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FOLLOW THE YELLOW CHIP ROAD

(REGN), (MRNA), (BLK), (GS), (LMT), (NOC), (IBM), (GOOGL), (TRMB), (TSLA), (GM), (FDX), (UPS), (MSFT), (NVDA), (AI), (PLTR)

"In the world of AI, we're not in Kansas anymore, Toto," I muttered to myself as I stared at the latest headlines about OpenAI's Project Strawberry. Buckle up, Dorothy, because if you thought AI was already shaking things up, we're about to take a technicolor trip into a world where machines don't just crunch numbers - they reason like Einstein on steroids.

Sam Altman and OpenAI are teasing us with "strawberries" again. But this isn't farmer's market gossip.

We're talking about Project Strawberry, or Q* as the insiders call it, OpenAI's shot at artificial general intelligence (AGI) – AI that could outperform humans in most economically valuable tasks.

In fact, some OpenAI employees are so confident, they're betting their bottom dollar that Q* could be the AGI breakthrough we've all been waiting for.

Now, here's where it gets as exciting as finding a bull market in a sea of bears. Q* has been flexing its mathematical muscles, solving problems at a grade-school level.

You might think, "Big deal, my calculator can do that." But hold your horses. This isn't just about crunching numbers; it's about reasoning.

And that's where the investment landscape starts to shift dramatically. While your run-of-the-mill AI is busy predicting the next word in a sentence, Q* is laying the groundwork for revolutionizing scientific research and God knows what else.

Let's explore how some of the major players could harness this potential.

Imagine Regeneron Pharmaceuticals (REGN) and Moderna (MRNA) using this tech to turbocharge drug discovery. We could be looking at new wonder drugs hitting the market faster than you can say "artificial intelligence."

Or picture BlackRock (BLK) and Goldman Sachs (GS) wielding Q*'s mathematical prowess to create financial models so sophisticated they make Warren Buffett look like he's using an abacus.

And it doesn’t end there. Lockheed Martin (LMT) and Northrop Grumman (NOC) could use Q*'s brainpower to calculate missile trajectories that would make NASA green with envy.

Let's not forget IBM (IBM) and our old friend Alphabet (GOOGL) - they're betting big on quantum computing, and Q* could be the secret sauce that makes those quantum bits dance.

And if climate change got you down? Companies like Trimble (TRMB) could harness Q*'s capabilities to model climate patterns so accurately you'll know whether to pack sunscreen or an umbrella for your vacation next year.

As for all you Tesla (TSLA) and General Motors (GM) bulls out there, imagine self-driving cars with the reasoning power of a math genius. Your morning commute could become smoother than a well-aged scotch.

Even logistics giants like FedEx (FDX) and UPS (UPS) could use Q*'s mathematical magic to optimize their supply chains. Your packages might start arriving before you even realize you need them.

But we can't talk about AI without giving credit to the major tech players who are pushing it forward.

Microsoft (MSFT) is sitting pretty as OpenAI's sugar daddy. They've already plugged OpenAI's tech into Azure, and in Q2 2023, their AI-driven revenue in Azure shot up faster than a SpaceX rocket - we're talking 150% year-over-year growth.

If Project Strawberry delivers the goods, Microsoft will be first in line at the AI buffet.

Then there's Nvidia (NVDA), the company making the brains that power these AI behemoths. In Q3 2023, their data center revenue, fueled by AI hunger, exploded to $14.51 billion - that's a 279% year-over-year jump, folks.

As Project Strawberry and its AI cousins evolve, Nvidia's hardware will be hotter than beach sand in July.

Don't count out Alphabet either. While they're not in bed with OpenAI, they're no slouch in the AI department. Their Google Cloud platform saw revenue grow 22% year-over-year to $8.4 billion in Q3 2023.

As this AI arms race heats up, expect Alphabet to double down on their AGI efforts faster than you can say "Hey Google."

For those of you with a taste for smaller players, keep an eye on C3.ai (AI). These folks are serving up enterprise AI solutions like hotcakes at a lumberjack convention.

In Q2 fiscal 2024, they reported revenue of $73.2 million, up 17% year-over-year. If Project Strawberry proves its mettle, C3.ai could be swamped with clients faster than a trendy restaurant on Valentine's Day.

And let's not overlook Palantir Technologies (PLTR). Their big data analytics could get a serious boost from advancements in AI reasoning.

They reported Q3 2023 revenue of $558 million, up 17% year-over-year. If Project Strawberry's math skills translate to better data crunching, Palantir could be offering insights sharper than a samurai's sword.

With the global AI market projected to hit $407 billion by 2027, the AI revolution is here, serving up opportunities juicier than a prime rib at Peter Luger's.

As I said, we're not in Kansas anymore. Project Strawberry and its kind promise a world where AI doesn't just process, it ponders.

It's a brave new world, and it'll take more than ruby slippers to navigate. But for those willing to embrace the yellow brick road of innovation, the emerald city of profit awaits.

Just remember, in this Oz of AI, keep your wits sharp, your courage strong, and your heart big. Because in the end, there's no place like a well-informed portfolio. Now, if you'll excuse me, I've got some flying monkeys - I mean, market trends - to watch.

August 9, 2024

Tech Letter

Mad Hedge Technology Letter
August 9, 2024
Fiat Lux

Featured Trade:

(WARNING SIGNS LITTER THE TECH NARRATIVE)
(ABNB), (BKNG), (EXPE)

Warning Signs Litter The Tech Narrative

Tech Letter

It was early.

The real recession doesn’t kick into gear for another quarter or so.

This was just a quick fake-out.

The bond market freaking out and pricing in 1.25% Fed Funds’ cuts was a generous gift to tech stocks.

Why do I say that?

It is a dip in which we can get into tech prices at cheaper prices – probably the last time before the U.S. election.

We are starting to receive confirmation from many earnings reports that the consumer is starting to get cold feet.

The pullback in consumer strength runs the whole gamut from home improvement to restaurant eating.

I cover tech and the weakness is multi-pronged stemming from hardware to software.

The latest to ring the alarm about sluggish consumer spending was the digital accommodation platform Airbnb (ABNB).

Airbnb earned sales of $2.7 billion for the same quarter last year and now they have told investors that for next year they plan to target $2.5 billion of sales.

The culprit blamed by Airbnb management is the American consumer.

Americans are shortening their Airbnb stays and soon they could be sacrificing Airbnb altogether. Although we aren’t at that point yet, US consumers simply can’t stomach this new wave of price increases for the cost of living, and reigning back discretionary travel is this logical item to shave from the budget.

The second quarter continued a trend of decelerating bookings growth for Airbnb. The total value of all bookings through Airbnb grew 11% year over year to $21.2 billion for the three-month period. That's down from 12% booking growth in Q1, 15% growth in the final quarter of 2023, and 17% growth in September-ended third quarter of 2023.

In 2022 and 2023, Airbnb, Booking Holdings (BKNG), and Expedia Group (EXPE) benefited from a bounce-back in travel after the harsh lockdowns prevented many types of travel in 2020 and into 2021. So-called revenge travel powered strong sales growth for the companies. But the picture appears to be shifting.

It is hard to see the US consumer just bouncing back with a V-shaped trajectory and that could affect Airbnb sales.

Reports out of high costs states like Washington and New York peg $150,000 per year in income as “lower middle class.”

There has also been a huge migration shift from wealth moving out of blue states to red states in the hope of maintaining purchasing power through these high inflation times.

The fact of the matter is that $35 trillion in Federal debt is the most important topic for this upcoming U.S. President Election, but this topic has been completely sidelined from the national discourse.

This surely means higher debt down the road and a further deterioration in the US consumer profile.

Tech companies with large moats around their business models will get through these times, but for Airbnb, they don’t have this type of moat because consumers don’t necessarily need to travel. Consumers do need to eat, sleep, and drive a car to work.

They can simply just delay travel for a few years before they reload financially.

It is high time to unload stocks like Airbnb even if they are leaders in the home-sharing sub-sector in tech.

Airbnb shares are down around 32% in the past few months highlighting the need for overly expensive tech stocks to adjust to the new reality.

I do believe there is another leg down in shares before an optimal window to buy on the dip presents itself, but that appears to be around $90-$100 per share.

August 9, 2024 - Quote of the Day

Tech Letter

“Apple doesn't do hobbies as a general rule.” – Said CEO of Apple Tim Cook

Trade Alert - (AAPL) August 9, 2024 - TAKE PROFITS - SELL

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

August 9, 2024

Jacque's Post

(DON’T GET TOO COMFY – MORE CHOP & CHURN IS ON THE HORIZON)

August 9, 2024

Hello everyone.

ARE WE THERE YET?

Historically, it is rare for markets to put in correction lows in August. September and October are more likely to see an eventual bottom. So, be ready for equity market volatility in September.

ELI LILLY(LLY)

Eli Lilly reported impressive second quarter earnings. Mounjaro, a prescription medication for Type 2 diabetes, and Zepbound, a prescription medicine for weight loss are two drugs by Eli Lilly seeing incredible demand. In its first full quarter in the U.S. market, Zepbound brought in $517.4 million in revenue. In the second quarter, it generated $1.24 billion in U.S. revenue.

Obesity affects nearly 42% of adults in the U.S. according to the latest data from the Centres for Disease Control and Prevention.

The demand for weight loss drugs in on the rise around the world. The global market for obesity medication is expected to hit $105 billion in 2030, according to Morgan Stanley’s research. That’s up from the firm’s forecast in September of $77 billion.

Drug manufacturers like Eli Lilly and Novo Nordisk, the pharmaceutical company that makes Ozempic and Wegovy, are racing to meet that demand. Both companies are investing billions to build new manufacturing plants to boost supply of the popular medications.

Eli Lilly was founded in 1876 and became a publicly traded company on the New York Stock Exchange in 1952.

$1000 invested in Eli Lilly 10 years ago would now be worth $13,143, an estimated percentage increase of 1,214%.

The lesson here is don’t try and attempt to use a company’s short-term performance to predict how well or how poorly it may do in the future. There will always be market fluctuations. The key is to stay the course and let the growth narrative unfold over time.

This is an item of interest, not a suggestion to buy (LLY) right now. But (LLY) is an excellent stock to hold for the long term.

WHAT SHOULD MY PORTFOLIO LOOK LIKE?

An illustration of asset classes and allocations by age.

It is different for everyone.

So, one example does not fit all.

WHAT IS… FORWARD PRICE/ EARNINGS RATIO?

The forward price/earnings ratio is a measurement of value. It is found by dividing a stock’s most recent price by next year’s earnings per share estimate for the entire year. If that estimate is unavailable, then the estimate for the full current fiscal year is used.

For a better understanding of what forward price-to-earnings means, let’s look at an example. Let’s say a company’s current stock price is $25. Analysts estimate an EPS of $1.50 for the next quarter. Its forward P/E ratio would be 25/1.5=16.

Difference between forward P/E and trailing P/E

The main difference between standard P/E and the forward price-to-earnings definition is that the former uses actual EPS that has already been reported by a company, whereas the latter uses the EPS estimate.

The standard P/E is used to evaluate whether a company is overvalued or undervalued, whereas forward P/E ratio determines future estimated value.

Let’s look at an example. If the current price of a stock is $8 with the EPS of $1, and its earnings are expected to double in the next year to $2, the forward P/E ratio will be 4x, or half of the company’s value when it earned $1.

If the forward P/E is lower than the current P/E, analysts expect earnings to increase. On the other hand, when the forward P/E is higher than the current P/E ratio, analysts expect earnings to decrease.

QI CORNER

SOMETHING TO THINK ABOUT…

Cheers

Jacquie

Trade Alert - (GOOGL) August 9, 2024 - BUY

Tech 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 - (MSFT) August 9, 2024 - TAKE PROFITS - SELL

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

August 9, 2024

Diary, Newsletter, Summary

Global Market Comments
August 9, 2024
Fiat Lux

Featured Trade:

TESTIMONIAL)
(AUGUST 15 LONDON ENGLAND STRATEGY LUNCHEON)

Testimonial

Diary, Newsletter, Testimonials

Hi, my name is Wilson and I've been with the Mad Hedge Fund Trader, John Thomas, since 2019. I caught the phenomenal returns in 2019 and 2020, somewhere in the order of the 80-90% returns for both of those years. I caught all of those trades—Nvidia (NVDA) the US Treasury bond fund (TLT), Tesla (TSLA), etc. Then in 2021, I started trading in some additional accounts and I have caught almost all of the trades since then as well, getting almost the entire amount of returns that John has received.

It’s been just fantastic!

Wilson
Mill Valley, California