Global Market Comments
October 23, 2019
Fiat Lux
Featured Trade:
(BIOGEN’S HUGE DISCOVERY),
(BIIB), (IBB), (NOVN), (ROG),
(PLEASE USE MY FREE DATABASE SEARCH)
It is the sort of development that most Biotech investors only dream about. It also shows what’s possible in biotech investing, which is occurring with increasing frequency.
Biogen shares (BIIB) have exploded to the upside on its FDA application for its new Alzheimer’s drug. Written off for dead six months ago, the company secretly kept working on Aducanumab until today’s blockbuster announcement.
The drug reverses amyloid plaques thought responsible for Alzheimer’s. This could eventually cure tens of millions of Alzheimer’s sufferers and maybe even myself someday. The stock is up an incredible 40% today and has even dragged up the biotech ETF (IBB) an impressive 3%.
Way back in March, we saw a huge flop for Biogen (BIIB) as the biotech company supposedly shut down research for Alzheimer's treatment: aducanumab (BIIB037) on the failure of a stage 3 trial. This announcement was a curveball for its shareholders as the drug was touted as a potential groundbreaking miracle treatment with sales pegged at the tens of billions.
Biogen has for some time made Alzheimer's experiments the epicenter of their new drug pipeline. It also offers a multiple sclerosis treatment called Tecfidera.
Generic competition has been hot on its heels and shareholders can expect a number of patent challenges in the next few years. This would undoubtedly lead to a fall in sales soon especially with the recent crackdown on the skyrocketing prices of meds.
To combat these looming challenges, Biogen has shifted its focus on Spinraza which has been beating expectations since its release three years ago. Set to exceed the $2 billion in sales mark, this spinal muscular atrophy drug has been dominating the rare disease market for quite some time.
This reign might not last long though as Novartis AG (NOVN) and Roche Holding AG (ROG) are gunning to release their own version of the drug by 2020 or 2021. This means Biogen would once again see another blockbuster drug go flat.
How does Biogen plan to deal with the backlash?
If history is any indication, then investors can expect Biogen to start looking into acquiring medium-size biopharma firms as soon as possible. Since the company closed 2018 with $3.5 billion in cash along with $5.3 billion in its free cash flow, a buyout is a viable solution at the moment. However, the biotech giant can only afford one.
The medium-sized biopharma firms speculated to be under consideration include ACADIA Pharmaceuticals, Biohaven Pharmaceutical Holding Company, and Alder Biopharmaceuticals. However, Neurocrania Biosciences and Sage Therapeutics are said to be potential frontrunners for a Biogen takeover.
While a lot of investors would understandably be wary of another risk from Biogen, Neurocrania and Sage could be promising targets for the biopharma giant.
Neurocrania has been raking in huge profits from their blockbuster tardive dyskinesia drug Ingrezza since gaining FDA approval in 2017. In fact, annual sales of this product has reached $410 million in 2018.
Aside from their success with Ingrezza, Neurocrine has taken the first step towards gene therapy via their collaboration with Voyager Therapeutics. Just this month, Neurocrine has invested $165 million to commence the process of coming up with a treatment drug for Parkinson's disease.
Another good option is Sage as the company also focuses on neurology, which means their goals could align with Biogen's. The recent approval of Zulresso makes Sage the first company to provide treatment for severe postpartum depression.
While the Alzheimer's debacle can be overwhelming, Biogen's fundamentals remain attractive. In terms of revenue estimates, the company is anticipated to report a 2.2% increase this year or up to $13.75 billion. Meanwhile, growth for earnings per share is projected to be at 9.4% or up to $28.67 from its current EPS of $21.58.
Global Market Comments
October 22, 2019
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE MAD HEDGE LAKE TAHOE, NEVADA CONFERENCE, OCTOBER 25-26, 2019)
(THE TECHNOLOGY NIGHTMARE COMING TO YOUR CITY)
Tickets for the Mad Hedge Lake Tahoe Conference are selling briskly. If you want to obtain a ticket that includes a dinner with John Thomas and Arthur Henry, you better get your order in soon.
The conference date has been set for Friday and Saturday, October 25-26.
Come learn from the greatest trading minds in the markets for a day of discussion about making money in the current challenging conditions.
How much longer can the Fed keep boosting the market?
Will the recession start in 2020, or will we have to wait until 2021, and how soon will the stock market start discounting it?
How will you guarantee your retirement in these tumultuous times?
Will the next bear market be as bad as 2008-2009, or worse? And is it worth selling out everything now?
What will destroy the economy first, rising interest rates, collapsing earnings, a trade war, or all three?
Who will tell you what to buy at the next market bottom?
John Thomas is a 50-year market veteran and is the founder, CEO and publisher of the Diary of a Mad Hedge Fund Trader. John will give you a laser-like focus on the best-performing asset classes, sectors, and individual companies of the coming months, years, and decades. John covers stocks, options, and ETFs. He delivers your one-stop global view.
Arthur Henry is the author of the Mad Hedge Technology Letter. He is a seasoned technology analyst and speaks four Asian languages fluently. He will provide insights into the most important investment sector of our generation.
The event will be held at a five-star resort and casino on the pristine shores of Lake Tahoe in Incline Village, NV, the precise location of which will be emailed to you with your ticket purchase confirmation.
It will include a full breakfast on arrival, a sit-down lunch, coffee break. The wine served will be from the best Napa Valley vineyards.
Come rub shoulders with some of the savviest individual investors in the business, trade investment ideas, and learn the secrets of the trading masters.
Ticket Prices
Copper Ticket - $699: Saturday conference all day on October 26, with buffet breakfast, lunch, and coffee break, with no accommodations provided
Silver Ticket - $1,399: Two nights of double occupancy accommodation for October 25 & 26, Saturday conference all day with buffet breakfast, lunch and coffee break
Gold Ticket - $1,598: Two nights of double occupancy accommodation for October 25 & 26, Saturday conference all day with buffet breakfast, lunch, and coffee break, and an October 26, 7:00 PM Friday night VIP Dinner with John Thomas
Platinum Ticket - $1,599: Two nights of double occupancy accommodation for October 25 & 26, Saturday conference all day with buffet breakfast, lunch, and coffee break, and an October 27, 7:00 PM Saturday night VIP Dinner with John Thomas
Diamond Ticket - $1,999: Two nights of double occupancy accommodation for October 25 & 26, Saturday conference all day with buffet breakfast, lunch, and coffee break, an October 25, 7:00 PM Friday night VIP Dinner with John Thomas, AND an October 26, 7:00 PM Saturday night VIP Dinner with John Thomas
Schedule of Events
Friday, October 25, 7:00 PM
7:00 PM - Exclusive dinner with John Thomas and Arthur Henry for 12 in a private room at a five-star hotel for gold and diamond ticket holders only
Saturday, October 26, 8:00 AM
8:00 AM - Breakfast for all guests at the Lakeshore Ballroom
9:00 AM - Speaker 1: Arthur Henry –The Mad Hedge Technology Letter -The Next Big Trends in Technology and How to Play Them
10:15 AM – 15-minute coffee break
10:30 AM - Speaker 2: John Thomas – Global Trading Dispatch - The Markets in 2020 – Risks and Rewards
12:00 PM - Lunch
1:30 PM - Speaker 3: Arthur Henry – The Mad Hedge Technology Letter - Pain and Pleasure in the Technology IPO Market
2:45 PM – Coffee Break
3:00 PM - Speaker 4: John Thomas – Global Trading Dispatch – The 2020 Election and the Markets
4:15 PM – Adjourn to Lone Eagle Bar
7:00 PM - Exclusive dinner with John Thomas for Platinum and Diamond ticket holders only in the lakeshore Ballroom
To purchase tickets, click here.
“Facebook, Google, Microsoft, and Amazon have a voodoo doll about each and every one of us regarding each and every touchpoint of our lives. They’re as much a part of us as our kidney or our legs,” said Roger McNamee of Elevation Partners.
Global Market Comments
October 21, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE FORK IN THE ROAD),
(SPY), (TLT), (WMT), (GM), (FXI), (NFLX)
I usually don’t pay attention to technical analysis. It is the last refuge of the inexperienced and the uneducated.
However, I don’t ignore it either.
And that sets of a quandary for investors today. For on the one hand, the economic data couldn’t be worse, pointing to a certain trade war-induced recession sometime in 2020.
On the other hand, look at the chart for the S&P 500 (SPY) below and you can see that stocks have been in a clear uptrend for 2 ½ months. Another few weeks, and we might see a breakout to new all-time highs. Or, we might get a false breakout driven by algorithms only and then collapse to new 2019 lows.
Welcome to my world.
While my recent track record may say otherwise, I actually don’t know what markets are going to do every day of every week. And when I don’t know what to do, I do nothing. That’s especially easy to do now with my Mad Hedge Market Timing Index at a dead on neutral position of 50.
Of course, the elevated level of share prices could be the result of ultra-low interest rates and a complete lack of viable alternatives. At 11.9% dividend yield, US stock are among the highest yielding financial instruments in the world. At this year’s 15% capital gain and they are especially compelling, particularly to the many foreigners earning negative interest rates.
In the meantime, I wait for the markets to tell me what to do. I’m basically looking for a higher high to sell into, or a lower low to buy.
The IMF Downgraded Global Growth, from 3.2% to 3% and trade gets the blame. At 2.5% growth, many major economies will be in recessions. Risks are to the downside. More than 90% of the Global Economy is Slowing. It's the worst forecast since 2008.
Bank earnings were mixed, with JP Morgan taking the lead with record revenues and credit card revenues the big winners. Goldman Sachs (GS) looks awful due to failing mergers and acquisitions. Wells Fargo is worse. Trading revenues are the drag.
Retail Sales dove off a surprising 0.3% in September when a 0.3% jump was expected. The individual shopper has been the sole support of the economy this year and when they bail the stock market will hate it.
A Brexit deal is finally on the table, but will Parliament vote for it? I doubt it. If they do, it will be a huge “RISK ON” development. This just could be like Trump announcing another China trade deal. If Brexit lives, Scotland will almost certainly vote to leave the United Kingdom and join Europe.
US Housing Starts fell in September from a 12-year high, down 9.4% to 1.256 million units. The mid-Atlantic gets the blame. Land and labor shortages are a problem.
The GM Strike (GM) is settled and the union probably will vote for it. The strike has definitely been a drag on the US economy. Part of the deal involved closing three old high cost US plants. It’s tough to vote against economic reality.
China’s Economy (FXI) slowed to a 6% growth rate as the trade war drags on business there. That’s a 30-year low. Export demand for US products is plunging. Almost every economic indicator is in decline. Not only is China one of America’s largest customers, it is also Europe’s. The data definitely put the kibosh on the week’s rally.
Netflix soared on an earnings beat, soaring 9%. It looks like it is too early to write off the inventor of movie streaming. I guess a 20-year head start still counts for something. But I am staying away anyway.
I hate to be boring, but my Mad Hedge Trader Alert Service has scored yet another new all-time high. In fact, I have hit new highs almost every day for the last three months. Worse yet, my thesaurus is running out of metaphors for “new high.”
My Global Trading Dispatch reached new pinnacle of +349.64% for the past ten years and my 2019 year-to-date accelerated to +49.50%. The notoriously volatile month of October stands at a blockbuster +12.08%. My ten-year average annualized profit clawed its way up to +35.56%. If I make any more than this, no one will believe it, a frequent problem during my hedge fund days.
Some 28 out of the last 29 trade alerts have made money, a success rate of a stunning 96.55%! Under promise and over deliver, that is the business I have been in all my life. It works. This is rapidly turning into the best year of the decade for me. It is all the result of me writing three newsletters a day, and doing research for 12.
With my Mad Hedge Market Timing Index sitting around the neutral 50 level, there was very little to do this week but take profits on existing positions. Nothing like watching the money roll in. It’s like having a rich uncle write you a check once a month.
All I am left with after the October 18 option expiration is 80% cash and short positions in Wal-Mart (WMT) and the S&P 500 (SPY).
The coming week is pretty non-eventful of the data front. Maybe the stock market will be non-eventful as well.
On Monday, October 21 at 2:00 PM, the US monthly Budget Statement for September comes out, most likely showing a horrific $200 billion deficit.
On Tuesday, October 22 at 10:00 AM, Existing Home Sales are out for September.
On Wednesday, October 23 at 10:30 AM, EIA Energy Stocks are published.
On Thursday, October 24 at 8:30 AM, US Durable Goods are out. Weekly jobless claims are out at the same time.
On Friday, October 25 at 10:00 AM, the University of Michigan Consumer Sentiment is announced. The Baker Hughes Rig Count follows at 2:00 PM.
As for me, I'll be driving up to Lake Tahoe to start organizing my October 25-26 conference, briefly stopping at Vacaville for breakfast at Mel’s Drive In and a top up charge for my Tesla Model X to make the climb over Donner Pass. First on the list is to unload there my five cases of vintage wine so it can adjust to the altitude.
Oh, and I haven’t had time for a haircut since I left for Australia four months ago. My kids are starting to call me a hippie.
The Mad Hedge Lake Tahoe Conference begins that night. Tickets are available by clicking here.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
October 18, 2019
Fiat Lux
Featured Trade:
(OCTOBER 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPX), (C), (GM), (IWM), ($RUT), (FB),
(INTC), (AA), (BBY), (M), (RTN), (FCX), GLD)
Below please find subscribers’ Q&A for the Mad Hedge Fund Trader October 16 Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: How do you think the S&P 500 (SPX) will behave with the China trade negotiations going on?
A: Nobody really knows; no one has any advantage here and logic or rationality doesn’t seem to apply anymore. It suffices to say it will continue to be up and down, depending on the trade headline of the day. It’s what I call a “close your eyes and trade” market. If it’s down, buy it; if it’s, upsell it.
Q: How long can Trump keep kicking the can down the road?
A: Indefinitely, unless he wants to fold completely. It looks like he was bested in the latest round of negotiations because the Chinese agreed to buy $50 billion worth of food they were going to buy anyway in exchange for a tariff freeze. Of course, you really don’t get a trade deal unless you get a tariff roll back to where they were two years ago.
Q: Did I miss the update on the Citigroup (C) trade?
A: Yes, we came out of Citigroup a week ago for a small profit or a break-even. You should always check our website where we post our trading position sheet every day as a backstop to any trade alerts you’re getting by email. Occasionally emails just go completely missing, swallowed up by the ether. To find it go to www.madhedgefundtrader.com , log in, go to My Account, Global Trading Dispatch, then Current Positions. You can also find my newly updated long-term portfolio here.
Q: How much pain will General Motors (GM) incur from this standoff, and will they ever reach a compromise?
A: Yes, the union somewhat blew it in striking GM when they had incredibly high inventories which the company is desperate to get rid of ahead of a recession. If you wonder where all those great car deals are coming from, that's the reason. All of the car companies want to go into a recession with as little inventory as possible. It's not just GM, it’s everybody with the same problem.
Q: When does the New Daily Position Sheet get posted?
A: About every hour after the close each day. We need time to process our trades, update all the position sheets before getting it posted.
Q: What do you think about Bitcoin?
A: We hate it and don’t want to touch it. It’s unanalyzable, and only the insiders are making money.
Q: Are you predicting a repeat of Fall 2018 going into the end of this year to close at the lows?
A: No, I’m not. A year ago, we were looking at four interest rate increases to come. This year we’re looking at 1 or 2 more interest rate cuts. It’s nowhere near the situation we saw a year ago. The most we’re going to get is a 7% selloff rather than a 20% selloff and if anything, stocks will rise into the yearend then fall.
Q: Why are we trading the Russell 200 (IWM) instead of the ($RUT) Small Cap Index? We pay less commissions to brokers.
A: There's more liquidity in the (IWM). You have to remember that the combined buying power of the trade alert service is about $1 billion. And that’s harder to do with smaller illiquid ETFs like the ($RUT), especially the options.
Q: If this is a “Don’t fight the Fed” rally for investors, where else is there to go but stocks?
A: Nowhere. But it’s happening in the face of an oncoming recession, so it’s not exactly a great investment opportunity, just a trading one. 2009 was a great time not to fight the Fed.
Q: Do you want to buy Facebook (FB) even though there are so many threats of government scrutiny and antitrust breakups?
A: The anti-trust breakups are never going to happen; the government can't even define what Facebook does. There may be more requirements on disclosures, which means nothing because nobody really cares about disclosures—they just click the box and agree to anything. I was actually looking at this as a buy when we had the big selloff at the end of September and instead, I bought four other Tech stocks and (FB) had moved too far when we got around to it. I think there’s upside potential for Facebook, especially if we can move out of this current range.
Q: Would you sell short European banks? It seems like they’re cutting jobs right and left.
A: I always get this question after big market meltdowns. European banks have been underpricing risks for decades and now the chickens are coming home to roost. Some of these things are down 80-90% so it’s too late to sell short. The next financial crisis is going to be in Europe, not here.
Q: Is it time to short Best Buy (BBY) due to the China deal?
A: No, like Macys (M), Best Buy is heavily dependent on imports from China, and the stock has gotten so low it’s hard to short. And the problem for the whole market in general is all the best sectors to short are already destroyed, down 80-90%. There really is nothing left to short, now that all the bad sectors have been going down for nearly two years. There has been a massive bear market in large chunks of the market which no one has really noticed. So, that might be another reason the market is going up—that we’ve run out of things to short.
Q: Do you like Intel (INTC)?
A: Yes, for the long term. Short term it still could face some headwinds from the China negotiations, where they have a huge business.
Q: Would you buy American Airlines (AA) on the return of Boeing 737 MAX to the fleet?
A: Absolutely, yes. The big American buyers of those planes are really suffering from a shortage of planes. A return of the 737 MAX to the assembly line is great news for the entire industry.
Q: Do you like Raytheon (RTN)?
A: No, Trump has been the defense industry’s best friend. If he exits in the picture, defense will get slaughtered—it will be the first on the chopping block under a future democratic administration. And, if you’re doing nothing but retreating from your allies, you don't need weapons anyway.
Q: Will Freeport McMoRan (FCX) benefit from a trade war resolution?
A: Yes, the fact that it isn't moving now is an indication that a trade war resolution has not been reached. (FCX) has huge exposure to traditional metal bashing industries like they still have in China.
Q: Would you go long or short gold (GLD) here?
A: No, I'm waiting for a bigger dip. If you can get in close to the 200-day moving average at $129.50, that would be the sweet spot. Longer term I still like gold and it is a great recession hedge.
Good Luck and Good Trading!
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Yes, I Still Like Gold
Global Market Comments
October 17, 2019
Fiat Lux
Featured Trade:
(UPDATING THE MAD HEDGE LONG TERM MODEL PORTFOLIO),
(USO), (XLV), (CI), (CELG), (BIIB), (AMGN), (CRSP), (IBM), (PYPL), (SQ), (JPM), (BAC), (EEM), (DXJ), (FCX), (GLD)
