- Greece? China? Panic? Meltdown? Biotech doesn’t care
- Thirty stocks competing for a cancer cure: Stephen Petranek handicaps the race
- Traders rush to safety (but not to gold)
- The solvency of the states, ranked 1-50
- Legalize weed, make more carbon… what a bail-in might look like… reader suggests The 5 is now “captive to a crony capitalism mindset and Goldman Sachs” (!)… and more!
Who would think the news out of Greece would push biotech stocks higher?” muses Greg Guenthner of our trading desk.
If you’ve been with us for any length of time, you know Greg’s being facetious. We get no shortage of entertainment from elite media headlines implying nonexistent cause-and-effect relationships between news events and market movements.
For our purposes today, the point is this: Despite the sturm und drang coursing through global markets these last few days, the biotech sector has been remarkably resilient.
Greg drew our attention to the phenomenon last week. Despite the whacking the broad market got on Monday, June 29, no fewer than 70 biotech stocks were in the green for the week by day’s end Tuesday the 30th.
“So far this week,” he says by way of an update, “I’m seeing plenty of juicy biotech names popping up on my radar. More than 80 biotechs gained at least 2% Monday, with five up double digits on the day. Not exactly a boring market as far as biotechs are concerned, right?”
“So much money in biotech — market money and research dollars — is invested in cancer,” says our biotech maven Stephen Petranek.
It was last fall Stephen told us he was optimistic for the first time in his adult life that a cure for cancer is within reach. Not a treatment, we emphasize, but a cure. This morning, he’s back with a well-timed update.
“There are nearly 30 companies you could invest in that are developing immune system therapies for cancer,” he tells us. “If you look at the stocks that get rewarded for drug and therapy development, cancer is king, especially now.”
But how do you narrow them down to the best of breed? “Too many of these stocks are already at very high valuations,” Stephen tells us, “and a number of them will crash when their trials don’t work. Not a single company on that list is curing 100% of patients in its trials. Not even close. There are some amazing results that seem truly miraculous, but there are a lot of bugs to be worked out, too.
“The individual genetics of each patient are beginning to look more and more crucial to results,” Stephen goes on.
“The exact specifics of the cancer and how it has progressed in a patient is beginning to look important too. Almost all of the therapies involved have been tested on very sick people with metastatic cancer, so we don’t really know exactly how powerful these therapies can be if used earlier. Some immunotherapies that seem to be working well make people very sick because as the cancer cells are destroyed, they release toxins into the body en masse.
“Thus, we may be able to give you the therapy for a somewhat reasonable price, but you’ll be in intensive care for more than a week, which might triple the costs. It is conceivable that someday soon we may be able to cure your cancer, but the total bill will be $1 million — not exactly sustainable.”
Bottom line: Stephen wants to get his subscribers into more cancer stocks — “but not if they’ve already risen 500%, not if their therapies are truly untested, not if their ‘cures’ will be too expensive for insurance companies and not if their competitors are likely to come up with something better first.
“Even worse, there is so much hype and froth in this part of biotech that we must tread cautiously and invest only in companies that show promising results yet haven’t jumped in price — a challenging task.”
[Ed. note: Challenging, but not impossible. That’s why Stephen is so keen to share three pictures with you.
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To the markets — where the safety trade is in full swing.
The twin crises of Greece and China linger, causing concern but not panic. China looks like the bigger concern right now. As noted yesterday, the Chinese central bank is indirectly lending to investors so they can buy more stock on margin. But that arrested the Chinese stock market’s decline for only a day — it’s now down about one-third since June 12. And one-third of all firms listed on the Shanghai and Shenzhen exchanges have suspended trading.
[Just in: Congratulations to Real Wealth Trader readers. Editor Matt Insley recommended a bearish China play on June 4 — only days before the market there started to tank. This morning, he recommended selling half the position for a 180% gain and letting the rest of it ride for a potential five-bagger by November.]
As for Greece, that’s all in suspended animation. Eurozone finance ministers are awaiting whatever new proposal Greek Prime Minister Alexis Tsipras is cooking up. He was supposed to deliver something today, but evidently that won’t happen until he speaks to the European Parliament tomorrow.
While the euro hung in there yesterday, it’s getting whacked today — down to $1.094 at last check.
Thus the dollar index is back above 97 for the first time in a month… and the commodity complex is getting whacked hard. Gold is off 1.5% at $1,152, its lowest since mid-March. Crude is off nearly 3% on top of yesterday’s clobbering; as we check our screens, it just broke below $51.
Stocks, you ask? Every major index is down at least three-quarters of a percent, the Dow at 17,535. For perspective, that’s 777 points below its record close back on May 19. On the other hand, that’s a not-so-whopping 4.24%.
Not surprisingly, traders are piling into Treasuries — bidding up prices and sending yields down. The yield on a 10-year note is back below 2.2% for the first time in over a month.
How solvent is your state government? The Mercatus Center at George Mason University is out with a new ranking.
We’ve had an interest in this topic for more than four years — ever since our executive publisher Addison Wiggin began to anticipate “the mother of all financial bubbles” making itself felt first on the state and local levels — when services you take for granted are no longer there.
Mercatus researcher Eileen Norcross examined five sets of figures from all 50 states — everything from short-term budgets to long-term pension obligations. Energy-producing states tended to look best. Northeastern states with heavy pensions burden looked worst.
We caution: The ranking is based on fiscal year 2013 figures. Things change, and quickly: The legislature in No. 1 Alaska just got through a grueling session, slashing spending by 19% to make ends meet.
A 50% drop in oil prices will have that effect…
If marijuana stimulates the appetite, marijuana production stimulates electricity demand.
So we learn from The Denver Post: “Citywide electricity use has been rising at the rate of 1.2% a year, and 45% of that increase comes from marijuana-growing facilities.”
Colorado voters legalized recreational weed in late 2012. That year, medical marijuana was already legal and growers consumed 86 million kilowatts of electricity. By last year, ganja cultivation was sucking up 200 million kilowatts.
Makes sense. If you use grow lights, that consumes energy. It also generates heat, so you need more air conditioning. Don’t forget dehumidifiers, too.
“Indoor marijuana cultivation is highly energy intensive,” explains a background story from CityLab, an arm of The Atlantic magazine. “Overall, energy costs account for about one-third of the cost of production. With $6 billion in energy costs annually, marijuana cultivation is one of the most energy-intensive of the major industries in the United States.”
The problem in Denver is that city fathers have set out a goal of capping overall energy use at 2012 levels. Carbon footprint and all that, you know. “We’re not going to compel people to reduce their usage,” says Jeffrey Ackermann of the Colorado Energy Office. “But we’re going to try to bring efficiency into the conversation.”
That assurance should make everyone inhale easier, no?
“You mentioned the possibility of a Greek ‘bail-in,’” a reader writes after yesterday’s episode, “where 30% of any bank accounts over 8,000 euros would be seized by the government.
“Do these bail-ins only affect bank accounts, or do they also affect brokerage accounts, stocks, bonds, ETFs etc.? Any thoughts on how bail-ins in the U.S. might work?”
The 5: Well, it’s all rumor and speculation right now, even in Greece.
It would be a challenging proposition extending a bail-in to brokerage accounts… because then you’d be talking about forced liquidation of open positions. Not saying it’s impossible, but there’d be no surer way to crash a stock market.
“Re the Greek proposition,” writes another: “Seems to me that the charter of fractional reserve banking provided by the central banks is to provide liquidity to the commercial banks… and that the ECB is NOT doing this for Greece in order to effect a capitulation and surrender of the Greek people via economic catastrophe, poverty, financial hardship and even starvation to achieve only the ECB’s mission of complete domination of the people regardless of the cost to those people, that this is war.
“Why is The 5 not screaming about the now criminal march to a one-world government lead by the ECB and the Fed?
“Is The 5 now a captive to a crony capitalism mindset and Goldman Sachs and only interested in purveying to us a never-ending series of craftily worded investment subscription schemes?
“Disappointed in you all.”
The 5: Good grief.
You notice we’ve scrupulously avoided any hectoring language here in The 5 about “spendthrift” and “irresponsible” Greeks? That’s because we know it takes two to tango. Greece didn’t have to borrow all that money… but its creditors didn’t have to lend all that money either. (And Goldman Sachs, as long as you bring it up, didn’t have to cook Greece’s books to make Greece eligible for eurozone membership.)
If you want to read people fulminating about the power elites and their schemes, there are scads of websites that can scratch that itch. If you want to know something you can do to insulate yourself from those schemes, that’s what we hope you come here for.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Speaking of the power elites and their schemes… we just got exclusive information obtained from an “invitation only” meeting in Washington, D.C.
Some of the most powerful people in finance gathered behind closed doors to discuss a secret deal… one that could have a major impact on your finances, especially if you were born before 1969.
If you’re a senior and rely on the government for income, you’ll be badly hurt if this deal gets done.
Click here to see the details.
