December 2024

Optimistic Future For Google

It isn’t a surprise that the Department of Justice is going after Google (GOOGL) to divest its Chrome browser following a ruling in August that the company holds a monopoly in the search market.

I don’t believe this will tank the cash cow business of Google Search, and let’s not forget the most likely outcome is that Chrome is retained as a division of Google.

At worst, if it does get divested, the appeal process takes many years.

Although I do believe it will become harder for Google Search to track and monitor user behavior without Google Chrome, this is by no means a deal breaker.

Plenty of traffic comes from completely different operating systems like Apple (AAPL) iOS that don’t employ the Chrome browser.

In fact, spinning out its browser would result in a massive windfall because the current setup hides the aggregate value and synergies within a larger corporation.

Once Google Chrome is spun out, animal spirits could take hold, and the value could skyrocket.

Google will naturally profit from this as well.

Chrome, which Google launched in 2008, provides the search giant with data it then uses for targeting ads. The DOJ said in a filing that forcing the company to get rid of Chrome would create a more equal playing field for search.

The DOJ said that Google will be prevented from entering into exclusionary agreements with third parties like Apple and Samsung. The department also said that Google be prohibited from giving its search service preference within its other products.

Search advertising accounted for $49.4 billion in revenue, representing three-quarters of total ad sales in the most recent period.

The DOJ’s request represents the agency’s most aggressive attempt to break up a tech company since its antitrust case against Microsoft, which reached a settlement in 2001.

In August, a federal judge ruled that Google holds a monopoly in the search market.

Also, the DOJ suggested limiting or prohibiting default agreements and “other revenue-sharing arrangements related to search and search-related products.”

The most likely outcome is that Google will be legally forced to do away with certain exclusive agreements, like its deal with Apple. I also don’t believe that Google will be forced to divest from the Android operating system, and the chances of that happening are almost zero.

Even without an exclusivity agreement, most Apple users use Google Chrome because it is still the most useful search engine.

Will that be the case in the future?

With AI changing business models left and right, it is hard to say, but in the interim, it is hard to believe that a lack of exclusivity agreement will cause any meaningful change to the bottom or top line in the next few years.

Breaking up parts of Google would result in a massive windfall for shareholders, strengthen the tech ecosystem, and make Google and its spinoff entities more competitive.

However, high-up executives are wary about voluntarily dumping revenue from the mothership because it hurts negotiating leverage when agreeing on future compensation, and that is what usually standalone corporate executives care about.

I believe spinning out some of these businesses, like Waymo, Google devices, Google Maps, and YouTube, would be great for America and give an opportunity for investors to jump into great tech companies before they skyrocket.

December 11, 2024 - Quote of the Day

Tech Letter

“You want to be the pebble in the pond that creates the ripple for change.” – Said CEO of Apple Tim Cook

December 11, 2024

Jacque's Post

(BUY PRODUCTS NOW BEFORE TRUMP TARIFFS HIT)

December 11, 2024

Hello everyone

ON THE RADAR TODAY

November CPI report.

Economists expect a monthly increase of 0.3% for both the headline CPI reading and core CPI, which excludes volatile food and energy prices. The November producer price index, scheduled for Thursday, is expected to show an increase of 0.2% in its headline and core readings. The thinking on Wall Street is that the Fed is highly likely to cut interest rates next week if inflation comes in at or below expectations in those two reports. Still, there is an element who disagrees and believes the Fed will hold if the CPI reading came in above 0.40%. The Labor market remains front of mind for the Fed.

WHAT TO BUY BEFORE TRUMP’S TARRIFS ARE ROLLED INTO PLACE

According to Trump’s policy promise, he plans to issue a 25% tariff on products from Canada and Mexico on his first day in office, as well as an additional 10% on top of the rates still in place from his first administration on Chinese imports.

The importers paying the tariffs will likely pass them on to consumers.

Many retailers are already preparing their customers for increased prices and encouraging them to shop now.

Of course, it’s unclear how much prices will increase and which specific items will be affected, but it would be a good idea to start thinking about any large purchases you might be planning. For instance, do you need to upgrade your iPad or your MacBook? My advice: Do it now.

These are some of the categories where prices are expected to increase.

Laptops and tablets

Videogame consoles

Smartphones

Apparel, footwear and accessories

AUSTRALIAN NEWS CORNER

The Reserve Bank of Australia keeps interest rates on hold at 4.35%. People hoping for an early Christmas gift from the RBA were let down once again. Now, the odds are that the RBA won’t start to cut interest rates until about April next year, so Australia still has some time to wait.

WORLD NEWS CORNER

Syrian regime falls. Assad flees to Russia. Full implications are still unfolding, but the hope is that the factions that make up the rebel force can work together to bring some semblance of stability to the country.

QI CORNER

SOMETHING TO THINK ABOUT

Cheers

Jacquie

December 11, 2024

Diary, Newsletter, Summary

Global Market Comments
December 11, 2024
Fiat Lux

Featured Trade:

(JANUARY 10 MIAMI FLORIDA STRATEGY LUNCHEON)
(THE BEST TESTIMONIAL EVER)

Friday, January 10, 2025 Miami, Florida Strategy Luncheon

Diary, Luncheon, Newsletter

Come join me for lunch for the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Miami, Florida at 12:00 PM on Friday, January 10, 2025. A three-course lunch is included.

I’ll be giving you my up-to-date view on stocks, bonds, currencies commodities, precious metals, and real estate.

And to keep you in suspense, I’ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $267.

I’ll be arriving early and leaving late in case anyone wants to have a one-on-one discussion or just sit around and chew the fat about the financial markets.

The lunch will be held at an exclusive hotel in the Coconut Grove sector of Miami, the details of which will be emailed to you with your purchase confirmation.

I look forward to meeting you, and thank you for supporting my research.

To purchase tickets for this luncheon, please click here.

The Best Testimonial Ever

Diary, Newsletter, Testimonials

I was pondering a TESLA trade alert from MHFT today when my cell rang with a Lake Tahoe area code. Since I know a couple of people in that part of the world, I answered, and it was none other than John Thomas.

If I had not heard his voice on the MHFT webinars, I would have thought I was being conned. But given that I’m in the last month of a trial run, he actually called to find out how I was doing with the service and what I thought.

Here’s the short version of what I told him.

I’m a pretty experienced investor, but definitely not sophisticated when it comes to using options, or for that matter, trading currencies and commodities.

My first trade with MHFT – a (FXY) vertical call spread – literally scared the hell out of me, so I used a tiny position size. I think I made around $900 (more than my trial subscription, so there’s that).

But through the process of using John’s trade ideas, I learned. Fast. Nothing will help you grasp the potential of option strategies like doing them. And as I write this, I have multiple positions on courtesy of MHFT that are on track to deliver double-digit percentage gains in a matter of weeks!

I can’t quite comprehend how he knows so many well-placed people, but he’s incredibly adept at grabbing insights from them, turning these into an investment thesis, and making it incredibly clear and actionable to this reader base.

One day, he’s writing about a chat with a three-star general, and the next, you’re buying a call spread on Palo Alto Networks. He connects the dots in a ridiculously useful way.

But it’s more than just the idea, it’s the timing of the idea. The world is full of people who can say, “hey, cyber-security is a big deal.” Or, “wow, the euro is getting killed.” But the actual trade execution to profit from that in the near term? He’s freaky good.

I also love the defined exit strategy. Look, if you’re the most disciplined human on the planet and never let a bad trade turn into a long-term “investment,” more power to you.

I am not. I hate it when I do it, but it’s happened more than once. With MHFT, the exit is well-marked. You can’t miss it. Personally, I find that removes significant stress, not to mention risk.

Today, I was over at my local Schwab office – before John called – and was raving about MHFT. Not stark raving. Good raving. I’d be surprised if they aren’t signing up for a trial as I write this.

John, thanks for the call. That was a really nice surprise.

But more importantly, thanks for your great work, thinking, and ideas. Enjoy your travels, and I look forward to meeting you at one of your conferences.

Neil

Dublin, Ohio

December 11, 2024 - Quote of the Day

Diary, Newsletter, Quote of the Day

“It’s a terrible mistake to own something, just because somebody else owns it, even if that other persona is Benjamin Graham, the head of investing,” said Oracle of Omaha, Warren Buffett.

December 10, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 10, 2024
Fiat Lux

Featured Trade:

(THE INSURANCE COMPANY ALWAYS RINGS TWICE)

(UNH), (CI), (CVS), (HUM), (AMGN), (BIIB), (GILD)

The Insurance Company Always Rings Twice

Biotech Letter

Got an interesting call yesterday from an old college buddy - let's call him Bob. We go way back to our UCLA days, before I headed to Tokyo and he went into tech.

He was fuming because UnitedHealth (UNH) just denied his family's third claim this year, something about an "experimental treatment" for his daughter's rare condition.

Coming from a guy who just cashed out of his third startup, hearing him rant about insurance bureaucracy was pretty rich.

Still, his situation got me thinking. After hanging up, I dug into what's really happening with insurance stocks, and the picture isn't pretty.

UnitedHealth Group, our nation's biggest health insurer, just had its worst week in years - dropping 9.5% after one of their executives was tragically murdered, which sparked an unexpected spotlight on their claims practices.

Cigna (CI) and CVS Health (CVS) caught the same downdraft, falling 4.5% and 5% respectively.

But here's what really caught my attention: UnitedHealthcare's denial rate for Medicare Advantage claims has more than doubled since 2020, hitting 22.7% last year.

Interestingly, this spike happened right as they rolled out new automation processes. Funny how that works, isn't it?

Experian Health's latest report shows this isn't isolated - 73% of healthcare providers are reporting more denials than ever, with processing times stretching longer and longer.

The cost of this trend? The Council for Affordable Quality Healthcare estimates $31 billion annually in administrative expenses alone.

Meanwhile, biotech companies find themselves in an awkward position. They're developing treatments that cost more than a house in the Hamptons and then need these very same insurers to make them accessible.

Amgen's (AMGN) been crushing it with their human therapeutics portfolio, pulling in $28.2 billion in revenue last year.

Biogen's (BIIB) making serious moves in neurological treatments, though their path has been rockier - just ask anyone who followed the Aduhelm saga.

Gilead Sciences (GILD), our antiviral champions, have managed to stay above the fray, partly because their HIV and hepatitis treatments have become standard of care.

But even these giants must wonder:: as insurers tighten their prior authorization screws, what happens to patient access?

These biotechs spend billions developing breakthrough treatments - Amgen alone dropped $4.4 billion on R&D last year - only to face the insurance industry's equivalent of "computer says no."

The irony isn't lost on anyone: insurers need innovative treatments to justify their premiums, while biotech needs insurance coverage to justify their R&D spending.

It's a delicate dance that's worked reasonably well so far, but these rising denial rates have everyone on edge. Just last quarter, we saw several biotech earnings calls dominated by questions about insurance coverage rather than clinical trials.

So what should we do? Well, I say UnitedHealth and Cigna are "holds" right now - the current turbulence needs time to settle.

CVS Health is showing broader operational challenges that suggest it might be wise to consider selling. But Humana (HUM), with their strong Medicare Advantage presence, looks promising.

On the biotech side, Gilead looks like an excellent stock to buy on the dip. Its leadership in antivirals and solid pipeline make it compelling.

Amgen and Biogen? Keep them on your watch list while they try to find their footing in this situation.

Bob texted me again this morning - turns out he's filing an appeal with help from one of Silicon Valley's top healthcare attorneys. Typical Bob, bringing a cannon to a knife fight.

But maybe that's exactly what this sector needs right now - some heavy artillery to shake up the status quo.

For those willing to dodge the crossfire, there might just be some spoils of war worth picking up. After all, fortune favors the bold—and sometimes, the heavily armed.