Merry Christmas & Happy New Year to you and your family! You are my hero, and who I aspire to be. Be well and see you in 2024!
Sincerely,
Wilson
Mill Valley, CA
“Large round numbers in the market act as rusty doors and sometimes need several swings before you can get through,” said Sam Stovall of CFRA Research.
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
February 15, 2024
Fiat Lux
Featured Trade:
(TACKLING THE BIG C)
(PFE), (BNTX), (BMY), (ABBV), (AZN)
Super Bowl Sunday: not just a day for football fanatics but a golden opportunity for brands to shine brighter than the halftime show, captivating over 100 million pairs of eyes.
Amid the usual suspects of beers, cars, and fizzy drinks, an unexpected name popped up on the screen: Pfizer (PFE). The Big Pharma titan threw its hat in the ring with a multimillion-dollar message that could be summed up as a toast to science itself.
Here’s how Pfizer’s ad went: animated legends of science — from Newton to Einstein, alongside Rosalind Franklin and Katalin Karikó — belting out an ode to medical milestones to the tune of Queen’s “Don’t Stop Me Now.” Add a dash of whimsy with a cameo from penicillin and a crooning tardigrade, culminating in the heartwarming sight of a young cancer survivor leaving the hospital to applause.
This cinematic piece wasn’t just about selling a product; it was about selling a dream, one where science leads the charge against cancer, underscored by Pfizer’s new rallying cry, "Outdo Yesterday," and a nudge towards LetsOutdoCancer.com.
Shrouded in mystery is the exact price Pfizer paid for this 60-second spectacle — shortened from its original 90-second glory.
But, my sources say that the pharma giant shelled out around $6.5 million to $7 million for half that time, making Pfizer’s splurge no drop in the bucket, especially juxtaposed against a recent $15 million pledge to the American Cancer Society.
This grand gesture comes at an important milestone, marking Pfizer’s 175th year and a concerted push to cast a vibrant, forward-looking shadow across its brand, appealing to the public, investors, and its own ranks alike.
After all, it’s an open secret that Pfizer’s looking to weather a storm, with its COVID-19 vaccine sales dwindling.
Despite riding high on the COVID-19 vaccine wave in partnership with BioNTech (BNTX), raking in roughly $57 billion across 2021 and 2022, Pfizer's financial seas have been anything but calm. The stock’s dramatic descent from its late 2021 peak paints a picture of uncertainty, rooted in the sobering performance of its COVID-19 titans, Comirnaty and Paxlovid.
Yet, as we can see, Pfizer’s narrative isn’t one of gloom. Stripping away the pandemic’s shadow reveals a company in robust health, with a 7% operational growth and a record seven FDA nods in 2023 alone.
Speaking of making it rain, Pfizer's not just throwing its COVID-earned billions around for kicks. For example, they've laid down a cool $43 billion on the table to bring oncology biotech Seagen into the fold.
This acquisition isn't your everyday shopping spree either. It's a move designed to transform Pfizer into the leader of the antibody-drug conjugate (ADC) movement in cancer therapy, potentially beating the likes of Bristol Myers Squibb (BMY), AbbVie (ABBV), and AstraZeneca (AZN).
Think of this move as the biopharma eyeing Seagen's $3 billion in 2023 revenue and saying, "Let's crank this up to $10 billion by 2030." Ambitious? Absolutely. But if anyone's got the blueprint to make it happen, it's Pfizer.
The pivot to cancer isn’t just a strategic shift but a play for the heartstrings of a global audience. With cancer touching lives universally, Pfizer’s Super Bowl gambit seeks to transcend its COVID-19 narrative, aiming for a connection that’s both deeper and more universal. The deliberate omission of its vaccine from the ad speaks volumes, aiming to bridge divides in a viewership as diverse as the Super Bowl’s.
Still, the true measure of its Super Bowl splash — beyond the ad’s immediate sparkle — may lie in subtler indicators, from stock movements to talent retention and a potential surge in interest around its cancer-fighting mission.
Whether this move translates into a long-term win for Big Pharma titan remains to be seen, but for now, the spotlight isn’t just on the Chiefs’ victory but on Pfizer’s leap into the hearts and minds of millions, championed by science and the indomitable spirit of innovation. I suggest you buy the dip.
Global Market Comments
February 15, 2024
Fiat Lux
Featured Trade:
(SPECIAL INCOME TAX ISSUE)
(THE TAX RATE FALLACY)
(THANK GOODNESS I DON’T LIVE IN SWEDEN)
(EWD)
While you are all diligently beavering away from getting your 2023 tax returns done in time for the April 15 deadline, I thought I’d correct some fundamental misperceptions about our nation’s tax system.
When anyone starts lecturing you that the US has the highest tax rate in the industrialized world, just turn around, walk away, and pretend you never heard them.
This person is either ignorant about this country's taxation system or is deliberately trying to deceive you.
According to a report released by the Internal Revenue Service for the 2022 tax year, the most recent for which figures are available, the top 400 individual tax returns filed in 2014 reported an average tax rate of only 22%.
This explains why Warren Buffet pays a much lower tax rate than his secretary. It really is true that in America, only the poor people pay taxes.
Look at any international comparison of taxes to GDP, and one can always find the United States at the bottom of the table.
Low American taxes are one of the main reasons why I moved my company here from England 30 years ago.
Take a look at the Fortune 500, where one-third of the largest companies pay no tax at all, and many that dominate the top of the list, like the oil majors and technology companies, pay only token amounts.
However, if any politician wants to pander to voters during election time on a tax-cutting platform, he will only bluster on about “high tax rates”, not actual taxes paid.
What the US has that other countries lack is the 77,000 pages of the Internal Revenue Code.
It is a 100-year accumulation of deductions, accelerated depreciation rates, tax credits, and other tax breaks that are the end product of intensive lobbying efforts and bribes by special interest groups, corporations, unions, and even religious groups.
If you do have a big tax bill, you need to hire a new accountant.
Take a look at the oil industry again. The oil depletion allowance permits drillers to deduct the cost of a new well in the first year.
When I first got into the oil and gas business 15 years ago, after reading the relevant sections of the tax code, I couldn't understand why everyone wasn't drilling for Texas tea.
The total value of this one tax break to the industry is estimated at $55 billion a year. This explains why we have had three presidents from Texas in the last 50 years.
Some of this money ends up in campaign donations. And this is all happening when the markets are absolutely flooded with oil. So, we’re subsidizing oil production?
I have a very simple solution to the country's budget deficit problem. Hit the reset button.
Eliminate the Internal Revenue Code. Just set it on fire or send it to the recycling bin. Keep the existing progressive, hockey stick tax rates on income, but eliminate all deductions.
And I mean everything; deductions for dependents, home mortgage interest, medical expenses, charitable contributions, the works.
The oil depletion allowance and other corporate loopholes are worth at least many hundreds of billions a year in lost federal revenues. There are no sacred cows.
My revised Form 1040 would be much like the original 1913 return, a postcard that would have only five lines on it:
Name
Social Security number
Income
Tax Rate
Tax Due
The budget deficit would disappear overnight. Government spending would shrink dramatically because you could ditch most of the 100,000 who work for the IRS.
Some 1.3 million auditors, CPAs, tax attorneys, and bookkeepers would have to hit the road in search of new work too.
The amount of money that is wasted on tax collection in this country is truly staggering. This is not some pie-in-the-sky concept. This is how taxation already works in most countries, and they seem to get along just fine.
In fact, the whole scheme might even pay for itself.
I Don't See Any Jobs for Former IRS Agents, Do You?
I recently found the chart below showing world tax rates as a percentage of GDP for the past 40 years. Sweden suffers the world's heaviest tax burden at 51%, compared to only 27% in the US.
The US has among the world's lowest tax burdens in terms of actual taxes paid, which has been falling for the last 20 years. Listening to TV pundits, you would think we had the world's highest tax rates, which are about to leap much higher.
Germany, home to some of the world's best run and most profitable companies which make the Fatherland a major exporter, has one of the lowest tax bills. Iceland sits at the bottom and is now bankrupt, thanks to an overdose of free market deregulatory philosophy.
Americans historically have had a very strong resistance to taxation, which you can trace back to the libertarian foundations of the country. The Revolutionary War, in which 17 of my known ancestors fought, was primarily about taxes.
The top end of the distribution is packed with European nations, but you never hear them complain about high tax rates. Most believe the cost of the social safety net is worth it. Those that don't, move to the US, Monte Carlo, Lichtenstein, or the British Virgin Islands.
Of course, having once been a part owner of a fashion model agency in Stockholm, I can certainly vouch for the advantages of living in the world's most taxed domicile. Suffice it to say, you spend a lot of time indoors in the home of the Vikings.
Well, Maybe It's Not So Bad After All
"I can calculate the motions of heavenly bodies, but never the madness of crowds," said Sir Isaac Newton, the inventor of calculus and discoverer of Newton's Laws who lost his entire fortune in a 17th century investment scam called "the South Sea Bubble."
(AMD), (NVDA), (INTC), (MSFT), (AMZN), (TSLA), (PLTR), (WBM)
Imagine cruising down the digital highway, where AI is fueling everything from your playlist recommendations to your investment decisions. At this point, we're no longer just talking about the future; we're living it.
So, who's driving this transformation? There’s no clear winner just yet, but Advanced Micro Devices (AMD) is making a compelling case as the potential leader of the AI revolution.
The AI market is growing impressively fast, with this segment expected to hit nearly $2 trillion by 2030. That's a lot of zeroes, my friends.
And smack dab in the middle of this gold rush is AMD, offering the shovels, pickaxes, and denim jeans to every AI prospector out there. Whether you're mining for AI gold in supply chains or marketing, chances are this company’s tech is the backbone of your operation.
Looking into AMD's financials, the company has soared from $6.7 billion in FY 2019 to a jaw-dropping $22.7 billion by FY 2023.
And just when you thought they couldn't go any higher, Q4 2023 earnings came in at a cool $6.20 billion, leaving Wall Street's estimates eating dust.
With earnings per share hitting $0.77, we're not just whistling Dixie — AMD is on fire.
But here's where it gets more interesting. AMD is eyeballing a slice of the AI chip market pie, projected to be worth a whopping $400 billion by 2027. And with Nvidia (NVDA) in the race, it's shaping up to be the tech equivalent of Godzilla vs. King Kong, minus the city destruction.
For context, AMD’s market cap is at around $277.77 billion while Nvidia’s is at $1.78 trillion. Despite this massive gap, AMD is not just holding its own; it's thriving, thanks to its Swiss Army knife approach to AI hardware.
Apart from these two, another player in the sector is Intel (INTC), which stands closer in size to AMD at $186.16 billion in market cap.
Unfortunately, Intel has been lagging behind like a kid trying to catch the ice cream truck on a tricycle. Their recent foray into AI chips feels a bit like showing up to the party after the cake's been eaten.
AMD, on the other hand, has been playing 4D chess with its AI investments, offering a smorgasbord of AI-optimized goodies for every conceivable need.
They rolled out the world’s first data center APU — a CPU and GPU living together in harmony on one chip. Price-wise, it’s a steal, and it's got Intel looking at their balance sheets a little worried, especially after their data center bucks took a 30% nosedive.
More importantly, this advancement would make AMD a go-to choice for big names in tech like Tesla (TSLA), Palantir (PLTR), Amazon (AMZN) and Microsoft (MSFT), retail giants such as Walmart (WMT), and even government agencies like NASA.
And for us regular folks? AMD's dishing out PC CPUs that are all about that AI life, like the Ryzen 8040. Plus, they've got these server CPUs for the big enterprise crowd.
In fact, AMD has flooded the market with millions of these Ryzen AI-powered PCs, and now they're in more than 90% of AI-enabled PCs out there. They were the first to toss a dedicated AI module into desktop processors, leaving the competition eating their dust.
Speaking of the competition, Intel’s just now getting their feet wet with AI-powered CPUs and hasn't seen the cash flow they hoped for in a while. Nvidia? They're the new kid on the CPU block. So, in the grand scheme of things, AMD's looking like the cool, experienced senior among freshmen.
Now, why should you care? Well, if you're looking to invest in a company that's got its fingers in the AI pie, AMD is your Huckleberry.
With a market cap that's a fraction of Nvidia's, AMD offers a value proposition that's as enticing as a slice of pie on a Sunday afternoon. I suggest you buy the dip.
