Global Market Comments
March 26, 2025
Fiat Lux
Featured Trade:
(WHY THE “UNDERGROUND” ECONOMY IS GROWING SO FAST)
There is no doubt that the “underground” economy is growing.
No, I’m not talking about violent crime, drug dealing, or prostitution.
Those are all largely driven by demographics, which right now are at a low ebb.
I’m referring to the portion of the economy that the government can’t see and therefore is not counted in its daily data releases.
This is a big problem.
Most investors rely on economic data to dictate their trading strategies.
When the data is strong, they aggressively buy stocks, assuming that a healthy economy will boost corporate profits.
When data is weak, we get the flip side, and investors bail on equities. They also sell commodities, precious metals, and oil, and plow their spare cash into the bond market.
We are now halfway through a decade that has delivered unrelentingly low annual GDP growth, around the 2% to 2.5% level.
We all know the reasons. Retiring baby boomers, some 85 million of them, are a huge drag on the system, as they save and don’t spend.
Generation X-ers do spend, but there are only 58 million of them. And many Millennials are still living in their parents’ basements—broke and unable to land paying jobs in this ultra-cost-conscious world.
But what if these numbers were wrong? What if the Feds were missing a big part of the picture?
I believe this is, in fact, what is happening.
I think the economy is now evolving so fast, thanks to the simultaneous hyper-acceleration of multiple new technologies that the government is unable to keep up.
Further complicating matters is the fact that many new Internet services are FREE, and therefore are invisible to government statisticians.
They are, in effect, reading from a playbook that is decades or more old.
What if the economy was really growing at a 3% to 4% pace, but we just didn’t know it?
I’ll give you a good example.
The government’s Consumer Price Index is a basket of hundreds of different prices for the things we buy. But the Index rarely changes, while we do.
The figure the Index uses for Internet connections hasn’t changed in 20 years.
Gee, do you think that the price of broadband has risen in a decade, with the 1,000-fold increase in speeds?
In the early 2000s, you could barely watch a snippet of video on YouTube without your computer freezing up.
Now, I can live stream a two-hour movie in High Definition on my Comcast Xfinity 1 terabyte per second business line. And many people now watch movies on their iPhones. I see them in rush-hour traffic and on planes.
I’ll give you another example of the burgeoning black economy: Me.
My business shows up nowhere in the government economic data because it is entirely online. No bricks and mortar here!
Yet, I employ 15 people, provide services to thousands of individuals, institutions, and governments in 140 countries, and take in millions of dollars in revenues in the process.
I pay a lot of American taxes, too.
How many more MEs are out there? I would bet millions.
If the government were understating the strength of the economy, what would the stock market look like?
It would keep going up every year like clockwork, as ever-rising profits feed into stronger share prices.
But multiples would never get very high (now at 20 times earnings) because no one believed in the rally, since the visible economic data was so weak.
That would leave them constantly underweight equities in a bull market.
Stocks would miraculously and eternally climb a wall of worry, as they did until February.
On the other hand, bonds would remain strong as well, and interest rates low, because so many individuals and corporations were plowing excess, unexpected profits into fixed-income securities.
Structural deflation would also give them a big tailwind.
If any of this sounds familiar, please raise your hand.
I have been analyzing economic data for a half-century, so I am used to government statistics being incorrect.
It was a particular problem in emerging economies, like Japan and China, which were just getting a handle on what comprised their economies for the first time.
But to make this claim about the United States government, which has been counting things for 240 years, is a bit like saying the emperor has no clothes.
Sure, there has always been a lag between the government numbers and reality.
In the old days, they used horses to collect data, and during the Great Depression, numbers were kept on 3” X 5” index cards filled out with fountain pens.
But today, the disconnect is greater than it ever has been, by a large margin, thanks to technology.
Is this unbelievable?
Yes, but you better get used to the unbelievable.
There May Be More Here Than Meets the Eye
"This is an epic bond bubble that we may have just seen the end of, not only here, but in Europe too," said Peter Boockvar, chief investment officer at Bleakly Financial Group.
Mad Hedge Biotech and Healthcare Letter
March 20, 2025
Fiat Lux
Featured Trade:
(WHEN SILENCE IS GOLDEN)
(ALNY), (PFE)
I was halfway through my morning coffee when my trader buddy in New York called me at some ungodly pre-market hour. He's one of those Wall Street guys who never sleeps and hasn't taken a real vacation since the Reagan administration.
"So what's your take on Alnylam?" he barked, not bothering with pleasantries. "Stock's been trading sideways for months between $230-$300. I'm getting impatient."
I took another sip of my Kona blend, remembering why I left the trading floor years ago. "Let me guess – you're looking at your Bloomberg terminal right now instead of enjoying the sunrise?"
"Cut the Zen master crap, John. What's the play here?"
The reality is that Alnylam Pharmaceuticals (ALNY) just snagged FDA approval for Amvuttra in ATTR-CM, opening the door to potential revenue north of $6 billion. But my friend, like most traders, was looking for the angle that wasn't already priced in.
"You know," I said, "when I was a combat pilot, we had a saying: 'It's not the missile everyone sees coming that gets you.' The approval announced on March 20th was expected, sure. But the label is better than most anticipated – approved for both hereditary and wild-type ATTR-CM. It's the first drug green-lighted for both polyneuropathy and cardiomyopathy, with the latter being more common and potentially more lucrative."
The label includes language about reducing "cardiovascular mortality, cardiovascular hospitalizations, and urgent heart failure visits" – with that last bit about urgent heart failure visits exclusive to Amvuttra. Seems small, but in pharmaceutical marketing, these distinctions matter.
"So should I buy the stock or not?" he pressed, always impatient.
"Here's what the Wall Street research notes won't tell you," I continued. "The HELIOS-B clinical study was a home run. Amvuttra will eventually muscle its way into front-line treatment, but initially, expect it to grab the 30% of ATTR-CM patients who deteriorate on Pfizer's (PFE) tafamidis or BridgeBio's (BBIO) acoramidis. Those are the 'stabilizers,' while Amvuttra is a 'silencer' – and in this case, silence is golden."
I could hear him typing furiously. "What about patient switchovers from stabilizers?" he asked.
"Doctors hate changing treatments that work, even if something better comes along. It's like trying to convince an old trader to use an app instead of calling his broker – not happening unless there's overwhelming evidence. But there's another angle – Amvuttra requires only four injections yearly versus daily pills. Plus, it's covered under Medicare Part B with zero copays, while the others fall under Part D. When patients realize they can save thousands in out-of-pocket costs, watch what happens."
Management is sticking with their hefty list price of $476,000 per year, though the real-world price after rebates and discounts will be lower. Given the clinical data and market dynamics, I'm convinced this indication alone is worth $6+ billion to Alnylam, with an upside to $7-8 billion if their newest compound, nucresiran, maintains efficacy with twice-yearly dosing.
"Fine, but is this a one-hit wonder or do they have more in the pipeline?" he pressed.
"Their R&D engine is firing on all cylinders. They've expanded beyond the liver to target neurodegenerative and ocular diseases, with plans to cover all major tissue types by 2030. Their batting average is impressive – three self-commercialized drugs, one partnered drug on the market, and another likely approval coming soon via Sanofi (SNY). That's the kind of success rate that makes venture capitalists weak in the knees."
I won't sugarcoat it though – currently, about 75% of their revenue comes from the TTR franchise, with Givlaari and Oxlumo making up the rest. Diversification is coming, but it's not an overnight process.
Keep your eye on zilebesiran, their antihypertensive being developed with Roche (RHHBY). Early results look promising, with KARDIA-3 results due later this year. It won't move the revenue needle immediately, but could eventually contribute significantly.
There's also mivelsiran for cerebral amyloid angiopathy and Alzheimer's – still in Phase II but potentially worth billions if successful. Not to mention early-stage programs targeting Huntington's, bleeding disorders, diabetes, obesity, and AMD. The pipeline is loaded like a billionaire's stock portfolio.
"Bottom line it for me, John. I've got a morning call in five minutes."
"Management's guiding for 30% product sales growth in 2025, mostly from Amvuttra in ATTR-CM. Their forecasts tend to be conservative but achievable – not the pie-in-the-sky numbers you get from pre-revenue biotechs promising to cure cancer with fairy dust."
In my model, the TTR franchise contributes about $202 per share to my $312 fair value estimate. Zilebesiran adds roughly $35, with an upside beyond $50 if clinical data continues to impress.
Admittedly, a 10% upside isn't the sexiest call for a biotech stock. But after watching thousands of companies come and go during my decades on Wall Street, I've learned to appreciate the rare combination of proven technology, commercial products, and pipeline depth that Alnylam offers.
"So you're saying buy?" he asked, clearly rushing now.
"I'm saying Alnylam isn't the stock you brag about at cocktail parties, but it might just be the one that pays for your kid's college education. Speaking of which, when was the last time you saw your children?"
He hung up without answering. Some things never change on Wall Street.
Global Market Comments
March 25, 2025
Fiat Lux
Featured Trade:
(THE ULTRA BULL CASE FOR GOLD)
(GLD), (UGL), (GOLD), (NEM)
(NVDA), (AAPL), (NFLX), (AMD), (IBM), (AMZN), (GOOGL), (META)
I was sipping an overpriced airport cappuccino when Jensen Huang strutted onto the GTC 2025 stage. My seatmate didn't recognize him, but I'd been at a private dinner with one of Nvidia's VPs the night before.
After 40 years covering tech from Tokyo to Wall Street, you build a network that pays dividends in boardroom whispers. "Tomorrow's announcements will make portfolio managers drool," he'd hinted, remembering when I'd steered his family into Apple (AAPL) back in 2003.
Two minutes into Jensen's keynote, my neighbor's jaw dropped faster than Netflix (NFLX) stock after missing subscriber estimates. By our boarding call, he was frantically buying Nvidia (NVDA) shares.
"Too late, kid," I muttered. "You're about $2 trillion late to this party."
While investors obsess over Fed rates, Jensen has built the infrastructure for the biggest gold rush since the internet. Nvidia is selling the only shovels that actually work.
The Blackwell Ultra processor, due late 2025, isn't just an upgrade but a leap in AI reasoning that makes current models look primitive. The Vera Rubin server, arriving in 2026, is expected to be 3.3x faster.
A Stanford classmate who designs power systems texted during the keynote: "Been testing prototypes for months. Had to sign blood-oath NDAs."
When your college buddies design the circulatory systems for the world's digital brain, you get texts analysts would trade their Bloomberg terminals for.
Jensen projected global data center spending reaching $1 trillion by 2030. When I repeated this to my bartender at the St. Regis, he asked if I was having a stroke.
"No one spends a trillion on computers." I reminded him no one used to spend billions streaming cat videos either.
Who benefits from this tsunami?
Nvidia is obvious, with 20-25% projected annual growth looking conservative.
Advanced Micro Devices (AMD) has been gaining ground. At a San Jose conference, I caught an engineer who "accidentally" left next-gen chip data visible.
When you've covered tech since before AMD made math coprocessors for IBM (IBM) clones, you spot when a "mistake" is actually a strategic leak.
Amazon (AMZN) remains the cloud king. During an investor site visit, an AWS director let slip their AI buildout is "significantly ahead of guidance."
My history covering AWS when analysts dismissed it means their PR people don't hover during these visits. They forget I reported on Amazon when Bezos was still shipping books from a garage.
Google (GOOGL) keeps their best tech garaged. In an Uber after a Palo Alto event, a tipsy engineer boasted: "The public sees maybe 20% of what we're running internally."
Twenty years of moderating "Future of Computing" panels puts me in countless rideshares with people building that future, who forget I write for fund managers controlling billions.
Meta (META) is investing heavily in generative AI. At an industry roundtable, their researcher, after his third wine, sketched neural networks on napkins.
Having covered companies from garage stages to trillion-dollar valuations gives you invisibility at these events – they see you as furniture rather than media.
The generative AI market is projected to reach $62.72 billion by 2025, but at a Bloomberg roundtable, fund managers confided they're allocating "multiples" of their usual positions.
After decades of running a hedge fund that spotted Japan's rise, the dot-com boom, and the fracking revolution, you get invited to side conversations where real money moves are discussed.
My advice: don't pick a single winner, think long-term, and watch innovation closely.
My nephew recently asked for stock tips for his summer job earnings. "Buy Nvidia and delete your trading app for 10 years," I advised. He looked offended. "Everyone knows Nvidia. I want something undiscovered."
I patted his shoulder. "Kid, sometimes the biggest mistake in investing is trying to be clever when the obvious answer is staring you in the face."
In the AI revolution, it's not about finding the next Nvidia. It's about not overthinking the Nvidia that's already here.
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
Mad Hedge Technology Letter
March 24, 2025
Fiat Lux
Featured Trade:
(23ANDME GETS DUMPED)
(ME)
Tech is full of ideas swept into the dustbin of history, and 23andMe is just another blatant example of it.
Mr. Market decides the fate of these public companies and nobody else.
Remember they went public when there was more money than common sense.
Interest rates were low and half-baked tech ideas were getting funded left and right.
That was back when things like Hollywood used to be relevant.
Fast forward to today and 23andMe is done and dusted.
They filed for bankruptcy protection in the US to help sell itself.
Many of these mediocre tech companies are falling like dead flies as the thirst to prove profitable has really hit tech as small firms deal with the 1000-pound gorilla in the room.
The company has never flipped a profit.
They could solve the problem of extracting recurring revenue and many customers fled the company after doing their DNA test.
The San Francisco-based company said its chief executive and co-founder Anne Wojcicki was stepping down. She has been pushing for a buyout since April last year but was rebuffed by 23andMe’s board.
The company is still reeling from a huge data breach in 2023 that affected the data of nearly 7 million people, about half of its customers. Revenues have fallen as many of its 15 million customers scramble to delete their DNA data from the company’s archives.
This is a company that can solely exist with some level of trust, and that trust was extinguished in one fell swoops as hackers made out with everything important to the company.
At a time when other tech overlords are headed into the health business, the proverbial goalposts could never be narrower than they are today.
That is bad news for shareholders and bad news for the possibility of a quick turnaround.
Fighting for survival, 23andMe has cut the jobs of 200 people, amounting to 40% of its workforce, and stopped the development of all its therapies in November. Wojcicki’s ambition has been to turn the company into a drug developer.
The CEO will be replaced by its chief financial officer, Joe Selsavage, until a permanent replacement is found but she is staying on the 23andMe board.
It has never been harder to make a profit in Silicon Valley and even though data leaks aren’t a big deal for big tech giants, they are a death sentence for an upstart.
A company like 23andMe never found a way to monetize its business model.
I remember the fad of getting your genes tested to see where you are from, but that spark was met with a big thud.
The truth is, how do you come back from a data leak when that is the sole value of your firm?
The answer is you don’t.
23andMe won’t be able to do much of anything to expand their revenue projections while they are mired in over 30 lawsuits.
Everything they will do will be like walking on a tightrope.
Better to just shut down the company and restart a new one.
It’s hard to believe that in 2021, the company had a stock price of over $320.
Fast forward to today and the stock is trading under $1.
American capitalism is for no faint of heart and 23andMe’s story is a bruising anecdote to what happens when tech firms don’t safeguard their secret sauce.
That sauce has now gone rotten.
