- The tiny drugmaker that delivered 880%… and the one set to repeat the feat
- The ruble’s collapse, and the dangers of Western powers poking the Russian bear
- How falling oil prices will influence a big Federal Reserve decision tomorrow
- An asset long hyped… whose moment has finally arrived
- A more accurate measure of poverty… the truth about the bailouts Fannie and Freddie paid back… last chance for early access to our 10-year NOVA Code project… and more!
Not so long ago, when the cholesterol-lowering Lipitor was the best-selling prescription drug in history, a 30-pack sold for $142.
Then its patent expired in 2011. Suddenly, the generic version was available for $22.50. Sales of brand-name Lipitor cratered 70%.
“Now just imagine,” says our investment director Paul Mampilly, “if a company had a whole set of drugs just like Lipitor. Well, that’s exactly the problem that Merck, Bristol-Myers and other big pharmaceutical companies have.”
This morning, Paul invites us to follow the breadcrumbs from this fact… to an opportunity to double your money in six months… or, best case, make 10 times your money.
The phenomenon Paul speaks of has a name in the pharmaceutical industry — the “patent cliff.”
“In 2000,” he explains, “generics or knockoffs were just 22% of all the medicines used in the U.S. Right now, generic or knockoff drugs make up almost 80% of all the medicines used in the U.S. 80%!
“According to one researcher who tracks expirations, as much as $200 billion of revenue is at risk from generics and knockoffs in 2014 as drug patents expire. To get past this crisis, big pharmaceutical companies need to replace the products that are losing patents with new ones.
“So what are the big pharmaceutical companies doing to combat this problem?” Paul asks rhetorically. “They’re buying up smaller companies producing and developing new drugs, as Merck just did.”
We mentioned last week how Merck is snapping up Cubist Pharmaceuticals — generating a 57% gain for some Agora Financial readers.
But that’s only one deal: “In 2012,” says Paul, “pharmaceutical companies spent $67 billion on buying other companies. In 2013, this jumped to $100 billion. On a worldwide basis, companies buying other companies in the health and life sciences sector hit a record $317.4 billion in the first six months of 2014.”
Paul has identified a niche sector where Big Pharma is smacking its collective lips — antiviral drugs fighting hepatitis A, B and C.
“They’re huge right now,” he explains, “because both the U.S. government and insurance companies are willing to pay big bucks for these treatments. For example, Gilead Sciences is able to charge $84,000 a year, or $1,000 a pill, for Sovaldi — a virtual cure for hepatitis C. Again, that’s for just one pill. Now you can see why drug companies are so eager to come up with a new drug!”
Gilead shares have run up nearly 500% the last three years. But here’s the thing: Gilead didn’t develop Sovaldi. No, the hard work was done by a tiny biotech company called Pharmasset.
“On Nov. 21, 2011,” says Paul, “Gilead stunned the world by buying Pharmasset for $11 billion. Gilead paid $137 a share, or 89% more than what Pharmasset stock was trading for on Nov. 20.
“Pharmasset stock was already up 250% in 2011 before Gilead made its $137 bid. If you had bought Pharmasset at its 52-week low of $13.98, you would have made 880% in little more than a year. That would have turned $10,000 into $98,000.
“I believe I’ve found the next Pharmasset,” says Paul.
It’s working on a treatment for hepatitis B. It shows a 95% reduction in hepatitis B in a preclinical animal study. And in Phase 1 clinical trials, it’s proven 100% safe.
The company’s market cap is a small $305 million… the firm has cash in the bank equal to 71% of the share price… and shares are nearly their 52-week low.
“Remember,” says Paul, “that investors who bought Pharmasset at its 52-week low made 880% when Gilead bought it. Once this drug’s potential is better understood, investors are going to come to bid it up in price.”
Out of respect to Paul’s paying subscribers, we’re withholding the name and ticker symbol. But if you’re eager to learn more, you should know Paul has several other, equally lucrative, picks. And wait till you see how he identifies them. Follow this link for the whole mind-blowing story…
The big winner in the markets so far today is bonds. U.S. Treasury prices are rising, sending yields tumbling; the yield on a 10-year note is down to 2.06%.
The major U.S. stock indexes are flat as we write. So is gold, albeit with much volatility; at last check, the bid was $1,194. In a just world, gold should be performing better in light of dollar weakness — the dollar index is back below 88 for the first time in a week. But it’s not a just world, so there.
Traders are chewing on a host of crosscurrents, including weak manufacturing numbers. The “flash PMI” figures for December are lousy: China’s factory sector is contracting for the first time in seven months. U.S. activity is still growing, but the growth is now the slowest in nearly a year.
And then there’s Russia’s failed attempt to keep the ruble from collapsing.
Last night, Russia’s central bank jacked up its benchmark interest rate from 10.5% to 17%. The move stanched the bleeding in the ruble… for a while. But now the ruble has collapsed to a record low — 72 rubles equal one U.S. dollar.
That’s the picture of Western sanctions, biting hard. “The ruble is in deep trouble,” says our friend Chuck Butler at EverBank World Markets. “Russian President Putin is being backed into a corner, and we all know what happens when you back a bear into a corner. It comes out meaner than a skillet full of rattlesnakes!
“And that scares me that we could be picking a fight with a bear. Our military is so stretched thin at this point after 11 years of fighting wars in Iraq, Afghanistan and Iraq again.”
Or as our own Jim Rickards tweeted a short time ago…
Not long after that came word the retail currency-trading platform FXCM suspended all trade in the ruble.
Part of the ruble’s whacking today can be credited to another whacking in oil.
Brent crude, the global benchmark, is now below $60… and West Texas Intermediate is testing $55.
Lest we forget, the Federal Reserve’s Open Market Committee (FOMC) has begun two days of meetings in Washington. Tomorrow, the members will issue a statement, and Fed chair Janet Yellen will regale us with a press conference.
Oil looms large in today’s discussions, says our acquaintance Erik Townsend, a hedge fund manager who trades oil futures: “The temporary oil price depression now upon us has effectively granted central bankers a license to print more money,” he writes in his latest newsletter.
“Deflationary pressure across the entire commodity complex is strong, and oil is far and away the most important commodity in terms of evaluating the risk of dovish monetary policy. Central bankers no longer fear $100-plus oil prices, and my prediction is that they’ll print money with reckless abandon as long as markets allow them to do so.
“For now, the Fed is in hiatus, but Japan is printing money like it’s going out of style. I predict the ECB will soon join the money-printing party. This will accelerate the rally in the U.S. dollar index, and that will incent the Fed to implement yet another round of QE.”
You can read Mr. Townsend’s free quarterly newsletter by signing up at his website. No, we get nothing in return if you do; we just think he’s a smart guy who merits your attention.
The investing moment for LED lighting has finally arrived, says our Chris Mayer.
“LED stands for light-emitting diode,” he reminds us. “For years, this was a hyped investment play. But the technology itself was not ready for prime time. Today it is.”
As you might know, traditional incandescent bulbs release 90% of their energy as heat. And those horrible compact fluorescents (CFLs) the government loves so much are little better, throwing off 80% of their energy as heat.
But LEDs emit very little heat. They last six times as long as CFLs… and 40 times as long as incandescents. The savings add up: According to the Energy Department, the electricity cost of a typical Christmas tree is 27 cents using LEDs… and $10 with incandescents.
“Think about using LEDs,” says Chris, “to light parking lots… warehouses… office buildings. We’re talking billions of square feet of space.”
A handful of big companies have made the switch — Coca-Cola and Dollar General. “But it’s still early,” says Chris. “The opportunity to sell and install LEDs is enormous. We’re talking about over a billion lighting fixtures. And the areas with the largest potential — like parking lots — have barely begun to change.”
[Ed. note: Chris is less than one day away from revealing the results of a 10-year experiment seeking the easiest, most effective way to consistently make big money in the markets. He’s pulled it off with 85% accuracy, in real-time, over the last decade.
Now’s your last chance to get in before he starts to tell all. If you don’t take advantage of this invitation — available only to Agora Financial readers — you’ll miss out on first-mover privileges. To say nothing of a proven method to beat the broad market 11-to-1. It takes only a few moments to sign up for access at this link.]
Poverty ain’t what it used to be. Or so we can conclude from a recent Census Bureau report.
The usual measure of the “poverty rate” you see in the news from time to time is misleading. It takes the cost of a basic subsistence diet, multiplies it by three, adjusts for family size and updates each year for inflation. By that metric, 14.5% of Americans live below the poverty line — an annual income of $23,600 for a family of four.
Here’s the problem, one we touched on last August: The cost of living varies wildly from place to place. The official poverty numbers don’t account for that.
So the Census wonks developed something they call the Supplemental Poverty Measure (SPM). It adjusts for the fact housing costs three times as much in San Francisco as it does in Cheyenne, Wyoming.
It also adjusts for the fact many poor people collect tax credits, food stamps, etc. The official poverty measure counts only pretax wages.
Factor in these important variables and the SPM gives you a very different picture of American poverty: California has the highest poverty rate of any U.S. state — 23.5%. But Mississippi — the perennial basket case using the traditional poverty metrics — is below the national average.
The national poverty rate using SPM? That’s 15.5% — one percentage point higher than the official figure.
“I believe everyone needs to understand where the money came from to pay back those ‘loans,'” a reader writes after we mentioned the government-sponsored enterprises (GSEs) of Fannie Mae and Freddie Mac paid back a $187 billion federal bailout.
“In the not too distant past, the Federal Reserve was purchasing approximately $25 billion a month in mortgage-backed securities, which I believe for the most part, came from the GSEs.
“Two points to observe here. First, the money to purchase these securities originated in someone’s computer. Two, I can’t prove this, but I would gamble the GSEs were paid full face value for the securities.
“The free market would have priced these things at 50 cents on the dollar at best, and probably worse, but then the Federal Reserve did sell them, at a price they never disclosed, to the large hedge funds and certain other private investors starting in 2012, and I am absolutely sure they did not pay retail. We are still on the ‘hook’ for those loans. They just moved from the books at the GSEs to those at the Federal Reserve.”
The 5: Wow, you’re as cynical as we are…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: Tonight is your final chance to get in on the ground floor of Chris Mayer’s 10-year experiment we’ve dubbed the “NOVA Code.”
If you’re looking for the formula to the most reliable long-term gains — we’re talking 11 times what the broad market indexes can return — you’ll want to ensure you have access. Here’s where to make sure you won’t miss out.