Proactiveinvestors USA & Canada column

Rent versus Buy - The Most Misunderstood Financial Decision

Fri, 24 May 2013 15:10:00 -0400

Rent versus Buy - The Most Misunderstood Financial DecisionPrint

Posted on May 24, 2013

By Tom Bradley

Should you rent or buy?

There are all kinds of reasons to buy a home – making it your own, establishing roots in the community, good schools, basketball hoop on the driveway – and they should be at the top of the list. From a financial perspective, however, the rent vs. buy decision usually lacks rigour (compared to the qualitative analysis) and is often just plain wrong. I cringe when I hear the rationale, “I don’t want to pay all that money for rent. It’s a waste.”

In the Report on Business last week, Rob Carrick wrote about a professor from McMaster University (Frank Tristani) who requires that his students go through a rent vs. buy analysis. This year’s calculation is shown in the column and while readers may not agree with all the assumptions, or the conclusion (in Hamilton, it makes more financial sense to rent than buy ... right now), the process is nonetheless instructive. It considers all the necessary factors and reveals the tradeoffs on both sides.

If you read Rob’s column, you’ll never put wasting money on rent on your ‘Reasons to Buy’ list.

Email this Share on Facebook Add to del.icio.us Stumble It!Tweet

Reading Tea Leaves and the Fed Minutes

Fri, 24 May 2013 15:09:00 -0400

Dear Reader,

Vedran Vuk here, filling in for David Galland. With Japan selling off more than seven percent the other day, the real news stateside wasn't what happened, but rather what didn't. We're still here, and our portfolios live to grow another day. In fact, by the closing bell on Thursday, the S&P 500 was down only 0.29%.

During the 2008 crash and afterward, it seemed that all of the world's economies were joined at the hip – the slightest disturbance in a peripheral country such as Greece or Portugal would send markets around the world reeling. Of course, we're never going to be completely independent of world events, but nonetheless, the relative calm following Japan's drop was certainly a silver lining to the event. We saw a major market get crushed, yet we barely suffered a scratch on the sidelines. That certainly makes me sleep a little better at night – especially considering that's when Japanese markets are open.

Speaking of things that send markets tumbling, I'll start with a review of Wednesday's Federal Open Market Committee (FOMC) minutes – which had a greater impact on domestic markets than the Japanese meltdown. Then, Dennis Miller will talk about who is really living large in retirement. Also, make sure to check out the latest issue of Miller's Money Foreverthat just came out on Tuesday. In the issue, we reveal nine exchange-traded funds (ETF) to replace your expensive mutual funds. One of the recommendations is a dividend ETF with an expense ratio of 0.07% – no, we didn't get a decimal place wrong in that percentage. Compare that to the average offered mutual fund fee of 1.43%. On a $100,000 investment, one would save $1,360 per year by switching to the ETF – that's more than 13 years' worth of subscribing to Miller's Money Forever. For that ETF and eight other ultra-low expense options, see our latest issue. Now, let's get the tea leaves ready to interpret the Fed's most recent musings.

The FOMC Minutes in Review

Vedran Vuk, Senior Analyst

With the FOMC minutes out on Wednesday, it was a fairly wild day in US markets. First, the S&P 500 jumped to 1,687, only to retreat to the 1,654 territory by the close. The headlines were almost comical throughout the day. In the first half, they announced, "Stocks Rise on Fed Comments." By the end of the day, the same news sources proclaimed, "Stocks Fall on Fed Comments." So what did the Fed minutes actually say? Apparently a lot of people are confused out there.

There's good reason for the confusion. Essentially, the Fed said that it will continue to play things by ear. If the economy starts doing better, it will start to scale back on the stimulus. If it gets worse, the stimulus will continue. In a way, that statement bolsters any point of view. If one sees the glass as half full, then this means the Fed could stop the stimulus early, as things are going pretty well. If one sees the glass as half empty, it means the Fed will keep stimulating the economy. Here's a key part of the FOMC minutes:

"A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome. One participant preferred to begin decreasing the rate of purchases immediately, while another participant preferred to add more monetary accommodation at the current meeting .... Most participants emphasized that it was important for the Committee to be prepared to adjust the pace of its purchases up or down as needed."

Notice the lack of a clear message here. Some members suggested pulling back in June. One person says to add more stimulus now, but another says to stop it immediately, while others can't agree on the evidence necessary to make a decision. The market is confused, but can you really blame traders with a Fed statement like that? Your reaction to the Fed minutes depends more on whether you're an optimist or pessimist, rather than the language itself.

Let's take a look at a few more parts of the FOMC minutes worth noting. Again, there were issues involving a bond bubble:

"At this meeting, a few participants expressed concern that conditions in certain U.S. financial markets were becoming too buoyant, pointing to the elevated issuance of bonds by lower-credit-quality firms or of bonds with fewer restrictions on collateral and payment terms (so-called covenant-lite bonds). One participant cautioned that the emergence of financial imbalances could prove difficult for regulators to identify and address, and that it would be appropriate to adjust monetary policy to help guard against risks to financial stability."

What does the Fed mean here? First, consider the problem at hand. As the minutes note, this is a situation where regulators have difficulty addressing the issue, and monetary policy could provide assistance. If I'm offering a junk bond for a very low yield, regulators can't really do anything about that. Prices are set by markets, which are heavily influenced by the Fed's low rate policy.

As yield seekers search for yield in this environment, they're taking more risks with junk bonds but are getting less compensation and safeguards through lower yields and weaker bond covenants. What the minutes are saying is that maybe the Fed should start raising interest rates to deter investors from those bonds. Obviously, regulators can't force rates up nor encourage more prudence with junk bonds – only the Fed can influence markets in such a direct manner.

While on the subject of low interest rates and yield seekers, the FOMC members also had a debate sure to infuriate anyone collecting ultra-low yields at the moment. See their view on inflation (all emphasis mine):

"Accordingly, participants generally continued to expect that inflation would move closer to the 2 percent objective over the medium run. Nonetheless, a number of participants expressed concern that inflation was below the Committee's targetand stressed that future price developments bore careful watching. ... A couple of participants expressed the view that an additional monetary policy response might be warranted should inflation fall further. It was also pointed out that, even absent further disinflation, continued low inflation might pose a threat to the economic recovery by, for example, raising debt burdens."

In short, some of the participants think that inflation should be higher. In fact, they wouldn't mind further monetary expansion to make it so. And if inflation rises while yields remain low, savers basically get creamed. But who cares about savers, right? Certainly not the Fed – but it does care about debtors. The minutes note that low inflation poses a threat by "raising debt burdens." Since higher inflation helps consumers and businesses inflate away their debts, the Fed essentially wants to help debtors at the expense of savors, which seems the opposite of common sense: one should be rewarded for saving and thrift, rather than spending and debt.

In summary, these weren't the most earth-shattering FOMC minutes in the world. We basically received more affirmation of what was already known – the Fed will play it by ear and at this point, it's willing to either push for more stimulus or withdraw it. The ultimate outcome depends on an uncertain future.

Share or Comment on "The FOMC Minutes in Review" by Vedran Vuk

Daddy, I Want to Work for the Government so I Can Be Rich

Dennis Miller, Senior Editor, "Miller's Money Forever"

A few years back, I read an interesting article about rich versus poor on the websiteDifference Between. The author cited the following as one major difference:

"While rich believe they are in control of their lives, poor feel they are subject to vagaries of life and life controls events taking place in their lives. Rich are not concerned with depression or recession, and they are not tied with any special knowledge or professional degree either. On the other hand, poor believes it is his lack of degree or knowledge that keeps him poor. It is when you start to feel that life is happening to you instead of you creating your future, you will lose the right track and condemn remaining poor."

To me, much of the difference boils down to personal confidence and understanding how to deal with the financial situation you are in. At the same time, major events can take place which can either bolster or erode our confidence. Many of my peers went from the "rich" mindset described above to that described as "poor." Yet for many, their net worth did not change.

When one looks at the terms "golden years" or "retiring comfortably," it is not hard to conjure up an image of retirees comfortable with their financial situation, not being too concerned about the economic events taking place around them. Instead, they are enjoying checking a lot of items off their bucket list.

Many retirees in the generation before us fit that mold, yet they were not multimillionaires. How can that be?

A recent Gallup article titled Pensions Are Top Income Source for Wealthier US Retireespresents poll results on sources of income, and presents the findings by annual household income. According to the poll, 55% of retirees earning annual incomes over $50,000 were doing so primarily with a pension. Gallup shared some interesting implications:

"Pension plans seem to be a major factor relating to how financially well off U.S. retirees are. With Social Security by far the major source of retirement funding among U.S. retirees, those who can supplement that money with income from a pension plan or other source appear to be doing much better."

Things Are Changing Quickly

So what does this mean? If you have a "guaranteed pension," you know you have enough money coming in to live on, so you don't sweat the markets anymore and can enjoy life. Not a bad thing.

I can personally attest to this – that's how we lived during the first six years of my retirement. We had the bulk of our nest egg in FDIC-insured CDs paying 6% interest. No worries there, as I knew how much interest income we had coming in, and the principal was backed by the federal government. We had enough to supplement our Social Security to cover our expenses and then some.

That all changed in the fall of 2008, when the first Troubled Assets Relief Program (TARP) started, and the government flooded the banks with money. Our CDs were called in, and we lost the major source of "guaranteed" (as in not to having to worry about it) income. At the time, our CD interest was five times the size of our current Social Security check. Today the best five-year rate on a CD I can find is 1.2%, and even a ten-year Treasury pays only about 2%. With the current interest rates not even keeping up with inflation, I wouldn't touch them. If I wanted to invest in those low yields anyway, the interest would be half of my current Social Security check. Now that is a major economic catastrophe.

In effect, we may still have our capital intact; however, we now have to put our money at much higher risk in order to survive. While others may look at many of us seniors as rich, it is pure baloney. We are damn concerned about recession, depression, and our nest egg. We no longer meet the definition of "rich"; a lot of our confidence has eroded.

Who Is Living Large? Who Is Taking a Step Backward?

It looks to me like those working in the private sector – particularly those baby boomers who are trying to plan for retirement – have quite a challenge.

In a recent Wall Street Journal article, Kelly Greene and Vipal Monga reported that pensions represent an increasingly smaller portion of Americans' retirement savings. The authors wrote: "The portion of private-sector US workers covered only by so-called defined-benefit plans fell to 3% in 2011 from 28% in 1979, according to US Department of Labor data compiled by EBRI."

We are seeing a huge disparity between those in the public sector working for the government and those in the private sector. Most government agencies still have generous, guaranteed pension plans, and many include health care for their retirees. Concurrently, the vast majority of those in the private sector do not have guaranteed pensions, but rather have to save their own money through various IRAs and 401(k)s in order to be able to retire comfortably. We have many friends who have retired from various branches of the government with pensions which are 80% or more of what they earned while they were working.

For example, consider this story from Illinois of teachers earning pensions over $100,000per year. While those are the most extravagant pensions mentioned in the article, the rest aren't too bad either. Whether it's Illinois, California, or New Jersey, you'll find the same story around the country. In fact, defined benefit state plans cover 20 million employees and 7 million retirees, about 90% of all state employees. So nearly everyone from the person at the Department of Motor Vehicles to the teachers are cashing in. Here's an excerpt from the report:

"Of those [Palatine-Schaumburg High School] District 211 retirees, 268 – or 42.5 percent – received pensions of $100,000 or more in 2012.

Other suburban school districts aren't far behind. At Stevenson High School District 125 in Lincolnshire, 39.1 percent of the 133 retired educators receiving pensions make more than $100,000 a year in retirement. District 125 retired educators drew pensions averaging $79,489 last year, according to TRS figures."

Honestly, I don't begrudge any retired government workers a dime. They earned their money and played by the rules which were in place. But ironically, many of those same friends who have these nice government pensions look upon those of us in the private sector as the ones who are rich. Just how much capital would a person in the private sector have to accumulate in order to earn an income of $100,000 "guaranteed" by the government?

Using the 2% ten-year Treasury rate, a person would have to invest $5,000,000 for "guaranteed" income of $100,000. Of course, there's also a difference in how that money is saved. It's what's left over after living expenses, kids' college tuition, and everything else that comes up in life. If you had a government pension, you never had to worry about saving for retirement – so it's less worry before and during retirement.

From this perspective, sure looks to me like those with guaranteed pensions – mostly retired government workers – are the ones who are living large and not worried about the ups and downs in the economy.

Doug Casey and other pundits have predicted a collapse, and I agree that it is going to happen. It will not be too long before more folks in the private sector realize that those government employees with their "guarantees" are the ones who are living rich as the earlier definition outlined, while we constantly have to fret and monitor our money. With things like the Tea Party groups forming, there are already signs that people have had enough. Is it any surprise that some of those groups received greater scrutiny from the IRS? After all, they are a threat to stream of endless pensions to all government employees.

When a full-blown tax revolt finally happens, I am sure their "guaranteed" pensions will be a big factor. This is one place where there's a clear line between the haves and have nots. The retirees from the private sector have to constantly worry about their retirement, while government employees have not a care with their guaranteed incomes. I'm quite confident that the taxpayers won't want to pay their pensions plus the trillions in shortfalls in those pension plans – especially in underfunded state plans around the country.

Those of us in the private sector saw our "guaranteed" pensions disappear. We now have the option of saving our own money and putting it at risk, and we are certainly worried about the ups and downs in the economy and the market. How much longer are taxpayers going to stand for having to save money for our retirement with no "guarantees," while we see our taxes continue to escalate to pay for cushy, guaranteed pension plans for others?

In the meantime, do you want to retire comfortably and enjoy your golden years not having to worry about your finances? Work for the government for 40 years or so and get a cushy pension and free medical care. We have a lot of friends who did just that, and they are very happy enjoying their golden years. I wonder if IRS workers ever have their tax returns audited? Probably not, but if these sorts of retirement inequalities last much longer, antitax groups will likely come to audit their pensions soon.

If you're a retired Illinois District 211 teacher, we'll answer your hate mail (surely coming our way) as soon possible. However, remember that mail to and from Hawaii takes a while, so please be patient. If you weren't so lucky as to retire with a $100K annual government pension, let us help you figure out how to navigate retirement in a low-interest-rate world, whether it's finding yield, learning about annuities, understanding reverse mortgages, or discovering cheap investment funds, and more. Try a risk-free, three-month trial of Miller's Money Forever.

Share or Comment on "Daddy, I Want to Work for the Government so I Can Be Rich" by Dennis Miller

Friday Funnies

That's it for today. Remember that Monday is Memorial Day in the US, so we won't be publishing a Casey Daily Dispatch. We hope our American readers enjoy the holiday, and we'll see you all next Tuesday. Thanks for reading and subscribing to Casey Daily Dispatch.

Vedran Vuk
Casey Senior Analyst

Daily Pfennig: German Business Confidence Shows Improvement

Fri, 24 May 2013 15:05:00 -0400

In This Issue.

* The euro rallies 2 days!
* High Yielders get hammered.
* China fixes renminbi at 19-year high!.
* Gold holds onto gains.

And, Now, Today's Pfennig For Your Thoughts!

German Business Confidence Shows Improvement.

Good day. And a Happy Friday to one and all! I know and fully understand that I've only been back in the office for 2 days, but it sure seems like it's been a very long week! So. plenty of you were not happy that I came back from MD Anderson Cancer Clinic in Houston and didn't tell you what all the tests, scans, and doctors had to say. So, I'll get to that in the Big Finish today. The Big soccer game was held in St. Louis last night. What a game! That's the kind of soccer that would get American fans all lathered up all the time! The score was 4-3, Manchester City, beat Chelsea, who actually led 3-0 at half! Our own Ty Keough, did the analysis on the sports voice of America, KMOX. I had the radio on, while watching it on TV. No it wasn't synched, but it was fun!

It was a Big day for the euro yesterday, and Gold for that matter. The euro gained almost 1-cent on the day, based on the flash PMI (manufacturing) numbers I told you about yesterday morning. The PMI's were not above 50, but there were stronger, and better than expected, and that was enough to get the euro bulls out of the pools to dry off and buy euros. The single unit is up another 3/4's of a cent this morning, as German Business Confidence, as measured by the think tank IFO, gained in a surprise move as expectations were for the number to remain flat. Instead, the May IFO rose to 105.7 from 104.4 in April.

OK, it wasn't a moon shot move higher. But, it was positive when everyone thought it would be flat, and that is cause for celebration in the Eurozone, for Germany is going to pull the Eurozone along until the other countries can get back on their feet. And listen to me now and hear me later when I say that Eurozone growth will only come from Germany in the near future, nowhere else. Wouldn't it be sweet if we could just buy Germany?

The Big news yesterday morning was that the Japanese Nikkei plunged 7.3% the previous night. Well, last night, the Japanese stocks began in the dumps again, but ended their session on a higher note, as investors were cherry picking cheap stock prices. The Japanese yen, reversed its gains from the previous night, and lost ground again. It's difficult to sit down and try to rationalize what the heck is going on in Japan these days. What do investors see one day and not the next day, etc. , etc. I would just prefer to steer clear of all this back and forth and wild swings. But then that's just me. I know some people live for markets like this. not me.

The Aussie and New Zealand dollars (A$'s and kiwi) lost more ground overnight, as they were unable to fill their sails with any of the rally wind coming from the euro. There has been no real beef news to warrant these moves downward in the two currencies, it just seems that sentiment toward the higher yielding currencies has really moved to the back of the room. Look across the board at the higher yielding currencies this week and you'll find them all getting taken to the woodshed. Brazilian real, Mexican peso, S. African rand, Aussie and kiwi. So, what now? What are investors looking for now, that replaces yield? Oh! That's right! Stocks. everyone is buying stocks, the ship is listing to the side of stocks right now, folks. better be careful. My friend, and guitar playing cohort, Steve Sjuggerud, believes that stocks will continue this rally until the Big Ben asset Bubble is removed. If that's the case, then stocks should go up for eternity! Well, we all know that's not going to happen, so there has to be a happy medium here. And like I say all the time, stocks will be in play until they aren't. Just like Greek interest rates that were low for almost 10 years, trading on top of German interest rates, until they weren't.

It looks like we'll head into the Memorial Day Weekend, with a couple of things going on. Like the stock market rally. The economic data here in the U.S. not really being what strong recoveries are made of. And the St. Louis Cardinals in first place. Memorial Day is the first marker in the long marathon baseball season, and my beloved Cardinals are sitting on top of their division and near the top in all of baseball. Makes me happy. And that's what we want going into a Holiday Day weekend that kicks off summer! Alex is out of school now.

Hey! I forgot to mention what a great opportunity Alex received. He's going to be playing with the Junior Olympics Water Polo team from St. Louis this summer, and will be in California at the end of July to play games. How about that! The little chunky kid that just wanted to play video games and build roller coasters when he was younger, is going to play with the Junior Olympics Water Polo team! It might turn out that he doesn't get much playing time, but he's on the team, and will gain tremendous experience to take with him into his senior season in high school next year.

Well, speaking of U.S. data, like was earlier, before all my personal stuff got in the way. Today we'll see the color of the April Durable Goods Orders. Recall, that March's number here wasn't very good, in fact it was downright awful, printing at -6.9%... The experts believe that April's Orders will rebound. But will they rebound enough to make up for a negative -6.9% drop in March? I doubt it. But let's move on, it's a Friday before a 3-day weekend, and I want to kick off summer in a good mood!

I told you yesterday morning that Gold was up $20 but that was before the boys and girls in NYC arrived at their desks. Well, they tried to take Gold down, as it lost $6 out of the starters blocks in NY trading hours, but the shiny metal was able to gain back that $6 and more, ending the day up $21. This morning, Gold is off to a rough start, but is only down $3, which isn't any great shakes.

Remember when I told you about how traders had taken what Big Ben Bernanke had to say on Wednesday, hawkishly? And the bias to buy dollars was big? Well, as I also told you, I didn't see it that way, and thought that Big Ben was simply speaking out of both sides of his mouth.. I think that the metals traders saw this as I did. The currency guys are a mish-matched bunch of traders right now, taking some currencies i.e. euros, higher, and leaving others i.e. A$'s to the selling blocks.

The Chinese renminbi / yuan moved higher against the dollar again last night, and hit a 19-year high! WOW! Chinese Premier, Li, spoke about how the country was making progress in opening up its capital account. That's central bank parlance for "we're getting ready to allow convertibility in the currency". The People's Bank of China (PBOC) fixed the currency higher in value, (lower in number) on this news, as capital continues to flow into China. The smart investors see what's happening here now even clearer than before. Of course if they had only been Pfennig Readers they would have known about China's plans before China even announced them, long ago! No, I'm not slapping myself on the back here, just pointing out that you all knew about this plan long ago. and you don't have to rush into buy now when everyone and their brother is trying to get some renminbi/ yuan. Or. maybe you listened to me then, and didn't buy, but are hearing me now.

Here's an interesting tidbit. Trading in Gold using the Chinese renminbi / yuan has tripled in Hong Kong this year. And people are worried that the Gold bull market is over. hogwash! Not according to buyers in Hong Kong!

OK. I have two Then There Was This things for you today. The first is my usual attempt to bring you some piece of news that you might have otherwise missed. The second is a note from our fearless leader, the one and only Big Boss, Frank Trotter. So, let's get to the meat of these things, eh?

Then There Was This. I found this on King World. An interview with one of my fave economists ever! James Grant. James Grant was asked if the Fed can exit QE gracefully as they have insisted is the case for some time. Here's what Mr. Grant had to say to that! "Well, anything is possible. As I indicated a moment ago, one becomes more agnostic or at least humbler in the face of the future the more birthday candles one blows out.

But it is a matter of record that the Fed has shown not much judgment with respect to future events.... It (the Fed) famously failed to see what some of us regard as the most obvious bubble of our lifetimes, namely the terrific distortions in residential house prices, and in residential mortgages.

So, to say the Fed is going to gracefully and without cost exit its policy of unprecedented money creation and experimentation is to give the Fed many, many benefits of the doubt. And I think it's prudent to prepare for an ungraceful, noisy, and distorting exit.

For that reason I continue, for example, to be bullish on gold and gold stocks, although one can hardly bear to say those words most days. They've been very disappointing. But I think they represent prudent (investments), if currently depressed, and for that reason perhaps more interesting than if they were elevated.

But certainly prudent investments in the possibility of monetary disorder. And with central banks the world over doing what central banks certainly in the modern age have never done, it seems to me only prudent to have some hedge against unscripted events." - James Grant

Chuck again. Sounds like a train wreck about to happen to me. Or, better yet, it's like I describe to people all the time. you're driving on an ice covered road, (people in the deep south have no idea what I'm talking about) and your car begins to spin out of control. You can't get it to stop no matter what you try, in fact, now you're spinning even faster, and you see that you're going to crash into the guardrail that keeps you from going over the cliff. The fact is simply that you're going to crash into the guardrail, the question is When? That's the U.S. on QE.

Then There Was This. From the Big Boss, and my long time good friend, Frank Trotter. This is great stuff folks, take a listen, and then act. here's Frank!

"We've been a little low key about social media knowing that Pfennig readers want solid commentary and don't care when we're running out for a cup of coffee. As this medium has progressed we now think there's a role for EverBank to keep you informed and sometimes entertained. To participate in this you can "Follow" EverBank at Google Plus you'll need to sign up of course but you control when you stop by, or just check in when we make an announcement here.

We have started adding a few pieces of commentary already just to prime the pump and we'll be doing much more. Referencing other articles of interest. Inserting a video commentary. Having live two-way video conversations with Chuck and others from the World Markets desk. Adding in some observations and reviews of what we discover as we travel for EverBank around the world. The http://www.dailypfennig.com isn't going away, but Google Plus is a little fresher and has many more capabilities that we'll be expanding on over time. So stop by. Sign up. Follow EverBank.

Chuck again. Yes, I signed up about a month ago, and find Google+ very interesting! I think this is a great way to follow EverBank.

To recap. The euro is gaining ground again today, yesterday it was the better than the average bear PMI's (manufacturing index) and today it's the upward movement in the IFO German Business Confidence for May. Germany will represent any economic growth that comes from the Eurozone, and Chuck laments not being able to buy just Germany. China allows further appreciation in the renminbi moving it to a 19-year high, as flows into China continue at a heavy pace. And Gold held onto its gains yesterday, but is seeing some slippage this morning.

Currencies today 5/24/13. American Style: A$ .9685, kiwi .81, C$ .9680, euro 1.2965, sterling 1.5125, Swiss 1.04, . European Style: rand 9.5355, krone 5.8140, SEK 6.6335, forint 224.05, zloty 3.2430, koruna 20.0345, RUB 31.31, yen 101.35, sing 1.2640, HKD 7.7630, INR 55.63, China 6.1867, pesos 12.45, BRL 2.0435, Dollar Index 83.51, Oil $93.92, 10-year 2.01%, Silver $22.44, and Gold. $1,387.85. and it's Friday, so let's take a quick peek at the U.S. Debt Clock, but only a quick peek we don't want to ruin our start to the holiday weekend! Click here.

That's it for today. Well. it's here! Summer! (yes, I know the official start is in 4 weeks, but you know what I mean) I noticed it was a full moon this morning. I love full moons, and no I'm not a werewolf! I especially love full moons when I'm near the ocean. OK. well, my trip to Houston and return was not fun, and getting stuck, scanned, and tested is no picnic either, but, the doctor had good news. the chemo I take seems to be working, and he said that I'm doing great! He showed me a picture they took of me last September when I first arrived at MD Anderson, and said compare that to now. "you look so much better"! I have to admit he was right. Of course he was also very apologetic for the stay I had to make in the ICU at the end of February. So, we will continue with the plan for now. And hopefully I continue to "get better". I will still suffer days when I just can't answer the bell, folks. so bear with me. And with that, this weekend is packed with activities. Tomorrow we will celebrate Braden Charles Butler's birthday at the house, and on Sunday we will celebrate the little girl next door and her high school graduation. Jordan Yanker and Alex were once good buddies, but then they got a little older and that wasn't cool any longer. Then our neighbors moved away, but remain good friends. And Jordan and Alex are once again friends in High School. She's quite the athlete too, as she will compete in the state track meet tomorrow in the long jump, triple jump, and high jump! WOW! Congrats graduate! And with that, let's get out of here and head to the backyard grills! I thank you for reading the Pfennig and I hope you have a Fantastico Friday, and Marvelous Memorial Day Weekend!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Amphora’s John Butler: Currency Market Rigging Likely Would Paint Gold’s Tape

Fri, 24 May 2013 15:02:00 -0400

¤ YESTERDAY IN GOLD & SILVER

The gold price hit its low shortly after 9:00 a.m. in Hong Kong on their Thursday morning...and then rallied unsteadily right until the 8:20 a.m. Comex open in New York. But as it was about to break above the $1,400 spot price mark, a seller showed up...and gold got sold down until shortly before noon EDT. The subsequent rally lasted until the 1:30 p.m. Comex close, before selling off a few dollars going into the 5:15 p.m. EDT close.

The Hong Kong low was around the $1,358 spot mark...and the high at 8:30 a.m. in New York, as recorded by Kitco, was $1,399,80 spot. After three days of price activity, it should be obvious to all and sundry that the $1,400 spot price mark is being defended...but for what reason, is unknown.

Gold closed at $1,391.60 spot...up $21.90 on the day. Volume, net of roll-overs, was pretty heavy...around 185,000 contracts.

It was more or less the same chart pattern in silver, except the spike low of the day [around $21.98 spot] came at exactly 10:00 a.m. Hong Kong time. The subsequent rally got turned lower at 8:30 a.m. EDT...and silver's New York low [$22.14 spot] came at 11:30 a.m.. The rally from that point ended a few minutes after the Comex close...and silver traded sideways from that point onward. The high tick came in the New York Access Market sometime...and Kitco recorded that as $22.81 spot.

Silver closed the Thursday session at $22.63 spot...up 36 cents from Wednesday's close. Gross volume was a very healthy 49,000 contracts.

The dollar index closed on Wednesday at 84.28...and rallied to its high of the day of 84.49 at 9:00 a.m. in Hong Kong. It was all down hill from there...and the low of the day [83.65] came at 12:00 o'clock noon right on the button in New York. The index gained back a few basis points going into the close...finishing the Thursday session at 83.75...down 53 basis points from Wednesday's close.

I carefully noted that despite the fact that the dollar index fell 75 basis points from its high to its low, it appears that the precious metal prices fall faster on dollar rallies, than they rise on dollar declines. That phenomenon was very visible in precious metal prices yesterday and Wednesday. And if you examined the New York Spot [Bid] charts for both metal yesterday, it's clear that the silver rally ended at precisely 11:30...and was in rally mode from that point...and gold hit its low about the same time...and traded sideways until shortly after 12 o'clock noon in New York.

The gold stocks gapped up over 2 percent at the open...and then chopped lower until gold put in its low at 11:30 a.m. in New York. From that point they rallied a bit before chopping sideways into the close. The HUI finished up 0.83%...a very poor performance considering the size of the price gain.

The silver stocks followed the same price pattern as the gold stocks...and Nick Laird'sIntraday Silver Sentiment Index closed up only 0.49%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 25 gold and 10 silver contracts were posted for delivery on Monday.

Once again there was a withdrawal from GLD. This time an authorized participant withdrew 48,340 troy ounces. There were no reported withdrawals from SLV.

There was no sales report from the U.S. Mint.

It was a busy day for silver over at the Comex-approved depositories on Wednesday, as 1,149,707 troy ounces were reported received, but only 60,354 troy ounces of the stuff were shipped out the door. The link to that activity is here.

In gold, these same depositories didn't report receiving any gold, but shipped out 64,136 troy ounces. The link to that activity is here.

Before my "cute quota" photos...here's a look at Canada's newest 'bank note'. You have to follow Canada's current political scandal to understand what it means...and for those that do, it's good for a laugh.

Here's your "cute quota" for the day...

Because I'm out of town for the next five days, I've attempted to cut down on the stories as much as possible.

¤ CRITICAL READS

Jim Rickards: We are in a depression

Jim calls it like it is when interviewed by Max Keiser on Russia Today yesterday. The video was posted on the youtube.comInternet site...and is well worth watching. The interview begins at the 12:00 minute mark. I thank reader Harold Jacobsen for today's first story.

BRICS risk 'sudden stop' as dollar rally builds

The stock of capital flowing into emerging markets has doubled from $4 trillion to $8 trillion since the Lehman Crisis, chasing a catch-up growth story that looks tired and has largely sputtered out in Brazil, Russia and South Africa.

Much of the money has gone into debt, with falling economic returns. This is the next shoe to drop in the festering saga of global imbalances. All it will take is a gear-shift by the US Federal Reserve and the inevitable dollar surge that follows. It was the Volcker Fed that set off Latin America's defaults in the early 1980s. It was the mighty dollar that set off Mexico's Tequila crisis, and then the East Asian chain-reaction in the 1990s.

"Every emerging market blow-up that I have seen was preceded by a rise in the dollar," said Albert Edwards for Société Générale .

"Investors overlook how vulnerable these countries are to a dollar shock. The whole process of excess liquidity and foreign reserve build-up goes into reverse. It acts like monetary tightening and turns into a vicious circle. Markets look for the weak link with the worst current account deficit, and then the dominoes start to fall," he said.

This must read Ambrose Evans-Pritchard article was posted on thetelegraph.co.uk Internet site late on Wednesday evening BST...and I thank Roy Stephens for bringing it to our attention.

European Leaders Saying No to Austerity...Don't Say Yes to Stimulus

Austerity is out after the euro-area recession extended to a sixth quarter. Stimulus isn’t yet in.That was the something-for-everyone message from European leaders at a summit in Brussels yesterday. All touted a previously announced 6 billion-euro ($7.7 billion), seven-year initiative to fight youth unemployment, now at 24 percent. National governments won’t put up more cash, German Chancellor Angela Merkel said.

“It’s not a matter of money,” Merkel told reporters after the summit. “It’s a matter of looking at how to spend this money most productively.”

The 17-nation euro area’s nonstop contraction since the third quarter of 2011 has left the European Central Bank to try to mitigate the damage by cutting interest rates and exploring unconventional ways of channeling money to needy companies, especially in the south.

This Bloomberg story, filed from Brussels, was posted on their website just before midnight MDT on Wednesday...and it's courtesy of U.A.E. reader Laurent-Patrick Gally.

MEPs vote to protect small bank depositors

Large depositors in the EU will from 2016 be in line to suffer losses if a bank gets into serious trouble, but deposits under €100,000 should be fully protected, MEPs in the economic affairs committee voted late on Monday (20 May).

“The bail-in of any creditors should be done according to a clear hierarchy, with depositors with savings over €100,000 last in line, whilst deposits under €100,000 would be fully protected,” said Green economic and finance spokesperson Philippe Lamberts in a statement.

The votes amended the European Commission’s bank recovery and resolution proposal.

The devil is, as they say, in the details...and there is quite a bit in the fine print...which you'll soon discover if you read thiseuobserver.com story from yesterday...and I thank Roy Stephens for his second story in today's column.

E.U. retreats from olive oil ban after wave of ridicule

The European Commission has been forced to beat a hasty retreat from a proposed ban on jugs of olive oil in restaurants after the idea met with widespread ridicule.

Barely a week after it was announced for "hygiene" and "consumer protection" purposes, the EU commissioner in charge, Dacian Ciolos, rushed to the same press room on Thursday (23 May) to announce he was withdrawing the measure.

Referring to the "quite strong reactions", Ciolos said he had decided to "not submit it for adoption."

The proposal would have banned jugs and dipping bowls of olive oil in restaurants from next year and was meant to prevent restaurant-goers from being served any old inferior oil.

This is from the top drawer of the "You can't make this stuff up" filing cabinet...and was posted on the euobserver.com Internet site late yesterday afternoon Europe time...and it's Roy Stephens' third offering of the day.

Veteran fears 'beginning of the end' for Japan as bond market buckles

Yields on 10-year Japanese bonds (JGBs) have doubled in a month and spiked dramatically to 1pc on Thursday, triggering a 7.3pc crash in the Nikkei stock index. It was the biggest one-day fall since the tsunami two years ago, comparable with wild moves seen at the height of the Asian crisis in 1998.

The contagion effect set off a retreat from stocks across the world, though Wall Street later pared losses. The iTraxx Crossover or “fear gauge” for corporate bonds jumped 25 points to 392.

The Bank of Japan (BoJ) intervened with $20bn (£13bn) to drive down yields again but the failure to ensure an orderly debt market has started to rattle investors. Banks, pension funds and insurers appear to be dumping JGBs for fear of being caught on the wrong side of a bond rout.

Richard Koo from Nomura, an expert on Japan’s Lost Decade, said the sell-off in recent days has shown that the BoJ may not be able to hold down yields “no matter how many bonds it buys”. This could lead to a “loss of faith in the Japanese government” and the “beginning of the end” for its economy, if handled badly.

This must read commentary by Ambrose Evans-Pritchard was posted on The Telegraph's website yesterday evening BST...and I thank reader Glenn Jeffs for bringing this very important story to our attention.

Four King World News Blogs/Audio Interviews

1. James Turk: "We Are Witnessing Extraordinary Events in Gold and Silver". 2. Rick Rule: "How Investors Can Make a Fortune in These Markets". 3. Jim Grant: "Gold and the Fed's Ungraceful Attempt to Exit QE". 4. The audio interview is with Michael Pento.

Amphora's John Butler: Currency market rigging likely would paint gold's tape

In his market letter for May, commodities fund manager John Butler of Amphora Capital in London describes the rationales and mechanisms of surreptitious currency market intervention by central banks, rationales and mechanisms that will be familiar to anyone who follows the gold market with even the slightest skepticism.

Drawing on a long conversation he had years ago with his professor of international economics in graduate school, a professor who was a former high U.S. Treasury Department official, Butler writes that supporting the U.S. dollar amid suppression of interest rates well may involve surreptitious suppression of the price of gold:

"The United States may have little in the way of foreign exchange reserves but it has a huge pile of gold reserves -- the world's largest, in fact. If the U.S. were to set about covertly intervening to support the dollar amid artificially low interest rates, therefore, it would make far more sense to do so through covert intervention in the gold market. Should they follow my former professor's advice, they would sell gold into the market at relatively illiquid times for maximum price effect. They would do so repeatedly until certain technical chart patterns turned in favor of the dollar and against gold, establishing a new trend. And if they succeeded, no one need ever know."

Central bankers, Butler notes, are very skilled tape painters.

With Butler's kind permission, the May edition of his letter, theAmphora Report, is posted at GATA's Internet site. It's a must read for sure...and I thank Chris Powell for wordsmithing the above introduction.

Gold Advances as Signs of China Slowdown Fuel Demand for Hedge

Gold capped the biggest gain in almost a month on signs that Chinese manufacturing will slow in May for the first time in seven months, sparking a drop in global equities and increased demand for bullion as a protection of wealth.

The preliminary reading for a Chinese purchasing managers’ index missed analysts’ estimates and came in below the level of 50, indicating a contraction. Commodities and stocks retreated, with Japanese equities falling the most since the aftermath of the Fukushima disaster two years ago. Bullion also gained as the dollar declined the most in more than a month against a basket of currencies.

“Nervous investors are turning to gold as everything else looks very bleak today,” Carlos Perez-Santalla, a broker at Marex North America LLC, said in a telephone interview from New York. “The weakness in the dollar is supportive for gold.”

This Bloomberg story was posted on their website during the Denver lunch hour yesterday...and I thank West Virginia reader Elliot Simon for finding it for us.

Yuan Gold Trade in Hong Kong Triples as Currency Gains Cut Risk

The yuan rose 0.6 percent this month, the best performance in Asia, as Premier Li Keqiang signaled China will unveil a plan on capital-account convertibility this year. People’s Bank of China Deputy Governor Yi Gang said in April the yuan’s trading band will be widened “in the near future.” The central bank sets a daily reference rate for the currency, which can diverge from the fixing by a maximum 1 percent.

China may double the band within a year, Ma Jun, chief economist for Greater China at Deutsche Bank AG, said at a press conference in Singapore on May 22. The nation has designated Qianhai district of Shenzhen, a city that borders Hong Kong, as a testing ground for freer cross-border yuan usage. The yuan climbed as much as 0.1 percent today to a 19-year high of 6.1279 per dollar in Shanghai after the central bank strengthened its fixing by 0.13 percent to a record 6.1867.

A wider trading range for the currency will spur trading and hedging in gold denominated in it, China Gold & Silver’s Cheung said. The society may seek cooperation with Qianhai Authority in steps to develop yuan-based bullion trading, such as building a vault for the precious metal, he said.

This Bloomberg news item, filed from Hong Kong, was posted on their Internet site yesterday evening MDT...and I thank Marshall Angeles for sending it along.

Goldbroker interviews GATA secretary about gold market manipulation

Goldbroker's Fabrice Drouin Ristori interviewed GATA's secretary/treasurer about gold market manipulation the other day, leading off with the question of how long it can continue. This interview was posted on the goldbroker.com Internet site yesterday.

It’s Time To Be BRAVE With Gold Stocks

This short, but terrific commentary by David Banister from The Market Trend Forecast was posted on theetfdailynew.com Internet site on Tuesday...and is definitely worth reading. I thank reader Ken Hurt for bringing it to our attention.

Bron Suchecki: Time to give up on the CFTC

Bron Suchecki of the Perth Mint reviews U.S. commodity trading regulations and concludes that they're too complicated and full of loopholes to result in any sensible interpretation that might be applied against market manipulation by the Commodity Futures Trading Commission.

"What the market needs," Suchecki writes, "is straightforward, common-sense rules that everyone knows in advance. ... Or just drop the pretense and go free-for-all law of the jungle. Having interest rates this low doesn't help, as speculators have minimal cost in holding a position for a long time (until it blows up) or taking on large positions. This just adds to the volatility. Time to give up on the CFTC being able to control this."

Suchecki's commentary is headlined "Time to Give Up on the CFTC" and it's posted at the 24hGold.com Internet site. I found this commentary in a GATA release from yesterday evening Vancouver time.

The 6 W’s: Who, what, where, when, why and what of it

The RegMed sector is ripe for the tourist trade…investors, most notably day traders hear a piece of news, get excited, and decided to buy. Great for the time being, but remember these same buyers can also be very fickle as their purchasing habits are often based on emotion, not sound investment strategies. One piece of bad news or, even worse, company silence sends them running for the exists causing turmoil for the equity(ies) in play. We can’t avoid bad news (s*it happens), but there is no excuse for a RegMed company not communicating with its owners, especially when one considers the ease of communication via the internet and social media. A cursory review of RegMed web pages shows companies not bothering to keep this vital marketing, customer, and investor relations vehicle up to date. We’ve seen many whose news and media pages and/or investor relations content have not been updated for 6 months or more. Not a great strategy for keeping your most important asset excited and confident about their investment. Build it and they will come. Nurture it, and they will grow with you!

The next few trading sessions will be critical for the RegMed sector which will establish whether market reaction to recent events is temporary and short-lived, or if this is the start of a more fundamental correction. One wildcard for someone to announce some clinical data but I don’t anticipate … ANY! Pricing has been percolating on the low end of the spectrum. Most of the RegMed equities are … way below I-Bank target … and they still haven’t readjusted and they won’t.

Everyone have a very safe and good Memorial Day Weekend! Take a moment to remember the troops.

Measuring the day – NEGATIVE – 19 red (downs) followed by 10 green (ups) and 7 fluctuating black (flats).

Mid-Day – Stocks continue to slide for a third day on concerns about the Fed’s possible withdrawal of the stimulus later this year. Early morning losses have been pared however as durable goods numbers came in better than expected. At mid-day, the NASDAQ is DOWN -10.87 or -0.32% at 3448.55 while the Dow is also DOWN -42.48 or -0.28% at 15,252.02. The CBOE volatility index is trading at 14.49.

Research Notes:

RegMed Daily – The Early Movers … http://www.scimitarequity.com/blog/2013/05/24/the-early-movers-whos-hot-whos-not-30

Research Report – Sangamo Biosciences (SGMO) gets $6.4 M from CIRM – BUY…http://www.scimitarequity.com/blog/2013/05/24/sangamo-biosciences-sgmo-gets-6-4-m-from-cirm-buy

Roll Call:

Aastrom (ASTM) is DOWN… -$0.01 to $0.5501 with a pending offering about to dilute the price and share count. A SELL.

Athersys (ATHX) is DOWN… -$0.07 to $1.74 post earnings. A HOLD.

BioLife Solutions (OTC: BLFS) is DOWN…-$0.02 to $0.32 per share at mid-day. BLFS is growing its business, evidenced by its licensing of specific areas of intellectual property, while keeping high growth as the regenerative medicine market opportunity develops. BLFS hold the leading supplier position for pre-formulated, clinical grade biopreservation media products. A BUY.

Biotime (NYSEMKT:BTX) is UP…$0.0770 to $4.2570 with a trading range of $4.20 – $4.31 and a 53 K share volume. HOLD

Cytori (CYTX) is DOWN … -$0.03 to $2.54 with today’s mid-day trading range of $2.51 – $2.5490 and a 31 K share volume. A BUY.

Cytomedix (OTC: CMXI) is up… +$0.01 at $0.50, with a trading range of $0.49- $0.50 and moderate volume of 44 K shares. A BUY.

Harvard Biosciences (HBIO) is DOWN…-$0.04 at $5.12 with a trading range of $5.10 – $5.14 and a light 4 K share volume. BUY

NeoStem (NYSE MKT: NBS) is UP …+$0.01 to $0.5789 with moderate share volume of 202 K at mid-day. The trending 50 and 200 day moving averages are at $0.61 and $0.63 respectively. A BUY!

Medistem (PINK: MEDS) is FLAT…at $1.10 … with no real news or share volume. MEDS needs to generate some significance to differentiate itself and forward … any visibility standing… A very thinly or no trading volume stock. A HOLD.

Nuvilex (OTC:NVLX) is DOWN…-$0.0005 at $14.15 with a trading range of $0.14 – $0.1479 and share volume of 1.9 M.

Sangamo (SGMO) is DOWN…-$0.05 at $7.88 with a trading range of $7.77 – $8.12 and a moderate share volume of 163 K. Look to pop next week on news of CRIM award working its way through the trading market. A BUY.

Verastem (VSTM) is DOWN…-$0.11 at $9.15 with a trading range of $9.00 – $9.28 and moderate volume of 15 K. BUY

News

The Icahn School of Medicine at Mount Sinai has granted Cellular Dynamics International (CDI) exclusive license rights to commercially develop cardiomyocyte progenitors for in vivo cell therapy and regenerative medicine applications. These cells are capable of further differentiation into the multiple cell types of the heart, including cardiomyocytes, endothelial cells, and vascular smooth muscle cells, and thus could be used as a potential therapeutic for damaged heart tissue. The original agreement announced in May 2009 was of an exclusive CDI license to a key patent portfolio surrounding the differentiation of stem cells into human cardiovascular progenitor cells as tools for research use only. Under the new agreement, CDI now can make use of, distribute, sublicense and sell cellular products that employ the licensed technology for therapeutic use.

Reduced-intensity conditioning allogeneic hematopoietic stem cell transplantation (HSCT) in 2 antiretroviral-treated patients heterozygous for the protective CCR5Δ32 mutation led to undetectable HIV DNA and HIV RNA in peripheral blood mononuclear cells (PBMCs). The finding indicates that this approach may purge the PBMC reservoir of HIV. The one recorded HIV cure involved myeloablative allogeneic HSCT for acute myeloid leukemia, using cells from a donor homozygous for the Δ32 mutation in the gene encoding CCR5, a coreceptor for HIV-1 entry. Homozygotes carry two identical copies of a gene affecting a given trait, while heterozygotes carry one copy of the gene of interest. People homozygous for CCR5Δ32 resist infection with CCR5-using HIV. CCR5Δ32 heterozygotes have slower HIV disease progression.

Share and Enjoy:

The Early Movers – who’s hot, who’s not

Fri, 24 May 2013 14:58:00 -0400

Which RegMed companies are making moves in the 1^st hour

Signs of life …

Shire ADR (SHPG +$1.34) and Reneuron (LON:RENE +$0.25) are the leaders as today’s market opens…

…followed by BioTime (NYSEMKT: BTX +$0.07), Fibrocell (NYSEMKT: FCSC +$0.05), NeoStem (NYSE MKT:NBS +$0.02), Stemline (STML +$0.02), Neuralstem (NYSEMKT: CUR +$0.01), BioLife Solutions (OTC: BLFS +$0.01), Brainstorm (OTC: BCLI +$0.007), and Advanced Cell Technology (OTC: ACTC +$0.0010)

A view of the downside at the open …

Wright-Medical (WMGI -$0.16) and MiMedx (MDXG -$0.13) are the loss leaders…

…followed by Osiris (OSIR -0.12), Athersys (ATHX -$0.09), Cryo-Cell (OTC: CCEL -$0.09), Harvard Bio (HBIO -$0.06), Verastem (VSTM -$0.06), Cytori (CYTX -$0.04), Aastrom (ASTM -$0.01), Cytomedix (CMXI -$0.01), Dendreon (DNDN -$0.01), Geron (GERN -$0.01), ImmunoCellular (NYSE MKT: IMUC -$0.01), and Opexa (OPXA -$0.01),

And some of the sector is flat

Bioheart (PINK: BHRT), IntelliCell (OTCMKTS: SVFC), Medistem (PINK: MEDS), Mesoblast ADR (PINK: MBLTY), Pluristem (PSTI), Proteonomix (OTC: PROT), Tengion (PINK: TNGN), StemCells (STEM), ThermoGenesis (KOOL), and Vitro Diagnostics (PINK: VODG)

Share and Enjoy:

Sangamo Biosciences (SGMO) gets $6.4 M from CIRM – BUY

Fri, 24 May 2013 14:57:00 -0400

Strategic Partnership Award from California Institute for Regenerative Medicine

SGMO receives $6.4 Million Strategic Partnership Award From California Institute for Regenerative Medicine (CIRM) to develop ZFP Therapeutic® for Beta-thalassemia funding for IND application and clinical trial of curative approach on the application of its zinc finger nuclease (ZFN) gene-editing technology in hematopoietic stem cells (HSCs).

The 4 year grant provides matching funds for preclinical work that will support an IND application and a P1 clinical trial in transfusion-dependent beta-thalassemia patients. The grant application entitled “A Treatment for Beta-thalassemia via High Efficiency Targeted Genome Editing of Hematopoietic Stem Cells” won the highest scientific score and was the only application recommended for funding in this round of CIRM’s Strategic Partnership Awards.

SGMO is taking a different approach. During development, a fetal form of hemoglobin is made. In infancy, it fully protects beta-thalassemia patients from developing disease symptoms. Later in childhood however, production of fetal hemoglobin ceases and is replaced by synthesis of adult-type beta-globin chains that are defective in beta-thalassemia patients. SGMO’s approach enables the permanent production of therapeutic fetal hemoglobin to achieve normal levels of hemoglobin and RBCs, with the goal of eliminating, or greatly reducing, the need for chronic blood transfusions. Moreover, by performing this genome editing in HSCs isolated and returned to the same patient (so called autologous BMT), SGMO’s approach eliminates both the need for a matched donor and the risk of GvHD.

The Bottom Line: Adding to our coverage list as SGMO’s ZFN-genome editing technology enables modification of a patient’s own stem cells and potentially provides a safer approach to current therapies for hemoglobinopathies such as beta-thalassemia and sickle cell disease. the persistence of fetal hemoglobin beyond the newborn stage mitigates the severity of these hemoglobin disorders. If successful, this could eliminate the need for life-long medications and red blood cell transfusions that are currently the standard of care for these disorders.”

SGMO closed on 5/23/13 at $7.43 on a low volume <450> day and had traded as high as $10.80 on 5/3/13. This is definitely an actionable event and I project a $0.10 to $0.20 jump for SGMO even in a DOWN and vacation weekend market on the non-dilutive CIRM funding – it might even spill over into Tuesday. The 50 day moving average is $9.28 followed by the 200 at a low of $8.10.

Beta-thalassemia is a genetic disease of the blood caused by mutations in the beta-globin gene. This gene defect leads to impaired production of hemoglobin, the iron-containing protein in red blood cells (RBCs) that carry oxygen from the lungs to the tissues. Individuals with thalassemia are dependent on blood transfusions for survival as they fail to make sufficient healthy RBCs. The unmet medical need in transfusion-dependent beta-thalassemia is significant, with reduced life expectancy due to multi-organ failure caused by iron overload, blood-borne infections and other disease complications. A bone marrow transplant (BMT) of HSCs from a “matched” related donor (allogeneicBMT) is curative.

Share and Enjoy:

Stay the course … What else can we do?

Fri, 24 May 2013 14:56:00 -0400

No long term investors are stepping up – WHY?

RegMed equities were again … sputtering to the close – there’s a lot of volatility in this market as traders – “tourist” the sector as fragility and …“artificiality” focuses the market. Volatility won’t go away … but I don’t expect any … big correction since stocks are already inexpensive and … It’s here – now! You have some further pullbacks … but it doesn’t mean you don’t want to exit the positions – just NOT jump into anything – especially any NEW OFFERING even at a discount – STML was lucky with 2 good underwriters and CSCs being HOT!. There still could be some further declines … here!

In the broader market … stocks closed modestly lower rebounding sharply in a volatile session as market participants weighed better U.S. economic data against the fears the Fed may soon start to curtail its bond buying.

There were some bright spots … the big bat in the ballpark … is Stemline (STML) UP +$0.60 after an offering to $15.42 after the $69 M offering and over-allotment being fulfilled. Verastem (VSTM) is UP +$0.08 at $9.26 with Osiris (OSIR) also UP + $0.08 to $9.26; Wright-Medical (WMGI) was UP + $0.07 to $23.73 – even after a very good day yesterday while Cytori (CYTX) is UP +$0.06 to $2.57 with a good article in Forbes by John Farrell. And finally … Harvard BIO (HBIO) is UP +$0.13 at $5.16 – after a market adjustment following tax free spin-out versus HART IPO – I won’t take total credit for the …. I told you so” …!

Closing negative … seated in the dug-out was … Shire (SHPG) DOWN -$0.30 to $96.74 – even while buying back some stock. MiMedx (MDXG) DOWN -$0.23 to $7.15. Dendreon (DNDN) is -$0.03 to $3.93 with Pluristem (PSTI) is -$0.09 to $3.06 while BioTime (BTX) is also -$0.05 to $4.18. Athersys (ATHX) -$0.05 to $1.81 Opexa (OPXA) was -$0.02 at $1.62 as is NeoStem (NYSE MKT: NBS) is -$0.012 to $0.57 – after the offering – hot damn! Aastrom (ASTM) is slowly eroding up and again DOWN -$0.01 to $0.56 – just in time for an offering and at what price – this is the most timed offering … I waited for a … long … time!

Other favorites closing … BioLife Solutions (BLFS) closed DOWN -$0.029 to $0.34 – expected after very short run to $0.41 along with Cytomedix (CMXI) who is also DOWN -$0.011 to $0.49 – wake up – roaring -BUY – investors should wake to this one; just think hybrid.

Fibrocell (NYSE MKT: FCSCD) who’s had very good days is UP having been UP is flat at $4.85 after a stock reverse also with Medistem (PINK: MEDS) at $1.10.

Measuring the close – NEGATIVE … 17 red (downs) … led 11 green (ups) followed by 9 black (flats) … The CBOE Volatility Index had – traded above15.

Closing Bell: The NASDAQ closed DOWN -3.88 (-0.11%) to 3,459.42 while the DOW was DOWN -12.67 (-0.08%) to 15,294.50.

Lower open anticipated

Fri, 24 May 2013 14:56:00 -0400

Futures drop ahead of durable goods data

Stock market futures fall on Friday ahead of durable-goods orders data that are expected to show continued sluggishness, and as volatility continued for Asian stocks. Investors also may be heading to the sidelines ahead of the long holiday weekend.

RegMed equities have been “sputtering” – there’s a lot of volatility in this market as traders – “tourist” the sector while fragility and “artificiality” focus the market.

DOW futures are DOWN -0.3% as are the NASDAQ futures are DOWN at -0.5%.

EU stock markets climb on Friday, partly recovering from a sharp selloff the prior day. Asian stocks were mixed – Hong Kong rebounded, Australian stocks fell, while Japanese stocks jumped early.

Share and Enjoy:

Riding A Copper Horse

Fri, 24 May 2013 12:55:00 -0400

As a general rule, the most successful man in life is the man who has the best information

My last article, ‘Give It A Doubt’ was about population growth, urbanization in developing countries and the one billion people predicted to join the consuming classes by 2025.

“One billion people will enter the global consuming class by 2025. They will have incomes high enough to classify them as significant consumers of goods and services…” McKinsey Global Institute, Urban world: Cities and the rise of the consuming class

Some of these new consumers are going to be Americans but the majority are in developing countries, they might not want to be Americans but they do want at least a modest piece of what we’ll call the American lifestyle, the cell phones, flat screen TV’s, a nicer apartment, a car or maybe a motorcycle, washer/dryer, a fridge, AC - the amenities of a modern society and all the necessary infrastructure that goes with a well functioning competitive modern economy.

But what if all these new one billion consumers were to start consuming, over the next 12 years, just like an American? What’s going to happen to the world’s mineral resources if one billion more ‘Americans’ are added to the consuming class? Here’s what each of them would need to consume, per year, to live the American lifestyle…

In 2010, more than 38,000 pounds (19 tons) of minerals and fuels were needed per person to maintain the American lifestyle.

Out of the 38,000 total pounds needed, 21,675 pounds were energy fuels - the coal, petroleum, natural gas, uranium - required for transportation and to heat, cool and light homes and businesses.

One billion new consumers by 2025. Can everyone who wants to, live an American lifestyle? Can everyone everywhere else have everything we in North America have?

The answer is a resounding NO!

“The data also show that nations such as South Africa and China will need to increase their average urban per-capita copper stock-in-use by seven or eight times to achieve the same level of services as the developed countries if they use existing technology.

Is there enough copper to meet this potential requirement?

Concern about the extent of mineral resources arises when the stock of metal needed to provide the services enjoyed by the highly developed nations is compared with that needed to provide comparable services with existing technology to a large part of the world’s population. Our stock data demonstrate that current technologies would require the entire copper and zinc ore resource in the lithosphere and perhaps that of platinum as well. Even a lower level of services could not be sustained worldwidebecause a continuing supply of new metal is needed to make up for inevitable losses in the recycling of the metal stock-in-use.

Substitution has the potential to ameliorate this situation, but one should not automatically assume that technology will produce a satisfactory substitute for every service at an affordable price and precisely when needed.

…anthropogenic and lithospheric stocks of at least some metals are becoming equivalent in magnitude, that world-wide demand continues to increase, and that the virgin stocks of several metals appear inadequate to sustain the modern ‘‘developed world’’ quality of life for all Earth’s peoples under contemporary technology…Do we really envision a developed world quality of life for all of the people of the planet…?” R. B. Gordon, M. Bertram, and T. E. Graedel, Metal Stocks and Sustainability

Copper ETF

The U.S. Securities Exchange Commission (SEC) approved the first copper exchange traded funds (ETF) to actually hold the physical metal. J.P. Morgan and BlackRock received approval to each start copper ETF’s that will allow speculators to buy and hold copper in warehouses - up to 183,000 tons - the more shares investors buy, the more copper is taken off the market.

JPMorgan’s fund would store LME copper valued at up to $499,761,150. BlackRock’s iShares Copper Trust - Goldman Sachs owns the warehousing company Metro BlackRock intends to use to store its copper - would use up to 121,200 tonnes of copper as guarantee against shares in its fund.

As of writing the two funds would equate to 30 percent of current copper stocks in LME-bonded warehouses.

Credit Suisse/Glencore, Deutsche Bank and Citigroup are also looking at physical copper ETFs. Goldman Sachs signed a copper off-take agreement with Spanish miner Emed in 2012.

“ETFs…can immediately take metal out of the market, potentially leading to physical scarcity. If investment in ETFs proves to be highly responsive to news, such as an earthquake in Chile for example, a relatively modest supply disruption could turn into a much larger one, directly impacting on the ability of consumers to buy the red metal.” Bloomsbury Minerals Economics’ Copper Briefing Service

Future Production

Some of the major copper projects either going into production or continuing to ramp up are:

Buenavista, Mexico
Antapaccay, Peru
Los Bronces, Caserones and Esperanza, Chile
Salobo, Brazil
Konkola Deep, Zambia
Morenci, U.S.
KOV and Tenke Fungurume, Democratic Republic of Congo (DRC)
Oyu Tolgoi, Mongolia

Two of the world’s largest existing mines – Escondida in Chile and Grasberg in Indonesia – should start seeing higher output again.

In April of 2013 the Chilean Copper Commission (Chile is the world's largest producer of copper) predicted global demand for copper will rise by 1.4 percent this year to 20.829 million mt. Global mine production will rise 3 percent to 17.526 million mt to create an estimated world surplus of 68,000 mt, rising to 89,000 mt in 2014.

There are many reasons to be bullish on copper

Global surpluses of 68,000 mt in 2013 and 89,000 mt in 2014, are, in the world of copper supply, fairly tight conditions. Perhaps even more significant, no one is calling for much in the way of a price decrease.

Why are analysts not calling for much of a price decrease? Well, many mines do not come online on time and the disruption rate, the amount of promised copper that fails to materialize is now as high as 8 percent - operating mines can suffer production stoppages/slowdowns or move into lower grade ore.

A long term structural trend became evident in the industry in 2012 - shortfalls in targeted production were characterized by a fall in grades and recoveries rather than unexpected disruptions.

Chile produces a third of the world’s copper and has seen a seven fold increase in energy costs over the last ten years, also because of a severe water shortage in the high desert, where most of the country’s major copper mines are located, water must be pumped from the ocean to almost 800 meters above sea level and then pumped hundreds of kilometers to the mines, of course the seawater must also be desalinated.

CRU estimates Chile’s copper production costs have risen 60 percent over the last seven years compared to a world average of 30 percent. Chile’s state copper giant, Codelco, has seen a 57 percent cash cost increase between 2010 and 2012.

Chinese end demand is growing and consumer destocking has ended.

Many of the world’s largest mining companies have delayed or outright halted expansion plans – BHP Billiton, the world’s largest miner, has said it will not spend the $80 billion slated for expansion by 2015.

There is a lack of good substitutes, plastic piping replaces copper piping but this has been going on for years, aluminum can replace copper in electrical cables but more is necessary for the same effect and connections are poor which can cause fires, this has lead to municipal building codes actually banning aluminum from being used for residential wiring.

There has been a recent surge in warehoused copper stocks, the increases reflect incentives offered to store metal in those locations. Glencore owned Pacorini has been offering incentives of more than $100 to deliver copper to their warehouses. These incentives have drawn usually unseen stocks into the public’s eye perhaps distorting impressions.

Perhaps the biggest reason to get bullish on copper are the massive costs and risks involved in finding and opening new mines in often geo-political risky countries where a miners social license to operate is shaky at best.

Copper prices need to be significantly above marginal cost, in other words, prices need to stay high enough to provide miners with an adequate return on their investment for building today’s much more expensive and riskier new mines. There is also a significant additional cost in keeping production constant year over year.

If copper does not stay well above miners marginal costs the much needed new mines will not be build.

Conclusion

Global growth is on the path for continued improvement in 2013 - metal consumption will expand. Excess copper stocks are being taken up by traders, warehousing companies and soon ETF’s.

Copper, one billion new consumers, over 800 million people to be born between now and 2025 and a massive current, and future, infrastructure deficit should all be on our radar screens.

Is an investment opportunity in copper on your radar screen?

If not, maybe one should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, ninemsn, ibtimes, businessweek.com and the Association of Mining Analysts.

If you're interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us atwww.aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Tom on BNN

Thu, 23 May 2013 15:10:00 -0400

Tom on BNNPrint

Posted on May 23, 2013

By Scott Ronalds

Prepare for extremes. This is an essential element to being a better investor, and is particularly topical on a day when the Japanese market is down 7%.

Tom expanded on the five essential elements to being a better investor on BNN this morning. You can watch the clip here.

Email this Share on Facebook Add to del.icio.us Stumble It!Tweet

Daily Pfennig: Markets Take What Big Ben Said Hawkishly?

Thu, 23 May 2013 15:03:00 -0400

In This Issue.

* Nikkei plunges 7.3%..
* Chinese manufacturing contracts.
* Two handed economists.
* Gold rebounds.

And, Now, Today's Pfennig For Your Thoughts!

Markets Take What Big Ben Said Hawkishly?

Good day. And a Tub Thumpin' Thursday to you! What the heck was I thinking, was running through my mind when the alarm went off this morning. In an attempt to relieve Chris from having to write the Pfennig this morning, I told him not to worry about it, I would write it.. All the time knowing that my flight from Houston wasn't getting in until very, very late.. And that was before all the cancellations! What the heck is going on with the aviation sector? It's a very long story, so I won't bore you with the details, but just know that I was ready to raise the white flag and say "you win, you've beaten my will". Darn airlines!

OK. The Big news overnight came from China, where the Chinese Purchasing Managers Index (manufacturing) fell to a seven month low of 49.6, which is obviously below the line in the sand demarcation of 50. Any number below 50 represents contraction in the sector. This comes as a bit of a surprise to me. Sure I saw the tea leaves on China's economic slowdown, but didn't think it would show such a cooling off of domestic demand. I did think that the external headwinds that face China every day, like Europe and the U.S. would play badly with this data, but the slowdown of domestic demand was a surprise..

This news sent the Japanese Nikkei to the woodshed. The Japanese stock market plunged 7.3% overnight. The Nikkei had been the darling of stock markets ever since the new PM Abe, made his announcement about promoting growth and inflation. Since China is Japan's biggest trading partner, the Chinese slowdown in manufacturing, really sunk the Nikkei's battleship. The Nikkei's plunge is weighing heavily in Europe this morning, and will probably hang like a dark storm cloud over the U.S. stock market too.

The other Big news overnight, has been the decision by the Eurozone leaders to cut austerity. the leaders apparently are receiving too much complaining and such, and see their ability to get reelected diminishing. I say that in complete disgust, because the austerity was working. and now when things get tough, the though roll over and look for their bellies to be scratched! Sure the Eurozone economy had contracted since the 3rd QTR of 2011, did these "leaders" really think it wouldn't, given the massive cuts to spending that they implemented? Well, at least the leaders didn't say, "we raise the white flag on austerity, and pin our colors to the "stimulus" mast." At least that's for now.

So. With the weak manufacturing report in China, the plunge of the Nikkei in Japan, and the Eurozone leaders rolling over to get their bellies scratched, the currencies are not having a good day. However, as I write, Gold is up $21 this morning. Of course that's before the NY boys and girls arrive at their desks and decide whether to play their shell game with Gold again or not. The bias to buy dollars is back on the table after a couple of days of not much movement either way.

Yesterday, we had Big Ben Bernanke giving his testimony to the lawmakers on the state of the economy. For us "old timers" this trek to the "hill" by the Fed Chairman used to be called the Humphrey-Hawkins testimony. But that bill requiring the Fed Chairman to make this trip expired many years ago, and since it made so much sense for this to happen twice a year, it has continued. We usually get some real interesting quotes from Big Ben, and yesterday was no exception.

Speaking from both sides of his mouth, Big Ben threw a cat among the pigeons by saying, "The Fed could take a step down in our pace of purchases in the next few meetings." But then threw cold water on that by saying, "A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further."

So. What do you think? Sounds like he was waffling to me. Trying to please everyone with a little bit of this, and little bit of that. it started with a kiss, now we're up to bat. and so on. These guys like to speak out of both sides of their mouths for sure. My dad used to say they were "two handed economists". They would say, "on one hand, we could see. , but on the other hand we could see this." Never really saying what they thought for sure!

And the markets' reaction to the statement by Big Ben? Well, now there you've got another pot to stir. You never know how the markets will take something like this, and yesterday was no different, as the markets decided to forget Big Ben's waffling, and go with a "hawkish" view of his testimony. That was good for the dollar in the immediate reaction to the statement, but has since dissipated a bit.

The euro is attempting to eke out some small gains this morning, after getting walloped yesterday. The Eurozone saw some better readings of their latest manufacturing with the index ticking up to 47.8 from 47. Still contraction territory, but an upside surprise should be enough to kick start a currency, as it has this morning with the euro.

I told you above about the Nikkei's plunge, and in the never ending attempt by the Japanese to move in opposite directions than other markets. The Japanese yen is rallying on the Nikkei news. Strange eh? But remember, all the time the Nikkei was rallying the past 3 months, yen was getting passed around like a pack of cigarettes at a prison, and now that the Nikkei has plunged overnight, yen recovered. I really don't expect much more to come of this scenario, so don't get all lathered up and go out and back up the truck with yen. But then, that's just my opinion, and I could be wrong!

The Aussie dollar (A$) is getting sold again this morning. This time, the selling, is tied to the announcement by Ford Motor Co. that they will close down their Australian local car production, along with two manufacturing plants. That's not a good sign folks.

The New Zealand dollar / kiwi, is getting sold alongside the A$ this morning. Sentiment toward these two is really plunging. And it started with a kiss. no wait.. it started with a rate cut in Australia and news of the Reserve Bank of New Zealand (RBNZ) announcing that they were sellers of kiwi.

The Swiss franc is having a couple of good days of trading, a couple of days that it hadn't seen in some time. No worries, the franc is very weak VS the euro, compared to a year ago, when it was bumping up against the 1.20 floor that the Swiss National Bank (SNB) put into place in September of 2011. Today, the cross to euros is trading around 1.2470. So, the franc could use a little strength, eh?

I had a reader send me a note and say that he noticed that Japan had booked a Trade Deficit for 11 months now, and since I always say that "We're turning Japanese" what did that mean for the U.S.? Well. In the case of Trade Deficits. The Japanese are actually turning American, for the U.S. has long dominated the Trade Deficits. But, to the Japanese, this booking of Trade Deficits is a real psychological problem, for they were the captains of trade surplus, long before the Chinese awoke from their slumber.

I told you above that Gold was up $21 as I was writing. Gold and other metals were also pushing higher yesterday before the Big Ben statement. And then they weren't. So, this recovery this morning is warranted, in my opinion. For in my opinion, Big Ben didn't' tell us anything that we didn't already know. Sure we all know that he could decide to end stimulus any ole time he wants to, but when is he going to want to? That's the question, and as long as there are questions, the markets should take the dollar to the woodshed.

I've told you before, and I tell crowds whenever they come to listen to me talk, that I wouldn't be surprised to see QEnterity. You know, 10 years from now, someone from EverBank will be up on the stage talking about QE 22, or 23, or 24.

As Chris told you earlier this week, I get the honor of talking about a boat load of economic data the next two days. First, we have Fed St. Louis President, James Bullard speaking today. then we'll see the usual Thursday fare of Weekly Initial Jobless Claims. In addition, New Home Sales, and the latest PMI Manufacturing Index, and Bloomberg Consumer Confidence.

Then There Was This.Since the markets were so moved by Big Ben's talk yesterday, I thought that this comment by Fed Head William Dudley that I found on Moneynews.com played well with my thought that Big Ben is not ready to scale back his bond buying stimulus.. Let's listen in to what Mr. Dudley had to say..

"Federal Reserve Bank of New York President William C. Dudley said policy makers will know in three to four months whether the economy is healthy enough to overcome federal budget cuts and allow the central bank to begin reducing record stimulus.

"I don't really understand very well how the tug-of-war between the fiscal drag and the improving economy are going to sort of work their way out," Dudley said in an interview with Michael McKee airing on Bloomberg Television. "Three or four months from now I think you're going to have a much better sense of, is the economy healthy enough to overcome the fiscal drag or not."

Dudley's remarks underscore that Fed officials have yet to reach consensus on when or how to dial back their $85 billion monthly bond-purchase program designed to spur growth and lower unemployment. Philadelphia Fed President Charles Plosser has called for reducing stimulus at the Fed's next meeting in June, while St. Louis's James Bullard said Tuesday the purchases should continue.

Chuck again. OK. these guys are all over the place with their forecasts, pretty soon, they'll talk and no one will pay attention. Of course I wish that were the way it was now! Anyway, the markets react and we have to shuffle through the mess they leave each and every time they think the Fed Heads are ready to pull the plug on stimulus. I tell them each time, but they just don't listen that it's print or suffer the consequences of a deeper depression than the one we're in.

To recap. Big Ben speaks out of both sides of his mouth, and the markets think he means he really is ready to remove stimulus. Chuck says hogwash to that! The bias to buy dollars that entered the markets after the Bernanke speech, reversed a couple of days of healing in the currencies. The Nikkei plunges 7.3% overnight, and China posts a manufacturing index that showed contraction, sending the Asian markets reeling.

Currencies today 5/23/13. American Style: A$ .9695, kiwi .8095, C$ .9675, euro 1.2880, sterling 1.5080, Swiss $1.0320, . European Style: rand 9.590, krone 5.8395, SEK 6.6675, forint 226.35, zloty 3.2625, koruna 20.2390, RUB 31.40, yen 101.70, sing 1.2645, HKD 7.7625, INR 55.58, China 6.1947, pesos 12.47, BRL 2.05, Dollar Index 83.95, Oil $93.36, 10-year 2%, Silver $22.40, and Gold. $1,390.20

That's it for today. A great Big Happy Birthday today to my grandson, Braden Charles Butler.. Braden turns 2 today. It's great having two grandsons that are close in age, watching them learn to interact with each other is a treat! Kathy says when they turn 5 she's taking them to Disneyworld. I tell her, I bet she changes her mind in 3 years! Well, this weekend will be Memorial Day Weekend. The Backyard grills will get fired up, the public pools will open, and the old brickyard gets a workout in Indianapolis. But let's not forget what the holiday is really about. And with that. here we go! Let's make this a Tub Thumpin' Thursday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Is the Patent Cliff a Lethal Blow to Big Pharma?

Thu, 23 May 2013 15:02:00 -0400

A little over a year ago in this space, we called your attention to a developing situation in the pharmaceutical industry, as shown by the chart below that dramatically illustrates the arrival of the so-called "patent cliff".

Today, the results are in from 2012. The IMS Institute for Healthcare Informatics has released its annual survey of the US drug market. It found that the market shrank last year for the first time ever.

Specifically, nominal drug spending in the US declined by 1% in 2012, to $325.8 billion. Real per-capita spending dropped even more, by 3.5% to $898.

Branded drug spending dipped by $11.4 billion, to $230.2 billion. Generic drug makers, as you would expect, were the beneficiaries here. Generics were used for a full 84% of dispensed scripts, with overall spending on them growing by $8 billion, not quite offsetting the diminishing dollars spent on branded meds.

This spending slide had the predictable consequence of slamming big pharma.

Eli Lilly, for example, was hit hard. The company's revenues, which reached an all-time high of $24.3 billion in 2011, skidded to $22.6 billion last year. Its revenues look set to keep sliding, as Lilly will lose patent protection for blockbuster Cymbalta – which brings in $4 billion in revenue annually – at the end of this year. This April, Lilly announced it will be dealing with the revenue erosion by laying off up to 1,000 employees in its US sales force.

Merck lost its protection of Singulair – a $5 billion/year drug responsible for 16% of US sales – in August of last year. Looking ahead, Merck had already begun cutting jobs in 2011 and wound up axing 30,000, nearly a third of its workforce. With Singulair sales falling 67% in 4Q12, the company experienced a 7% decline in fourth-quarter profits.

Novartis also took drastic steps ahead of its September 2012 loss of Diovan, which produced $2.5 billion/year in domestic revenues, or 15.9% of US sales. The company did $1.9 billion in cost cutting in 2011, followed by another $1.9 billion in 2012. That included the elimination of 2,400 jobs.

Bristol-Myers Squibb was hammered after losing Plavix, the world's second best-selling drug, last May. By 1Q13, Plavix sales had plummeted 95%, dragging down the company's revenues from $5.25 billion to $3.83 billion, and net income from $1.1 billion to $609 million.

And so on, pretty much down the line.

As the chart shows, this is not a one-time phenomenon. Patent expirations remain relatively high this year and next, and balloon again in 2015, when branded drugs' losses will almost equal last year's, at an estimated $33.5 billion. So, the question must be raised: will big pharma slowly waste away after tumbling over the patent cliff?

The short answer is "no." These are going to be some lean years, no question. But there's some good news, too.

"Initially the figures do look depressing, but I don't think people should be running for the hills just yet," says editor Lisa Urquhart of pharma analysts EP Vantage. "The efforts the industry has put in to change business models, which have included investing more in niche busters, mean this time round things might not be as bad."

In addition, most of the patent expiries from last year involved small-molecule drugs, which are easy to replicate. Going forward, a good number of those expiring are biologics, or large-molecule drugs, and these are not as simple to pick apart.

Big pharma is also emerging from a relative dry spell in the way of new products. Sales of newly introduced drugs – defined as products that have been on the market for less than 24 months – actually grew last year, accounting for $10.8 billion in spending, up from $10.3 billion in 2011. In line with recent trends in the field, the lion's share of new-drug spending came in the specialty category.

Rollouts will continue at a brisk pace, too. IMS projects the launch of new molecular entities (NMEs) to come in at 32-37 per year, potentially including new mechanisms of action in Alzheimer's, autoimmune disorders, diabetes, a number of cancers, and orphan diseases. That would establish a pace of 160-185 NMEs introduced between 2012 and 2016, well above the 140 launched in 2006-2010.

"We're not talking a return to the late '90s or the early 2000s, when there were forty or more some years," and the growth rate was in the high single or double digits, says IMS research chief Michael Kleinrock. He notes that we should expect fewer mega-blockbusters and more high-priced specialty and orphan treatments, and adds that, "Rumors to the contrary, the US market is still alive and well. The patent cliff will take some of those dollars out of the mix, but once it's past its peak … we're going to see a significant rebound in what's available for both branded and generics companies."

Furthermore, although the US market is likely to stagnate – IMS estimates an anemic cumulative growth of 1%-4% from now through 2016 – the emerging nations are poised for explosive 12%-16% growth over the same period.

"In the next five years," Kleinrock says, "we will see the maturation, the evolution, of emerging markets – which are heavily generic and driven by volumes primarily rising from very low-income people that have become more affluent or are otherwise getting better access to medical care."

The US still will remain by far the world's leading drug consumer, with a 31% share of the global market by 2016. But that's sharply down from its 41% share in 2006, with most of the shift going to the "pharmerging" countries, as the IMS calls them. They made up only 14% of the market in 2006 and 20% in 2011, but are predicted to draw nearly even with the US in 2016, when they'll gobble up 30% of the overall pie.

And a substantial pie it will be. Some $1.2 trillion is destined to be spent on pharmaceuticals in 2016, the IMS says – up from $956 billion in 2011 – with a still-hefty $615-645 billion going to branded drugs and $400-430 billion siphoned off by generics.

What does it all mean for big pharma? With sales from existing drugs falling off the patent cliff, there will inevitably be an increased emphasis on development of new therapies that show high earning potential. That means plenty of employment for in-house researchers, but that source is not likely to be rich enough.

The current negative economics of giant mergers probably indicates that we will see few if any of those in the near future. But it's a certainty that big phama is going to be keeping close tabs on smaller companies that have promising drugs in Phase II or III trials. Those are certain to be acquired at an accelerating rate, as their larger brethren seek to restock their R&D shelves in the most cost-effective manner.

Small companies with strong pharmaceutical pipelines are mainstays of the Casey Extraordinary Technology portfolio. While we would never buy shares of a company solely because we were betting on a buyout, that can provide some very nice icing on the cake for early investors when it happens.

Bits & Bytes

Chaaaarge… (Daily Tech)

What's the most frequently uttered sentence in the English language? OK, we don't actually know. No one does. However, we have a strong candidate. It could be: "I gotta go, my phone's almost out of battery." Heard that one lately? But suppose it could be replaced with: "I gotta recharge the phone, call you back in a minute." Yes, one minute. That dream could soon become reality, thanks to an 18-year-old California high school student, who has invented a way to charge cellphones in 30 seconds or less.

Young at Heart (Science)

One problem with hearts is that as they age, the muscle thickens and no longer works as efficiently. Could that inevitable progression be reversed? Perhaps, according to Harvard researchers. At least, it's been successfully done with mice, using a technique first developed in the 19^th century. Whether the same results can be obtained with humans remains to be seen.

No Sale! Yeah, There's an App for That (Forbes)

Are there corporations you just hate? Companies whose products you wouldn't buy, if only you could untangle the invisible web of corporate affiliations that lies behind that widget in your hand? Buycott is an app that will let you do just that. Simply scan a product's bar code with your smartphone and its corporate family tree will pop up on the screen, in all its intricate glory. You can also join user-created groups that promote boycotts of general business practices as well as specific companies – and on the positive side, join others that encourage buying from companies that support principles in line with your own.

Who's Behind Those Glasses? (New York Times)

We've always figured that we wouldn't have long to wait before the government got involved with Google Glass, and we were right. Last week, a group of eight Congresspersons – the Bipartisan Congressional Privacy Caucus – sent a letter to Larry Page which outlined eight questions for Google and asked for a response by June 14. "We are curious whether this new technology could infringe on the privacy of the average American," the letter read. Will Washington pass regulations on the new device before its general release next year? We shall see.

The Dire State of the Platinum-Palladium Miners

Thu, 23 May 2013 15:00:00 -0400

¤ YESTERDAY IN GOLD & SILVER

NOTE: I will be at the Vancouver Investment Conference for the next five days. Because of that, my Friday, Saturday...and Tuesday columns are going to be as short as I can possibly make them. I have other fish to fry while I'm there...and sacrifices have to be made...and this is one of them.

The gold price rallied in fits and starts all through Far East and most of London trading on Wednesday, but got sold down a bit beginning shortly after 9:00 a.m. in New York.

But once the London p.m. gold fix was in, the gold price blasted higher...reaching its high tick of the day of $1,416.00 spot at 10:15 a.m...fifteen minutes later. It took JPMorgan et al almost to the close of London trading at 11:00 a.m. EDT to kill that rally and drive the gold price back below its Tuesday close...safely back under $1,400 spot...and an intraday trading range of seventy bucks.

The low price tick at 2:45 p.m. in electronic trading...and Kitco recorded that as $1,346.00 spot.

Gold close on Wednesday at $1,369.70 spot...down $6.30 from Tuesday's close. Volume was immense, as the short sellers of last resort used a lot of paper gold to put the London p.m. gold fix fire out. Net volume was 259,000 contracts.

It was pretty much the same price pattern in silver. Silver's high tick at 10:15 a.m. in New York was reported as $23.46 spot...and the 2:45 p.m. EDT low was recorded as $22.12 spot. That was an intraday move of $1.34.

Silver closed at $22.27 spot...down 16 cents from Tuesday. Volume in silver was very chunky as well...79,500 contracts.

The price patterns for Platinum and palladium were similar as well...and here are their respective charts...

The dollar index closed at 83.76 in late afternoon trading in New York on Tuesday...and then didn't do much until 10:00 a.m. in New York. After a two-minute 27 basis point dip, the dollar index blasted higher...reaching it's zenith at 12:30 p.m. EDT. From there it slid a hair into the close...finishing the Wednesday session at 84.28...up 48 basis points from Tuesday's close.

If you'd like to believe that the Fed minutes...or Bernanke's commentary...had much to do with precious metal prices yesterday, you're certainly entitled to hold that opinion. The dollar index and all four precious metals were blasting higher together, until the not-for-profit sellers showed up at 10:15 a.m. EDT and put an end to it. That's why volumes in both gold and silver were over the moon...because, as I said, it took enormous fire power to kill the precious metal rallies stone-cold dead.

The gold stocks were up over 5 percent before JPMorgan et al put in an appearance...and by the London close, most precious metal stocks were back to almost unchanged on the day. For the most part, the gold stocks followed the price of the metal itself very closely...although there was a bit of a rally in the last thirty minutes of trading that lifted the HUI from no gain, to finish up 1.16%.

Of course it was pretty much the same sort of price action in the silver equities as well...but Nick Laird's Intraday Silver Sentiment Index closed down 0.16%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that zero gold and 40 silver contracts were posted for delivery on Friday...and the link to yesterday's Issuers and Stoppers Reportis here.

There were more withdrawals from both GLD and SLV yesterday. In GLD, it was 96,682 troy ounces...and in SLV, it was an eye-watering 5,648,281 troy ounces. This huge amount of silver was obviously not plain-vanilla investor liquidation...and as Ted Butler mentioned in yesterday's column, he feels that it's JPMorgan and a few other bullion banks helping themselves by redeeming shares they already own...probably ones they bought in the April 12/15 engineered price decline...or in Monday's bear raid...or both.

There was a smallish sale by the U.S. Mint yesterday. They reported selling another 37,500 silver eagles.

Over at the Comex-approved depositories on Tuesday, they didn't report receiving anysilver...but shipped 669,991 troy ounces out the door. The link to that activity is here.

In gold on Tuesday, these same depositories reported receiving 57,855 troy ounces of the stuff...and didn't ship any out. The link to that activity is here.

I have no charts or graphs for you today, so here's your "cute quota" before all the stories posted below.

I don't have all that many stories for you today...and I'll leave the final edit up to you.

¤ CRITICAL READS

Bernanke Says Premature Tightening Would Endanger Recovery

Federal Reserve Chairman Ben S. Bernanke defended the central bank’s record stimulus program under questioning from lawmakers, telling them that ending it prematurely would endanger a recovery hampered by high unemployment and government spending cuts.

“A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke said today in testimony to the Joint Economic Committee of Congress in Washington.

Bernanke lamented the human and economic costs of an unemployment rate at 7.5 percent nearly four years into the recovery from the deepest recession since the Great Depression, and said the Fed’s easing is providing “significant benefits.” His comments echoed remarks by William C. Dudley, president of the Federal Reserve Bank of New York, who said in an interview that it would take three to four months before policy makers will know whether a sustainable recovery is in place.

You have to ask yourself this question. What recovery is he talking about? I thank U.A.E. reader Laurent-Patrick Gally for sending me this Bloomberg story yesterday.

Fed's Dudley: Decision on QE Tapering Will Require Three to Four Months

Federal Reserve Bank of New York President William C. Dudley said policy makers will know in three to four months whether the economy is healthy enough to overcome federal budget cuts and allow the central bank to begin reducing record stimulus.

“I don’t really understand very well how the tug-of-war between the fiscal drag and the improving economy are going to sort of work their way out,” Dudley said in an interview with Michael McKee airing on Bloomberg Television. “Three or four months from now I think you’re going to have a much better sense of, is the economy healthy enough to overcome the fiscal drag or not.”

Dudley’s remarks underscore that Fed officials have yet to reach consensus on when or how to dial back their $85 billion monthly bond-purchase program designed to spur growth and lower unemployment. Philadelphia Fed President Charles Plosser has called for reducing stimulus at the Fed’s next meeting in June, while St. Louis’s James Bullard said Tuesday the purchases should continue.

Why does anyone pays attention to these guys? It's print...or die...and a couple of more months ain't going to make any difference, as they're still going to print. This moneynews.comarticle from yesterday was sent to me by West Virginia reader Elliot Simon.

Jim Grant on the Fed, QE and Stocks

This 7:28 minute video with Jim Grant and Maria Bartiromo was posted on the CNBC website yesterday afternoon just after the markets closed. It's a must watch for sure...as James rips the Fed a new one...and I thank I thank reader Joseph Kahan for sharing it with us.

Mortgage Applications Tumble as Interest Rates Jump

Applications for U.S. home mortgages dropped for a second week in a row last week as a spike in interest rates stymied demand for refinancing, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, tumbled 9.8 percent in the week ended May 17.

The index of refinancing applications slumped 11.7 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 3 percent.

This very short Thomson/Reuters story appeared on themoneynews.com Internet site very early yesterday morning EDT...and is worth skimming. I thank Elliot Simon for his second offering in today's column.

Top IRS official will invoke 5th Amendment

A top IRS official in the division that reviews nonprofit groups will invoke the 5th Amendment and refuse to answer questions before a House committee investigating the agency’s improper screening of conservative nonprofit groups.

Lois Lerner, the head of the exempt organizations division of the IRS, won’t answer questions about what she knew about the improper screening — or why she didn’t disclose it to Congress, according to a letter from her defense lawyer, William W. Taylor III. Lerner was scheduled to appear before the House Oversight Committee on Wednesday.

“She has not committed any crime or made any misrepresentation but under the circumstances she has no choice but to take this course,” said a letter by Taylor to committee Chairman Darrell Issa (R-Vista). The letter, sent Monday, was obtained Tuesday by theLos Angeles Times.

This story appeared on the L.A. Times website early on Tuesday afternoon PDT...and I found it in yesterday's edition of the King Report.

Schizophrenic investors expect slump: bet on boom

The latest poll of Morgan Stanley's top clients from across the world says it all.

Chief economist Joachim Fels tells us that not a single investor at the bank's Florence forum thought the world economy would rebound with any strength later this year.

Just a quarter expect a return to trend growth. Some 57pc think there will be no escape from the "twilight" conditions afflicting the western world, and 20pc expect an full-blown global recession. That is a remarkably bearish set of views. Yet the same investors are overwhelmingly bullish on stocks and property.

This schizophrenic exuberance seems entirely based on the assumption that QE and central bank largesse will keep the game going, flooding asset markets with liquidity. Indeed, 80pc think the ECB will cut rates again, and half think it will have to swallow its pride and join the QE club in the end.

Great shades of 1929! Party on, dude! This must readcommentary by Ambrose Evans-Pritchard was posted on thetelegraph.co.uk Internet site on Tuesday...and I thank Roy Stephens for bringing it to our attention.

Europe targets Switzerland in fight against bank secrecy

Europe edged closer to lifting banking secrecy on Wednesday after Austria said it was ready to share data on foreign depositors but Vienna's support could fade should efforts to strike a similar deal with Switzerland fail.

Austria's dropping of objections allowed EU leaders to commit to an exchange of bank information between countries by the end of the year, as cash-strapped states seek to stop tax evasion and close loopholes highlighted by Apple Inc's use of a base in Ireland.

"It's a bad day for tax cheats," Austrian Chancellor Werner Faymann told reporters at a meeting of EU leaders to discuss fighting tax fraud by lifting bank secrecy.

"I believe we will manage the exchange of data by the end of the year," he said, adding later that although he was watching negotiations on a similar deal with Switzerland, Austria was in "full agreement".

This Reuters article was filed from Brussels...and posted on their website mid-afternoon on Wednesday...and it's another offering from Laurent-Patrick Gally.

Japan stocks slump rapidly, lead Asia losses

Asian stocks took a beating Thursday as data showing that Chinese manufacturing activity unexpectedly contracted in May exacerbated early losses recorded on worries the Federal Reserve could downscale its bond purchases.

Japanese shares suffered the most, with the Nikkei Stock Average swinging spectacularly to plunge more than 4% in the afternoon session from a 2% rise posted earlier in the day.

The benchmark, which had ended at multiyear highs in each of the previous four sessions, was down 4.1% in highly volatile late-afternoon trade.

The Nikkei Average’s more-than-6-point intraday reversal coincided with a surge in Japanese government bond yields that forced the Bank of Japan to offer 2 trillion yen ($19 billion) in funds to calm investor nerves. The central bank announced the fund-supplying operation after 10-year JGB yields soared to their highest level in more than a year, citing “the unreasonable increase” in volatility.

This marketwatch.com story, filed from Hong Kong, was posted on their website in the wee hours of this morning EDT. It's worth your time...and I thank reader 'David in California' for finding it for us.

Four King World News Blogs

The first interview is with Michael Pento...and it's headlined "Fed Lies and Propaganda Won't Stop Gold and Silver Rise". Next is this commentary by Citi analyst Tom Fitzpatrick "Gold to Advance a Stunning $2,000+ From Current Levels". Here's a blog with Robert Fitzwilson. It's entitled "The Fed Destruction and a Cascading Panic Among Investors". And lastly is this interview with Dan Norcini...and it bears the headline "Incredibly Important Developments in Many Key Markets".

2013 U.S. Silver Set Prices to Fall as Coin Melt Values Drop

Four silver sets from the United States Mint are slated to be reduced in price according to a memo from the bureau.

According to the U.S. Mint, the 2012 and 2013 US Mint America the Beautiful Quarters Silver Proof Set, the 2013 US Mint Silver Proof Set, and the 2013 US Mint Congratulations Set will all be re-priced. Effective date for the change is not yet known, though it could happen on Wednesday.

This short article was posted on the silvercoinstoday.com Internet site on Tuesday...and I thank Marshall Angeles for sending it.

Risk of vicious circle for gold as hedging returns

London-listed gold producer Petropavlovsk has said it will pre-sell 55pc of its future output planned for the second quarter of 2014, at an average price of $1,408 an ounce. This is the first time that a big producer has hedged more than half its future sales.

“We have a huge investment programme and thought a little price protection in the short-term will let us sleep better at night,” said chairman Peter Hambro.

“It was hedging that killed gold prices the 1990s,” said Ross Norman from Sharps Pixley. “Every time there was rally, the producers seized on the chance to sell forward. It was most unhelpful.”

Mr. Norman said it was the unwinding of hedge books a decade ago that unleashed the bull market. This process could now go into reverse if hedging spreads. "We don't think it will. The forces that led to the bull market will prevail," he said.

The forward sale is for only three months...and Ross Norman has it exactly right. Except for project financing, no miner is going to put their head back in that particular lion's mouth ever again. This Ambrose-Evans Pritchard offering was posted on The Telegraph's website early yesterday evening BST...and it's Roy Stephens second and final offering in today's column.

Sprott's Thoughts: The Dire State of the Platinum-Palladium Miners

During the third week of May each year, representatives of the Platinum industry gather in London, for an event that has become known as ‘Platinum Week’. Platinum Week centers on an industry dinner sponsored by the London Platinum and Palladium Market (LPPM) which marks the anniversary of the inauguration of the London Platinum Quotation (the forerunner of the present London Fixings) in 1973.

This event is attended by Platinum group metals (PGM) producers, refiners, fabricators and traders. The first major event of the week is the publication of Johnson Matthey’s annual review of supply and demand for the PGM markets.

According to Johnson Matthey, the The 6 W’s: Who, what, where, when, why and what of it

The RegMed sector is like … a bowl of Jello! Push down on one part and the other will pop up. One company’s failure to successfully bring a therapeutic through investigative trials is another organization’s opportunity to purchase intellectual property and clinical assets for its endeavors. These deals should be happening more as …some guilty companies should take the milestone and catalyst cash to supplement other programs and partner their cancelled programs to others who can accomplish and fulfill the trials – as intended.

Measuring the day – NEGATIVE – 17 red (downs) followed by 12 green (ups) and 6 fluctuating black (flats).

Mid-Day – Stocks pulled a 180⁰ turn today, opening down nearly 1% after news on a possible early-than anticipated end to Fed stimulus and weak China factory data sent Asian and European markets tumbling. Yet bargain hunters stepped in to erase the majority of losses. At mid-day, the NASDAQ is DOWN -2.64 or -0.16% at 3462.35 while the Dow is UP +16.39 or +0.11% at 15,323.56. The CBOE volatility index is trading near 14.

Research Notes:

RegMed Daily – The Early Movers … http://www.scimitarequity.com/blog/2013/05/23/the-early-movers-whos-hot-whos-not-29

Stemline Therapeutics (STML) Exercise of “green shoe” Option…http://www.scimitarequity.com/blog/2013/05/23/stemline-therapeutics-stml-exercise-of-green-shoe-option

BioTime (NYSE MKT: BTX) Shareholders approve Geron assets acquisition…http://www.scimitarequity.com/blog/2013/05/23/BioTime-nyse-mkt-btx-shareholders-approve-geron-assets-acquisition

Roll Call:

Aastrom (ASTM) is DOWN… -$0.0115 to $0.5585 with a pending offering about to dilute the price and share count. A SELL.

Athersys (ATHX) is UP… +$0.03 at $1.83 post earnings. A HOLD.

BioLife Solutions (OTC: BLFS) is DOWN…-$0.049 at $0.32 per share at mid-day. BLFS is growing its business, evidenced by its licensing of specific areas of intellectual property, while keeping high growth as the regenerative medicine market opportunity develops. BLFS hold the leading supplier position for pre-formulated, clinical grade biopreservation media products. ASTRONG BUY.

Cytori (CYTX) is UP … +$0.01 to $2.52 with today’s mid-day trading range of $2.40 – $2.52 and a 110 K share volume. A BUY.

Cytomedix (OTC: CMXI) is FLAT… at $0.50, with a trading range of $0.50- $0.51 and moderate volume of 27K shares.. A BUY.

NeoStem (NYSE MKT: NBS) is DOWN …-$0.01 to $0.57 with moderate share volume of 250 K at mid-day. The trending 50 and 200 day moving averages are at $0.61 and $0.63 respectively. A STRONG BUY!

Medistem (PINK: MEDS) is FLAT…at $1.10 … with no real news or share volume. MEDS needs to generate some significance to differentiate itself and forward … any visibility standing… A very thinly or no trading volume stock. A HOLD.

News

Advanced Cell Technology (OTC:ACTC) appointmented Edward “Ted” Myles, CPA, as Chief Financial Officer and Executive Vice President of Corporate Development. With nearly 20 years of progressive finance and operations experience in the life sciences industry, Myles comes to ACT from PrimeraDx, a privately-held molecular diagnostics company, where he served as chief financial officer and vice president of operations. He joined PrimeraDx in 2008, and helped lead the company from the proof-of-concept stage to become a fully integrated commercial organization. Prior to joining PrimeraDx, Myles was chief financial officer and senior vice president of Pressure BioSciences, a Nasdaq-listed life science tools company. At Pressure BioSciences he oversaw all compliance activities, transformed the investor relations approach and helped to transition the company into a commercial organization with more than 50 systems installed in the research field.

Italian lawmakers today gave their final approval to a law that allows limited use of a controversial type of stem cell therapy which has been condemned by many scientists but has given hope to families of terminally-ill children. The law gives the go-ahead for therapy being carried out by the Stamina Foundation on dozens of patients to continue, and allows for an 18-month period of clinical trials for the procedure, which had previously been blocked by Italian authorities. The bill was amended from an earlier version and states the therapy must be carried out under regulatory oversight and using cells made according to the Good Manufacturing Practice (GMP) which the Stamina Foundation has not adhered to. The Stamina Foundation says its treatment is based on mesenchymal stem cells and could treat diseases like spinal cord injury and motor neurone disease. But leading scientists have warned that there is no evidence to suggest the treatment could work and no way to know that it will not cause harm. Umberto Galderisi from the University of Naples and president of Stem Cell Italy is among critics of the bill. He said the clinical trials would “never have been allowed” if scientific accepted practice had been followed. “This is legislating on the basis of public opinion. It means exploiting suffering. Patients are not lab rats,” he told AFP, adding there were “no scientific certainties” the therapy could work. “We do not want Italy to become one of those countries like China or Ukraine where there are untested scientific trials,” he said. Patients lobbied for the therapy to be given the go-ahead, receiving support from various celebrities including actress Gina Lollobrigida. At one demonstration, protesters wore T-shirts with the slogan: “Yes to Stamina, Yes to Life”. The association Stem Cell Research Italy has branded the new law as “unacceptable” saying the therapy was not backed up by clinical data published in peer-reviewed academic journals. US journal Nature said it was a “rogue” therapy.

A U.S. stem cell study described as a major medical breakthrough in the journal Cell last week is under investigation for so-called “image reuse,” according to a report by another journal. Last week, researchers at the Oregon Health and Science University and the Oregon National Primate Research Center reported in Cell they had successfully reprogrammed human skin cells to become embryonic stem cells capable of transforming into any other cell type in the body. The research received wide media coverage but a commenter on PubPeer, a site dedicated to post-publication peer review, alleged several instances of “image reuse” in the Cell paper, according to the ScienceInsider blog published by the journal Science. The commenter also found that “in the paper, it is recorded that the journal Cell accepted this paper just four days after submission,” it said. Cell spokesperson Mary Beth O’Leary confirmed the journal’s editorial team “is assessing the allegations brought up in the PubPeer piece” and promised to release the results as soon as the investigation ends.

Worth Noting

Advanced Cell Technology files $35m mixed securities shelf…look for possible reverse in the future.

Worth Reading

Cytori Banks On Its Real-Time Stem Cell Treatment For Heart Disease…

In the near future, chronic heart disease patients in the U.S. could find themselves in an outpatient clinic, getting a new treatment that is not much more complicated than donating platelets at the Red Cross. Say hello to the Celution system from Cytori Therapeutics, which is currently being tested in the U.S. http://www.forbes.com/sites/johnfarrell/2013/05/23/cytori-banks-on-its-real-time-stem-cell-treatment-for-heart-disease/?goback=%2Egde_4416703_member_243533655

Share and Enjoy:

The Early Movers – who’s hot, who’s not

Thu, 23 May 2013 14:54:00 -0400

Which RegMed companies are making moves in the 1^st hour

Signs of life …

Wright-Medical (WMGI +$0.17) and Reneuron (LON:RENE +$0.16) are the leaders as today’s market opens…

…followed by Harvard Bio (HBIO +$0.02), IntelliCell (OTCMKTS: SVFC +0.01) and Bioheart (PINK: BHRT +0.0024)

A view of the downside at the open …

Shire ADR (SHPG -$0.89), and Stemline (STML -$0.30) are the loss leaders…

…followed by Osiris (OSIR -0.14), MiMedx (MDXG -$0.18), Pluristem (PSTI -$0.09), BioTime (NYSEMKT: BTX -$0.05), Cytori (CYTX -$0.04), Neuralstem (NYSEMKT: CUR -$0.04), StemCells (STEM -$0.04), Athersys (ATHX -$0.03), Dendreon (DNDN -$0.02), Geron (GERN -$0.02), Opexa (OPXA -$0.02), BioLife Solutions (OTC: BLFS -$0.019), NeoStem (NYSE MKT:NBS -$0.013), Aastrom (ASTM -$0.011), ImmunoCellular (NYSE MKT: IMUC -$0.01) Cytomedix (CMXI -$0.001), ThermoGenesis (KOOL -$0.006), and Advanced Cell Technology (OTC: ACTC -$0.0016)

And some of the sector is flat

Brainstorm (OTC: BCLI), Cryo-Cell (OTC: CCEL), Fibrocell (NYSEMKT: FCSC), Medistem (PINK: MEDS), Mesoblast ADR (PINK: MBLTY), Proteonomix (OTC: PROT), Tengion (PINK: TNGN), Verastem (VSTM) and Vitro Diagnostics (PINK: VODG)

Share and Enjoy:

Stemline Therapeutics (STML) Exercise of “green shoe” Option

Thu, 23 May 2013 14:51:00 -0400

Additional 620,689 shares brings it to $69 M

STML’s underwriters have exercised in full their option to purchase an additional 620,689 shares of common stock. The option to purchase additional shares is being exercised in connection with Stemline’s previously announced public offering of 4,137,931 shares of common stock at a public offering price of $14.50 per share. As a result of the exercise of the option, the total gross proceeds are expected to be approximately $69 M before deducting underwriting discounts and commissions and other estimated offering expenses.

Jefferies LLC and Aegis Capital Corp. acted as joint book-running managers for the offering. Roth Capital Partners acted as co-lead manager for the offering.

The Bottom Line: Money talks and BS flushes down! Another Verastem (VSTM) – let the competition begin!

Share and Enjoy:

BioTime (NYSE MKT: BTX) Shareholders approve Geron assets acquisition

Thu, 23 May 2013 14:50:00 -0400

Shareholders approve proposals of acquisition of stem cell assets

BTX’s Special Shareholder Meeting held on 5/21/13 approved the proposals related to the planned acquisition of stem cell related assets from GERN by BTX’s subsidiary Asterias Biotherapeutics.Each of the proposals received at least 32,459,164 votes in favor from the 34,450,307 shares that were represented and voted, in person or by proxy, at the meeting.

Approvals of the Share Issuance Proposal and the Articles Amendment Proposal were necessary for the acquisition of stem cell related assets from Geron Corporation under the Asset Contribution Agreement, as the approval of those proposals satisfies one of the conditions required to be met in order to complete the asset contribution transaction.

The Bottom Line: Finally, now let’s see what happens to monetizing these … assets!!

Share and Enjoy:

Lower open anticipated

Thu, 23 May 2013 14:47:00 -0400

Stocks seen down on Fed fears, China

Stock index futures signaled a lower open on Thursday, on concerns the Fed may begin tapering off its bond purchases in the near future

RegMed sector shares minimally rise, as many stocks fall… as swiftly flow the shares – one session following another … and we haven’t even … needed a fiddler on the roof playing the violin.

DOW futures are DOWN -0.7 and NASDAQ futures are also DOWN -0.9%.

European stock markets open with sharp losses on Thursday, after disappointing data from China and comments from the Fed about tapering its stimulus. Japanese shares suffer their worst losses in more than 2 years after data showing an unexpected contraction in Chinese manufacturing while Hong Kong and Australian shares drop as well

Share and Enjoy:

Exelixis Prepares for ASCO 2013, Stocks Stays Rangebound

Thu, 23 May 2013 14:46:00 -0400

One of the biopharmaceutical companies that has been lagging the stellar performance of its peers isExelixis (NADSAQ: EXEL), developer of the compound cabozantinib. Cabo, which was FDA approved last year for the treatment of medullary thyroid cancer (MTC), is now being marketed under the trade name COMETRIQ. In the company’s reported Q1 2013 earnings release on May 7^th, the company was able to present some early results for the drug’s performance on the open market although it’s difficult to accurately interpret a drug’s intrinsic monetary potential with only a few weeks of sales data and estimates on the drug’s penetration into a market.

For Q1 2013 the company reported $1.86 M in product revenues. Given the company’s estimates that they could be treating up to 500-700 MTC patients within the current FDA-approved indication, we can infer that there is a $50 to $70 M market potential here, given that the average MTC patient should generate about $100,000 for Exelixis out of a typical regimen. There is also the opportunity that the drug has in Europe within the partnership that was established with Swedish Orphan Biovitrum (Sobi), which should generate additional revenue from a large external market.

The MTC market could prove to be a very valuable niche market, although I’ve stated before that cabozantinib will truly make or break the valuation of Exelixis in the prostate cancer market, which realistically represents hundreds of millions in revenues compared to tens of millions in the MTC market. Exelixis also intends to try cabozantinib in the tough hepatocellular carcinoma (HCC) and renal cell carcinoma (RCC) indications. Phase III trials for both indications are expected to start in Q3 2012.

The metastatic castration-resistant prostate cancer (mCRPC) indication will be built on the results of the COMET-1 and COMET-2 phase III trials, which are ongoing and should have top line results in 2014. While the company didn’t give any extra details, it seems plausible based on the estimated completion time for the trials that they will present the results at ASCO 2014. If this turns out to be true, investors should know whether or not cabozantinib will meet its primary endpoints in overall survival (OS) and pain reduction (for COMET-1 and COMET-2 respectively) one year from now.

Until then, it’s likely that EXEL will favor its approximate trading range of $4-5 per share, presuming that the broader market doesn’t make any drastic moves. Exelixis has not shown a very high correlation to the broader market or the biotech sector as a whole, presumably because traders are generally waiting for a catalyst that is still quite far away (the COMET-1 and -2 data release).

Exelixis now has a market capitalization $877 M, although I think there is substantial upside to be realized if the company succeeds in late stage trials for mCRPC – perhaps as much as an additional 100% given that cabozantinib continues healthy expansion in the MTC indication.

The company’s financial position is also pretty good, although the substantial R&D budget (which is likely to increase as the company begins enrollment into the Phase III HCC and RCC trials) and money allocated for sales will overwhelm revenues generated from the commercialization of COMETRIQ for most (if not all) of its lifespan. However, the company reported $567 M in cash as of March 31^st of 2013.

The reported burn rate for Q1 2013 was $45 M. While I expect this to increase due to rising interest expenses and the aforementioned spike in R&D that should be the result of large HCC and RCC trials, Exelixis should not be financially stressed until 2015. This provides more than enough time for the company to report the results of COMET-1 and COMET-2 (perhaps the full results even), which should either induce an appreciable rally in the stock or a drop in reaction to data.

Going forward, investors who are interested in the stock will have some extra material to digest during ASCO 2013 where the company will have 1 oral presentation and eight poster presentations. I think the one that may receive the most attention is Abstract 5026, which should include analysis of the shocking bone scan images that were taken during a Phase II trial implying that cabozantinib shrinks these lesions over time, although there will be other data presented as well (including data that could support the commercialization efforts in the MTC indication).

In terms of mechanism of action, cabozantinib is certainly “unique”, although it fulfills a familiar function at the same time. It is an inhibitor of both VEGFR2 (Vascular endothelial growth factor receptor 2) and c-MET, as well as RET. Both of these pathways are used by cancer cells for the sake of proliferation, although the VEGF receptors already see enormous attention from cancer drug developers. Regarding VEGFR2 in particular, we already saw success with GlaxoSmithKline’s pazopanib. What makes cabozantinib interesting is the targeting of the MET protein pathway, which has not been made available until the introduction of COMETRIQ into the market earlier this year. Other compounds have also lacked the success that cabozantinib has seen in previous clinical trials.

So for now, it’s generally agreed that investors are hungriest for information on COMET-1 and -2. Like mentioned earlier, it seems that EXEL will stay rangebound until the big news comes. Wall Street analysts generally don’t have strong opinions on the stock, which makes sense given the company’s situation.

disclosure: long

Amarin Stays Rangebound, Prescriptions Stagnate

Thu, 23 May 2013 14:45:00 -0400

Amarin Corporation (NASDAQ: AMRN) has been struggling a lot lately as retail channel prescription data for its EPA capsule Vascepa imply that the drug is starting to slow down its momentum in the MARINE indication (hypertriglyceridemia patients with >500 mg/dL). While the company has seen significant progress since the launch of the drug in January, it is still not causing any excitement in an investor base that wanted to see a big pharma buyout of the company ever since the company reported successful Phase III results.

Despite the incredible strength of the broader market and the biotech sector in particular this year, AMRN is down 14% YTD as of the time of writing. Since the company released Q1 2013 financial results (as discussed in a recent note), the company rallied all the way to $8.00/share before continuous selling brought shares back to the $7.00 per share level.

We also have yet to see the FDA make a decision regarding the NCE (New Chemical Entity) status of Vascepa, which will have a profound positive/negative impact on the value of Vascepa as a product and possibly on the chances for Amarin to receive an attractive partnership or buyout offer from a larger pharmaceutical company. CEO Joe Z’s commentary seems to suggest that a partnership is needed prior to the prospective launch of Amarin into the ANCHOR indication due to the sheer number of sales reps that the company would need to market into such a huge primary care indication, although details are scare for the time being.

Additionally, the market seems disinterested in more recent news which would normally generate some buying interest despite the mediocre market performance of Vascepa in its current disease indication. For instance, the market seemed to gloss over the recently released new data from the MARINE/ANCHOR Phase III trials that shows statistically significant reductions in Apolipoprotein C-III (Apo C-III), which is a lipoprotein that serves as a biomarker for poor cardiovascular health. This bodes well for the REDUCE-IT Phase III trial, which will transition Vascepa into a hypertriglyceridemia therapy into a preventative cardiovascular risk therapy that can be combined with standard statin regimens.

But in general, we haven’t seen anything new with Amarin or Vascepa that should change one’s opinion on the stock quite yet. The market seems much more preoccupied with oncology drug developers who will be presenting at ASCO 2013 – the American Society of Clinical Oncology meeting that will be held Chicago between May 31^st and June 4^th, 2013.

This generally explains why AMRN has been more of a trader’s stock than an investor’s stock, making exaggerated movements in reaction to news that has little implications on the long term health of Amarin. Despite the volatility, Amarin seems to favor trading ranges which is why the company may be a good candidate for options trades that favor sideways trading within a predetermined ranged.

As mentioned in other notes, Amarin has a PDUFA goal date of December 20^th 2013 for the sNDA that will significant expand the size and scope of Vascepa’s target indication. If Vascepa sales move in line with analyst expectations (which should ultimately approach ~$80M in sales revenues for FY 2013) we may see continued sideways trading in the stock as the market waits for further developments.

One particular strategy that takes advantage of neutral sentiment is the “Iron Butterfly” strategy, where one writes an at-the-money call and an at-the-money put while buying an out-of-the-money call and an out-of-the-money put. This could be very profitable, although the trade would likely go sour in the event that the FDA issues a decision on Vascepa’s NCE status in one of its Orange Book updates. The same would also be true if the company announced any kind of partnership or acquisition offer, although a complete lack of any official information on this topic has pushed away would-be M&A speculators.

Amarin, on the whole, seems to have fallen out of favor in the biotech investment community. This may change as we head closer to December 20^th (or after an unexpected announcement), but without a tangible piece of news that can positively affect Vascepa’s sales figures or its financial valuation don’t expect much more than a continuation of what we’ve seen this year.

Sentiment Drives Mannkind to Fresh Highs Ahead of Vital Catalyst

Thu, 23 May 2013 14:38:00 -0400

An enormous amount of hype in the last couple of weeks has sent the diabetes and cancer drug developer MannKind Corporation (NASDAQ: MNKD) soaring, particularly after the company’s first quarter financial results for fiscal year 2013 on May 9th.

After yesterday’s rally, MNKD is up 56% since the most recent earnings release.

The company’s financials did not change much, with the cash burn rate remaining at a $36M in Q1 2013 versus $34M for Q1 2012 and with the company’s cash position dropping to a total of $28M. Stockholder’s deficit moved further into negative territory, now at -$146M. The implication is that the company will need more cash in the near future, so a public offering seems especially likely in the next few months due to the recent rise in MNKD common stock and the company’s need for financing for the second half of 2013 and beyond.

Still, what has ultimately been driving MNKD to fresh 52-week highs has been a big surge in coverage on the stock in the media and on Wall Street, and hype over the upcoming Phase III data releases for the AFFINITY 1 and AFFINITY 2 trials for the company’s insulin inhaler Afrezza. Much of the hype is actually coming from MannKind CEO and creator Alfred Mann himself, who seems to believe that Afrezza will become one of the biggest success stories in the pharmaceutical industry ever.

There’s no question that the diabetes indication is enormous, although a lot of parallels have been drawn between an insulin inhaler introduced to the market in 2006 called Exubera and Afrezza. There are distinct differences between the two devices, although there is still major skepticism over the commercial prospects of Afrezza, even if it does succeed in Phase III trials and reaches the market after FDA approval.

Still, traders and investors who are following MNKD for the time being are very focused on the upcoming top line results of the two nearly completed Phase III trials Affinity 1 and Affinity 2, which should be unveiled at some point in August 2013. The release of the trial data should be a very potent mover of MannKind stock. If the trials are successful, investors will generally assume that Afrezza will see FDA approval after an NDA resubmission and will be a success story once it hits the market.

Based on this, I think investors may put MannKind closer to a $3B valuation (or roughly $10/share) implying that there is something in the ballpark of 60-70% upside after good trial results. If, on the other hand, we see poor outcomes in the upcoming clinical trials we are likely to see a return to the $1-2 per share range based on the notion that Afrezza cannot pass Phase III development. Investors should note that the product was issued a CRL after an NDA submission a few years ago, although the company believes that the adjustment of a few parameters in the current clinical trials will alter the outcome.

The Takeaway

It’s difficult to tell how the stock will trade as we get closer to the expected data releases for Affinity 1 and Affinity 2, although it’s clear that the stock becomes much riskier when bullish sentiment alone drives the stock up 56% in a matter of weeks (as mentioned earlier). The trade regarding the upcoming catalyst (the Phase III data release) has become increasingly lopsided as a result. Investors who believe in the story still have the chance to see substantial returns as we approach a potential approval for Afrezza, although an unexpected bearish outcome in either clinical trials or in Afrezza sales down the road could be particularly devastating after the hype that this stock has seen.

Sentiment Drives Mannkind to Fresh Highs Ahead of Vital Catalyst

Thu, 23 May 2013 14:38:00 -0400

After yesterday’s rally, MNKD is up 56% since the most recent earnings release.

The Takeaway

Vivus Heats Up, Shorts Discourages on Possible Bidding War

Thu, 23 May 2013 14:38:00 -0400

Vivus (NASDAQ: VVUS) has been seeing relatively modest growth in QSYMIA (phentermine and topiramate ER) prescriptions since the drug launched in September 2012 under the FDA’s REMS agreement, which restricted the drug’s sales significantly due to the inability for patients to have prescriptions for the drug filled at brick-and-mortar pharmacies. Because of this, and because of an apparent and drastic overstatement of the true size of the prescription obesity drug market, investors have have mixed and overall bearish opinion on VVUS since the FDA approval of QSYMIA. The stock is trading at roughly half of its level post FDA approval.

While the larger trend since FDA approval remains negative, a relief rally that was initially discussed in a Bio-Wire note on April 18^th brought the stock 17% higher since. This move was a reaction to a change in the QSYMIA REMS which could have a profound (and much needed) positive impact on QSYMIA sales in the H2 2013.

The company’s recently released Q1 2013 financial results were not particularly shocking in eithier the bullish or bearish direction. Throughout the first three months of the year, the company reported $4.1 M in sales revenue on the sale of about 59,000 prescriptions. About 21,000 of these prescriptions were written on a promotional program for QSYMIA that is designed to accelerate the drug’s adoption into the mainstream obesity care space. Up to this point, the company has seen particularly strong interest from endocrineologists who have obese patients that may have glandular problems, although the company seems to be looking to target primary care physicians who have a much larger pool of patients.

Vivus bulls generally expect this shift into primary care to provide a much-needed acceleration in QSYMIA prescriptions, which have been relatively stagnant in the last month.

Based on the valuation of Vivus, the company still needs to multiply QSYMIA prescriptions at least tenfold to justify the current price per share. The market capitalization of Vivus, at $1.4 B at the time of writing, requires that the company generate about $70 million in earnings each year to reach a typical P/E multiple of 20. The actual prescription counts that would be needed to reach this goal heavily depend on the pricing of the drug and the continuing existence of the QSYMIA promotional program, but based on the Q1 data and based on current margins and profit value we can approximate that the company will need to sell prescriptions in the millions down the road. With only 59,000 prescriptions sold in Q1 2012, we can see that the company will have a particularly difficult time if the QSYMIA promotional program continues to represent a substantial portion of the total pool of QSYMIA prescriptions.

In the recent Q1 earnings conference call, Vivus management addressed the issue by discussing QSYMIA’s progress on the reimbursement front. In particular, the company is hopeful about recently instated Tier 3 coverage that limited patients’ copayments for 30-day prescriptions to $50. This, along with an amendment to the QSYMIA REMS which was submitted in October 2012 by the company which will bring the drug to “thousands of brick-and-mortar pharmacies in July 2013” according to the company’s statements, should begin to affect QSYMIA prescriptions dramatically. The problem is that we don’t know if this will be dramatic enough to multiple the drug’s sales enough times to justify the valuation of Vivus in the long run.

While most analysts have positive opinions of the company, Brean Capital’s Jonathan Aschoff and Jefferies’ Thomas Wei have sell/underperform ratings on the stock due to the underwhelming potential that Qsymia has demonstrated up to this point.

The Vivus situation got a lot more interesting with recent events, including a $220 M offering a 4.50% convertible senior notes which started on May 16^th 2013 and concluded just recently. The conversion rate priced these shares at $14.86 per share – much higher than the price of the shares at the time (about $12.50 per share). Then, it was announced this morning that ~2% shareholder Alex Denner (the former head of health-care investments for Carl Icahn and owner of the new fund Sarissa Capital Management) joined the activist slate challenging current Vivus management. The effort is being spearheaded by 10% shareholder First Manhattan. First Manhattan believes that Vivus is doing a terrible job at marketing Qsymia.

While it’s generally agreed that Vivus is doing poorly, this is unlikely to be reflected in the company’s stock price as short sellers worry about a potential bidding war between activist shareholders and Vivus management. The market may take some time to fully digest the implications of the aggressive moves of activist shareholders, but what we do know is that VVUS may see extremely movements that don’t reflect changes in the underlying company’s financials.

Where’d All the Fear Go?

Wed, 22 May 2013 16:29:00 -0400

With the US stock market grinding to new nominal highs on what seems like a daily basis, you might be wondering: where'd all the fear go? Just a quarter or two ago, it was cool to be a bear. Analysts were citing a high unemployment rate, weak GDP growth, and swelling debt as just a few of several albatrosses that would prevent the economy from taking off anytime soon.

Fast forward to today, and the bears are in hibernation. The same economic drags persist, but for some reason, most analysts are no longer worried about them. Unless you actively seek out contrarian viewpoints, you're likely to hear all good news all the time.

Maybe the best way to understand this abrupt about-face in sentiment is through the prism of a childhood game: Jenga.

If you're not familiar with Jenga, play begins with a sturdy column of wooden bricks stacked to form a vertical tower. Players take turns removing one block from near the foundation of the tower and placing it on the top. The goal is to make it through your turn without knocking the tower over. As the game progresses, the tower grows taller at the expense of structural integrity, as blocks that once formed a strong foundation are now balancing high in the air.

As the tower becomes more precarious with each turn, the participants become more fearful, and act more cautiously – entirely logical responses, given that the taller the tower grows, the more likely it is to topple.

Applying that principle to financial markets, one would think that, all else equal, a stock market at record highs would induce similar emotions as a too-tall Jenga tower. Because stocks are currently scraping the sky, any slight breeze – perhaps in the form of a bad jobs report or another scandal – could bring them tumbling.

Such a tumble would be especially violent, because it would commence from heights never before seen.

The parallels continue when you consider that several cracks are beginning to form in the ostensible foundation of this stock market rally. Recent earnings have been mediocre at best, and trading volumes have been steadily declining – classic indicators that momentum may be petering out.

I'm sure you see where I'm going with this: sober analysis indicates that the stock market is a wobbly Jenga tower. But investors are not treating it that way. On the contrary, as I quickly skim the financial headlines, I note that US economic confidence is at a five-year weekly high. Two other surveys peg both investor complacency and bullishness at multiyear highs as well.

What gives? My best guess is that investors see a stock market that has risen for five straight years, their 401(k)s or bonuses rising with it, and assume it will continue unabated… which makes as much sense as a Jenga player believing that, because the tower has not fallen in the past few turns, it won't fall for his turn either.

Obviously, no one is that foolish. We all understand that what's important in this scenario is that the tower becomes less sturdy, and thus more likely to fail, with each turn. By eschewing that truth and substituting for it an extrapolation of a past trend, you'd be setting yourself up for disaster.

But as easy as it is to call out that type of reasoning as fallacious, it's exactly what's happening in the stock market today. For some reason, the thinking becomes muddled when money is at stake. And the result is a level of fear in the market today that is incommensurate with the fundamental risks present.

Fear is cheap… cheaper than it has any business being.

So how can we "buy" fear? That's the topic of this week's feature in which Stephen Belmont, chief market strategist and senior partner with futures brokerage RMB Group, measures just how low fear is compared to historical norms. Stephen then goes on to explain how investors can "buy" fear while it's cheap in order to make money when it inevitably spikes, or at least reverts to the mean.

The article was originally published in World Money Analyst, a premium publication dedicated to sharing the best investment ideas of a collection of international experts, each of whom specializes in a different region. Our good friends at Mauldin Economics, which publishes WMA, have allowed us to share this article – usually reserved for subscribers – with our readers.

With that, I'll leave you to explore the piece yourself. For those of you in the US, enjoy the long weekend. I won't be with you next week, but I'm leaving you in the capable hands of Nick Giambruno, editor of InternationalMan.com.

Dan Steinhart
Managing Editor, The Casey Report

Fear Is Cheap… Is It Time to Buy?

Steve Belmont, RMB Group

Most markets spend most of their time tracing out the middle of a range, oscillating on either side of their statistical means like a water skier tethered to a boat. They move in the direction of the boat, hopping back and forth across a "wake" that is a trend. The trend can be up, down, or sideways.

It is very difficult to trade these small oscillations – deemed by many analysts as mere "noise" – so we don't try most of the time. But there are periods when a given market pegs so far to one extreme or the other that it becomes hard to ignore. Such is the case with the market that measures fear – known by stock investors the world over as "VIX."

VIX is telling us that fear – at least as it relates to stock prices – is dirt cheap. With what we know about markets and human nature, we do not expect fear to remain cheap forever.

VIX is the symbol for the Chicago Board Options Exchange (CBOE) Volatility Index. It measures the volatility embedded into options traded on the S&P 500 (SPX) and reflects investors' 30-day consensus view of the future. S&P 500 puts grant the buyer the right, but not the obligation, to sell the S&P 500 Index at a fixed price for a limited time.

VIX Measures Fear

The greater the investors' fear, the more they will pay for put option protection. The more they pay, the higher the market volatility implied in the cost of the S&P 500 options. This is what VIX measures. Since fear is the strongest human emotion, it's no surprise that VIX rises and falls in proportion to investor fear.

A VIX of 10.00% means option buyers only expect the market to move 10% in the foreseeable future. A VIX reading of 20.00% means option traders expect the market to be twice as volatile. VIX does not measure actual volatility; it measures traders' anticipated volatility, based on how much they are willing to pay for protection against it. The VIX is forward-looking, which means it can spike much higher than actual market volatility.

The VIX tends to rise when investors either expect or experience big market declines; it tends to fall as fear of those declines subsides. This relationship can be seen clearly in the "Monthly VIX" chart below. Note how VIX spiked to 89.00% during the Lehman crash while stocks dropped a much smaller 58%.

Data Source: CQG

Data Source: Reuters/Datalink

Take a look at the long-term chart of the S&P 500 right below the long-term chart of VIX and you'll see just how correlated these two markets are. VIX tends to rise during a stock market fall, and to fall when the market rises. Note how it tends to fluctuate in a well-defined range, from a low of roughly 9% to a high of approximately 45%. (I ignore the Lehman crash spike in VIX to nearly 90% as a "one off" – unlikely to happen again anytime soon.)

By measuring expected volatility, VIX also measures probability. A reading of zero assumes an absolutely flat stock market with no volatility at all. While theoretically possible, that kind of market condition is extremely improbable. This is why VIX has a practical floor at around 9.00% – it is reasonable to assume that stocks as a whole could fluctuate this much in even quiet market conditions. Similarly, VIX rarely climbs above 45.00% because the chances of the market staying that volatile for any length of time are slim.

Data Source: CQG

The thick blue line on the long-term chart above shows multi-decade support in VIX just above 9%. The thick gold line (representing the 276-month moving average of VIX) is a close approximation of the "mean" of expected volatility. It covers almost every conceivable market scenario – bull markets, bear markets, and numerous "crashes." Like the water skier in our metaphor, VIX crisscrosses this "wake" of expected stock market volatility and either reverts to it, or close to it, nearly every year.

Will it do so again this year? Only time will tell. However, with VIX close to its practical low of 9% (currently 12.22%) and the public getting more complacent and starting to pile back in to stocks, now may be a good time to consider adding a bit of fear to one's portfolio. We recommend our trading customers consider doing precisely that.

VIX Futures: A Pure Play on Fear

The underlying value of VIX futures is $1,000 times the Index. That makes VIX futures at a price of 15.00% worth $15,000, and at a price of 45.00% worth $45,000. VIX is purely an electronic contract. Normal trading hours are 8:30 AM to 3:15 PM, and extended trading hours begin at 7:30 AM (all times Central). Liquidity, especially in the first two contract months, is very good and so is open interest.

Since volatility cannot drop below zero, buying VIX futures represents a maximum risk of your buy price times $1,000. Let's say we buy a VIX futures contract at 15.00; the most we can lose is $15,000 plus transaction cost. However, given the fact that VIX has never dropped below 9.00, our practical risk is probably far less.

Use VIX as an Effective Hedge

VIX can be a very effective hedge for a stock portfolio. Let's assume that we purchased one VIX futures contract for each $100,000 of stock exposure in our portfolio in 2010 and 2011, and paid an average of 15.00% ($15,000) for each contract. When VIX subsequently spiked to 47.00% ($47,000) in both years, gains in each futures contract would have offset roughly $32,000 worth of losses (or roughly 32%). Similarly, buying one VIX futures contract for each $200,000 in our portfolio would have offset a loss of approximately 16% in the underlying portfolio.

While there is no guarantee this level of protection will manifest itself in future declines, the charts above clearly show a tendency of VIX to increase sharply during major stock market corrections. Margin to trade one futures contract is currently $5,000. Hedgers should consider posting at least $9,000 to avoid potential margin calls.

With the "Sell in May and go away" timeframe upon us, using VIX futures to hedge is an appealing idea. Consider one futures contract for each $100,000 to $200,000 in portfolio value, depending on your risk tolerance and the level of protection you desire.

We can also take a speculative position in VIX by going long VIX futures at the low end of its historical trading range and using the 20.00% level as a potential exit point. To make either of these long-VIX scenarios work properly, you must be committed to your position and willing to endure shorter-term losses, "rolling" your position forward as the market dictates.

Stephen Belmont is chief market strategist and senior partner with the Rutsen Meier Belmont Group (RMB), a futures and futures options brokerage firm in Chicago specializing in commodities, currencies, and interest rates since 1984. For more info about these 2013 plays, call 800-345-7026 (toll free) or 312-373-4970 (direct), emailsuerutsen@rmbgroup.com, or visit www.rmbgroup.com.

Video: Equity Fund Update

Wed, 22 May 2013 15:02:00 -0400

Blog: Cutting Through the Noise

Video: Equity Fund UpdatePrint

Posted on May 22, 2013

By Scott Ronalds

We caught up with Gord O'Reilly earlier this month for an update on the Equity Fund. Gord is a founding partner of CGOV (he's the "O"), the firm that manages the fund.

The portfolio has performed well over the last few years and we wanted to provide investors with an update on CGOV's current thinking and the positioning of the fund.

Topics of discussion include the fund's emphasis on high-quality companies, the role of foreign investments, the manager's thoughts on dividends, and their views on valuations.

Download, subscribe via iTunes or RSS, or watch now:

Gord was firing on all cylinders on the day of filming, so we kept the camera rolling and also updated our 'Overview of CGOV' video, which you can watch here.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

Ted Butler: Blockbuster in Gold

Wed, 22 May 2013 14:59:00 -0400

¤ YESTERDAY IN GOLD & SILVER

After an exciting day on Monday, trading in the Far East was very quiet...and the attempt to break through the $1,400 spot mark around 1:30 p.m. Hong Kong time was the start of a long, slow sell-off that ended at the London p.m. gold fix. The low tick at that point was, according to Kitco...$1,359.00 spot.

The subsequent rally lasted until noon in New York...and that was it for the day.

Gold closed at $1,376.00 spot...down $24.10 from Monday. Net volume was very heavy...around 195,000 contracts.

Silver was under selling pressure right from the New York open on Monday evening...and was down about 50 cents by 9:00 a.m. Hong Kong time. It rallied until around 2:00 p.m...and then, like gold, went into a slow decline, with the low also at the London p.m. gold fix...10:00 a.m. EDT in New York.

And also, like gold, rallied until noon before selling off a bit into the close. The noon low, according to Kitco, printed $22.00 spot.

Silver closed at $22.43 spot...down 49 cents on the day. Gross volume was a chunky 63,000 contracts.

The platinum and palladium charts looked mostly similar.

The dollar index closed at 83.76 in late-afternoon trading in New York on Monday...and then traded more or less sideways until 2:00 p.m. Hong Kong time...and the subsequent rally peaked out at 84.20 about 10:20 a.m. in New York. Then, in less than three hours, the index fell to its low of 83.70 at precisely 1:00 p.m. EDT...giving up all of its earlier gains...and a few basis points more. The index closed at 83.76...unchanged on the day.

The gold price fell $40 as the dollar index rose 41 points between 2:00 p.m. in Hong Kong...and 10:20 a.m. in New York...but when the dollar index declined 52 basis points during the following two and half hours, the gold price only rose by about $15.

The gold shares gapped down almost 4 percent at the open...hit their low at 10:00 a.m. EDT when gold hit its low...and then rallied until around 1:00 p.m. in New York, before selling off into the close as gold did the same. The HUI finished down 2.75%.

The silver chart looked similar...and Nick Laird's Intraday Silver Sentiment Indexclosed down 2.37%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 18 gold and 10 silver contracts were posted for delivery tomorrow within the Comex-approved depositories. The link to yesterday's Issuers and Stoppers Report is here.

GLD had another withdrawal yesterday. This time it was 270,710 troy ounces...and as of 11:38 p.m. last night, there were no reported changes in SLV.

The U.S. Mint had another sales report yesterday. They sold 5,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 217,500 silver eagles.

Over at the Comex-approved depositories, there was big movement in silverinventories on Monday. They received 968,451 troy ounces...and shipped 1,119,034 troy ounces out the door. The link to that activity is here.

In gold on Monday, these depositories didn't receive any, but shipped 32,033 troy ounces out the door...and the link to that activity is here.

Here is today's "cute quota"...

I have the usual number of stories for a mid-week column...but not too many ones related to precious metals...and a couple of them are must reads.

¤ CRITICAL READS

Moody's: US Faces Downgrade Without Budget Deal

U.S. policymakers must address debt loads projected to rise later this decade to avoid a 2013 downgrade, even as the latest budget projections are “credit positive,” according to Moody’s Investors Service.

The U.S. budget deficit will drop to $378 billion in 2015 from a record $1.4 trillion in 2009, according to Congressional Budget Office data. The federal government will post a $642 billion deficit this year, the first time in five years that the shortfall has been less than $1 trillion. Moody’s said Sept. 11 that the U.S.’s top Aaa rating would likely be cut to Aa1 if an agreement on the debt ratio isn’t reached.

“The fact that it showed much lower debt levels going forward, we view as a positive development,” Steven Hess, senior vice-president at Moody’s and based in New York, said in a telephone interview of the CBO forecast. “More needs to be done on the policy front to address this rising debt ratio.”

This moneynews.com article was posted on their website early Monday afternoon..and today's first story is courtesy of West Virginia reader Elliot Simon.

SAC’s Cohen Said to Mull Deal That Would Shut Hedge Fund

After five years under investigation for insider trading, Steven Cohen is considering proposing a deal to prosecutors that would shut his $15 billion hedge-fund firm to outside investors, according to a person familiar with his thinking.

Cohen has discussed an agreement under which his SAC Capital Advisors LP would admit wrongdoing but wouldn’t be prosecuted unless it broke the law again, said the person, who asked not to be named because the talks are private. As part of the deal, known as a deferred prosecution agreement, Cohen would close the Stamford, Connecticut-based firm to outside investors and make it a family office that manages his personal fortune. SAC Capital probably would also pay a fine.

That Cohen would ponder a deferred prosecution agreement suggests the 56-year-old billionaire sees it as unlikely that he could fight criminal insider-trading charges and continue to run a hedge fund. Prosecutors, who have already linked at least nine current or former employees to insider trading while at SAC Capital, probably wouldn’t accept an agreement that lets Cohen off the hook, said John Coffee a professor at Columbia University School of Law.

"...won't be prosecuted unless it breaks the law again???" That's saying that you can commit your first murder, bank robbery, or fraud...and get a pass. You can't make this stuff up. This story was posted on the Bloomberg website late Monday afternoon...and it's courtesy of U.A.E. reader Laurent-Patrick Gally.

Watch out Watford: Here comes the secretive Bilderberg Group

Whether it’s the shape-shifting group of reptilian descendants from the constellation Draco who control humanity, or the shadowy cabal of powerful financiers and politicians who covertly run all governments, conspiracy theorists are once again preparing for their annual jamboree of protest against those who really rule the world, this year in the highly secretive destination of... Watford.

For three days beginning on 6 June, a five-star hotel in Chandler’s Cross that normally hosts the England football team before Wembley matches, will turn over its 227 luxury rooms and 300-acre estate grounds to the über-secretive Bilderberg Group.

The Grove, once the home of the earls of Clarendon where prime ministers such as Palmerston and Walpole were guests and where a young Queen Victoria started the fashion for “the weekend break”, will turn back the clock when it welcomes around 140 of Europe and America’s most powerful leaders from banking, finance and politics with a scattering of royalty and aristocracy adding to the elite guest list.

Due to a tradition that stretches back to 1954 and the first conference held at the Hotel de Bilderberg in Oosterbeek in the Netherlands, nothing that is discussed or agreed at a Bilderberg meeting is reported. Until recently even the names of those who were invited was kept secret.

This news item appeared on the independent.co.uk Internet site on Tuesday...and I thank U.K. reader Tariq Khan for bringing it to our attention.

British P.M. tries to break deadlock on tax havens

EU leaders will make another bid to agree rules on tax evasion after UK Prime Minister David Cameron called on 10 British tax havens to "get their house in order" on secret bank accounts.

In a letter released Monday (20 May) to the leaders of the British islands, including the Channel and Cayman islands, Cameron urged them to disclose details of accounts used for company ownership.

The islands should "provide for fully resourced and properly managed centralised registries, that are freely available to law enforcement and tax collectors, and contain full and accurate details on the true ownership and control of every company," he said.

This story appeared on the euobserver.com Internet site early yesterday morning Europe time...and it's Roy Stephens first offering in today's column.

‘Cameron wants to kick E.U. exit issue into long grass’ – Nigel Farage

Despite the British government’s desire to soft-pedal the country’s possible EU exit, the referendum to decide UK’s future in the Union must be held before the 2015 general election, believes the leader of the UK Independence Party, Nigel Farage.

With a lot of hard feeling swirling around the EU, one thing many seem agreed on is anger at Brussels. Nine European countries are now in recession and, with no end to austerity in sight, EU membership appears to be more trouble than its worth for some.

The leader of the Euroskeptical UKIP party, Nigel Farage, says recent research show that by participating in the EU, Britain is annually losing more than £100 billion due to membership fees and the Union’s regulations.

This story was posted on the Russia Today website late Monday evening Moscow time...and it's another contribution from Roy Stephens.

Farage Bashes Tax-Advantaged Hypocritical European Politicians

With Tim Cook being fried on Capitol Hill, it is perhaps ironic that the issue of taxes is front-and-center in the European parliament today. However, as usual, the always-willing-to-tell-the-truth Nigel Farage points out the gross hypocrisy of a political elite calling for higher taxes (on the wealthy and more broadly in peripheral nations) when the reality is that the higher-ups in the European parliament have their marginal tax rates capped at 12%. Of course, none of that matters because stocks are rising and interest rates are falling; but perhaps the 60% of Greek youth or 57% of Spanish youth might be intrigued at the new normal idea of 'fair share' in Europe.

This 3:56 minute tirade was posted on the Zero Hedge Internet site early yesterday afternoon...and this video clip is courtesy of Marshall Angeles.

Wealthy bank depositors to suffer losses in E.U. law

A draft European Union law voted on Monday would shield small depositors from losing their savings in bank rescues, but customers with over 100,000 euros in savings when a bank failed could suffer losses.

On Monday, a group of European lawmakers in the house's economics committee voted that, from 2016, large depositors in the European Union might suffer losses if a bank gets into serious trouble, echoing a deal in Cyprus where wealthy depositors were hit hard at two banks to save the country from bankruptcy.

Under the EU proposal, a bank would only dip into large deposits of over 100,000 euros once it had exhausted other avenues such as shareholders and bondholders.

This Reuters story, filed from Brussels, was posted on their website late on Monday evening Europe time...and I thank Manitoba reader Ulrike Marx for sending it along.

Corporate Tricks: E.U. Faces Tough Battle to Close Tax Loopholes

Wealthy businesspeople shift millions of euros abroad while profitable companies use accounting tricks to minimize their taxable earnings and assets. The EU finally wants to create effective policies to curb these practices, but faces strong opposition from member states.

BASF, based in Ludwigshafen in southwestern Germany, has a large tax department, whose work consists partly in moving money around between continents. But now the company has discovered a tax haven right at home in Europe

In addition to a large plant, the company operates the BASF Belgium Coordination Center in Antwerp. Some 160 employees at the center spend a portion of their time searching for legal ways to reduce BASF's tax bill. In 2011, the company paid taxes on its many millions in profits at a rate of only 2.6 percent.

BASF is by far not the only company to take advantage of favorable tax conditions in a neighboring EU country to improve its bottom line. Volkswagen, currently the most profitable company in Germany, was even greedier. In 2012, Belgian subsidiary Volkswagen Group Services paid no taxes at all on profits of €153 million, and in the previous year it raked in €141 million in tax-free profits -- and it was all completely legal.

This story was posted on the German website spiegel.de yesterday afternoon Europe time...and I thank Roy Stephens for sharing it with us.

Taxes on some wealthy French top 100 percent of income

More than 8,000 French households' tax bills topped 100 percent of their income last year, the business newspaper Les Echoesreported on Saturday, citing Finance Ministry data.

The newspaper said that the exceptionally high level of taxation was due to a one-off levy last year on 2011 incomes for households with assets of more than 1.3 million euros ($1.67 million).

President Francois Hollande's Socialist government imposed the tax surcharge last year, shortly after taking office, to offset the impact of a rebate scheme created by its conservative predecessor to cap an individual's overall taxation at 50 percent of income.

This Reuters item, filed from Paris, was posted on their Internet site early Saturday afternoon EDT...and I thank U.K. reader Teresa Tannahill for bringing it to our attention.

New Arms Bill in Congress Could Involve Major Sanctions on Russia

The US Senate Foreign Relations Committee voted on Tuesday to pass a bill that will be highly unpopular in Moscow, not to mention Damascus.

The Syrian Transition Support Act would provide arms to Syrian rebels in support of a regime change — a precedent Russia deeply opposes. Moscow has already been overtly sending weapons to Assad (more intensely so as of late), so Washington's move to overtly arm the rebels could easily paint Syria as the battleground of a blossoming proxy war.

Russia won't like that idea, but it also won't like the paragraph in the bill about sanctions on anyone shipping arms or oil to the Syrian regime: Sanctions on arms and oil sales to Assad: Targeting any person or entity that the President of the United States determines has knowingly participated in or facilitated a transaction related to the sale or transfer of military equipment, arms, petroleum, or petroleum products to the Assad regime.

This very short article appeared on the businessinsider.comInternet site yesterday evening EDT...and it's Roy Stephens' final offering in today's column.

Abe’s Resurgent Japan Hurt by Lack of Business Spending

As Japan’s cherry trees bloomed and the stock market soared, Kohetsu Watanabe flew to a blossom-viewing party in Tokyo hosted by Prime Minister Shinzo Abe to tell the premier personally how bad things really are.

When the head of machine-parts maker Daikyo Seiki Co. shook hands with Abe at the 12,000-guest event in Shinjuku Gyoen park, he says he begged the premier to help small- and medium-sized companies that make up 70 percent of Japan’s industry.

“Stocks and the yen may have come back, but the state of the real economy is very different,” said Watanabe, 49, who has no plans to raise wages for his 17 employees and hasn’t paid a bonus since 2008. “It’s impossible for me to be optimistic.”

This Bloomberg story appeared on their website in the wee hours of yesterday morning MDT...and I found it in yesterday's edition of the King Report.

Four King World News Blogs/Audio Interviews

1. Dr. Stephen Leeb: "Gold, Silver and 100-Year Inflection Point to Crush the West". 2. Richard Russell: "I Haven't Seen This in 60 Years of Writing". 3. Ron Rosen: "Silver to Soar a Stunning 400% and Gold $1,500 in 10 Months". 4. The audio interview is with Egon von Greyerz.

Rubber bullets fired at South African mine strikers, several hurt

Ten striking South African miners were taken to hospital on Tuesday after being hit by rubber bullets, police said, as labour strife swells in mines and factories ahead of mid-year pay negotiations.

"If our demands are not met we will have no option but to go to the streets," NUMSA national treasurer Mphumzi Maqungo told Reuters.

The comments underscored the fragility of labour relations in Africa's biggest economy since last year's bloody mining sector unrest, and pushed the rand beyond 9.50 to the dollar for the first time since early 2009.

In This Issue.

* Will they or won't they???
* IMF tells the Swiss to go negative.
* BOE denies King his request to increase stimulus.
* Possibility of more stimulus helps the emerging markets.

And, Now, Today's Pfennig For Your Thoughts!

Looking for direction from Chairman Bernanke.

Good day. We finally got a break from all of the storms last night, with most of the major storms passing just south of the St. Louis area. The break was certainly appreciated, as my two dogs have kept me up most of the last two nights. I have a yellow lab and a smaller lahtese who work each other up whenever a storm rolls through. My wife actually went to the vet to get some 'doggie downers' yesterday as nobody in our house was able to get any sleep with our two dogs all hyped up by the storms.

Currency traders must have taken some good drugs the past two days as the currencies markets have been very mellow this week. The range on the dollar index has been tightening over the past 4 trading days, with the lower end of the range holding steady and the upper end continuing to come down. But testimony from Fed Chairman Ben Bernanke could certainly break the dollar out of this pattern today.

Bernanke will be testifying on the economic outlook before the Joint Economic Committee of Congress today and the minutes of the FOMC's last meeting will be released at about the same time. Investors have been waiting to hear which side of the fence the Chairman is on - is he going to be in favor of tapering the bond buying program or will he feel the plan needs to continue until the labor market improves? Without any data released here in the US this week, the markets have been trading up and down according to expectations of what Bernanke will say. Today we will finally get to hear from the man himself.

San Francisco Federal Reserve President John Williams started all of the hype around Bernanke's testimony with a suggestion at the end of last week that the Fed should start tapering their monthly purchases of Mortgage Backed securities. Philadelphia Fed Pres Charles Plosser added more fuel to the 'end stimulus' fire with his suggestion that the Fed should start shrinking their purchases at the next meeting. But then Boston's Eric Rosengren threw water on the fire by telling reporters that low inflation and high unemployment suggests there may be a need for MORE stimulus not less.

The St. Louis Fed President, James Bullard weighed into the argument yesterday during a speech over in Frankfurt, Germany. Bullard said the central bank should continue its bond buying program in order to boost growth which is slower than the FOMC would like. Bullard's words carry a bit more weight with the markets as he is one of the Fed Presidents who currently votes on the policy-setting FOMC. "Quantitative easing is closest to standard monetary policy, involves clear action and has been effective," Bullard said. "We may need to update our thinking with respect to the so-called exit principles."

After Bullard's comments hit the news wires, New York Fed President William C. Dudley was asked for his opinion on QE and probably gave the best indication of what Chairman Ben Bernanke will say during his testimony today: wait and see. Dudley said he has not decided on what the next move should be and suggested the FOMC should continue to monitor the markets and the economic data to see when to adjust the purchase program. "Because the outlook is uncertain, I cannot be sure which way - up or down - the next change will be," Dudley said in a speech yesterday. He believes the Fed needs to take some more time before making any changes to the policy, "Three or four months from now I think you're going to have a much better sense of, is the economy healthy enough to overcome the fiscal drag or not."

I think Bernanke will sound a lot like Dudley today during his testimony. The FOMC minutes will probably reflect that the committee members do feel the US economy is on a good recovery path, and there was probably some discussion of ending the bond buying. But Chairman Bernanke is a cautious dove when it some to economic policy, and he will suggest that more proof of the recovery will need to be reflected in economic data, and in particular we will need to see more positive signs from the labor market. The FOMC members will be worried about the nascent recovery here in the US, and have shown that they are much less worried about any longer term inflation. They will much rather be too late in removing the stimulus instead of too early. Therefore I think the chances are greater that we will see a drop in the dollar today instead of a dollar rally.

As I mentioned earlier, St. Louis Fed Head was in Germany yesterday, and certainly didn't keep his comments solely on the US stimulus program. During his speech Bullard also suggested that the ECB should take a more aggressive approach in their monetary policy. Bullard said Europe is risking an extended period of low growth and deflation similar to Japan's 'lost decades' and that the ECB should therefore start buying bonds similar to what the US and the UK have done. Bullard suggested that low interest rates weren't the answer for Japan, as they kept them near zero for over 15 years. QE is what will be needed for Europe according to the St. Louis Fed head.

The IMF is suggesting the Swiss National Bank should also get more aggressive with their policies, stating in a report released yesterday that the SNB should introduce negative interest rates. And SNB President Thomas Jordan says the negative interest rates are a tool the SNB is considering. By moving the rate the central bank pays on bank deposits into negative territory, the thought is that the banks will put more money to work in the markets instead of just keeping it with the central bank. This should increase the 'velocity' of money in the Swiss economy and lead to more inflation and activity; encouraging more economic activity. But as SNB President Jordan suggested yesterday, these negative interest rates could also have unintended side effects. He suggested simply moving the cap on the CHF/EUR may be a better short term option. The Swiss franc dropped through 1.26 CHF/EUR for the first time in two years after this suggestion by Jordan.

The minutes of the last BOE meeting were released this morning, and showed that BOE Governor Mervyn King was again defeated in his bid to expand the stimulus efforts. King has been pushing the BOE to increase the amount of bond buying they are doing in this latest round of quantitative easing, but other bank officials have cautioned against any increase on fear of stoking inflation expectations. King and two other members want to increase the bond purchases by 25 billion pounds to 400 billion pounds.

The pound sterling fell after the release of the meeting minutes, and moved down even further after a report showed UK retail sales unexpectedly declined last month. Retail sales dropped 1.3% from March when they declined .6%. Falling retail sales would seem to counter the 'inflation argument' being presented against the QE increase, so there is speculation that King will eventually wear down the other members and QE will be increased.

Commodity currencies fell yesterday as both the AUD$ and CAD$ were lower. The Australian dollar fell after a report showed consumer confidence dipped 7% this month, following a 5.1% drop in April. The RBA dropped rates at the beginning of May, and falling consumer confidence may encourage further rate cuts in order to try and stimulate the Australian economy. Lower rates are a problem for holders of Aussie dollars, as one of the key supports of the currency is interest rate differentials.

Oil prices fell a bit yesterday, snapping a four day rally and putting pressure on the petrol currencies including the Canadian dollar. Oil is Canada's largest export, so the fall in crude prices helped push the loonie lower. The talk of ending the QE program in the US has also weighed on the Canadian dollar as the US dollar rallies. The Canadian economy is still struggling, and the new BOC leader is seen as more of a dove than his predecessor, so the chances of a hike in rates are being reduced. The BOC has held rates steady since September of 2010, and these rates are now expected to remain at their current levels through the end of the year. Not good news for the loonie.

The emerging market currencies were buoyed slightly by the possibility that the US stimulus policies would be extended. Both the Mexican peso and Brazilian real moved higher yesterday on the suggestion by STL Fed Head Bullard that QE be extended. Brazil's real rose from a four month low, climbing for the first time in six days vs. the US$. Brazil's Central Bank President Alexandre Tombini said policy makers will act to ensure inflation slows in the second half of the year. "The central bank is vigilant and will do what's necessary in a timely fashion to make inflation decline." Tombini said yesterday. Inflation remains close to the 6.5% upper limit of the central bank's target range, and Tombini's comments may suggest interest rates could be increased in the coming months. This would be very good news for the Brazilian real, as this currency is very attractive for investors looking for higher yield.

In addition to Bernanke's testimony and the release of FOMC meeting minutes, Existing Home Sales data is scheduled to be released this morning. The housing market is one of the positive signs of the US economic recovery, so this number will be closely watched. Existing home sales are expected to have climbed in April to the highest level in more than three years, with a 1.4% increase.

To recap. The markets are eagerly awaiting the testimony of Ben Bernanke today along with the release of the FOMC meeting minutes. Everyone is looking for a clue as to when the Fed will start to reduce their Quantitative Easing efforts. Indications from the different Fed Heads show just how split they are regarding the end of QE, but I think we will see it continue through the end of the year. STL Fed Head Bullard feels the ECB should start a bond buying program of their own. The BOE kept their QE program at the current level in spite of the urging of King to increase it. Commodity currencies fell and emerging market currencies rose yesterday as the question of an end to QE swung in their favor.

Currencies today 5/22/13. American Style: A$ $.97484, kiwi .81136, C$ .9700, euro 1.2932, sterling 1.5094, Swiss $1.0259. European Style: rand 9.5103, krone 5.7820, SEK 6.6135, forint 223.73, zloty 3.2319, koruna 20.1597, RUB 31.16, yen 102.91, sing 1.2615, HKD 7.7612, INR 55.5875, China 6.1904, pesos 12.3344, BRL 2.0404, Dollar Index 83.889, Oil $95.52, 10-year 1.92%, Silver $22.645, Gold. $1,387.40, and Platinum $1,467.65.

That's it for today. The Cardinals won big last night, beating the San Diego Padres 10-2! The Cardinals will remain out west for an extended period as Busch Stadium is re-configured to host an International Soccer match. The pitcher's mound was removed and base-paths have all been sodded to allow the Manchester City and Chelsea football clubs from the English Premier league to play a 'friendly' tomorrow night. The soccer pitch will be slightly smaller than what the teams are used to, as they had to 'shoehorn' it into Busch Stadium. Our own Ty Keough will be calling the game on KMOX, the local radio station and the stadium was sold out within minutes. Chuck will be back in the saddle tomorrow morning, so this is it for a while from me. Hope everyone has a Wonderful Wednesday, and thanks for reading the Pfennig.

Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Green as Grass

Wed, 22 May 2013 14:57:00 -0400

The 6 W’s: Who, what, where, when, why and what of it

RegMed equities and investors enjoy your day in the sun – today’s trading within the sector is in lock-step with the overall positive market. Could this be a sign of things to come? Perhaps, but as I mentioned yesterday the dichotomy between clinical data and trial risk performance must be addressed. Still, it’s always gratifying to see the sector leverage the bull market when it can.

Measuring the day - POSITIVE - 21 green (ups) followed by 7 red (downs) and 6 fluctuating black (flats).

Mid-Day - Stocks were upbeat at mid-day Wednesday following Fed Chairman Bernanke’s Senate testimony that the central bank will continue to apply stimulus efforts, though a step down in the pace of bond purchases could occur if the job market continues to improve. Traders were also pleased with data on U.S. housing showing sales at their highest level in more than 3 years. The NASDAQ is UP +15.93 or 0.45% at 3518.05 while the Dow is also UP +96.91 or +0.63% at 15,484.49. The CBOE volatility index traded above 13.

Research Notes:

RegMed Daily – The Early Movers … http://www.scimitarequity.com/blog/2013/05/22/the-early-movers-whos-hot-whos-not-28

Henry McCusker presenting at Sachs Cancer Bio Partnering Institute…http://www.scimitarequity.com/blog/2013/05/22/henry-mccusker-presenting-at-sachs-cancer-bio-partnering-institute

Roll Call:

Aastrom (ASTM) is UP … +0.0064 to $0.5799 with a pending offering about to dilute the price and share count. A SELL.

Athersys (ATHX) is UP… +$0.01 at $1.87 post earnings. A HOLD.

BioLife Solutions (OTC: BLFS) is FLAT…at $0.38 per share at mid-day. BLFS is growing its business, evidenced by its licensing of specific areas of intellectual property, while keeping high growth as the regenerative medicine market opportunity develops. BLFS hold the leading supplier position for pre-formulated, clinical grade bio-preservation media products. A STRONG BUY.

Cytori (CYTX) is UP … +$0.05 to $2.59 with today’s mid-day trading range of $2.51 – $2.60 and a 40 K share volume. A BUY.

Cytomedix (OTC: CMXI) is UP… +$0.0049 to $0.5149, with a trading range of $0.50- $0.5149 and moderate volume of 37 K shares compared to Tuesday’s close of $0.51. A BUY.

NeoStem (NYSE MKT: NBS) is DOWN …-$0.0025 to $0.5750 with moderate l share volume of 357 K at mid-day. The trending 50 and 200 day moving averages are at $0.61 and $0.63 respectively. A STRONG BUY!

Medistem (PINK: MEDS) is DOWN…-$0.10 at $1.10 … with no real news and minimal volume of 100 shares. MEDS needs to generate some significance to differentiate itself and forward … any visibility standing… A very thinly or no trading volume stock. A HOLD.

News

An expert panel of scientists and clinicians is warning people against going overseas for costly and unproven stem cell treatment for cerebral palsy. A forum held in Sydney last night heard from leading researchers in the field and a parent who sought treatment in the United States for his young son. The Cerebral Palsy Alliance estimates as many as 500 Australians have sought stem cell therapies overseas. But the alliance last night urged families to hold out for the possibility that Australia will undertake its own clinical trials of the treatment as early as this year. “We’re very worried about families travelling overseas for treatment,” Associate Professor Iona Novak, from the alliance, said. “A lot of these stem cell tourism companies don’t even describe what type of cells they’re giving, so first we don’t even know if they’re human cells… so, of course, it is a very risky procedure. “There have been a couple of cases internationally of children actually dying from these treatments.”

Cellular Biomedicine Group (OTCQB: CBMG) has achieved half of the enrollment of the total projected enrollment required for its PI trial to evaluate the safety and preliminary efficacy of TC-DC (Tumor Stem Cell Specific Dendritic Cell) therapy for hepatocellular carcinoma (HCC), the most common type of liver cancer. To date the trial has had no Severe Adverse Effect (SAE) reported.The Phase I clinical trial for TC-DC therapy for HCC, registered with NIH under number NCT01828762 is an open label clinical trial conducted with Shanghai’s PLA 85 Hospital, one of the Liver Disease Centers of People’s Liberation Army. The trial will evaluate the safety and efficacy in lowering the incidence of tumor recurrence and metastasis by means of autologous immune cell therapy in primary HCC patients following standard tumor resection and TACE chemotherapy.

Stemline ( STML) closed on its previously announced underwritten public offering of 4,137,931 shares of its common stock at a public offering price of $14.50 per share. The gross proceeds to Stemline from the public offering are $60 million, before underwriting discounts and commissions and other offering expenses payable by Stemline.

Worth Noting

Cytomedix (CMXI) chairman David Emerson Jorden bought 80,000 of CMXI 5/17-21/2013

Share and Enjoy:

Doug Casey’s Primer on Internationalization

Wed, 22 May 2013 14:57:00 -0400

As many of you may know, International Man has its roots in the book of the same name. It was first published in 1978 by best-selling author, speculator, and renowned world-traveler Doug Casey.

The original intent of that book was to give readers a general sense of the exciting and opportunity-rich world that lay outside of their national borders, with a review of over 100 countries, valuable "opportunity intelligence," and the resources that anyone could follow to realize these opportunities.

Even though the book is now clearly out of date, the need for information on internalization is more relevant than ever, as governments the world over become more desperate. The purpose of this website is to preserve the mission of that book and be the premier location for up-to-date, highly actionable, and practical information on the topic.

So why is internationalization prudent?

Doug Casey has said over and over that spreading your political risk beyond one single jurisdiction is the single most important thing he can recommend today.

Political risk is minimized when you don't depend absolutely on any one particular country. Having all your eggs in one basket only makes it easier for someone to grab them all. Being internationalized makes it much harder for any particular government to control you.

We will no doubt see the major underlying trend of increasing political risk (especially for Westerners) get worse as governments sink deeper into fiscal and moral bankruptcy.

It is only prudent and logical to assume that you will, somehow and someway, continue to be squeezed harder in the pocketbook and subjected to escalating arbitrary and burdensome regulations and restrictions. In short, expect more government and less freedom all around.

The window to protect yourself from these risks by diversifying internationally gets verifiably smaller with each passing week. There are many ways to internationalize that do not require you to leave your home country. It is not necessary (at least, at the moment) that you immediately leave and become an expat.

However, it is necessary that you develop the options to internationalize before the government closes the window of opportunity to do so. If history is any guide, it won't be open forever.

In that sense, it is much better to have developed and implemented many parts of your internationalization game plan a year early rather than a minute late.

There are four broad areas of internationalization:

Savings: This covers how to setup offshore bank, brokerage, and financial accounts, foreign real estate and "bolt-holes" in case of trouble, moving and owning gold overseas, and structures like foreign trusts that help to legally reduce taxes. Placing your savings outside the immediate reach of your local government ensures that they cannot be trapped in the case of capital controls or outright seized at the drop of a hat, such as what happened when the government became sufficiently desperate in Cyprus.

Yourself: Obtaining a second passport from another country and establishing legal residency in foreign countries.

Income: The structuring of your cash flows to reduce dependence on any one source in any one jurisdiction. Establishing additional sources of revenue, international investment opportunities and trends, and setting up an offshore company.

Digital Presence: This commonly includes your IP address (which can often pinpoint you to a precise physical address), email account, online file storage, and the components of personal/business websites.

Last, I will leave you with a primer on internationalization with Doug Casey.

To navigate all the possibilities and options available, it is imperative to have the most accurate and current information possible. Casey Research has recently updated and expanded its popular Going Global report to give its readers exactly that. Going Global 2013explores in detail the choices investors have for moving investments offshore, including insurance and trusts; it discusses many stock markets and currencies; and it covers internationalizing yourself, starting with getting a second passport and including choosing a new country (or countries) in which to create homes. If you want to start internationalizing, you'll find no better resource on the subject. Click here to learn more and get started today.

The Early Movers – who’s hot, who’s not

Wed, 22 May 2013 14:54:00 -0400

Which RegMed companies are making moves in the 1^st hour?

Signs of life …

Shire ADR (SHPG +$0.35) and Wright-Medical (WMGI +$0.19) are the leaders as today’s market opens…

…followed by MiMedx (MDXG +$0.17), BioTime (NYSE MKT: BTX +$0.11), Harvard Bio (HBIO +$0.10), Osiris (OSIR +$0.10), Stemline (STML +$0.10), Verastem (VSTM +$0.08), Opexa (OPXA +$0.05), StemCells (STEM +$0.03), Proteonomix (OTC: PROT +$0.025), Dendreon (DNDN +$0.02), Geron (GERN +$0.02), Aastrom (ASTM +$0.015), NeoStem (NYSE MKT: NBS +$0.004), and Advanced Cell Technology (OTC: ACTC +$0.0017)

A view of the downside at the open …

Cryo-Cell (OTC: CCEL -$0.10) and ReNeuron (LON: RENE -$0.07) are the loss leaders…

…followed by Athersys (ATHX -$0.02),ThermoGenesis (KOOL -$0.02) Neuralstem (NYSEMKT: CUR -$0.01), International Stem Cell (PINK: ISCO -$0.01), Brainstorm (OTC: BCLI -$0.005), Vitro Diagnostics (PINK: VODG -$0.004), and Tengion (PINK: TNGN -$0.009)

And some of the sector is flat

Bioheart (PINK: BHRT), BioLife Solutions (OTC: BLFS), Cytomedix (OTC: CMXI), Cytori (CYTX), Fibrocell (NYSE MKT: FCSC), ImmunoCellular (NYSE MKT: IMUC), IntelliCell (OTCMKTS: SVFC), Medistem (PINK: MEDS), and Mesoblast ADR (PINK: MBLTY)

Share and Enjoy:

Stocks rise, stocks fall, swiftly flow the shares – one session following another

Wed, 22 May 2013 14:49:00 -0400

Except we have no fiddler in the RegMed sector playing the music!

RegMed equities were sputtering to the close.

In the broader market … stocks had a wild ride during the session, as investors digested congressional testimony by the Fed’s Bernanke post the release at 2 p.m. Eastern of the minutes from the Fed’s April 30-May 1 meeting. Stocks closed down nearly 1% in a volatile session after the minutes from the last Fed policy setting meeting suggested the central bank is divided on when it may start to pull back on its monetary stimulus.

There were some bright spots … the big bat in the park is … Mesoblast ADR (MBLTY) +$2.19 to $29.24 followed by Stemline (STML) UP +$0.32 after an offering to $14.82. Verastem (VSTM) is UP +$0.02 at $9.18 with MiMedx (MDXG) UP at +$0.16 to $7.38. Pluristem (PSTI) is UP +$0.09 to $3.15 while BioTime (BTX) is also UP +$0.07 to $4.26. Shire (SHPG) being UP +$0.10 to $97.04 – buying back some stock. Fibrocell (NYSE MKT: FCSCD) who’s had very good days is UP having been UP at +$0.16 to $4.89 after a stock reverse! While Osiris (OSIR) was UP +$0.13 to $10.98 with NeoStem (NYSE MKT: NBS) also UP +$0.002 to $0.58

Closing negative … weathering the dug-out was … Wright-Medical (WMGI) DOWN -$0.86 to $23.66. Cytori (CYTX) is DOWN -$0.01 to $2.52 with Dendreon (DNDN) is DOWN -$0.03 to $3.93. and finally Medistem (PINK: MEDS) is DOWN -$0.10 at $1.20. Harvard BIO (HBIO) is DOWN -$0.04 at $5.06 – market adjustment following tax free spin-out versus HART IPO. Opexa (OPXA) was DOWN -$0.03 at $1.64 as is Aastrom (ASTM) after slowly eroding up and down at -$0.003 to $0.57 – just biding time to an offering – this is the most timed offering … I waited for a … long … time! Tengion (TNGN) is DOWN -$0.099 to $0.60 – can they last?

Other favorites closing … BioLife Solutions (BLFS) closed DOWN -$0.011 to $0.369 after very short run along with Cytomedix (CMXI) who is also DOWN -$0.009 to $0.475 – wake up – roaring -BUY – investors should wake to this one; just think hybrid. Athersys (ATHX) is FLAT at $1.86.

Measuring the close – barely POSITIVE … 16 green (ups) led 15 red (downs) … followed by 6 black (flats) … The CBOE Volatility Index traded below 13.

Closing Bell: The NASDAQ closed DOWN -38.82 (-1.11%) to 3,463.30 while the DOW was DOWN -80.41 (-0.52%) to 15,307.17.

Share and Enjoy:

Commodity weakness weighs on WEIR

Wed, 22 May 2013 14:48:00 -0400

A glance at the above chart of the FTSE 100 shows equities powered to fresh record highs, driven by the US, which continues to outstrip economic dynamics in the developed world.

Further positive news on the US economy came from data revealing that retail sales expanded faster than expected, despite fiscal tightening in the world’s largest economy. The Commerce Department said retail sales crept up 0.1% during the month, against forecasts for a modest decline, after a 0.5% fall in March, the largest in the past nine months.

Better data also prompted an improvement in sentiment towards Europe, after a larger than expected increase in industrial production raised hopes that the recession in the region has eased. Eurostat showed Eurozone industrial output rose 1% in March, double the rate expected and the biggest since July 2011.

Ratings agency Fitch even upgraded Greece’s credit rating, citing progress in the debt laden country reducing its budget deficit and the risk of a Eurozone exit receding. Fitch said it expected Greece to have a milder recession this year of 4.3% and a weak recovery in 2014.

The Japanese stock market also surged to a fresh five year high after the Group of Seven finance ministers failed to criticise the Bank of Japan’s aggressive monetary easing. The politicians and central bank have pushed the yen down against all its major trading partners, boosting the leading exporters’ shares. Data this week showed gross domestic product rose 0.9% from the previous quarter, against the median forecast of a 0.7% rise, providing the first hard evidence that Prime Minister Shinzo Abe’s sweeping stimulus is boosting the economy.

Concerns over the pace of global growth, however, remained in evidence elsewhere, with industrial commodities losing ground following disappointing economic data from China. The world’s second largest economy has faced a slowdown in fixed asset investment, worse than expected industrial production and disappointing retail sales. Brent crude fell back to $101.6 a barrel and gold moved below $1400 an ounce.

Growth data from Europe also disappointed after the region contracted more than expected in the first quarter of the year, weighing on the single currency. Official data showed growth in the Eurozone slowed by 0.2% in the first three months of the year, compared to expectations of a 0.1% fall, with both Germany and France growing at a slower than expected rate.

The German Zew survey of economic sentiment grew at a much lower rate than expected, while the gauge of current conditions dropped sharply, suggesting conditions are still deteriorating in Europe’s powerhouse economy.

Technical analysis illustrates the acute gains experienced this month, with the FTSE 100 nearing 12 year highs at 6750 and all-time highs during the technology bubble in 200 at 6930. Meanwhile, the oscillators are acutely overbought, suggesting the recent momentum could be nearing exhaustion. Strong resistance is likely at 6750, while support is seen at 6505, 6400 and 6240.

In conclusion, it has been an excellent run for equities, supported by an improving global economy that has strengthened the foundation for the stock market rally. That said, with the FTSE 100 nearing all-time highs combined with the acutely overbought technical suggests further short-term gains are growing increasingly unlikely.

Given the above analysis of the FTSE 100, I have been focusing on short-term selling opportunities and as commodity prices remain under pressure, I have concentrated my efforts on engineers with heavy exposure to the materials sector.

Weir Group (LON:WEIR) is a FTSE 100 listed specialist pump and valve maker, servicing the oil and gas, mining and power generation industries.

Despite recent improvement in the share price, the bears have still got their teeth into the company. Around 15% of its shares are currently out on loan to investors that are speculating the price will fall, making it the second most shorted stock in the FTSE All-share index.

An interim management statement on 1st May revealed Weir was trading in line with expectations, forecasting low single digit revenue growth and broadly stable margins, although the outlook highlighted a few concerns.

The mining sector represents 45% of group revenues, where capital expenditure is being squeezed by lower commodity prices. The company said first quarter trading was resilient, but the longer commodity prices remain weak, means margins will get squeezed.

Services to the oil and gas sector, including equipment used in the process of fracking, contributes a third of revenues, but with US gas prices near historical lows because of the Shale revolution, there has been less incentive for companies to invest in new drilling capacity.

The group’s performance over the first quarter was affected by a lower opening orderbook, particularly in the oil and gas division. Overall like-for-like order input fell 14% between January and the end of March when compared to last year, with analysts highlighting the likely implications on full year profits.

Weir offers a good geographical spread, but trading on a hefty 16.2x earnings, while only forecast to grow by 8%, leaves them looking fully rated on a PEG of 2 and a yield of 1.7%. Furthermore, a director recently selling £700,000 worth of shares at 2400p, doesn’t install confidence.

The above chart of Weir illustrates the rapid ascent experienced over the past year, although the shares appear to be running out of steam near the March highs of 2500p. The oscillators are showing early signs of rolling over in overbought territory, with the stochastics intersecting to the downside, implying a drop in momentum.

Given the earlier analysis of the FTSE 100 combined with the commodity related pressure at Weir, suggests the shares are vulnerable to a correction. At the time of writing the share price is 2470p and I believe a short trade with a tight stop-loss above resistance at 2544p, offers an attractive risk / reward bias, with targets seen at 2371p, 2252p and 2105p.

This report was written by Mark Allen – Head of Derivatives at Simple Investments Stockbrokers. The writer does not hold a position in Weir Group, but client accounts may. The material in this report has come from Simple Investments internal data sources, Simply Charts and Weir Group’s corporate website.

Higher open anticipated

Wed, 22 May 2013 14:48:00 -0400

Futures Point UP

Futures suggest a higher open on Wednesday, as investor attention remains focused on today’s testimony to the Senate by Fed Chairman Ben Bernanke. Markets are especially keen for clues as to next steps regarding a reduction or end to quantitative easing. Investors will also digest U.S. existing home sales data due out this morning.

RegMed sector share pricing remains volatile, often with dramatic swings in pricing throughout the trading day, with upwards of 7% – 12% in changes not uncommon.

Both the DOW and NASDAQ futures are UP 0.13% and 0.20% respectively.

In Europe, the FTSE 100 was down 0.2 percent at 6,790 while the DAX fell 0.3 percent to 8,443. The CAC-40 in France was 0.6 percent lower at 4,011. Meanwhile in Asia stocks rebounded, with Japan’s Nikkei up 1.6% to close at its highest point in five years. Hong Kong’s Hang Seng, where trading was suspended in the morning due to bad weather, fell 0.5%.

Share and Enjoy:

Henry McCusker presenting at Sachs Cancer Bio Partnering Institute

Wed, 22 May 2013 14:48:00 -0400

Publicly Traded Companies Targeting Cancer Stem Cells

Scimitar Equity founder Henry McCusker is presenting this morning at the Sachs Cancer Bio Partnering Forum in Boston. The Forum brings together thought leaders from Cancer research institutes, patient advocacy groups, pharma, and biotech to facilitate funding and investment.

On a panel entitled Cancer Stem Cells, Henry will offer an update on the current state of cancer stem cell research from an investment perspective, and provide a snapshot on six companies and their efforts in this burgeoning area of medicine.

Click http://scimitarequity.com/HenryCSCPPRES5-18-4.pdf for a copy of Henry’s presentation.

Share and Enjoy:

Stemline Therapeutics (STML) Offering Closes

Wed, 22 May 2013 14:46:00 -0400

$60 M in proceeds

STML, a clinical-stage bio-pharmaceutical company developing oncology therapeutics that target both cancer stem cells (CSCs) and tumor bulk, closed its previously announced underwritten public offering of 4,137,931 shares of its common stock at a public offering price of $14.50 per share.

The gross proceeds to Stemline from the public offering are $60 M, before underwriting discounts and commissions and other offering expenses.

Jefferies LLC and Aegis Capital Corp. acted as joint book-running managers for the offering. Roth Capital Partners acted as co-lead manager for the offering.

The Bottom Line: Cash is KING but, let’s see how the milestones and catalysts keep the shares UP!

STML closed UP +$0.33 to 14.83.

Share and Enjoy:

Synergy Is A Straightforward Opportunity: Trial Results At DDW Back Plecanatide

Wed, 22 May 2013 14:38:00 -0400

It doesn't get much better than this, and Synergy Pharmaceuticals (SGYP) remains a favorite idea. The company's lead drug candidate, plecanatide, has demonstrated strong safety and efficacy results in a 951-patient clinical trial, there's a path to FDA approval, and the company is trading at a fraction of the value of its closest competitor, Ironwood Pharmaceuticals (IRWD). Once approved, plecanatide will likely have a number of commercial advantages over Ironwood's Linzess (linaclotide): specifically, much lower rates of diarrhea, a prohibitive side effect. While Linzess has beaten plecanatide to the market by about three years, Ironwood and partner Forest Labs (FRX) will do all of the heavy lifting, spending significant marketing and promotional resources to penetrate the market. Both Linzess and plecanatide are guanylate cyclase-C (GC-C) agonists, the only two drugs in a new class of compounds for the treatment of chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C). In fact, Ironwood's just-announced ~$140M capital raise evidences the promotional spend necessary to plow the ground for uptake of GC-C agonists. By the time plecanatide is ready to launch, physicians and patients will be well aware of this class of drugs and ready for a next generation product. The medical community is just learning about plecanatide, and the late-breaker presentation today at the annual Digestive Disease Week meeting (DDW) in Orlando, Florida, was well-attended and went a long way toward raising the drug's visibility with clinicians. And we suspect more market buzz will be generated when new clinical sites are brought on to conduct Synergy's Phase III trials for plecanatide later this year.

An estimated 50 million Americans suffer from CIC and IBS-C, and this potential blockbuster drug category should be on the radar screen of larger drug companies in search of new late-stage assets. We highlight some important themes for plecanatide at the DDW meeting and also revisit key points on SGYP as an investment opportunity. Shares of Synergy suffered after a fumbled capital raise (see prior story here), but the company's balance sheet is now in stellar shape with over $100 million in cash. This situation, in our view, presents investors with an opportunity to own the stock, with Wall St. analyst price targets averaging $14.70 per share (nearly a triple from here). Given this relatively low-risk/high reward story, we expect shares of SGYP to at trade back toward their recent highs in the near-term as healthcare investors dig into the story.

Crowd gathers around plecanatide presentation at DDW. Data from the 951-patient Phase IIb/III trial for plecanatide were presented by gastroenterologist and key opinion leader Dr. Phil Miner (Oklahoma University). The room for the late-breaker presentation was full, and a number of physicians that we spoke with were just learning about this new compound and were optimistic about its potential. The plecanatide presentation ended with strong applause before the room emptied by about two-thirds, suggesting that the interest in Synergy's lead drug is high in the gastroenterology community. We spoke with Dr. Miner after the presentation, who noted that the GC-C mechanism could be very important, and is in the initial stages of understanding the implications in treating many GI diseases. Dr. Miner noted that this drug class has the potential to evolve like the H2 antagonist class (Tagamet/Zantac) or proton pump inhibitor class (Prilosec/Nexium), blockbuster drug categories that evolved to treat various GI conditions in large numbers of patients.

The dose response curve for the drug is impressive, and in the graphics below (from Tuesday Morning's presentation), one can see consistency as the plecanatide dose is increased.

(click to enlarge)

Additionally, nearly 70% of patients treated with 3mg plecanatide experienced a spontaneous bowel movement (SBM) within 24 hours of taking the first dose. This is, of course, important for patients presenting with CIC.

(click to enlarge)

A 9.7% rate of diarrhea and 3% discontinuance for severe diarrhea with plecanatide compares very favorably to Linzess' 16% rate and 8% discontinuance for severe diarrhea as seen in the drug's FDA approved label. Importantly, doctors believe that the rate of severe diarrhea with Linzess is higher in the real world vs. the clinical studies, but are not too worried given that alleviating constipation is the primary focus when treating a patient. However, an alternative therapy that has lower incidence of diarrhea like plecanatide would certainly be welcome, as patients will be more likely to stay consistently on treatment.

Controversial Q&A session highlights interest in plecanatide; IRWD takes a swipe. Three questions were asked after Synergy's presentation, including one from a representative of Ironwood asking to see data that were not part of the official presentation. The slide, on relief of bloating associated with CIC was quickly shown, but was not an approved slide (projector error led the speaker to use a different SGYP presentation). The Ironwood rep argued that the slide should be reshown but the speaker refused. Importantly, IRWD's interest in plecanatide is clear - this drug is seen as serious competition, and this competitor is digging for all the data it can find to try to quell interest. As a result, we believe this will have an opposite effect. Another question focused on the diarrhea side effect, and questioned whether higher diarrhea is needed for higher efficacy. Plecanatide does appear to have a dose-response effect on diarrhea rates (the 3mg strength has the highest rate), but the rate of discontinuation at 3mg was similar to the 1mg dose (3.0% vs. 3.4%, respectively). In our view, this question highlighted that the diarrhea side effect is important to physicians treating CIC or IBS-C, and good efficacy with lower diarrhea is optimal. Plecanatide seems to be the best positioned drug to fill that role. The last question was on the clinical significance of the data presented on plecanatide, and the speaker noted that the data were not only highly statistically significant, but also were clinically meaningful. The high rate of complete spontaneous bowel movements (CSBMs) across all of the doses (highest at 3mg) evidences that plecanatide is an effective drug that produces clinically meaningful results.

Now that the full data set has been presented, we expect analysts to conduct physician calls to gauge enthusiasm for plecanatide and to get physician opinions on the competitive profile relative to Linzess, as well as the overall market opportunity. Such calls are likely to support SGYP shares, and could be value-creating events for the stock.

Off-label use in OIC detected with Linzess at DDW suggests larger market opportunity for both Linzess and plecanatide. At the DDW conference, physicians we spoke with noted that they have tried or are likely to try Linzess off-label to treat opioid induced constipation (OIC), which is intuitive given its mechanism to mobilize fluid into the gut to alleviate constipation. It also makes sense, given that Sucampo's (SCMP) Amitiza product, initially approved for IBS-C and CIC, was just approved for OIC. Physician investigators also indicated a high level of interest in participating in trials with the GC-C agonists to treat OIC. Note that the GC-C agonists, Linzess and plecanatide, look very safe and tolerable, and while Linzess may exert severe diarrhea side effects in some patients, Amitiza has caused nausea and vomiting in 30%+ of patients. Additionally, doctors are simply not that impressed with Amitiza's efficacy, however, it's currently the only game in town for OIC. As a result, we expect off-label use of Linzess in OIC to increase, and plecanatide, with arguably the best tolerability profile in the class, is likely to exploit this opportunity as well once on the market. Given that opioids are among the largest categories of drugs dispensed in the U.S. and chronic use of these pain medicines in arthritis and back pain patients is commonly associated with constipation, analysts estimate that the OIC indication has billion-dollar market potential as well. According to Sucampo, there are 3 million patients in the U.S. on chronic opioid therapy, and roughly 80% experience OIC. It's a large market opportunity that is not being modeled into expectations for plecanatide. We believe that a potential OIC indication for plecanatide means that current sales estimates for the drug could be too low. This could translate into an even higher valuation for SGYP should a large drug firm step up to acquire the company.

Several presentations at DDW support the growing IBS-C and CIC treatment market. A number of presentations at the DDW meeting in Orlando this week addressed disorders associated with constipation and offered evidence that the market for drugs to treat these disorders is increasing. We highlight two presentations below that apply to both plecanatide and linaclotide (Linzess), in which the room was crowded with conference attendees.

Alterations in the Guanylate Cyclase-C/cGMP Pathway in Patients With Irritable Bowel Syndrome With Constipation.Andrea M. Harrington1, Joel Castro1, Richard L. Young1, Caroline B. Kurtz3, Ada Silos-Santiago3, Nam Q. Nguyen, Jane M. Andrews, Stuart M. Brierley.

Notably, this presentation was given by Stuart Brierley, a key opinion leader in the gastro space, and focused on the major pathway that is relevant to both plecanatide's and linaclotide's mechanism of action. Dr. Brierley noted that the GC-C/cGMP signaling pathway is considerably reduced in patients with IBS-C compared to healthy subjects. These findings imply that normal functioning of GC-C signaling is critical for GI physiology, and disruption of this signaling can lead to GI disorders such as IBS-C and CIC. While the presentation focused on linaclotide's GC-C agonist properties, plecanatide may be a more natural way to treat these disorders as it is an analogue of uroguanylin, not an enterotoxin analogue like Linzess (linaclotide is an analogue of the diarrhea-causing toxin produced by E-Coli). Importantly, normalizing GC-C signaling may lead to more normal bowel function, and the physician community is beginning to pay closer attention to this treatment pathway.

State of the Art: Are We Any Closer to Understanding the Pathophysiology of IBS. Giovanni Barbara

This presentation was impressively well attended despite being the last session of the day on Monday. The symposium consisted of presentations on the pathophysiology of IBS, and Dr. Barbara Giovanni discussed the critical roles of immune function and inflammation in the etiology of IBS. Plecanatide has been shown to have potent anti-inflammatory properties in several animal models, and given the strong interest in this presentation, plecanatide's profile is likely to be attractive to physicians treating IBS and other bowel disorders.

Linzess launch ramp can provide catalysts for SGYP longer-term. Doctors we spoke with at the DDW meeting like Linzess, albeit a product with less diarrhea and similar efficacy would be preferred. Nevertheless, we believe Linzess has the ability to become a blockbuster drug. The best precedent was Zelnorm, which was removed from the market in 2007 by its innovator, Novartis, for safety reasons, but was poised to achieve nearly $700 million in sales in IBS and CIC after only a couple of years on the market. Based on current prescription data, the launch ramp for Linzess is tracking similarly to initial Zelnorm prescriptions, despite Ironwood missing expectations in 1Q 2013. Ironwood reported Linzess sales in 1Q 2013 (the drug's first full quarter on the market) at $4.4M vs. Wall St. consensus expectations of $12M. However, it seems it was not demand that caused the disappointment, but the flow of inventory with wholesalers given initial launch quantities of the drug in the distribution channel. Looking at the prescription demand for Linzess in the first quarter and price per prescription, evidence suggests that sales were approximately in-line with analyst expectations.

Ironwood reported Linzess sales of $24M net since the product's launch in December of last year, and if one simply divides the $24M in half, first quarter sales of $11-$12M is not unreasonable. Linzess sales are booked as they leave the factory, not as wholesalers sell through to pharmacies. And given that the distribution channel was loaded with initial product in December, it makes sense that little sales were booked in 1Q 2013 as wholesalers sold inventory they already had in 1Q. We note that this is typical of products that are just launched, and this ebb and flow is not unusual. In fact, 2Q 2013 is likely to contain some channel reloading that could mean Linzess sales come in higher than expected. In fact, on Ironwood's 1Q 2013 conference call, Mizuho Securities analyst Mario Corso said that based on IMS prescription trends and pricing assumptions, he estimated demand in the quarter at $10-$11M - Ironwood management noted that his methods were an "appropriate way to look at it." With that in mind, pharma partners and/or acquirers are likely to be sensitive to Linzess' launch in order to gauge the prospects for plecanatide. Many believe plecanatide's better tolerability profile could render a better launch ramp than Linzess (and we agree), however, the market is likely to see the prospects for these products as similar. The good news is that a strong quarter for Linzess could mean good news for SGYP, and additional good news is that because SGYP's valuation is so much lower than IRWD's there is little risk to SGYP if Linzess disappoints in the next couple of quarters.

Meanwhile, Linzess grew 4.5% in the prior sequential weekly period (one week to the next), therefore the drug is growing at a calculated annual run-rate of 234% based on prescription data (4.5% times 52 weeks = 234%). In our view, this is a respectable growth rate for a drug product in its first year of launch, and at the recent Bank of America conference, Ironwood noted that in April alone, Linzess sales were about $8.5M based on IMS prescription data. This suggests that analyst expectations for 2Q 2013 of between $20M-$26M are achievable, and perhaps beatable, especially if the distribution channel needs some refilling.

Thus far, we are hearing from industry sources that sales reps from both Ironwood and Forest are happy with their progress and ability to meet or exceed their sales plans. Note that IRWD and FRX initially distributed Linzess samples to doctors for one month of use, therefore, prescriptions could catch up once these initial samples are exhausted (one month sampling ended in February). Again, strong Linzess sales will likely drive shares of SGYP higher. We like that kind of risk/reward skew.

SGYP remains the only pure play take-out candidate in the GC-C category. IP agreement with IRWD blocks competition.Despite the company's patent-license agreement with Ironwood, there's still some investor belief that an intellectual property overhang exists on the stock, thus, the company's plecanatide patents are worth touching on. The patent deal with IRWD,announced in September of 2012, actually blocks other companies from entering into the GC-C agonist segment and competing in the key IBS-C or CIC indications, or any other inflammatory GI diseases or cancers with the technology. As a result, for large companies hoping to enter this drug class, SGYP is the only asset available for acquisition or partnering and this is why the company is likely to be on analyst take-out lists this year. Synergy has two patents covering the composition of plecanatide - one is a broad patent covering several analogues of uroquanylin (the parent structure of plecanatide), and the other is a patent covering the specific structure of plecanatide itself. These patents, with Hatch Waxman exclusivity, are expected to expire in 2025, and the company continues to evolve its patent estate.

Plecanatide is an analogue of uroquanylin, with one amino acid different from the active form of uroquanylin. The replacement of aspartic acid with glutamic acid fixes the structure in a rigid (partially closed) state, which was designed to act in the intestine and is more stable and more potent than uroquanylin. This novel peptide structure was also designed for optimum low-cost manufacturing.

Ironwood obtained a patent on the use of plecanatide in IBS-C and CIC after multiple rejections by the U.S. Patent and Trade Office (PTO), but of course, Ironwood cannot sell the product in these indications because plecanatide (its composition of matter) is owned by Synergy. Synergy never applied for this "use" patent, as it believed the chance for issuance was low, and even if issued, the patent might not provide much protection. Nevertheless, Synergy licensed the patent from IRWD in order to cease litigation, but the company reserves the right to challenge its issuance per the license agreement. As a result, Synergy owns its initial composition of matter patents on plecanatide and has complete freedom to market plecanatide in all indications with the benefit of the IRWD license agreement. Should SGYP decide to challenge and successfully invalidate the use of the patent held by Ironwood, it will not be obligated to pay the "low-single-digit" royalty to Ironwood per the license agreement. Either way, Synergy's IP on plecanatide remains strong.

Disclosure: I am long SGYP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Jake King. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relationships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. Our full disclaimer is available at www.propthink.com/disclaimer.

Index Falls for Two Consecutive Weeks

Wed, 22 May 2013 10:19:00 -0400

Oreninc Index Update: May 9 - 16, 2013

Index Falls for Two Consecutive Weeks

Note: The Oreninc Index image below has been inverted from previous weeks. The weekly state of the market is now the purple line and the five-week moving average is the grey area.

The Oreninc Index has returned following a one-week hiatus as most of the team traveled to New York City for the Metals & Minerals Investment Conference.

The Index fell for two consecutive weeks ending May 9 and May 16, 2013, changing the five-week moving average to its lowest in 2013 and its lowest level since August 2012. The markets remain incredibly soft and as summer and the Canadian exploration season begins, there is no reason to expect a stunning turnaround in the short term.

Summary (for the week ending May 16th only):

· Total deals announced fell to 23, a four-week low.

· Two brokered deals were announced for $18 million.

· One bought deal was announced for $15 million.

· Total dollars announced was $64 million, a two-week high.

· Average deal size moved to $4.1 million, a two-week high.

Major Financing Openings (for the weeks ending May 9th and 16th):

· Probe Mines Ltd. (TSX-V:PRB) opened a $15 million offering underwritten by a syndicate led by Cormark Securities Inc. on a bought deal basis. Each unit includes a 1/2 warrant that expires in 24 months. The deal is expected to close on or about May 28, 2013.

· Denison Mines Corp. (TSX:DML) opened a $13 million offering underwritten by a syndicate led by Raymond James Ltd on a bought deal basis. The deal is expected to close on or about May 28, 2013.

· St. Augustine Gold and Copper Limited (TSX:SAU) opened an $11 million offering on a best efforts basis.

· Armadillo Resources Ltd. (CNSX:ARO) opened a $10 million offering on a best efforts basis.

Major Financing Closings (for the weeks ending May 9th and 16th):

· Whitecap Resources Inc. (TSX:WCP) closed a $20 million offering on a best efforts basis. The deal is expected to close on or about May 16, 2013.

· True Gold Mining Inc. (TSX-V:TGM) closed a $10 million offering on a best efforts basis.

· Curis Resources Ltd. (TSX:CUV) closed a $6 million offering on a best efforts basis.

· Ucore Rare Metals Inc. (TSX-V:UCU) closed a $5 million offering underwritten by a syndicate led by Byron Capital Markets on a best efforts basis.

Author: Eli Fabens

Original Link: http://oreninc.com/orenthink/entry/oreninc-index-update-may-16-2013

Oreninc also publishes the Oreninc Deal Log, a daily list of all financing activity in the TSX resource sectors. Visit http://oreninc.com to see which companies and sectors to watch. Oreninc also writes custom reports for companies on effective capital raising strategies to help companies maintain long-term shareholder value.

Disclaimer: The views presented in Oreninc's blog reflect the opinions of the Oreninc Team only. We use the publicly available data we collect for the ODL to discuss greater market and financing issues. See Terms.

Be Better

Tue, 21 May 2013 15:07:00 -0400

Better Investors will experience higher returns, and be more comfortable and confident in the process.

This is our underlying belief and driving force behind a new report we’ve published on what makes a better investor. It focuses on the structural and behavioural elements of investing rather than the nitty gritty of picking stocks and determining an asset mix. As we’ve said many times, this isn’t rocket science. Yet, we’ve seen too many people who don’t have a plan or process, which has led to poor returns and a frustrating investing experience. We wanted to create a simple doctrine to assist investors. Call it a Jerry Maguire moment.

We identify five essential, yet simple, elements to being a better investor. In short, they are: (1) being realistic, (2) having a long-term plan, (3) committing to a routine, (4) being prepared for extremes, and (5) being a good CEO of your portfolio.

Our report expands on these elements in plain-English and is accompanied by sketches from Carl Richards, a contributor to The New York Times, author of The Behavior Gap, and expert at making complex financial concepts easy to understand.

The Hidden Bargain – Uranium

Tue, 21 May 2013 15:07:00 -0400

Over the past month, gold has seen a considerable decrease in price, dropping almost 15% since the beginning of May. If this trend continues, gold will have its first losing year since 2000. This has led many investors, from the housewives of China to the bankers on Wall Street, looking for a bargain in gold prices.

However, what they don't realize is that there is already a bargain available – in uranium. Despite being the source of 20% of electricity in the United States and 35% in the EU, its price remains at multiyear lows.

Yes, gold has dropped a lot in the past month, but an ounce of gold can still buy almost 35 pounds of uranium at today's prices – that's much more than the historical average of 22 pounds. In fact, back in 2007, an ounce of gold would only net you about five pounds of uranium.

What does this mean? If you consider paper fiat money to be worthless and gold as real money, then the fact that you can buy more of uranium with gold means that uranium is cheap. Right now, we are clearly in the territory of "uranium is cheap relative to gold." Since these types of ratios have a way of going back to their historical averages, this means that in a gold bull environment, uranium is set to increase even more.

Still not convinced about uranium? Join us in our free online video event, The Myth of American Energy Independence, to learn more about the future of nuclear power, energy security in the US, and the uranium sector as a whole. To set the record straight, we have invited some of the most knowledgeable experts in the field, including:

Spencer Abraham, former US Secretary of Energy
Lady Barbara Judge, chairman emeritus of the UK Atomic Energy Authority
Herb Dhaliwal, the former Canadian Minister of Natural Resources
Rick Rule, CEO of Sprott US Holdings; and
Amir Adnani, CEO of Uranium Energy Corp.

If you have always wanted to know more about this very important part of today's energy paradigm, then this is one video that you do not want to miss. For those who sign up, you will also receive a free copy of our Global Resource Intelligence report on uranium (a $29 value). Sign up today and get ready to profit from uranium – and the hidden contrarian bull market that's ahead.

Additional Links and Reads

EU Taps Top Oil Traders for Help in Price-Fixing Probe (Globe and Mail)

The price-fixing investigation continues, this time with the focus shifting to the top commodity trading houses of Europe. This is good news for Statoil and Shell, as it appears that they are not suspects in the investigation. It will be interesting to see what transpires, and to see how deep the wormhole goes.

Oil Pumping Suspended as a Result of Attack on Iraqi-Turkish Pipeline (Hydrocarbon Processing)

While oil transportation has now resumed, it is important to note that terrorist attacks or attempts on this pipeline are almost a monthly event. Now that ExxonMobil and other international majors are in Kurdistan, let's see what kind of security and diplomacy they can add to the area. A foreign oil company in Iraq at this point may actually be a good thing.

German Minister Calls EU Move on Chinese Solar a "Grave Mistake" (The Nation)

We expect that this has more to do with Germany's energy security rather than its exports. Germany is definitely reeling from its unrealistic energy goals, and we expect a major overhaul of them in the near future. Germany already subsidies solar very heavily, and the import tax will just make solar even more expensive. Germany cannot really justify this paradigm shift in the current European economy.