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
April 23, 2024
Fiat Lux
Featured Trade:
(WHY MOST SPAC’S ARE A SCAM)
(DJT), (PSTH), (SPAK), (NKLA)
I have been watching with some amusement the trading of the Trump Media & Technology Group (DJT).
After the IPO was issued in 2023, it soared to $130, then collapsed to $15. It has just completed another round trip, plunging 50% over the last month. This is for a company that posted a horrific $58 million loss in 2023. In no way can that support a $5 billion market cap at the current $22 share price unless it’s the next AI stock we don’t know about. (DJT) has become the latest meme stock.
So many hedge funds have lined up to sell that the borrowing costs have skyrocketed to an incredible 550%. (DJT) has become the latest meme stock. The former president owns 60% of the shares. Accusations of insider trading and fraud are rife. If the former president loses the election, goes to jail, or dies as a result of his unhealthy lifestyle (he’s 50 pounds overweight) the shares become worthless. In other words, it’s a stock that no professional investor would touch with a ten-foot pole.
Every investment bubble creates its special instruments of self-destruction and this one is no different.
There were highly touted leveraged commodity and gold funds during the seventies, portfolio insurance during the eighties, money-losing tech companies with lots of “eyeballs” in the nineties, and subprime lending in the 2000s.
In this cycle, we have the Special Purpose Acquisition Companies, otherwise known as “SPACs.”
The goal of a SPAC is to raise money first on some generalized investment theme, and then merge with a target company to achieve those goals. This allows companies to go public while skipping most disclosure requirements.
SPACs have their advantages for some people. It enables start-up companies with no track record or earnings to go public faster without the costs and regulatory scrutiny of the burdensome public IPO process. Promoters promise to get investors into the next Amazon (AMZN) or Facebook FB) early.
Easier said than done.
Some $162 billion was raised for SPACs in 2021 followed by a much more modest $15 billion in 2022 and $125 million in 2023. The largest has been hedge fund manager Bill Ackman’s Pershing Square Tontine Holdings Ltd. (PSTH) at $4 billion. There is even a SPAC for SPACs, the Defiance Gen SPAC Derived ETF (SPAK).
The performance of SPACs so far has been dismal. There have been 915 SPACs created since 2015. Only 93 managed to invest their funds in a target company and only 29 of those have produced a profit. This was during one of the greatest runaway bull markets of all time.
You would have done better to simply buy the cheapest Vanguard index funds or 90-day T-bills. In the meantime, the issuers of SPACs for the most part became wealthy.
The quality of the management who had stepped forward to run SPACs has been mixed at best, including Ackman himself, who recently ran two gargantuan money-losing years back to back. They include former House Speaker Paul Ryan and NBA Hall of Famer Shaquille O’Neil, not exactly known as financial wizards.
Then there’s Nikola (NKLA), an electric/hydrogen vehicle company that has promised to take on Elon Musk, unfazed by the complete lack of a functioning vehicle. These shares have cratered by 92% since their market peak among multiple fraud allegations aimed at the founder.
The risks and limitations of SPACs are legion. You are essentially betting on the good faith and judgment of a single individual unmoored by any filings with the SEC. There are no guarantees they can achieve anything. These disclosures to the government are there to protect you. Without them, you are swimming without a swimsuit.
The conflicts of interest are enormous. SPAC issuers get to buy the equivalent of call options on their funds at deep discounts prior to the issue. When issuers make fortunes overnight with little money upfront, you want to run a mile.
And here is the big problem with SPACs. They are essentially roach motel investments, easy to check in but impossible to check out. Liquidity going in is unlimited but coming out is nil. You can often only redeem your investment at a huge discount, or if another buyer is willing to take out at any price. That makes marks to market challenging at best.
Investors that buy SPACs are giving up all the protections of SEC protections for much higher risks and lower returns.
Suffice it to say that if PT Barnum were working in the financial markets, he’d be up to his eyeballs with SPAC offerings.
Personally, I’ll give them a pass. You should too.
"If there were no way to short stocks, the probability of stock market bubbles would be much greater," said hedge fund manager, Bill Ackman, of Pershing Square.
(NVDA), (AMZN), (IBM), (GOOGL), (AMGN), (NVO)
Turns out, the key to unlocking Alzheimer's or even finding the cure for cancer might actually be hiding in the same tech that powers Call of Duty. Today, let me tell you the story of how Nvidia (NVDA), the once video game-obsessed tech giant, is rewriting the rules in the healthcare sandbox.
You’ve seen others take a swing at it — Amazon (AMZN) tried to cut costs, IBM (IBM) had a good run until Watson Health scrambled, and Alphabet’s (GOOGL) big dreams with Verily and Calico are still, well, just dreams.
But Nvidia? They’re not playing by the old pharma rules. Their leap from gaming to drug discovery with AI is calculated, not lucky.
Remember the GPU? Back in 1999, these were the darlings of the gaming world.
Fast forward a bit, and Nvidia’s launching CUDA in 2006 — a software language that turned these GPUs from gaming gadgets into something your local biotech's drooling over.
Suddenly, you could use GPUs to tackle way more than exploding aliens.
But here's where it gets even crazier. Nvidia noticed those fancy new chips were getting a lot of use from scientists — not hardcore gamers. They worked like translators, turning the messy language of biology into something computers could understand.
This opened up a whole new world for drug discovery. These folks were using them to figure out how tiny molecules and proteins dance around, unlocking secrets of diseases and potential cures.
Then, in 2010, Nvidia invited a big-shot biophysicist, Klaus Schulten, to one of their developer conferences.
Picture a room full of gamers suddenly getting a crash course in wriggly 3D molecules. Schulten blew minds showing how these simulations could help crack how viruses like Swine Flu work. But there was a catch – the tech was crazy expensive and tough to use.
Nvidia’s big "aha!" moment came rolling in when Google’s DeepMind showed off AlphaFold in 2018, predicting how proteins fold more accurately than a seasoned origami master.
Sure, Nvidia had been dipping their toes in biology for years – molecular stuff, gene sequencing, fancy microscopes – the usual science nerd fare. But AlphaFold was next level.
Imagine turning boring strings of amino acids into super-accurate 3D protein models.
So, Nvidia took Google’s breakthrough as a green light, and they weren't about to slow down. They punched the gas pedal with BioNeMo in 2022, which is basically a treasure chest of AI models that can whip up new drugs in the time it takes to brew your morning coffee.
BioNeMo, a software powerhouse packed with AI models, even AlphaFold itself, was used for simulating how molecules fit together like puzzle pieces, programs to create brand new molecules, and AI that can predict how tightly a drug binds to its target – this was a geek's dream come true.
By then, over 100 drug companies signed up in a flash, and Nvidia knew it was just the beginning.
Leading this charge is Nvidia’s CEO, Jensen Huang, who might as well be the pitchman of the future — a future where biology is fully digitized. He’s the guy in the leather jacket at the science fair, convincing all the big pharma kids to try out his shiny tech toys. And it’s working.
Now, Nvidia isn’t just selling chips anymore. They’re selling digitized biology that could be the golden ticket to curing, well, just about anything.
Still, not everyone’s buying the glossy brochure. Some seasoned biotech vets whisper about Nvidia simplifying the complex dance of biology just to push product.
But then you’ve got folks like Sean McClain over at Absci (ABSI) saying if it weren’t for Nvidia, AI in healthcare would be stuck at the starting line.
According to McClain and others who have embraced Nvidia’s technology, AI isn’t just a nice-to-have. It has become essential for future breakthroughs in healthcare.
So, which part of the biotech and healthcare industry is Nvidia focusing on the most these days?
Well, Nvidia's betting the farm on AI transforming drug discovery from a sort of high-stakes casino game (where most bets are losers) into a more predictable endeavor.
After all, Nvidia's still all about those super-powerful chips. They're building custom supercomputers for giants like Novo Nordisk (NVO) and Amgen (AMGN), tapping into their massive DNA databases.
But here's the thing: it's their software that really puts that power to work in drug discovery. This is where Nvidia’s making serious moves. Basically, their engineers optimize and fine-tune those AI models into pharma-friendly tools.
And Nvidia's latest trick? Microservices – ready-to-go AI models priced for serious buyers.
So far, these things are priced at $4,500 per GPU per year or $1 per GPU per hour. That means if you need to use them for an hour, a year, or whatever – Nvidia's got you covered.
Essentially, you get instant AI for drug discovery, no tech PhD required. Nvidia’s experts crunch the numbers and let pharma focus on what they do best.
Despite the eye rolls from the old guard calling this wildly optimistic, or "hopelessly naive," there’s tangible excitement about what AI can really do.
Given everything Nvidia has accomplished to date, it’s clear that Huang’s not just making idle chit-chat. He’s laying down a vision of a world where designing drugs is as error-free as drafting up the next smartphone.
High hopes? Sure. But with companies like Amgen seeing real results — boosting their clinical trial success rates and cutting down research timelines — there might just be something to all this talk.
And let’s face it, with Nvidia's muscle in AI, even if you're not buying what Huang’s selling, you've got to admit, the guy’s onto something. The healthcare industry might just be standing on the edge of a revolution, looking down at a future where AI is as common in a lab as a petri dish.
Mad Hedge Technology Letter
April 22, 2024
Fiat Lux
Featured Trade:
(TIK TOK IN HOT WATER)
(SMCI), (NVDA), (TIKTOK), (META), (MSFT), (GOOGL), (AMZN)
Tech is getting real political and that’s a problem for tech valuations.
On one side, there are foreign companies hoping to make a buck stateside and they are finding out it is not always smooth sailing.
The cradle of capitalism isn’t unfettered access to unlimited Benjamin’s.
The difficulties and examples are sprinkled through the sub-sectors of tech.
For example, to secure the EV battery plant subsidies from the US federal government, Korean companies have to produce the battery inside the United States.
Being a Korean company, Hyundai and Kia, pulling this off delivered painful financial expenses related to the companies.
Another Asian company grappling with additional political fallout is the social media app TikTok.
The most recent House bill easily passed meaning that if Senate approved the bill, TikTok might need to divest or be banned from the US.
TikTok told employees it will fight in the courts if a US bill forcing a ban or divestiture of the Chinese-owned app is signed into law.
US President Joe Biden has said he will sign the legislation promptly if it reaches his desk.
TikTok’s 170 million American users and 7 million small businesses would need to find a different platform.
ByteDance, the Chinese communist party-sponsored owner of TikTok, intends to fight the US ban in court and exhaust all legal actions before it considers any kind of divestiture, people familiar with the matter have said.
Beijing, in the meanwhile, will have to green light any TikTok deal on the tech-export ground, and it has reiterated it opposes a forced sale.
The environment for trading tech stocks has nudged into this ferocious backdrop of trading barbs and its increasingly disturbing tech companies from carrying out their duty to serve the end customer.
Tech customers don’t like that and it doesn’t matter if it’s waiting on an iPhone or software product that can’t be delivered in full, the product gets watered down or withheld.
Irreparable harm is being caused if customers don’t have full faith that tomorrow they will wake up and see an app not disappear from the app store or a device become obsolete because of regulation or government saber-rattling.
Part of this is the angst in which traders are seeing the market now as highly fraught, and tech stocks have run into a logjam at these higher levels because profit-taking is the best recipe of the day.
There needs to be a great reason for incremental investors to jump in, because let’s not kid ourselves, tech stocks are expensive at this point.
We pile into them because there are more or less 5 stocks growing robust earnings while many zombie companies don’t punch above their weight.
This is why traders are piling into Nivida, Meta, Microsoft, Amazon, and Google. I would put Super Micro Computers (SMCI) on that list too as a volatile super growth stock.
Tech still is the place to be, but the geopolitical strife is exacerbating the short-term consolidation of tech and we are experiencing larger selloffs than would be otherwise.
Tech readers must be patient as expectations for this earning season must be scaled back and we wait to unload on the next move up.
“The first rule is not to lose. The second rule is not to forget the first rule.” – Said American Investor Warren Buffett
(LOOKING BEYOND THE TECH SECTOR FOR INVESTMENT IDEAS IN AI)
April 22, 2024
Hello everyone.
The week ahead calendar
Monday, April 22
8:30 a.m. Chicago Fed National Activity Index (March)
Euro Area Consumer Confidence
Previous: -14.9
Time: 10:00 am ET
Earnings: Verizon Communications, Ameriprise Financial, Truist Financial
Tuesday, April 23
8 a.m. Building Permits final (March)
9:45 a.m. PMI Composite preliminary (April)
9:45 a.m. Markit PMI Manufacturing preliminary (April)
9:45 a.m. Markit PMI Services preliminary (April)
10 a.m. New Home Sales (March)
Australian Inflation Rate
Previous: 4.1%
Time: 9:30 pm ET
Earnings: Baker Hughes, Visa, Enphase Energy, Tesla, NextEra Energy, Freeport-McMoRan, Philip Morris International, Halliburton, United Parcel Service, PepsiCo, Lockheed Martin, Raytheon Technologies, GE Aerospace.
Wednesday, April 24
8:30 a.m. Durable Orders preliminary (March)
Previous: 1.4%
Time: 8:30 am ET
Earnings: Chipotle Mexican Grill, International Business Machines, Lam Research, Ford Motor, Align Technology, Waste Management, Universal Health Services, Raymond James Financial, Meta Platforms, Boeing, Hilton Worldwide Holdings, AT&T.
Thursday, April 25
8:30 a.m. Continuing Jobless Claims (04/13
8:30 a.m. GDP (Q1)
Previous: 3.4%
Time: 8:30 am ET
8:30 a.m. Initial Claims (04/20)
8:30 a.m. Wholesale Inventories preliminary (March)
10 a.m. Pending Home Sales (March)
11 a.m. Kansas City Fed Manufacturing Index (April)
Earnings: T-Mobile US, Capital One Financial Corp, Intel, Western Digital, Microsoft, Alphabet, Comcast, American Airlines Group, Southwest Airlines, Valero Energy, Caterpillar, Tractor Supply, Royal Caribbean Group, PG&E, GE Vernova.
Friday, April 26
8:30 a.m. PCE Deflator
8:30 a.m. Personal Consumption Expenditure
8:30 a.m. Personal Income
10 a.m. Michigan Sentiment NSA final
Japan Interest Rate Decision
Previous: 0%
Time: 12:00 am ET
Earnings: T. Rowe Price Group, Colgate-Palmolive, Exxon Mobil, Chevron, AbbVie, Phillips 66.
Big Tech is on stage this week – among other sectors - to deliver earnings results. Will they be mighty results and revive the flagging market? Let’s wait and see. Tech has had an incredible run since last October, so it should not be a surprise to see this sector taking a rest. This week will also give us a sense of where investors’ perceptions are in relation to AI.
In addition, Consumer spending will be under the spotlight this week, so we will get some understanding of the U.S. consumer’s behavior in the face of higher prices. Are they still consuming and borrowing?
The Bank of Japan is set to meet Friday at 12 am EST. With the USD/JPY reaching above 154.00, forex traders will be listening closely to hear any commentary from the BoJ regarding the depreciation of their currency.
Brief Market Update
US Dollar: The dollar will continue to rally for the medium term at least. Euro, Pound, Yen, Aussie, and KIWI will continue to weaken against the USD.
S&P 500: Correction in progress. Having advanced almost in a straight line since last October, the market is drawing breath. From an Elliott Wave perspective, the market is interpreted as undergoing a 4th wave correction. Market should find support around 4,820 or at worst in the low 4,700’s. Still potential for this market to extend to new highs after it takes a rest.
GOLD & SILVER: Bull market in progress. Gold’s uptrend to extend on to the next target around $2,500 over the coming weeks. Silver will rally toward $32.00.
Bitcoin: The coin has been undergoing a complex correction. Next upside target is around $83,000.
10-Year Yields: Yields could rally a little further before taking a rest.
Revisiting some Trades and Recommendations made last year.
October 25, 2023, Newsletter Title: Finding Defensive and Stable Stocks Amongst Changing Global Forces.
Stocks recommended:
Johnson & Johnson (JNJ) @ $ 150 April 19, 2024 @ $147.91
Visa (V) @ $ 235.00 April 19, 2024 @ $269.78
Google (GOOGL) @ $132.50 April 19, 2024 @ $ $154.09
November 11, 2023, Title: It’s a Green Light for the Market according to this Indicator.
Recommended: Digital Ocean (DOCN) $26.30 April 19, 2024 @ $32.43
November 13, 2023, Title: Which Noise is the Market Listening to: Wars in Europe and the Middle East or the Recession Drums?
Recommended: Trade ideas for Palo Alto Networks (PANW)
1/ Buy 1 Dec. 15, 2023, 250 call.
Sell 1 Dec. 15, 2023, 260 call.
2/ (More aggressive at the time)
Buy 1 June 21, 2024, out of the money 260 call.
Sell 1 June 21, 2024, out of the money 270 calls. Profit $540. Loss $460.
Current price of PANW as of Friday, April 19, 2024, is $277.71. If you took this trade, take profits.
What Stocks will Power the AI revolution?
Investors are starting to look beyond tech stocks when it comes to investing in artificial intelligence. They are now looking at real estate, energy, and utilities.
WHY?
Data centers will support a new world of AI technologies, and this is also fuelling demand for the providers of data center parts. In other words, we need to start thinking about power producers, grid equipment makers, providers of grid technology, as well as commodity companies tied to uranium and copper, used for cabling and electricity networks serving the data center.
Power usage for data centers will more than double and then some. Power usage is expected to grow at a compound annual rate of between 25% and 33% between 2023 and 2028. AI processing tends to happen on graphics processing units, or GPUs, which are more power-intensive.
According to Bank of America analysts, several companies stand to benefit from the rapidly growing power needs of data centers, including Caterpillar (CAT) and Equinix (EQIX).
Caterpillar is underrated here. The company is the leading manufacturer of diesel generator sets with more than 450,000 kilowatts installed in data centres and hospitals in a single year. Management is raising its own capital expenditures for the first time in a decade to meet the power demand for data centers. Caterpillar dropped last week but is a quality stock to own for the long term.
Equinix (EQIX) is starting to capture the very early signs of AI demand. Most of the total opportunity is yet to come. (EQIX) is anticipating strong top-line revenue growth this year. Bank of America expects Equinix to jump roughly 33% this year. Equinix has dropped around 7% so far this year.
Bank of America is also bullish on electrical components maker Eaton (ETN) in relation to its ability to provide data center infrastructure and power supply. BofA believes Eaton shares could climb another 12% after gaining more than 25% this year.
Generally speaking, analysts expect data center demand to likely exceed supply. It is understood that AI demand will emerge in two phases – training and inference – where training new AI models will require power and cooling while new data centers will need to be built to accommodate those needs.
Quite Interesting (QI) Corner
Cheers,
Jacquie
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