- Who needs a bull market? The advantages of selective biotech investing
- Another lowered economic forecast: Rickards on the Fed’s next move
- That’s nothing: T-bill that pays zero interest
- The depressing reason DuPont’s staging a monster rally… the grilled cheese bubble deflates… in defense of David Stockman… and more!
Let’s see… The Dow industrials collapsed 260 points on Friday morning, only to rally 460 points by the close. And then they added another 300 points yesterday. Stability.
The biotech sector has experienced similar thrills ’n’ chills. IBB, one of the big biotech ETFs, started Friday below $300 a share, leaped to $320 by yesterday morning… and as we write today is nearly back where it started on Friday. In fact, it’s nearly back where it started the year 2015.
A week ago today, we pronounced the end of biotech’s bull market — or at least its current leg. But as we said then… all that means is that if you’re looking for big biotech gains, you have to be selective. Because while the sector as a whole is going nowhere fast, carefully selected plays are making their investors big bucks.
Case in point — a company whose shares leaped as much as 50% yesterday after it achieved a first-of-its-kind success. Research shows its experimental gene therapy improved vision in patients who suffer an inherited eye disorder.
“This is a huge announcement,” says Breakthrough Technology Alert editor Stephen Petranek, “not just because it offers a successful therapy to people who are otherwise likely to go completely blind, but also because it paves the way for an application to the FDA for the first gene therapy ever to be approved in this country.”
Once that goes through, analysts at JPMorgan figure this one drug will haul in peak worldwide sales of $600 million. What’s more, the firm has another gene therapy targeting another eye disorder… and its peak global sales could reach $1.6 billion.
[Ed. note: Out of respect to Stephen’s paying subscribers, we’re withholding the name and ticker of this stock. “This stock has a long way to run,” he says, “because this news validates its platform for gene therapy, which is far more valuable than one therapy alone.”
However… if you’re looking for a ground-floor opportunity, we have one. It has the potential to multiply your money 10-fold over the next 12 months. But for reasons you’ll come to understand when you click here, we can allow full access to only 50 readers a day. We apologize in advance if we’ve already reached that limit.]
The major U.S. stock indexes are taking a rest after the last two trading days. Most of them are slightly in the red, the S&P 500 off fractionally at 1,984.
The Dow, however, is up a third of a percent — powered by DuPont, up 10% this morning. No, the company hasn’t come up with a 21st-century equivalent to polyester or Teflon. Instead, it slashed its outlook, said it would accelerate cost-cutting plans and showed its CEO the door. Guess that’s what counts for progress in this day and age.
Treasuries are rallying, pushing yields down. As we write, the 10-year yield is back below 2.05%.
Gold is likewise rallying and pushing back toward the $1,150 level — at least check, it’s only 60 cents shy. And you can chalk up only some of that move to dollar weakness; the dollar is down about two-thirds of a percent against the euro at $1.126.
Crude is making its first meaningful break away from the $45 mark in a month… and it’s to the upside. At last check, a barrel of West Texas Intermediate is up 4%, approaching $48.
The big economic number of the day is the trade deficit — which exploded from $41.8 billion in July to $48.3 billion in August.
The mainstream attributes the move to a surge in imports of new iPhones — the new model and all. But that accounts for only $2.1 billion of the total.
So what gives? Leave it to our friend Chuck Butler at EverBank Global Markets. Before the number was released this morning, he wrote, “The trade deficit is going to show a HUGE widening, and no one, and I mean no one outside of me, is going to associate the monthly trade deficit widening with the strength in the dollar.
“It’s unwarranted, this dollar strength, and to me it’s unsustainable. I don’t care what the economists and traders are saying. They’re all wrong, and they just don’t know it yet!”
For the record: The International Monetary Fund has downgraded its global economic outlook. Again.
The IMF says worldwide GDP in 2015 will clock in at 3.1%. That’s down from a forecast of 3.3% in July and 3.5% in April.
Which only reinforces Jim Rickards’ forecast here last month: “At this point, the global slowdown is so pronounced that the Fed’s next move is more likely to be in the direction of ease rather than tightening.”
Jim anticipates the first move will be a return to “forward guidance” in the Fed’s policy statements early next year. “Forward guidance was abandoned in March 2015 when the Fed removed the word ‘patient’ from their statements,” he explains. “They can put the word ‘patient’ back in, or maybe an equally evocative synonym like ‘forbearing.’
“The exact word doesn’t matter. Fed insiders will call The Wall Street Journal, explain what they mean, and the Journal will tell the world what to think. The important thing is that the Fed will have blinked.”
Sign of the times, Part 1: The U.S. Treasury auctioned new 3-month Treasury bills yesterday with a yield of zero. Yes, that’s a first.
To some degree, it’s a function of continued ultralow rate policy from the Federal Reserve — yields on short-term T-bills are very sensitive to changes in Fed policy. But it’s also a function of the looming debt-ceiling fiasco: Treasury issuance has fallen in recent months as the bureaucrats maneuver to stay under the $18.2 trillion limit. Less supply, more demand.
Sign of the times, Part 2: The Chinese renminbi is now the world’s No. 4 currency for payments, surpassing the Japanese yen. The dollar, euro and British pound remain in the top three slots.
Still, the renminbi made up only 2.79% of global transactions during August, according to the global payments network SWIFT.
The usual suspects will try to tell you this is another step on China’s long march toward the renminbi supplanting the dollar as the globe’s reserve currency. The truth is more interesting — and as Jim Rickards has said for some time, potentially devastating to your wealth.
What do you do when your tiny “fast casual” food chain is hemorrhaging cash? You try to crack the New York market, of course!
Time for a 5 follow-up on The Grilled Cheese Truck Inc. (GRLD) — which, as we said last February, aims “to become the largest operator in the gourmet grilled cheese space.” It’s right there on the website.
Said money manager and blogger extraordinaire Barry Ritholtz at the time: “I can’t think of a more interesting sign of the old irrational exuberance in equity markets than a publicly traded grilled cheese truck (four in this case) business trading at a $100 million-plus valuation. That sort of thing doesn’t happen unless there is significant excess in the markets.”
Irrational exuberance, thy name is The Grilled Cheese Truck
Heh… This morning, the market cap is a touch under $21 million. The stock is down 78% year to date. But it’s an LA sensation!
And yes, it’s expanding into New York. In fact, it’s taking up a joint effort with Soupman Inc. — which traces its origins to the guy who inspired the soup Nazi character on Seinfeld. Soupman shares, by the way, have tripled this year… although they’re down 96% from their IPO in early 2011.
We can’t laugh too hard: GRLD has recruited retired Gen. Wesley Clark to encourage veterans to launch their own Grilled Cheese Truck franchises. Yikes…
“Why would I want to invest in anything David Stockman recommends?” a reader inquires now that word of our new partnership is public. “Why would The 5 and Agora Financial want to be involved promoting any ideas of his?”
The reader cut and pasted a few paragraphs from Mr. Stockman’s Wikipedia entry. The reader also alluded to David’s “dubious” record as White House budget director.
The gentleman’s email concludes, “Are we about to be subjected to Agora Financial’s ‘new’ ‘Jim Rickards’ promotion? Spare me! Please!”
The 5: We told a little bit of the story a month ago. It never hurts to revisit.
In the first place, we’re not sure what’s “dubious” about David’s record as Reagan’s first budget director. Standing up against the “deficits don’t matter” crowd? We count that as a feather in his cap.
About David’s time on Wall Street: We’ll let our executive publisher and 5 founder Addison Wiggin pick up the story: “He worked for Salomon Bros. and later as a founding partner in Blackstone — the world’s largest private equity firm.
“During that time, he built a small fortune for himself. Remember the term ‘leveraged buyout’ during the ’80s? David pioneered it with his work. He’s not proud of it… but he’s in the position to call out the Federal Reserve and Wall Street today because of it.”
About the bankruptcy of the industrial firm he founded, and the federal witch hunt that followed: In the end, the feds dropped the case once they realized how shaky their “evidence” was.
David tells the story in detail in his book The Great Deformation: “During a multiyear battle to prove there was nothing wrong with Collins & Aikman’s accounting, I had extensive occasion to delve into every nook and cranny of its balance sheet and other financial statements and come face to face with the debt monster I had created in this case, and had been doing in the LBO business as a general practice for years.”
At the risk of oversimplifying, David came to realize the success he’d experienced on Wall Street had less to do with his own business acumen… and more to do with a long cycle of falling interest rates and Alan Greenspan’s EZ-money policies at the Fed. Knowing what he knows now, he can call BS on corporate balance sheets with the authority won of hard experience.
So David has a hell of a story of revelation and redemption. Like Jim Rickards, he’s seen how the financial sausage is made up close. We think that makes him potentially much more valuable to our readers than your garden-variety Fed basher who’s been calling for a crash and/or hyperinflation since 2011.
And yes, when the time comes, we will market David’s new trading advisory as aggressively as we’ve marketed Jim Rickards’.
You’d rather we relied on word of mouth?
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. One more thing about the ground-floor biotech opportunity we discussed earlier…
The “leak” revealed below could shake government and the media to their cores.
Once again, this audio is so sensitive we can release the full transcript to only 50 readers today.
Click the play button below to hear this “leak”… (And please excuse the scratchy sound.)
As you’re about to see, the government faces fallout from this “leak” because if what it reveals is true, Americans will demand to know why this wasn’t common knowledge much sooner.
And the media face backlash because if proven correct, this leak would mean the media dropped the ball yet again.
Click here to gain access to the “leak” we recorded in its full form.
