Global Market Comments September 24, 2018 Fiat Lux
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Some 40 years ago, when I was a biotechnology student at UCLA, a handful of graduate students speculated about how dangerous our work really was.
It only took us an hour to figure out how to synthesize a microbe that had a 99% fatality rate, was immune to antibiotics, and was so simple it could be produced in your home kitchen.
Basically, a bunch of bored students discovered a way to destroy the world.
We voiced our concerns to our professors, who immediately convened a national conference of leaders in the field. Science had outpaced regulation, as it always does. They adopted standards and implemented safeguards to keep this genie from getting out of the bottle.
Four decades later scientists have been successful at preventing a ?doomsday? bug from accidently escaping a lab and wiping out the world?s population.
That is, until now.
In 2010, Dr. Craig Venter created the first completely synthetic life form able to reproduce on its own. Named ?Phi X 174,? the simple virus was produced from a string of DNA composed entirely on a computer. Thus was invented the field of synthetic biology, better known as ?SynBio.?
Venter?s homemade creature was your basic entry level organism. Its DNA was composed of only 1 million base pairs of nucleic acids (adenine, thymine, cytosine, guanine, and uracil), compared to the 3 billion pairs in a human genome. Shortly thereafter, Venter one-upped himself by manufacturing the world?s first synthetic bacteria.
The work was hailed as the beginning of a brave new world that will enable biology to make the same dramatic advances in technology that computer science did in the 20thcentury. Dr. Drew Endy of Stanford University says that SynBio already accounts for 2% of US GDP, and is growing at a breakneck 12% per year. He predicts that SynBio will eventually do more for the economy than the Internet and social media combined.
You may recall Craig Venter as the man who first decoded the human genome in 2003. The effort demanded the labor of thousands of scientists and cost $3 billion. We later learned that the DNA that was decoded was Craig?s own. Some five years later, the late Steve Jobs spent $1 million to decode his own genes in a vain attempt to find a cure for pancreatic cancer.
Today, you can get the job done for $1,000 in less than 24 hours. That?s what movie star Angelina Jolie did, who endured a voluntary double mastectomy when she learned her genes guaranteed a future case of terminal breast cancer.
The decoding industry is now moving to low cost China, where giant warehouses have been built to decode the DNA of a substantial part of humanity. That should soon drop the price to $100. It?s all about full automation and economies of scale.
This technology is already spreading far faster than most realize. In 2004, MIT started the International Genetically Engineered Machine Contest where college students competed to construct new life forms. Recently, a high school division was opened, attracting 194 entries from kids in 34 countries. Gee, when I went to wood shop in high school it was a big deal when I finished my table lamp.
This will make possible ?big data? approaches to medical research that will lead to cures of every major human disease, such as cancer, heart disease, diabetes, and more, within our lifetimes. This is why the health care (XLV), biotechnology (XBI), and pharmaceutical (XPH) sectors have been top performers in the stock market for the past two years. It?s not just about Obamacare.
The implications spread far beyond health care. IBM (IBM) is experimenting with using DNA based computer code to replace the present simple, but hugely inefficient, binary system of 0s and 1s. ?DNA based computation? is prompting computer scientists to become biochemists and biochemists to evolve into computer scientists to create ?living circuit boards.? Alphabet (GOOG), Apple (AAPL), and Cisco (CSCO) have all taken notice.
We are probably only a couple years away from enterprising hobbyists downloading DNA sequences from the Internet and building new bugs at home with a 3D printer. Simple organisms, like viruses, would need a file size no larger than one needed for a high definition photo taken with your iPhone. They can then download other genes from the net, creating their own customized microbes at will.
This is all great news for investors of every stripe, and will no doubt accelerate America?s economic growth. But it is also causing governments and scientists around the world to wring their hands, seeing the opening of a potential?Pandora?s Box. What if other scientists lack Venter?s ethics? He went straight to President Obama for a security clearance before he made his findings public.
If we can?t trust our kids to drink, drive, or vote, then how responsibly will they behave when they get their hands on potential bioterror weapons? How many are familiar with Bio Safety Level 4 (BSL) standards? None, I hope.
In fact, the race is already on to weaponize SynBio. In 2002, scientists at SUNY Stonybrook synthesized a polio virus for the first time. In 2005, another group managed to recreate the notorious H1N1 virus that caused the 1918 Spanish Flu epidemic. Some 50-100 million died in that pandemic within 2 years.
Then in 2011, Ron Fouchier of the Erasmus Medical Center in Holland announced that he had found a way to convert the H5N1 bird flu virus, which in nature is only transmitted from birds to people, into a human to human virus. Of the 565 who have come down with bird flu so far, which originates in China, 59% have died.
It didn?t take long for the Chinese to get involved. They have taken Fouchier?s work several steps further, creating over 127 H5N1 flu varieties, five of which can be transmitted through the air, such as from a sneeze. The attributes of one of these just showed up in the latest natural strain of bird flu, the H7N9.
The World Health Organization (WHO) and the Center for Disease Control (CDC) in Atlanta, Georgia are charged with protecting us from outbreaks like these. But getting the WHO, a giant global bureaucracy, to agree on anything is almost impossible, unless there is already a major outbreak underway. The CDC has seen its budget cut by 25% since 2010.
The problem is that the international organizations charged with monitoring all of this are still stuck in the Stone Age. Current regulations revolve around known pathogens, like smallpox and the Ebola virus, that date back to the 1960s, when the concern was about moving lethal pathogens across borders via test tubes.
That is, oh so 20th?century. Thanks to the Internet, controlling information flow is impossible. Just ask Muammar Gaddafi and Bashar al-Assad. Al Qaida has used messages embedded in online porn to send orders to terrorists.
Getting international cooperation isn?t that easy. Only 35 countries are currently complying with the safety, surveillance, and research standards laid out by the WHO. Indonesia refused to part with H5N1 virus samples spreading there because it did want to enrich the western pharmaceutical companies that would develop a vaccine. African countries say they are too poor to participate, even though they are the most likely victims of future epidemics.
Scientists have proposed a number of safeguards to keep these new superbugs under control. One would be a dedicated sequence of nucleic acid base pairs inserted into the genes that would identify its origin, much like a bar code at the supermarket. This is already being used by Monsanto (MON) with its genetically modified seeds. Another would be a ?suicide sequence? that would cause the germ to self-destruct if it ever got out of a lab.
One can expect the National Security Agency to get involved, if they aren't already. If they can screen our phone calls for meta data, why not high risk DNA sequences sent by email?
But this assumes the creators want to be found. The bioweapons labs of some countries are thought to be creating n ew pathogens so they can stockpile vaccines and antigens in advance of any future conflict.
There are also the real terrorists to consider. When the Mubarak regime in Egypt was overthrown in 2011, demonstrators sacked the country?s public health labs that had been storing H5N1 virus. Egypt has one of the world?s worst bird flu problems, due to the population?s widespread contact with chickens.
It is hoped that the looters were only in search of valuable electronics they could resell, and tossed the problem test tubes. But that is only a hope.
I have done a lot of research on this area over the decades. I even chased down the infamous Unit 731 of the Japanese Imperial Army which parachuted plague infected rats into China during WWII, after first experimenting on American POWs.
The answer to the probability of bio warfare always comes back the same thing. Countries never use this last resort for fear of it coming back on their own populations. It really is an Armageddon weapon. Only a nut case would want to try it.
Back in 1976 I was one of the fortunate few to see in person the last living cases of smallpox. As I walked through a 15th?century village high in the Himalayas in Nepal, two dozen smiling children leaned out of second story windows to wave at me. The face of every one was covered with bleeding sores. And these were the survivors. Believe me, you don?t want to catch it yourself.
For those who want to learn more about SynBio, or participate in the discussion, please visit the BioBricks Foundation by clicking the link: http://biobricks.org.
Sure, I know this doesn?t directly relate to what the stock market is going to do today. But if a virus escaped from a rogue lab and killed everyone on the planet, that would be bad for prices, wouldn?t it?
I really hope one of the kids competing in the MIT contest doesn?t suffer from the same sort of mental problems as the boy in Newton, Connecticut did.
I Think Wood Shop Would Have Been Easier
Cause of the Next Bear Market or the End of the World?
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Phi-X-174-Synthetic-Bacteria.jpg374408Mad Hedge Fund Traderhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2016-12-28 01:06:472016-12-28 01:06:47Will SynBio Save or Destroy the World?
One has to be truly impressed with the selloff in biotech and health care stocks over the past year.
Since May, there were signs that life was returning to this beleaguered sector. Then Mylan decided to raise the prices of it's EpiPen by 400% and it was back to the penalty box.
Let?s gouge poor small children who may die horrible deaths if they can?t afford our product. That sounds like a great marketing and PR strategy. NOT!
Once the top performing sectors of 2015, they went from heroes to goats so fast, it made your head spin.
What I called ?The ATM Effect? kicked in big time.
That?s when frightened investors run for the sidelines and sell their best stocks to raise cash. After all, no one wants to sell other stocks for a loss and admit defeat, at least in front of their clients.
It?s not that the companies themselves were without blood on their hands. Valuations were getting, to use the polite term, ?stretched? after a torrid five-year run.
Gilead Sciences (GILD) soaring from $18 to $125?
Celgene (CELG) rocketing from $20 to $142?
It has been a performance for the ages.
If a financial advisor wasn?t in health care, chances are that he is driving for Uber in a bad neighborhood by now.
Then there was The Tweet That Ate Wall Street.
Presidential candidate Hillary Clinton made clear in a broadcast on September 21, 2015 that the health care industry would be target number one in her new administration.
Her move was triggered by an overnight 5000% price hike for a specialty HIV drug by a minor player in the industry.
Among the reforms she would implement are:
1) Give the government power to negotiate drug purchases with the industry collectively. 2) Allow Medicare to import drugs from abroad to encourage price competition (which I already do with my annual trips to Switzerland). 3) Ban drug companies from using government grants to pay for sales and advertising. 4) Set an out of pocket limit for drugs bought through Obamacare at $250 a month, thus ending customers? blank checks. 5) Set a 20% of revenue minimum which companies must spend on research and development.
She certainly got our attention.
Competition in the drug industry? Yikes! Not what the shareholders had in mind.
Raise your hand if you think Americans aren?t paying enough for their prescription drugs.
Yes, I thought so.
Drug company CEOs aren?t helping their case by flying to press conferences to complain about the proposals in brand new $65 million Cessna G-5?s.
And that Mylan CEO, Heather Bresch? She took home $18 million last year, and she?s just a kid.
Here?s the key issue for health care and biotech for investors. It all about politics.
Even if Hillary does get elected, the government is likely to remain gridlocked for another 4-8 years. The Democrats will almost certainly retake the Senate in 2016, thanks to a highly favorable calendar, and keep it for at least two years.
But the heavily gerrymandered House is another story.
With the current districting map, the Democrats would have to win 57% of the national vote for them to regain a majority in both houses.
That is a feat even Barack Obama could not pull off in 2008, when a perfect storm in favor of his party blew in.
A Hillary appointed liberal Supreme Court could bring an end to gerrymandering, but that is a multiyear process. Texas hasn?t had a legal districting map since 2000.
Even with Democratic control of congress, Hillary won?t get everything she wants.
Remember, Obamacare passed by one vote only after a year of cantankerous infighting, and then, only when a member changed parties (Pennsylvanian Arlen Spector).
That means few, if any, Clinton proposals will ever make it into law. If they do, they will be severely watered down and subject to the usual horse-trading and quid pro quos.
Beyond what she can accomplish through executive order, her election may be largely symbolic.
Therefore, the biotech and health care stocks are a screaming ?BUY? at these levels, provided you ignore Mylan (MYL), now the poster boy for corporate greed.
It?s a political call I can only make after spending years in the White House and a half century following presidential elections.
It?s easy to understand why these stocks were so popular, and are found brimming to overflowing in client portfolios and personal 401ks and IRAs.
We are just entering a Golden Age for biotech and health care.
Profit growth for many firms is exceeding 20% a year. Hyper accelerating biotechnology is rapidly bringing to market dozens of billion dollar earning drugs that were, until recently, considered in the realm of science fiction.
And we have only just gotten started. Cures for cancer, heart disease, arthritis, diabetes, AIDS, and dementia? You can take your pick.
Most biotech and health care stocks have given up all of their 2015 gains. Here is a chance to hoover up the fastest growing companies in the US at 2014 prices.
If you missed biotech and health care the first time around, you?ve just been given a second chance at the brass ring.
Here?s a list of five top quality names to get your feet wet:
Gilead Sciences (GILD) ? Has the world?s top hepatitis cure, which it sells for $80,000 per treatment. For a full report, see the next piece below.
Celgene (CELG) ? A biotech firm that specializes in cancer cures (thalidomide) and inflammatory diseases. It also produces Ritalin for the treatment of ADHD.
Allergan (AGN) ? Has the world?s third largest low cost generic drug business. In addition, it has built a major portfolio of drug therapies through more than two dozen acquisitions over the last decade.
Regeneron (REGN) ? Already has a great anti-inflammatory drug, and is about to market a blockbuster anti cholesterol drug that will substantially reduce heart disease.
HCA Holdings (HCA) ? Is the world?s largest operator of for profit health care facilities in the world.
If you want a lower risk, more diversified play in the area, you can buy the Health Care Select Sector SPDR (XLV). Please note that a basket of stocks is going to deliver a fraction of the volatility of single stocks.
Therefore, we have to be more aggressive with our positioning to make any money, picking call option strikes that are closer to the money.
Johnson and Johnson (JJ) is the largest holding in the (XLV), with a 12.8% weighting, while Gilead Sciences (GILD) is the fourth, with a 5.1% share. For a list of the largest components of this ETF, please click: https://www.spdrs.com/product/fund.seam?ticker=XLV.
Their largest holding is Biogen (BIIB), followed by Gilead Sciences (GILD), Celgene (CELG), Amgen (AMGN), and Regeneron Pharmaceutical (REGN).
I?ll be shooting out Trade Alerts on biotech and health care names as soon as I think the coast is clear.
Until then, enjoy the ride!
Say You Were A Biotech Investor, Did You?
https://www.madhedgefundtrader.com/wp-content/uploads/2015/10/EpiPen-e1472773044918.jpg375400Mad Hedge Fund Traderhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2016-09-02 01:06:052016-09-02 01:06:05Biotech and Health Care Stocks to Buy at the Bottom
It was known as the ?Tweet that sank Wall Street.?
When presidential candidate Hillary Clinton attacked the drug industry last summer, the entire pharmaceutical and health care industries were taken out to the woodshed and beaten like the proverbial red headed stepchild (my apologies in advance to red heads).
One of the principal victims was cancer drug maker Celgene (CELG), which dropped some 24.6% from top to bottom.
Never mind that Clinton is unlikely to get what she wants, even if she wins the election.
For that, you need a congress in your pocket, a probability that is at least 5-9 years away.
That is, unless Donald Trump continues his campaign for the Republican nomination.
However, in this nervous, twitchy, gun shy trading environment, it is shoot first and ask questions latter. So Celgene shares sank, whether it was warranted or not.
Celgene is really all about one drug, Revlimid, a blood cancer treatment that accounts for 75% of its sales. Last year, the company sold $7.6 billion worth of this complex molecule.
To wean itself off of its overdependence on a single drug it has embarked on a number of aggressive initiatives.
Since the spring of 2012, it has increased the use of its Abrazane drug to treat late stage pancreatic cancer, the disease that killed Steve Jobs. It has won regulatory approval for the psoriasis drug Otezla.
It has also pursued the mergers and acquisitions road to growth, picking up some two-dozen small drug makers in recent years. The $7.2 billion purchase of Receptos was a big one, which manufactures Ozanimod, a drug used to treat ulcerative colitis and multiple sclerosis.
Celgene also picked up Juno Therapeutics for $1 billion a few months ago, a maker of innovative cellular immunotherapies.
If this ambitious strategy works, Celgene?s net earnings should continue to grow at a 25% annual rate for the next five years. That means the shares should triple by 2020.
This is why the company?s shares command a lofty multiple of 18 times 2016 earnings, the higher end of the range for this industry.
So the next time Hillary opens her mouth, use the dip in (CELG) shares to load the boat. It would also be helpful if stock investors shift their focus from value back to growth.
Looks Like a ?BUY? To Me
Loose Lips Sink Ships
https://www.madhedgefundtrader.com/wp-content/uploads/2015/10/Hillary-Clinton-e1446065472317.jpg253400Mad Hedge Fund Traderhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-10-29 01:08:492015-10-29 01:08:49Celgene Will Make a Comeback
I am going to continue to use this correction in the stock market as an opportunity to put new names in front of you for inclusion in your investment portfolio.
That way, when the markets turn, you can strike with the speed of a rattlesnake in returning to a ?RISK ON? posture.
Major turnarounds are not the time to engage in deep, fundamental research. It is when you should be pulling the trigger on Trade Alerts, which you have wisely spent time lining up.
This brings me back to my three core sectors for long-term investment, technology, health care, and energy. For a four cyclical play, you can add the financials as an interest rate play.
Which brings me to one of my perennial favorites, Gilead Sciences (GILD). Long-term readers will recall this big momentum name, which I first recommended last December at $75 a share. It hit $125 in June, last week, and could fly as high as $200 in 2016.
Obamacare is proving to by one of the greatest windfalls in the history of the health care industry. More than 45 million new individuals now enjoy government guaranteed payments for health care services for the first time. In addition, millions more are signing up for private insurance.
One of the cleanest shots at this new profit stream is Gilead Sciences. The ticker symbol seems so appropriate for this new Golden Age for the health care industry.
(GILD) is an American biotechnology company that discovers, develops and commercializes treatments for a range of different diseases. The California based firm initially concentrated on antiviral drugs to treat patients infected with HIV, hepatitis B, or influenza.
In 2006, Gilead acquired two companies that were developing drugs to treat patients with pulmonary diseases.
These are all expected to be huge growth areas in the future, and the company has become a favorite of hedge fund traders. Both the shares and the sector have been on fire all year.
Don?t rush out and buy (GILD) today. Rather, I?d wait until the last of the sellers get flushed out in this correction, which will probably not be until well into October.
Take a look at the charts below, and they suggest that the S&P 500 could reach as low as 1,976, or down another 160 handles from here.
That will give us another top to bottom pullback of 12.52%, which certainly qualifies as a healthy correction. This will be the time to load the boat with (GILD).
Keep close tabs on your text message service and email, and I?ll let you know when it is time to lay your cajones on the line once more.
Yes, It?s $1,000 a Pill
https://www.madhedgefundtrader.com/wp-content/uploads/2014/09/Pills-e1411767040932.jpg226400Mad Hedge Fund Traderhttps://www.madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-10-01 01:06:142015-10-01 01:06:14Keep Gilead Sciences on Your Radar