- BREAKING NEWS: The president tweeted something
- Why you must ignore short-term media noise for investing success
- You heard it here first: GOP’s circular firing squad gets into formation
- An appropriate graveyard for those emissions-scandal VW diesels… whatever happened to the Chinese “maxi-devaluation”?… Trump = Hoover?… and more!
Because your editor retains his sanity by, among other things, refusing to watch U.S. cable news channels, I was unaware until this morning that this is now a thing on CNBC…
As a recovering TV news pro, I’m sure if I were running CNBC, I’d do the same thing. The mixture of hype and urgency and a dynamic personality like Trump’s is pure crack for cable news audiences. And there’s no denying Trump can move a stock or an entire sector with a few cross words on Twitter.
Not just Twitter, either. During a press conference on Jan. 11, he trashed Big Pharma pricing: “They’re getting away with murder.” The Nasdaq Biotechnology Index is only now starting to recover…
Alas, graphic bling and whooshing sound effects have precious little impact on investing success. In fact, they’re a distraction from investing success. So are presidential tweets and interviews and press conferences.
We’ll stick with biotech as our example. It’s been a choppy sector both before and after Trump’s election; it’s still down substantially from where it began the year 2016…
Seen in the long term, you can barely make out the impact of Trump’s “murder” remark. Unless you’re a day trader, you’re not going to make any money from anything the president says off the top of his head.
And yet, despite all that chop, “Big profits can still be made on small biotechs that achieve clinical, regulatory and commercial success,” says FDA Trader editor Ray Blanco.
“A small biotech that develops a new therapy for a serious condition that’s more effective or safe than what’s on the market will still be able to command a high price no matter what the president says.”
While all that chop was going on… “In April, we scored a 51% gain in less than a month when a dermatology biotech was acquired.
“In July, we hit a triple-digit jackpot when we sold a tiny sickle cell disease therapy developer ahead of clinical trial news.
“In September, we walked away from the table with a 51% gain off a Phase 3 trial in a biotech working on improving treatment options for diabetics.”
Meanwhile, readers are also sitting on open gains of up to 230% in a year, waiting for even more. That’s the power of the “magic calendar.”
“The U.S. Food and Drug Administration practically telegraphs the names of drug companies that are going to see stock boosts,” Ray explains.
“As you may know, every drug must go through a battery of tests before it can be sold to the American public. Once it has passed muster, the FDA schedules a day to offer its final approval for the drug.
“Companies would probably prefer this information be kept secret… but the FDA can’t do that. Thanks to a law called the Prescription Drug User Fee Act (PDUFA), the FDA must keep the public informed about upcoming decisions on new medicines.
“So officials regularly issue PDUFA dates — the exact day it plans to announce whether a drug is approved or not. This helps us create a sort of ‘magic calendar’ — pinpointing companies that will see increased revenues if the drug is approved.”
There are 29 dates on Ray’s magic calendar over the next 12 months. If you want to take advantage, best not procrastinate… because this extraordinary story about how the magic calendar came into being goes offline this Sunday night at midnight.
Amid a flurry of earnings reports and economic numbers, the major U.S. stock indexes can barely be motivated to say “meh.”
At last check, the Dow was down fractionally at 20,088. Small caps are taking a slightly bigger hit, the Russell 2000 down four-tenths of a percent at 1,370.
Google parent Alphabet delivered an earnings “miss,” but that was tempered by the fact revenue is growing three times as fast as earnings. Chevron delivered a stinker of a report; shares are down 2% as we write.
The big economic number of the day is the Commerce Department’s first guess at GDP for the fourth quarter of 2016. It rang in at an annualized 1.9% — an anemic figure that fell short of still-anemic expectations for 2.2%.
Durable goods orders slipped 0.4% in December — which confounded the “expert consensus” calling for a 2.6% increase. But this always noisy number was influenced by a drop in orders for military aircraft. If you factor out transportation, the number was sorta OK.
But the really meaningful economic number of the day is the one least followed.
The Philadelphia Fed state coincident index tracks four job metrics from all 50 states. The index isn’t altogether straightforward, so at the risk of oversimplifying… if fewer than 37 states report job growth, it usually indicates a recession is setting in.
The number dipped into that danger zone last summer, but has since bounced back smartly. In the latest report, 47 states report growth. Job activity in Illinois is flat… while Alaska and North Dakota are still feeling the pain of lowish energy prices.
One week into his presidency, the outlines of the Trump agenda are… becoming even fuzzier than before.
Now that Mexico’s government has made clear it won’t foot the bill for the president’s border wall… the White House publicly threw a bunch of ideas up yesterday to see which might stick. (White House chief of staff Reince Priebus preferred to describe “a buffet of options.”)
First, there was a 20% tariff on imports from Mexico — in other words, make avocado aficionados and tequila tipplers, among others, shoulder the cost.
Then they floated the so-called “border adjustment” scheme in which imports would be taxed and exports exempted from taxation. In other words, legislation that would pay for the wall might get tied up in knots with plans for corporate tax reform.
“The point is American taxpayers are not going to fund it,” said White House spokesman Sean Spicer. No, American consumers would fund it instead.
During the day, the president ventured to Philadelphia for a retreat with congressional Republicans. The Wall Street Journal charitably said the executive and legislative branches “struggled to understand each other.”
We’re hard-pressed to imagine anyone in Corporate America witnessing this spectacle and feeling confident about hiring more people or expanding their operations. The “circular firing squad” in the GOP that David Stockman’s been warning us about for several weeks? They’re getting into formation.
Reminder: The debt ceiling, suspended since October 2015, comes back into force 48 days from now.
We can’t say it any better than the poster on the business page at Fark.com. “It’s a vortex of suck: The parking lots at the Pontiac Silverdome are being used to store all the cars that VW bought back due to the emissions scandal.”
Well, not all of them… but we’ll get to that in a bit.
The Detroit Lions haven’t played in the Silverdome since 2001. The stadium was shuttered from 2006–2010 and again since 2013. The roof has been deflated and removed. But hey, it’s got a big ol’ parking lot and it’s filling up once again.
Only now the cars are all diesel-powered vehicles that Volkswagen engineered to trick emissions-inspection equipment. As part of a $15.3 billion settlement, VW is buying back many of these cars from disgruntled owners. Last month, we told you many owners of those cars are stripping them for parts before returning them to VW.
Now we know where these borderline-junkers are piling up. Here’s an aerial from Detroit’s WXYZ-TV…
According to Jalopnik, VW is warehousing the cars at two other sites. One is a decommissioned air force base in California. The other is the Port of Baltimore, just a few miles from Agora Financial headquarters — which says nothing good about business at the Port of Baltimore these days…
“Just over a week ago,” a reader writes, “Jim Rickards was explaining the ‘Chinese maxi-devaluation’ anxiously and as imminent. Lately, not a peep.
“Is that threat over now that Trump is knocking ’em out of the park daily? Is there a chance, then, that Jim and David Stockman may have underestimated “Mr. T” and a stronger U.S. could raise all boats?”
The 5: No, we haven’t mentioned it for a few days, but nothing’s changed.
“China has lost over $1 trillion in reserves in the past two years,” says Jim, “and it’s now down to only $1 trillion of liquid reserves left (exclusive of what’s illiquid or is needed to bail out the banks).
“Given current rates of capital outflows, and the fact that such outflows accelerate once reserves hit a critical level (no one wants to be the last one out of a burning building), China could be broke by late 2017.”
As always, inevitable events aren’t always imminent. And we’ll stay on top of new developments…
“Wow!” a reader writes with a prediction — except it’s sorta not.
“This Republican president is so influential that the markets take off at a blistering pace when he is elected, level off and continue to all-time highs after he is inaugurated. He hits the ground running — slams the door on immigration and threatens widespread tariffs against foreign cheaters. He bends public corporations to his will. He announces massive public works to employ the common man. Who is this guy?
“He is Herbert Hoover, 31st president of the United States. Inaugurated March 4, 1929, Hoover begins massive government intervention. His tariff regime will be enshrined in the Smoot-Hawley Tariff Act of 1930. Trade crawls. Children beg. His many programs in his first 100 days will be called the New Deal by his successor.
“In six months, the stock market will peak, and then bottom three years later, shedding 84 percent of its value. It will not see those highs again for 27 years.
“Hoover will levy the largest peacetime tax increases in U.S. history thus far. He will triple the budget. We will name this period the Great Depression. All government efforts fail.
“After a single term, the opposition seizes control and drags the U.S. into world war.”
“I’ve been faithfully reading The 5 for the last year and a half and want to tell you I would never miss a (weekday) issue,” writes a reader from the Tampa Bay area — one of your editor’s many old stomping grounds.
“To get such applicable and current worldview and financial market info and observations for free actually makes me an accessory to a crime. The wit displayed, including from readers that dare you to print their stuff, is truly welcome when most everything else that I read of a financial nature is sober, even funereal. The 5 always delivers.
“As a committed Jeffersonian and Libertarian, I admire the rationality running throughout The 5 Min. Forecast and other Agora publications, except possibly when David Stockman is in the middle of a meltdown (joke).
“After 63 years on this Earth, I recognize that we are headed for a real reckoning. Knowing that you too recognize this and work to keep the story interesting and lighthearted for your readers keeps me engaged. Without irony, knowing that you and your team ‘will be with me every step of the way’ provides assurance that carries into my life. Truth.
“This will probably be the only time that I write, but know there’s probably a small legion like me out here.”
The 5: Thanks for the compliments… and for reminding us how readers set a high bar for us. But we wouldn’t have it any other way.
Happy Chinese New Year,
The 5 Min. Forecast
P.S. According to our back-tested data, if you had simply held all 35 of these stocks on the “Magic Calendar” back in 2013, you would have gotten an average 24% return last year.
After inviting more that 4,124 of our readers into this special project to beta-test our trading recommendations in real-time… we’ve seen actual gains of:
- 127% in just 45 days on Anthera Pharmaceuticals…
- 90% on Dyax Corp. in exactly 139 days…
- 267% on Aveo Pharmaceuticals in less than 6 months…
There is still time to grab your FREE “Magic Calendar” while supplies last. But come Sunday night at midnight, this page will come offline.
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