Mad Hedge Technology Letter
September 15, 2023
Fiat Lux
(GEN Z AND TECH)
($COMPQ)
America is changing as we know it.
That’s not always bad, but readers need to understand the major ramifications to the tech sector ($COMPQ) and the US consumer.
By 2030, Generation Z will account for nearly one-third of the U.S. workforce, scary isn’t it?
While a sizable percentage still has yet to penetrate the talent market, they’re already taking a far more radical approach to career growth than their predecessors.
That's due, in part, to the fact that Gen Z, much of whom is still under age 18, is accumulating debt at higher rates than any other generation.
The cohort is least likely to think they will ever be able to retire and is generally concerned that climate change will prevent them from any chance at a normal life or career.
I am particularly referring to the concept that hard work, determination, and loyalty to one’s company will score financial success.
These young bucks are making a full 180-degree turn.
This is devastating for certain industries like housing where Gen Z rather rent and cruise the globe to beautify social media profiles.
I won’t say that Gen Z has their priorities wrong, I will just say that they have interesting priorities.
For various reasons true and somewhat true, Gen Z is taking the microphone back and saying they wish to do something else.
Many of the Gen Z don’t want to grow up and bear the responsibilities of scary life events that are remotely connected to settling down.
It terrifies them.
It would behoove employers to pay keen attention to Gen Z’s expectations or alternative desires.
Understanding Gen Z as the up-and-coming, entry-level positions at these companies is valuable. We cannot just discard them.
I expect the bulk of Gen Z to target companies like Google, Apple, Amazon, Meta, Tesla, Snapchat, and TikTok as corporate America tries to appease this upcoming generation. I say those specific companies because they are the most accepting of social media activists.
Another key takeaway here is that Gen Z are hooked more on tech devices, hardware, software and products more than other generations before them.
Not only did they grow up with tech, but they are described as the first generation to be “tech natives.”
During a 3-year stint in the most formative years, they were forced to lock down in their parents’ house and make do with technology as their only friend.
Many data surveys show that Gen Z uses technology devices more than any other generation with some ages registering 10 hours of use per day.
These trends are highly bullish for tech companies because it means more hours logged watching Netflix, more screen time on Apple iPhones, and more pizza orders on Uber Eats.
It’s my belief that in the next 10 years, the US economy will experience a 50% increase in the average use of tech devices per day thanks to the additive Gen Z tailwind and the Baby Boomer generation dropping off.
More often than not, surveys have shown that high users of products often handpick the same stocks to purchase for the long term because anecdotal experience seals the deal.
Gen Z will also be the generation fully utilizing generative artificial intelligence to supercharge Silicon Valley business.
These trends are highly bullish for tech stocks.
“There is no art which government sooner learns of another than that of draining money from the pockets of the people.” – Scottish Economist Adam Smith
(BILLIONS LOST EVERY YEAR THROUGH RETAIL FRAUD)
September 15, 2023
Hello everyone,
Every year global companies are losing large amounts of money by virtue of customers abusing company policies. Return fraud, coupon stacking, and fake accounts are costing retailers around $100 billion annually.
Some would say it is the cost of doing business.
But for retailers, it is a hard act to swallow.
Some of the practices customers use include using multiple email addresses to take advantage of promotions more than once. Another one is buying multiple items with the intention of returning most of them or wearing an item with plans to return it and not pay for it.
Some customers also buy an item and then say it is faulty and request another item be sent. Company policy requires that a new item be sent out for free as a replacement for the faulty one, (which isn’t faulty at all). These customers are then on-selling the items through another online shop. This technique is common for limited-edition sneaker drops.
Another type of policy abuse includes using bots to buy out highly valued items and re-selling them for a higher cost on a third-party platform (like the example given above). An example here would be concert tickets, which happened during sales for Taylor Swift’s Eras Tour.
These lax policies are allowing fraudsters to have a field day.
In one example I read about a pet supply company based in the U.S. that lost $3.5 million in the first quarter of 2023 after a small group of serial fraudsters exploited a promotion code for a 35% to 50% discount.
Trying to fight back against this type of abuse is extremely difficult as companies don’t have the resources or the time to check every claim. Perhaps red-flagging customers who appear to show repeated behaviors is a way to fight bad actors who are taking advantage of programs.
In other news…
Arm debuted on the stock market on September 14. IPO was priced at $51 a share. It jumped nearly 20% during intraday trading. At the open it was valued at almost $60 billion.
Happy weekend to you all.
Cheers,
Jacquie
Global Market Comments
September 15, 2023
Fiat Lux
Featured Trade:
(FRIDAY, OCTOBER 6 FRANKFURT, GERMANY STRATEGY DINNER)
(THERE ARE NO GURUS),
(THE PRICE TAG FOR CLEAN COAL),
(KOL), (UNG), (PGE), (BTU)
I wanted to get the low down on clean coal (KOL) to see how clean it really is, so I visited some friends at Lawrence Livermore National Laboratory in California.
The modern-day descendent of the Atomic Energy Commission, where I had a student job in the early seventies, the leading researcher on laser-induced nuclear fission, and the administrator of our atomic weapons stockpile, I figured they’d know.
Dirty coal currently supplies us with 35% of our electricity, and total electricity demand is expected to go up 30% by 2030. The industry is spewing out 32 billion tons of carbon dioxide (CO2) a year and the great majority of independent scientists out there believe that the global warming it is causing will lead us to an environmental disaster within decades.
Carbon Capture and Storage technology (CCS) locks up these emissions deep underground forever. The problem is that there is only one of these plants in operation in North Dakota, a legacy of the Carter administration, and new ones would cost $4 billion each.
The low estimate to replace the 250 existing coal plants in the US is $1 trillion, and this will produce electricity that costs 50% more than we now pay. In a gridlocked constrained congress, this is a big ticket that is highly unlikely to get picked up.
While we can build a wall to keep out illegal immigrants from Latin America, it won’t keep out CO2. This is a big problem as China is currently completing one new coal-fired plant a week.
In fact, the Middle Kingdom is rushing to perfect cheaper CCS technologies, not only for their own use but also to sell to us. The bottom line is coal can be cleaned but at a frightful price.
Coal once had a huge price advantage over other energy sources that disappeared when the price of natural gas (UNG) collapsed for $17 BTU to $2/MM BTU. Yesterday, gas closed at a feeble $2.70.
Cost savings aside, virtually every utility in the country would love to get out of the coal business because of the litigation it invites. Read the prospectus for new securities issued by any of them, and you will find a litany of lawsuits over diseases caused by Sulfur Dioxide (SO2), Nitrous Oxides (NO2), and a host of other asthma and cancer-causing pollutants.
Burning natural gas only emits carbon dioxide (CO2) (only half the amount that crude oil derived bunker fuel does) and water (H2O). Sorry, but my inner chemist is speaking.
California closed its last coal-fueled power plant a 20 years ago, switching to natural gas, accidentally creating a windfall for consumers. Much of the money saved was used to modernize the grid buy installing statewide smart meters which allow customers to both buy and sell electricity back to utilities generated from home solar installations and charged up 1,000-pound 100 kWh lithium-ion Tesla batteries.
These moved are expected to save our local Pacific Gas and Electric (PGE) the capital cost of building two new major generating plants. This is not your father’s utility.
Although it is unlikely that another coal fired power plant will ever be built in the US again, don’t expect coal giants like Peabody Energy (BTU) to disappear anytime soon. There is still a massive export business to China, as the Burlington Northern freight trains that rumble near my home testify (love that midnight whistle).
But don’t ever confuse a stock price that has gone down a lot with “cheap.” The shares of these companies could remain in the dumps for a long time, and possibly forever, creating a classic value trap. That is, until the Chinese buy them out for pennies on the dollar.
These are jobs I don’t mind exporting to China. They can have them.
When I checked the price of the old coal ETF (KOL) I discovered that it had ceased trading in 2020 after its asset under management fell from $908 million to just $35 million. At that level Van Eck was losing money running the fund. Most pension funds had banned investing in coal companies.
That alone tells you a lot right there.
Coal's Popularity is Fading Fast
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
September 14, 2023
Fiat Lux
Featured Trade:
(A PIGGYBACK RIDE TO THE FUTURE)
(BMY), (NVS), (PFE), (MDT), (ABT), (TMO), (HCA), (UHS), (DGX), (LH)
As I walked the sterile, fluorescent-lit hallways of a leading biotechnological institute last summer, I overheard snippets of a conversation that immediately piqued my interest: “human-pig kidney,” “game-changer,” and “investor's goldmine.”
We often think of medical advancements in terms of their immediate patient benefits. Yet, in this chance encounter, the talk of the town was how these breakthroughs could cascade into lucrative opportunities in the stock market.
But how close are we to realizing this future?
Imagine a world where organ shortages, a grim reality for over 106,000 hopeful recipients in the U.S., could become a thing of the past. This isn’t a whimsical daydream but a tangible reality we're inching towards.
The mastermind behind this evolution? Kidneys grown inside pig embryos with a human cell composition ranging between 50% to 70%. This meticulous procedure, entailing 1,820 genetically modified pig embryos transplanted into 13 surrogate mothers, brought forth five specimens that met research criteria.
Switching our perspective, from a purely financial lens, the world of biotechnology is ripe with promise. But with the emergence of this organ transplant technology, investors should sit up and pay attention.
Consider giants like Bristol Myers Squibb (BMY), Novartis AG (NVS), and Pfizer Inc. (PFE). Their R&D teams are burning the midnight oil to roll out immunosuppressive drugs, pivotal for post-transplant procedures. Influenced by such groundbreaking endeavors, their stock trajectory could be a sight to behold in 2023.
Transitioning to medical equipment, Medtronic plc (MDT), Abbott Laboratories (ABT), and Thermo Fisher Scientific Inc. (TMO) aren't just names in the medical devices sphere. They represent the zenith of innovation, manufacturing state-of-the-art equipment integral to organ transplant procedures. If this biotechnological marvel scales, they stand at the precipice of unprecedented growth.
Moving onto healthcare, HCA Healthcare, Inc. (HCA) and Universal Health Services, Inc. (UHS) are the custodians of transplant centers. Their potential upswing is directly proportional to the success of human-pig kidney transplantations. And not to be overlooked, Quest Diagnostics Incorporated (DGX) and LabCorp (LH) are at the heart of organ compatibility diagnostics. As this transplant technology forges ahead, they are poised for a meteoric rise as well.
However, a word of caution is due.
While the financial forecasts appear rosy, any discerning investor is well aware of the need to balance enthusiasm with caution. The stock market's volatile nature, coupled with regulatory shifts and unpredictable research outcomes, can be game-changers. It is extremely crucial to keep your finger on the pulse of the sector and maybe even conduct more in-depth research on the potential of each company before making investment decisions.
Also, beyond finance, it would be remiss not to address the elephant in the room. The melding of human cells into pig embryos has raised eyebrows and ethical concerns. With human cells found in the embryos' brains and spinal cords, it prompts uneasy questions about the potential integration into the pigs' cognitive or reproductive systems. How the scientific community and regulators address these concerns will undoubtedly influence both the pace and direction of research, as well as investor sentiment.
Looking back, my chance encounter in that research institute was an omen of the times to come. On the brink of a scientific revolution, we are witnesses to a watershed moment in healthcare. But for the astute observer, it’s not just about saving lives. It's about understanding how such advancements can recalibrate the entire financial landscape.
To encapsulate the mood, let me leave you with this quote from the infamous Marie Curie: "Nothing in life is to be feared; it is only to be understood. Now is the time to understand more so that we may fear less.”
Global Market Comments
September 14, 2023
Fiat Lux
Featured Trade:
(SEPTEMBER 29 ZERMATT SWITZERLAND STRATEGY SEMINAR)
(THE BLOCKBUSTER READ IN THE HEDGE FUND COMMUNITY)