September 11, 2014
- An insanely optimistic episode of The 5
- One day that symbolizes the biggest biotech bull market ever
- New York Times discovers a re-made America, nearly three years after we did
- One insect in the ointment: A new “de-dollarization” summit in… Dushanbe?
- A tribute to the man behind the Time Magazine Cover Indicator… why Americans are pulling out the plastic again… taxes as protection money… and more!
“We are still in the early innings of the biggest and greatest biotech bull market in history,” writes our investment director Paul Mampilly.
“It’s like being there at beginning of the California Gold Rush in 1849 or the Texas Oil Boom in 1901 or the first Internet technology boom in 1992. If you were in on those booms early, you got rich. And that is exactly where we are with biotechnology today.”
[Reader advisory: Today’s episode of The 5 will be ridiculously optimistic. Verging on Pollyanna-ish.
We will deal almost exclusively with the plus side of the “Tale of Two Americas.” If you’re new to us, that’s our shorthand for a phenomenon our executive publisher Addison Wiggin described thus in early 2012 — “the contrast between the overwhelming rot penetrating governments and the financial system on the one hand… and the staggering entrepreneurial potential that can overcome the rot on the other.”
It’s all about entrepreneurial potential and innovation today. The doom-minded are urged to avert their eyes. Your turn will come soon enough…]
Yesterday that biotech bull market caught a tail wind. One of the big biotech ETFs jumped 1.8% — a darn sight better than the broad market. Among the biotech plays Paul has recommended for his readers, one powered up 6.5% (that’s the one we discussed in yesterday’s episode)… another leaped 7.7%… and one soared 25.1%.
The last of those three is an object lesson in the power of a PDUFA date.
We introduced you to this mouthful of an acronym — pronounced puh-DOO-fuh — in April. As a reminder, it’s short for the “Prescription Drug User Fee Act.”
“It’s a promise the government makes to companies to approve or reject new drugs much faster than in the past,” Paul explained then.
“We want to know the PDUFA day, some idea whether the company is going to get its drug approved or not, because companies with PDUFA dates have the chance to go up the most if the FDA says yes to their drug application.”
The company that jumped 25% yesterday has a PDUFA date next month – Oct. 24, to be precise. We’re going to withhold the name and ticker out of respect to Paul’s paying subscribers because it has the potential to jump further between now and then.
The drug the firm is working on treats hypoparathyroidism. “Hypoparathyroidism causes your body to produce very low levels of parathyroid hormone or (PTH),” says Paul. “PTH plays a big role in regulating calcium and phosphorous in your body. And having too little PTH means you get too little calcium and too much phosphorous.”
Current therapies all come up short. The new drug could generate annual sales of $700 million and grow the company’s market cap 50%.
The stock jumped 25% yesterday because the FDA issued a preliminary review. It was all good. Tomorrow comes the next step: The drug goes before an FDA advisory committee. The final call comes on the PDUFA date, Oct. 24. “All my research and sources indicate that the drug is going to get a favorable vote.”
The share price will jump around in the next six weeks. Right now, it’s above Paul’s buy-up-to price. But PDUFA dates roll around 36 times a year — Paul calls it the “magic calendar.” And there’s another date coming up that he’s just as enthused about, for a company whose shares haven’t made the big move yet.
Click here to turn the “magic calendar” into predictable gains…
“I wanted to leave so badly when I graduated high school and the steel mills were closing,” recalls real estate developer Dominic Marchionda. “It’s nice to be a part of bringing the city back.”
The city he’s helping bring back is Youngstown, Ohio — a place long synonymous with “Rust Belt.” Marchionda has plans to take a 1907 building from the city’s glory days and turn it into an upscale hotel.
Youngstown is experiencing what The New York Times calls “a transformation spreading across the heartland of the nation, driven by a surge in domestic oil and gas production that is changing the economic calculus for old industries and downtrodden cities alike.”
Well, it’s nice to see the Gray Lady catch up to what we were covering in these pages nearly three years ago. That’s when our resident oil field geologist Byron King issued a report called Re-Made in America.
Right there in the report, he said, “Pittsburgh, Pennsylvania… Youngstown, Ohio… Williston, North Dakota — people all across the nation are experiencing a wave of wealth and prosperity unlike any we’ve seen in decades.” Way back then, Byron was explaining how America’s shale energy boom was about much more than just energy.
“It’s a natural phenomenon so powerful it has repeatedly altered history,” Byron explained — the phenomenon of “convergence.”
The arrival of the steam locomotive in 1829 opened up vast stretches of gold, timber and farmland. “America quickly transformed itself from a nation of farmers to an urban, industrial nation.”
Byron said the cycle was getting underway again. At long last, the Times is noticing: “Here in Ohio, in an arc stretching south from Youngstown past Canton and into the rural parts of the state where much of the natural gas is being drawn from shale deep underground, entire sectors like manufacturing, hotels, real estate and even law are being reshaped.”
Well, better late than never. But the story has long since moved on. Now it’s about individuals making huge new fortunes from America’s shale energy bounty.
Indeed, by one estimate, the boom is creating 38 millionaires every week. And you don’t have to own a piece of land with thousands of barrels of oil lying beneath to become one of them. All you need to do, says Byron, is follow six simple steps. Let him show you the way at this link.
To the markets… Stocks are a mixed bag today: The small-cap Russell 2000 is slightly in the green, but everything else is in the red.
The S&P 500 has shed four more points as we write, to 1,992. That’s 16 points below the record close last Friday.
“It looks like momentum is beginning to roll over,” assesses Jonas Elmerraji of our trading desk. “When Mr. Market speaks, we need to listen.”
With that in mind, Jonas urged his readers yesterday to close out a rising S&P 500 play. If they played it conservatively, they picked up a solid 6% gain in a month. If they played it aggressively, it was good for 43% gains.
[Ed. note: Jonas’ $10,000 challenge has less than two days remaining. He’s out to show you how you can go from zero to $10,000 in as little as 36 days.
You don’t need any previous trading experience. In fact, the less you know, the better off you might be. The offer comes off the table at midnight tomorrow, so check it out while you still can.]
Leaders of the anti-NATO, anti-dollar coalition have begun two days of meetings in the happenin’ locale of Dushanbe, Tajikistan.
While the elite media in the U.S. fret this morning about ISIS (even though Homeland Security says the threat of large-scale attacks in the West is “limited”)… China’s state-run English-language CCTV is all about this year’s gathering of the Shanghai Cooperation Organization.
China and Russia are the big dogs in the SCO. This year, the SCO might welcome India and Pakistan as well. Iran is in line to join later.
In the run-up to the meeting, China and Russia agreed on Tuesday to settle even more of their trade in yuan and rubles than they do already.
“We are not going to break old contracts, most of which were denominated in dollars,” said Russia’s First Deputy Prime Minister Igor Shuvalov. “But we’re going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country.”
We spoke of the two countries’ “de-dollarization” plans back in May. The mainstream is now catching up: “U.S. and European Union sanctions against Russia threaten to hasten a move away from the dollar that’s been stirring since the global financial crisis,” Bloomberg reported last month.
Yes, the dollar’s sitting pretty at 14-month highs… but this is a long-term trend we’ll keep watching…
The swoon in precious metals is accelerating. Gold is down 1% as we write to $1,236. Silver has broken through $19 decisively – at $18.58.
We bid a fond farewell to one of the most prescient analysts you’ve never heard of.
Paul Macrae Montgomery died last weekend at age 72. He gave the world the Time Magazine Cover Indicator: Basically, if you see an economic phenomenon on the cover of Time, chances are that phenomenon has all but played out and you should act on the opposite…
June 2005: Those were the days…
Montgomery also popularized the “hemline indicator” — the one about miniskirts during prosperity, more modest attire during lean times.
“I was fortunate to have had several conversations with Montgomery over the years,” money manager Barry Ritholtz wrote on his blog yesterday. “He was humble and soft-spoken but he took delight in puncturing the bad theories that pass for analysis on Wall Street.”
We need more of those people. Alas, there’s one fewer now. RIP…
“You say people are using ‘plastic’ more, again,” writes one of our regulars after the consumer credit numbers we relayed Tuesday.
“Could it be because they are trying to keep up a certain living standard, even as prices rise but earnings don’t? Or maybe earnings disappear — along with jobs? First we use the cards to buy things, and then we pay off one card with another. Then we borrow against assets. Then the banks own everything, but they can’t sell anything. One way for a Greater Depression to begin, eh?
“All because our wonderful tax-and-regulate politicians make it impossible for any but the largest companies to make a living profit.”
The 5: Yes. [See, we said the doom squad would get its due…]
The hollowing out of the middle class proceeded like so: Until Nixon cut the dollar’s last tie to gold, a comfortably middle-class existence was possible on one income. Then it took two incomes. Then it took two incomes and a drawdown of savings. Then it took two incomes, a drawdown of savings and the assumption of debt.
Then it all flew apart in 2008, and we’re living through the most anemic “recovery” of the postwar era. Or, if you prefer, a Tale of Two Americas…
“When I read the comment recently about the taxes being the same as ‘protection’ money, it gave me a memory from many years ago,” a reader recalls.
“I was the accountant for a businessman in Minneapolis who was in business there when the ‘mob’ was in control. He always said when paying the state taxes that it was the same as the protection money he used to pay. The only difference was that the mob actually protected him.”
“The lady who thinks she can use the watch from Apple just like a phone will be sorely disappointed,” a reader writes.
“You still have to use your phone to send emails or actually have a conversation. Sounds like the only thing you can do is dictate messages to it or use it like a walkie-talkie with another watch wearer. Oh, and you can doodle and tap out vibrations on it. Whoopee!”
The 5:
Best regards,
Dave Gonigam
The 5 Min. Forecast
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