“Price is what you pay, value is what you get.” – Said Warren Buffett
Mad Hedge Biotech and Healthcare Letter
October 22, 2024
Fiat Lux
Featured Trade:
(TICK TALK)
(AAPL), (ABT), (BSX), (MDT), (RMD), (INSP), (DXCM), (PODD)
(THE AUSSIE OUTBACK IS BEING PREPARED FOR WAR WITH CHINA)
October 23, 2024
Hello everyone
A little-known airbase in the middle of nowhere in outback Australia is being prepared by American/Australian forces for an all-out war with China. If this event comes to pass, RAAF Base Tindal will play a central role.
Ever heard of the novel We of the Never Never? The location of the novel and this Airbase are one and the same. About 300km south of Darwin, near the town of Katharine in the Northern Territory, a small army is preparing the formerly unmanned army base for the arrival of B-52 bombers capable of carrying nuclear weapons and, later, for American stealth bombers.
The runway has been extended to handle the West’s biggest military aircraft. Fuel bunkers full of millions of liters of jet fuel are complete. Submerged bunkers are loaded with computer equipment. Dormitories with hundreds of beds are in place. Additionally, underground power systems backed up by large Rolls Royce-made emergency generators costing millions will increase resilience if there is an attack. Construction is ongoing at the Base so that six B-52’s can be parked.
Several of Australia’s F-35A stealth jet fighters – which will eventually be 72 – are already based at Tindal. The Australian Air Force Wing Commander Fiona Pearce said that “We’re going to be big enough to take any aircraft in the world and to park and fly every different variant of aircraft.”
Michael McCaul, chairman of the US House of Representatives, described Australia as “the central base of operations” for America’s military to confront Chinese aggression in the Indo-Pacific.
Paul Dibb, emeritus professor of strategic studies at the Australian National University, said that the military build-up in Australia was Washington’s insurance policy.
It will not only be 1950’s-era B52 bombers that will operate out of Tindal. The rapid upgrades to the base will also accommodate the US B-2 stealth heavy bomber and its long-range replacement, the B-21, which made its maiden flight last year.
The American military build-up is becoming obvious to the residents of Darwin. US Marine Osprey aircraft operated by US Marines housed in the tropical city have become a familiar sound. In addition, the sight of a US fuel dump dominates the skyline.
Not everybody is happy about this defense build-up. Some former Australian politicians are scathing of the build-up and have expressed anger at the fact that Australia would be targeted in a war between the U.S. and China. Also, the Australian public has been mostly uninformed about this strategic development.
Elisabeth Clark, the mayor of Katherine, said: “With China and everything else, you just don’t know what’s going to happen. I think people are aware we are now a target.”
QI CORNER
SOMETHING TO THINK ABOUT
Cheers
Jacquie
Global Market Comments
October 23, 2024
Fiat Lux
Featured Trade:
(THE CODER BOOM),
(THERE ARE NO GURUS)
There is a new boom going on in Northern California.
It is not another gold rush, even though this winter’s heavy rains have flushed out a new supply of the yellow metal in High Sierra rivers and streams.
And I am not referring to the marijuana boom triggered by growing anticipation of the legalization of the evil weed in the November election.
No, I am talking about the coder boom, the stampede by young job seekers to cash in on the overwhelming demand for computer programmers.
I’m hearing about this everywhere.
Kids are quitting their jobs driving trucks, running farms, or working as baristas at Starbucks. They blow their entire life savings on a three-month crash course at a coding school. The schools then promise them dream jobs on graduation.
Schools like this are popping up like mushrooms on the green California hills in winter, charging up to $20,000 per course. Don’t think you’ll just walk into these places either. All of these schools have waiting lists, and only the most qualified and ambitious get in.
They’re almost as hard to get into as my….tennis club.
It’s worth it because it sets you up to move into a six-figure job almost immediately. At least, it’s supposed to.
There is no doubt that there is an absolutely mammoth demand for computer programmers right now. There is NO part of the US economy that isn’t attempting to grow its online presence as rapidly as possible.
Salaries are through the roof, as can be seen by the interactive map of current programming jobs around the country published by Cyber Coders (click here).
Headhunter Robert Half ( click here ) wants to charge you 30% of a first year’s salary for their service in finding developers.
Ouch!!
Click here for a map from the Bureau of Labor Statistics on where all the developer jobs are going.
The problem is that as soon as a coder gets good, they go freelance, charging up to $200 an hour. Who can blame them? Raking the money in while working anywhere, anytime, sounds like a great gig to me.
Hiring a developer can be the most challenging task for a small, rapidly growing business. Stories are rife of dummy developers wiping out business overnight because of incompetent coding. And Heaven help you if you thought you could save money and outsource this job to India.
Marquee names like Google and Apple soak up the few out there with actual college degrees in computer science, leaving the rest of us to hire hobbyists who went full-time. Sound familiar.
Coder Camp (www.codercamp.com ) invites you to “Reprogram your Career” with a series of immersive camps on Java, JavaScript, and Ruby on Rails for $14,200 each.
Udemy (www.udemy.com ) offers dozens of courses ranging from $49 and up for online tutorials on every programming topic under the sun. They boast 20,000 online instructors and 10 million hungry students in 190 countries.
Learning Tree International (https://www.learningtree.com ), the veteran in the space, has a four-course training passport for $6,790.
Devbootcamp (http://devbootcamp.com/ ) pioneered the short-term immersive “web development boot camp,” a model that transforms beginners into full-stack web developers. Their 19-week $13,900 program offers three-year low-interest financing.
Hack Reactor (http://www.hackreactor.com ) is a high-end Cadillac operation and promises a 99% job placement rate with a $105,000 initial salary.
I hear that production-grade iPhone apps are a hot skill to learn. And if you are able to learn anything about cyber security, you can write your own ticket.
As is so often the case with these Internet schemes, the hype may exceed actual results (mine excluded). Developer friends tell me that it takes a year of full-time study before you can land an actual regular job. It really takes as much time to learn coding as it does to speak a new foreign language fluently.
Many new coders start with limited part-time assignments and work their way up from there as their skills build.
If you are good at math, you have a definite advantage, as much of good coding involves problem-solving of a mathematical nature.
Still, you can’t argue with people abandoning old economy jobs and training for new economy ones, whatever the cost. I’m told there was a recent influx of new students freshly laid off in the oil patch.
If you still have a Millennial living in the basement awaiting their calling, this is a big chance to turf them out. All you need is a cheap computer, broadband, and motivation.
Oh, and by the way, the Mad Hedge Fund Trader is looking to hire a developer with a specialty in API and Infusionsoft (click here for that link).
Thanks to last year’s blowout double-digit performance numbers, my firm has entered hyper-growth mode, and everyone is working pedal to the metal.
Please send your resume to Nancy at support@madhedgefundtrader.com and specify “DEVELOPER” in the subject line.
So What is This "DEL" Key For Anyway?
If there was ever an argument that you should rely on independent newsletters for guidance about financial markets, such as The Diary of a Mad Hedge Fund Trader, and not traditional brokerage houses, take a look at the chart below from JP Morgan.
It shows that despite all of the reforms passed after the dotcom crash, less than 3% of broker reports come with “sell” or “hold/sell” ratings.
If an investment bank’s analyst dislikes a stock, they will simply drop coverage or lose the file behind the radiator, rather than lose potentially lucrative business or risk potential lawsuits.
If individual investors are going to have a prayer of keeping their heads above water in the “new normal,” it will only be through studying truly unbiased sources and drawing their own conclusions.
Despite many pretenders, there are no real “gurus” out there, no matter how hard you look.
If this reality is too hard to face, get used to the 0.01% you are earning in your money market fund, or the 2.51% you get with ten-year Treasury bonds.
These ultra-low short rates are going to be around for a while.
While waiting two hours to vote at the Incline Village Library this weekend, I counted the number of smartwatches in the line.
Seemed like everyone was checking their heart rates in the cold. One woman's Apple Watch even suggested she sit down after standing too long in the 40-degree weather.
That got me thinking about the billions flowing into medical wearables - and where that money should really be going instead.
Let's start with some sobering numbers about atrial fibrillation (AFib), the crown jewel of smartwatch detection capabilities.
Yes, Apple's (AAPL) 2020 study showed their watches can detect 84% of AFib cases during monitoring sessions. Sounds impressive, until you dig deeper.
Of the 50 million Americans wearing smartwatches, these devices identify only about 5,000 new AFib cases annually - a mere 0.083% of the 6 million Americans affected by the condition.
Plus, the real money tells a different story. The U.S. performs 250,000 ablation procedures yearly, creating a $3.2 billion market growing at 10% annually.
Abbott Laboratories (ABT), Boston Scientific (BSX), and Medtronic (MDT) dominate this space, with combined annual revenues of $12.4 billion from their cardiac rhythm management divisions alone.
Those 5,000 smartwatch-detected cases? They represent just 2% of annual ablation procedures. Not exactly the revolution we've been promised.
The story doesn't improve when we look at sleep apnea detection.
While Apple and Samsung tout their sleep-monitoring capabilities, their watches identify only about 60,000 of the 2 million new sleep apnea cases diagnosed yearly - that's 3% of new diagnoses.
Meanwhile, ResMed (RMD) and Inspire Medical Systems (INSP) generated combined revenues of $4.8 billion last year from sleep apnea treatments.
The smartwatch contribution to their patient pipeline is barely a rounding error.
Still, it’s not like this sector is a complete waste. The global smartwatch market stands at $58 billion and is projected to reach $98 billion by 2027, growing at 10.5% annually. Impressive, until you compare it to the traditional medical device market: $495 billion, reaching $718 billion by 2029.
The cardiac monitoring device segment alone represents $24.5 billion, expanding at 6.9% annually.
More importantly, traditional medical device companies are growing their revenues faster than smartwatch detection is adding to their patient base.
But, like I said, don't write off the sector entirely. The next generation of smartwatches promises some intriguing possibilities.
Continuous blood pressure monitoring could tap into a $23 billion market.
Non-invasive glucose tracking might crack the $28 billion diabetes monitoring space by 2027.
Enhanced sleep diagnostics could open up another $12.8 billion in opportunities.
So what's the smart play here?
Near term, keep your focus on established leaders like Abbott and Medtronic. Their upcoming Q4 earnings reports will tell us more about traditional patient acquisition trends than any smartwatch sales figures.
Watch for FDA clearances too - Abbott's new cardiac mapping system, expected in Q1 2025, could be a game-changer.
Looking out 12-24 months, keep your eye on companies like Dexcom (DXCM) and Insulet (PODD) as glucose monitoring moves mainstream.
ResMed's new sleep diagnostic platforms, launching mid-2025, could redefine how we think about sleep medicine.
Meanwhile, Boston Scientific's push into AI-enhanced cardiac monitoring might just bridge the gap between consumer tech and serious medical devices.
For long-term thinkers, watch for companies developing hybrid solutions that combine traditional devices with consumer tech.
The real breakthrough will come when medical device makers start acquiring wearable technology companies. That's when you'll know the revolution is real.
Remember, following the patient flow matters more than following the hype flow. Just like timing your visit to avoid a two-hour voting line, timing in the market is everything.
And right now, the time is right for medical device stocks, not their flashier smartwatch cousins.
Meta, the tech giant behind Facebook, Instagram, and WhatsApp, is no stranger to controversy. But its recent foray into the world of large language models (LLMs) with its Llama family has ignited a new firestorm, this time centered around the very definition of "open source." While Meta claims its Llama models are open source, critics argue that the company is muddying the waters, confusing users, and ultimately "polluting" a term that holds significant weight within the software development community.
The heart of the issue lies in the discrepancy between Meta's use of the term "open source" and the long-established understanding of what it entails. The Open Source Initiative (OSI), a non-profit organization that maintains the Open Source Definition (OSD), has been vocal in its criticism of Meta's labeling. According to the OSD, open-source software must grant users the freedom to use, study, share, and modify the software in any way they choose. This typically includes access to the source code and the ability to redistribute both the original and modified versions.
While Meta allows free access to its Llama models and permits their use for research and commercial purposes, it falls short of the OSD's criteria in several key aspects.
Points of Contention:
- Limited Transparency: Meta has not released the training data or the code used to train the Llama models. This lack of transparency makes it difficult for researchers to understand the models' inner workings, reproduce results, or identify potential biases and limitations.
- Restrictive Licensing: While the Llama models are available for free, their license includes certain restrictions. Notably, companies with over 700 million daily active users are prohibited from using the models, a clause seemingly targeted at competitors like Google and Microsoft. This restriction contradicts the open-source principle of free and unrestricted use.
- "Open Weights" vs. "Open Source": Meta often uses the phrase "open weights" to describe its models. This term, while gaining traction in the AI community, is not synonymous with "open source." Releasing the model weights allows users to utilize the pre-trained model but doesn't provide the same level of transparency and control as access to the full source code and training data.
Why the Controversy Matters:
The debate surrounding Meta's use of "open source" is not merely semantic. It strikes at the core of what open source represents and has significant implications for the future of AI development:
- Trust and Transparency: Open source fosters trust by allowing users to scrutinize software and verify its claims. Meta's approach, with its limited transparency, undermines this trust and raises concerns about potential hidden biases or limitations in the Llama models.
- Collaboration and Innovation: Open source thrives on collaboration and the free exchange of ideas. By imposing restrictions on usage and withholding crucial information, Meta hinders the collaborative spirit that has driven open-source innovation for decades.
- Fair Competition: The restrictive licensing clause targeting large companies raises concerns about anti-competitive practices. Critics argue that Meta is leveraging the "open source" label to gain a competitive advantage while limiting the ability of others to build upon its work.
- Ethical AI Development: Transparency and open collaboration are crucial for developing ethical and responsible AI. Without access to the training data and code, it is difficult to assess and mitigate potential biases, safety risks, and societal impacts of LLMs.
The Impact on the Open-Source Community:
Meta's actions have sparked widespread debate within the open-source community. Many developers and experts have expressed concerns about the potential for Meta's approach to dilute the meaning of "open source" and erode trust in the label.
Some argue that Meta's "open washing" – using the term "open source" for marketing purposes without adhering to its principles – could mislead users and create confusion about what constitutes truly open-source software. This confusion could ultimately harm the open-source movement by making it harder for users to identify and support genuinely open projects.
Others worry that Meta's influence and resources could lead to the normalization of a less open definition of "open source" in the AI domain. This could set a dangerous precedent, encouraging other companies to adopt similar practices and undermining the core values of the open-source movement.
Meta's Response:
Meta has defended its approach, arguing that existing open-source definitions do not adequately address the complexities of LLMs. The company claims to be committed to working with the industry to develop new definitions that better reflect the unique challenges of AI development.
However, critics argue that Meta's actions speak louder than its words. The company's continued use of the "open source" label despite widespread criticism suggests a reluctance to acknowledge the concerns of the open-source community.
Looking Ahead:
The controversy surrounding Meta's Llama models highlights the growing tension between the traditional values of open source and the commercial interests of tech giants in the rapidly evolving field of AI.
As LLMs become increasingly powerful and influential, the need for clear definitions and ethical guidelines becomes paramount. The open-source community, with its emphasis on transparency, collaboration, and community-driven development, has a crucial role to play in shaping the future of AI.
It remains to be seen whether Meta will revise its approach to align with the principles of open source or continue to chart its own course. The outcome of this debate will have significant implications for the future of AI development and the open-source movement as a whole.
In Conclusion:
Meta's use of the "open source" label for its Llama models has sparked a heated debate about the meaning and future of open source in the age of AI. While Meta's contributions to the AI field are undeniable, its approach raises concerns about transparency, ethical development, and the potential for misuse.
The controversy serves as a reminder that the principles of open source – freedom, collaboration, and community – are more important than ever in ensuring that AI technologies are developed and deployed responsibly. It is crucial for the open-source community to remain vigilant in upholding these principles and challenging any attempts to dilute their meaning or undermine their importance.
Mad Hedge Technology Letter
October 21, 2024
Fiat Lux
Featured Trade:
(BITCOIN PRICE ACTION IS GOOD FOR TECH STOCKS)
($COMPQ), (BTCUSD)
When I see Bitcoin coming back from the doldrums, it highly suggests to me that there is a great deal of liquidity sloshing around in the markets.
Bitcoin doesn’t pay your mortgage or buy food at the grocery.
Fiat currencies do.
Therefore, users still need to convert their crypto holdings into whatever it may be, whether it is Turkish Lira or Euro, to transact with most retailers.
So when we have a roaring economy of 3% GDP powered by $3 trillion in annual deficit spending, it seems that many investors are focused on the large deficit spending, which infuses a heavy dose of asset appreciation into the economy and other asset classes like crypto and tech stocks. That is why tech stocks, houses, Bitcoin, and groceries are all expensive and rarely go down in price.
Bitcoin approaching $70,000 per coin is a highly bullish sign to the rest of the tech stocks that this rally will power on until year-end.
Tech stocks are denominated in US dollars, which makes them a huge beneficiary of increasing global liquidity, which is on the rise again, with central banks across the world injecting cheap capital into their economies.
When global liquidity has exceeded its moving average in the past, it has often coincided with significant upward movements in the price of Bitcoin and tech stocks.
Compounding the positive fortunes of Bitcoin and tech stocks are the presidential candidates saying they are very pro-crypto.
Republican candidate Donald Trump is avowedly pro-crypto, so much so that Bitcoin is viewed as a so-called Trump trade. Democratic rival Vice President Kamala Harris has vowed to support a regulatory framework for the industry.
I do believe that this synchronized trade of higher-tech stocks, higher bitcoin, a weaker yen, and stronger gold continues until there is a paradigm shift.
The one outsized risk that is a “known known” is the Aha moment when investors realize the federal debt is a now problem.
We have kicked the can down the road for decades, but even Elon Musk has repeated a warning that the U.S. is hurtling toward the brink of "bankruptcy."
U.S. national debt has skyrocketed in recent years, crossing the $34 trillion mark at the beginning of 2024, largely due to lockdown stimulus measures that sent inflation spiraling out of control and forced the Federal Reserve to hike interest rates at a historical clip.
Earlier this year, Bank of America warned the U.S. debt load is about to ramp up to add $1 trillion every 100 days, headed towards $36 trillion by the end of 2024. This will also trigger a surge in Bitcoin prices.
I do believe if the federal government limits its debt spending to $3 trillion per year, tech stocks and bitcoin will continue to increase in price in tandem.
However, if we ever do get a recession, yes, the one that was supposed to happen since 2019, then it could trigger a $15 trillion federal debt response to limit the contagion, destroying more purchasing power.
A massive fiscal event like that would careen the US economy into a dangerous path while disrupt the tech and bitcoin trade into the only bitcoin and gold trade.
We still have time to get the situation under control, but neither party has even talked about it during their campaign. Only Musk has said he wants to create a department of efficiencies to trim the fat and reduce government spending.
As it stands now, goldilocks continues, and readers should buy the dip in tech stocks.
