by ilene - November 23rd, 2015 2:05 pm
If you didn't know what "full Volkswagen" means, now you do — it means "K-BIOed." See the chart below and be glad you didn't act on your rational assessment that the stock's move to $18 on Friday was overdone.
Just as we warned was possible, KBIO is going full Volkwsagen up another 150% today alone (up from $1 last Wednesday to over $45 today), the stock has just been halted.
Here is what we said may be happening:
In other words, Shkreli's consortium had acquired 70% of the company, and should they decide to pull the borrow, on the odd chance that the short interest had soared to above 30%, KBIO – which until a few days ago – suddenly has the potential to become the next Volkswagen: a company which has more shares short than there is float available to cover them.
And, as of today, it appears to be happening just as previewed:
From 44c to $45.82 in a week…
— Eric Scott Hunsader (@nanexllc) November 23, 2015
It seems we were spot on:
What happens if Shkreli's plan is indeed to rerun the "Volkswagen" scenario and unleash an epic short squeeze that sends the price of the company into the stratosphere, unlinked from any fundamentals, but merely soaring ever higher as desperate shorts pay any price just to get out.
We hope to find out as suddenly this until recently bankrupt company whose price has exploded in the past two days, has become not only a poster child for everything broken and manipulated with the market (think 2014's CYNK one year forward) but has the market following with morbid to find out how the tragicomedy of "Shkreli vs the Shorters" concludes.
Is this next?
Because… Short interest actually rose to 38% of float as of Nov. 20, up from 5.7% on Nov. 13: Markit
[Picture by Banksy.]
by ilene - November 20th, 2015 1:50 pm
By John Mauldin
Soon after the Paris attacks, I picked up the phone to talk over the situation with my friend George Friedman. George is one of the truly world-class thought leaders on geopolitics. We had an animated 20-minute conversation. I didn’t particularly like what I heard.
George thinks we face big difficulties in dealing realistically with the ISIS threat. The more I read—and the more I listen to people like George who have worked these issues for decades—the more I think that we, as a culture, need to face reality.
I asked George to distill his thoughts into a short essay I could publish in Outside the Box, and he agreed.
This is a very thought-provoking piece with a different conclusion—which is what you can always expect from George.
John Mauldin, Editor of Outside the Box firstname.lastname@example.org
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe
By George Friedman
The attacks in Paris last Friday night were part of a long-term pattern of occasional terrorist attacks by jihadists on targets in Europe. In the European context, this stood out for two reasons. First, the scale of the attack was substantially larger than other attacks in recent years, both in the number of participants and the number of casualties. Second, it was different in the level of sophistication and planning. Securing weapons and explosives, gathering at least three teams, identifying the targets and the manner in which these targets were to be attacked involved fairly complex logistics, intelligence and above all coordination. Most impressive was their counter-intelligence and security. There were at least seven attackers and additional support personnel to secure weapons, gather information and help them hide out in preparation for the attack. No one detected them.
The large majority of attacks are detected and disrupted prior to execution by European and American intelligence services, using information, communications intercepts and the other tools available to them. No one detected this group, indicating that the group, or at least its leaders, were aware of the methods used to identify attacks and evaded them. Lone wolves evade
“Devastated” Trader Crushed By Soaring Biotech, Starts Online Begging Campaign To Fund $106,000 Margin Call
by ilene - November 19th, 2015 10:54 pm
This is a bizarre story of an overconfident and perhaps delusional trader attempting to fund his losses by collecting donations to his GoFundMe account. It's a lesson in what not to do.
The stock which Joe Campbell shorted is KaloBios (KBIO). It once traded much higher but has been falling constantly since its IPO, including a 1/8 reverse stock split in July, 2015.
Here's the Yahoo Chart of the KBIO's life as public company:
From Bloomberg: "KaloBios, which has dropped from $64 a share since going public in early 2013, reached a low of 90 cents a share on Nov. 12. [It hit $0.44 on the open, Nov. 16, 2015.] The South San Francisco, California-based company said last week that discussions about possible strategic transactions had ended and it was unlikely a viable alternative would surface."
A viable alternative did emerge this week led by the infamous Martin Shkreli of Turing Pharmaceuticals. Shkreli and his group bought over half the shares on the open market. The share buying started on Monday, Nov. 16.
KBIO chart from Yahoo. Note the wildest trading was after hours and before the market opened:
Chart from BigCharts, which does not show after hours:
The prices and volume according to Yahoo is in the table below. The number of shares of KBIO outstanding is 4.12M and the float is 3.84M. The number of shares trading today (Nov. 19) was almost 12.5M. Notice that the buying started on Monday--with the price climbing almost 300% during the day.
That's the background. Here's the story from Zero Hedge.
"Devastated" Trader Crushed By Soaring Biotech, Starts Online Begging Campaign To Fund $106,000 Margin Call
Courtesy of ZeroHedge
And now, what may be the craziest story of the day.
Less than a week ago, one of the countless fly-by-night biotech pennystocks, drug developer KaloBios Pharmaceuticals said it would wind down its operations and that it had engaged restructuring firm Brenner Group to help liquidate its assets. The company said it was "highly…
by ilene - November 18th, 2015 4:16 pm
Watch: Phil's Stock World's Weekly Trading Webinar – 11-17-15
(Subscribe to our YouTube channel here.)
00:02:00 INDEX: DOW, S&P, NIKKEI, NFLX, NGK, NG, GLD, SLV
00:07:38 GLD: Long-Term. it’s a great buy
00:12:42 SLV: Long-Term. explode and collapse
00:15:00 Accuweather: It’s hot right now (NY), next week is cold more usage of Natural Gas
00:21:23 5% Portfolio
00:24:50 Butterfly Portfolio
00:25:07 Short-term Portfolio
00:28:40 OOP Review, Filling Spread, BHI Spread
00:30:40 BHI Spread, Trade Idea, Puts and Calls, Long-Term Option
00:46:35 Saving Bull Calls Spread: Gold
00:59:00 GLI put GLL put good play
00:59:39 BHI: 10% difference
01:03:45 GLL: up, down, up, down…
01:16:30 We have a strong Dollar right now
by ilene - November 16th, 2015 4:50 pm
Courtesy of Urban Carmel, The Fat Pitch
Summary: It's true that corporations buying their own shares (buybacks) represents a large source of demand for equities and have helped push asset prices higher.
But much of what is believed about buybacks is a myth. There is much more to share appreciation than buybacks. EPS growth is overwhelmingly driven by higher profits, not share reduction. Buybacks are not a result of ZIRP or QE. Companies are not, as a whole, under investing in manufacturing or R&D or other sources of future growth because of buybacks.
Buybacks are widely vilified and greatly misunderstood. This post will try to separate the facts from the myths.
It's true that buybacks represent a large amount of money. In the past 12 months, companies have spent $555b on buybacks. Over the past 3 years, over $1.5t has been spent on buybacks. This is a lot of money (data below and elsewhere in this post from Yardeni).
It's also true that buybacks represent a large source of demand for equities, larger than the demand from equity mutual funds and ETFs. The data below is gross buybacks, not net buybacks, an important distinction we'll discuss below (data from FT).
These huge sums represent stock buying demand in excess of that from institutions and individuals. There is little doubt the stock indices have moved higher with the help of the money being spent on buybacks. This is not new: it was also a pattern in the previous bull market.
While the dollar amounts of buybacks are large, it is small relative to the size of the stock market. In the 2Q, gross buybacks were less than 1% of market capitalization. Buybacks are big; the stock market is really, really big.
What is often ignored when buybacks are discussed is that companies are also issuing shares. Most prominently, executives are often given compensation in the form of share options; buybacks have become a way for the company to mop…
by ilene - November 16th, 2015 12:45 pm
Courtesy of John Rubino.
This weekend’s Paris attacks, occurring in the middle of one of history’s largest mass-migrations, has the feel of uncharted territory. But it’s actually an eerie echo of something that happened nearly two thousand years ago in more-or-less the same place.
According to some historians, the fall of the Roman Empire wasn’t pre-ordained. By AD 300 it had its problems, including far-flung, hard-to-defend borders and recurring currency crises, but was generally stable and prosperous. Then a new power arose in the East. The Huns were horse archers who could out-ride and out-shoot their neighbors, and they terrorized the Vandals and Goths who lived in what is now Germany and the Balkans, driving them west to Rome’s borders.
Rome chose to let half a million “barbarians” enter, hoping to use them as soldiers and laborers. Instead, it found itself with invading armies and unstable, uncontrollable political coalitions. The complete story is winding, convoluted and full of unfamiliar names, but it ends with the division of the Empire into two parts and the destruction of the original, Italian half. Here’s a History Channel synopsis of the process:
The Barbarian attacks on Rome partially stemmed from a mass migration caused by the Huns’ invasion of Europe in the late fourth century. When these Eurasian warriors rampaged through northern Europe, they drove many Germanic tribes to the borders of the Roman Empire. The Romans grudgingly allowed members of the Visigoth tribe to cross south of the Danube and into the safety of Roman territory, but they treated them with extreme cruelty. According to the historian Ammianus Marcellinus, Roman officials even forced the starving Goths to trade their children into slavery in exchange for dog meat. In brutalizing the Goths, the Romans created a dangerous enemy within their own borders. When the oppression became too much to bear, the Goths rose up in revolt and eventually routed a Roman army and killed the Eastern Emperor Valens during the Battle of Adrianople in A.D.
by ilene - November 15th, 2015 12:12 pm
Courtesy of John Rubino.
One of the challenges of managing money is the (increasingly-frequent) need to translate non-financial tragedies into action to protect clients and, yes, profit from the broader world’s horror.
So while most people react to events in Paris with stunned sympathy and/or impotent rage, the financial community is deciding what to buy and sell. And right now it looks like “sell” is winning.
(Telegraph) – Global stock markets are headed for a sell-off on Monday after the deadliest attacks to hit France since the Second World War left more than 100 people dead and dozens injured.
Stock market futures pointed to falls in Asia, Europe and the US, as bourses across the Middle East recoiled on Sunday amid warnings that the terrorist attacks in Paris could spark a renewed bout of volatility.
The Dubai stock market fell 3.7pc in afternoon trading on Sunday to a fresh 2015 low, while stocks in Saudi Arabia lost 2.6pc and Egypt’s benchmark index dropped to a two-year low. Markets in Kuwait and Bahrain also fell.
Sustained oil price weakness has already prompted concerns about the region’s outlook.
Analysts said the attack was likely to hit tourism in Paris, which could have consequences for the rest of France and Europe.
“The truly awful events in Paris could certainly have a significant negative impact on consumer confidence in the near term at least,” said Howard Archer, chief UK and European economist at IHS Global Insight.
“There could also be an adverse impact on tourism in some European countries where people think attacks are most likely to occur – not just in France…Volatility should rise for Europe and for the Middle East.”
Several things to consider going into next week:
First, the global equity markets were already correcting before the Paris attacks. Last week was the worst for US stocks since August, and the plunging price of oil combined with truly horrible numbers from major retail chains pointed towards more volatility in any event.
by ilene - November 14th, 2015 5:44 pm
By John Mauldin
One of the most successful investors in the world is Howard Marks of Oaktree Capital Management. One of the things I look forward to every quarter is the letter he writes to his clients – it goes right to the top of my reading list. Not only is it always full of generally brilliant investment counsel, Howard is also a great writer. He has an easy style that pulls you through his letter effortlessly.
I have never sent his letter to you as an Outside the Box, as the copies I get are clearly watermarked and copyrighted. So I was surprised and delighted to learn that the letter is free when I listened to a speech by Howard in which he encouraged everyone to get it. Unlike another hundred-billion-dollar hedge fund company that shall go unnamed, Oaktree evidently thinks that brilliance should be shared.
I am especially pleased to be able to pass on this latest issue, in which Howard returns to a theme he has used in the past, which is the parallels between investing and sports. He recounts the career of Yogi Berra, who sadly passed away in September. Yogi was always a fan favorite, and he was certainly one of mine; but it was his consistency, both on offense and defense, that made him great.
Marks goes on to defend the seemingly indefensible: in last year’s Super Bowl, Pete Carroll, coach of the Seattle Seahawks, called for a passing play on the one-yard line as time was running out, which as anyone who watched that game would remember, was one of the most spectacularly unsuccessful decisions of all time. But Howard asks us, “His decision was unsuccessful, but was it wrong?”
Can we judge a career on one play? I am grateful that my investment and writing careers are not judged solely by my many mistakes.
This past weekend at the T3 Conference in Miami was enlightening. Todd Harrison put together a great lineup of speakers who represented a wide range of investment styles and strategies. Perhaps because I have been looking at alternative income…
by ilene - November 12th, 2015 9:05 pm
A search for "Theranos" on Business Insider brings a long list of recent developments, so go here for the play-by-play history as a prequel to the Zero Hedge post below.
Looking back at the build up and the let down on the Theranos story, the recurring question that comes up is how the smart people that funded, promoted and wrote about this company never stopped and looked beyond the claim of “30 tests from one drop of blood” that seemed to be the mantra for the company. While we may never know the answer to the question, Aswath Damodaran offers three possible reasons that should operate as red flags on future young company narratives…
1. The Runaway Story: If Aaron Sorkin were writing a movie about a young start up, it would be almost impossible for him to come up with one as gripping as the Theranos story: a nineteen-year old woman (that already makes it different from the typical start up founder), drops out of Stanford (the new Harvard) and disrupts a business that makes us go through a health ritual that we all dislike. Who amongst us has not sat for hours at a lab for a blood test, subjected ourselves to multiple syringe shots as the technician draw large vials of blood, waited for days to get the test back and then blanched at the bill for $1,500 for the tests? To add to its allure, the story had a missionary component to it, of a product that would change health care around the world by bringing cheap and speedy blood testing to the vast multitudes that cannot afford the status quo.
The mix of exuberance, passion and missionary zeal that animated the company comes through in this interview that Ms. Holmes gave Wired magazine before the dam broke a few weeks ago. As you read the interview, you can perhaps see why there was so little questioning and skepticism along the way. With a story this good and a heroine this likeable, would you want to be the Grinch raising mundane questions about whether the product actually works?
by ilene - November 11th, 2015 3:48 pm
Phil's Weekly Must-Watch Webinar is now available on YouTube (subscribe on YouTube).
Watch below. Enjoy!
Major Topics Timeline:
00:01:50 - Quick look at the market, futures and various indexes.
00:02:45 – Crack spread, wider than usual. VLO. Natural gas. Commodity futures. Consumers are cutting back.
00:09:15 - It's the perfect time to buy natural gas, UNG. Natural gas is cheap. Natural gas is generally a local product because it was previously inefficient to move it around. It's a fairly clean burning fuel but it's not always easy to get and it's hard to store. But now that liquidified natural gas has been perfected, gas can be moved and stored efficiently. Price of natural gas should go higher. We're like the Saudi Arabia of natural gas. Energy, coal, natural gas. UNG spread strategy.
00:28:50 – Discussion of how a weak vs. strong Dollar affects the price of indexes.
00:30:00 – UGAZ — too much decay for a long term trade.
00:31:20 – Gold discussion. New trade idea, bull call spread on GLD. Gold is not likely to fall below $1,000, though it's possible.
00:41:00 – UNG spread, example.
00:42:20 – IBM: PSW's stock of the year for 2016. Phil's expecting a substantial move over in the next two years. Cloud services, Watson (which will replace millions of jobs). Long term position.
00:47:30 – AAPL example. AAPL kept going lower, and Phil kept saying buy more. IBM is in a similar position to AAPL before its big move higher.
00:57:40 – AT&T: T's a very boring stock to own. Bull call spread – not the best strategy because the price of the spread is not high enough. Try something else, e.g. buy stock, sell call and sell put. Collect the dividend with this strategy.
01:03:30 - FXI, China and Hong Kong.
01:06:00 - UNG position.
01:07:00 – NRF position.
01:07:35 - LL: Long LL in the long-term portfolio. Hanging on to LL.
01:09:15 – More on the T long-term dividend play.