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april@madhedgefundtrader.com

November 30, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
November 30, 2023
Fiat Lux

Featured Trade:

(A SLEEPER HIT IN THE BIOPHARMA WORLD)

(PFE), (LLY), (VTRS), (BNTX), (SEGN)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-30 12:02:542023-11-30 11:36:55November 30, 2023
april@madhedgefundtrader.com

A Sleeper Hit In The Biopharma World

Biotech Letter

Eli Lilly's (LLY) recent strides in the weight-loss treatment market have made headlines, especially with Mounjaro, their diabetes drug doubling as a weight-loss medication. The real buzz began when Zepbound, another of Lilly’s offerings, got the green light for weight management.

These developments have propelled Lilly into a potentially profitable orbit, but let's not get carried away just yet. While this company’s stock has been climbing the ladder, partly priced in with the latest news, it's worth casting a wider net.

In the world of pharmaceuticals, opportunities abound, and sometimes the best catches are not the shiniest. Enter Pfizer (PFE), a familiar name that’s been a bit under the weather, stock-wise.

Pfizer's shares have taken a 40% hit this year, a response to the waning demand for their COVID-19 vaccine and treatment.

But let's not forget that we're shifting gears to a post-pandemic era, and such shifts in demand are part of the course. Add to this the impending loss of exclusivity on some of their key products, and you've got a recipe for some financial heartburn.

In 2023, Pfizer’s performance didn’t quite match up to the market, a stark contrast to its 2021 and 2022 glory days, driven by its COVID-19 portfolio. However, looking at Pfizer through the narrow lens of recent performance alone is like judging a book by its last chapter.

Let's rewind a bit. Pfizer took some bold steps in recent years, steps that have shaped its current narrative.

The big move was shedding its consumer health and off-patent drug business, Upjohn, which led to the creation of Viatris (VTRS). The goal? To sharpen focus on innovative pharmaceuticals.

Then came the historic collaboration with BioNTech (BNTX) on a COVID-19 vaccine, marking the first U.S. authorization for an mRNA-based vaccine and bringing in substantial revenue in 2021 and 2022.

Fast forward to 2023, and Pfizer's investment fruits are beginning to ripen. This year alone, it has launched seven new products, from Litfulo for alopecia areata to the RSV vaccine Abrysvo.

Pfizer's non-COVID revenue forecast is promising, projecting up to $84 billion by 2023.

But the plot thickens. Pfizer recently announced a $43 billion acquisition of Seagen (SEGN), an oncology-focused biotech. This isn’t just a new chapter for Pfizer; it’s a whole new book, potentially leading to groundbreaking developments in cancer treatment.

With these in mind, it’s reasonable to believe that Pfizer’s current stock-market blues are but a temporary cloud.

With 83 candidates in development and a robust pipeline, partly fueled by its COVID-19 success, a rebound is on the horizon.

The dividend yield, sitting pretty at 5.5%, along with a decade-long streak of increasing payouts, adds to Pfizer's charm as a long-term investment.

So, investors should see Pfizer’s current price not as a red flag but as a golden ticket – an opportunity to get in on the ground floor before the elevator goes up. Its revenue forecast doesn’t even include its COVID-19 products, which could continue to generate significant revenue, especially during flu season.

Now, back to Eli Lilly. Yes, its revenue has seen double-digit growth recently, and it has been facing the same headwinds as Pfizer. It’s important to note, though, that its valuation makes sense in the context of its current earnings and potential growth. That makes it difficult to truly make a fair comparison at this point.

But, if we're talking opportunity, Pfizer is the one that's looking like a hidden gem. To put it simply, it's all about opportunity cost.

Pfizer, at present, is the underdog with untapped potential. Investing in Pfizer now could mean reaping substantial rewards down the line.

I’m talking about a company with a proven track record, a solid pipeline, and a knack for innovation. And for its current valuation, Pfizer is a deal that's hard to pass up.

For investors willing to play the long game, this could be the moment to seize an opportunity that could pay dividends in the future.

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-30 12:00:412023-11-30 11:36:39A Sleeper Hit In The Biopharma World
april@madhedgefundtrader.com

November 30, 2023

Diary, Newsletter, Summary

Global Market Comments
November 30, 2023
Fiat Lux

Featured Trade:

(SO WHAT IS YOUR “INFLUENCER” SCORE)
(REPORT FROM THE ORIENT EXPRESS)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-30 09:06:032023-11-30 14:45:48November 30, 2023
MHFTR

Report from The Orient Express

Diary, Newsletter

I was awoken from a dead sleep in the middle of the night in my suite on the Orient Express by a juddering halt and the smell of burning breaks in the air.

We were somewhere high in the Swiss Alps, and every single passenger on the all-first-class train had to be thinking that a murder had just been discovered.

It turned out that in the darkness we had hit a 400-pound wild boar astride the tracks. We spent four hours on a remote siding waiting for Swiss National Rail to deliver us a new engine.

I elicited chuckles when I ordered boar for lunch the next day. The matre’d assured me it wasn’t ready yet, as the meat had to soak in vinegar for 48 hours before cooking. That’s the kind of thing you only hear in Europe.

I boarded the train that morning at London’s Victoria Station in anticipation of the trip of a lifetime. Venice Simplon Orient Express didn’t disappoint, although I would not be surprised if the IRS questioned the $8,500 cost for the 34-hour trip as a business expense on my tax return this year.

The legendary train has featured in a dozen films (James Bond and Agatha Christie), and two dozen television shows, and played a major part in countless novels. You can even buy a video game.

The modern Orient Express has three different trains.

From Victoria Station in London to Folkstone on the coast, I traveled on a vintage British train that was showing its age.

Then I boarded a bus, which drove on to a flatbed rail car that whisked us through the tunnel 1,500 feet under the English Channel. There, we claustrophobes closed our eyes and held our breath for 20 minutes.
The real luxury started when I boarded a vintage 1924 Pullman first-class sleeping car in Calais, France, lovingly restored to the day it was built.

I set my watch ahead one hour and back 100 years. Suddenly, the trees resembled those in impressionist paintings, the land was dotted with Norman fortresses, and gasoline was $8 a gallon.

 

The original Orient Express, from Paris to Istanbul, made its inaugural journey in 1882 and quickly became famous for its unheard-of luxury and speed. Modern bullet trains and cut-rate airlines put it out of business 100 years later.

The current incarnation started in 1977 when James Sherwood, who had built up a fortune through Sea-Land Containers, bought three dilapidated Pullman rail cars at an auction in Monte Carlo. Like all of us with insanely expensive hobbies, he sought a way for outsiders to fund his passion.

Hence, the Venice-Simplon Orient Express started luring big spenders and the romantically inclined in 1982 (click here for their site)

I became one of the original passengers in England when my broker chartered it for a day of client entertainment, an ancient steam engine laboring all the way.

Over the next 30 years, Sherwood built Orient Express into one of the world’s preeminent luxury brands, on par with Cartier, Tiffany, and Channel.

He developed a massive global network of cross-marketing deals that tied in package tours, hotels, cruises, and other vintage trains.

Today, the parent company, Belmond (BEL) carries a market cap of $1.3 billion (click here for that site).

Ironically, the company today still only owns one of its dozens of rail cars. The rest have been sold to Middle Eastern investors with long-term leaseback contracts.

The dinner onboard is the highlight of the trip, a fabulous six-course, three-hour affair. There you meet the other passengers, all dressed to the nines.

Most were wealthy elderly couples knocking off a bucket list item, along with a few young hedge fund managers and a passel of mistresses.

I was one of the few Americans. I ate with a casino operator in Ireland and the owner of a manufacturing company in the UK. All I can say is thank goodness for the elastic waist on my tux trousers.

Having spent a lifetime analyzing corporate management, I was fascinated by the operation of the train. While the onboard staff is limited to 79, they are supported by a management, marketing, and engineering team of no less than 4,500.

You don’t just show up with a 17-car train in Europe’s incredibly congested rail network. You must first file a route plan and get a clearance slot, much like any airline.

Engines and crews must be changed at every border. Mechanics are onboard with an ample stockpile of 1920s rail car parts. Oblivious passengers are frequently left stranded behind at stations along the way and must be retrieved by taxis, which catch the train down the line.

 

 

 

To make up for the time we lost due to the unlucky boar, the rail authorities routed us through the 12-mile long transalpine tunnel under Splügen Pass, then along the sublime shores of Lake Como, where the train rarely travels.

We roared past George Clooney’s house, who, I am told, is a frequent passenger on the train. Amazed Italians were waving and taking pictures of us with their cell phones at every stop. Suddenly the buildings were all shaded in pastels, the churches changed from Protestant to Catholic, and the trees resembled those in Renaissance religious paintings.

We raced over the causeway to Venice’s Marco Polo station that evening, dumping our considerable luggage into a private speedboat which whisked us away down a Grand Canal crowded with gondolas, en route to the fabled Cipriani Hotel.

 

 

In 2019, Belmond, the parent company of Orient Express, was taken over by the ultimate luxury brand, LVMH Moet Hennessy. I worked with the son of the current owner at Morgan Stanley 40 years ago, who everyone referred to as “Bubbles.”

Because of the scheduling difficulties of crossing the English Channel post-Brexit, this is the last year the train will operate from London. In 2024 you can only catch the fabled train from Paris.

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2018/07/john-thomas-onboard-1.png 558 564 MHFTR https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png MHFTR2023-11-30 09:02:522024-12-31 09:03:09Report from The Orient Express
april@madhedgefundtrader.com

November 30, 2023 - Quote of the Day

Diary, Newsletter, Quote of the Day

“I’ve always been big on lowering expectations. That’s how I got married, my wife lowered her expectations,” said Warren Buffet’s late partner, Charlie Munger.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/11/Charlie-Munger.png 478 716 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-30 09:00:262023-11-30 14:45:34November 30, 2023 - Quote of the Day
Douglas Davenport

AI’S GAME OF THRONES

Mad Hedge AI

(MSFT), (AAPL), (EA), (CSCO), (GOOGL), (PYPL), (ORCL), (INTC), (AMD), (CRM), (IBM), (BIDU), (TSLA), (AMZN), (META)

In a striking twist of corporate intrigue, the artificial intelligence sector is abuzz with the latest developments involving Sam Altman, Microsoft, and OpenAI. The narrative unfolding around Altman's sudden departure from OpenAI, the very startup he co-founded, and his subsequent shift to Microsoft reads like a thriller set in the fast-paced world of AI innovation.

On a seemingly ordinary Friday, the AI world was rocked by the news of Altman's dismissal from ChatGPT's parent company, OpenAI. The board cited a lack of "consistent candor" in his communications, an accusation that seemed to spell the end of his tenure. 

However, the plot thickened as negotiations for his potential return to OpenAI began to surface, revealing a tangle of corporate strategies and personal ambitions.

Amidst this turmoil, Microsoft's (MSFT) CEO, Satya Nadella, demonstrated his strategic acumen by quickly bringing Altman into the fold to lead an advanced AI research team. This maneuver not only solidified Microsoft's position in the AI race but also retained Altman's expertise and influence within the company, thereby averting the risk of him joining a competitor.

The discussions surrounding Altman's possible reinstatement at OpenAI further complicate the narrative. 

With the involvement of OpenAI's interim CEO Emmett Shear and board member Adam D’Angelo, who is also the co-founder and CEO of Quora, along with key investors like Thrive Capital, Khosla Ventures, and Tiger Global Management, the plot thickens. 

The inclusion of Sequoia Capital, a top venture capital firm that’s also invested in tech giants like Apple (AAPL), Electronic Arts (EA), Cisco Systems (CSCO), Google (GOOGL), Oracle (ORCL), and PayPal (PYPL), in these discussions underscores the high stakes involved.

This corporate chess game isn't just a battle for executive talent; it's emblematic of the broader ideological struggle over AI's future direction. 

Should the industry charge ahead, accelerating technological development, or should it tread more cautiously, prioritizing safety and ethics? 

This debate is personified by the contrasting visions of Emmett Shear, OpenAI's new CEO, who favors a slower approach, and Elon Musk, who advocates for a pause in AI advancements.

Altman's alignment with the acceleration camp, alongside his potential return to OpenAI and involvement with Microsoft, poses a significant challenge to those advocating for a more measured approach. 

This could have far-reaching implications not just for the industry's giants but for the entire ecosystem of AI development.

Microsoft's strategic gain in securing Altman and Greg Brockman, another OpenAI co-founder, also has broader ramifications for the tech and AI sector. 

Giants like Intel Corporation (INTC) and Advanced Micro Devices, Inc. (AMD) could see a surge in demand for their AI-relevant chips. At the same time, Salesforce.com, Inc. (CRM) might find its AI-driven customer relationship tools increasingly indispensable.

Globally, Baidu, Inc. (BIDU) in China and International Business Machines Corporation (IBM), with its Watson AI technology, could also benefit from these shifts. 

Needless to say, this is more than a corporate reshuffle; it's a transformation that could reshape the competitive landscape in AI technology, with implications for companies and investors alike.

This development also raises pertinent questions about the future trajectory of AI and the role of major players in shaping this path. 

Smaller AI startups may find competing for talent and recognition challenging in this intensified environment. Traditional software and IT service providers not heavily invested in AI could increasingly find themselves at a disadvantage.

The automotive sector is another arena where the impact of these developments could be profound. 

Legacy automakers that have been slow to integrate AI, particularly in autonomous driving, might find themselves lagging behind more technologically agile competitors like Tesla (TSLA).

For tech giants like Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN), this episode is a double-edged sword. 

While they stand to benefit from the overall expansion of the AI market, Microsoft's bolstered position presents a formidable challenge. 

Similarly, Meta Platforms, Inc. (META), with its significant investments in AI and virtual reality, may attract interest but also faces stiffer competition.

As AI continues to cement its role across various industries, the terrain is set for rapid and unpredictable changes. These transitions will undoubtedly have far-reaching implications for these companies and the broader market, necessitating close monitoring by investors and industry watchers alike.

Ultimately, the story of Altman, Microsoft, and OpenAI isn't just a momentary headline; it's a microcosm of the transformative power of AI, heralding a future where innovation, competition, and collaboration merge to drive progress in ways we are only beginning to comprehend. 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/11/Screenshot-112923-1.png 723 773 Douglas Davenport https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Douglas Davenport2023-11-29 16:38:582023-11-29 16:38:58AI’S GAME OF THRONES
april@madhedgefundtrader.com

November 29, 2023

Tech Letter

Mad Hedge Technology Letter
November 29, 2023
Fiat Lux

Featured Trade:

(DEALING WITH A BLACK BOX)
(TSLA), (UBER), (LYFT)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-29 14:04:192023-11-29 14:49:58November 29, 2023
april@madhedgefundtrader.com

Dealing With A Black Box

Tech Letter

Who is responsible when artificial intelligence harms someone?

The California jury may soon have to make a decision. In December 2019, a man driving a Tesla (TSLA) with an AI navigation system killed two people in an accident. The driver faces up to 12 years in prison.

These events were bound to happen as teething pains are quite common with new technology especially one that is ambitious enough to transport machines in a human world.

Multiple federal agencies are investigating Tesla crashes, and The California Department of Motor Vehicles is investigating the use of AI-controlled driving functions.

Our current liability system used to determine liability and compensation for injuries is not AI-friendly.

Liability rules were designed for a time when humans caused most injuries.

However, with AI, errors can occur without direct human intervention. The liability system must be adjusted accordingly. Poor accountability won't just stifle AI innovation. It will also harm patients and consumers.

It's time to start thinking about accountability as AI becomes ubiquitous but remains under-regulated. AI-based systems have already contributed to injuries.

The right accountability approach is critical to unlocking the potential of AI. Uncertain regulations and the prospect of costly litigation will deter investment, development, and deployment of AI in industries ranging from healthcare to autonomous vehicles.

Currently, liability claims typically begin and end with the person using the algorithm. Of course, if someone abuses the AI system or ignores its warnings, that person should be held accountable.

But AI errors are often not the user's fault. Who can blame an emergency doctor for letting an AI algorithm miss papilledema — a swelling of part of the retina?

AI's failure to detect the disease could delay care and potentially cause the patient to lose their eyesight. Papilledema is difficult to diagnose without an ophthalmologist.

AI is constantly self-learning, which means it takes in information and looks for patterns in it. This is a "black box" that makes it difficult to understand which variables affect the outcome.

The key is to ensure that everyone involved - users, developers, and everyone else in the chain - has been vetted to keep AI safe and effective.

First, insurers should protect policyholders from AI injury litigation costs by testing and validating new AI algorithms before deploying them.

Car insurers have also been comparing and testing cars for years. An independent security system can provide AI stakeholders with a predictable system of accountability that adapts to new technologies and practices.

Second, some AI errors should be challenged in courts that specialize in uncommon cases. These tribunals may specialize in particular technologies or topics.

Third, proper regulatory standards from federal agencies can offset the excessive liability of developers and users. For example, some forms of medical device liability have been superseded by federal regulations and laws. Regulators should focus on standard AI development processes early on.

Regulation can make or break AI in the upcoming years and I lean towards the laissez-faire attitude of deregulation.

Too many regulations will stifle development and bring about undue costs.

No company will continue with loss-making operations unless they see a light at the end of the tunnel.

If allowed to develop with light regulation, AI will be that supercharger to tech stocks that investors dreamed of.

Transportation-based tech stocks such as Uber and Lyft will be one of the largest winners from the widespread implementation of driverless technology.

Also, throw in there the food delivery companies like DoorDash (DASH).

Another group with immense expense-saving possibilities is all the airline firms around the world because theoretically, self-driving technology will become good enough to deploy in short and long-haul flights.

Getting to the point of consumers and regulators fully trust self-driving technology is still a long and windy path, but I do believe we will arrive there.

When we do get there, the tech companies underwriting these benefits will feel a 10X boost to their share price.

 

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2023-11-29 14:02:042023-11-29 14:49:41Dealing With A Black Box
Mad Hedge Fund Trader

November 29, 2023 - Quote of the Day

Tech Letter

“Most entrepreneurial ideas will sound crazy, stupid and uneconomic, and then they’ll turn out to be right.” – Said CEO of Netflix Reed Hastings

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/03/reed-hastings.png 510 390 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-11-29 14:00:132023-11-29 14:49:26November 29, 2023 - Quote of the Day
april@madhedgefundtrader.com

November 29, 2023

Jacque's Post

 

(WE COULD SEE A SECULAR BULL MARKET FOR THE NEXT DECADE)

November 29, 2023

 

Hello everyone,

It’s the question on everyone’s lips – will this rally continue throughout 2024 and beyond?

One Bank seems to think so, and that bank is Deutsche.  And they are not allowed in this bullish outlook.

Deutsche sees the S&P 500 rallying 11% to a record high next year and has a 2024 year-end target of 5,100 on the S&P500.   It incorporates expectations of a mild, short recession that has been pulled forward.

In its most bullish case, Deutsche expects the S&P500 could climb to 5,500 or more than 20% above where the benchmark closed last.

The bank notes that the S&P 500 has been in a clear trend-up channel since the Great Financial Crisis.  Jim Reid, London-based head of global economics and thematic research points out that after falling below last year, the rally in the first half this year took it back up to the bottom and it has been muddling along at the lower end since.  A continued muddle through along the bottom implies 5300 by the end of 2024, while a move to the middle to 6000.

Deutsche expects markets have already priced in concerns around higher interest rates and geopolitical risks and argued that any sell-off from a possible recession would be short-lived and mild.

Historically, equities typically rally in the aftermath of a U.S. presidential election, set for next November.  Reid expects a sizeable potential upside risk from tight labor markets may bolster productivity by encouraging the adoption of new technologies such as generative artificial intelligence.

The German bank remains neutral on mega-cap growth and technology stocks, citing elevated valuations after their rally this year.  Going forward, the bank recommends overweight positions in financials and consumer cyclicals (AMZN, HD, TSLA, MCD, AAPL) that could bounce back after their recent weakness and remain neutral on energy while turning overweight on materials.  It remains underweight in defensive stocks until it sees falling bond yields coupled with recession fears

 

 

Deutsche Bank sees the rally this year continuing into 2024 and beyond and makes bold 2024 year-end targets.

 

According to RBC technical analyst Robert Sluymer.

The stock market has surged nearly 20% this year, but the rally could be part of a larger secular bull market cycle that sends the S&P 500 to 14,000 by 2034.

Sluymer maintains and argues that the long-term secular trend for US equity markets remains positive with an underlying 16-to-18-year cycle supportive of further upside into the mid-2030s, potentially to S&P 14,000.

Sluymer’s forecast for the S&P 500 to trade as high as 14,000 by 2034 represents a potential upside of 209% from current levels or an average annualized gain of just under 10% over the next 11 years.

 

 

Sluymer looked at a long-term chart of the S&P 500 going back to the Great Depression in 1929.  Since then, there have only been two secular bull markets, with one occurring during the 1950s and 1960s, and another occurring during the 1980s and 1990s.

Both generated total returns of about 2,300%.

Sluymer points out that if the current cycle generates a similar rally of +2000% the S&P could move toward 14,000 by 2034 which is when we expect the current 16-to-18-year secular bull cycle to peak. 

Between now and 2034, Sluymer advises long-term oriented investors to lean bullish and view selloffs in the stock market as opportunities to increase exposure to secular and cyclical growth stocks, including industrials.

In a nutshell, Sluymer recommends long-term investors stay the course and remain optimistic.

 

 

 

Cheers,

Jacquie

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