Page 248 - Mad Hedge Fund Trader

Pox Populi

Hold onto your hazmat suits because the world of infectious diseases just got a lot more interesting. And if you're someone with a stomach for volatility, you might want to pay attention.

Mpox is back, and it's brought a nasty new cousin to the party. The World Health Organization (WHO) just hit the big red button, declaring the mpox outbreak a public health emergency of international concern (PHEIC). That's fancy talk for "this is serious, people."

Let's break it down. We're not dealing with your garden-variety mpox here. This is a new strain, dubbed Clade Ib, and it's tearing through central Africa like a bull in a china shop.

The Democratic Republic of Congo (DRC) has seen over 15,600 cases so far this year, more than all of last year. And it's not staying put.

Kenya, Burundi, Rwanda, and Uganda are all reporting their first-ever mpox cases. It's like watching a virus go on a world tour, minus the t-shirts and overpriced concessions.

Now, before you start panic-buying toilet paper again, the Centers for Disease Control and Prevention (CDC) says the risk to the U.S. is very low.

But they're still telling healthcare providers to keep their eyes peeled for any funky rashes on patients who've been globe-trotting lately.

So, what do we do with this information? Well, let's talk vaccines.

Bavarian Nordic (BVNRY), the company behind the most widely used mpox vaccine, has seen its stock jump more than 30% since the WHO's announcement. It's like they won the pharmaceutical lottery.

And Uncle Sam's not shy about showing them some love – the U.S. Department of Health and Human Services just placed a $156.8 million order for a bulk vaccine product.

But they're not the only player in town.

Emergent Biosolutions (EBS), another vaccine manufacturer, also saw its stock surge when the news broke.

Even GeoVax Labs (GOVX) saw its stock shoot up 40% yesterday morning. Not bad for a company most people had never heard of last week. They're working on an MVA vaccine – that's Modified Vaccinia Ankara for you science nerds out there. It's the go-to choice for folks with weakened immune systems.

But it's not all sunshine and rainbows in vaccine land.

Siga Technologies (SIGA) released some disappointing trial data for their antiviral drug TPOXX. Turns out, it's not much better than a sugar pill for treating mpox.

Other companies are also jockeying for position.

Chimerix (CMRX) is developing brincidofovir, an antiviral that could potentially treat mpox. Tonix Pharmaceuticals (TNXP) is working on TNX-801, a live-virus vaccine candidate.

And let's not forget the diagnostic giants like Thermo Fisher Scientific (TMO) and Abbott Laboratories (ABT). After all, in the world of infectious diseases, being able to spot the bad guy quickly is half the battle.

Even the big guns of the COVID-19 vaccine world, Moderna (MRNA) and Pfizer (PFE), might decide to flex their mRNA muscles in the mpox arena. And with their track record, who's going to bet against them?

But here's the million-dollar question: Is this a golden opportunity for investors, or a potential minefield? The answer, as always in the stock market, is "it depends."

On one hand, companies directly involved in mpox vaccines, treatments, and diagnostics could see their stocks soar if the outbreak worsens.

On the other hand, the biotech sector is about as stable as a jenga tower in an earthquake. Today's miracle drug could be tomorrow's cautionary tale.

The smart money isn't putting all its eggs in the mpox basket. Diversification is still the name of the game. Remember, this outbreak could fizzle out as quickly as it started, leaving one-trick ponies high and dry.

Plus, let's always keep in mind the wild card in all this: government contracts.

In the world of infectious diseases, Uncle Sam often holds the purse strings. Keep your ear to the ground for any whispers of government funding or contracts. That kind of news can send stocks into the stratosphere faster than you can say "public health emergency."

So, what's the bottom line? The mpox outbreak is creating some intriguing opportunities in the biotech sector. But as with any investment, don't let the fear of missing out cloud your judgment.

And remember, in the stock market, as in epidemiology, it's all about managing risk.

In the meantime, maybe skip that bushmeat sandwich on your next African safari. Just a thought.

August 20, 2024

Diary, Newsletter, Summary

Global Market Comments
August 20, 2024
Fiat Lux

Featured Trade:

(MY TRIP INTO INFINITI),
(TSLA)

My Trip into Infiniti

Diary, Newsletter

Don’t worry.

I was late with my newsletter today because I fell off some Alp or crashed an airplane. The 200-year-old doors in my Cambridge Airbnb are so thick that they can’t be penetrated by WIFI. The broadband here hasn’t been upgraded since the Roman Empire, but at least it works.

This year, I thrilled you with my glider flight over Eastern Europe. Last year I climbed a shear rock face in the Italian Dolomites. The year before my aerobatic flying of a WWII Spitfire over the White Cliffs of Dover probably sent chills down your spine (click here if you missed it).

Then I one-upped myself.

In appreciation to the early buyers of Model S-1’s, Tesla invited me to submit a photo to be etched on the side of a satellite launch into space. Having purchased chassis no. 125, I certainly qualified. Those who referred 25 other buyers were allowed to send videos.

Of course, I had to send a picture of me piloting a 1929 Travelaire D4D biplane, which you can find below. The photo was inserted into the mosaic on the side of a spacecraft. I sent the Spitfire video on an SD card and it’s in orbit as well.

The blast-off took place at Cape Canaveral, Florida.

You have to hand it to Tesla, they really know how to do PR, and their advertising budget is nearly zero. The Detroit Big 3 spends $50 billion a year on advertising and gets a lesser result.

To watch a video of me blasting off into space on a Space X Falcon 9, or at least my laser-etched image, please click here.

Oh, and buy (TSLA) on any big dips as well. The EV nuclear winter can’t last forever.

As for me, I’m off for a pint of ale at the Churchill Arms.

August 20, 2024 - Quote of the Day

Diary, Newsletter, Quote of the Day

“If you look at newspaper headlines every day for the past 50 years, they’re almost always negative. If you look at the economy every day for the past 50 years it’s always positive,” said Oracle of Omaha Warren Buffett.

The AI Revolution in Banking: A Deep Dive into the Institutions Leading the Charge

Mad Hedge AI

Artificial Intelligence (AI) is no longer a futuristic concept in the banking industry. It's a reality, rapidly transforming how banks operate, serve customers, and make strategic decisions. From fraud detection to personalized financial advice, AI is permeating every facet of banking operations.

In this article, we'll delve into the current AI landscape in the banking sector, highlighting the institutions that are at the forefront of this technological revolution and we'll explore their specific AI implementations, the benefits they're reaping, and the challenges they face.

The Leaders of the Pack

While AI is being embraced across the board, some banking institutions stand out due to their extensive and innovative use of this technology. Let's spotlight a few of these pioneers:

JPMorgan Chase:

AI implementations: JPMorgan Chase leverages AI for a myriad of purposes, including fraud detection, risk management, trading, and customer service. Their use of AI for algorithmic trading is particularly noteworthy. They've developed sophisticated AI models that can analyze market trends, identify trading opportunities, and execute trades at lightning speed.
Benefits: The benefits are manifold. AI has enabled JPMorgan Chase to improve operational efficiency, reduce costs, enhance customer experience, and make better-informed investment decisions.
Challenges: One of the main challenges is ensuring the explainability of AI models, especially in high-stakes areas like credit risk assessment.

Capital One:

AI implementations: Capital One's Eno, an AI-powered chatbot, is a testament to their commitment to AI. Eno assists customers with a wide range of tasks, from checking balances to disputing transactions. Capital One also uses AI extensively for fraud detection, credit risk assessment, and marketing.
Benefits: AI has enabled Capital One to provide more personalized customer service, improve fraud detection rates, and make more targeted marketing campaigns.
Challenges: A key challenge is maintaining customer trust in AI-powered systems, especially when it comes to handling sensitive financial information.

Wells Fargo:

AI implementations: Wells Fargo's use of AI spans from customer service to risk management. They've implemented AI-powered virtual assistants to handle customer inquiries, AI-based models for fraud detection, and AI algorithms for credit risk assessment.
Benefits: Wells Fargo has reported increased operational efficiency, reduced fraud losses, and improved customer satisfaction as a result of their AI initiatives.
Challenges: A persistent challenge is ensuring the fairness and non-discrimination of AI algorithms, especially in areas like lending.

Bank of America:

AI implementations: Bank of America's virtual assistant, Erica, is a prime example of their AI prowess. Erica can help customers with a variety of tasks, from checking balances to setting up bill payments. Bank of America also leverages AI for fraud detection, risk management, and investment advice.
Benefits: Erica has been instrumental in enhancing customer engagement and satisfaction. AI has also helped Bank of America improve its operational efficiency and risk management practices.
Challenges: A major challenge is keeping up with the rapid pace of AI advancements and ensuring their AI systems remain at the cutting edge.

Citigroup:

AI implementations: Citigroup uses AI extensively across its operations, from customer service to investment banking. They've developed AI-powered chatbots to handle customer queries, AI-based models for fraud detection, and AI algorithms for trading and risk management.
Benefits: AI has enabled Citigroup to provide more efficient and personalized customer service, enhance its risk management practices, and make more informed investment decisions.
Challenges: A key challenge is ensuring the ethical use of AI, especially in areas like customer profiling and targeted marketing.

Specific AI Use Cases in Banking

AI is not just a buzzword in the banking sector. It's being applied to a wide range of use cases, each with its own set of benefits and challenges. Let's explore some of the most prominent ones:

Customer Service:

AI-powered chatbots and virtual assistants are increasingly being used to handle customer inquiries, provide account information, and assist with basic transactions.
Benefits: This frees up human agents to focus on more complex issues, leading to improved customer satisfaction and reduced costs.
Challenges: Ensuring chatbots can handle a wide range of queries and provide accurate information can be a challenge.

Fraud Detection:

AI algorithms are being used to analyze vast amounts of transaction data to identify patterns that might indicate fraudulent activity.
Benefits: This enables banks to detect fraud more quickly and accurately, reducing losses and protecting customers.
Challenges: Staying ahead of fraudsters who are constantly evolving their tactics is an ongoing challenge.

Credit Risk Assessment:

AI models are being used to assess the creditworthiness of loan applicants, taking into account a wide range of factors beyond traditional credit scores.
Benefits: This allows banks to make more informed lending decisions, potentially expanding access to credit for underserved populations.
Challenges: Ensuring these models are fair and non-discriminatory is crucial.

Algorithmic Trading:

AI is being used to analyze market trends, identify trading opportunities, and execute trades at high speed and volume.
Benefits: This can lead to increased profitability and improved risk management for banks involved in trading activities.
Challenges: The complexity and potential risks of algorithmic trading require careful oversight and regulation.

Personalized Financial Advice:

AI-powered robo-advisors are being used to provide personalized investment advice and portfolio management services.
Benefits: This makes financial advice more accessible and affordable for a wider range of customers.
Challenges: Ensuring these robo-advisors provide suitable advice and act in the best interests of their clients is paramount.

The Road Ahead: The Future of AI in Banking

The AI revolution in banking is still in its early stages, but its potential is vast. As AI technology continues to advance, we can expect to see even more innovative and transformative applications in the years to come.

However, along with the opportunities come challenges. Ensuring the ethical and responsible use of AI, maintaining customer trust, and keeping up with the rapid pace of technological change will be key priorities for banks.

In conclusion, AI is reshaping the banking landscape, enabling institutions to operate more efficiently, serve customers better, and make more informed decisions. The banks that embrace AI and harness its power effectively are likely to be the ones that thrive in the digital age.

August 19, 2024

Tech Letter

Mad Hedge Technology Letter
August 19, 2024
Fiat Lux

Featured Trade:

(WHAT WILL PALANTIR STOCK DO FOR THE REST OF 2024?)
(PLTR)

What Will Palantir Stock Do For The Rest Of 2024?

Tech Letter

Not all tech stocks are created equal.

Some have the power of connections from the beginning and that goes a long way to understand if a company can do what it takes to survive.

Very rarely do tech companies come out of nowhere and it is true that recognized venture capitalists help like rocket fuel.

Palantir (PLTR) was supported initially by tech insider billionaire Peter Thiel.

It’s not surprising that this is a company sitting deep at the intersection of strategic national intelligence and artificial intelligence.

The stock hit a low of $5 per share and now trades north of $32 per share.

Investors might easily understand this company as the war tech stock and co-founder and CEO Alex Karp is in no mood to apologize or be politically correct for its military, police, and U.S. Immigration and Customs Enforcement services despite facing massive backlash.

Karp acknowledged the company’s consistent pro-Western view despite polarizing views regarding the appeasement of Iran, Russia, and China.

Karp refused to apologize for defending the U.S. government on any issue and he has never wavered behind their principle of powering the U.S. government.

Karp stood out for his fierce criticism of Former US President Donald Trump, but he has said that he will work with both administrations.

Karp also maintained his pro-artificial intelligence stance, indispensable to preventing AI abuse.

In August, Palantir reported second-quarter revenue of $678.13 million, up 27% year-over-year, topping the analyst consensus of $652.1 million.

Palantir has been selling AI software for much longer than most of its competitors, which gives it a leg up on its competition. It started off as a software program intended for government use, with the simple concept of data in and insights out. This helped guide real-time decision-making by ensuring the people making the choices had the best possible information in front of them.

Still, government revenue makes up more than half of Palantir's total and rose at a 23% pace. It was powered by U.S. government revenue, which saw the highest demand since 2022.

No matter how you dice it up, Palantir's Q2 results were phenomenal. However, management thinks its growth may slow in Q3. Third-quarter revenue is expected to be about $699 million, indicating growth of 25%. While that's less than Q2's growth rate, management has consistently beaten its guidance.

My opinion about where the PLTR’s stock is going might surprise some people.

On one hand, the United States has the biggest military in the world and will covet and utilize PLTR’s software to continue to make real-time decisions in a national security sense.

On the other hand, the issue I have with PLTR is not with the quality of the business, but the price of their stock.

The stock has risen too fast too furiously in a short-amount of time.

The move from $5 per share to $32 took place over a 2.5-year time frame obviously boosted by global events in Eastern Europe and the Middle East.

For the rest of the year, I do think PLTR has a chance to blow past $40 per share and at that point, we will most likely reach the short-term high water mark of the stock.

The stock is due for a big sell-off once the AI frenzy cools down a little and that could be later this year.

Remember that the AI narrative has reignited in the short-term so it is smooth saying until the next road bump.

This is a complex company and with many of those, the trajectory of the stock can be many times more complicated.

August 19, 2024 - Quote of the Day

Tech Letter

“The superior man understands what is right; the inferior man understands what will sell.” – Said Chinese Philosopher Confucius

August 19, 2024

Jacque's Post

(THE JACKSON HOLE SYMPOSIUM WILL STEAL THE SPOTLIGHT THIS WEEK)

August 19, 2024

Hello everyone,

Week ahead calendar

2024 Democratic National Convention Aug. 19 - 22

2024 Jackson Hole Economic Policy Symposium Aug. 22 – 24

Monday Aug. 19

10 a.m. Leading Indicators (July)

9:30 p.m. Australia RBA Minutes

Earnings: Palo Alto Networks, Estee Lauder.

Tuesday Aug 20

8:30 a.m. Canada Inflation Rate

Previous: 2.7%

Forecast: 2.7%

Earnings: Lowe’s

Wednesday Aug 21

2 p.m. FOMC Minutes

Earnings: TJX Companies, Analog Devices, Target, Raymond James Financial.

Thursday Aug 22

8:30 a.m. Chicago Fed National Activity Index (July)

8:30 a.m. Continuing Jobless Claims (08/10)

8:30 a.m. Initial Claims (08/17)

9:45 a.m. PMI Composite preliminary (August)

9:45 a.m. Markit PMI Manufacturing preliminary (August)

9:45 a.m. Markit PMI Services preliminary (August)

10 a.m. Existing Home Sales (July)

11 a.m. Kansas City Fed Manufacturing Index (August)

7:30 p.m. Japan Inflation Rate

Previous: 2.8%

Forecast: 2.9%

Earnings: Intuit, Ross Stores

Friday Aug 23

8:00 a.m. Building Permits (July)

10 a.m. New Home Sales (July)

Later this week, we will be tuned into Jerome Powell’s speech at the Jackson Hole symposium. This speech comes just a few weeks after the July Fed meeting where he gave investors some confidence that a September rate cut was on the table. This confidence was built on “coded statements” from Powell, that appeared to say a lot, without saying anything decisive.

To further confuse investors about the Fed’s actions going forward, we were whipsawed by the Aug 2 non-farm payrolls data, and then the retail sales report and softer inflation data last week.

This week investors will also be able to examine the behaviour of the consumer as we have earnings results from retail chains, including Lowe’s and Target.

We can also pore over weekly continuing and initial unemployment claims data to gauge the temperature of the labour market.

Outside the U.S., attention will focus on inflation metrics, with significant data releases from Canada and Japan.

Goldman Sachs urges investors to “keep the faith” that the U.S. will avoid a recession…

My advice: be ready to take advantage of any volatility going forward. Scale into sold-off stocks and gradually build your positions.

MARKET UPDATE

S&P 500

The market rejected the recent low a couple of weeks ago very quickly. Is that the low? We can never be certain. If it is, then we have made an Elliott Wave 4 pattern low, which should now be followed by the market running up to new highs in the mid-5,700’s or toward 6000. (But don’t expect a straight lineup). Only once this Wave 5 is over, will the bullish sequence from the October 2022 low of 3,492 be complete. And this then leaves the market vulnerable to its biggest corrective sell-off since this bottom. The market will tell us where the top is in its Wave structure over the coming weeks/months.

GOLD

Gold has pierced the $2,500 level, and now seems set to rally to the mid $2,500’s and then $2,670. Support lies around $2,480-$2,450.

BITCOIN

Bitcoin is still undergoing a complex corrective structure. Support is still found in that band between $40k and $50k. We are looking for a sustained break above $60,000 to encourage advance toward the $70,000 level, enroute to the key $73,794 resistance.

QI CORNER

Elon Musk, Albert Einstein, Charlie Munger and many others are big believers in INVERSION THINKING.

What is it exactly?

Let’s throw some light on it by looking at some extracts from Alex Penunuri on X.

Inversion thinking is a problem-solving technique where you tackle problems backward. Instead of focusing on success, you identify WHAT leads to FAILURE and AVOID those actions. This leads to a faster & easier decision-making process.
Elon Musk is a big advocate of inversion thinking. He often uses it to avoid pitfalls in his ventures. He identifies potential failures early & steers his projects away from common mistakes.
It’s also a tool Charlie Munger regularly used. “Avoiding stupidity is easier than seeking brilliance” – he believed. Rather than trying to win, avoid losing.
Why is inversion thinking so powerful? As humans, we’re better at seeing threats than seeing opportunities. By inverting your thinking, you turn complex problems into obvious solutions.
Another benefit of inversion thinking is its ability to relieve anxiety. When facing a difficult problem, it’s hard to see the way out. Inversion lets you see situations from a different angle.
Another example: Building a relationship. What behaviours will ruin a relationship? Judgement, Lack of communication, No respecting the other person. By inverting the question, you can easily see how to avoid a bad relationship.
What about the business context…What behaviours would ruin a business? Having a bad product. Not promoting your stuff. Giving customers a poor experience. It’s hard to see how to grow a business, easy to see how you can destroy one.
How can you apply Inversion Thinking in your life:
1/ Find the problem
2/ Identify the desired outcome
3/ Invert it by asking what would prevent that goal from happening
4/ Plan to avoid those actions