Page 359 - Mad Hedge Fund Trader

Google Hits A Rough Patch

Google’s stock has felt the pain the last few days.

Why?

Its generative AI has gone wrong or at least producing controversial images as Google’s AI technology produces historical figures in different ethnic races.

The backlash was so bad that Google CEO Sundar Pichai issued a mea culpa.

The incident marks the latest misstep from Google as it scrambles for positioning in the blossoming market for AI products and plays catch up to Microsoft (MSFT) and its AI partner OpenAI ChatGPT.

In a memo to staff on Tuesday, CEO Sundar Pichai said, "I know that some of its responses have offended our users and shown bias — to be clear, that’s completely unacceptable, and we got it wrong."

The underwhelming AI performance means that Google is falling way behind other competition.

All investors care about these days is the trajectory of AI and stocks go up just based on that.

There must be a question of whether the generative AI research they are doing is good enough and if they have the right talent to compete.

Right now it certainly doesn’t look good.

Google is in the unfamiliar position of not being the leader in a core, [machine learning]-driven technology.

Google is trying hard to catch up and now needs to go backward to repair a core technology component while dealing with a major PR blunder.

Google's first AI fumble came a year ago when the company released a demo of its AI chatbot, Bard, a few months after ChatGPT exploded onto the scene.

Google's chatbot spits out an inaccurate response in a promotional video that was widely circulated online. In the immediate aftermath, skittish investors wiped $100 billion from Google's market value just as Microsoft's fortunes climbed.

Google explained in a recent blog post that it tuned its Gemini image generation tool to show a range of people of different ethnicities and other characteristics but that it failed to account for cases that should not depict diversity.

This is setting up for a great buy-the-dip moment for the company.

In the short term, Google investors have been burnt.

The Mad Hedge Tech Letter had a bullish position in GOOGL and it got torched.

However, Google has been a good short-term trade since it became a duopoly with Meta.

The fact is that Silicon Valley is turning into a race for AI and Google are the kings of search using the older generation.

That doesn’t quite mean they possess the correct talent to compete in AI.

Search was never geared towards this one area of technology that has become the newest thing.

Google has dropped 12% since its January highs which is surprising because they have been a solid bet for years to rebound from any weakness.

Now Google has the unenviable task of proving to investors that they have the ability and capacity to go toe to toe at the high levels of the AI race.

We won’t see deteriorating ad numbers soon, but over time, this could become a slow burn of them ceding search share as AI becomes integrated into the search business.

I still believe Google is worth holding long-term, but we are seeing a mild pullback after a great 2023.

February 28, 2024 - Quote of the Day

Tech Letter

“Price is what you pay. Value is what you get.” – Said US Investor Warren Buffett

Trade Alert - (GOOGL) February 28, 2024 - STOP LOSS - SELL

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

February 28, 2024

Jacque's Post

(AI TO THE RESCUE WITH CYBERSECURITY THREATS)

February 28, 2024

Hello everyone,

Globally cybersecurity attacks cost an estimated $8 trillion in 2023. Yes, that’s just one year. And that cost is set to rise to $10.5 trillion by 2025, according to Cybersecurity Ventures.

According to CEO Sundar Pichai, intelligence tools could help governments and companies speed up the detection of – and response to – threats from hostile actors.

With the real possibility of AI getting into the wrong hands, everyone is right to be worried. It is really a two-edged sword because while AI can strengthen defenses against nefarious actors, those same actors can also take advantage of this smart technology and exert pressure on governments and/or companies. It comes down to the fact that if you can run a little bit faster than your adversary you will triumph. Take time away from your opponent. And that is what AI will be designed to do for companies.

Last week, Google announced a new initiative offering AI tools and infrastructure investments designed to boost online security. A free, open-source tool dubbed Magika aims to help users detect malware – malicious software. Pichai said the tools were already being used in the company’s products, such as Google Chrome and Gmail, as well as its internal systems.

Companies are also starting to respond robustly to AI-generated “deepfakes” designed to deceive voters in election years. This can’t come soon enough, in my opinion, as the internet becomes an increasingly important sphere of influence for both individuals and state-backed malicious actors.

Former U.S. Secretary of State Hilary Clinton on Saturday described cyberspace as “a new battlefield.”

A report published last week by Microsoft found that state-backed hackers from Russia, China and Iran have been using its Open AI large language model (LLM) to enhance their efforts to trick targets.

Russian military intelligence, Iran’s Revolutionary Guard, and the Chinese and North Korean governments were all said to have relied on the tools.

Cheers,

Jacquie

February 28, 2024

Diary, Newsletter, Summary

Global Market Comments
February 28, 2024
Fiat Lux

Featured Trade:

(AMERICA’S DEMOGRAPHIC TIME BOMB),
(THE BEST TESTIMONIAL EVER)

America's Demographic Time Bomb

Diary, Free Research, Newsletter

You can never underestimate the importance of demographics in shaping long term investment trends, so I thought I’d pass on these two highly instructive maps.

The first shows a map of the world drawn in terms of the population of children, while the second illustrates the globe in terms of its 100-year-olds.

Notice that China and India dominate the children’s map. Kids turn into consumers in 20 years, stay healthy for a long time, draw on few government services, and power economic growth.

The US, Japan, and Europe shrink to a fraction of their actual size on the children’s map, so economic growth is in a long-term secular downtrend there.

There is more bad news for the developed world on the centenarian’s map, which show these countries ballooning in size to grotesque, unnatural proportions.

This means higher social security and medical costs, plunging productivity, and falling GDP growth.

The bottom line is that you want to own equities and local currencies of emerging market countries and avoid developed countries like the plague.

Use any major meltdowns this year to increase your exposure to emerging markets, as I will.

Would You Rather Own Them?

Or Them?

The Best Testimonial Ever

Diary, Newsletter, Testimonials

I was pondering an FXE trade alert from MHFT today when my cell rang with a Berkeley, CA area code. Since I know a couple of people in that part of the world, I answered, and it was none other than John Thomas.

Had I not heard his voice on the MHFT webinars, I would have thought I was being conned. But given that I’m in the last month of a trial run, he actually called to find out how I was doing with the service and what I thought.

Here’s the short version of what I told him.

I’m a pretty experienced investor, but definitely not sophisticated when it comes to using options, or for that matter, trading currencies and commodities.

My first trade with MHFT – a (FXY) vertical call spread – literally scared the hell out of me, so I used a tiny position size. I think I made around $900 ($400 more than my trial subscription, so there’s that).

But through the process of using John’s trade ideas, I learned. Fast. Nothing will help you grasp the potential of option strategies like doing them. And as I write this, I have multiple positions on courtesy of MHFT that are on track to deliver double digit percentage gains in a matter of weeks!

I can’t quite comprehend how he knows so many well-placed people, but he’s incredibly adept at grabbing insights from them, turning these into an investment thesis, and making it incredibly clear and actionable to this reader base.

One day he’s writing about a chat with a three star general and the next you’re buying a call spread on Palo Alto Networks. He connects the dots in a ridiculously useful way.

But it’s more than just the idea, it’s the timing of the idea. The world is full of people who can say “hey, cyber-security is a big deal.” Or, “wow, the euro is getting killed.” But the actual trade execution to profit from that in the near term? He’s freaky good.

I also love the defined exit strategy. Look, if you’re the most disciplined human on the planet and never let a bad trade turn into a long term “investment,” more power to you.

I am not. I hate when I do it, but it’s happened more than once. With MHFT, the exit is well marked. You can’t miss it. Personally, I find that removes significant stress, not to mention risk.

Today, I was over at my local Schwab office – before John called – and was raving about MHFT. Not stark raving. Good raving. I’d be surprised if they aren’t signing up for a trial as I write this.

John, thanks for the call. That was a really nice surprise.

But more importantly, thanks for great work, thinking, and ideas. Enjoy your travels and I look forward to meeting you at one of your conferences.

Neil

Dublin, Ohio

Trade Alert - (ADBE) February 27, 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

February 27, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 27, 2024
Fiat Lux

Featured Trade:

(CASHING IN ON CURES)

(LLY), (NVO), (JNJ), (PFE), (MRK), (BIIB)

Cashing In On Cures

Biotech Letter

In the biotechnology and healthcare industry, reaching a $1 trillion market cap is akin to scaling Mount Everest without oxygen. Yet, Eli Lilly (LLY) has emerged as an unexpected contender, catching the investing world’s attention by not just climbing the mountain but being on the verge of planting its flag at the summit.

A year ago, if you'd whispered in my ear that Eli Lilly's stock was about to skyrocket nearly 140%, I might have choked on my coffee. But here we are, and the buzz isn't just about the rocket ride — it's whether Eli Lilly can be the first biopharma behemoth to hit the $1 trillion market cap. Wild, right?

So, what's cooking at Eli Lilly that's got everyone so revved up? Well, they've got a couple of aces up their sleeve.

Sure, they've been making waves with Verzenio for breast cancer and Jardiance for diabetes, but the real game-changer? Tirzepatide, sold under their brand name Mounjaro for type 2 diabetes and is now strutting the stage as Zepbound for weight loss. This isn't just any old drug; it's the blockbuster that's got everyone from Wall Street to Main Street talking.

But what makes tirzepatide so darn special? It's the first of its kind, a dual GLP-1/GIP agonist, making it a heavyweight champion in the fight against obesity. With sales already blasting past the $5 billion mark in record time, it's like watching a rocket take off without any signs of slowing down.

Now, I know what you're thinking. "But hey, aren't there other big fish in the sea?" Sure, Johnson & Johnson (JNJ), Pfizer (PFE), and Merck (MRK) are doing their thing, but next to Eli Lilly's recent performance, they're looking a bit like they're running in slow motion.

And while Novo Nordisk (NVO) has been gaining traction in the diabetes market with its own version of the treatment, Eli Lilly’s tirzepatide is in a league of its own. In fact, this drug is projected to become the top-selling treatment in history, with the potential to rake in sales north of $25 billion.

For context, AbbVie (ABBV) Humira had an annual record of $21.2 billion, and that’s already the recorded highest-selling therapy in history. But, the road to hitting these goals demands many more new indications.

That’s why it comes as no surprise that tirzepatide is eyeing a new target: metabolic dysfunction-associated steatohepatitis, or MASH for short. It's a fancy way of saying "a really bad liver problem," and it's a growing issue globally.

Beyond tirzepatide, Eli Lilly's expanding in a few other markets. Alzheimer's, for one, where their potential therapy, donanemab, is making waves and presents a potential competitor to Biogen’s (BIIB) Leqembi.

And let's not overlook their recent wins with cancer medicine Jaypirca and ulcerative colitis therapy Omvoh. It's like Eli Lilly's hitting bingo on every card.

With all these in mind, can Eli Lilly truly reach that $1 trillion valuation? With their current market cap already north of $715 billion, it looks like the company is ready to take home the title. Assuming a modest compound annual growth rate of about 7%, that trillion-dollar dream could become reality quicker than you can say "biopharma giant."

As investors, industry watchers, and, frankly, anyone with a pulse on the future of medicine keep their eyes glued to this unfolding story, the message is clear: Eli Lilly is not just about the numbers. It's about setting new benchmarks, pushing boundaries, and cashing in on cures in the most spectacular way possible.

So, if you're wondering where the smart money is heading in the biotechnology arena, following Eli Lilly's trail might just lead you to a treasure trove of opportunities. I suggest you buy the dip.