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
April 10, 2024
Fiat Lux
Featured Trade:
(PODCASTS A NEW EXPERIMENT FOR SPOTIFY)
(SPOT)
The dominant music streaming platform Spotify is trying harder these days.
When I say trying harder, I mean trying harder to become profitable because after almost a generation of when burning cash was ok, investors suddenly demand a business that doesn’t run a minus every year.
Zero rates have had an oversized effect on the balance of business in 2023 and 2024.
Failure isn’t rewarded with gaudy executive compensation and more vested shares.
Belt tightening by cutting staff and streamlining operations is the paradigm we are finding ourselves in.
Spotify was the prototypical loss maker in tech that was given a pass because it grew users fast.
Now that interest rates are high, tech companies are penalized by going to the debt markets too much and the effect is magnified if a company needs a high amount of debt.
Logically, SPOT has made diversifying revenue a top bullet point in their strategic future and that is exactly what they are doing.
SPOT has also discovered it can generate additional money from the most diehard music fans. Currently, all listeners pay the same rate for access to a musician’s catalog. But there are fans willing to pay far more to support an artist they love, as evidenced by the rising price of concert tickets, merchandise, and even vinyl for Korean artists.
SPOT plans to raise the price of its popular audio service in several key markets for the second time in a year, a crucial step toward reaching long-term profitability.
The streaming giant will increase prices by about $1 to $2 a month in five markets by the end of April, including the UK, Australia, and Pakistan, according to people familiar with the matter.
It will raise prices in the US, its largest territory, later this year, said the people, who asked not to be identified discussing confidential plans.
The higher prices will help cover the cost of audiobooks, a popular service introduced late last year.
Spotify offers customers up to 15 hours of audiobook listening a month as part of their paid plan. While the company pays publishers for books, it has so far only collected additional revenue from listeners who exceed the limit.
Spotify paid record labels, artists, and others more than $9 billion last year – from $13.2 billion in revenue.
Last year, SPOT posted its best year of user growth ever, with 113 million new sign-ups to its free and paid services.
Spotify had 602 million users at the end of 2023, including 236 million paying customers.
The success of the price increase has given management confidence to seek even more. Under the new pricing, individual plans will go up by about $1 a month, while family plans and so-called duo plans for couples will rise by $2.
In the last 365 days, the stock has catapulted from $134 to over $300 per share.
The stock is absolutely resonating with investors and moves by management have been aggressive to branch out from the music royalty business.
Buy SPOT on the dip.
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
(INVESTORS ARE SPINNING ON EMPTY AS THEY COME TO GRIPS WITH ECONOMIC DATA)
April 10, 2024
Hello everyone,
Have you invested in Gold Bars? Look who is selling them.
But I’m sure your portfolio already has quality gold and silver stocks. Right?
Let’s pause for a moment and consider where we are.
I’m not speaking philosophically.
I’m talking about where we are in the economic cycle, by using an analogy of washing machine cycles.
Let me briefly explain.
For the last few years, we have been in the wash cycle, and that cycle was definitely not the one we use for Delicates or Woollens.
We have been washed up, rinsed, tossed around, and radically tested.
There was great cost and disruption associated with this cycle, so the world saw a flush of funds and then an acceleration of costs – inflation.
We are moving into the spin cycle now, where everything seems chaotic, and you can’t seem to get your bearings or make sense of the world. Disconcerting, to say the least.
How long will the spin cycle last? – not sure yet.
Markets have rebalanced. While the tech sector is resting, energy, commodities, and the metals have taken centre stage and have risen steadily.
Jamie Dimon, CEO of J.P. Morgan commented recently on the economic outlook and emphasised the need for investors to stay overweight on commodities with a focus on energy to hedge against inflation as he believes interest rate cuts may arrive much later than originally forecast.
According to Marko Kolanovic, J.P. Morgan’s chief market strategist “we are not out of the woods yet on inflation, and the current backdrop of above-trend growth raises the risk that inflation will re-emerge as a problem for both central banks and markets.”
In recent months, inflation has risen in both the U.S. and Western Europe, most particularly in the services sector. Due to stronger economic growth, JPMorgan has revised its global growth upward by 0.5% in the first half of this year.
The investment bank now expects the Fed to start cutting interest rates in July – and right now it still sees 75 basis points of cuts through year-end.
However, this forecast is tied to data related to growth and inflation and so the Fed could easily pull back from pulling the trigger on the expected number of rate cuts. And it is a possibility we may not get any at all.
The crude rally is impacting the global economy at the same time as the conflict in the Red Sea disrupts shipping and demand puts upward pressure on prices.
JPMorgan expects Brent prices could rise to $100 a barrel by September.
Why?
Russia is slashing production and Ukraine is escalating drone attacks against Russia’s energy infrastructure.
Ukraine has hit 18 Russian oil refineries so far with a total annual capacity of 3.9 million barrels per day. An estimated 670,000 barrels per day of Russian refining capacity is currently shuttered, according to JPMorgan. What this means is that Ukraine’s attacks could force Russia to cut production further and ban gasoline exports.
The U.S. could act here and become a fall-back measure by tapping the strategic petroleum reserve as a countermeasure if the situation escalates and deteriorates further.
Interesting times, to say the least.
Cheers,
Jacquie
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
Global Market Comments
April 10, 2024
Fiat Lux
Featured Trade:
(MAY 8 GALAPAGOS ISLANDS STRATEGY LUNCHEON)
(WHY THE UNDERGROUND ECONOMY IS GROWING SO FAST)
“2024 will be the fourth year of living dangerously,” said Ed Yardeni of Yardeni Research.
Mad Hedge Biotech and Healthcare Letter
April 9, 2024
Fiat Lux
Featured Trade:
(A PHARMA TORTOISE IN A MARKET FULL OF HARES)
(JNJ)
For the thrill-seekers who get a kick out of watching industries move faster than a cat on a hot tin roof, riding the wave of trending growth stocks might be for you.
But for those who prefer a good night's sleep over night sweats about market swings, pinning down stocks that promise a smooth sail towards retirement is the name of the game.
Now, if I were to put my money on one sector that's as steady as they come, I'd bet the farm on healthcare.
Why, you ask? Well, let’s take a look at the numbers.
U.S. healthcare spending ballooned to a jaw-dropping $4.5 trillion in 2022. That’s $13,493 for every man, woman, and child. With an army of about 10,000 baby boomers daily marching into Medicare eligibility, it's a safe bet this number's on a one-way trip up.
Let’s talk about a healthcare giant arena that might not make you rich overnight, but it's a dividend machine you can count on: Johnson & Johnson (JNJ).
Think of J&J as the responsible older sibling of your portfolio. They recently raised their dividend for the 61st year in a row. That's a 3.1% yield right now – a pretty good return for such a dependable company.
Over the past five years, J&J’s payout has beefed up by over 25%. Quite the feat, especially considering it just slimmed down by spinning off its consumer health division.
This strategic move has made J&J a lean, mean, dividend-paying machine. They're now laser-focused on their core businesses: med tech and pharmaceuticals.
This focus is paying off – they raked in a sweet 11.1% jump in adjusted earnings in 2023. With dividends sitting pretty at $4.76 a share and a clear path for growth, this blue chip just keeps getting better.
But J&J's not just a big fish in the healthcare pond – it's practically the whole ocean. They hauled in a jaw-dropping $85.2 billion in revenue last year. This company has a decades-long track record of turning its massive size into consistent growth for shareholders.
Case in point: J&J just made a big power play, grabbing Shockwave Medical (SWAV) for a cool $13.1 billion.
Not bad for a company that clearly loves shopping for heart-focused companies – remember when they scooped up heart device maker Abiomed for $16.6 billion in 2022? This latest acquisition isn't just about beefing up their medical device game. It's their ticket to dominating the cardiovascular space.
But, J&J's not content with just hearts; they're setting their sights on robot-assisted surgery with their new Ottava device.
Sure, they might be playing catch-up to Intuitive Surgical (ISRG), but think about it: barely any surgeries use robots right now. This market has potential written all over it
Of course, it's not all sunshine and roses in the land of Big Pharma. J&J's had its share of courtroom battles and regulatory headaches, just like any mega-corporation.
But they've weathered the storm, and their credit rating is better than Uncle Sam's. That shows a kind of resilience you just can't fake.
In today's volatile market, it's easy to get swept up in the hype of flashy, high-risk stocks – the hares of the investing world. But what if true wealth lies in the slow and steady pace of the tortoise?
In the pharma world, J&J is proof that slow and steady progress, unwavering reliability, and a continuous effort to innovate are the secrets to long-term success. They might not be the flashiest stock, but their steady march of growth and consistent dividends make them a quiet force in the pharma world.
So the next time you're tempted to chase the latest market fad, remember the pharma tortoise – and consider adding a reliable blue-chip like J&J to your portfolio. If you see a dip, don't hesitate, buy it.
