- Biotech firm promises to innovate more, stock promptly tanks 6% — what?!
- The real promise that remains in biotech, if you choose carefully
- China’s big transition… and hardly anyone’s noticing
- Byron King on the West’s “tight, nasty corner” in Syria
- A gift for someone who has everything… millionaires next door and generational warfare… a special announcement that will be out-of-date tomorrow… and more!
Stocks are starting the new week going nowhere. As we write, the major indexes are moving little, the S&P 500 at 2,027.
Biotech is showing signs of life, though. IBB, one of the big biotech ETFs, is up nearly 1.5% this morning. After falling hard in August (broad market turmoil) and harder in September (Hillary Clinton’s empty threat of price controls on drugs), IBB is up 5% in three weeks.
Go figure: The big biotech mover of the day is down 6%. Valeant Pharmaceuticals (VRX) announced strong earnings numbers and a stronger outlook. So why the drop?
Valeant has been in hot water recently for a practice we spotlighted last month — gaming the convoluted system of federal regulations to buy drugs that went off-patent long ago and jacking up the price.
On a conference call this morning, Valeant said it would pare back this strategy — which makes up about 10% of its sales. “It’s likely we’ll pursue fewer if any transactions that are focused on mispriced products,” said CEO Michael Pearson. He also promised to spend more on research and development.
Making money by innovating instead of leveraging government to rig the market? Sell!
“Isn’t this the wrong time to be investing in biotech?” asks our one of our biotech mavens, Stephen Petranek.
Stephen understands the impulse to pose that question. IBB is still in a bear market, down 20% from its peak in July. But that’s not the point, he suggests.
“Do I think we could still test lows in biotech over the next few weeks? Yes. But seeing some stocks soar by nearly 20% on a single up day tells me there’s still a lot of capital that wants to be invested in companies that are likely to make breakthroughs in medicine that will be so profound we’ll just be shaking our heads in disbelief when they are announced.”
A stock soaring 20% in a single day? Yes. It happened earlier this month with a company he’s following. We’ve mentioned it before; it’s working on a gene therapy to treat patients with an inherited eye disorder. The firm announced very promising results of a study — so promising that the treatment might well be the first gene therapy to win approval from the FDA.
“Most of the great medical discoveries are still to be made,” Stephen goes on.
“Just looking at the hundreds of clinical trials that show promise to cure cancer with immunotherapies, other trials to stop fatal diseases before they start with gene editing and still more trials to restore lost heart function with stem cell therapies (not to mention curing paralysis and Parkinson’s with stem cells), that statement is easy to make.
“But a lot of companies are going to come up empty-handed before that future arrives. A lot of trials will fail. The secret is good curation, or to put it in Wall Street’s words: good stock picking. You can’t throw even a smart dart at a list of ‘good’ biotech stocks and hope to pick a winner. You’ve got to look for as many factors of potential success as possible.”
In other words, innovation still pays — Valeant notwithstanding.
[Time-sensitive announcement: As we mentioned on Friday, one of Stephen’s Breakthrough Technology Alert recommendations is going to make a major announcement tomorrow during a gathering of top research scientists. It’s what Stephen was alluding to just now with a stem cell cure for Parkinson’s.
But the promise of this treatment goes far beyond just a Parkinson’s cure. The world will learn that tomorrow… while you can learn about it right now before the share price makes the first of many big moves. You’ll find the urgent details at this link.]
Gold lost ground as Friday wound down, and it’s losing more today: At last check, the bid was $1,171.
One of the few bright spots in the U.S. economy still looks strong: The October housing market index from the National Association of Home Builders clocked in this morning with the highest reading since 2005.
Granted, this is a sentiment survey… and homebuilders are as prone to misplaced optimism as anyone else… but all the same, we won’t ignore it.
Almost no one noticed, but China’s long-anticipated shift away from an “export-driven economy” appears to be underway.
The Chinese government issued its third-quarter GDP numbers overnight — an annualized 6.9%. The mainstream is obsessed with details like these: It’s the slowest since the first quarter of 2009, it’s higher than the “expert consensus” of 6.8%, but it’s still shy of the government’s 7% target. Big whoop.
Here’s the real story: “What was interesting about this print,” says our friend Chuck Butler at EverBank Global Markets, “was that the difference in the strength of the number was consumption outpaced exports.
“Whoa, there partner! Did you just say that the great switcheroo that China has been working to take place where domestic demand would pick up the slack of exports has happened? Well, I don’t live there, but given the data, I would say so!
“The growth in the services sector rose 8.4%, while the secondary industry, which includes manufacturing, weakened to 6%… And here’s further proof. Industrial output rose 5.7% in September from a year earlier, while retail sales rose 10.9% versus the same period
“So according to the data, there’s been the BIG rebalancing of growth in China, which is a very good thing, in my humble opinion. A large economy like China needs to be diversified, and they just had to get away from having their growth be solely at the mercy of manufacturing and exports.”
“Syria is a war-torn wreck,” says Byron King — once again donning both his natural-resources and military-affairs hats.
“It’s a failed state with no real economy anymore. Syria’s major export is hordes of refugees fleeing to Turkey, and thence to Greece and the rest of Europe.”
Meanwhile, “Russia is bombing the tar out of Syrian rebels, especially the non-ISIS, versus pedigreed ISIS.” Byron directs our attention to a New York Times map of recent airstrikes by the United States and Russia. “Kurds hold green areas, ISIS holds pink, other Syrian rebels hold yellow and what’s left of Syria’s government holds blue. (Brown is mostly uninhabited desert.)
“Russia is — characteristically, I must add — being a good ally to Syria,” Byron explains. “There’s a solid relationship there dating back to the late 1940s and the former Soviet Union. Soviet/Russian intelligence services know and understand Syria far better than pretty much any of the alleged ‘analysts’ on our side.
“On our end, the West/NATO finds itself painted into a tight, nasty corner. Do we support Russia and that awful little man Assad? Or support other bloodthirsty, deceitful rebels? Or even those horrid barbarians of ISIS? Aside from the Kurds, there are no other real or potential allies. Our altruism of the past 25 years goes unremarked and unrewarded, alas.
“Don’t fret that Russia isn’t bombing ISIS, as such — meaning don’t get hung up on labels,” Byron adds. “It’s fair to say that Russia is not bombing Kurds, who we like, and is bombing radical Sunni Islamic fundamentalists, who are not our friends even if they’re taking U.S./CIA/NATO money. Let ’em burn.”
Bottom line: “If you thought that the Russian military was a bunch of leftover Soviet equipment, maintained and operated by vodka-swilling drunks, you are way off base.”
If you missed it last week, Byron believes an element of Russian strategy is to bleed the Saudi princes who’ve been sending arms and money to the anti-Assad jihadists in Syria. The princes have been keeping oil prices fairly low — which hurts Russia. It’s “a war Saudi Arabia cannot win,” Byron says. And the end stage will be the Saudi princes announcing oil production cutbacks, sending prices higher, “sooner or later — likely sooner.”
For the moment, however, crude is down more than 2%, at $46.14. That’s still higher than it was most of last month.
Entrepreneurialism or stupidity? You decide. A gentleman from Somerville, Massachusetts, has hit on a moneymaking idea perfect for this time of year.
Kyle Waring is gathering fall foliage leaves from his home turf in New England… and will ship a batch to you for $19.99. “I’ve hit over 200 sales so far,” he tells Reuters, in a story that’s 10 days old now.
For that price, you get one red leaf, one yellow leaf and one green leaf, each 3-6 inches in diameter. They’re preserved in a mixture of glycerin and water.
Three of these beautiful leaves, hand-selected… yours for only $19.99
[You’d think he could send three more for free, you pay only processing]
Last winter after Boston got a record snowfall, Waring marketed some of the snow as well. He says he got requests for 718 pounds of snow.
The leaf thing sounds like a better business proposition to us: Snow needs special packaging to stay frozen, and it weighs a lot more than three leaves. And the leaf drop operates on a more predictable schedule…
“Hats off to ‘Boomer 1946,’” reads a reply to Friday’s mailbag. “Small successful entrepreneurs gain great pleasure in accomplishing their objectives, but society doesn’t congratulate them often, as the rank and file view them either with envy or as lucky.
“That’s all right, as we don’t need others’ admiration. It’s just personally satisfying to inwardly enjoy accomplishment. This unnamed 69-year-old fellow deserves special kudos though for having contracted the dreaded ‘C,’ losing his job and probably being unemployable in his late 50s and going on to create a successful new business. I’m impressed.
“I quit a fine corporate position to start my own business at age 48, didn’t have cancer and enjoy similar success with similar challenges but not having to overcome age nor illness. Go, capitalism!!”
“I’d be willing to make a major wager that they were NOT raised by successful entrepreneurs/small-business owners,” reads another entry today.
We should back up a moment. Last week, a reader suggested boomers have achieved more financial success than millennials because millennials haven’t absorbed the values of “personal financial accountability.” We gently asked which generation raised most of those millennials. Hence, today’s reply.
“They were NOT raised by folks who risked their own time and money to create their own financial success. Although there are a lot of boomer millionaires, there are far, far more boomers that just worked at a job and gave their children ‘everything.’ They had never had to put it all on the line. So they didn’t teach their children how to ‘create their own.’ How could they? They had never done it themselves.”
The 5: Good point. This thread has been fun. We purposely stirred the pot a bit to see if any generational warfare would bubble up, and we weren’t disappointed!
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Last chance: For reasons that will become obvious when you click, this presentation will come offline at midnight tonight.
