Global Market Comments
December 15, 2023
Fiat Lux
Featured Trade:
(DECEMBER 13 BIWEEKLY STRATEGY WEBINAR Q&A),
(BYDDF), (TSLA), (NEM), (UNG), (WMT), (TGT), (GOLD), (TLT), (JNK), (HYG)
Below please find subscribers’ Q&A for the December 13 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: I think it's a good time to buy gold, do you agree? If so, what are your top picks for a long-term hold?
A: I was looking at some very long-term gold charts, and gold tends to have really hot and really cold decades, and we're just finishing a cold decade. In fact, the price of gold today is roughly where it was 12 years ago—it hasn't moved in 12 years. But if you look at the decade before that, it went up ten times from $200 to $2,000, so we're about to enter another hot decade. It may not go up 10X, but 5X is realistic. That would take us up from $2,000 to $10,000, and I think we could see $3,000 as early as 2025.
The best plays are always the gold miners. And my two favorite picks there are Barrick Gold (GOLD) and Newmont Mining (NEM). If you want to be even more aggressive than that, the underlying miners tend to go up at four times the rate of the gold metal. I can also go with junior minors who probably are losing money now, but if gold goes up to $5,000, they'll make money. Those are hugely leveraged, high-risk plays.
Q: Is it time to sell Tesla (TSLA) stock on all long-term accounts?
A: It is not. If you truly are long-term, I think Tesla goes to $10,000 eventually, but we are in the middle of a price war. Price wars are not when you want to be involved in the stock, so I wouldn't be adding to Tesla positions here—I want to see what the final bottom looks like, when the price wars end the prices start to go up, and we'll get that with an economic recovery next year.
Q: Who are Tesla's prime competitors?
A: I would say it's BYD CO., INC. (BYDDF) in China. BYD, which I visited in China 12 years ago, is actually out selling Tesla in China, and they have the ability to produce a super cheap car. They have a $25,000 car in Europe right now, and the fear is that they will make a $15,000 car, and then flood the United States with it. I doubt that will happen; they've never been able to reach American quality and safety standards, and that's why you don't see Chinese cars here. You do see them in other countries like Australia, Hong Kong, and parts of Africa; and they're currently making a big push in Europe, which certainly has all the German car producers worried. Competition is out there and does pose a risk to Tesla, but I think long-term Tesla still wins anyway. By the way, I hasten to mention there are no American competitors to Tesla. Tesla is so far ahead that the big three will never ever catch up and eventually just be reduced to selling Teslas on license.
Q: Where do you think the bottom in oil is?
A: The consensus in the market right now is $62 a barrel. That's about another $6 or $8 lower than here, and then I think we really do bottom out. Then you want to start piling into oil producers like ExxonMobil (XOM), which we had a position in last week, and Occidental Petroleum (OXY), which is the number one pick by Berkshire Hathaway. So those are two good names to go with. What drives these and all other commodities in the future? The answer is a recovering economy. Let's assume we drop from 5.2% last quarter to maybe 2% this quarter—we will accelerate to 5% next quarter, and that's what takes all of your commodity plays upward.
Q: Would you buy retailers here like Walmart (WMT) or Target (TGT)?
A: No. The time to buy retailers is in the run-up to Christmas. I don't know about you, but I'm finished with all my Christmas shopping! You want to buy in the run-up to Christmas shopping, not when it's peaking. Target on the other hand has done really well, and on a massive cost-cutting effort.
Q: When do you think is the first interest rate cut?
A: Since the market has a consensus of May, with some people saying March, I'll go for June. I think this Fed wants to torture us a little bit more and delay any interest rate cuts, but markets will discount that anyway. So it all sets up a great backdrop to buy stocks now, because markets discount things six months in advance, and six months from now is May. That's why we've had the ballistic moves that we've seen in stocks.
Q: Whatever happened to the natural gas trade United States Natural Gas Fund (UNG)?
A: The problem with all these commodity trades is that they are all in one way or another dependent on the weather, and we are having a warm winter, so you can't fool Mother Nature. Not only is it warm here, but it's warm in China, and in Europe. I think they have this thing called…global warming? It makes you ask yourself if you even want to be near an energy trade during a time of global warming, which is accelerating. So anyway, we had a nice profit on this in October—it completely went away. The (UNG) ETF went from $8 all the way down to $4.50, so we'll just have to wait for the cold weather and for (UNG) to ramp up. If it doesn’t happen soon, we may not have a rally this year in natural gas. Pray for snow!
Q: Is junk the best to buy in bonds?
A: It's the best risk-reward ratio; it has a yield roughly 50% higher than TLT with only slightly more risk. The default ratio on junk bonds is actually quite low. And in fact, before you buy (JNK) (SPDR Bloomberg High Yield Bond ETF) or (HYG) (iShares iBoxx $ High Yield Corporate Bond ETF), go to the website and look at their largest holdings and you’ll see what I mean, it's all airlines and cruise lines which had to load up on debt during the pandemic but are doing great right now.
Q: How can the market still rally if it's time to sell and take profit?
A: We get a round of profit-taking at some point, and there's your entry point. Right now, no professional trader is buying anything right now, they're just holding back and seeing when they take profits. And the way traders think is they don't want to trade anymore until they get paid! The year end is ending shortly and the risk-reward favors taking profits and then sitting on the profits. Guess what I'm doing? I'm taking profits and sitting on the profits because traders have bonuses that tend to get paid in January.
Q: On the (TLT) put trade, should one get out once it hits $95?
A: Yes, I always stop out when we hit the nearest strike on a call spread or a put spread. That's a good discipline to have. 90% of the time, if you hold on to expiration, you make the maximum profit in these, but that 10% of the time it's a total write-off, so you get to choose. I try to keep the volatility of the Mad Hedge service low so I always stop out quickly—easier to dig yourself out of a small hole than a big one.
Q: How do you think the next two government shutdowns in January and February will affect the market? Is this a buying opportunity?
A: Absolutely, yes, it is a buying opportunity. Shutdowns tend to be short, but you may get a lot of political turmoil, especially in the House. After the Long Island by-election to replace the disgraced George Santos the Republican majority is likely to shrink to only two seats. The House could fire another speaker, for example. We're kind of in unprecedented territory here in terms of the US government, but at any stock market decline, you would be a big buyer. That's how to play it. If people want to puke out on what's happening in Washington—thank you very much, I'll take your stock.
Q: Are we still bullish on the Barack Gold (GOLD) LEAPS?
A: Absolutely, especially if you have the 2025 expiration. There is an easy double or triple here.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
At BYD in China 2011
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
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 Biotech and Healthcare Letter
December 14, 2023
Fiat Lux
Featured Trade:
(EDITING YOUR PORTFOLIO)
(CRSP), (VRTX), (BLUE), (BEAM), (CRBU), (EDIT), (NTLA), (PRME), (VERV), (LLY), (REGN)
In the world of biotechnology, the buzz these days is all about gene editing – a frontier that’s moving at warp speed.
While the journey from sequencing the first human genome took a staggering 13 years, companies like CRISPR Therapeutics (CRSP) have sped up the process, bringing their revolutionary "molecular scissors" concept to market in a mere decade.
It's a thrilling time for investors, with the potential for staggering returns, but the path is littered with clinical and regulatory landmines. This turns choosing the best stocks to put your money into a tricky challenge.
Recently, the FDA gave the green light to two groundbreaking gene therapies for sickle cell disease, developed by Vertex Pharmaceuticals (VRTX) in collaboration with CRISPR Therapeutics and by Bluebird Bio (BLUE).
This disease, predominantly affecting African-American communities in the U.S., has been a target for medical advancement for years.
While the approval is a landmark, it's not without its tremors. Bluebird Bio's stock took a nosedive by 33.9%, triggered by the FDA’s warning label about potential cancer risks linked to their treatment.
In contrast, the treatment by Vertex and CRISPR dodged such warnings, possibly giving it an edge in the eyes of prescribing doctors.
And then there’s the money side of things. Bluebird Bio missed out on a priority review voucher from the FDA, which they were hoping to sell to Novartis for a cool $103 million. That's a tough break.
Meanwhile, the Vertex and CRISPR therapy, now known as Casgevy, boasts the honor of being the first FDA-approved drug using the trailblazing Crispr/Cas9 technology. It's a Nobel Prize-winning innovation that's finally reaching the patients it promises to help.
The approvals of Casgevy and Bluebird Bio’s Lyfgenia, which arrived earlier than expected, mark a significant moment for patients with sickle cell disease.
Although priced in the millions, these treatments offer a potential one-time cure, replacing the traditional, complex regimens. Unfortunately, they are not without their challenges, involving intensive procedures, lengthy hospital stays, and chemotherapy.
This brings us to the investment side of things.
The gene-editing arena is brimming with potential, but it's akin to navigating a labyrinth. With no specific exchange-traded funds (ETFs) focusing solely on gene editing stocks, investors might feel like they're trying to find their way in the dark.
However, a diversified approach could be the lantern in this darkness.
Companies like Beam Therapeutics (BEAM), Caribou Biosciences (CRBU), Editas Medicine (EDIT), Intellia Therapeutics (NTLA), Prime Medicine (PRME), and Verve Therapeutics (VERV) are some of the key players in this space, each with its unique technological platform.
But it's not just the pure-play gene editors that are worth your attention. Giants like Eli Lilly (LLY), Regeneron Pharmaceuticals (REGN), and Vertex Pharmaceuticals have thrown their hats into the ring, making substantial investments in gene editing.
So, how should you play this? If it were my money, I'd spread it around.
Put a chunk in leaders like CRISPR and Intellia. Then, combine these with established players like Eli Lilly, Regeneron, and Vertex to provide a safety net, balancing out the inherent risks of this high-stakes biotech game.
On the other hand, companies like Beam and Verve, representing the next wave of this technology, should not be overlooked, though perhaps with a more conservative stake.
And here's a little hedge for you: keep an eye on smaller players like Caribou Biosciences and Editas Medicine. In this high-stakes game, they could be your ace in the hole.
The gene-editing industry is a roller coaster of innovation, risk, and potential. It's a sector where fortunes can be made and lost in the blink of an eye.
For the savvy investor, a diversified, strategic approach, blending the bold with the stable, could be the key to unlocking the vast potential of this exciting field.
Remember, as with any investment, the key is not just in choosing the right horses but knowing how to spread your bets across the race.
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
December 14, 2023
Fiat Lux
Featured Trade:
(JACQUIE MUNRO JANUARY 10, 2024 MELBOURNE AUSTRALIA STRATEGY LUNCHEON),
(TESTIMONIAL),
(A DAY WITH TOM FRIEDMAN OF THE NEW YORK TIMES)
I took a day off to attend the New York Times Global Forum at San Francisco’s Sony Metreon Center.
Their goal was to put together 400 of the most forward-thinking and influential minds in the Bay Area, stand back, and see what happened.
It was organized by my old friend, fellow traveler, and veteran journalist, Tom Friedman.
Tom and I date back to the old days in Beirut, during their vicious civil war in the early eighties, when working as a journalist meant not knowing if you would wake up the next morning.
Tom worked for the old United Press International, and I for the still prospering Economist.
Our mutual friend, the Associated Press’s Terry Anderson, the best man at my wedding, was kidnapped out of his apartment and held hostage by Shiite Hezbollah militants for five years, an ordeal he described in chilling detail in his book, Den of Lions.
You know Tom as the controversial and kibitzing resident of the Times Op-ed page.
He popularized the concepts of globalization and a flat world in a series of groundbreaking, best-selling books, including The Lexus and the Olive Tree, Hot, Flat, and Crowded, and That Used To Be Us.
I managed to speak to dozens of guests and gained a fascinating read from many different viewpoints of our long-term future.
I shall try to distill what I learned in a few lines without any particular attribution. I am always shopping for a new framework with which to view our rapidly evolving planet, and I was not disappointed.
The merger of globalization and information technology has been the most important development of this century. The new hyperconnectivity is changing the world at a breakneck speed that few understand.
In the days of old, you needed an entire country to impact the global economy. Then, only a corporation was required, starting with the Dutch East India Company in the 1600’s. Now, all it takes is a laptop computer or smartphone with a broadband connection.
Several disparate trends came together during the nineties to enable this revolution.
The PC made possible the authoring of content in digital form. The Internet is distributed globally for free. Workflow software allowed the residents of this potential Tower of Babel to seamlessly talk to each other.
Google gave us unlimited free searches, permitting us to all find each other.
A dozen years ago, 5G was a parking space, Skype was a typo, the cloud was in the sky, Twitter was a sound, Facebook didn’t exist, and big data was a rap group.
Today, the collapse of storage costs has ushered in big data and super-empowered innovators. High-speed Internet is even available at the summit of Mount Everest.
If the entire world were a math class, the grading curve would just rise steeply for everyone.
“Average” is officially dead.
When Tom’s predecessor, James Reston, went to the office 30 years ago, he wondered what his seven competitors at the major national newspapers would write that day.
Now Tom wonders what his 70 million competitors will write. He is writing for the readers in Chengdu as much as he is writing for the ones in Chicago.
Employment prospects for kids these days are particularly challenging. They have to be innovation-ready and not job-ready.
In fact, the whole concept of a “job” is rapidly dying out. People have to think like newly landed immigrants: unconnected, hungry, and paranoid, but still optimists.
We need to always be in “beta” mode, endlessly improving our value added to the global economy. The moment you think you’re finished, you are finished.
A lot of people will tell you how to invest your 401k, but no one will tell you how to invest in yourself.
The Diary of a Mad Hedge Fund Trader is one of the few resources that does this, teaching readers how to prosper in the financial markets independent of the establishment.
The US will not cut or spend its way out of the current economic malaise. It will invent its way out. An accelerating rate of innovation will eventually soak up our current excess workers.
America is now the place where everyone around the world comes to launch their moon shot.
That is great for business and explains the tidal wave of new capital pouring into this country.
In the meantime, we need to bolster our safety nets, like Medicare and Social Security, as they will be in much greater demand in this independent world.
I will write more about the conference in the coming days, with carve-outs on specific topics. The outlook for technology is truly unbelievable.
Two Old Warhorses
In the intricate dance of maintaining healthy finances, predicting cash flow and customer payment behavior often feels like staring into a crystal ball. But for service-based businesses, navigating these uncertainties can be especially treacherous. Enter Certinia, a company leveraging the power of artificial intelligence (AI) to illuminate the path forward, transforming cash flow and customer payments from cryptic mysteries to clear-cut insights.
Certinia's AI, aptly named "Certinia AI," isn't just a sprinkle of technological dust. It's a meticulously crafted suite of capabilities woven into the very fabric of its platform. This deep integration allows Certinia AI to seamlessly analyze vast swathes of data, from historical invoices and payment records to project details and resource allocation. This potent blend of information fuels its predictive engine, generating forecasts with uncanny accuracy.
Imagine this: instead of agonizing over opaque spreadsheets, finance teams can now rely on Certinia AI's cash flow forecasting to anticipate future inflows and outflows with remarkable precision. This newfound clarity empowers them to make informed decisions, from optimizing resource allocation to negotiating payment terms. No more scrambling to cover unexpected shortfalls or letting precious cash languish idle. With Certinia AI, financial planning becomes proactive, not reactive.
But the magic doesn't stop there. Certinia AI tackles the age-old enigma of customer payment behavior with equal finesse. Its AI models delve into the labyrinthine history of each customer, unearthing hidden patterns in their payment habits. Days to pay, payment seasonality, and even potential red flags for delinquency are all brought to light, allowing for targeted interventions and proactive collection strategies. No more chasing invoices or dreading the inevitable late payment scramble. With Certinia AI, collections become a dance of personalized reminders and well-timed nudges, fostering stronger customer relationships and ensuring timely payments.
The benefits of Certinia AI aren't confined to the finance department. The ripple effect extends to every corner of the service organization. Project managers gain invaluable insights into potential risks and resource bottlenecks, enabling them to proactively mitigate issues and deliver projects on time and within budget. Service delivery teams benefit from precise margin optimization, ensuring profitability and maximizing client satisfaction. And leadership? They gain a crystal-clear view into the organization's financial health, allowing them to make data-driven decisions that steer the company toward sustained success.
But what truly sets Certinia AI apart is its transparency. Unlike the opaque, black-box nature of some AI solutions, Certinia AI sheds light on its decision-making process. The user interface provides clear explanations of how predictions are arrived at, empowering users to understand, trust, and ultimately leverage the insights provided. This transparency fosters a collaborative relationship between humans and AI, where both work in harmony to navigate the financial landscape.
Certinia's AI journey isn't a static snapshot. It's a continuous evolution, with the company actively developing new use cases and refining existing capabilities. From streamlining workflows to automating tedious tasks, Certinia AI is constantly pushing the boundaries of what's possible, all with the singular goal of empowering service-based businesses to thrive in an ever-changing world.
In conclusion, Certinia AI represents a paradigm shift in how service-based businesses manage their finances. It's not just a tool; it's a trusted partner, illuminating the path towards financial stability and growth. By harnessing the power of AI, Certinia is not just predicting the future of cash flow and customer payments – it's actively shaping it, ensuring that service businesses are not just surviving, but thriving in the age of intelligent automation. So, the next time you find yourself staring into the crystal ball of cash flow and customer payments, remember Certinia AI. It might be the key to unlocking a future of financial clarity and success.
