- Reduce inflammation: “Get rid of cancer”
- Ray Blanco on a decade-defining medical breakthrough
- Zach Scheidt: “Perfect market for crude oil refining companies”
- An emerging-market legend’s admonition (China)
- High crypto hopes in the mile-high city… CBDCs languish in the dark… Stock buybacks overpromise and underdeliver?
“Cancer is caused by inflammation. Get rid of the inflammation, and you can get rid of cancer.”
So said a Russian scientist years ago to Paradigm Press tech-and-biotech specialist Ray Blanco.
“At first blush, this seemed like a quirky take on the No. 2 killer behind heart disease,” Ray tells us. “But his opinion had strong credence. He was the winner of several national science prizes during his youth in the Soviet Union, and after it collapsed, he was quickly accepted as a biochemistry professor at Harvard.
“Over time, scientific evidence has come more in support of the role of inflammation in multiple diseases like cancer.”
Inflammation might even play a role in certain types of mental illness: “Psychedelics are often credited with somehow making the brain reboot, and thus helping treat conditions like depression and post-traumatic stress disorder. But research is emerging that some psychedelics also have an anti-inflammatory action on the human brain. Could this be helping brain function in patients that need it?”
One of the main culprits in inflammation is a molecule called “tumor necrosis factor alpha” — or TNFα for short.
“TNFα is an important immune signaling component, also known as a cytokine,” Ray says. “When the body detects infection, damage or the formation of cancer cells, immune system cells release TNFα into circulation, producing an immune and inflammatory response, which includes destruction of existing cells.”
It’s TNFα that’s targeted by Humira — the rheumatoid arthritis treatment that’s the bestselling drug of all time. Imperfectly, to be sure: The side effects can be severe, and Humira can also weaken the immune response against infection — and against developing cancers.
Ray is keenly following the fortunes of a tiny biotech that aims to one-up Humira — and treat a host of maladies beyond arthritis.
Unlike Humira, the drug under development at this company doesn’t just block TNFα. It also keeps the body’s production of TNFα under control — before it can start causing problems.
An even bigger difference: “It isn’t a large-protein molecule like existing drugs,” says Ray. “Instead, it’s a small molecule that can even be taken orally. (Humira can only be injected.} Moreover, it can easily cross the blood-brain barrier, which to me suggests a huge future potential at getting to the inflammatory roots of brain diseases.”
Ray says what this company is working on amounts to the biggest medical breakthrough of the last decade — with long-term profit potential of 10,000%.
And with an FDA catalyst perhaps imminent, the next big bump in the share price could begin as early as tomorrow morning. Click here and Ray will lay out the full scope of the opportunity.
The U.S. stock market is starting a new week by adding to the previous week’s gains.
And once again, it’s the Nasdaq leading the way higher — up nearly 1% to 11,803. The S&P 500 is up two-thirds of a percent to 4,071. The Dow is the laggard, up a third of a percent to 33,507.
Among the big movers is Apple — up nearly 3% after iPhone supplier Foxconn reported its second-best February sales ever. (That said, the best February was a year ago — and sales are down 11.7% year-over-year.)
Bonds are likewise rallying, pushing yields down. The 10-year Treasury yield is back below 3.96%.
Paradigm’s options-trading authority Alan Knuckman points out on our internal Slack channel this morning that we’re 10 days away from the first anniversary of the Federal Reserve embarking on its current rate-raising cycle. Lo and behold, the S&P 500 is only 4.4% lower than it was back then. That’s resilience in the face of the steepest jump in the fed funds rate for over 40 years.
Precious metals are digesting last week’s gains, gold at $1,850 and silver at $21.11. Crude is little moved at $79.51 a barrel.
While oil prices have been stable of late, gasoline prices are on the move… and the proverbial summer driving season is still months away.
But don’t just grumble at the pump: Consider refinery stocks, says Paradigm’s value-and-income maven Zach Scheidt. “The current market is perfect for crude oil refining companies,” he says.
“Refineries typically buy oil at spot prices. Today that means the refiners can get oil for less than $80 per barrel. Crude oil is then refined into useable products like jet fuel, gasoline, kerosene and other petroleum-based products. Depending on the grade of oil, each barrel typically produces 19 gallons of gasoline, 12 gallons of diesel fuel, 2.6 gallons of jet fuel and an assortment of other products.
“One of the problems in today’s economy is that demand for these different products doesn’t always match up to the ratios of what’s produced from each barrel,” Zach continues.
“So there are times when refiners produce too much diesel but not enough gasoline. Plenty of rubber and asphalt but not enough jet fuel. And so on.
“While there’s a reasonable amount of crude oil available to refiners today, inventories of jet fuel and gasoline are low, especially in certain parts of the country. This creates a unique profit opportunity for refiners. These refiners can buy crude at cheap prices and then sell the most important refined fuels at higher prices.”
Zach’s preferred way to play it right now is Phillips 66. “Thanks to high refinery profit margins, PSX is expected to generate profits of $13.93 per share this year. And if the split between crude oil prices and refined fuel prices continues to diverge, this estimate could turn out to be far too conservative.”
And at current share prices, you pull down a dividend yield of nearly 4%. That’s as good as a 10-year Treasury… but the yield on that T-note never changes, while PSX has jacked up the dividend three times in the last 18 months.
For the record: “I would be very, very careful investing in China,” says a rock star of emerging-market investing.
“I’m personally affected because I have an account with HSBC in Shanghai. I can’t get my money out,” Mobius Capital Partners’ Mark Mobius told Fox Business on Thursday. “The government is restricting the flow of money out of the country.”
And despite his impeccable credentials — he launched one of the first emerging-market mutual funds at Franklin Templeton in the 1980s — he can’t get a straight explanation. “They don’t say, ‘No, you can’t get your money out,’ but they say, ‘Give us all the records from 20 years of how you’ve made this money,’ and so forth. It’s crazy.”
Signs of a financial crisis in China? Or just a growing contempt for Western investors? We don’t know, but we do know this news hasn’t gotten nearly as much publicity as it should.
Mobius is much more partial these days to India. “You’ve got a billion people, they can do the same thing that the Chinese do.”
Despite all the bad news that’s hit the crypto space since the implosion of FTX last November, spirits are high at the ETHDenver conference.
“The line to register was almost a mile long,” says Paradigm’s Chris Campbell, senior analyst for James Altucher’s Early-Stage Crypto Investor. “According to the staff, this is their biggest year yet. Triple the attendees compared with 2022.”
Who says interest in crypto is dead? [Twitter-submitted photo.]
Chris has attended crypto conferences and meetups around the world since 2016 — from San Francisco to Prague to Bangkok. “One thing I’ve noticed: The less stable the speaker’s home currency and government, the more excited he or she is about the most basic use cases of crypto. And the closer they are to home, the more it resonates.”
So it went at the Denver conference. Said a native of Brazil: “Back in the 1990s the government overnight froze all of our savings. Imagine waking up and literally not being able to use your own money that’s in the bank.”
The evidence isn’t just anecdotal, says Chris: “According to a study released by Mastercard, more than one-third of Latin Americans have used private stablecoins. In Venezuela, stablecoins make up 34% of all small transactions.”
Yes, as we mentioned on Friday, crypto-centric Silvergate Bank is close to going under: But to Chris and the folks at the conference, “this underscores the importance of crypto’s most basic principles — transparency, openness, self-custody — which are all-too easy to dismiss in traditional finance. (Until the next blowup, when everyone asks, ‘How could this happen!?’)”
➢ Meanwhile, prices of the two most popular cryptos continue hanging tough — Bitcoin at $22,515 and Ethereum at $1,574.
“Reading about central bank digital currencies,” a reader writes after Friday’s edition, “it occurs to me that these can ONLY be used when there is power to run the electronic devices that will be required — and the associated communications infrastructure — to process a CBDC transaction.
“That being said, and after looking at the aftermath of many tornadoes, hurricanes and winter storms, the question comes to mind as to exactly HOW will people in these disaster areas be able to use their CBDCs — provided they still have the digital token. The next question that comes to mind is how will people spend their money when a disaster separates their CBDC token from them to the point it is irrecoverable?
“I am quite certain that the Biden administration does not give a rodent’s patootie about these people — as evidenced by the administration’s complete lack of response to other disasters — so it comes as no surprise to me that people experiencing a full range of disasters will be left homeless and for some amount of time penniless due to the loss or destruction of their digital tokens!”
The 5: Yeah, we’ve entertained the “what if there’s no power” question before.
There’s also the matter of what if there’s no internet access — not a hypothetical matter for millions of Canadians one day last summer. And we still marvel at how folks got by in India’s restive Kashmir region when the government shut down the internet for seven months during 2019–20.
“I am always puzzled by the way stock buybacks are portrayed as a miracle increase-in-value trick,” a reader writes. (Seems the buyback topic has legs here in early 2023…)
“The reality is the company spent millions of dollars of an asset (cash) to retire those shares. The remaining shares need to be revalued on the new lower asset total. The company is not as valuable as it was before it spent those dollars. You can’t get something for nothing.”
The 5: Again, we don’t mean to portray buybacks as an unalloyed good.
As we said last week, buybacks are a lousy idea if the company’s shares are richly priced. So why do executives do it anyway? Often, it’s to manipulate earnings per share — on which their compensation is based. (In some cases the company immediately reissues the retired shares after the suits get their big payday!)
But there are so many instances of well-executed buybacks that have immensely prospered shareholders. Back in the day, Teledyne CEO Henry Singleton bought back 90% of the firm’s shares over nearly three decades — generating an average 20% annual return.
More recently, AutoZone shrank its share count 75% from 2000–2013 — generating a compound annual return for shareholders of 21% compared with 3% for the market as a whole.
And a couple of stragglers weigh in on the light-beer ad wars…
“I prefer to refer to light beer as a ‘mildly alcoholic beer-flavored beverage’.”
“I’ve always said, ‘Coors. When I don’t want to drink water.’ Love The 5.”
OK, that’s it. I’m resolved: Light beer will never darken my refrigerator door again!
Best regards,
Dave Gonigam
The 5 Min. Forecast
