• The hidden benefits of municipal bonds
  • The dark implications of a CBDC
  • At the intersection of AI and healthcare

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.

Before we get to our questions, I’d like to alert readers to an important investment presentation I’m putting on tomorrow.

As we all know, this year has been a difficult one. With aggressive rate hikes, record-setting inflation, and incredible volatility, there seems to be nowhere to hide.

But no matter what the market conditions are, there are always a handful of investment strategies that not only work… but can produce fantastic gains with little to no downside. 

That’s why I’m so excited to share a new investment strategy with my readers. It’s a strategy that will provide us guaranteed income and virtually zero downside, while still giving us triple-digit upside potential. I call these investments “X-Bonds.”

It sounds too good to be true, I know. But this is a very real strategy that has been regularly implemented by wealthy investors during times of volatility – just like what we are seeing today. And it’s time that we did the same. The best part? Anyone can do this.

If you’d like to be put on the list to receive all the details, simply click right here. Now, let’s turn to the mailbag.

The power of municipal bonds…

Hi Jeff,

As a retired (VP of Human Resources) employee of a very large Fortune 500 corporation, I cannot tell you how impressed I am with your work ethic and your persistence in assisting your subscribers. Thank you.

My question… I was thinking about U.S. treasury bonds instead of municipal bonds. Isn’t the yield from a U.S. treasury bond better than a municipal bond after taxes even if I take a 3-month penalty should I withdraw early in 24 months? Thoughts?

Many subscribers are like me and do not send feedback or questions. Please know we appreciate your help navigating through this wild ride.

Eileen L.

Hi, Eileen, thank you for your kind words and for being a reader. I’m glad that you wrote in, because there are some important dynamics that we need to understand around this kind of investing.

The absolute best place to purchase U.S. Treasury bonds is directly from the Treasury itself. Most investors aren’t aware of this, but anyone can purchase Series I Savings Bonds at a great rate of return – right now, that’s at 9.62%.

This is fantastic income, basically risk-free, with no one in the middle. But there is one catch… An individual can only purchase $10,000 total each calendar year. With that said, this is a smart investment strategy for the first $10,000 worth of investment allocation for fixed income. More information can be found at https://treasurydirect.gov.

After the first $10,000, we can consider U.S. Treasuries vs. municipal bonds. Today, a U.S. 10-Year Bond yields about 3.2%. By comparison, the national average yield on a tax-free municipal bond is almost the same, 3.18%.

That’s only an average, however. Smart municipal bond investors are able to consistently invest in tax-free municipal bonds with yields well above 4%. The interest rate, or coupon, isn’t an apples-to-apples comparison however, because the municipal bonds are tax-free.

If we were to invest $100,000 into each asset, we would receive approximately the same yield every year, $3,200.

But the Treasury investor must pay income tax on this yield. For investors in the highest bracket (37%), that means they only take home $2,016 at the end of the year. The municipal bond investor – meanwhile – gets to keep the entire $3,200.

After 10 years, the Treasury investor would collect $20,160. Meanwhile, the muni bond investor would collect $32,000. By simply picking the municipal bond over the Treasury, we receive nearly $12,000 more.

And in many cases, if we buy a bond issued by the state that we live in, we also are exempt from any state income tax.

There is one other key point, however: Using tax-free municipal bonds makes the most sense for those whose federal tax bracket is 30% or higher. For investors in lower tax brackets, investing in high-quality corporate bonds, or strong dividend-paying stocks, is going to be a better strategy for fixed income.

But for those investors who are suitable for tax-free municipal bond investing, it is a fantastic complement to any asset allocation strategy. Depending on where we are in our careers – and where we are in life – impacts what percent of our investable assets we might allocate to fixed income investing and specifically municipal bonds… as they have little to no downside risk, and attractive tax-free income generation.

It has always surprised me how few investors take advantage of this asset class. But there is a reason for that, and it’s actually not the investors’ fault.

Investing directly into the primary offerings of municipal bonds has been notoriously difficult for retail investors to access. They are typically reserved for large, institutional money. And if a retail investor ever does find a municipal bond from their traditional brokerage, we can safely assume it’s passed through several hands before it gets to us.

That’s not what I want for my subscribers. I want us to go “straight to the source,” and take part in the primary offerings for these bonds – right alongside wealthy investors and institutional capital. We can equate the primary offering of a municipal bond to its “IPO,” or initial public offering.

That’s what I plan to do. It’s a special project I have been working on for years. And I recently made the first piece of research available to my elite subscribers, Brownstone Unlimited. That’s one of the benefits of membership… Unlimited members get first access to any new ideas or strategies I produce.

Within the next week or two, I’ll be publishing an alert for my first muni bond IPO – something I’ve been excited about for some time. Thanks for your question, Eileen.

What Executive Order 14067 means for investors…


Can we get your perspective on Biden’s Executive Order 14067, whereby they are looking to transition from Paper Money to Digital Currency? Do you see any issues with that? What impact will that have on investing?

– Joseph W.

Hi, Joseph. This is a great question. We could spend hours discussing this topic, but I’ll try to cover the most important implications.

For the benefit of subscribers, Biden’s Executive Order 14067 is titled “Executive Order on Ensuring Responsible Development of Digital Assets.” Buried within it, was this line (emphasis added):

Sovereign money is at the core of a well-functioning financial system, macroeconomic stabilization policies, and economic growth. My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC.

A central bank digital currency – also known as a “CBDC” – may be a new concept for many of us. At a very high level, a CBDC is a digital version of a national currency under the complete control of a country’s central bank.

Through my contacts with The Chamber of Digital Commerce, I learned that the digital dollar has been a growing priority in some corners of D.C. I knew it was only a matter of time before the United States moved in this direction.

Would a U.S. CBDC have any impact on investing? The reality is, we don’t know yet. 

Transferring a blockchain-powered CBDC could make settlement possible for investments in a matter of minutes. But it could also mean that the U.S. government would have the ability to restrict investors to invest in certain companies that they may deem to not be “compliant” or counter to the prevailing political narrative.

If we would have had this discussion three years ago, I would have said that isn’t much of a concern. But after what we have seen in the last two years, this is entirely possible. 

Bank accounts have been frozen, applications banned, scientists censored, and Twitter accounts eliminated, all for being deemed to be counter to a political narrative. A CBDC would empower any central government to have complete control over our assets.

Now, purely as a technologist, I have to admit that a CBDC would remove an enormous amount of “friction” from our current financial system.

For instance, a little over two years ago, the American public received a series of stimulus checks. At the same time, many employers took part in the Paycheck Protection Program (PPP).

But as many of us know, the distribution of these stimulus funds was a mess (I’m being kind). Many people waited weeks or months to receive a physical check. And it is now estimated that as much as 15% of PPP loans could have been fraudulent. I wouldn’t be surprised at all if the number was much higher.

However, imagine a world with a CBDC… The federal government could have simply “airdropped” a digital currency into every American’s digital wallet overnight. This process would remove an enormous amount of friction and fraudulent activity.

So, that’s the positive. But there’s a darker side…

The appeal of a CBDC for central banks and governments is that it centralizes control of a nation’s money even more than it already has. And once governments have control of their own CBDC, we can imagine what is possible.

Are we not paying our “fair share”? The current U.S. administration is using exactly this language right now. With a CBDC, the IRS could track and tax every transaction we make. And if it deems we haven’t paid our fair share, it will simply deduct an amount directly from our digital wallet or bank accounts.

Is our government interested in addressing climate change? They could limit how much gasoline or meat we purchase. In other words, it could control what transactions we are permitted to make.

Do we hold “unacceptable views”? Does the current administration consider us a “threat to democracy itself”? We could be denied the ability to purchase items like firearms or ammunition. Or our funds could simply be frozen altogether.

To be clear, I am not saying these things will happen. But with complete control of a CBDC, these actions will be possible with the push of a button.

Again, even a few years ago, I would have doubted anything like this would have been possible. But something has changed. Governments around the world have shown an increasing willingness to take extraordinary measures to “punish” those they disagree with.

I’m sure we all remember the “Freedom Convoy” protests in Canada. Regular Canadians came from all over to peacefully protest the draconian lockdowns and irrational “vaccine” mandates.

And what did the Canadian government do? Prime Minister Justin Trudeau described this group as a “fringe minority” that held “unacceptable views.” Bank accounts for many protesters were frozen and they were denied any recourse.

The fact that a G7 government would “de-bank” their own citizens for the “crime” of peacefully protesting would have been unthinkable just a few years ago.

Increasingly, we are being told that some ideas are not just “wrong,” but also “dangerous.” And the individuals who hold these views are not just incorrect, but also “treasonous.”

If certain viewpoints are “dangerous,” then it becomes easier to rationalize taking extreme measures against the people that hold those views. And, once again, with the launch of a CBDC, it becomes as easy as a few keystrokes to “punish” ordinary citizens.

I’m usually a very optimistic person. But the potential implications for this are truly disturbing. The employment of a CBDC and the removal of cash from society is a frightening prospect in the current environment.

Can AI fix healthcare?

Hi Jeff,

After reading one of your subscriber’s questions about AI for automobile traffic enhancement, I was reminded of my similar thoughts about AI for medicine.

Recently, a family friend had a medical complication. The hospital doctors were each specialist and did not approach the problem with the same diagnosis or treatment plan. As you might expect my friend got worse. Fortunately, her family members were constantly at her side and took note of what worked and what did not.

At one point the family told the kidney specialist that she had gotten better whenever dialysis was performed to get toxins out. This specialist said that the numbers did not warrant dialysis several times per week. Again, she got worse.

She went to ICU where dialysis was prescribed, and it was determined that more intensive dialysis was necessary. That wiped out her kidneys, and now back at the rehab where the doc who refused dialysis works, daily dialysis is mandatory.

I can’t help to think that AI in medicine and for medical decisions would help tremendously. Any companies you’re keeping your eye on?

Ron A.

Hi, Ron. Thanks for sharing your story. I’m very sorry to hear about your friend. Sadly, this is such a common story. 

The reality is that physicians are trained specifically for their specialty, and while they have a broad understanding of healthcare, most are not trained in a multi-disciplinary fashion.

And I can’t tell you how many times I’ve even met with specialists –  and asked questions about recent scientific research in their own fields – only to receive a blank stare. It was always surprising to me to speak with a cardiologist, pediatrician, or gastroenterologist about the latest developments in their field that they haven’t studied. 

Which is why what your friend’s family did is exactly the right thing to do. The easy course is just to say, “they’re the experts, I’m going to trust what they say.” But there is so much variability in healthcare and physicians.

Blind trust is simply not appropriate, and it’s not safe either. It’s much harder, and smarter, for us to take ownership of our own health, become educated – at least at a high level – and do our best to assess what is working and what’s not working. At a minimum, this gives us the ability to ask relevant questions to our physicians and test what makes sense.

As for your question, this is becoming a bit of a theme in our mailbag. Last week, we looked at how AI could fix traffic congestion. Could it also fix some of the weaknesses in our healthcare system? The answer is absolutely yes.

One of my areas of focus is the convergence of high technology – primarily robotics, artificial intelligence, and machine learning – and medical care. As my longtime readers know, I’m predicting a revolution in healthcare and biotechnology in the coming years. I call this trend “precision medicine.”

Today, our healthcare system is largely reactive. We only seek treatment when a problem presents itself. And even then, our healthcare system can usually only treat the symptoms, not the root cause.

With precision medicine, this dynamic is flipped. With this framework, we would have our genome – our genetic “blueprint” – sequenced on a regular basis. From there, we could “unleash” an artificial intelligence on this data to spot any genetic abnormalities that could lead to disease. We would know what disease we are susceptible to years before symptoms present.

From there, we could seek proactive treatment or even make use of CRISPR genetic editing to correct our genetic mutation, essentially “curing” the disease before it ever appears. With this system of medicine, we’ll live longer and with better quality of life.

I cover these trends in my various research publications, but if we’re looking for any favorite companies at the forefront of this trend, I could mention one place to start.

Schrödinger (SDGR) is not a company that I would expect most of us to have heard of… But it is operating at the intersection of artificial intelligence and drug discovery. 

Schrödinger is solving two pain points in the biopharmaceutical industry: time and money. Let’s consider one data point alone… It costs roughly $2.6 billion to develop a drug therapy from the discovery stage to U.S. Food and Drug Administration (FDA) approval.

That’s an extraordinary number, especially considering that more than 90% of all drug candidates fail and are never approved by any regulatory body. With those odds, it’s almost incredible that any investors or companies are willing to take the risk.

But they do so because the rewards are so incredible. “Blockbuster” drugs can result in tens of billions of dollars’ worth of sales for biopharma companies every year.

And here’s what’s remarkable…

Schrödinger’s software platform can evaluate billions of different molecules over weeks or even days. By doing so, it creates a shortlist of molecules with the highest chance of being effective. A biopharma company can simply pick the top candidates and then synthesize and analyze those.

Put simply, the AI is “unleashed” on the task of drug discovery, saving time and money in the process.

Schrödinger can analyze hundreds of billions of compounds in any given year. The data that would come from this process is worth a fortune.

And remember, this task would be literally impossible for humans alone. A team of thousands could work around the clock for a century and still not come close to producing a fraction of the results that Schrödinger’s AI has.

Now, it’s worth mentioning that this is a small-capitalization stock… And it has been punished in recent months along with the wider market. I expect it to be very volatile in the months ahead. But looking longer term, this is absolutely a stock I would put on my list to own.

Thanks for your question, Ron.

That’s all the time we have this week. Remember, if you’d like me to answer one of your questions, send me a note by writing to [email protected]. I’ll do my best to get to it in a future mailbag.


Jeff Brown
Editor, The Bleeding Edge