by ilene - July 28th, 2015 6:01 am
The decreasing cost of gene sequencing (as low as $1,000 a patient today) is allowing companies to to sequence many people's DNA, create large data bases, and find relationships between genes and symptoms. The result: potentially new and improved drugs to treat genetic and other conditions such as high cholesterol and chronic pain.
Drug companies are exploiting rare mutations that make one person nearly immune to pain, another to broken bones
Dreyer and Pete are “a gift from nature,” says Andreas Grauer, global development lead for the osteoporosis drug Amgen is creating. “It is our obligation to turn it into something useful.”
What’s good for patients is also good for business. The painkiller market alone is worth $18 billion a year. The industry is pressing ahead with research into genetic irregularities. The U.S. Food and Drug Administration is expected to approve a cholesterol-lowering treatment on July 24 from Sanofi and Regeneron Pharmaceuticals based on the rare gene mutation of an aerobics instructor with astoundingly low cholesterol levels. Amgen has a similar cholesterol drug, based on the same discovery, and expects U.S. approval in August. The drugs can lower cholesterol when statins alone don’t work. They are expected to cost up to $12,000 per patient per year and bring in more than $1 billion annually.
Drugmakers are also investing in acquisitions and partnerships to get their hands on genetic information that could lead to more drugs. Amgen bought an Icelandic biotechnology company, DeCode Genetics, for $415 million in 2012, to acquire its massive database on more than half of Iceland’s adult population. Genentech is collaborating with Silicon Valley startup 23andMe, which has sold its $99 DNA spit kits to 1 million consumers who want to find out more about their health and family history—more than 80 percent have agreed to have their data used for research. The Genentech partnership will study the genetic underpinnings of Parkinson’s disease. And Regeneron has signed a deal with Pennsylvania’s Geisinger Health System to sequence the genes of more than 100,000 volunteers.
by ilene - July 28th, 2015 5:05 am
As I have noted for the last two weeks, this earnings season carries a special significance. It provides an alternative to the official data on the economy. After a bad week for stocks, the punditry will be asking:
What is the message of the market?
Prior Theme Recap
In my last WTWA [Weighing the Week Ahead], I predicted that attention to earnings reports would once again dominate the news. This was an accurate call. Earnings stories, both good and bad, were daily highlights. Our featured chart on dollar weakness as more important than geopolitics was especially accurate. More on earnings in the account of the week below.
We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead. You can try it at home.
This Week’s Theme
Earnings season has developed a bipolar theme: Strength in some popular momentum names and weakness in stocks sensitive to the dollar. The market has provided a daily verdict on earnings reports. For many there is also an important economic message. Observers are asking:
What is the message of the market?
…and for some… Will the Fed be listening?
The earnings message draws several different viewpoints, including some noted last week.
- A weak economy has finally taken a toll on corporate profits, especially in some sectors.
- Stock market leadership has narrowed dramatically. Frank Zorilla illustrates with the chart below. He is open-minded about how this divergence could resolve, including a possible broad rally.
Stockbee has a very similar take on this important theme, including the potential for a rally.
- The strong dollar has hurt exports and profit margins of many large companies. It is showing up dramatically in energy stocks.
- Commodity price declines have accompanied the earnings
by ilene - July 28th, 2015 4:40 am
Courtesy of Joshua Brown, The Reformed Broker
There’s more than one way to skin a cat. The stuff that Paul Tudor Jones has made his billions based on does not appear in any traditional investing text book. Ben Graham would read his stuff and roll over in his grave.
For example, the idea of being on the right side of a predominant trend – bring a concept like this into the Church of Value Investing and you might see the holy water begin to boil. And yet, it can work if applied correctly.
Here’s PTJ on his own chosen trend indicator, the 200-day moving average, via Tren Griffin at 25iq:
One principle for sure would be: get out of anything that falls below the 200-day moving average.”
I teach an undergrad class at the University of Virginia, and I tell my students, “I’m going to save you from going to business school. Here, you’re getting a $100k class, and I’m going to give it to you in two thoughts, okay? You don’t need to go to business school; you’ve only got to remember two things.
The first is, you always want to be with whatever the predominant trend is. My metric for everything I look at is the 200-day moving average of closing prices. I’ve seen too many things go to zero, stocks and commodities. The whole trick in investing is: “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out.
Josh here – We run a tactical model in-house that is designed to respect trend and omits the kind of touchy-feely pseudo-intellectualism that often accompanies market or economic prognostication.
Part of this is because there is no Why. Or, more reasonably, if there is a Why, it is only very clear to the majority of people after the fact. Trends are confirmed or violated as a result of the process by which markets attempt to figure out the Why, in real-time. When the the crowd feels confident that it’s got the What and Why figured out, a trend solidifies. When this confidence is shaken – in either direction – a trend becomes invalidated and a…
by Market Shadows - July 28th, 2015 4:27 am
Financial Markets and Economy
2015 has simply not been a fun year in the stock market (Business Insider)
2015 has not been a fun year for stock investors.
In 2015, the S&P 500, which opened the year nearly at all-time highs, has made a new all-time high just 10 times. For a point of comparison, at this time last time at this year, the benchmark index had hit 27 fresh all-time records, and when 2014 was said and done, the S&P 500 had hit a new record 53 times.
The bull in China’s shop has no more room to run (Market Watch)
Investors in Chinese stocks were mopping up after that market’s biggest one-day percentage slide since 2007. Ironically, the same forces that unleashed Chinese investors’ animal spirits have brought the bull to its knees.
Mounting concern that Chinese authorities could scale back efforts to support stock prices sunk the country’s main Shanghai Composite Index. SHCOMP, -8.48% and the smaller Shenzen Composite 399106, -7.00% and Shenzhen ChiNext399006, -7.40% indices.
Stocks in China crashed, and U.S. equities capped the longest losing streak in more than six months.
Mining stocks are in a hole right now.
They're getting creamed as prices for gold, iron ore and copper crumble. Shares of mining companies Freeport-McMoRan (FCX) and Joy Global (JOY) have plunged 35% and 28% this month, respectively. That makes them the worst performers in the entire S&P 500 in July.
When Nixon took the dollar off gold on August 15th 1971 he did not end the Bretton-Woods arrangement. On the contrary, he exacerbated the very same destructive effects that had forced him to renege on the promise to pay gold at a fixed exchange rate to the dollar in the first place. To fund wars and an ever expanding welfare state the custodian of the global reserve currency had fallen for the almost irresistible temptation to print excess dollars
by ilene - July 27th, 2015 6:35 pm
By John Mauldin
“I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.”
– Romano Prodi, EU Commission president, December 2001
Prodi and the other leaders who forged the euro knew what they were doing. They knew a crisis would develop, as Milton Friedman and many others had predicted. It is not conceivable that these very astute men didn’t realize that creating a monetary union without a fiscal union would bring about an existential crisis. They accepted that eventuality as the price of European unity. But now the payment is coming due, and it is far larger than they probably anticipated.
Time, as the old saying goes, is money. There are lots of ways that equation can work out. We had an interesting example last week. Europe and the eurozone pulled back from the brink by once again figuring out how to postpone the inevitable moment when all and sundry will have to recognize that Greece cannot pay the debt that it owes. In essence they have borrowed time by allowing Greece to borrow more money. Money, I should add, that, like all the other Greek debt, will not be repaid.
I’ve probably got some 40 articles and 100 pages of commentary on Greece and the eurozone from all sides of the political spectrum in my research stack, and it would be very easy to make this a long letter. But it’s a pleasant summer weekend, and I’m in the mood to write a shorter letter, for which many of my readers may be grateful. Rather than wander deep into the weeds looking at financial indications, however, we are going to explore what I think is a very significant nonfinancial factor that will impact the future of Europe. If it was just money, then Prodi would be right – they could just create new economic policy instruments, whatever the heck those might be. But what we’ve been seeing…
by ilene - July 27th, 2015 6:32 pm
Courtesy of Mish.
At long last, the stench from Chicago is so strong that Fitch can finally smell it. Fitch just now downgraded Chicago Board of Education General Obligation bonds to junk status.
Fitch and the S&P were holdouts because there's money to be made by purposely pretending a manure factory is a rose garden.
MarketWatch reports Fitch Downgrades Chicago Board of Ed (IL) ULTGOs to 'BB+'.
Fitch Ratings has downgraded the Chicago Board of Education, IL's (the board) approximately $6.1 billion of unlimited tax general obligation (ULTGO) bonds to 'BB+' from 'BBB-'. The rating has been placed on Negative Watch.
- Continued financial stress
- Dependency on borrowing
- Cash flow drain
- Pension liability weakness
- Poor labor history
- Unfavorable debt position
- Structural imbalances
- Mounting fixed costs
- Limited options to address large budgetary gaps
- Growing gap for fiscal year 2016
- Liquidity concerns
- Negative cash balances
- Swap termination triggers
Fitch can finally smell enough stench from the above rating drivers to label the bonds as junk.
The "J" Word
The downgrade from BBB- to BB+ is a downgrade to a "non-investment" rating, commonly labeled "junk". Curiously, MarketWatch just could not bear the say the "J-Word".
MarketWatch reports "Fitch would downgrade the rating further if there is not clear and meaningful progress over the next several months in reducing the large structural imbalance."
I think we can count on that.
Deep Into Junk…
[Picture of Chicago via Pixabay.]
by ilene - July 27th, 2015 4:44 pm
Courtesy of Mish.
The Atlanta Fed second quarter GDPNow final estimate came it at 2.4%.
The second quarter GDP official "advance" estimate from the BEA is due out Thursday, July 30 along with the annual revision of the National Income and Product Accounts (NIPA).
The Bloomberg Consensus Estimate for second quarter GDP is 2.9%, a half percentage-point higher than the Atlanta Fed model.
I will take the under.
First quarter GDP releases by the BEA have been all over the map. The initial reading was +0.2%, revised to -0.7%, then revised again to -0.2%.
Whatever number comes out Thursday, expect revisions, possibly in both directions. I expect the final first quarter and/or second quarter GDP to be revised lower.
by ilene - July 27th, 2015 3:08 pm
Courtesy of Mish.
Nearly 1,800 stocks, over 60% of issues traded on the Shanghai and Shenzhen stock exchanges fell by the daily limit of 10% and were halted according to a Financial Times report.
When contacted by the Financial Times, the China Securities Regulatory Commission refused to answer any questions.
The amusing comment of the day comes from Zhu Ning, deputy dean at Shanghai Advanced Institute of Finance: “If [the government] does nothing then all its previous efforts will have been wasted but if they continue with the rescue efforts then the hole will get bigger and bigger. We hope the regulators will respect the market and the rules of the market.”
In reality, previous efforts were wasted the moment they were tried. Price discovery is now lacking, and that is a huge problem in and of itself.
Absurd Cries for More Intervention and Liquidity
On Monday, Zhu Baoliang, director of the economic forecast department of the State Information Centre, a government research agency, told Reuters the stock market crash was having a deep impact on the real economy and that it was "essential for the authorities to cut interest rates and loosen monetary policy further."
Bear in mind that it was excessive liquidity that created China's property bubble followed by the stock market bubble.
Thus, Zhu Baoliang is another charlatan promoting the inane notion that the cure is the same as the disease. In effect, Baoliang wants to give alcohol to alcoholics.
Witch Hunt is On
The witch Hunt is on. That means the ridiculous notion of blaming the shorts is in full swing.
Chinese regulators even launched a website encouraging people to name the shorts, further stating those found guilty will be "dealt with severely".
[Pictures via Pixabay.]
by Market Shadows - July 27th, 2015 3:01 pm
Financial Markets and Economy
A reader recently asked the question of why we so often don't trade our plans after we've gone to the trouble of planning our trades. The usual answer to this question is that emotion gets in the way, which naturally leads to strategies for yet more planning, "discipline", and the dampening of emotion. As an interesting article on motor sport makes clear, however, it may well be that we lose our plans when we lose our concentration. Instead of working to control emotions, it makes sense to cultivate expanded levels of focus. After all, an athlete can be fired up emotionally *and* wholly focused on the game: emotion can facilitate performance. Indeed, it's the football or basketball team that comes to the game "flat" that is apt to fall short in performance. Quite literally, their heads are just not in the game.
Here's your complete preview of this week's big economic events (Business Insider)
It's Q2 earnings season, and for the most part, companies are doing better than expected.
"Of the 187 companies that have reported earnings to date for Q2 2015, 76% have reported earnings above the mean estimate and 54% have reported sales above the mean estimate," FactSet's John Butters said.
China’s stocks tumbled, with the benchmark index falling the most since February 2007, amid concern a three-week rally sparked by unprecedented government intervention is unsustainable.
China stocks plunge, suffer biggest one-day loss since Feb 2007 (Business Insider)
China stocks plunged more than 8 percent, their biggest one-day drop in more
by ilene - July 27th, 2015 1:13 pm
Courtesy of John Rubino.
The whole “market economy” thing is turning out to be a little trickier than China’s dictators expected. To set up the story: After the 2008 crash the country borrowed about $15 trillion (an amount that dwarfs the US Fed’s quantitative easing programs) and spent the proceeds on history’s biggest infrastructure program.
This pushed up the prices of iron ore, oil, copper, etc., igniting a global commodities boom. Then China liberalized its stock trading rules, setting off a stampede into local equities that doubled prices in less than a year. The result is a classically unbalanced economy, with massive physical malinvestment, overpriced financial assets and way too much debt. The inevitable crash began in June.
Beijing responded by tossing about 10% of GDP into equities to stop the bleeding. This worked, as such interventions tend to do, for a while. But last night it failed:
(Reuters) – Chinese shares slid more than 8 percent on Monday as an unprecedented government rescue plan to prop up valuations ran out of steam, throwing Beijing’s efforts to stave off a deeper crash into doubt.
Major indexes suffered their largest one-day drop since 2007, shattering three weeks of relative calm in China’s volatile stock markets since Beijing unleashed a barrage of support measures to arrest a slump that started in mid-June.
“The lesson from China’s last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect,” wrote Capital Economics analysts in a research note reacting to the slide.
The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen tumbled 8.6 percent to 3,818.73 points, while the Shanghai Composite Index .SSEC lost 8.5 percent to 3,725.56 points.
China’s market gyrations have stoked fears among global investors about the broader health of the world’s second biggest economy, hitting prices of growth-sensitive commodities such as copper, which fell on Monday to not far from a 6-year low.
While the prices of commodities and equities have been bouncing around, China’s currency, the yuan, has been eerily stable in US dollars, because the government pegs the former to the latter.