Mad Hedge Technology Letter
October 30, 2024
Fiat Lux
Featured Trade:
(LACK OF AI ROCKS THE KOREAN HEAVYWEIGHT)
(SAMSUNG), (SK HYNIX)
It’s not just about smartphones for Samsung anymore, their stalwart chip business is in full-blown crisis mode as they have been too slow to adapt to the artificial intelligence revolution.
It shows that if a company is asleep at the wheel, how quickly and how far they can fall back.
Samsung is Korea’s flagship tech company, and it is like the Titanic in a way because it is hard to turn around with the amount of employees it has.
Old habits die hard, and management simply wasn’t prepared for the giant leap forward in semiconductor chips.
Remember when their flagship smartphone, named the Galaxy, was the best phone in the world?
Oh, have times changed?
Concerns are piling up that the company is losing out to smaller rival SK Hynix in AI memory and failing to gain on Taiwan Semiconductor Manufacturing.
Overseas investors have sold about $10.7 billion worth of the South Korean company’s shares on a net basis since the end of July.
That hope has been snuffed out with the company admitting delays with its latest-generation HBM chips in early October, soon after SK Hynix said it had begun volume production. Meanwhile, US rival Micron Technology is stepping up efforts in HBM as well and has reported strong demand for its offerings.
Beyond its lag in AI memory, Samsung has struggled with a costly, yearslong effort to close the gap with TSMC in the foundry business. Like Intel— which has run into similar difficulty with plans to expand its outsourced chipmaking operations — the Korean firm is now moving to cut jobs and make other efforts to stop the bleeding.
Jay Y. Lee — a grandson of Samsung’s founder who was appointed executive chairman two years ago — was acquitted of stock manipulation charges in February after years of legal issues. Three months later, the company unexpectedly replaced its semiconductor division head with Jun Young-hyun, a memory chip veteran.
Samsung executives and engineers are now in full unison, heading towards the exits, looking for greener pastures, and that is a massive red flag.
It certainly isn’t a good optics when the best talent is looking for another job, but that is where we are at with Samsung.
In the short term, I don’t expect a quick turnaround because the management problems are real, and to get competitive in AI is a tall order.
Just look at AMD, they are about a year behind Nvidia, and Samsung isn’t even in the ballpark.
I expect a slow slide into irrelevancy and foreign shareholders dumping big swaths of Samsung stock backs this theory.
In the short term, readers shouldn’t get too fancy with picking AI stocks because there is a massive risk to the downside, considering how expensive the equity market is right now.
Samsung won’t be the last company to be swept up by the dustbin of tech firms.
In the U.S., it is clear which companies are behind and which are leading.
Microsoft is definitely one to buy the dip on.
I definitely envision at least one fiercer rally in AI stocks as we cruise past the U.S. election.
(WE ARE EARLY IN THE AI GROWTH NARRATIVE – OPPORTUNITIES ARE AHEAD)
October 30, 2024
Hello everyone.
Don’t listen to people who say the AI sector is stretched. We are near the beginning of the journey, and there will be opportunities across the board, not just in Big Tech.
Revenues related to this industry could pass the trillion-dollar mark within the next decade. So, don’t try and time your market journey with this theme – stay the course and enjoy the roller coaster ride.
Any weakness in AI-related companies should be seen as an opportunity – to build strategic and long-term AI exposure. Over the next one to two years, we can expect robust growth in this sector.
On Monday, Apple released its AI platform, known as Apple Intelligence, in an iOS upgrade for the iPhone 16 and iPhone 15 Pro, as well as in software updates for the iPad and Mac. Shares closed nearly 1% higher following the announcement. Several investment bank analysts see steady iPhone growth and strong growth in its services.
Netflix, which reported a little over a week ago, could also be a beneficiary of the rise in AI demand. The stock has risen around 56% in 2024. Expect to see continued strong growth globally.
Any pullback in Nvidia shares should be scaled into. The chip space has further to run.
HALLOWEEN CORNER
It’s Halloween once a year, so let’s distract ourselves from all things financial for a moment and take a journey into a real zombie world.
Ghosts and ghouls and all manner of scary things are well and truly arranged and secured in people’s front yards as they await this special day in October. Costumes have been purchased or brought out of the plastic covering. All is ready for the day. Me, I’m not into the Halloween tradition and prefer to observe from the sidelines.
But here’s an insight which really will bring the zombie story to real life.
Imagine a flesh-eating, brain-warping fungus from the genus Cordyceps, which inspired the zombie-apocalypse video game and TV series The Last of Us.
There are about 600 species of Cordyceps. Most of them prey on ants or insects, such as the large “ghost” caterpillar. This species of fungus takes control when the caterpillar is buried in the soil.
The caterpillar of the Australian ghost moth tends to burrow straight down into the soil to graze on the roots of gum trees and some other species related to eucalypts. So, it probably picks up the fungus as it burrows into the earth. The fungus then penetrates the exoskeleton or digestive tract of the insect with a thin, needle-like tube.
Once inside the caterpillar, the fungus starts to grow rapidly. It produces very fine threads (hyphae) that spread through the body of the insect, replacing its structure. The fungus expands to fill the available space, assuming ultimate control. The fungus produces a range of chemicals that influence the brain in a way that meets the environmental and reproductive needs of the fungus.
The caterpillar is doomed as soon as the fungus starts to grow inside it. After being taken over by another life form, the zombie caterpillar dies. All of this happens out of sight, under the soil surface.
Cordyceps also preys on ants and can wipe out entire ant colonies.
Humans need not fear being zombified and mummified by Cordyceps fungi. Believe it or not, these macabre creatures have a long history in traditional medicine. While the fungus has been cultivated for about 40 years, naturally growing, wild fungi can be very expensive as they are still relatively rare and difficult to find. A kilogram can retail for A$30,000.
Members of the genus Cordyceps have been around for more than 45 million years. Humans have nothing to fear from these creatures, but if you are a certain species of ant or ghost moth, Halloween may take on a whole new meaning.
QI CORNER
David Attenborough, 98 years old, is still working and now introducing his landmark natural history series on Asia.
See Asia Sunday at 6:20 pm BBC1/ Whole Series available from Sunday iPlayer.
SOMETHING TO THINK ABOUT
VACATION CORNER
Cheers
Jacquie
Global Market Comments
October 30, 2024
Fiat Lux
Featured Trade:
(TAKE A LEAP INTO LEAPS)
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 Biotech and Healthcare Letter
October 28, 2024
Fiat Lux
Featured Trade:
(WHEN WALL STREET MET PHARMA)
(PFE), (TSLA), (AAPL)
If corporate America were a dinner party (and let's face it, sometimes it absolutely is), Pfizer (PFE) would be that guest who showed up fashionably late with an award-winning bourbon pecan pie during the pandemic, and is now being quietly judged for bringing Trader Joe's crackers to the latest soirée. The pharmaceutical giant, which briefly enjoyed the kind of celebrity usually reserved for Tesla (TSLA) and Apple (AAPL), finds itself in the midst of what we might delicately call a boardroom intervention. With its stock price taking a dive, Pfizer attracted the attention of Starboard Value, a hedge fund with a billion dollars' worth of opinions about how to run things better.
Unfortunately for Starboard, these problems are not that simple to fix. Here's the thing about making breakthrough drugs: 9 out of 10 fail, each costs about $2 billion to develop, and even the most brilliant scientists can't tell you which one will work until the very end. This uncertainty sits at the heart of Pfizer's current predicament. After delivering a ratings blockbuster with its COVID-19 vaccine and Paxlovid treatment, the company now faces the pharmaceutical industry's dreaded sophomore album syndrome.
On top of that, every successful drug faces the same issue: it comes with its own expiration date. Patents run out, generic competitors swoop in, and suddenly everyone's asking, "What's next?"
And here's where it gets more interesting, in the way that all corporate power plays are interesting if you enjoy watching incredibly wealthy people disagree about how to become even wealthier. Take Starboard's critique of Pfizer's performance. It has all the subtlety of a CNN town hall debate, spiced up with the potential involvement of former Pfizer CEO Ian Read and CFO Frank D'Amelio — a plot twist as unsurprising as finding a filibuster in the Senate.
Having previously applied its corporate reconstruction techniques to the restaurant industry (think less Thomas Keller, more Olive Garden optimization), the hedge fund now fancies itself as something of a pharmaceutical expert. This is like suggesting that because someone successfully managed a food truck, that same person is qualified to run a three-Michelin-star restaurant.
Granted, Starboard has an impressive track record in corporate makeovers, much like the HGTV stars of Wall Street. Still, renovating a pharmaceutical company isn't the same as flipping a restaurant chain. There's something uniquely challenging about applying fast-casual dining turnaround principles to the development of life-saving medications. Some processes simply can't be rushed unless you enjoy explaining to the FDA why you thought clinical trials were more of a suggestion than a requirement.
As we try to figure out what's happening with the pharma giant right now, it helps to keep in mind that the key question isn't just whether Pfizer needs a makeover (though that's certainly part of it), but whether Wall Street's "time is money" philosophy can successfully coexist with the "science takes time" reality of drug development. It's the corporate equivalent of trying to teach quantum physics to a day trader - theoretically possible, but likely to result in some interesting misunderstandings along the way.
So, what's the play here? Looking at Pfizer's current stock price of around $28.45 (down 2.47%), the chart looks about as exciting as a waiting room magazine collection.
While the stock hovers below its 50-day moving average and sits near the lower end of its $25.20 - $31.54 yearly range, there are a few bright spots: a healthy 5.91% dividend yield and several promising projects in the pipeline - an RSV vaccine and an obesity treatment that could have customers lining up around the block again.
But here's my recommendation: Keep this one on your watchlist, but hold off on placing your order just yet.
Think of Pfizer as that once-trendy restaurant that's neither closing its doors nor winning any new Michelin stars - it's simply simmering on medium heat while the new chef (courtesy of Starboard) debates menu changes with the original kitchen staff.
Will Starboard's intervention prove to be the corporate equivalent of a breakthrough drug, or more like one of those miracle cures you see advertised at 3 AM?
The answer, like most things in the pharma world, will take time to develop. And in this battle of wits within corporate America, sometimes the hardest pill to swallow is patience - though I suspect Starboard would prefer it in fast-dissolving form.
After all, when Wall Street meets Pharma, it's less about whether the patient needs the medicine and more about timing the market's appetite.
For now, let's keep this one in the "worth watching" category until we see some signs of the stock's vital signs improving.
Global Market Comments
October 29, 2024
Fiat Lux
Featured Trade:
(RIGHT SIZING YOUR TRADING)
In an era where artificial intelligence is reshaping nearly every aspect of our lives, retirement planning stands on the cusp of a dramatic transformation. The traditional model of retirement planning – annual meetings with financial advisors, static spreadsheets, and one-size-fits-all investment strategies – is giving way to a more dynamic, personalized, and AI-driven approach that promises to democratize financial planning for millions of Americans
The Dawn of AI Financial Planning
Financial technology experts predict that by 2030, the majority of Americans will rely on AI assistants as their primary tool for retirement planning. These digital advisors won't just crunch numbers; they'll serve as personal financial coaches, available 24/7 to help individuals navigate the complex landscape of retirement preparation.
"We're moving from a world where retirement planning was something you thought about quarterly or annually to one where it's an ongoing, dynamic conversation," says Dr. Sarah Chen, Director of Financial Technology Research at Stanford University. "AI assistants will continuously monitor your financial situation, making micro-adjustments to your retirement strategy in real-time."
Personalization at Scale
One of the most significant advantages of AI-powered retirement planning is the ability to create highly personalized strategies. Traditional financial planning often relies on broad demographic categories and general rules of thumb. In contrast, AI systems can analyze thousands of variables specific to each individual, including:
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Spending patterns and habits
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Career trajectory and earning potential
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Health data and life expectancy predictions
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Family circumstances and obligations
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Regional economic conditions
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Personal risk tolerance and financial goals
Mark Rodriguez, CEO of RetireTech Solutions, explains: "AI assistants can process and analyze data points that human advisors simply don't have the capacity to consider. This means retirement strategies can be tailored not just to broad demographics, but to the individual level – down to suggesting specific timing for major purchases or identifying the optimal moment to begin Social Security benefits."
Real-Time Adjustments and Dynamic Planning
Unlike traditional retirement planning tools, AI assistants can provide continuous monitoring and adjustment of retirement strategies. These systems can:
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Automatically rebalance investment portfolios based on market conditions
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Adjust savings recommendations based on spending patterns
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Modify investment strategies in response to major life events
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Provide immediate guidance during market volatility
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Optimize tax strategies throughout the year
"The days of static retirement plans are over," notes Financial Planning Association President Jennifer Wong. "AI assistants can detect subtle changes in your financial situation and make immediate adjustments to keep you on track for your retirement goals."
Democratizing Access to Financial Expertise
Perhaps the most revolutionary aspect of AI-powered retirement planning is its potential to make sophisticated financial guidance accessible to a broader population. Traditional financial advisors often require minimum investment amounts or charge fees that put their services out of reach for many Americans.
"AI assistants are democratizing access to high-quality financial planning," says Dr. Michael Patel, an economist at the Brookings Institution. "These tools can provide professional-grade retirement planning advice at a fraction of the cost of traditional advisors, making comprehensive retirement planning accessible to millions of Americans who previously couldn't afford it."
The Human-AI Partnership
Despite the growing capabilities of AI assistants, experts emphasize that they won't completely replace human financial advisors. Instead, the future will likely involve a partnership between AI systems and human professionals.
"AI assistants excel at data analysis, pattern recognition, and continuous monitoring," explains Rachel Martinez, CFP, of Fidelity Investments. "But human advisors bring emotional intelligence, complex problem-solving abilities, and the capacity to understand nuanced family dynamics that AI systems might miss."
This hybrid approach is already emerging, with many financial advisory firms incorporating AI tools into their practice while maintaining the human relationship aspect of their service.
Enhanced Decision-Making Through Behavioral Analytics
One of the most promising aspects of AI-powered retirement planning is the ability to help individuals overcome common behavioral biases that can derail long-term financial planning. AI assistants can:
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Identify and alert users to emotional decision-making patterns
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Provide behavioral nudges to encourage better financial habits
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Offer context-aware guidance during market volatility
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Help users maintain long-term perspective during short-term market events
"Financial decisions are often emotional decisions," says Dr. Lisa Thompson, a behavioral economist at MIT. "AI assistants can help identify when emotions might be clouding judgment and provide objective, data-driven recommendations to keep retirement plans on track."
Privacy and Security Considerations
As AI assistants become more integral to retirement planning, privacy and security concerns take center stage. The industry is developing robust frameworks to protect sensitive financial data while maintaining the effectiveness of AI systems.
"Security isn't just about protecting data; it's about maintaining trust," says cybersecurity expert David Chang. "The future of AI-powered retirement planning depends on creating systems that are both powerful and secure, giving users confidence that their financial information is protected."
The Role of Regulatory Oversight
As AI assistants take on greater responsibility in retirement planning, regulatory frameworks are evolving to ensure appropriate oversight. The Securities and Exchange Commission and other regulatory bodies are developing new guidelines for AI-powered financial advice.
"We're working to strike the right balance between innovation and consumer protection," says former SEC Commissioner Elizabeth Barrett. "The goal is to harness the benefits of AI while maintaining the high standards of fiduciary responsibility that consumers expect and deserve."
Looking Ahead: The Next Decade
As we look toward the future, experts predict several key developments in AI-powered retirement planning:
Enhanced Predictive Capabilities
AI systems will become increasingly sophisticated at predicting future financial needs and market conditions, allowing for more accurate long-term planning.
Integration with Other Financial Services
Retirement planning AI will seamlessly integrate with other financial services, from banking to insurance, creating a more holistic approach to financial management.
Improved Natural Language Processing
AI assistants will become more conversational and intuitive, making complex financial concepts more accessible to the average user.
Greater Customization
AI systems will offer even more personalized recommendations, taking into account an expanding array of personal and economic factors.
Conclusion
The future of retirement planning is being reshaped by AI assistants that offer unprecedented levels of personalization, accessibility, and continuous optimization. While these tools won't completely replace human financial advisors, they will democratize access to sophisticated financial planning tools and help millions of Americans better prepare for retirement.
"We're entering an era where quality retirement planning isn't just for the wealthy," concludes Dr. Chen. "AI assistants are making it possible for everyone to have a personal financial advisor in their pocket, working around the clock to help them achieve their retirement goals."
As these systems continue to evolve and improve, they promise to help address the retirement savings crisis facing many Americans by making expert-level financial guidance more accessible, affordable, and effective than ever before. The future of retirement planning isn't just about better technology – it's about creating a more financially secure future for everyone.
Mad Hedge Technology Letter
October 28, 2024
Fiat Lux
Featured Trade:
(THE FUTURE OF TECH STOCKS)
(AI), (NVDA), (XLU), (XLE), (AAPL), (GOOGL), (AMZN), (META), (MSFT)