Global Market Comments
January 24, 2020
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE FRIDAY, FEBRUARY 7 PERTH, AUSTRALIA STRATEGY LUNCHEON)
(JANUARY 22 BIWEEKLY STRATEGY WEBINAR Q&A),
(BA), (IBM), (DAL), (RCL), (WFC),
(JPM), (USO), (UNG), (KOL), (XLF),
(SEE YOU IN TWO WEEKS)
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting in Perth, Australia on Friday, February 7, 2020 at 12:30 PM.
An excellent meal will be followed by a wide-ranging discussion and a question-and-answer period. I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, energy, and real estate.
I also hope to provide some insight into America’s opaque and confusing political system. And to keep you in suspense, I’ll be throwing a few surprises out there too.
Tickets are available for $235.
The lunch will be held at an exclusive hotel in downtown Perth, the location of which will be emailed with your purchase confirmation.
I look forward to meeting you and thank you for supporting my research. To purchase tickets for the luncheons, please click here.
Below please find subscribers’ Q&A for the Mad Hedge Fund Trader January 22 Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Are you concerned about a kitchen sink earnings report on Boeing (BA) next week?
A: No, every DAY has been a kitchen sink for Boeing for the past year! Everyone is expecting the worst, and I think we’re probably going to try to hold around the $300 level. You can’t imagine a company with more bad news than Boeing and it's actually acting as a serious drag on the entire economy since Boeing accounts for about 3% of US GDP. If (BA) doesn’t break $300, you should buy it with both hands as all the bad news will be priced in. That's why I am long Boeing.
Q: Do you think IBM is turning around with its latest earnings report?
A: They may be—They could have finally figured out the cloud, which they are only 20 years late getting into. They’ve been a lagging technology stock for years. If they can figure out the cloud, then they may have a future. They obviously poured a lot into AI but have been unable to make any money off of it. Lots of PR but no profits. People are looking for cheap stuff with the market this high and (IBM) certainly qualifies.
Q: Will the travel stocks like airlines and cruise companies get hurt by the coronavirus?
A: Absolutely, yes; and you’re seeing some pretty terrible stock performance in these companies, like Delta (DAL), the cruise companies like Royal Caribbean Cruises (RCL), and the transports, which have all suffered major hits.
Q: Will the Wells Fargo (WFC) shares ever rebound? They are the cheapest of the major banks.
A: Someday, but they still have major management problems to deal with, and it seems like they’re getting $100 million fines every other month. I would stay away. There are better fish to fry, even in this sector, like JP Morgan (JPM).
Q: Will a decrease in foreign direct investment hurt global growth this year?
A: For sure. The total CEO loss of confidence in the economy triggered by the trade war brought capital investment worldwide to a complete halt last year. That will likely continue this year and will keep economic growth slow. We’re right around a 2% level right now and will probably see lower this quarter once we get the next set of numbers. To see the stock market rise in the face of falling capital spending is nothing short of amazing.
Q: Do you think regulation is getting too cumbersome for corporations?
A: No, regulation is at a 20-year low for corporations, especially if you’re an oil (USO), gas (UNG) or coal producer (KOL), or in the financial industry (XLF). That’s one of the reasons that these stocks are rising as quickly as they have been. What follows a huge round of deregulation? A financial crisis, a crashing stock market, and a huge number of bankruptcies.
By the time you read this, I will be winging my way over the Pacific Ocean on my way to Fiji, Guadalcanal, and the better part of Australia, where I will be involved in fundraisers for fire relief. I’ll be making stops along the way to visit with my existing subscribers.
The Golden State has already sent 200 firefighters to the Land Down Under to advise on fighting these enormous conflagrations and we suffered our first three fatalities today, C130 pilots, who I happen to know well as I am one myself.
I am also making a stopover at Guadalcanal in the Solomon Island to make a documentary film about the epic WWII battle there for the 78th anniversary. I’ll send you the link to the video when it is finished.
In the meantime, I will be posting my options training course over the next ten days. We have recently taken in a large number of new subscribers and they will need to be instructed on the basics. Some of you veterans may have also forgotten what’s important so you should probably give a read as well.
I’ll be back on February 8 after an endless series of 42 hours of flights.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
January 23, 2020
Fiat Lux
Featured Trade:
(AN AFTERNOON WITH ANTHONY SCARAMUCCI OF SKYBRIDGE),
(BRK/A), (EEM)
I asked Anthony Scaramucci, CEO and founder of Skybridge Capital, why we should attend his upcoming SALT conference point-blank.
“It’s going to be exciting,” he said.
“How exciting?” I enquired.
“I’ve invited former White House chief of staff General John F. Kelley to be my keynote speaker.” General Kelley, an old friend from my Marine Corps days, fired Anthony after only eight days on the job as Donald Trump’s Press Secretary.
“That’s pretty exciting,” I responded. “Humble too.”
This was the answer that convinced me to attend the May 7-10 SkyBridge Alternative asset management conference (SALT) at the Las Vegas Bellagio Hotel. You all know the Bellagio. That is the casino that was robbed in the iconic movie Oceans 11.
That is not all Scaramucci had to offer about the upcoming event, known to his friends since his college days as “The Mooch”.
Among the other headline, speakers are former UN ambassador Nikki Haley, AOL Time Warner founder Steve Case, artificial intelligence guru Dr. Kai-fu Lee who I have written about earlier, and Carlyle Group co-founder David Rubenstein.
SALT will give seasoned investors to update themselves on the hundreds of alternative investment strategies now in play in the market, raise or allocate money, meet fascinating people, and just plain have fun. Some SkyBridge services accept client investments as little as $25,000. Their end of conference party is legendary.
SkyBridge is led by Co-Managing Partners Anthony Scaramucci and Raymond Nolte. Ray serves as the Firm’s Chief Investment Officer and Chairman of the Portfolio Allocation and Manager Selection Committees. Anthony focuses on strategic planning and marketing efforts.
While I had “The Mooch” on the phone, I managed to get him to give me his 30,000-foot view of the seminal events affecting markets today.
The proliferation of exchange-traded funds and algorithms will end in tears. There are now more listed ETFs than listed stocks, over 3,500.
The normalizing of interest rates is unsustainable, which have been artificially low for ten years now. One rise too many and it will crash the market. The next quarter-point rise could be the stick that breaks the camel’s back (an appropriate metaphor for a desert investment conference).
However, rising rates are good for hedge funds as they present more trading opportunities and openings for relative outperformance, or “alpha.”
There has been a wholesale retreat of investment capital from the markets, at least $300 billion in recent years. The end result will be much higher volatility when markets fall as we all saw in the Q4 meltdown until this structural weakness has been obscured by ultra-low interest rates. The good news is that banks are now so overcapitalized that they will not be at risk during the next financial crisis.
Ever the contrarian and iconoclast, Scaramucci currently has no positions in technology stocks. He believes the sector has run too far too fast after its meteoric 2 ½ year outperformance and is overdue for a rest. Earnings need to catch up with prices and multiples.
What is Anthony’s favorite must-buy stock today? Berkshire Hathaway (BRK/A), run by Oracle of Omaha Warren Buffet, is almost a guarantee to outperform the market. Scaramucci has owned the shares in one form or another for over 25 years.
While emerging markets (EEM) are currently the flavor of the day, Anthony won’t touch them either. The accounting standards and lack of rule of law are way too lax for his own high investment standards.
SkyBridge is avoiding the 220 IPOs this year which could total $700 billion. Many of these are overhyped with unproven business models and inexperienced management. The $100 billion in cash they actually take out of the market won’t be enough to crash it.
SkyBridge Capital is a global alternative investment firm with $9.2 billion in assets under management or advisement (as of January 31, 2019). The firm offers hedge fund investing solutions that address a wide range of market participants from individual investors to large institutions.
SkyBridge takes a high-conviction approach to alpha generation expressed through a thematic and opportunistic investment style. The firm manages multi-strategy funds of hedge funds and customized separate account portfolios, and provides hedge fund advisory services. SkyBridge also produces a large annual conference in the U.S. and Asia known as the SkyBridge Alternatives Conference (SALT).
Finally, I asked Anthony, if he were king of the world what change would he make to the US today? “If I could wave a magic wand, I would reduce partisanship,” he replied. “It prevents us from being our best.” Will he ever go back into politics again? “Never say never,” he shot back wistfully.
With that, I promised to give him a hug the next time I see him in Vegas which I have been visiting myself since 1955 during the rat pack days.
To learn more about SkyBridge, please visit their website here.
To obtain details about the upcoming May 7-10 SALT conference at the Bellagio Hotel in Las Vegas, please click here. Better get a move on. Their discount pricing for the event ends on March 15. Institutional Investors are invited free of charge.
Global Market Comments
January 22, 2020
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE TUESDAY, FEBRUARY 4 SYDNEY, AUSTRALIA STRATEGY LUNCHEON)
(WHY THERE’S ANOTHER DOUBLE IN CRISPR THERAPEUTICS)
(CRSP), (BLUE), (EDIT), (NVS), (GILD)
Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Sydney Australia at 12:30 PM on Tuesday, February 4, 2020.
An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, energy, and real estate.
And to keep you in suspense, I’ll be throwing a few surprises out there too.
Tickets are available for $233.
The lunch will be held at an exclusive downtown hotel the details of which will be emailed 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.
Occasionally, I discover a piece of research from one of my other Mad Hedge publications that is so important that I send it out to everyone immediately.
Today piece from the Mad Hedge Biotech & Health Care Letter is one of the instances. It makes the case and provides the numbers as to why Biotech & Health Care will be one of two dominant sector to follow for the next decade. It also is a key plank in my argument for a return of a new Golden Age and a second “Roaring Twenties.”
Here it is.
Biotech investors, take note: 2019 was a great year for the industry, but the best is yet to come.
In the final three months of 2019, the biotech sector grew by 32% -- notably outpacing the pharmaceutical industry, which only recorded a 9.5% gain.
However, the biotechnology sector is estimated to grow substantially in 2020, and reach over $775 billion in revenue by 2024 as more and more treatments for previously incurable diseases get discovered.
Looking at all the progress in the biotechnology space, this could even be the year we’d finally discover the cure to many life-threatening and debilitating conditions like cancer and Alzheimer’s disease.
With all these technological advancements, two revolutionary tools have been overhauling the entire biotechnology and healthcare industry from the ground up: precision medicine and CRISPR. Actually, the impressive growth of the biotechnology industry has been largely attributed to the excitement generated by the gene-editing sector.
While the majority of companies concentrating on the human genome are still in the research phase, the growth of this industry is undeniable.
Here’s tangible proof.
Just 20 years ago, reading all the DNA of a single person cost approximately $3 billion. Now, this price is down to only $1,000. In the future, this number will go even lower at $100. There are now gigantic factories in China sequencing DNA for companies like Ancestry.com and 23andMe.
This is just one example of how the biotechnology industry has grown by leaps and bounds. It’s also the reason behind the surge of CRISPR shares.
In effect, the specialists in this niche, including Crispr Therapeutics (CRSP), Bluebird Bio (BLUE), and Editas Medicine (EDIT), are amplifying their efforts in 2020.
Among the specialist companies, CRISPR Therapeutics is considered as one of the frontrunners -- if not the top stock. This is because compared to its rivals, which are still in preclinical phases of development, CRISPR Therapeutics’ already has two drugs going through Phase 1 trials: CTX001 and CTX110.
The promising results of the company’s research resulted in a 113% rise in shares last year, with the bulk of the surge starting in October. In fact, CRISPR Therapeutics’ performance had been so impressive that its market cap reached $3.4 billion.
CTX001 is created to target patients suffering from genetic blood disorders, specifically sickle-cell disease and transfusion-dependent beta-thalassemia.
Meanwhile, CTX110 is a CAR-T treatment. The process involves the extraction of immune cells from the patient. These are then retrained and later re-introduced to the human body.
CRISPR Therapeutics’ CAR-T treatment is anticipated to be offered at a cheaper price compared to the other CAR-T therapies.
Both Novartis (NVS) and Gilead Sciences (GILD) are pursuing the same treatment. However, the cost of the therapy from the latter two is expected to reach as much as $475,000 for every patient annually.
Apart from CTX001 and CTX110, CRISPR Therapeutics has two more immunology candidates, currently dubbed CTX120 and CTX130.
If both phase trials succeed, these will bring massive home runs for CRISPR Therapeutics, especially since the cancer immunology market is expected to reach $127 billion by 2026. Over the next 10 years, this niche is estimated to reach $25 trillion in sales.
Among the gene-editing treatments under development today, CRISPR is projected to grow tenfold in the number of applications and potentially curing 89% of disease-causing genetic variations by 2026.
Taking this pace into consideration, the valuation for this market is expected to grow from $551 million in 2017 to reach roughly $3.1 billion by 2023 and $6 billion by 2025.
Meanwhile, precision medicine as a whole is estimated to show a significant jump from $48.6 billion in 2018 to $84.6 billion by 2024. In 2028, this market is expected to rake in $216 billion.
Hence, further success with CTX001 and CTX110 along with additional treatments in the drug pipeline would all but guarantee that Crispr Therapeutics could beat the market again in 2020.
Global Market Comments
January 21, 2020
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE WEDNESDAY FEBRUARY 3 BRISBANE, AUSTRALIA STRATEGY LUNCHEON)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or DOW 120,000 HERE WE COME!)
