Dave Gonigam – June 28, 2012
- While government mucks around in health insurance… biotech innovators solve the most pressing threats to human health
- The biggest breakthrough fighting obesity in more than a decade… and the next breakthrough you won’t hear about on the news
- A crowded bear trade: Greg Guenthner on signs that stock market pessimism “is reaching its outer limits”
- “Craven and degraded” Europeans and their new Chinese overlords: Doug Casey assesses the tragicomedy of the eurozone
- Signs of tight supply in the precious metals market… a true “audit the Fed” bill clears a hurdle… another food stamp scam on top of all the ones we showed yesterday… and more!
It’s a good thing we have a news media to perform the essential civic function of fostering an informed citizenry.
Except when it’s subject to “epic fail”…
Then again, the Supreme Court’s leap of logic in justifying the 2010 health care law could scramble a rocket scientist’s brain: a fine for failing to buy health insurance is now a “tax.”
“It is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance,” read the majority opinion. “Such legislation is within Congress’s power to tax.”
We’ll spill little virtual ink on this opinion today. In line with our “sauve qui peut” outlook here at The 5, we’ll focus on things within your control… and beyond the reach of the Supreme Court.
The timing to do so is ideal… because less than 24 hours ago we got a reminder of the unstoppable — and highly profitable — wave of innovation in the health care space…
The FDA has approved its first weight-loss drug in 13 years — produced by a company Patrick Cox spotted in 2010.
Arena Pharmaceuticals (ARNA) is coming to market with a drug called Belviq. “Belviq,” a Reuters article explains, “is designed to block appetite signals in the brain to help people feel full after eating smaller amounts of food.”
It also has some pleasing knock-on effects, as Patrick explained in his initial write-up: “Blood pressure drops, heart rate drops, the ‘bad’ LDL cholesterol goes down, the ‘good’ HDL cholesterol goes up and triglycerides levels drop. Remarkably, all the key markers move in the right direction.”
Patrick recommended ARNA in March 2010, when it was a shade over $3. By last month it became a clean double: He recommended selling half the position and letting the rest ride. This morning, it’s well over $10.
And it almost didn’t happen.
“The FDA has been under mounting pressure to approve a new weight-loss treatment,” says the Reuters story.
No wonder: Two-thirds of Americans are now classified overweight or obese. But the agency has proceeded with great caution since its last major approval — the disastrous “fen-phen” combination, pulled from the market in 1997 because it turned out to cause heart damage.
Indeed, the FDA rejected Belviq in October 2010 — prompting an unusual shareholder revolt. “What has mobilized so many people, within our group and beyond, are the comments and behavior of some FDA officials and what we believe to be incorrect scientific conclusions,” shareholder Douglas Park told The Wall Street Journal.
“The increase in tumors in rats was statistically insignificant,” Patrick explained, “and no one on the panel was qualified to weigh the animal study results.” So the FDA reevaluated. Patrick urged his readers to hang on.
This morning, they’re sitting on a 235% gain.
Two other companies are in the same boat Arena was until yesterday: hoping for approval of a weight-loss drug the FDA initially rejected.
Patrick is taking a pass on both. But he’s not giving up looking for the next weight-loss breakthrough. Far from it. The market is too lucrative: Weight loss is a $65 billion-a-year business in the United States.
Clinical trials are set to begin later this year on a drug that tackles obesity in an entirely new way.
It doesn’t try to fool the brain into feeling satisfied. “It doesn’t work on the brain to lessen the power of the cravings that are generated by shrinking fat cells,” Patrick explains. “It’s trying to eliminate the fat cells themselves. In other words, it attacks the REAL problem.”
“In primate studies, obese monkeys given the treatment quickly became slim. More importantly, all their metabolic markers returned to healthy levels.”
The company behind this revolutionary approach is getting big-bucks support from the same research group that backed the anti-cancer drug Avastin. Avastin is in such high demand these days it’s often counterfeited.
In light of other drugs this company has in the pipeline, Patrick says, “I’m astonished that this stock hasn’t already taken off, but I’m thankful it hasn’t. I suspect that five years out, it would have been a bargain at many times its current price.”
For the next four days, you have a chance to access Patrick’s high-end research at the lowest price we’ve ever offered.
It’s not for the impatient, nor for the faint of heart — witness the snub the FDA gave ARNA before coming through with final approval yesterday. But ARNA is proof positive that you can build life-changing wealth from world-changing companies.
This offer is available through Monday, July 1, at 5:00 p.m.
Major U.S. stock indexes are taking a one-two punch this morning.
The Dow gave up all of yesterday’s gains at the open — a move widely attributed to jitters about the umpteenth “make or break” eurozone summit — and added to those losses after the Supreme Court ruling. The index has seesawed around 12,500 for six weeks now.
The economic numbers today aren’t helping…
- First-time unemployment claims: Down to 386,000 last week — although once again, the previous week’s figure was revised up. The four-week moving average is basically flat
- First-quarter GDP: Still at an annualized 1.9% according to the Commerce Department’s latest guess. Nothing especially interesting in the revisions.
While the broad market’s down, we see that IHF – the iShares Dow Jones US Healthcare Provider ETF – is slightly in the green. Heh.
“According to a Supreme Court brief filed by the insurance industry’s biggest lobbying group,” wrote Peter Suderman in Reason last year, “the industry doesn’t oppose the law — just so long as it includes the most constitutionally dubious provision, a mandate to purchase health insurance.”
“Attitudes on Wall Street and Main Street couldn’t get any worse right now,” writes Greg Guenthner. “And that’s actually a good thing for stocks.”
Earnings season starts July 9, and “analysts are dreading the second quarter. After expecting earnings growth in S&P 500 stocks as recently as last month, they are now looking for a second-quarter drop of about 1%, according to Bespoke Investment Group.”
Retail investors are sharing in the gloom, says Greg: “Tuesday’s consumer confidence report revealed a 10% jump in consumers who believe stock prices will decline in the near future. In only one month, the percentage of bears went from 32 to 42.”
“The ‘bear trade’ is looking crowded right now because there is so much uncertainty and fear in the world right now. Simply put, investors are craving clarity. And whether news or resolutions are perceived to be ‘good’ or ‘bad,’ we will probably see sentiment improve when some certainty is added to the mix.”
“The bottom line is we’re seeing signs that the pessimism is reaching its outer limits. That’s a great contrarian indicator. Remember, true contrarianism doesn’t instruct us to mindlessly latch onto an opposite position. Instead, it tells us to look for these extremes.”
“At this point, the Europeans are so craven and degraded they deserve to be indentured servants of the Chinese, which they will be,” says perennial Vancouver favorite Doug Casey — unimpressed by the eurozone “summit” today and tomorrow.
“The debt they are using to finance their bulging bureaucracies, bloated welfare rolls, giant pensions and so forth is largely coming from the banks. But the banks are all bankrupt too, partly because they’ve lent so much capital to bankrupt governments. So you’ve got two sets of bankrupt institutions trading debt back and forth between themselves.”
“Europe is China’s largest trading partner. When the EU really goes into reverse and suffers a major economic collapse, the Chinese are going to lose their main customers — and end up owning a lot of chateaux. That also means the Chinese will stop buying the raw materials — commodities — they use to make what they sell to the Europeans. That will hammer the Australian, Brazilian, Canadian and other resource-driven economies.”
Doug says the bank runs in Greece could easily come to the United States. “I’d definitely recommend building up a stash of twenties and hundreds, enough for several months’ living expenses, in case banks suddenly don’t have cash on hand. Better yet, put it in gold and silver, because you never know what the banks will give you when push comes to shove.”
Gold and silver are a better bargain today than they were yesterday; the precious metals are sharing in the broad sell-off.
The Midas metal’s been knocked back to a six-week low of $1,554. Silver’s testing a new year-to-date low at $26.47.
First-quarter gold coin sales are down year over year at three of the world’s major mints.
“Combined sales of U.S. American Eagle, Canadian Maple Leaf and Vienna Philharmonic gold coins fell by more than a third, to 451,113 ounces in the three months to March,” Reuters reports. However, that decline comes off record levels set last year.
Already as Q2 winds down, new signs are emerging of tightness in the physical bullion market: If you want bags of “junk silver” from Apmex, you’ll have to wait till a week from tomorrow for shipment. And you’ll pay a premium of up to $1.59 per ounce over spot.
[Ed. Note: Keep an eye out next month for a special announcement about the ideal way to buy, store and sell gold and silver, hands down. This is something that’s been in the works all year. We’re still sworn to secrecy… but as soon as we can reveal more, you’ll be the first to know.]
Rep. Ron Paul’s effort for a real audit of the Federal Reserve is closer to reality.
The House Oversight and Government Reform Committee passed his bill yesterday by voice vote, with nary a “nay” to be heard.
This is the full-strength version of the bill Congress watered down before passage in late 2009. It would throw open everything to scrutiny — including transactions with other central banks.
“Now onto the House Floor!” Dr. Paul tweeted yesterday. He’s already lined up a majority of the chamber — 257 members — as co-sponsors.
Not exactly a new gold standard, but it’s progress — the sort he couldn’t even dream about 30 years ago. Then he found himself issuing a “minority report” after President Reagan’s Gold Commission — stacked with bankers and bureaucrats — recommended a continuation of the fiat-money status quo.
That document is as relevant today as it was then. It’s why our Laissez Faire Books joined forces with the Mises Institute to republish it. And it’s why we’re offering it for a steal.
“Thanks for the good article on food stamps,” a reader writes after yesterday’s episode.
“There is no limit on the junk food you can buy with food stamps. I see people in our local Kroger buying soda, packaged foods, snacks and all sorts of crap and using their food stamp card to pay. Most of them are about 100 pounds overweight.”
“Another crock is some of these same leeches go to a convenience store and sell their food stamps for around 60 cents on the dollar and then buy booze. This whole program should be cut in half.”
“My friend works at Wal-Mart here in Las Vegas,” writes a reader adding some critical detail, “and he tells me how the SNAP people will offer to purchase items for a customer and then charge them half of whatever it costs.”
“This way they can use the money to go buy their alcohol or drugs. They will even give them their identification number to use with the card so they don’t have to go shopping with them!”
“Very timely,” adds a third. “But of all the people you mentioned that had a dog in this fight, you didn’t mention us farmers, who are the real ones ‘getting rich,’ according to the lame stream media.”
“Ask us. We know that the Farm Bill, no matter how big or small, donates at least 65% to food stamps, school lunches and now Michelle’s nutritional programs, plus they’re now adding school breakfast and talking of school dinner (supper, as we call it here in our southland).”
“Believe me, as one with farm interests, there’s no one I know of getting rich off the Farm Bill except the firms you mentioned in your article. Nice job… Keep it up!”
“Doesn’t anyone find it interesting,” writes a fourth, “that food stamp recipients can buy enough Coke to bathe in, enough Cheetos to stuff a mattress and enough Swanson frozen family dinners to ice skate on, but you are forbidden to purchase vitamins or supplements of any kind?”
”What is next? Will Regal Cinemas lobby for swiping my SNAP card for popcorn and soda? Will baseball stadiums let me load up on nachos and Dr. Pepper during the seventh-inning stretch? Soda and snack foods should be banned from SNAP, and only items found in the perimeter of the grocery store allowed!”
The 5: Last year Yum! Brands — the parent company of KFC, Pizza Hut and Taco Bell — lobbied to expand SNAP to fast food — which was a bridge too far even for the Department of Agriculture.
That, or the company didn’t pay off the right people…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “In America,” an expatriate reader wrote us a while back, “workers are held hostage to jobs they hate because working independently or taking early retirement means no access to health care unless you are willing to pay $1,000 a month for insurance. International health insurance costs me less than $100 a month.”
Nothing about today’s Supreme Court ruling alters that unfortunate reality.
“The good news?” writes Addison. “You don’t have to expatriate to take your health care into your own hands.” He shows you exactly how you can do so in the current issue of Apogee Advisory. Not a subscriber yet? Join here and get a free copy of The Little Book of the Shrinking Dollar.