- Will crypto help Facebook take over the world?
- Don’t worry. This new company won’t cripple biotech investors’ gains
- This reader has a “difficult” question…
Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
But first, I want to tell you something a bit personal…
Back in February, I traveled to the U.C. Berkeley Law School. I spent a week with colleagues from around the world, studying the ins and outs of venture capital deal structures. It was a great event. But the entire time, I didn’t feel so well…
I had a persistent, dry cough. My breathing wasn’t normal, and I was really fatigued. For two days in a row, I crashed for several hours in the middle of the day. I was incapable of working. I just didn’t have any energy at all. I couldn’t focus on anything.
I’m super healthy, have a great diet, and exercise regularly… That kind of thing never happens to me.
I’m convinced I had COVID-19.
After those two bad days, I quickly recovered and isolated until I felt certain I wouldn’t spread it.
About a month ago, antibody tests became available at my doctor’s office. I signed up and had my blood drawn. I wanted to know if the test worked and whether I had the IgG antibodies that would indicate my body had used them to fight off the virus.
The results were negative…
I was in a state of disbelief until I spoke with an epidemiologist who reviewed the results with me. She told me that the negative result didn’t mean much. It only meant that I didn’t have the IgG antibodies in my system. She told me that my body may have produced other antibodies that fought off COVID-19… antibodies that the test would not have identified.
Serological tests have indicated that COVID-19 has spread further than many imagine. But that discussion I had indicates to me that the virus has likely spread even further than supposed. The real number is almost certainly quite higher.
And even more interesting is some new research that was just published a few days ago by the Karolinska Institutet in Sweden. It tested over 200 people for both antibodies and T cells.
Why T cells?
T cells target infected cells and destroy them. By doing so, it stops infected cells from spreading quickly to healthy cells. It can stop a virus in its tracks.
This was interesting because research around COVID-19 immunity has been focused on antibodies. What if we’ve been looking in the wrong place?
The research showed that two times as many people tested positive for the COVID-19-killing T cells than antibodies. What does this mean?
It means that it is highly likely that immunity has spread even wider than the serological tests for antibodies has shown. Put more simply, a much higher percentage of the population is likely already immune to COVID-19 than previously thought.
Professor Danny Altmann from the Imperial College in the U.K. referred to the research out of Sweden as “robust, impressive and thorough” and stated clearly that “antibody testing alone underestimates immunity.”
This also would mean that the real case fatality rate is a fraction of what we are told it is by the media. This is wonderful news and bodes well for the fall/winter months.
I suspect that I had COVID-19 after all.
Now for our mailbag…
Big Tech is getting into digital assets…
First up is a question about Facebook’s ambitions to launch its digital asset…
What is with the story that Facebook’s Zuckerberg is planning to take over the financial world to control money with crypto technology?
[…]
I have heard something about this and would deem that these financial institutions are planning on dumping money into the new crypto or the technology that runs bitcoin. They are going to make millions. What do you know?
– Delores C.
Hi, Delores. Thanks for your question. I believe what you’re referring to is Facebook’s Libra project.
To catch readers up, Facebook released its Libra white paper in June of last year. In the world of blockchain technology, white papers are a formal document that describes the technology and how it works. It represents the point at which a project is publicly announced.
Libra will be what’s known as a “stablecoin.” That means it will be backed by a basket of fiat currencies. And Libra, as a digital asset, will be fungible. In other words, users will be able to convert Libra into another digital asset like bitcoin… or convert it back into U.S. dollars, yen, pounds, euros, and so on.
Given that Libra will be a stablecoin, it will have low volatility. That will be attractive in countries without a stable currency, like many countries in South America or Africa.
Stablecoins are also attractive for use in daily purchases. After all, who wants to use a currency that might fluctuate 10% a day? It is very difficult to budget for daily necessities when there are high levels of volatility.
That means Libra could be used for small-value payments and as a store of value in certain markets.
Three billion people around the world actively use one of Facebook’s products. If Facebook were to launch Libra to this user base, it would gain immediate adoption.
You’re right, Delores. Transaction fees alone would create a multibillion-dollar business for Facebook virtually overnight.
And here’s the other important point…
Libra could become a global reserve currency practically overnight. It could rival currencies like the pound, the euro, and even the U.S. dollar. We have to appreciate the chutzpah Facebook demonstrated. It is essentially planning to launch a global central bank that it will control.
And government officials are taking notice. Treasury Secretary Steven Mnuchin – speaking about Libra in July of last year – said that “we will not allow digital asset service providers to operate in the shadows.”
Even the president made his feelings known via Twitter…
President Trump on Facebook’s Libra
Source: Twitter
Facebook’s strategy has been to position this project as something that will benefit mankind. It will benefit those in unbanked developing markets and people whose national currency suffers from bad fiscal policy and rampant inflation.
A stable, digital “reserve” currency like Libra would act as a critical store of value benefiting those in need… Or so the story goes…
The reality, of course, is quite different.
Launching a digital currency and a digital wallet to three billion people on the planet would put Facebook, and thus Zuckerberg, in an incredible position of power.
Not only would Facebook make billions in profit through all of the financial transactions, but it would also be a stepping-stone to deliver all kinds of financial services to just about anyone on the planet.
And it would mean that Facebook would have even more information about our daily spending habits and lifestyle… which it could then collect, aggregate, and monetize by selling it for even more advertising revenues.
Facebook already has an incredible amount of influence and power, which it has consistently abused. The launch of a currency and digital platform like this, however, would be taking things to a completely different level.
One final note…
The rise of company-issued digital currencies has important investing implications. Once these digital currencies are unleashed on the world, it will immediately raise the profile of blockchain technology.
Blockchain technology will revolutionize our society the way the internet did more than 20 years ago. Smart investors stand to make a small fortune over the next few years.
But most investors are so distracted by bitcoin and Facebook’s Libra that they have missed the big picture. If you’re interested in a way to profit from the blockchain megatrend… without ever downloading a digital wallet or logging onto a cryptocurrency exchange… go here now.
What Royalty Pharma means for the biotech industry
Next up comes a comment about “biotech royalties”…
Hi, Jeff. I am a subscriber to your three publications: The Near Future Report, Exponential Tech Investor, and Early Stage Trader.
[…]
Reading about this new Biotech Royalties company brings a question to my mind: How many of these new royalty companies will be appearing from now on? How will this impact (cripple) the possible gains of the small investor who made the effort of “getting in” on an early stage [biotech company] and is patiently waiting for the catalysts and a real reward like it seems we should get? I feel the small investor has no chance for real profits. Discouraging
– Mary
Hi, Mary. Thanks for your question and for being such a dedicated reader.
For readers who missed it, last week we discussed a company named Royalty Pharma (RPRX). The company held its IPO in June and raised nearly $2.2 billion. That makes it the largest biotech IPO in history.
But here is the important point: Royalty Pharma is not a traditional biotechnology company. It doesn’t have a pipeline of products. It doesn’t conduct clinical trials. And it’s not trying to bring a therapy to market.
Instead, this company invests in biotech and pharmaceutical companies looking to raise capital to fund their development. In exchange, Royalty Pharma gets a royalty stream from any therapies in those companies’ pipelines.
This is a very common business model in the gold and silver mining industry. These royalty companies simply finance the mining companies and then receive a percentage of the gold and silver produced. It’s the same idea here, just applied to the biotechnology space.
And with the pace that biotech is progressing today, I wouldn’t be surprised to see more of these companies in the near future.
And here’s the important part. These royalty companies won’t “cripple” any potential gains for biotech investors. It’s quite the opposite. This is actually great news for biotech investors.
We can think of a royalty company like Royalty Pharma almost like a private equity or a venture capital firm. It has a pool of capital, and it is willing to invest it in promising early stage biotechnology companies as well as larger pharmaceutical companies.
This additional investment capital will help fuel new innovation in the biotech industry and create new investment opportunities.
And that means that we, as investors, will still have great opportunities to get in early before Wall Street catches on to the most exciting developments in the world of biotech.
How to measure success in biotech stocks
For our third topic of the mailbag, we have a reader who says he has a difficult question…
Hello, Jeff: You indicated you like difficult questions, and I know it’s unreasonable to measure early stage companies without an actual product against more established companies, but what index might you suggest we use to measure the success of the biotechs you recommend? The industry as a whole has been off the charts, so being able to have some kind of barometer would be a nice point of reference.
– Graham L.
Hi, Graham. You are right that I want my readers to ask any question they have, no matter how difficult it may seem. And you’re also correct that the biotech industry has been booming this year.
58% of all traditional IPOs this year have been biotechnology companies. Collectively, they’ve raised nearly $10 billion for drug development. Plus, we’ve been seeing some exciting partnerships like the one between pharma giant Eli Lilly and early stage biotech AbCellera searching for an antibody therapy for COVID-19.
As I’ve written about on numerous occasions, COVID-19 has accelerated the development of biotech research. Breakthroughs that were 5 to 10 years away before the pandemic are now seemingly happening on a monthly basis. The virus has lit a fire under this overlooked industry. And as investors, we can see that this is just the beginning of a bull market in biotech.
As for your question about how to benchmark our biotech portfolio companies against the rest of the industry, one good resource I can recommend is the iShares Nasdaq Biotechnology ETF (IBB).
That’s the largest ETF tracking the biotechnology sector, and it’s trading up around 14% year to date. While many of its holdings are larger than the ones we usually consider for Early Stage Trader, it should help give you a sense of where our portfolio sits by using that as a baseline.
Of course, we achieve much higher returns in Early Stage Trader and Exponential Tech Investor compared to the IBB benchmark. In fact, one of our trades recently spiked, and members should keep an eye out for today’s Early Stage Trader update.
Thanks for writing in.
And for my U.S.-based subscribers, have a fantastic Fourth of July weekend. Here’s to freedom.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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