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Mad Hedge Fund Trader

Quote of the Day - January 20, 2023

Tech Letter

“Desperation sometimes drives innovation. Put the right people in the right places, and then you trust them to do the right stuff.” – Said CEO of Uber Dara Khosrowshahi

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/01/alex-carp.png 876 480 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-20 15:00:392023-01-20 15:59:05Quote of the Day - January 20, 2023
Mad Hedge Fund Trader

January 18, 2023

Tech Letter

Mad Hedge Technology Letter
January 18, 2023
Fiat Lux

Featured Trade:

(FOLLOW THE MONEY)
(PLTR)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-18 15:04:472023-01-18 17:14:50January 18, 2023
Mad Hedge Fund Trader

Follow The Money

Tech Letter

In an interview with CNBC’s Andrew Ross Sorkin, the CEO of Palantir (PLTR) Alex Karp pitched us why America should view his company Palantir as a force for global good and why investors should invest in this company.

I wasn’t convinced after hearing his answer, and the dead giveaway was his avoidance of the question about why he continues to dilute the volume of shares in the software company.

On the revenue side of things, it’s been quite good, with the software business exploding in revenue from $560 million in 2018 to annual revenue of $1.54 billion in 2021.

His tech company overwhelmingly benefits from geopolitical catastrophes like kinetic wars ,which is why the military conflict in Eastern Europe is so lucrative for Palantir.

In the interview, he hyped his software as the great equalizer to Russia’s army, claiming that the reason a “small” country can fight toe to toe with Russia is with the help of the Palantir software.

That claim was a bit of a stretch, but why not use the global stage to hype up one's product and abilities?

Karp also took a victory lap on the brutal governmental lockdowns of 2020 and 2021 around the world, saying his company “saved millions of lives” by integrating Palantir with government services.

Basically, if the world is trending badly and the worse the better for the tech firm to the point of mass violence and anarchy, his company will ride those coattails to profits.

Yet the stock price has swan dived from $40 to $7.

You read that correctly.

Part of the problem of Karp’s software company is clearly the economic and financial backdrop that has forced interest rates higher and caused rampant inflation. I won’t discount that.

But the more important excuse for the appalling stock performance is because of Karp aggressively diluting shares.

The number of shares has increased by around 200% since the 2020 IPO and many of those shares have gone to upper management.

Karp and his friends have a habit of cashing out these diluted shares because they are still worth hundreds of millions even after the dilution, and Karp is still owed newly minted shares each year for around the next 10 years.

Sounds like a bad deal for the incremental investor.

In short, Palantir has served as the personal piggy bank for Alex Karp and his executive management team.

Instead of rewarding the shareholders, he has milked the company for profits while pouncing on public money to fund his software company.

In almost every interview I have seen him participate in, he doesn’t miss a chance to bash the Silicon Valley establishment either and almost calls them un-American.

Although he is highly forthright about his responsibility to be an American-first company, his shunning of external investors is why every reader should avoid this company.

If you invest hard-earned money into this firm, your money will be cashed out by Karp like his personal ATM.

It’s like an annual procession – rinse and repeat.

He’s just waiting until the end of 2023 for his new tranche of diluted shares to hit his account, and then he will sell them on the open market and withdrawal more fiat dollars.

Aside from the stock dilution circus, the company is actually quite solid with a competitive moat around its proprietary software.

The one negative I can think of is the lack of profitability with the firm losing half a billion dollars last year.

However, the company is growing too fast so that super growth justifies the loss-making.

Karp needs to stop running the company only for the purpose of his personal bank account and PLTR’s shares will never go up until he accommodates outside shareholders.

This is a $7 today, but because of Karp’s financial mismanagement of PLTR, it should be a $25-$30.

Until there is proof that Karp has changed strategies and incorporates a vision of prioritizing shareholder returns, readers will need to look elsewhere to make money in the tech sector.

 

karp

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-18 15:02:422023-01-31 18:32:40Follow The Money
Mad Hedge Fund Trader

Quote of the Day - January 18, 2023

Tech Letter

“Bad times are incredibly good for Palantir.” – Said CEO of Palantir Alex Carp

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/01/alex-carp.png 876 480 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-18 15:00:442023-01-18 17:10:30Quote of the Day - January 18, 2023
Mad Hedge Fund Trader

January 13, 2023

Tech Letter

Mad Hedge Technology Letter
January 13, 2023
Fiat Lux

Featured Trade:

(BUY ANY TECH DIP)
($COMPQ), (APPL), (TSLA), (CPI)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-13 15:04:302023-01-13 16:07:18January 13, 2023
Mad Hedge Fund Trader

Buy Any Tech Dip

Tech Letter

Deflation is back and hard to believe after a disastrous 2022.

Tech investors finally are cheering on the positive structural backdrop as the mother’s milk has been removed for quite some time.

Last year was so bad for big tech that CEO Tim Cook’s compensation sunk from $99 million in 2022 to only $48 million in 2023.

Is that Putin’s fault too?

Jokes aside – yeh - it’s that bad for the tech CEOs so you can imagine how bad it is for the part-time worker censoring Facebook posts.

It’s not going all smooth at Apple either.

Apple is in the process of moving production from China to India and Vietnam.

Chinese factories aren’t as cheap as they used to be and they aren’t open consistently.

The 6.5% CPI was right bang on consensus yesterday and confirms the notion that prices are coming down fast.

Just look at some prices like used cars – prices are down 8.8% year over year.

The end result is that a recession will be delayed and the tech market won’t crash because of rapidly sinking earnings, but propped up by rapidly sinking interest rates.

Just look at the bond market – the U.S. 10-year rate has crashed.

Earnings won’t be great and tech has led the way with firings from many of the famous big tech firms.

It’s true that this is a down patch for big tech, but big tech will come roaring back like it always does.

The leaders will most likely be different motley crew this time around.

Tech companies aren’t doing great right now, but it could be worse.

The ones with strong balance sheets are looking to add growth externally such as Microsoft’s potential investment in OpenAI.

The dirty secret is that many tech companies aren’t looking to add cash-burning companies which prevent a lot of potential deals since most start-ups aren’t profitable.

Another clear sign that tech is on sale is the much-publicized Tesla price cuts so lower revenue is definitely on tap or at best – revenue plateauing.

Consumers can now get their Tesla for an eye-watering discount – just don’t anger the CEO or he’ll turn your software off.

The discounts have spread to Europe, in Germany, Tesla cut prices on the Model 3 and the Model Y from 1% to around 17%, depending on the configuration. Tesla’s Model 3 was the bestselling electric vehicle in Germany in December 2022, followed by the Model Y.

Part of the real reason that tech has rallied so hard to begin the year is because the sector was battered so badly last year.

We cannot claim victory after just 2 weeks of positive price action – only politicians get to claim victory for nothing – the rest of the year won’t be easy by any metric.  

The world is wonky where the American consumer is tapped out, but much of the job firings have been limited to tech. Former tech workers can still rotate into other sectors to find work as tech companies become streamlined. I expect a very different tech sector moving forward with far less waste. I forecast something more similar to a single CEO delegating work to an army of bots and algorithms.

Tech overhired in the first place, so going back to 2020 staffing levels supersede any sensationalist headline that tech is over. I believe tech companies need to go back to 2015 staffing levels.

As long as deflation is priced into tech shares for the rest of 2023, tech stocks will be a buy-the-dip type of asset class.

However, in the short term, we have run quite hot for the first 2 weeks as the tech sector sets up for the first dip of the year.

 

deflation

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-13 15:02:222023-01-31 16:24:36Buy Any Tech Dip
Mad Hedge Fund Trader

Quote of the Day - January 13, 2023

Tech Letter

“I think the most diverse group will produce the best product; I firmly believe that.” – Said Apple CEO Tim Cook

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/01/tim-cook.png 630 380 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-13 15:00:192023-01-13 16:06:13Quote of the Day - January 13, 2023
Mad Hedge Fund Trader

January 11, 2023

Tech Letter

Mad Hedge Technology Letter
January 11, 2023
Fiat Lux

Featured Trade:

(OPENAI BLAZES A TRAIL)
(BING), (GOOGL)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-11 16:04:212023-01-11 20:06:18January 11, 2023
Mad Hedge Fund Trader

OpenAI Blazes A Trail

Tech Letter

ChatGPT, the artificial intelligence chat tool created by OpenAI, burst onto the scene only a month ago in December 2022 when the service accumulated a few million subscribers in days.

Artificial intelligence has always been tabbed as the future – the future is now here.

Damn straight, and about time!

ChatGPT is a program that is able to carry on a text-based conversation by generating answers and replies using its artificial algorithm.

In many cases, the answers and replies seem so natural that it is almost impossible to differentiate between a real human and a piece of code.

This software is a game changer.

The piece of technology went viral only last month when its free version launched and students were the first to figure out its usefulness.

December 2022 could be looked back upon as the AHA moment when American students finally stopped needing to ever write essays and that’s exactly what has happened.

Then there is the question of why students securing degrees in fields like art history, language, or any humanity field need to go to school at all.

OpenAI has now rendered American universities worthless.

Aside from specific specialty fields like science, technology, and engineering, the case for students paying a bajillion dollars per year to attend some glorified adult day care center is marginal.

Technology has now democratized knowledge.

It’s not that surprising a big tech company would swoop in to take advantage - Microsoft and their CEO Satya Nadella are in talks with OpenAI to invest $10 billion in ChatGPT-owner OpenAI as part of funding that will value the firm at $29 billion.

Hard to understand why Apple or Meta isn’t in the running.

Microsoft will also get 75% of OpenAI's profits until it recoups its initial investment.

OpenAI expects $200 million in revenue next year and $1 billion by 2024.

OpenAI charges developers licensing its technology about a penny or a little more to generate 20,000 words of text, and about 2 cents to create an image from a written prompt.

This could be the beginning of a foray into intense competition with Google’s search engine by Microsoft’s Bing.

Bing has been deadweight for many years and I hardly know anyone who actually uses it.

The effectiveness of Bing search is mediocre at best and Google search has always been the best in class.

I believe that Microsoft will unleash ChatGPT to skew future content towards its Bing search engine.

If one opens Google Maps on a different browser, it hardly works.

I expect some sort of similar correlation with Microsoft Bing that ties ChatGPT-based content with the Microsoft Bing browser.

Then there is the ChatGPT foreign language potential which could potentially usurp Google Translate in the future simply because it becomes better than Google Translate.  

Google translate has cornered the foreign language translation market in a browser market and that could easily be reversed with ChatGPT once it starts integrating with many foreign languages.

I am surprised Google let this one get away because they are directly threatened by it and Google’s acceleration is decelerating.

Microsoft is clearly a winner from this investment and I can expect for its Bing search engine to slowly steal market share from Google search as it integrates ChatGPT into its in-house browser. The American university system is clearly a loser here with most college degrees not worth the ink the diplomas are written on. Don’t waste money on obsolete education.

Buy Microsoft shares on the dip.

 

chatgpt

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-11 16:02:392023-01-31 14:15:21OpenAI Blazes A Trail
Mad Hedge Fund Trader

Quote of the Day - January 11, 2023

Tech Letter

“Don't let the noise of others' opinions drown out your own inner voice.” – Said Co-Founder of Apple Steve Jobs

 

https://www.madhedgefundtrader.com/wp-content/uploads/2023/01/steve-jobs.png 590 500 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-01-11 16:00:132023-01-11 20:04:20Quote of the Day - January 11, 2023
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