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
Mad Hedge Biotech and Healthcare Letter
January 9, 2024
Fiat Lux
Featured Trade:
(HATCHING THE GOLDEN EGG IN YOUR BIOTECH PORTFOLIO)
(CRSP), (VRTX), (BAYRY)
In the words of Louis Pasteur, “Chance favors the prepared mind.” This axiom holds especially true in the world of biotechnology, where preparation meets opportunity at the cutting edge of innovation.
It's in this dynamic arena that CRISPR Therapeutics (CRSP) stands out, exemplifying Pasteur's vision. Remember how we talked about finding that golden egg in your investment portfolio? Well, pay attention, because this biotech might just be it.
Let's rewind to 2023. That year was like a warm-up lap for CRISPR, with its shares jumping a whopping 54%.
Now, as we leap into 2024, CRISPR isn't just riding a wave; it's creating a tsunami of momentum. Picture a baseball pro stepping up in a World Series game. That’s CRISPR, swinging its groundbreaking gene-editing tech, starring their brainchild, Casgevy.
But let's not get lost in the jargon. We're talking about a field where diseases get a one-way ticket out of your system, thanks to advanced gene therapies.
Sure, we haven't seen everyone jumping on this bandwagon yet, but with the gene therapy market set to balloon to a cool $80 billion by 2029, it's like sitting on a biotech gold mine. And who's leading the charge? You guessed it - CRISPR Therapeutics.
Diving into their treasure chest, we find a cushy $1.75 billion in cash and a debt profile so lean, it could give fitness models a run for their money. In the world of biotech, CRISPR isn't just fit; it's doing financial gymnastics.
Now, let's gab about Casgevy. This isn't your everyday biotech gizmo. It's like finding a diamond in a sea of rhinestones.
Developed with Vertex Pharmaceuticals (VRTX), it's the first FDA and UK-approved bigwig using CRISPR-CAS9 tech. Designed as a once-in-a-lifetime fix for sickle-cell disease (SCD), it's also eyeing a spot in treating transfusion-dependent beta-thalassemia.
On top of that, the financial side of this story is as juicy as a ripe peach. Casgevy's price tag is a cool $2.2 million per treatment. Yes, you read that right. It's an exclusive club, with a reach estimated at 25,000-30,000 patients globally, mainly in the U.S.
The big question is: How many can actually afford this golden ticket? Considering the lifetime tab for SCD treatment hovers around $1.7 million, insurance companies might just get on board. The whole shebang – from prep to recovery – is a marathon, not a sprint.
But even with a modest guess of 10,000 patients getting treated, we're talking a revenue of $22 billion and a sweet $8.8 billion of that could waltz right into CRISPR's pockets.
But there's more to CRISPR than just Casgevy. They're playing 3D chess in a world where most are stuck playing checkers. Their lineup? It's like the Avengers of biotech – tackling everything from cancer with their “super soldier” CAR T-cells to diabetes and heart disease.
In the immuno-oncology corner, they're busy cooking up CTX112 and CTX131. These aren’t your average T-cells; they’re like tiny superheroes, souped up to target the baddies while giving your good cells a friendly nod. And the best part? CRISPR Therapeutics has the whole shebang under its wing.
Switching gears to Regenerative Medicine, imagine kicking those insulin shots to the curb. CRISPR's working on treatments that could reset your body’s natural functions. They've got VCTX210 and its beefier sibling VCTX211, both aiming to turn stem cells into insulin-producing champs.
Teaming up with ViaCyte, they've pocketed a nifty $100 million upfront, and there’s potentially more where that came from.
And then there's the In-Vivo stuff. This isn't your typical lab concoction; it's more like an internal bodyguard against heart diseases. With CTX310 and CTX320, CRISPR’s targeting pesky proteins that mess with your heart, proving they're not just a one-trick pony.
Oh, and let's not forget the buzz about their team-up with Bayer (BAYRY) on a hemophilia treatment. It's still cooking in the lab, but it's got the makings of something big.
For the investors rubbing their hands, wondering if CRISPR's stock is a wise pick – here’s my two cents. There’s still plenty of room for growth. It’s like uncovering an undervalued masterpiece at an art auction. The potential of CRISPR’s tech is just beginning to show its true colors.
So, what's my verdict? CRISPR Therapeutics isn't just a stock to buy; it's a golden ticket to the future of healthcare.
After all, in the end, it’s about betting on those who are not just playing the game but changing it entirely. And CRISPR? They're in a league of their own.
Global Market Comments
January 9, 2024
Fiat Lux
Featured Trade:
(JOIN ME ON CUNARDS QUEEN ELIZABETH FOR MY SATURDAY, JUNE 29 ALASKA SEMINAR AT SEA),
(TESTIMONIAL)
Options trading, once a domain reserved for sophisticated investors and Wall Street veterans, is undergoing a metamorphosis. At the helm of this transformation stands a powerful force: artificial intelligence (AI). As algorithms evolve beyond mere number-crunching, they're poised to reshape the landscape of options trading, ushering in an era of unparalleled efficiency, precision, and perhaps even democratization. Let's delve into the crystal ball of finance and predict what the future holds for AI in options trading, exploring both its opportunities and the challenges it presents.
Beyond Predictability: The Rise of Autonomous Options Strategy Generation
Current AI applications in options trading primarily focus on order execution and risk management, optimizing trade timing and minimizing losses. While valuable, these functionalities merely scratch the surface of AI's potential. The game-changer lies in autonomous strategy generation. Imagine AI analyzing vast datasets of market data, historical trends, and real-time news, then weaving these threads into bespoke options strategies tailored to individual investor goals and risk profiles. This isn't a distant dream; projects like Akuna Capital's AI-powered platform, VIKING, are already demonstrating the capability of algorithms to generate and execute complex options strategies within milliseconds.
Personalized Portfolios: From DIY to Auto-Pilot
For novice and seasoned investors alike, navigating the intricate web of options contracts can be daunting. AI will act as a digital sherpa, crafting customized portfolio allocations based on individual risk tolerance, investment horizons, and desired returns. Forget cookie-cutter strategies; AI will consider your unique financial situation and goals, dynamically adjusting your portfolio as market conditions shift. This democratizes options trading, making sophisticated strategies accessible to a wider investor pool.
The Market Whisperer: Unlocking the Power of Predictive Analytics
Market movements are notoriously fickle, often defying even the most astute predictions. But AI, trained on mountains of data, may hold the key to unlocking predictive power. Algorithms can analyze not just traditional quantitative data but also qualitative factors like social media sentiment and newsfeeds, gleaning insights invisible to the human eye. These insights can then be translated into predictive models, enabling traders to anticipate market shifts and capitalize on emerging trends before they unfold.
The Human Factor: Collaboration, Not Replacement
The rise of AI doesn't herald the demise of human traders. Instead, it promises a future of augmented expertise, where AI acts as a powerful tool to amplify and refine human decision-making. Traders can leverage AI's analytical prowess to identify promising opportunities, validate their own intuitions, and back-test potential strategies with unparalleled speed and accuracy. This collaborative approach, far from diminishing the human element, elevates it, allowing traders to focus on higher-order tasks like strategic planning and risk assessment.
Beyond the Horizon: Challenges and Ethical Considerations
While the future of AI in options trading is brimming with promise, it's not without its challenges. Issues of algorithm transparency, data privacy, and potential market manipulation must be addressed to ensure a fair and ethical trading environment. Furthermore, the reliance on AI could exacerbate existing systemic risks, leading to herd behavior and market meltdowns if algorithms follow the same flawed models. Addressing these challenges through regulatory frameworks and responsible development practices is crucial to harnessing the potential of AI for good.
A Brave New Market: Democratization and the Rise of the Supermind
In conclusion, the future of AI in options trading paints a picture of a radically transformed market. On the one hand, this future promises democratization, making sophisticated strategies accessible to a wider audience and potentially leveling the playing field. On the other hand, it raises concerns about ethics, transparency, and systemic risk. Ultimately, navigating this brave new world requires a balanced approach, one that embraces the power of AI while carefully mitigating its potential pitfalls. As AI evolves into a collaborative partner, a "supermind" augmenting human expertise, the options market may one day resemble a chessboard, where humans and machines strategize together, locked in an intricate dance of intellect and foresight. It will be a fascinating journey, and one whose outcome will define the future of finance.
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
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
Mad Hedge Technology Letter
January 8, 2024
Fiat Lux
Featured Trade:
(S174)
($COMPQ)
One of the least talked about tax code blunders S174 could derail Silicon Valley ($COMPQ).
What happened?
Basically, all costs related to R&D cannot be expensed, including labor for software development.
These costs have to be capitalized and amortized over 5 years – or 15 if labor is done outside of the US.
This is a massive game changer that makes IT salaries substantially more expensive on paper.
This topic has come up a few times in private conversations that I have had, even though startups are arguably the hardest-hit companies of all.
What’s the fallout?
An unexpectedly high tax bill out of nowhere.
Many US software businesses amassed surprisingly high tax bills in 2023, seemingly out of nowhere, due to a tax change that took effect in July of the previous year, which many small companies knew nothing about until finalizing their 2022 returns.
The change was expected to be repealed (reversed) in December 2022, so many accountants didn’t inform customers for that reason. So, businesses got a surprise when the first tax payments fell due last April.
The amendment to S174 means employing software engineers can no longer be accounted as a direct cost in the year they are paid – unlike the norm, globally. Here’s a simplified example of the change from the final tax year before the change.
Here is how amortization works:
Less hiring of software engineers and more software engineering layoffs are already happening at smaller US tech companies.
This could slash around 100,000 software developers at small companies.
One of these changes was Section 174, set to come into effect 5 years later, in 2022. These parts deliver the blow by making it clear that software development costs need to be amortized over 5-15 years.
What’s the damage?
Microsoft: $4.8B additional tax paid in 2023. The company generated a $72B profit that year, so this tax increase was manageable. It’s still a very large amount!
Netflix: around $368M in additional tax paid – also manageable with $4.4B annual profit.
What’s the key takeaway?
Innovation across all US software companies will take a hit if Section 174 isn’t repealed.
The tax change incentivizes software companies without large cash reserves to invest less in research and development. Or they can just move abroad.
But the change isn’t just bad for small software companies; it hurts even the largest ones – it is why Microsoft and Amazon are also advocating for its reversal.
I won’t pretend that Silicon Valley is full of little companies because it’s not.
I can easily see many firms like Google and Apple offshoring more jobs abroad for lower wages if they cannot amortize the full amount of wages in one year.
It puts American tech at an acute disadvantage, but I do believe US tech is so far ahead of its peers than in the long term, it won’t matter too much.
Just take Europe, many of the backwater countries are just a fraction of the size of Apple or Microsoft.
US tech is gargantuan and we forget that sometimes.
In the short term, the pressure is squarely asserted on the balance sheet. How will Silicon Valley nudge up the EPS with even more expenses coming down the pipeline?
The solution is clearly firing more American developers and reallocating the workload to other colleagues and a partial workload will go to AI.
US tech is famous for working smarter and this is just another hurdle to jump over.
In the first part of the year, this puts a lot of pressure on external tailwinds mainly the Fed pivot to power us through to new highs.
Buy the dip in tech.
