Weekly Mailbag: The Future of Biotech, AI, and Crypto

Dear Reader,

Welcome to the mailbag edition of The Bleeding Edge. I know this week has brought sudden change and questions about Brownstone Research.

Many of you asked about the Day One Investor and biotech portfolios. I have updates for you below.

I appreciate those of you that reached out and wished me luck – but I know this transition is not easy for many of you.

In my first newsletter to you, I said trust is not given but earned. One way I plan to do this is to continue to answer your questions each Friday.

If you have any questions for me, you can submit them here.

Thank you for the brief introduction and strategy overview. I have been pretty vocal about your predecessor and the lack of a risk strategy and the fact that he seemed to be a follower of the Cathie Wood investment strategy. I was no longer investing in many of the recommendations, but rather, would do a deep dive of my own prior to investing in the various Brownstone Research recommendations. I was recently surprised at the great number of position exits. I had exited many of those previously, but now know why this happened.

I am looking forward to seeing new investments, knowing there is someone different behind these recommendations with a realistic risk management profile behind each investment: entry, exit, and most importantly a stop loss.

– Ross W.

Thank you for the email, Ross. I too am looking forward to sharing new investments with you soon. I will be providing my insights on any stocks that remain in the portfolios as well. That process has already begun.

For readers that missed it, we recently published an update for The Near Future Report. If any subscribers missed that alert, please catch up here.

Every recommendation will come with an entry, exit/target price, and a stop loss. I really appreciate your support and look forward to providing you with the best research I can in the coming months.

Hi, Colin, know that your announcement is not a welcome one for some. A necessary one, perhaps.

Although I have not been anointed by my fellow subscribers, I believe the two biggest, smelliest elephants in the room are as follows:

1. Readers were promised 50 pre-IPO deals in five years. I think subscribers have received “about” 13-14 deals so far. These are admittedly long-term, high-risk plays, but I would like the program to continue. My reason? I want to harvest the fruit in 5-10 years. I can afford to wait for some potentially big payoffs. Please be extremely careful before making any significant changes to this program.

2. The biotech portfolio is in shambles. There have been a few winners. I would love to see a comprehensive evaluation of every one of these equities with a binary recommendation from you, namely “Dump or Hold.” And PLEASE provide a coherent road map.

To summarize, keep the pre-IPO campaign. Rescue the small pharma.

I do wish you good luck.

– Charles S.

Thank you for the email, Charles. I’m very excited about the pipeline of deals in Day One Investor, and I’ll have an update for you soon. But we are currently looking at six deals.

You are correct, the biotech portfolio needs attention. Going forward, every new stock recommendation will have an entry price, exit/target price, and a hard stop loss. Updates will be sent as stocks cross these thresholds. No exceptions.

Part of my journey as an investor was learning what I’m not good at. I’m comfortable admitting the biotech/pharma sector is not an area of expertise… For this reason, I haven’t invested in the space at all – or actively followed it. I have a biotech industry expert reviewing the portfolio and will have an update on the next steps soon.

Welcome to Brownstone Research, Colin. I look forward to your research and recommendations going forward. 

I am a Brownstone Research Unlimited member. The main question I have regarding the overall portfolio is what will the private equity portfolio look like going forward? How will it be managed, and will there be continued recommendations going forward?

Thanks,

– Scott S.

Thank you, Scott! The Day One Investor deals are something I’m the most excited about. Deal flow has slowed over the past year, largely due to market conditions – but with the uptick in markets, that will likely change. We’re currently looking at six deals, and I look forward to performing all the necessary due diligence to bring you the best.

Colin,

There are articles about a new bull market starting, about a nasty recession, about no recession, about a soft landing, and on and on. This is not specific advice, though all the advice is obviously specific advice, and the disclaimers are slightly ridiculous. But I have always taken responsibility for my own actions, so it does not matter. The question is how likely is it that this market will continue to ignore the headwinds for another year or more?

Kind regards,

– Frank L.

Frank, thank you for your message, great to hear from you. My preferred strategy for dealing with headwinds (that may or may not materialize) is to remain consistent with risk management. That involves having stop losses that are regularly updated and taking profits when stocks approach areas where sellers have materialized in the past.

Right now, the old Wall Street cliche applies – the trend is your friend. At some point, the trend will reverse, and my preferred method is to wait for that to show up on the price chart rather than try to predict when it might happen. Once the trend shows signs of weakness, I will alert subscribers.

Was hoping for any guidance from you this week with ALL of the crazy Binance & Coinbase news. Ugh. What are we to do in this crypto conundrum? I’m watching pioneering, cutting-edge projects like Polygon plummet in my portfolio. It just makes ZERO sense. How can this be? What should we be doing? Sell it? Do nothing? Just breathe? Wait for the dust to settle? ANY Insight (incredible and intuitive) from you about what’s really going on would sure help settle this Polish-Canadian gal’s Unsettled Nervous System (UNS). I know you’ve got a plentiful plate already, and I don’t mean to pile on more. Honest!

What a crazy and interesting era we’re living in, huh? But perhaps it’s also a time of exponential discovery, remarkable growth, and unprecedented expansion across many levels… and most importantly, the SOUL LEVEL taking the starring role, center-stage. Deep dive in. Yay!

With much appreciation for all you do,

– Janet P.

Hi Janet, thanks for the message. The situation with Coinbase and Binance is troublesome. First, the United States Government should have worked with these companies on regulations and rules well before the SEC had to take action. Nothing can be done about that now, but it’s always a risk in a largely unregulated market that the government strikes before working closer with the companies on regulation.

As for the future of crypto, I’m far from an expert – however, I started buying Bitcoin in 2014, and I’ve dabbled with crypto mining in the past. I view any coin other than Bitcoin and Ethereum as pure speculation. There’s very little utility with most crypto projects, so buying most coins is simply hoping someone buys it at a higher price. Proper risk management and investment sizing should be used at all times.

As for the exchanges, an interesting phenomenon might occur. If crypto is pulled from exchanges, it (likely) will go to cold storage. That is obviously less liquid than holding crypto on an exchange, so it might drain some liquidity from the marketplace. We’re seeing a similar phenomenon in real estate. Fewer people are listing/selling houses, so it’s helping keep prices stable as rates move higher. Crypto moving off exchanges could behave similarly.

If AI is going to displace all the forecasted jobs, where are the new jobs going to be created? And if enough jobs aren’t created, how high will unemployment climb, and where is all the money going to come from to buy all the products of these firms? AI is a double-edged sword; it takes away, but does it create enough that it displaces?

– Dennis H.

Hi Dennis, you make some excellent points that are certainly going to be a concern going forward. In the short term, we are going to see some job loss. Large tech companies like Meta and Google have been able to cut software engineers knowing, in part, coders are using AI to become more productive. Over time, this will trickle down to other industries.

Ultimately, however, higher productivity drives prices down. As prices come down, consumers have more money to spend on other goods and services. There will be large segments of the economy less impacted by AI – such as travel, leisure, food, fashion, and real estate. As consumers have more money, they tend to spend it on these less-impacted areas of the economy.

One of the most exciting aspects of AI is that it could drive down costs on things like health care. Groundbreaking drugs, cures, and treatments could help reduce insurance premiums and the amount the government spends on health care.

You are right, in the short run it’s a double-edged sword. But in the long run, it will be similar to the dot-com and smartphone eras. AI technology will make some jobs obsolete, but it ultimately will create far more.

Regards,

Colin Tedards
Editor, The Bleeding Edge