(NVDA) - Page 26 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or What Will Kill this Market

What if Goldilocks decided to hang around for a while? I’ve always been in favor of a long-term relationship.

It could be weeks. It could be months.

Certainly, the widely predicted New Year selloff has failed to materialize.

Failure to fall after the first week of 2024 has delivered a rally almost as ferocious as the one that launched in October. (NVDIA) up 15% in a week? Good thing I have a double position. Cameco (CCJ) up 25%? The market action was so positive that it rushed me into a rare 100% fully invested portfolio.

Which all begs the question of what WILL eventually kill this market. After all, nothing goes up forever.

It's very simple.

If the coming Fed interest rate cuts become so certain that companies start aggressively investing for the recovery NOW, there could be a problem. The headline Unemployment Rate never falls, inflation reaccelerates, and even the idea of interest rate cuts gets pushed off until 2025. That would thrust a dagger through the heart of the current rally post haste, which has been interest rate-driven from day one.

If there’s anyone who will save our bacon from this dire scenario, it is the legion of dour analysts out there who are perpetually behind the curve with their ultra-conservative earnings forecasts. That is scaring companies from expanding too quickly and is why every announcement delivers an upside surprise. That alone could provide enough of a drag on the economy to keep the Goldilocks scenario on track.

Watch Out Above!

If that is the case, then the ten positions I added last week to achieve a rare 100% invested portfolio should do pretty well, which has a strong technology bent. In the AI-dominated world, data is king. Let’s see who owns the data.

Microsoft (MSFT) – knows every keystroke you have executed since you bought your first PC in 1990.

Google (GOOGL) – knows every search you have performed since 2005 plus every YouTube video you have watched, even the X-rated ones (oops!).

Tesla (TSLA) – knows every function your car has performed since 2010 and has 12 videos of where you have been (double oops!).

Meta (META)– knows every keystroke you have performed on your social media accounts.

If all of this sounds scary, it should be. But it also means that while these stocks may be expensive relative to 2023 earnings, they are still in the bargain basement regarding 2024 and 2025 earnings. Buy everything on dips. Investors are adding to what they already own because it’s been working big time, including me.

On a completely different topic, Uranium is going nuclear again. Yellow cake, the fuel used by nuclear power plants, has seen prices up 45% since May. Before the Ukraine war, Russia produced 50% of the world’s nuclear fuel. Now it is banned due to sanctions. The US has announced the creation of a nuclear fuel stockpile.

Congress is about to vote on a ban on Russian fuel. France just announced the addition of 14 large nuclear plants. Oh, and it’s green.

Uranium prices endured a long nuclear winter starting with the Three Mile Island accident in 1979, followed by Chernobyl in 1986, and Fukushima in 2011. That time is now over, thanks to more advanced reactor designs and better risk control.

I used to collect Czech uranium glass, which emits a very low level of gamma radiation and glows in the dark under ultraviolet light. Time to collect some of Canadian uranium miner Cameco (CCJ) also … again.

So far in January, we are up +6.19% with a 100% invested position. My 2024 year-to-date performance is also at +6.19%. The S&P 500 (SPY) is down -0.07% so far in 2024. My trailing one-year return reached +67.65% versus +37.82% for the S&P 500.

That brings my 15-year total return to +682.82%. My average annualized return has exploded to +52.19%, another new high.

Some 63 of my 70 trades last year were profitable in 2023.

I am going into 2024 with longs in (MSFT), (BA), (AMZN), (DAL), (V), (PANW), (CCJ), (TLT), and a double long in (NVDA).

FAA Grounds the Boeing 737 Max….Again, after a huge chunk of the fuselage fell off on a passenger flight which made an emergency landing in Portland. Dozens of the troubled aircraft were grounded. The move affects about 171 planes worldwide. The 737 Max is by far Boeing’s most popular aircraft and its biggest source of revenue. United Airlines is the biggest operator of the type followed by Alaska. Use any major dips to buy (BA) stock, which is facing a golden age.

NVIDIA Ramps Up its Graphics Cards. Nvidia is playing up its strength in consumer GPUs for so-called “local” AI that can run on a PC or laptop from home or an office. The new chip can be used to generate images on Adobe Photoshop’s Firefly generator to remove backgrounds in video calls, or even make games that use AI to generate dialogue. Buy (NVDA) on dips, as I did this last week.

Energy Prices Collapse Again, with Texas tea diving 4% to $70 on Saudi price cuts. This is despite steady buying from the US government for the SPR. The kingdom is moving to shortcut cheating by lesser OPEC members, as it usually does. If you throw good news in the market and it fails to go up, you sell it. Avoid (USO), (XOM), and (OXY).

Natural Gas Goes Ballistic, up 50% in three weeks. The 2026 $8-9 LEAPS I recommended over Christmas have already doubled. Expansion of export facilities to China is the reason, for accommodating more demand. BUY (UNG) on dips.

Mortgage Demand Soars by 10% in the first week of the year, and the next leg in the bull market for residential housing begins anew. Applications to refinance a home loan jumped 19% from the previous week and were 30% higher than the same week one year ago.

Consumer Price Index Flies, coming in at 0.3% for December instead of the anticipated 0.2%, a 3.4% annual rate. Fed rate cuts just got pushed back from March to June, where they belong. Used car and apparel prices get the blame. Car insurance was up a shocking 20% YOY. Go figure.

Bitcoin ETF’s SEC Approved, after a ten-year wait, potentially marking a market top. The SEC is still warning about market risks, even if the ETF sellers don’t. During the last crypto spike, there was an absence of cheap quality growth stocks. Now there is an abundance. Bitcoin prospered when we had a cash surplus and asset shortage. Now we have the opposite.

Global EV and Hybrid Sales Jump by 31% in 2023, compared to only 10% for internal combustion driven cars. Global sales of fully electric and plug-in hybrid vehicles (PHEVs) rose 31% in 2023, down from 60% growth in 2022, according to market research firm Rho Motion. For 2024, there are forecasts of global EV sales growth of between 25% and 30%. That’s really quite amazing given the weak 2023 global economy.

Microsoft Tops Apple, as the world’s most valuable publicly traded company, with a $3 trillion market cap. A huge lead in AI and a growing storage presence with Azure are the reasons. I’m long (MSFT) lower down.

US Budget Deficit Tops $500 Billion in Q1, starting October 1, 2023. But the frenetic price action, up a mind-blowing $19 in 2 ½ months proves the government isn’t borrowing too much money, it isn’t borrowing enough! There is a severe bond shortage in the marketplace. Never argue with Mr. Market as he is always right. Buy the (TLT) on dips, as I have.

Tesla to Halt Production in Germany, thanks to soaring shipping costs in the Red Sea. Tesla has been selling Berlin-made Model Ys to China via the Suez Canal. Shipping costs have doubled to $5,000 per container since October.

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper-accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.

Dow 240,000 here we come!

On Monday, January 15, markets are closed for Martin Luther King Day.

On Tuesday, January 16 at 8:30 AM EST, the New York Empire State Manufacturing Index will be released.

On Wednesday, January 17 at 2:00 PM, the Retail Sales are published.

On Thursday, January 18 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Building Permits for December.

On Friday, January 19 at 2:30 PM, the December University of Michigan Consumer Sentiment is published. At 2:00 PM, the Baker Hughes Rig Count is printed.

Uranium Glass

As for me, when you make millions of dollars for your clients, you get a lot of pretty interesting invitations. $5,000 cases of wine, lunches on superyachts, free tickets to the Olympics, and dates with movie stars (Hi, Cybil!).

So it was in that spirit that I made my way down to the beachside community of Oxnard, California just north of famed Malibu to meet long-term Mad Hedge follower, Richard Zeiler.

Richard is a man after my own heart, plowing his investment profits into vintage aircraft, specifically a 1929 Travel Air D-4-D.

At the height of the Roaring Twenties (which by the way we are now repeating), flappers danced the night away doing the Charleston and the bathtub gin flowed like water. Anything was possible, and the stock market soared.

In 1925, Clyde Cessna, Lloyd Stearman, and Walter Beech got together and founded the Travel Air Manufacturing Company in Wichita, Kansas. Their first order was to build ten biplanes to carry the US mail for $125,000.

The plane proved hugely successful, and Travel Air eventually manufactured 1,800 planes, making it the first large-scale general aviation plane built in the US. Then, in 1929, the stock market crashed, the Great Depression ensued, aircraft orders collapsed, and Travel Air disappeared in the waves of mergers and bankruptcies that followed.

A decade later, WWII broke out and Wichita produced the tens of thousands of the small planes used to train the pilots who won the war. They flew B-17 and B-25 bombers and P51 Mustangs, all of which I’ve flown myself. The name Travel Air was consigned to the history books.

Enter my friend Richard Zeiler. Richard started flying support missions during the Vietnam War and retired 20 years later as an Army Lieutenant Colonel. A successful investor, he was able to pursue his first love, restoring vintage aircraft.

Starting with a broken down 1929 Travel Air D4D wreck, he spent years begging, borrowing, and trading parts he found on the Internet and at air shows. Eventually, he bought 20 Travel Air airframes just to make one whole airplane, including the one used in the 1930 Academy Award-winning WWI movie “Hells Angels.”

By 2018, he returned it to pristine flying condition. The modernized plane has a 300 hp engine, carries 62 gallons of fuel, and can fly 550 miles in five hours, which is far longer than my own bladder range.

Richard then spent years attending air shows, producing movies, and even scattering the ashes of loved ones over the Pacific Ocean. He also made the 50-hour round trip to the annual air show in Oshkosh, Wisconsin. I have volunteered to copilot on a future trip.

Richard now claims over 5,000 hours flying tailwheel aircraft, probably more than anyone else in the world. Believe it or not, I am also one of the few living tailwheel-qualified pilots in the country left. Yes, antiques are flying antiques!

As for me, my flying career also goes back to the Vietnam era as well. As a war correspondent in Laos and Cambodia, I used to hold Swiss-made Pilatus Porter airplanes straight and level while my Air America pilot friend was looking for drop zones on the map, dodging bullets all the way.

I later obtained a proper British commercial pilot license over the bucolic English countryside, trained by a retired Battle of Britain Spitfire pilot. His favorite trick was to turn off the fuel and tell me that a German Messerschmidt had just shot out my engine and that I had to land immediately. He only turned the gas back on at 200 feet when my approach looked good. We did this more than 200 times.

By the time I moved back to the States and converted to a US commercial license, the FAA examiner was amazed at how well I could do emergency landings. Later, I added on additional licenses for instrument flying, night flying, and aerobatics.

Thanks to the largesse of Morgan Stanley during the 1980s, I had my own private twin-engine Cessna 421 in Europe for ten years at their expense where I clocked another 2,000 hours of flying time. That job had me landing on private golf courses so I could sell stocks to the Arab Prince owners. By 1990, I knew every landing strip in Europe and the Persian Gulf like the back of my hand.

So, when the first Gulf War broke out the following year, the US Marine Corps came calling at my London home. They asked if I wanted to serve my country and I answered, “Hell, yes!” So, they drafted me as a combat pilot to fly support missions in Saudi Arabia.

I only got shot down once and escaped with a crushed L5 disk. It turns out that I crash better than anyone else I know. That’s important because they don’t let you practice crashing in flight school. It’s too expensive.

My last few flying years have been more sedentary, flying as a volunteer spotter pilot in a Cessna-172 for Cal Fire during the state’s runaway wildfires. As long as you stay upwind, there’s no smoke. The problem is that these days, there is almost nowhere in California that isn’t smokey. By the way, there are 2,000 other pilots on the volunteer list.

Eventually, I flew over 50 prewar and vintage aircraft, everything from a 1932 De Havilland Tiger Moth to a Russian MiG 29 fighter.

It was a clear, balmy day when I was escorted to the Travel Air’s hanger at Oxnard Airport. I carefully prechecked the aircraft and rotated the prop to circulate oil through the engine before firing it up. That reduced the wear and tear on the moving parts.

As they teach you in flight school, better to be on the ground wishing you could fly than be in the air wishing you were on the ground!

I donned my leather flying helmet, plugged in my headphones, received a clearance from the tower, and was good to go. I put on max power and was airborne in less than 100 yards. How do you tell if a pilot is happy? He has engine oil all over his teeth. After all, these are open-cockpit planes.

I made for the Malibu coast and thought it would be fun to buzz the local surfers at wave top level. I got a lot of cheers in return from my fellow thrill seekers.

After a half hour of low flying over elegant sailboats and looking for whales, I flew over the cornfields and flower farms of remote Ventura County and returned to Oxnard. I haven’t flown in a biplane in a while and that second wing really put up some drag. So, I had to give a burst of power on short finals to make the numbers. A taxi back to the hangar and my work there was done.

There are old pilots and there are bold pilots, but there are no old, bold pilots. I can attest to that.

Richard’s goal is to establish a new Southern California aviation museum at Oxnard airport. He created a non-profit 501 (3)(c), the Travel Air Aircraft Company, Inc. to achieve that goal, which has a very responsible and well-known board of directors. He has already assembled three other 1929 and 1930 Travel Air biplanes as part of the display.

The museum’s goal is to provide education, job training, restoration, maintenance, sightseeing rides, film production, and special events. All donations are tax-deductible. To make a donation, please email the president of the museum, my friend Richard Conrad at rconrad6110@gmail.com

Who knows, you might even get a ride in a nearly 100-year-old aircraft as part of a donation.

To watch the video of my joyride, please click here.

Where I Go My Kids Go

Good Luck and Good Trading,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

January 16, 2024/by april@madhedgefundtrader.com

January 12, 2024

Diary, Newsletter, Summary

Global Market Comments
January 12, 2024
Fiat Lux

Featured Trade:

(JANUARY 10 BIWEEKLY STRATEGY WEBINAR Q&A)
(SPY), (UNG), (NVDA), (UUP), (FXA), (GOOG), (GOOGL), (GLD), (GOLD), (WPM), (BYDDY), (F), (GM), (TSLA)

January 12, 2024/by april@madhedgefundtrader.com

January 10 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the January 10 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.

Q: Would you sell Nvidia (NVDA) covered calls?

A: No, I would not. Nvidia could double at any time, or at least go up 50%. That is not a covered call writing situation, that is a long call situation, or at the very least a long call spread situation. Do not bet against Nvidia on pain of death—one of the seven-stop losses I had last year was a short in Nvidia.

Q: Do you recommend any brokers for executing my trades?

A: Yes, I recommend Tastytrade (click here) because I know the owner of the company, and they have the lightest code in the entire industry. It’s written to go very fast; that gives you a price advantage over other platforms. Plus they have very competitive margin rates and commissions. They only charge commissions on openings, not on closings.

Q: Why are you adding positions when the market timing index is so high? Aren't you supposed to be avoiding risk here?

A: The market timing index in the PowerPoint is for the S&P 500 only. If you look at the individual stocks that I've added in the last two days, they've all had 10-20% corrections. So you don't want to touch the main market up here. If anything it's a short, and I am looking at an S&P 500 (SPY) short, by the way, to hedge our other longs. Individual stocks have already corrected, and I've already started to add positions in the leaders for the year. Big tech is moving up; it’s leading the rally so that is what's happening there.

Q: Is it time to buy Tesla (TSLA)? It's a 200-day moving average.

A: I don't want to touch Tesla until the price war is over. Obviously, it's still continuing and Tesla itself is leading the charge on the price war, so I would hold off on that while the other tech stocks like Nvidia (NVDA) are so hot.

Q: I bought the UNG (United States Natural Gas Fund) LEAPS you put out over the Christmas vacation. They have since doubled in value in two weeks. Should I take profits?

A: Yes. Always take a profit in any option play when you get an immediate return because they have the tendency to give up those returns very quickly. They do call natural gas the “widow maker” in the commodities market because of the extreme volatility. So when you get a 50% move in natural gas or any commodity, take the money and run. Go to Las Vegas for a weekend, take your wife to Hawaii, pay off your kid's student loans, or buy yourself a new Rolex watch! Take the quick profit. You always get a chance to buy again on a dip, and there’s nothing like starting off 2024 with a double on a LEAP. For me, it's a matter of professional pride, not about the money. So way to go, John Thomas.

Q: Has crude oil reached the bottom?

A: $70 per barrel has been holding for a long time, but it's not acting like a bottom. I have to tell you, it's not getting any big dead cat bounces you see at real bottoms. So my guess is we have to move into the 60s, maybe all the way down to $62 before we get a turnaround. We need to see a turnaround in the global economy before we get a turnaround in the price of oil, and especially a turnaround in China, which is the world's largest importer of oil—and there is no sign of that happening anytime soon. So there is your answer; watch China.

Q: Will any Bitcoin ETFs be approved in the US?

A: Probably yes, but that also could mark a top of the market. Remember the insiders, the miners, have a huge trading advantage over us. Which is one reason why I'm avoiding this asset class this time around. I have a feeling we'll peak lower than the last high, and then we go back down into lows again. So avoid Bitcoin. There are too many other better things to buy now like Nvidia. During the last Bitcoin peak, all the techs were insanely expensive, and now they're not. We have better alternatives to crypto than we did two years ago.

Q: With China not improving, do you still like the US dollar to drop and the Australian dollar to increase?

A: I do expect the US dollar (UUP) to fall. I think it's peaked out and already dropped 10%, and I expect the Aussie (FXA) to rise. It's already risen by about 7%, but not because of China. It's happening because the US will cut interest rates anywhere from 3 to 6 times this year. And it could be either; it could be 3 quarter-point rate cuts, or it could be 6. I'm kind of leaning towards 6 myself. Which leads to the next question...

Q: Do you still like bonds?

A: Absolutely, yes. (TLT) is trading around $97 today. I'm looking for it to hit $110 to $120 by the end of the year, plus the interest payments. So the total return on (TLT) bonds will be between 18% and 28% on the year. Most people will take that.

Q: Do you still like uranium?

A: Yes. In fact, just last week, France announced it was building 14 new nuclear power plants. These are the big 1 to 4-megawatt old-style plants on top of their additional programs. So that creates more demand for yellow cake fuel and more demand for uranium, and it is getting a lot of push these days as a green fuel. Which it is—it is non-carbon producing. By the way, look at NuScale (SMR) if you're interested in uranium because they have the newest design that solves all the old nuclear problems. And the stock just had a big selloff because they lost a customer.

Q: Do you still like the banks?

A: Well, all four of the financial LEAPS that I recommended at the bottom of the banking crisis in March are all expiring this month at max profits anywhere over a hundred percent. So yes, I love the banks, but I don't especially like them right here, not on top of 30-35% gains. So wait for a pullback. These would be great candidates for any sell-off going into March; that's when we take another look at these. Oh, and if another bank goes bankrupt so much the better, that creates much better entry points.

Q: What's the best way to trade long-term dollar shorts (UUP)?

A: The answer is through futures contracts through banks, is the cheapest way to do it. You get a leverage of 10 to 100 times depending on the contract. You can do long or short. The dealing expenses are the cheapest, and that's how professionals trade for their own account, is through futures contracts through banks. It's not really an equity play. There are a number of short-dollar ETFs out there, but dealing with expenses wide, tracking errors is big so it is not an efficient way to do it. So, that would be my recommendation on long-term dollar shorts. The other way is to buy the Australian dollar, the (FXA).

Q: How are your stem cell knee injections working, John?

A: Fantastic. It completely cured my arthritis with my stem cell injections in my knees and lower back. And after I got shot in the hip in Ukraine, I had a Stem cell injection there too, and that worked. So the pain is completely gone from that bullet wound I got from the Russians in October. Yes, I'm one of the lucky people where everything stem cell-related seems to work, so I do all of them. Go ahead and try it, it’ll only cost you a thousand dollars or two per injection.

Q: When trading Google, do you use the (GOOGL) or just the (GOOG)?

A: One is the holding company, and one is the operating company for the search business. It's really six of one and half a dozen of the other. Both are liquid. The tracking between the two is almost nil, so I don't bother.

Q: Do you expect a recession or high unemployment this year?

A: No, you never get recessions or high unemployment in election years. And much of the spending that the administration obtained years ago has yet to be spent. You know, the lag time on government spending is in the years and it magically tends to happen the most in election years. Go figure. So after a slowdown in the first quarter, I'm expecting to speed up going into the rest of the year.

Q: How much can gold (GLD) go up this year?

A: At least 20 to 30%. Which means the Barrick Gold (GOLD) and Newmont Mining (NEM) could easily double this year. And what about silver? It should go up even more. Which means a Wheaton Precious Metals (WPM) leap at this level should go up 400%. Yes, you've heard it here first, 400% with fairly low risk. And if you want to know how to do that, just search for LEAPS on my website or become a concierge member and you can call me and I'll tell you how to do it. I'll guide your hand on how to do the trade.

Q: Is BYD in China a threat to Tesla (TSLA)?

A: No. BYD Motors (BYDDY) is taking over the low end of the market. Read the least profitable end of the market in China where they actually sell more cars than Tesla including hybrids, but Tesla still leads in EVs, and it's the question of would you rather own a Rolls Royce or a Volkswagen. That is the choice. In China, people buy EVs to show off their wealth, and a BYD car shows off your humility or at least your stinginess. So in some emerging markets where cost is the issue, BYD may take over the market, but they won't make very much money at it. And in other markets where quality is the issue like the US, like China, Tesla will dominate and you may end up with a situation like you have with Apple (APPL). Apple has only a 6% market share in the global cell phone business, but they account for 91% of global profits in the cell phone business, and Tesla could do the same. They could end up making all the money with a lesser market share ceding the bottom end or the money-losing end of the market to BYD, Ford (F), General Motors (GM), or anybody else down there.

Q: What do you think of a (TLT) February $90-$93 vertical bull call debit spread for February?

A: I like it. It’s a little close to the money—I usually try to go out $5 points on the TLT strikes when I'm setting these up. So that's a little aggressive, but you'll end up making more money. My bet is you could make 20% on this call spread right here. So many people are still trying to get into the bond market. They got left out, the move up was so fast since October. The institutional investors that dominate that market are not used to the idea of speed. So yes, I think we're looking at a sideways move before the next leg up.

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, TECHNOLOGY LETTER, or JACQUIE'S POST, 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

January 12, 2024/by april@madhedgefundtrader.com

December 19, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 19, 2023
Fiat Lux

Featured Trade:

(HIDDEN IN PLAIN SIGHT)

(VRTX), (CRSP), (NVDA), (GOOGL), (AMZN), (AAPL), (META), (MSFT), (TSLA)

December 19, 2023/by april@madhedgefundtrader.com

Hidden In Plain Sight

Biotech Letter

In the high-pressure game of stock market investments, where volatility is the norm and certainty a luxury, the Nasdaq Composite’s 36% uptick this year is nothing short of remarkable.

The credit largely goes to the “Magnificent Seven” – a septet of tech behemoths comprising Nvidia (NVDA), Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), and Tesla (TSLA). These giants have not just captured the market’s imagination; they've powered its ascent.

However, while these tech titans have been capturing the spotlight, there's been a different kind of giant, hidden in plain sight, quietly making significant strides in a sector just as crucial as technology – biotechnology and healthcare.

This is where Vertex Pharmaceuticals (VRTX) emerges, a standout performer in the industry, demonstrating that groundbreaking innovation and solid investment opportunities aren't exclusive to the tech world.

The tech sector's rebound this year, following a tumultuous 2022, wasn't just luck. It was a confluence of a resilient economy and consumer spending that stayed robust.

This buoyancy proved a boon for the Magnificent Seven, whose fortunes often mirror economic trends. Apple's case is illustrative. Its iPhones, a blend of luxury and necessity, see fluctuating demand based on economic health.

But Vertex operates on a different plane.

Vertex specializes in life-saving drugs for cystic fibrosis (CF). This isn't a market swayed by economic tides. CF patients depend on the company’s drugs, literally, for survival.

What's more, Vertex is the only game in town for these medications. This unique position grants Vertex significant pricing power, ensuring stable financial performance, come rain or shine.

Now, let’s zoom in on Trikafta, Vertex’s CF superstar.

This is not just another drug; it’s a lifeline, a revenue juggernaut with 13 years of patent protection left.

While rivals scramble to find footholds in CF therapy, Vertex is already eyeing the next big thing: a once-daily treatment, promising more convenience than Trikafta’s twice-daily regimen.

In short, Vertex isn’t just leading the CF market; it's redefining it.

Vertex's ambition doesn't end with CF. The company is making bold strides in pain management with VX-548, a potential opioid alternative. This pill is a beacon of hope in a field littered with failed attempts at non-opioid pain solutions. The recent Phase 2 study results? Encouraging. The study revealed significant pain reduction in patients with chronic neuropathic pain.

But there's more. Vertex is also pioneering gene-editing therapies. Its latest triumph is Casgevy, developed with CRISPR Therapeutics (CRSP).

This treatment, a potential cure for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT), recently received UK approval. It’s a complex treatment, not a simple pill. This complexity translates to both a high price and a shield against generic competition. With an initial target market of 32,000 patients, Vertex is looking at a potential goldmine.

Contrast this with the struggles of smaller gene-editing firms. Vertex stands out with its deep pockets and negotiation expertise. It's not just about developing groundbreaking therapies; it's about successfully bringing them to market. As it has shown over the years, Vertex’s prowess in this arena is unrivaled.

Of course, biotech is a realm of high risks and high rewards.

Vertex is no stranger to setbacks. Remember October 2020? The company saw its shares plummet by over 15% in a day after discontinuing a promising program. But it's the rebound that tells the story. Since then, Vertex’s shares have soared, making that drop a mere blip in its upward trajectory.

In the pantheon of biotech, Vertex Pharmaceuticals is a rare breed. It's a company that has not only conquered the CF domain but is also making significant inroads in pain management and gene editing. The financials are solid, the pipeline robust, and the market potential vast. Its collaboration with CRISPR Therapeutics on Casgevy is just one example of its strategic foresight.

So while the Magnificent Seven continue to dominate headlines, Vertex Pharmaceuticals emerges as a compelling, if quieter, story. It’s a narrative of a company not content with leading just one market but expanding its prowess into new, uncharted territories. I suggest you buy the dip.

December 19, 2023/by april@madhedgefundtrader.com

December 8, 2023

Tech Letter

Mad Hedge Technology Letter
December 8, 2023
Fiat Lux

Featured Trade:

(SOUTH ASIA PARTNERS)
(NVDA), (AAPL)

December 8, 2023/by april@madhedgefundtrader.com

South Asia Partners

Tech Letter

Big developments happening in the tech sector abroad and investors should take notice.

The CEO of technology giant Nvidia Jensen Huang said he believes that Malaysia will become a potential hub for artificial intelligence “manufacturing.”

This is big news for South Asia and this is the first stage of Silicon Valley looking to harness the power of South Asia to progress its narrative and developmental footprint.

It’s essential they find some low-cost countries to partner with because it’s not always sensible to manufacture in the United States because of cost restrictions.

Take AI, the need for large-scale servers is intense, and opting for a better cost-efficient place is a good strategy.

Huang mentioned that Malaysian conglomerate YTL Corp. could play an important role in setting up AI data centers.

Malaysia “is a very important hub for SEA’s computing infrastructure. It requires access to land, facilities, power, which is extraordinarily important,” he said. “I think YTL could play a great role in that.”

Malaysia’s expertise in packaging, assembly, and other aspects of manufacturing makes it well-suited for the manufacturing of artificial intelligence.

Nvidia is working with 80 AI startups in the country.

In Malaysia, the data center infrastructure layer of computing, which is one of the most important parts of the AI and the cloud, is very successful.

Southeast Asia will likely be a hub for AI computing because countries need their own AI data centers to refine and transform data into valuable information. Old data processing centers were designed to hold data files and run applications. AI requires the use of each place's culture, language, values, literature, and common sense.

The prospects of Southeast Asia are highly positive as it attempts to turn into an important technology hub. It’s already experienced in packaging, assembly, and battery manufacturing. It has rounded out to perform well throughout the entire technological supply chain.

The smart move here is to decouple from China as geopolitics threaten to spin out of control.

Also, consider that Chinese demographics are one of the grimmest in the world.

China simply isn’t producing young workers anymore and wages have skyrocketed.

It doesn’t make sense to build factories there anymore.

India will have a big role to play in the advancement of Silicon Valley production in the next generation.

Apple will shift a quarter of its iPhone production to India in the next two to three years.

The decision will translate into more than 50 million iPhones a year being built in India.

The iPhone production in India lagged seriously behind China but that changed with the iPhone 14, which began manufacturing in the same month as in China.

In 2023, Apple built more iPhone 15 units in India than any other model and it marked the first time it managed to release a model made in India on launch day.

Foxconn is currently building a plant in Karnataka state that should open for business in April 2024.

As Silicon Valley marches on, they will have an interest in partnering in other parts of the world to fine-tune their business models.

Expect a heavy dose of South Asia for the next generation because that is where the low-hanging fruit is.

India will come into its own in the next few years, and Malaysia certainly is a good value player.

The most important takeaway is the accretive effect they will have on American technology companies.

In the short term, I believe NVDA is a better stock player than Apple, although Apple is a great long-term investment.

December 8, 2023/by april@madhedgefundtrader.com

December 7, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 7, 2023
Fiat Lux

Featured Trade:

(CHALLENGING THE MAGNIFICENT SEVEN)

(LLY), (NVO), (RHHBY), (AZN), (AMGN), (VKTX), (MSFT), (NVDA)

December 7, 2023/by april@madhedgefundtrader.com

Challenging The Magnificent Seven

Biotech Letter

If you thought the S&P 500’s dance floor was exclusively reserved for tech's Magnificent Seven, including the likes of Microsoft (MSFT) and Nvidia (NVDA), think again.

Galloping up from behind, with the confidence of a new sheriff in town, are Eli Lilly (LLY) and Novo Nordisk (NVO), blazing trails in the obesity drug market.

Eli Lilly, with its freshly minted weight-loss drug, has catapulted to an eye-watering market value of nearly $600 billion. That's a leap from less than $100 billion in just over five years – talk about a growth spurt!

On the other side, we have Novo Nordisk, hailing from Denmark and thus not a part of the S&P club. Nevertheless, they're no slouches, sporting a hefty $450 billion market cap, quadrupling in value over five years.

The latest to throw their hat into this lucrative ring is Roche Holdings (RHHBY). They've just penned a $3.1 billion deal to acquire Carmot Therapeutics. This isn't just pocket change – it's a clear signal Roche wants a piece of the weight-loss pie, currently dominated by Eli Lilly and Novo Nordisk.

Carmot Therapeutics, a U.S.-based outfit, is cooking up something special in the GLP-1 receptor agonists segment, a class of drugs stirring up both the market and cultural scene.

Roche, by acquiring Carmot, gains exclusive dibs on three promising drugs, all at different stages of trial.

Now, let's talk numbers.

Roche is shelling out $2.7 billion upfront with another $400 million on the line, based on performance milestones. Analysts reckon Roche is gunning for phase III trials to crash the Eli Lilly and Novo party.

But let's not kid ourselves – it's an uphill battle for market share, considering the head start the other two have.

As for the market's reaction? Roche's stock perked up by 2.5% in Switzerland, although it's still trailing by 15% this year. Eli Lilly and Novo Nordisk, meanwhile, saw a bit of a dip in early trading, despite a strong showing this year.

Ultimately, Roche’s goal isn’t just to focus on the drugs. Instead, the company is eyeing an integrated approach, combining pharmaceuticals, diagnostics, and expertise in cardiovascular and metabolic diseases. It's like putting together a high-stakes puzzle where every piece matters.

Furthermore, other pharma giants are joining the fray. For example, AstraZeneca recently entered a $2 billion deal with China’s Eccogene for a nascent obesity and Type 2 diabetes drug.

But here's the million-dollar question: Are we seeing a bubble in these slimming stocks? It's hard to pin down.

What we do know is that the global obesity epidemic isn't slowing down, and these drugs are showing results.

Take Lilly’s tirzepatide, for instance – it's making waves as both diabetes and obesity treatment, with trial participants shedding an average of 52 pounds.

The financial forecasts are staggering, projecting potential annual sales of $67 billion by 2032, and possibly $100 billion by 2030.

This means obesity drugs might outshine immuno-oncology treatments, another sector with sky-high prices and a vast patient pool.

But this prosperity brings a dilemma.

Eli Lilly's trading at a whopping 90 times this year's earnings forecast. Novo? They're at 39 times. These figures could spell an opportunity for the patient investor, or they could be a harbinger of overestimated growth.

To better navigate this, let’s consider the situation from a different angle. I suggest looking at the broader picture – the intersection of obesity with other conditions like heart disease and NASH. It's a fresh perspective, focusing on specific patient subgroups.

Taking this approach leads us to companies like Amgen (AMGN) and Viking Therapeutics (VKTX), each targeting a different slice of the obesity pie.

Amgen's got its eyes on obesity and heart disease, while Viking is tackling obesity and NASH. Early trials have shown promise, and these companies are exploring novel delivery methods like monthly injections and pill formulations.

It's worth noting that Amgen is more than just a one-trick pony – they've got Repatha for high cholesterol, which could be a game-changer if combined with their obesity treatment.

Viking, although smaller and riskier, is making waves with a drug that's shown significant liver fat reduction in trials.

So, what's the takeaway here?

Well, the obesity sector is ripe with opportunity, but it's also fraught with speculation and risk. Amgen, a solid bet with a 3.2% dividend yield, and Viking, a more speculative choice, are just two examples of the diverse strategies in play.

One thing's for sure: As competition heats up, prices for obesity meds are likely to drop, mirroring the trajectory seen with other high-priced drugs.

The obesity drug market is a complex, rapidly evolving beast. It offers a blend of incredible potential coupled with considerable risk.

For investors willing to ride out the storm, the rewards could be substantial. Meanwhile, for those seeking exposure to the growing sector without the associated risks, a diversified investment strategy could be key.