December 2024

Survival Of The Solvent

The biotech industry likes to measure success in breakthroughs, but 2024 taught us to count it in survivors.

Sure, we saw remarkable wins in schizophrenia and obesity treatments - enough to keep Big Pharma writing checks that would make anyone pause.

But those layoff numbers? They keep climbing, and I've seen enough market cycles to know what that means.

Yes, the Nasdaq Biotechnology Index eked out a 5.4% gain in 2023, but don’t let that calm surface fool you.

Beneath it, some companies were taking on water faster than a paper boat in a tsunami. It’s not exactly the environment to make your local biotech cheerleader grin ear to ear.

Still, there is value in understanding what went wrong.

Take Kodiak Sciences (KOD) - and I mean that literally because the market sure did. They watched their high hopes for an age-related macular degeneration treatment encounter the brick wall of trial results that proved no better than existing standards of care.

The market’s reaction was swift and merciless, erasing more than 70% of Kodiak’s valuation. Back in my hedge fund days, we called this kind of drop a "character-building event."

Then there's Gossamer Bio (GOSS), which missed its endpoints in pulmonary arterial hypertension so badly you'd think they were aiming for a different disease altogether.

They learned the hard way that lofty ambitions can deflate at high altitudes when critical endpoints fail to materialize, leaving the company staring at a gaping hole where investor confidence used to be.

Bluebird Bio (BLUE)? They've been playing regulatory red light green light with their gene therapy platform.

Despite having the science that could make this possible, they struggled to justify the hefty R&D spending necessary to bring complex and costly treatments to a market that can turn stingy when results arrive late and uncertain.

Speaking of tough breaks, Sio Gene Therapies (SIOX) discovered the cruel reality that neurodegenerative pipelines rarely behave the way spreadsheets say they should.

And poor Codiak BioSciences (CDAK) - their exosome therapy platform imploded so spectacularly that they were forced to declare bankruptcy.

Even Galapagos NV (GLPG) found itself stuck reassessing once-promising late-stage candidates. Those strategic alliances they bragged about last year aren't looking quite so strategic anymore, either.

It would be easy to pin the blame on management missteps or scientific overreach, but the numbers are showing something else.

FDA’s Center for Drug Evaluation and Research did not exactly smile on the biotech crowd’s ambitions. In 2022, it approved 37 novel drugs. By December 2023, fewer than 30 had made the cut.

Want more sobering statistics? The probability of a drug making it from Phase I to FDA approval sits at 7.9%. In immuno-oncology alone, we've got over 1,500 active trials fighting for attention. Overcrowding would be an understatement.

Meanwhile, global biopharmaceutical R&D spending topped $200 billion in 2022 - that's a lot of investor cash burning through labs with no guarantee of return.

Remember the IPO party from a few years back? Well, 2023 saw fewer than 20 biotech IPOs brave the public markets. That's not caution - that's fear.

For those still interested in this sector - and I know you're out there - some of these disasters might offer lessons, or even opportunities.

The iShares Biotechnology ETF exists for those who prefer to spread their risk. Smart move, considering what we've seen this year.

Let's talk specific names. Bluebird Bio might still have a chance if they can get their regulatory act together and convince insurers to cover their therapies.

Sio Gene Therapies could find new partners - though I wouldn't hold my breath. Galapagos has Gilead (GILD) in their corner, which counts for something in this market.

So here's my take: hold Kodiak if you can stomach more volatility - they've already taken their biggest hits.

Same goes for Bluebird Bio, but only if you've got patience. Galapagos? Keep it, but watch those pipeline updates like a hawk.

Gossamer Bio? Time to consider an exit. Sio Gene Therapies lacks catalysts, and Codiak - well, bankruptcy speaks for itself.

The lesson from Kodiak, Gossamer, Bluebird, Sio, Codiak, and Galapagos is simple: brilliant science means nothing without solid analysis, realistic timelines, and serious cash. 2024 proved that point six times over.

Sure, everyone in biotech wants to change the world. The hard part? Staying solvent long enough to make it happen.

Trade Alert - (BAC) December 20, 2024 - EXPIRATION AT MAX PROFIT

Trade Alert

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

Trade Alert - (C) December 20, 2024 - EXPIRATION AT MAX PROFIT

Trade Alert

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

December 19, 2024

Diary, Newsletter, Summary

Global Market Comments
December 19, 2024
Fiat Lux

Featured Trade:

(A CHRISTMAS STORY),
(THE U-HAUL INDICATOR)

A Christmas Story

Diary, Newsletter

When I was growing up in Los Angeles during the fifties, the most exciting day of the year was when my dad took me to buy a Christmas tree.

With its semi-desert climate, Southern California offered pine trees that were thin and scraggly at best, and we didn’t want to chop down the view that we had.

So, the Southern Pacific Railroad made a big deal out of bringing trees down from much better-endowed Oregon to supply local holiday revelers.

You had to go down to the freight yard at Union Station on Alameda Street in downtown LA to pick them up.

I remember a jolly Santa standing in a box car with trees piled high to the ceiling, pungent with seasonal evergreen smells, handing them out to crowds of eager, smiling buyers for a buck apiece.

Watching great lumbering steam engines as big as houses whistling and belching smoke was enthralling. We took our prize home to be decorated by seven kids hyped on adrenalin, chugging eggnog.

A half-century later, the Southern Pacific is gone, the steam engines are in museums, anyone going near a rail yard would be mugged or arrested for vagrancy, and Dad long ago passed away. Dried-out trees at Target for $60 didn’t strike the right chord.

So, I bundled the kids into the SUV and drove to the Eastern shore of Lake Tahoe, on the Nevada side, a $10 US Forest Service tree-cutting permit in hand.

Deep in the forest at 8,000 feet, the kids, hyped on adrenalin, made the decision about which perfect 12-footer to take home. I personally chopped it down and dragged it along the ridge, huffing and pugging all the way. I then tied it to the roof and drove us home. Lifting a 200-pound tree gets tougher every year. Thank goodness the kids are getting bigger.

I netted three trees that day, one for each home and one for my oldest daughter. I figure I saved myself $600.

With any luck, these memories will last until the next century, long outlasting me.

Now, the story really comes full circle. I was in Portland, Oregon, a few years ago and had some free time to kill. So, I wandered across the river to the Oregon Rail Heritage Center.

What do I see, but Southern Pacific engine no. 4449, the exact same locomotive I marveled at in LA 65 years ago, all decked out in its glorious orange and red paint.

It was like discovering a long-lost family member. The 435-ton, 72-year-old behemoth was recently rebuilt from the ground up by a dedicated team of similarly aged volunteers to serve as the city’s Polar Express train in 2014.

For the link to the museum, please click here.

Union Pacific still maintains in running condition some of the largest steam engines ever built for historical and public relations purposes.

One, the “Old 844,” once steamed its way over the High Sierras to San Francisco on a nostalgia tour. The 120-ton monster was built during WWII to haul heavy loads of steel, ammunition, and armaments to California ports to fight the war against Japan. The 4-8-4-class engine could pull 26 passenger cars at 100 mph.

When the engine passed, I felt the blast of heat of the boiler singe my face. No wonder people love these things! To watch the video, please click here and hit the “PLAY” arrow in the lower left-hand corner.

Please excuse the shaky picture. I shot this with one hand while using my other hand to restrain my over-excited kids from running onto the tracks to touch the laboring beast.

Merry Christmas
John Thomas

Long Time No See, Old Friend

The U-Haul Indicator

Diary, Newsletter

It is the end of the semester at the University of California, and as a single parent, the unenviable task of retrieving my daughters out of the dorms for the holidays fell to me.

When I arrived, I was stunned to find nothing less than a war zone. Both sides of every street were lined with mountains of trash, the unwanted flotsam and jetsam cast aside by departing students.

Computer desk, embarrassingly stained mattresses, broken lava lamps, and an assortment of heavily worn Ikea furniture were there for the taking. Newly arriving students were sifting through the piles, looking for that reusable gem.

Diminutive Chinese teenagers were seen pushing massive suitcases on wheels down the sidewalk on their way back to Shanghai, Beijing, and Hong Kong. The university attempted to bring order to the chaos by strategically placing dumpsters on every block, but they were rapidly filled to overflowing.

It was all worth it because of the insight it gave me into one of my favorite, least-known leading economic indicators. When I picked up the truck at U-HAUL, the lot was absolutely packed with returned vehicles, and there were more parked on both sides of the streets.

The booking agent told me there is a massive influx of people moving into California from the Midwest and the Northwest, with the result that lots all over the San Francisco Bay Area are filled to capacity.

I love this company because, in addition to providing a great service, they get the first indication of any changes to the migratory habits of Americans. The last time I saw this happen was after the dotcom bust when thousands of tech-savvy, newly unemployed pulled up stakes in the foggy city and moved to Lake Tahoe to work in “the cloud.”

Bottom line: California is enjoying a resurgence of hiring and new economic growth, most likely driven by Artificial Intelligence. This is what the stock market is screaming at us right now.

Want a Great Deal on a Used Lava Lamp?

December 19, 2024 - Quote of the Day

Diary, Newsletter, Quote of the Day

“This isn’t a choice between vanilla and chocolate, folks! It’s all rocky road: a few marshmallows to get you excited before the elections, but with a lot of nuts to ruin the aftermath,” said the ever insightful Bill Gross at PIMCO.

AI: The New Detective on the Block - How Artificial Intelligence is Cracking Unsolved Crimes

Mad Hedge AI

For decades, unsolved crimes have cast long shadows, leaving families and communities grappling with unanswered questions and a lingering sense of injustice. But a new era of crime-solving is dawning, one where artificial intelligence (AI) is stepping in to assist investigators in cracking cold cases that have baffled detectives for years.

From analyzing vast troves of data to identifying patterns invisible to the human eye, AI is proving to be a game-changer in the pursuit of justice. This technology is not just a futuristic fantasy; it's being deployed right now, helping to bring closure to victims' families and hold perpetrators accountable.

The AI Detective's Toolkit

AI's role in crime-solving is multifaceted, with algorithms and machine learning models being utilized in a variety of ways:

Facial Recognition: AI-powered facial recognition systems can analyze images and videos from crime scenes, comparing them to vast databases of faces to identify potential suspects. This technology has already been instrumental in solving cases where the only evidence was a grainy photograph or a fleeting glimpse of the perpetrator.
DNA Analysis: Traditional DNA analysis can be time-consuming and complex. AI algorithms can expedite this process, quickly identifying matches and predicting potential familial relationships, leading to breakthroughs in cases where DNA evidence is limited or degraded.
Predictive Policing: By analyzing crime data, AI can identify patterns and predict where future crimes are likely to occur. This allows law enforcement to allocate resources more effectively and potentially prevent crimes before they happen. While this application of AI raises ethical concerns about bias and profiling, its proponents argue that it can be a valuable tool for proactive policing.
Natural Language Processing (NLP): NLP algorithms can analyze vast quantities of text data, such as police reports, witness statements, and social media posts, to identify connections and extract crucial information that might have been overlooked by human investigators.
Pattern Identification: AI excels at identifying patterns and anomalies that humans might miss. By analyzing crime scene data, phone records, and other digital footprints, AI can uncover hidden connections and generate new leads.

Real-World Success Stories

The impact of AI in solving unsolved crimes is not just theoretical; it's already making a tangible difference:

The Case of the Golden State Killer: One of the most notorious cold cases in American history, the Golden State Killer case, was finally cracked in 2018 with the help of AI. Investigators used a genealogy website to compare DNA from crime scenes to publicly available genetic data, ultimately leading them to Joseph James DeAngelo, a former police officer who was convicted of 13 murders and dozens of rapes.
Identifying Child Predators: AI is being used to analyze online activity and identify individuals who are sharing or seeking child sexual abuse material. This technology can detect patterns of behavior and language that indicate predatory intent, helping law enforcement apprehend offenders and protect vulnerable children.
Cold Case Units: Law enforcement agencies across the country are establishing dedicated cold case units that utilize AI tools to re-examine old evidence and generate new leads. These units are bringing closure to families who have waited years for answers and ensuring that justice is served, no matter how much time has passed.

The Ethical Considerations

While the potential benefits of AI in crime-solving are undeniable, it's crucial to address the ethical considerations surrounding its use:

Bias and Discrimination: AI algorithms are trained on data, and if that data reflects existing biases, the algorithms can perpetuate those biases in their predictions and analyses. This can lead to unfair targeting of certain groups, particularly minorities who are already disproportionately represented in the criminal justice system.
Privacy Concerns: The use of facial recognition and other AI-powered surveillance technologies raises serious concerns about privacy and civil liberties. Striking the right balance between public safety and individual rights is a complex challenge that requires careful consideration.
Transparency and Accountability: It's important for AI algorithms used in crime-solving to be transparent and explainable. This allows investigators to understand how the AI arrived at its conclusions and ensures that the technology is not being used in a biased or discriminatory manner.

The Future of AI in Law Enforcement

The use of AI in law enforcement is still in its early stages, but its potential is vast. As technology continues to evolve, we can expect to see even more innovative applications of AI in the fight against crime:

Crime Scene Reconstruction: AI could be used to create virtual crime scenes, allowing investigators to explore different scenarios and test hypotheses in a safe and controlled environment.
Enhanced Interrogation Techniques: AI could analyze micro-expressions and other nonverbal cues during interrogations, helping investigators detect deception and extract more accurate information.
Personalized Risk Assessments: AI could be used to assess the risk of recidivism for individuals who have been convicted of crimes, helping to inform sentencing decisions and rehabilitation programs.

Conclusion

AI is transforming the landscape of crime-solving, offering new tools and capabilities that were once unimaginable. While it's essential to address the ethical concerns and ensure responsible use, the potential of AI to bring justice and closure to victims and their families is undeniable. As technology continues to advance, we can expect AI to play an even greater role in the pursuit of justice, ensuring that no crime goes unsolved and no perpetrator escapes accountability.

Trade Alert - (MS) December 20, 2024 - EXPIRATION AT MAX PROFIT

Trade Alert

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

December 18, 2024

Tech Letter

Mad Hedge Technology Letter
December 18, 2024
Fiat Lux

Featured Trade:

(UNLOCKING THE FUTURE OF TECH)
(TSLA), (NVDA), (AMZN)