June 2024

SMART MONEY, SMARTER BETS

(NVDA), (AMZN), (AAPL), (AVGO), (CRM)

Back in the late 1970s, I found myself a stone's throw from the buzzing epicenter of Asia's tech boom – Tokyo. The air crackled with the electric charge of innovation as Japan rose to dominate the world of semiconductors.

Traders and tycoons, adrenaline junkies all, made moves that would lay the digital world's foundation. It was a frenzy, reminiscent of the Gold Rush, and there I was, scribbling notes faster than a trader on his third espresso.

Fast forward to today, and while the tech has evolved, that adrenaline rush? It's the same, only now it's fueled by artificial intelligence (AI).

A few weeks ago, while most of us were distracted by Jerome Powell's eyebrow twitches or dissecting the latest earnings reports, something far more intriguing slipped under the radar. On May 15, the big boys of Wall Street - those with at least $100 million to play with - filed their Form 13Fs.

Now, for those of you who haven't spent decades in the trenches of high finance, these forms are like a treasure map of what the smartest money in the game is doing.

And let me tell you, the latest 13Fs read like a who's who of the AI gold rush. It's enough to make the Klondike prospectors look like amateurs.

Of course, it’s reasonable for anyone to think that Nvidia (NVDA), the darling of the AI world, would be the belle of this ball. After all, their stock has shot up faster than a MiG-25 - and believe me, I know how fast those things can climb.

We're talking about an 802% increase since the start of 2023. That's $2.9 trillion in market value, more than the GDP of most countries I've reported from.

But here's where it gets interesting. Some of the sharpest knives in the drawer - I'm talking about Philippe Laffont of Coatue Management, who has a net worth of around $6 billion, and Ken Griffin of Citadel Advisors, with an estimated net worth of $35 billion - have been dumping Nvidia shares like they're going out of style.

In fact, Laffont offloaded nearly 3 million shares, while Griffin shed about 2.5 million. Why, you ask? Well, let me pour you a glass of metaphorical vintage wine and explain.

First off, history isn't exactly on Nvidia's side. In my time, I've seen more “next big things” come and go than I've had hot dinners. Remember the dot-com bubble? The 3D printing craze?

Every single game-changing innovation in the last 30 years has had its bubble burst. AI might be different, but I wouldn't bet my antique aircraft collection on it.

Secondly, Nvidia's success has painted a target on its back. Everyone and their dog is trying to muscle in on the AI chip market. It's like watching a feeding frenzy in the financial waters, and Nvidia might just find itself outswum.

But here's where it gets really intriguing.

While these billionaires were selling Nvidia, they were also busy buying up other AI plays. It's like watching a high-stakes game of financial Jenga, and believe me, I've seen a few of those in my time.

Laffont, for instance, was gobbling up shares of Broadcom (AVGO) and Salesforce (CRM) faster than a Deng Xiaoping economic reform.

Broadcom's Jericho 3 chip is the talk of the AI town, capable of connecting 32,000 GPUs. That's more connections than I made during my entire time as a foreign correspondent, and let me tell you, I knew everyone from Ferdinand Marcos to Margaret Thatcher.

Salesforce, on the other hand, is using AI to supercharge its CRM software. It's like giving steroids to an already dominant athlete - and with 21.7% of the global cloud-based CRM market, Salesforce is certainly flexing its muscles.

Meanwhile, Griffin, whose hedge fund has made more money than some countries I've reported from, is betting big on Amazon (AMZN) and Apple (AAPL).

Besides, Amazon's not just selling books anymore. They're now knee-deep in AI, from their own chips to their AWS services.

And Apple? Well, they've just unveiled "Apple Intelligence." It's like Siri multiplied by a hundred, and it's coming to an iPhone near you.

Now, I'm not saying you should follow these billionaires blindly.

After all, I've climbed to 20,000 feet on Everest, and let me tell you, the view isn't always clear up there. But keeping an eye on what the big money is doing? That's just good business.

June 26, 2024

Tech Letter

Mad Hedge Technology Letter
June 26, 2024
Fiat Lux

Featured Trade:

(FISKER BLOWS UP)
(FSRNQ), (NVDA), (TSLA)

Fisker Blows Up

Tech Letter

Fisker (FSRNQ) is bankrupt and I can tell you that I am not surprised.

The sushi has hit the fan.

The non-Nvidia (NVDA) tech firms minus big tech are really having a tough time staying liquid and dare I might say profitable.

Many already knew Fisker was in trouble.

They also have a terrible car which doesn’t help its case.

If Tesla (TSLA) is having a hard time selling EVs then imagine what it is like for Fisker to sell an utter clunker.

FSRNQ’s car has been coined as the worst EV on the market by many prominent bloggers.

Fisker management told us they might run out of cash before 2024 is over.

Definitely not shareholders like to hear in an industry that is looking more like a race to zero than an industry able to price itself at a premium.

I believe many car executives are ruing the fact of the multi-decade knowledge transfer to the Chinese about building quality cars.

How do we take tabs of the situation at Fisker?

It only sells one car called the Fisker Ocean electric SUV. Last year, around 10,000 of the SUVs were made but only about half had been delivered to customers.

In a recent interview with Automotive News, the company’s founder and CEO Henrik Fisker admitted that the Ocean had quality problems. He blamed the issues on software from different suppliers that worked poorly together and said they were being addressed through updates.

Worldwide sales of plug-in vehicles could rise 21% this year, which represents a smaller rise than the 35% increase in 2023.

The company listed between $500 million and $1 billion of assets, and between $100 million and $500 million of liabilities, in its petition filed in Delaware. The filing protects Fisker from creditors while it works out a plan to repay them.

While Fisker Ocean sport utility vehicle production started on schedule in November 2022, the first SUVs lacked basic features including cruise control. The California-based company told customers it would deploy capabilities it had promised them the following year, via over-the-air software updates.

Fisker produced 10,193 Oceans last year but delivered only 4,929 vehicles to customers.

Fisker follows a handful of other EV startups into bankruptcy, including Charge Enterprises, the installer of EV charging stations that filed for Chapter 11 protection in March. Other EV makers that have filed for bankruptcy include Lordstown Motors, Proterra and Electric Last Mile Solutions.

Anecdotally, EVs didn’t calculate properly how difficult it is to convince the 2^nd wave of buyers.

For example, everyone in my family that will buy an EV has already bought one.

One Gen Z relative of mine swears he will never buy an EV because it doesn’t amount to more than a “toy car” with a battery that needs to be plugged in. He prefers a Ferrari or a Maserati where he can hear the engine roar. There is a high chance he will never be persuaded to buy an EV or if he does get persuaded, it will take 10-20 years for him to come around.

That is what EV makers face in bringing forward the next buyer.

Therefore, look at the bottom of the barrel EV production, they are all facing Chapter 11 and this is just the beginning.

Fisker’s share price peaked at around $30 per share in 2021 and now shares trade at $.02 per share. I would not buy the stock even at these levels.

Tesla’s halving of its share price also most likely means it is fairly priced for right now as we wait for a catalyst to send us either up or down.

The walls are closing in on the EV industry in the short-term and I advise readers to head to higher ground, let’s say the chip industry for a better crack at tech stocks.

June 26, 2024 - Quote of the Day

Tech Letter

“Only when the tide goes out do you discover who's been swimming naked.” – Said American Investor Warren Buffett

June 26, 2024

Jacque's Post

(AI TECHNOLOGY MAY SOON BE ABLE TO DETECT FIRES FROM SPACE)

June 26, 2024

Hello everyone,

In Australia, early detection of wildfires will become increasingly important. In the summer of 2019-2020, more than 12 million hectares, an area the size of England, was impacted.

The University of Sydney carried out an analysis for WWF-Australia, which showed that “about 143 million mammals, 2.46 billion reptiles, 181 million birds, and 51 million frogs occupied areas hit by the fires.” More than 60,000 koalas were killed.

Scientists from the University of South Australia believe they have found a way to use satellites and Artificial Intelligence (AI) to greatly increase the rates at which wildfires are detected.

Stationary satellites located up to 34,000km above the surface of the Earth, or lower, and orbiting satellites can both detect wildfires, but they have several limitations. The key innovation, say scientists, is to put sophisticated AI-enabled software into tiny cube satellites (CubeSats) that weigh just a few kilograms.

Geospatial scientist, Dr Stefan Peters, says that the idea has been modelled, and is soon to go live.

The Kanyini CubeSat (a collaboration between the Government of South Australia, a consortium of universities, and various industry partners) is scheduled to be launched on July 2, and Peters confirms that the onboard fire smoke detection solution will become operational at the end of this year or beginning of next.

Peters believes it should be able to reliably detect wildfires in less than one hour, whereas current satellites can take between 6-8 hours. Using a past fire event in the Coorong of South Australia, the AI approach took less than 14 minutes to detect smoke and relay the data.

Reducing the impact of wildfires has multiple benefits. Obviously, it protects millions of wild animals, as well as human lives and property, but it also stems from the huge release of carbon emissions during these catastrophic events.

WWF- Australia published a report following the 2019-20 wildfire season which said that somewhere between 400-700 million tonnes of carbon dioxide had been released. Let’s put that in perspective now. Australia’s annual emissions during the 12 months to June 2019 were about 500 million tonnes.

The cost of replacing these carbon stocks was estimated at somewhere between AU$1-2.8 billion.

Investing in early detection will surely pay dividends.

What is/are… CFDs?

Contracts for Difference, or CFDs, are a type of financial derivative used in CFD trading. The derivative works as an agreement to exchange the difference in price of an asset from when the position is opened to when it is closed. They can be used to speculate on the future price of a variety of financial markets like shares, forex, commodities, indices, or bonds.

When trading CFDs, the underlying asset is never exchanged between the buyer and the seller, and neither party needs to physically own it to begin with – CFDs are a purely speculative product. And because there is no need to own the underlying asset, CFDs can be used to take advantage of both rising and falling markets – known as ‘going long’ and ‘going short’.

CFDs are traded on leverage, which means that traders can benefit from magnified profits, but could also incur magnified losses.

I have used CFDs to trade Gold and Silver, QQQs, and single stocks.

Cheers,

Jacquie

June 26, 2024

Diary, Newsletter, Summary

Global Market Comments
June 26, 2024
Fiat Lux

Featured Trade:

(THE EIGHT WORST TRADES IN HISTORY),
(TESTIMONIAL)

June 25, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 25, 2024
Fiat Lux

Featured Trade:

(MORE THAN MEETS THE (WALL STREET) EYE)

(MRK), (PFE)

More Than Meets The (Wall Street) Eye

Biotech Letter

Dawn breaks, and as usual, I'm buried nose-deep in my morning ritual. You will find me, fervently hopping from one news site to another, much like a kangaroo in the wild.

This means my mornings are a mixed bag of global news digest — from German dailies to French periodicals (thank goodness for translation tools, right?), all part of an old habit from my days as a reporter.

So, why am I blabbing about this?

Well, it's because of a recent headline that grabbed my attention: "This drug can "melt away" bowel cancer," screamed BILD, Germany's numero uno newspaper.

Now THAT made me sit up straight. And the medicine they were gushing about? Keytruda from our very own healthcare titan, Merck & Co. (MRK).

Don't get me wrong. Merck’s been on my radar long before this, but I didn’t really give it much thought until the last quarter of 2023. Why? Well, with an annual return shy of 7% since January 2004, it wasn’t exactly screaming “look at me.”

But as life would have it, the story changed around 4Q23. All of a sudden, I found myself in the Merck rabbit hole, and boy, the wonders I found there.

Merck has been making waves in major programs like oncology, helping not just my portfolio, but countless patients with serious health conditions.

Just this month, at the American Society of Clinical Oncology (ASCO) meet—think of it as the Oscars for oncology nerds—Merck really strutted its stuff. Since 2021, their oncology portfolio has ballooned from 40 to 53 approved indications, and approvals in early-stage cancers have jumped from 2 to 10. Impressive, right?

And here’s the most impressive update of all: Keytruda alone has snagged 9 new early-stage US approvals.

Then, there’s also the PD-1/PD-L1 heavyweight, which is the lone therapy proving an overall survival benefit across lung, renal, breast, and cervical cancers.

To fortify its case, Merck has over 30 Phase III trials with 30,000 patients targeting earlier treatment. Crucial studies demonstrating survival rates for early intervention - a win for patients and healthcare systems alike.

Now, I've skipped some nitty-gritty details about these drugs, mainly to avoid turning this into a science class. The focus here is the bigger picture: how well Merck is positioned for growth.

Merck's already helping 2.6 million people worldwide. But what's driving this? Their 53 approved indications across 23 tumor types and two tumor-agnostic indications. Not just in the U.S., but also in the EU and Japan. And guess what? They're just getting started.

The company’s oncology pipeline is predicted to generate a whopping $20 billion in sales by mid-2030. Current products not included.

On top of that, they are aiming for $63.1 billion in total revenue this year alone.

Oh, and if you thought Merck was just about cancer, think again. They’ve just thrown a gauntlet at Pfizer (PFE) with their new FDA-approved pneumococcal vaccine, Capvaxive.

For context, Pfizer has been leading the pneumococcal vaccines market like a seasoned quarterback with its Prevnar shots, raking in a cool $6.4 billion just last year.

Just last week, though, Merck got the green light from the FDA for Capvaxive, designed specifically with adults aged 18 and up in mind. It zeroes in on those nasty strains most responsible for causing pneumococcal disease in adults aged 50 and older. Between you and me, that makes it one-up on Pfizer’s Prevnar 20.

Now, I hear you asking, "John, is FDA approval the finish line?" Not by a long shot. This is just the intermission. Next up, we've got the CDC’s advisory committee recommendations, which could turn this game on its head.

At this point, most adults look to Pfizer for their shots. But, if the CDC switches their recommendation in favor of Capvaxive, they'll be the ones leading the charge in the pneumococcal vaccine market.

So, what does that mean for stockholders?

Excluding Capvaxive’s potential earnings, Merck has actually been on a roll, making more dough in the first quarter of this year than a baker's first shift.

In the first quarter alone, their vaccine portfolio, headed by GARDASIL, saw a 17% increase in sales. Even currency headwinds didn't stop Merck from outdoing itself.

After 13 consecutive annual hikes, Merck dishes out dividends like candy at a parade. You're looking at a yield of 2.4% - a sweet deal if I ever saw one.

And I have to say, Merck's been putting on quite a show, outperforming the Healthcare ETF over the last decade with 225% returns.

But here's the best part - the show isn't over. With expected EPS growth of 14% and 8% in 2025 and 2026 respectively, this stock is undoubtedly on a tear. With an A+ credit rating and a below 1x leverage ratio in 2024, Merck is proving to be a standout in the healthcare arena.

Now, I’m not one to tell you where to put your money, but if Merck keeps up this pace, their path of robust EPS growth and a powerhouse portfolio could make them a standout in your portfolio too.

So, maybe give that old stock a new look. Who knows? It could be just what the doctor ordered.

June 25, 2024

Diary, Newsletter, Summary

Global Market Comments
June 25, 2024
Fiat Lux

Featured Trade:

(THE U-HAUL INDICATOR)

The AI Revolution: Which Jobs Will Be Replaced First?

Mad Hedge AI

Artificial intelligence (AI) is rapidly advancing and its potential impact on the job market is a topic of intense discussion and speculation. While AI promises increased efficiency and productivity, it also raises concerns about job displacement. Experts predict that certain jobs, particularly those involving repetitive tasks or data analysis, are more susceptible to automation in the near future.

According to a 2023 World Economic Forum report, an estimated 85 million jobs could be displaced by AI by 2025. However, the report also highlights that AI is expected to create 97 million new jobs during the same period, primarily in fields that require human-AI collaboration and technological expertise. The key to navigating this transition lies in understanding which jobs are most likely to be affected and preparing for the changing landscape of work.

Top 10 Jobs Likely to Be Replaced by AI:

1. Data Entry Clerks: AI-powered software can quickly and accurately process large volumes of data, making manual data entry increasingly obsolete.

2. Telemarketers: AI-driven chatbots and virtual assistants can handle customer inquiries and sales calls, often with greater efficiency and personalization than human telemarketers.

3. Customer Service Representatives: As AI technology continues to improve, chatbots and virtual assistants are becoming more sophisticated in their ability to understand and respond to customer queries, reducing the need for human intervention.

4. Proofreaders and Copy Editors: AI-powered tools can analyze text for grammar and spelling errors, inconsistencies, and potential plagiarism, streamlining the editing process and potentially replacing human proofreaders and copy editors.

5. Market Research Analysts: AI algorithms can efficiently analyze vast amounts of market data, identify trends, and generate insights, potentially replacing the need for human analysts.

6. Financial Analysts: AI-powered tools can process financial data, identify patterns, and make predictions, potentially automating some tasks traditionally performed by financial analysts.

7. Truck Drivers: Self-driving trucks are already being tested, and as the technology matures, they could potentially replace human truck drivers on long-haul routes.

8. Factory Workers: Robotics and automation are already widely used in manufacturing, and as AI technology advances, robots are becoming more capable of performing complex tasks, potentially displacing human workers.

9. Retail Workers: Self-checkout kiosks, automated inventory management systems, and AI-powered customer service tools are transforming the retail industry, potentially reducing the need for human cashiers and sales associates.

10. Couriers and Delivery Drivers: As autonomous delivery robots and drones become more widespread, they could potentially replace human couriers and delivery drivers, particularly for short-distance deliveries.

It is important to note that this list is not exhaustive, and the pace of AI adoption will vary across industries and regions. Additionally, the replacement of human workers by AI is not always a simple one-to-one substitution. In many cases, AI will augment human capabilities, allowing workers to focus on higher-value tasks that require creativity, critical thinking, and interpersonal skills.

Preparing for the Future of Work:

To thrive in the age of AI, individuals and organizations must adapt to the changing landscape of work. This includes investing in education and training programs that focus on developing skills that are difficult to automate, such as creativity, complex problem-solving, emotional intelligence, and adaptability. Additionally, fostering a culture of lifelong learning and embracing new technologies will be crucial for staying competitive in the job market.

Governments and businesses also have a role to play in ensuring a smooth transition to an AI-powered economy. This includes investing in research and development, supporting education and training initiatives, and implementing policies that promote fair and equitable distribution of the benefits of AI.

In conclusion, while AI is poised to transform the job market and displace certain jobs, it also presents opportunities for new jobs and industries to emerge. By understanding the potential impact of AI on employment and proactively preparing for the future of work, individuals and organizations can navigate this transition and thrive in the age of artificial intelligence.