarter, and it stems mostly from terrible investment decisions.

Most of Masayoshi Son’s Softbank targets are at the small time level where a few hundred million of revenue per year is something they are interested in.

The thinking behind this is to hit those 10 baggers, and to his credit, he did pocket some of those like Alibaba and Uber in the days of yore.

A broken clock is right twice a day.

Do Son’s actions signal a turning of the corner from his hefty losses?

I would strongly suggest he is doubling down on his losing strategy based on what he’s green-lighted in South America.

Take for instance the recent news of his investment in Rappi, a food delivery app that has grown into one of Latin America’s most-valuable startups.

They just announced they will offer loans to restaurants in Mexico and Colombia.

The plan is to offer loans to restaurants that have been selling via the app for at least three months.

The foray into commercial lending shows how Rappi has adapted its business model to add more revenue streams in the eight years since it started as a grocery delivery business.

Facing stiff competition from the likes of Naspers Ltd’s iFood and UberEats, Rappi has increasingly embraced financial technology as it expands in the region.

In its latest push, Rappi is targeting $60 million in loans across the two countries.

Rappi didn’t disclose the terms of the loans it will offer. The credits will be repaid through the restaurants’ sales via the app.

The company could expand the loan business to some of the other nine countries where it has operations as soon as this year.

This strategy screams desperation and low-quality decision-making.

Restaurant revenue isn’t stable enough to base a loan on a highly changeable industry.

There are no fixed contracts as to how many tacos per month are sold and the hilarious concept of offering loans based on 3-months of operating the app is irresponsible.

The company wouldn’t comment on what type of terms they would offer because they most likely will be highly predatory because this maneuver is highly risky.

Don’t expect Japanese bond levels of 0% and think of something more like 18% similar to Russian mortgage rates.

My understanding here is that management is trying to pump up revenue in the short term just to shine up the business metrics for the IPO.

After the IPO, the management will be able to cash out, and then management can throw the business to the wolves for all they care.

The great news here is that Softbank funding this type of weak tech business model is good for the entire tech ecosystem because tech needs that sucker that juices up the purses.

If other parts of tech didn’t get any investment, then there wouldn’t be the top 7 big tech stocks that boss the S&P.

Much of the reason tech shares have reached Himalayan highs is because a stream of short-sellers must cover their shorts with every explosion to the upside.

Son subsidizing the bottom feeders of global tech apps is in fact positive for Silicon Valley as a whole.

Tech needs guys like him to get stuck with the bill so people like us cash out at the top.

It’s a dog-eat-dog world.

Unfortunately for Rappi, the restaurant loan business is ripe to implode betting on a financially unproven population to power this app to the public market.

Rappi’s management better hope they can unload vested shares before the whole game is up.

rappi

Quote of the Day - July 28, 2023

Tech Letter

“Once a new technology rolls over you, if you're not part of the steamroller, you're part of the road.” – Said Writer Stewart Brand

July 28, 2023

Diary, Newsletter, Summary

Global Market Comments
July 28, 2023
Fiat Lux

Featured Trades:

(MY TRIP TO INTO INFINITI)
(TSLA)

CLICK HERE to download today's position sheet.

My Trip Into Infiniti

Diary, Newsletter

Don’t worry.

I didn’t fail to send off a newsletter yesterday because I fell off some Alp, although there were some close calls.

This high up in the mountains, there just wasn’t enough Internet to transmit my heavyweight ideas around the world. Here in Trento in northern Italy, the broadband hasn’t been upgraded since the Roman Empire, but at least it works.

Last year, I thrilled you with my aerobatics flying a WWII Spitfire over the White Cliffs of Dover (click here if you missed it).

Then I one-upped myself.

In appreciation to the early buyers of Model S-1’s, Tesla invited me to submit a photo to be etched on the side of a satellite launch into space. Having purchased chassis no. 125, I certainly qualified. Those who referred 25 other buyers were allowed to send videos.

Of course, I had to send a picture of me piloting a 1929 Travelaire D4D biplane, which you can find below. The photo was inserted into the mosaic below. I sent the Spitfire video on an SD card and it’s in orbit as well.

The blast-off took place at Cape Canaveral, Florida on August 4, 2022.

You have to hand it to Tesla, they really know how to do PR, and their advertising budget is nearly zero. The Detroit Big 3 spends $50 billion a year on advertising and gets a lesser result.

To watch a video of me blasting off into space on a Space X Falcon 9, or at least my laser-etched image, please click here.

Oh, and buy (TSLA) on dips as well. It just has a heck of a run.

As for me, I’m off for a bottle of prosecco.

July 27, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 27, 2023
Fiat Lux

Featured Trade:

(INVESTING IN NECESSITIES)
(KVUE), (JNJ), (HLN), (GSK), (KO)

Investing in Necessities

Biotech Letter

Everyone knows that Warren Buffett was schooled by the one and only Benjamin Graham. His game was easy-peasy early on — he hunted for dirt-cheap companies in relation to their assets, snagged them, and played the waiting game until the market woke up and realized their true worth. This was the good old 'cigar butt' investing.

It took Charlie Munger, Buffett's partner-in-crime, to shake things up. Munger nudged Buffett to eye high-quality companies with a thick competitive buffer that could weather long stretches of time.

Now with Johnson & Johnson's (JNJ) recent spinoff of Kenvue (KVUE), it seems the investment gods have dished up just the kind of opportunity Munger and Buffett would drool over.

JNJ is rolling out a red carpet, enticing its investors to trade their shares for most of its stake in Kenvue, the consumer division it made public in May.

If you're invested in JNJ, consider looking into this proposition. We're talking about a potential $35 billion transaction. Actually, JNJ is practically dangling a carrot, offering its holders $107 in Kenvue stock for every $100 in JNJ stock, capped, of course.

Basically, the JNJ deal lets holders swap all, some, or zip of their shares for Kenvue. It's a limited-time offer, expiring on August 18, with the price nailed down between August 14 to 16.

Interestingly, the Big Pharma company opted to play the game of 'voluntary exchange offer,' or 'split-off' in Wall Street jargon. A bit more elusive than your garden-variety spinoff, but trust me, it has its charm.

Why, you ask? This method tends to tighten the share count, beefing up the earnings per share.

And here's the sweetener: split-offs usually come with perks. The parent company tends to sprinkle a little discount magic for investors who decide to trade their old shares for the shiny new spinoff ones.

So, what could investors expect from Kenvue?

When it comes to its financial muscle, Kenvue's flexing a robust $20 billion in equity. The balance sheet displays a formidable $35 billion in assets squaring off against a $15 billion debt.

The first quarter has set the pace, projecting an annual revenue run rate of a cool $15.2 billion, and the operating cash flow isn't too shabby either, clocking in at $3.2 billion.

Kenvue's market valuation stands around 18 times its forecasted earnings for 2023, yielding a sweet 3.4%. That's a smidge more than J&J's yield of 2.8%.

Sure, Kenvue may not be sprinting in the high-growth lane — with earnings growth likely to pace in the mid-single digits post-2023 — but it holds a rock-solid portfolio of consumer health brands we've all grown to trust. Bonus? It trades at a discount compared to its closest peer, Haleon (HLN), GlaxoSmithKline’s (GSK) spinoff company.

Kenvue boasts a roster of brand-name products that people can't live without, and this constant demand spells nothing but growth. This spinoff is the proud holder of household names like Tylenol, Listerine, and Band-Aid.

In essence, Kenvue comes off as a Warren Buffett-type business that's up for grabs at a seemingly bargain price.

Consider for a moment why Buffett is so cozy with his long-standing stake in Coca-Cola (KO). Coke quenches the world's thirst with its myriad beverages, winning over brand loyalty and securing repeat purchases like it's a walk in the park.

My investment angle on Kenvue draws a parallel here, with a twist: Kenvue's products are absolute necessities, not just something you treat yourself to. That fact alone makes it even more appealing to me.

The company also disclosed a promising earnings range of $1.26 to $1.31 per share, with sales growth itching to hit a respectable 5%. The cherry on top? They're starting a quarterly dividend at 20 cents a share.

Now, you might be wary of growth prospects stagnating – let's face it, there's a limit to how many Band-Aids and Tylenol a household will need, right?

But here's where the plot thickens: the fine folks over at healthcare firm IQVIA (IQV) made quite the compelling argument that the over-the-counter drug market is expected to grow by a hearty 6.1% until 2025.

With a product lineup that's nothing short of a hit with consumers, a sturdy financial standing, and a rosy outlook for growth in the market it caters to, Kenvue is shaping up to be quite the catch for investors.

Of course, there are possible risks, such as a looming recession prompting even the most brand-loyal customers to opt for generic alternatives or management falling short on growth plans. That said, these potential drawbacks are dwarfed by the massive upsides of investing in Kenvue.

I think it's about time you give Kenvue some serious thought.