Global Market Comments
September 20, 2023
Fiat Lux
Featured Trade:
(FRIDAY, OCTOBER 31 MIAMI, FLORIDA GLOBAL STRATEGY LUNCHEON)
(WHY I HAVE BECOME SO BORING),
(SPY), (QQQ), (IWM), (AAPL), (TSLA),
(TACKLING THE INFLATION MYTH),
(AAPL), (GOOG), (FB)
I have recently received a few complaints from readers that I have become boring. I have to confess that they are right.
I am not a person who boredom comes to easily. I’m the guy who climbed the Matterhorn, crossed the Sahara Desert on the back of a camel, and went to surfing school.
And that’s just what I did last year! Oh, and I’m also headed for the world’s hottest combat zone.
However, I do admit that I have become boring on the trading front.
If I get a request for one thing more than any other, it is for recommendations of stocks that will rise by at least ten times over the next ten years.
Readers want to know the names of shares of companies that they can just buy and forget about, and then retire rich as Croesus a decade down the road.
What could be more reasonable?
I happen to have sent out quite a few of these over the years.
Whenever I attend my global strategy luncheons around the world, someone inevitably thanks me for my effort to cajole them into buying Tesla (TSLA) at a split-adjusted $2.50. Nothing seemed more questionable at the time (2010) in the wake of the Great Recession and financial crisis.
At my New York luncheon in June, a guest pressed a one-ounce American Gold Eagle into my hand and said thanks for NVIDIA (NVDA). He bought it at $15 and rode it all the way up to $450.
He then doubled his money by jumping into Apple (AAPL) at $56 (on a split-adjusted basis) and rode the express train to $200, again after my pleading.
Then there was the reader who offered me his mega yacht in the Mediterranean for a week for free because I virtually forced him to buy Moderna (MRNA) just before the pandemic before it rocketed 50X. It was nice cruising the Mediterranean last summer on his advice.
It’s not that I have suddenly become averse to dishing out ten-baggers. I have not grown weary in my old age either, although I confess to finding those erectile dysfunction and baldness ads on TV more fascinating by the month.
No, the real problem is that the stock markets are just not offering anything right now. And here is where I give you some great trading tips.
When stock markets are rising and financial assets are generally in “RISK ON” mode, you want to own single stocks.
Individual shares have “betas”, or a propensity to move, that is far greater than indexes. If an index rises 10%, some of its individual components can move anywhere from 15%-100%.
When stock markets are in correction (down) or consolidation (sideways) mode, as we are now, the higher betas of stocks work against you. They fall faster than the index.
Therefore, in flat and falling markets you want to trade indexes, like the S&P 500 big cap index (SPY), the NASDAQ technology index (QQQ), and the Russell 2000 small cap index (IWM). Better yet, don’t execute any trades at all, especially if you are already up 60% on the year.
Keep your powder dry. A dollar at a market bottom is worth $10 at a market top.
Your mistakes trading these relatively nonvolatile (read boring) instruments earn you less money. The risk/reward for short-term trading right now is terrible.
Therefore, by trading stocks in up markets and indexes only in down markets, you create an inbuilt bias in your portfolio that works in your favor.
A classic example of how this works was to see the market reactions to corporate earnings announcements in July. In these risk-averse times, winners were rewarded modestly, but losers were taken out to the woodshed and beaten senseless.
Look at the recent charts for Apple (AAPL), Tesla (TSLA), and Disney (DIS) and you’ll see what I mean. I bet the owners of these companies wish they had been trading indexes in August, which barely moved. Is 3% the new 10% correction?
These are all fundamentally great companies for the long term. But when people run for cash, they will often sell whatever has the most profit, and all three of these names met that standard. Investors were, in effect, raiding the piggy bank.
Of course, you can try and be clever and go long stocks in rising markets, and then sell them short in falling ones.
My half-century of experience tells me that this is easier said than done.
While many managers will promise you this bit of investing in gymnastics, very few can actually deliver. Most professionals are unable to time markets with this precision, let alone individuals.
Needless to say, don’t try this at home.
I have long told my listeners at conferences, webinars, and strategy luncheons my definition of the “new inflation”: the price for whatever you have to buy is rising, as with your home, health care, and a college education.
The price of the things you need to sell, such as your labor and services, is falling.
So while official government numbers show that the overall rate of inflation is muted at multigenerational highs, the reality is that the standard of living of most Americans is being squeezed at an alarming rate by both startling price increases and real wage cuts.
I finally found someone who agrees with me.
David Stockman was president Ronald Reagan’s director of the Office of Management and Budget from 1981-1985. I regularly jousted with David at White House press conferences, pointing out that the budgets he was proposing would not produce a balanced budget, as he claimed.
Instead, I argued that they would lead to an enormous expansion of the federal deficit. In the end, I was right, with the national debt growing 400% during the Reagan years.
To his credit, David later admitted to running two sets of books for the national accounts, one for external consumption for people like me, and a second internal one for the president with much more dire consequences.
When David finally made the second set of books public, there was hell to pay. It was a fiery departure. I knew Ronald Reagan really well, and when the cameras weren’t rolling, he could get really angry.
After a falling out with Reagan over exactly the issues I brought up, Stockman disappeared for three decades.
He is now back with a vengeance.
He is running a blog named David Stockman’s Contra Corner (click here for the link at http://davidstockmanscontracorner.com ), a site he says “where mainstream delusions and cant about the Welfare State, the Bailout State, Bubble Finance, and Beltway Banditry are ripped, refuted and rebuked.” (Good writing was never his thing).
Despite this rant, there is no place I won’t go to discover some valid arguments and useful statistics, and Stockman is no exception.
For a start, home utility prices have been skyrocketing for the past decade, nearly doubling. Over the last 12 months alone, it has jumped by 5.3%, while natural gas is up more than 10%, compared to an annual Consumer Price Index rise of only 3.3%.
But utilities have such a low 5% weighting in the Fed’s inflation calculation it barely moves the needle.
Wait, it gets better.
Gasoline costs have also been on a relentless uptrend since the nineties. Crude oil is up from a $10 low to today’s print of $95. Retail gasoline has popped from $1 a gallon to $5.50 in California, and that’s off from the year’s high at $3.50.
That works out to an annualized increase of 57%, or more than triple the official inflation rate.
The nation’s 40 million renting households have been similarly punished with price increases. They have averaged a 5.0% annual rate, nearly double the inflation rate.
The country’s 75 million homeowners are getting hit in the pocketbook as well. They have seen the cost of water, sewer, and trash collection balloon at a 4.8% annualized rate. And this has been an almost entirely straight-line move, with no pullbacks. And home insurance? It is absolutely through the roof.
David recites a dirty laundry list of Fed omissions and understatements on the inflation front, including gold, silver, and commodities prices.
All of these nickels and dimes add up to quite a lot for a family of four who is trying to scrape by on a median household income of $69,000 a year. And Heaven help you if you try to live on that in California.
The cost of a few items has declined, but not by much. They are largely composed of cheap import substitutes from Asia, including apparel, shoes, household furniture, consumer electronics, toys, and appliances.
One area the Fed data doesn’t remotely come close to measuring is the plunging cost of technology. How do you measure the savings from products that didn’t exist 20 years ago, like smart phones, iPods, iPads, and solid-state hard drives? How do you measure the cost of services that are handed out for free as Google, Facebook, and X do?
I can personally tell the cost of my own business is probably 90% cheaper to run than it would have three decades ago. I remember shelling out $5,000 for a COMPAQ PC that costs $300 today but has 1,000 times the performance.
David finishes with his usual tirade against the Fed, accusing them of obsessing over the noise of the daily data releases and missing the long-term trend.
Anyone like myself who watched in horror how long it took our central bank to recognize the seriousness of the 2008 financial crisis pr the pandemic would agree.
This all reminds me of what a college Economics professor once told me during the late 1960’s. “Statistics are like a bikini bathing suit. What they reveal is fascinating, but what they conceal is essential.”
Mad Hedge Biotech and Healthcare Letter
September 19, 2023
Fiat Lux
Featured Trade:
(A SHOT AT HOPE)
(MRNA), (IMTX), (MRK), (PFE), (BMY), (GH), (ILMN), (NVS), (RHHBY), (BGNE), (AZN)
In a quaint Boston lab, as the first rays of dawn broke, a team of scientists, led by Moderna (MRNA), embarked on a mission. Their goal? To craft a solution to one of humanity's most persistent adversaries: cancer.
The grim reality remains that cancer is a leading cause of death in the United States. The statistics are daunting, with over 1.9 million new cases anticipated in 2023 and a projected death toll exceeding 600,000. The financial implications mirror this gravity, with costs expected to soar from $156 billion in 2018 to a staggering $246 billion by 2030.
As the world watched with bated breath, Moderna, already a household name for its COVID-19 vaccine, was silently weaving a narrative that could redefine the future of oncology.
Needless to say, the biotechnology sector, a realm of ceaseless innovation, has been abuzz with Moderna's latest venture. Earlier this month, the biotech announced its agreement with the German drug developer Immatics (IMTX) to develop cancer vaccines and therapies. As part of the deal, Moderna will pay $120 million in cash and will also make additional milestone payments.
This collaboration is not just about the financials; it's a beacon of hope for millions.
The partnership is set to merge Moderna's mRNA technology with Immatics’s T-cell receptor platform, focusing on various therapeutic modalities such as bispecifics, cell therapies, and cancer vaccines. Their combined research aims to leverage mRNA technology for in vivo expression of Immatics's half-life extended TCR bispecifics targeting cancer-specific HLA-presented peptides, among other innovative approaches.
With an upfront investment of $120 million, Moderna has made it clear: they're in it to win it. And the stakes? Potentially life-changing cancer vaccines.
However, this isn’t Moderna’s first foray into the realm of cancer treatments.
Building on the momentum of the technology of its highly potent COVID-19 shots, Moderna announced a partnership with Merck (MRK) earlier this year, combining their efforts to come up with treatments that can drastically reduce the spread of skin cancer. By leveraging Merck's Keytruda with its own innovative vaccine, Moderna has showcased the potential of such collaborations in advancing cancer treatment.
After all, the global community oncology services market is not just growing; it's clearly thriving.
From $47.95 billion in 2022 to a projected $53.79 billion in 2023, the numbers speak for themselves. By 2027, this figure is set to skyrocket to $81.33 billion. Such exponential growth underscores the immense potential and critical importance of advancements in oncology.
Yet, as expected, Moderna isn't the only player on the field.
Giants like Novartis (NVS) and Roche (RHHBY) have also thrown their hats in the ring, collaborating with known international cancer organizations to democratize access to cancer medicines. Among the myriad of promising stocks these days, though, Moderna, China’s BeiGene, Ltd. (BGNE), and the UK’s AstraZeneca PLC (AZN) shine the brightest.
Other notable contributors to the fight against cancer include Bristol Myers Squibb (BMY), Guardant Health (GH), Illumina (ILMN), and Pfizer (PFE). Their diverse portfolios and relentless pursuit of innovation are set to shape the future of oncology.
But as the curtains draw on this narrative, the spotlight remains firmly on Moderna. Their success with the COVID-19 vaccine has already etched their name in the annals of medical history. With their sights now set on cancer vaccines, the world waits with eager anticipation.
In the grand tapestry of medical advancements, Moderna's endeavors in the cancer vaccine domain promise to be a golden thread. Their journey, fraught with challenges and uncertainties, is proof of human resilience and ingenuity. As investors, we're not left standing on the sidelines watching history unfold; we're granted an active role in it.
The potential of Moderna's innovations in oncology beckons a promising horizon. For those looking to make a mark in the annals of medical investments, this biotech offers a gateway to the future of oncology. Act now, and be part of this groundbreaking narrative.
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
September 19, 2023
Fiat Lux
Featured Trade:
(OCTOBER 20 LONDON STRATEGY LUNCHEON)
(THE TWO CENTURY DOLLAR SHORT),
(CNN’S JOHN LEWIS; THE DEATH OF A COLLEAGUE)
I was deeply saddened by the death of my old friend, CNN Asia correspondent, John Lewis, a legend in television journalism.
I first met John in Tokyo at the Foreign Correspondents’ Club of Japan back in 1974, when he was a decorated Vietnam vet from Ohio trying to claw his way into TV, bootstrap style.
Personable and easygoing, he was one of the few in the club who got along with most of the cantankerous, suicidal, or just plain drunk writers there, and was often the first to step in to stop a fight. In those days you didn’t get fired in this rough and tumble business for punching out competitors.
At my 1977 wedding at the club, John graciously took the pictures because I was too poor to hire a professional. In 1979, rumors spread that this wild man millionaire named the “Mouth of the South,” Ted Turner, was going to start up a 24-hour news cable channel called Cable News Network, or CNN, and was looking to hire a full-time Asia correspondent. We both jumped at the job, and Lewis won out. Everyone was impressed but kept their fingers crossed.
I was left part-time stringing for NBC News, reporting to the late Bruce McDonald, who had worked his way up from writing for Johnny Carson’s Tonight Show to the network producer for Asia, which is a big deal. And you wonder where I got my wicked sense of humor.
I often ran into John in the field, he covering the typhoons, floods, and wars, and me the business angle, which often blended into the same story. So we covered the corrupt Marcos regime in the Philippines, the assassination of Indira Gandhi in India, and the opening up of China. We never missed an opportunity to swap contacts and war stories at dingy, dubious bars from Seoul to New Delhi, and all points in between.
We parted ways in the eighties when my career made a sharp jag to the right with my joining Morgan Stanley in New York. John shot to international fame when he ignored Chinese orders to cease covering the Tiananmen Square massacre in 1989 and kept beaming reports abroad until the heavies cut the power off.
Gutsy move, John.
I heard that John died of a heart attack at 63. Foreign correspondence did not exactly offer a healthy lifestyle, with all the smoking, drinking, and general carousing that went on. There were also the occupational hazards of the occasional stray bullet, bouts of amoebic dysentery, and stints in jail at the behest of some third-world dictator.
It was a larger-than-life existence, but not exactly conducive to a family life, so I moved on. John stuck with it, but what a price! I was appalled when I saw his recent picture. The years had not been kind.
John was one of a dying breed of journalists whose sole interest was to get the story right and get it fast. There was no pandering to a particular political viewpoint, stealth marketing of defective products, or surreptitious product placement that has regrettably become endemic in the trade today. His was really an old-fashioned kind of reporting, almost quaint in its principles.
John will be missed.
“We’ve seen the S&P 500 drop 50% twice in the last 15 years. That is the new normal”, said Richard Kang of Emerging Global Advisors.
(IS EVERYONE SOLD ON MUSK’S CYBERTRUCK?)
September 18, 2023
Hello everyone,
The Tesla pick-up truck, Cybertruck, is a one-of-a-kind vehicle. It has an exoskeleton that is nearly impossible to penetrate, a stainless-steel reinforced body, and armor glass. Every component is designed for superior strength and durability. The Tesla internals are made of a paper composite material, making it environmentally friendly and durable. The material is heated and made to look like marble giving it a luxury look. And it can run 500+ miles on a single charge. What’s not to like?
Yes, the Cybertruck runs on electric power, but let’s think about how the car was put together in the first place. Large amounts of energy, aluminum, and mined materials are needed to build the Cybertruck. Doesn’t this go against Musk’s climate-preserving principles? Eliminating tailpipe emissions is all very well, but when you are mining battery materials to achieve this end, the process itself is environmentally damaging. The negative effects include groundwater pollution from mining scraps and chemicals and the fact that underage labour is used at many mines outside Western countries.
While it may produce less carbon pollution, its status as an entirely environmentally friendly vehicle is debatable. The tires and the weight of the car are a problem. Heavy EVs seem to create more harmful tire dust than conventional vehicles and the tiny particles that are shed float in the air and leach into our waterways, which damages human health and wildlife. A hazardous chemical treatment typically used on tires is linked to declining salmon populations in the U.S. and tire dust is arguably seen as an unregulated contributor to lung and heart disease.
The tire wear is much greater because of the added weight of the vehicle, and researchers in this area state that most of this will be created under acceleration, braking, and cornering.
The Cybertruck is a niche, fashion statement vehicle, but will it meet the needs of customers who want it to equal a regular pick-up?
One thing that could put many off is the price. Most customers buy a pick-up truck with a purpose in mind. It should be functional, reliable, and economical. Tesla is known for its pricey cars, so buyers of regular pick-up trucks may not find the Cybertruck an affordable vehicle. Additionally, Tesla has no experience designing and manufacturing pick-up trucks. The company has only designed SUVs and sedans, so early customers may find some shortcomings in the design and performance of the Tesla pick-up truck.
On the plus side, the Tesla pick-up truck is sure to offer advanced features and technology not offered by any other regular pick-up trucks. Tesla is known for incorporating cutting-edge technology into its vehicles. Self-driving features and high-tech infotainment systems spring to mind. This would appeal to the tech-savvy community.
Additionally, Tesla has a reputation for producing high-quality vehicles that need little maintenance in their lifetime. As a reliable and economical vehicle, the Cybertruck could be seen as more attractive in that it would probably require less maintenance and replacement parts than a regular pick-up truck.
So, with the pros and cons put on the table, we will have to wait for the first Tesla Cybertrucks to hit the road before customer reviews and testimonials tell the real story.
Have a wonderful week.
Cheers,
Jacquie
