Mad Hedge Technology Letter
March 20, 2024
Fiat Lux
Featured Trade:
(A NEW SET OF CHIPS ARE COMING)
(NVDA)
The accolades keep raining down on Nvidia (NVDA) CEO Jensen Huang. I even heard one person say he is the new Steve Jobs.
Those are quite lofty compliments for a guy who has been under the radar for quite a long time. However, he can’t hide anymore as NVDA’s share price has skyrocketed and the valuation today stands at over $2.2 trillion.
NVDA should be at the heart and core of every tech portfolio. They are critical to the facilitation of AI in the present and the future. So when he talks publicly, people listen and that’s what just happened.
Jensen Huang described what he sees ahead for artificial intelligence and Nvidia. He believes it is something so vast and transformative that computing and how we use it will never be the same.
Huang gave the keynote address on Monday to open Nvidia's GTC 2024 conference. Huang focused on what he insisted was the coming transformative influence that his company's Blackwell program of chips and related systems would have on technology and artificial intelligence at the first level and the entire economy beyond.
The audience at the SAP Center in San Jose was waiting for his every word.
Huang focused on Nvidia's new generation of chips and the two factors that make AI work: the training (or programming) that enables the semiconductors to receive data, recognize and organize it, and send it back out to a client in usable form; and the brute computing power to make it all happen.
Nvidia's influence on artificial intelligence is already substantial, thanks to its H100 GPU chips and related products which power most AI applications now.
The Blackwell platform, expected to be available toward the end of 2024, will use a new series of chips, the B200 family, combined with new components and software to get the most out of the chips.
The goal is to let a user pack more training onto chips so these chips and the components built around them can recognize data more quickly.
The chips are supposed to access more inference — the capacity to know how to analyze the data to produce usable conclusions to queries and questions.
Blackwell is supposed to offer 4 times the capacity of Nvidia's wildly popular A100 chip to program the training aspects in the chips themselves and 30 times the inference output.
Add more of these chips into the system, and you can gather more data and translate it into more usable information almost instantaneously.
Nvidia is developing other equally fast components into the platform system so that the information flows in and out swiftly and, as importantly, smoothly, all the while using a lot less power.
Many can see how these cut across a slew of industries by making them more productive and efficient. The head and brains of an operation for most corporations will be an algorithm facilitated by an Nvidia chip.
The demand for these products will be out of the roof coming from industries like logistics, industrial, transport, consumer products, finance, and so on.
Nvidia will supercharge business everywhere.
I will keep tabs on how the Blackwell platform performs, but it is hard to envision it failing because Nvidia’s reputation precedes itself.
This also could trigger another leg to the bull market in tech stocks.
“Economies of scale are a good thing. If we didn't have them, we'd still be living in tents and eating buffalo.” – Said JP Morgan CEO Jamie Dimon
(PALANTIR IS A STANDOUT WHEN IT COMES TO IMPROVING U.S. SECURITY & THE MILITARY)
March 20, 2024
Hello everyone,
PALANTIR(PLTR)
It is a promising AI investment.
It has links to defence and intelligence.
Involved in cyberspace for the government.
Producing AI applications for military and defence.
Holds an Artificial Intelligence Platform (AIP)
Palantir’s future looks bright.
Shares of Palantir jumped nearly 10% on March 6 after Palantir announced its Tactical Intelligence Targeting Access Node was selected by the U.S. Army. TITAN uses artificial intelligence to provide targeting information for missiles.
The bulk of Palantir’s revenue comes through government contracts. Its government segment makes up nearly 56% of total sales. The rest of sales are commercial.
Analysts believe that their strong product portfolio together with AI will produce a meaningful share of a $1 trillion AI Global TAM as enterprise and government ecosystems rush to implement useful platforms for automating complex workflows.
Analysts have given the stock a target of $37.00. Shares of Palantir are up around 41% year-to-date.
The global energy sector is cheap relative to the broader market. I recommended to everyone to average into this sector earlier in the year. Analysts at Berenberg Investment Bank among others, argue that on a global basis, energy trades at relative valuation levels only seen three times in the past 40 years: the late 1980s, 2000, and 2020.
The bank pointed out that investors in oil and gas stocks on those three occasions outperformed the market by an average of 108% - or more than doubled their money – from the depressed valuation levels.
Analysts at Berenberg used a proprietary metric based on a combination of price-to-earnings multiples, dividend yields, and price-to-book multiples to determine the sector’s valuation.
For investors looking to increase their energy exposure, Berenberg named several stocks as their “top picks.” (Shell (SHEL) ($66.47), Total Energies (TTE) ($68.40), and Harbour Energy (HBR.L) ($274.80).
You can buy any of these stocks in small parcels or choose to pass. You could also choose to do an option instead of buying stock. Or, as I point out next, you could buy an energy ETF. Totally up to you. I know many of you are holding (XOM), that I recommended earlier in the year. Great job!
An alternative to buying energy stocks is to take a position in an energy ETF. The one I am thinking of here is the Energy Select Sector SPDR Fund (XLE) (Price $92.18). This ETF offers exposure to the entire energy sector, including both oil and natural gas companies, as well as renewable energy companies. (XLE) offers a diversified approach to the energy industry.
Here is the link to the Zoom monthly meeting held in early March. Enjoy!
https://www.madhedgefundtrader.com/meeting-replay-march-2024/
Cheers,
Jacquie
Global Market Comments
March 20, 2024
Fiat Lux
Featured Trade:
(WELCOME TO THE DEFLATIONARY CENTURY),
(TLT), (TBT), (AAPL), (MSFT)
Ignore the lessons of history, and the cost to your portfolio will be great. Especially if you are a bond trader!
Meet deflation, upfront and ugly.
If you look at a chart for data from the United States consumer prices are rising at an annual 3.2% rate. The long-term average is 3.0%.
This is above the Federal Reserve’s own 2.0% annual inflation target, with most of the recent gains coming from housing costs.
We are not just having a deflationary year or decade. We may be having a deflationary century.
If so, it will not be the first one.
The 19th century saw continuously falling prices as well. Read the financial history of the United States, and it is beset with continuous stock market crashes, economic crises, and liquidity shortages.
The union movement sprung largely from the need to put a break on falling wages created by perennial labor oversupply and sub-living wages.
Enjoy riding the New York subway? Workers paid 10 cents an hour built it 125 years ago. It couldn’t be constructed today, as other more modern cities have discovered. The cost would be wildly prohibitive. Look no further than the California Bullet Train, now expected to cost $100 billion. A second transbay tube in San Francisco will cost $29 billion.
The causes of the 19th-century price collapse were easy to discern. A technology boom sparked an industrial revolution that reduced the labor content of end products by ten to a hundredfold.
Instead of employing 100 women for a day to make 100 spools of thread, a single man operating a machine could do the job in an hour.
The dramatic productivity gains swept through the developing economies like a hurricane. The jump from steam to electric power during the last quarter of the century took manufacturing gains a quantum leap forward.
If any of this sounds familiar, it is because we are now seeing a repeat of the exact same impact of accelerating technology. Machines and software are replacing human workers faster than their ability to retrain for new professions. If you want to order a Big Mac at McDonald’s these days, you need a PhD in Computer Science from MIT. The new stores have no humans to take orders.
This is why there has been no net gain in middle-class wages for the past 40 years. That is until the pandemic hit which created labor shortages that are still working their way out. It is the cause of the structurally high U-6 “discouraged workers” employment rate, as well as the millions of millennials still living in their parent’s basements.
To the above add the huge advances now being made in healthcare, biotechnology, genetic engineering, DNA-based computing, and big data solutions to problems. Did anyone say “AI”?
If all the major diseases in the world were wiped out, a probability within 10 years, how many healthcare jobs would that destroy?
Probably tens of millions.
So the deflation that we have been suffering in recent years isn’t likely to end any time soon. In fact, it is just getting started.
Why am I interested in this issue? Of course, I always enjoy analyzing and predicting the far future, using the unfolding of the last half-century as my guide. Then I have to live long enough to see if I’m right.
I did nail the rise of eight-track tapes over six-track ones, the victory of VHS over Betamax, the ascendance of Microsoft (MSFT) operating systems over OS2, and then the conquest of Apple (AAPL) over Motorola. So, I have a pretty good track record on this front.
For bond traders especially, there are far-reaching consequences of a deflationary century. It means that there will be no bond market crash, as many are predicting, just a slow grind up in long-term bond prices instead.
Amazingly, the top in rates in this cycle only reaches the bottom of past cycles at 5.49% for ten-year Treasury bonds (TLT), (TBT).
The soonest that we could possibly see real wage rises will be when a generational demographic labor shortage kicks in during the late 2020s.
I say this not as a casual observer, but as a trader who is constantly active in an entire range of debt instruments.
I just thought you’d like to know.
Hey, Have You Heard About John Deere?
Mad Hedge Biotech and Healthcare Letter
March 19, 2024
Fiat Lux
Featured Trade:
(NOT JUST A ONE-TRICK PONY, BUT A BIOTECH THOROUGHBRED)
(LLY), (NVO), (PFE), (AMGN)
I've been around the block a few times when it comes to investing, and let me tell you, I know a thing or two about spotting a winner. And right now, there's one name in the biotechnology and healthcare world that's caught my eye like a shiny new penny: Eli Lilly (LLY).
First off, let's talk about Lilly's recent partnership with Amazon Pharmacy (AMZN). This pair is bringing the future to us, offering direct home delivery of Lilly's medications, including the much-talked-about weight-loss drug Zepbound.
You heard that right. Thanks to this partnership, you can now get your hands on Lilly's weight-loss wonder drug, Zepbound, without ever leaving your couch.
Approved last year for obesity treatment, Zepbound is shaping up to be a blockbuster. And let's not forget about LillyDirect, the platform making all this possible, blending healthcare provision with top-notch delivery service.
Since launching in 2020, Amazon Pharmacy has been on a mission to simplify how we get our prescriptions, and teaming up with Eli Lilly only turbocharges this mission.
Now, let's talk about Lilly’s financials. This biotech’s market cap has ballooned to an eye-watering $700 billion, thanks to a 130% surge over the past year.
The buzz around Zepbound, showing potential for a 27% reduction in body weight, has investors sitting up and taking notice.
But I hear you ask, "Have I missed the boat on Eli Lilly?" My take? Not at all.
In fact, I think this stock could easily double in value and even surpass the trillion-dollar mark within the next five years. It's a bold prediction, but I've been around long enough to know a sure thing when I see it.
With obesity rates tripling since 1975 and more than half of the global population predicted to become obese or overweight by 2035, the demand for effective treatments like these is going to skyrocket.
Actually, the market for weight loss treatments is projected to reach $100 billion by 2030. And Lilly? They're ready to ride that wave all the way to the bank.
To date, Lilly only has one strong competitor in this space: Novo Nordisk (NVO). While other pharma giants, like Pfizer (PFE) and Amgen (AMGN), are trying their best to gain traction, these two are leaps and bounds ahead.
Now, I know what you might be thinking. "Isn't it expensive to develop these cutting-edge treatments?" You bet your bottom dollar it is.
Lilly isn't afraid to put its money where its mouth is. They're investing heavily in manufacturing capacity to keep up with the inevitable surge in demand. It's a bold move, but that's what separates the winners from the also-rans in the biotech race.
That’s not where it ends though. Lilly has another ace up its sleeve: donanemab, their early Alzheimer's treatment. This could also be a potential competitor of Biogen (BIIB) and Tokyo’s Eisai’s (ESALY) lecanemab, currently marketed as Leqembi.
Sure, the FDA might have put a temporary hold on Lilly’s candidate’s approval, but I've seen this rodeo before. It's just a minor bump in the road for this potentially game-changing drug.
If donanemab gets the green light, it could add billions more to Lilly's already impressive revenue streams. For perspective, the market for Alzheimer’s treatments is predicted to reach $6 billion to $8 billion by 2025 and record $15.5 billion by 2031.
Of course, no investment is without risk. But when I look at Eli Lilly, I see a company that's firing on all cylinders.
They're making strategic partnerships, investing boldly in their future, and have a track record of success that's the envy of the industry.
With a pipeline full of promising treatments, I believe Lilly is poised to gallop its way to even greater heights in the years to come.
So if you're looking for a biotech thoroughbred with a pedigree of success and a bright future ahead, I'd say Lilly is a horse worth betting on.
Global Market Comments
March 19, 2024
Fiat Lux
Featured Trade:
(THE MAD HEDGE MARCH 12-14 TRADERS & INVESTORS SUMMIT VIDEOS ARE UP!)
(THE BEST COLLEGE GRADUATION GIFT EVER),
(TESTIMONIAL)
The Mad Hedge Summit Videos are Up, from the March 12-14 confab. Listen to 18 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals.
The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by going to www.madhedge.com, selecting CURRENT SUMMIT REPLAY, and clicking on WATCH REPLAY below the picture of your desired speaker.
