Monetary Policy Week in Review – Jun 17-21, 2013: 5 of 13 central banks cut as Fed’s plan for QE exit roils markets

By www.CentralBankNews.info
    This week 13 central banks took policy decisions with the Federal Reserve’s narrowing of its timetable for normalizing monetary policy triggering higher U.S. interest rates and a plunge in global stock markets amidst concern over turmoil in China’s money markets.
     At the press conference following this week’s meeting of the Federal Open Market Committee, Chairman Ben Bernanke firmed up his congressional comments from May 22, saying asset purchases would be slowly reduced later this year and then wound up by mid-2014, assuming the economy continues to expand.
    It’s not immediately obvious why Bernanke’s statements caused such a ruckus in global financial markets as his reason for winding up years five years of ultra-easy monetary policy is basically good news: Falling unemployment and solid economic growth rather than a feared rise in inflation.
   But the Federal Reserve’s decision to wave goodbye to quantitative easing may have come earlier than expected, surprising highly leveraged investors who relied on low interest rates to hunt for yields around the world. Like crack addicts that lose their mind when the dealer runs dry, they panicked.
    U.S. long-term interest rates have shot up, global stock markets have plunged and capital has flowed out of emerging markets. Since early May benchmark U.S. 10 year yields have rocketed to over 2.5 percent from 1.66 percent, the highest in two years, tightening credit and mortgage conditions at the same time the Federal Reserve pumps in liquidity with monthly asset purchases of $85 billion and looks to keep shor-term rates close to zero until late 2014 or early 2015.
    The jump in U.S. interest was accompanied by a surge in Chinese money market rates, apparently because the Chinese central bank is attempting to let the air out of a credit bubble by reining in some forms of credit that have been used by the massive shadow banking sector.

    While the Federal Reserve’s decision to wind up asset purchases was based on growing confidence about the economic outlook, Norway’s central bank turned more pessimistic though it was still among the eight central banks (India, Turkey, Egypt, Morocco, Namibia, Switzerland, Norway and the United States) that held rates steady this week.
    Norges Bank signaled that it is likely to cut rates in the year ahead, dropping its tightening bias and completing a shift in policy that has been under way since October last year when it first started pushing back the timeframe for a rate rise.
    Not only is Norway’s economy feeling the effects of the euro area’s recession, which it expects to persist for longer than expected, the central bank may be starting to worry about the specter of deflation, saying it is concerned that inflation expectations could become entrenched at too low a level.
    Illustrating the growing role of central banks in financial stability, Norges Bank expects in September to issue rules on the size and timing of a countercyclical buffer that will be imposed on domestic banks to help dampen the continuing rise in household debt from a strong housing market.
    The buffer – a concept introduced in the Basel III rules in 2010 – is aimed at boosting banks’ capital cushions so they can better weather a downturn when credit growth begins to pose a systemic risk.
    The buffer adds to central banks’ growing arsenal of tools to fine-tune economic activity and will be useful to Norway’s central bank which fears that a rate cut will end up encouraging further debt and higher home prices.
    Like Norway, Switzerland is also faced with strong real estate markets and plans to impose its own countercyclical buffer in September.
    The Swiss National Bank (SNB) reiterated its determination to keep the franc from rising above 1.20 euros, saying the threat of upward pressure has not been averted as the franc remains sought after by investors seeking a safe haven.
     The Reserve Bank of India (RBI), whose rupee has been falling in recent weeks along with other emerging market currencies, also held rates steady but warned of the inflationary impact of the falling exchange rate.
     India is vulnerable to capital outflows due to its high current account deficit and the RBI was been reported to have intervened last week to support the rupee.

     While most emerging markets are feeling the pressure from the outflow of capital, which is hitting their currencies, stock and bond markets, Pakistan has chosen a different route.
    In contrast to Indonesia, which last week raised its rate to fend off inflationary pressure from a depreciating rupiah, Pakistan cut its policy rate this week in a calculated bet that a persistent outflow of capital would reverse due to improved sentiment among investors following the recent elections.
    The State Bank of Pakistan (SBP), which has been worried over the impact on foreign exchange reserves from the lack of capital inflow, is also relying on inflation remaining under control – in May it hit the lowest level since October 2009 – to help attract capital and boost the growth of credit and thus economic activity.
    Pakistan’s rupee has dropped by 1.7 percent against the U.S. dollar so far this year compared with Indonesia’s rupiah that has dropped almost 3.0 percent.

    The other four central banks that cut rates this week include Mauritius, Botswana, Georgia and Rwanda.
    Through the first 25 weeks of this year, central bank policy rates have been cut 62 times, or 25.5 percent of the 243 policy decisions taken by the 90 central banks followed by Central Bank News. This is up from 24.8 percent after 23 weeks.
    The number of rate increases this year was stable at 12, accounting for 5 percent of all policy decisions.

    LAST WEEK’S (WEEK 25) MONETARY POLICY DECISIONS:

COUNTRYMSCI             DATE              RATE       1 YEAR AGO
INDIAEM7.50%7.50%8.00%
NAMIBA5.50%5.50%6.00%
MOROCCOEM3.00%3.00%3.00%
MAURITIUSFM4.65%4.90%4.90%
BOTSWANA8.50%9.00%9.50%
TURKEY EM4.50%4.50%5.75%
GEORGIA4.00%4.25%5.75%
UNITED STATESDM 0.25%0.25%0.25%
SWITZERLAND DM 0.25%0.25%0.25%
NORWAYDM 1.50%1.50%1.50%
EGYPTEM9.75%9.75%9.25%
RWANDA7.00%7.50%7.50%
PAKISTANFM9.00%9.50%12.00%

   
    NEXT WEEK (week 26) features nine scheduled central bank policy meetings, including Israel, Armenia, Hungary, Taiwan, the Czech Republic, Fiji, Uruguay, Angola and Trinidad and Tobago.

COUNTRYMSCI             DATE              RATE       1 YEAR AGO
ISRAELDM24-Jun1.25%2.25%
ARMENIA25-Jun8.00%8.00%
HUNGARY EM25-Jun4.50%7.00%
TAIWANEM27-Jun1.88%1.88%
CZECH REPUBLICEM27-Jun0.05%0.50%
FIJI 27-Jun0.50%0.50%
URUGUAY 27-Jun9.25%9.25%
ANGOLA28-Jun10.00%10.25%
TRINIDAD & TOBAGO28-Jun2.75%3.00%

 
     www.CentralBankNews.info

Money Weekend’s Technology FutureWatch 22 June 2013

By MoneyMorning.com.au

TECHNOLOGY: The Usain Bolt of Supercomputers

We all are more than likely to have a computer. If you’re reading this, if it’s not on a computer it’s on a tablet or mobile device of some sort.

As you’re familiar with a home PC it’s more than likely you’re familiar with the speed of your machine. If it’s older it will be a bit slower than new machines.

As an example, a new modern day PC will have something like 4 GB of Random Access Memory (RAM), and maybe a Computer Processing Unit (CPU) of about 2–3GHz. You might have heard of one as IBM’s Quad-Core processor.

Within that CPU will be maybe two to four ‘cores’ which are actually CPU’s themselves just bundled together into one. And then in addition to all this you have a graphics accelerator, a GPU which helps handles things like video and rendering.

Now you’ve got a grasp of what a typical PC has in terms of grunt, and you have a rough gauge as to the speed and performance of such machines.

If we mentioned Titan, Watson, Sequoia or Tianhe you certainly wouldn’t think of them as famous names. But in the world of computing, those names are the rockstars of hardware. By that we mean those are the names of some of the world’s fastest and most powerful supercomputers.

And twice a year, every year, these supercomputers race each other to see how fast they go. It’s like the 100m Olympic Final and IBM is like the Jamaican team. And it looks like Sequoia is Usain Bolt. According to Graph500.org the Sequoia smashes the competition…for now.

IBM Sequoia
Source: digitaltrends.com

But competition and bragging rights aside, just how fast are these computers really?

Well to get a scale for how powerful and fast these supercomputers are, your PC has at best probably four ‘cores’ as we mentioned earlier. The Sequoia (an IBM BlueGene/Q model) has 1,048,576 ‘cores’.

The purpose of supercomputers is to help scientists and researchers do mind-bogglingly hard calculations. Also, they push the boundaries of possibility when it comes to modern day computing. Moving forward, better and faster supercomputers will overtake these existing ones. But as history has shown us the supercomputers of today are your home PC in 5–10 years.

What this means is that the speed of computers is still moving at a breakneck pace. And it’s continuing to filter down into our lives. As this happens it means your day to day lives adapt to the ability of computers to assist in enhancing your life.

It’s all part of the Integrated Technology trend we’ve been writing about. As companies like IBM continue to push the boundaries of what’s possible in computing, we all benefit in the long run.

HEALTH: 7400 Slices of Brain, 1000 Super Computer Hours

While on the subject of supercomputers, they’ve been useful in the latest advancement in mapping the human brain. We’ve spoken previously about the US BRAIN Project. Recently a team from the Jülich Research Centre in Germany has completed research to compliment that study. They’ve sliced and diced a deceased woman’s brain to 3D model it on a supercomputer.

As reported by New Scientist, Dr. Katrin Amuntus and her team ‘embedded a 65-year old woman’s brain in wax, sliced it into more than 7400 sections each 20 micrometres thick – one-fifth of the width of a human hair – and made digital images of the slices, also at a resolution of 20 micrometres.

What they next did was use these digital images to recreate a 3D model of the woman’s brain on a supercomputer. This was a very challenging task that an ordinary computer wouldn’t be capable of.

Using a supercomputer it took the team over 1000 hours to recreate the brain model. In other words it took the supercomputer 41 days to do it…that’s a lot of processing!

This 3D model of the brain is the most detailed model ever created. It’s a great step forward in helping other brain-related projects like BRAIN reach their final end point. That end point being able to understand the workings of the human brain.

As we’ve said before, next to the Human Genome Project it’s possibly one of the most significant projects in the history of mankind.

It’s an ambitious goal, but with little steps forward like the work of Dr. Amuntus, it’s certainly an achievable goal in the not too distant future to understand the most complex and most powerful machine on earth, the human brain.

ENERGY: Dance your Phone Back to Full Charge

We don’t know about you, but one of the most frustrating problems we have is how to keep our mobile phone charged during the day. Current phones seem to do a very good job of depleting battery life in about half a day. It’s likely because of the always-running apps we have on them.

With that in mind, big phone companies like Vodafone don’t like phones dying of battery. It means fewer calls, messages, downloads…and fewer dollars for them. So it’s in the interest of a big Telco to keep phones powered and alive.

Thankfully Vodafone has been beavering away at a solution to this problem. And they’ve combined this with their strong marketing presence at the many festivals held across the UK during ‘festival season’.

Vodafone in conjunction with Professor Stephen Beeby from the Electronics and Computer Science Department of the University of Southampton have created ‘Power Pockets‘.

As Vodafone have outlined the tech through their company blog,

(Stephen’s) research has culminated in thermoelectric material that’s so small it can be stitched into a pair of shorts or, in the case of the Recharge, a sleeping bag. But how does it work?

Professor Beeby explains,

Basically, we’re printing down pairs of what are called ‘thermocouples’. You print lots of those down and connect them up to make a thermoelectric module. One side of that is cold and the other is hot, and when you get a flow of heat through it you can create a voltage and a current. Voltage and current together equals electrical power.

Now that’s all good and well, but what do Power Pockets and Festivals have to do with each other. Well Vodafone has put their Power Pockets in sleeping bags, and ‘short-shorts’. Or as Vodafone are calling them, Power Shorts and the Recharge Sleeping Bag.

power pocket
Source: blog.vodafone.co.uk

Using the thermoelectric modules, simply dance the day away in the power shorts, and you’ll have enough charge for about 4 hours of usage. Tuck in to the sleeping bag over night and you get about 11 hours of standby time.

That’s pretty impressive. And particularly handy when you’re short (excuse the pun) of power points at a festival.

Sam Volkering
Technology Analyst

Join me on Google+

From the Archives…

Don’t Make Investing a Chore… Invest in an Innovative Business
14-06-2013 – Kris Sayce

The Technology Revolution Begins in Four Days…
13-06-2013 – Kris Sayce

Zero G for the Australian Dollar is a Shot in the Arm for Miners
12-06-2013 – Dr Alex Cowie

There’s More to Technology Than Facebook and Spying
11-06-2013 – Sam Volkering

Four Great Australian Technological Achievements
10-06-2013 – Sam Volkering

Industry Veteran Vern Gowdie, Tells It Like It Is

By MoneyMorning.com.au

In today’s Money Weekend we put aside the events of the week and in the markets for a chat with Vern Gowdie, the latest editor to join Port Phillip Publishing.

Vern is working on an exciting ‘Family Office’ style project that will draw on his nearly thirty years’ experience in financial planning. You might have seen a couple of his articles appear in Money Morning over the last few weeks. 

One thing we can say right off the bat is that Vern’s position is the complete opposite of regular Money Morning editor Kris Sayce.

Kris is backing a rising market over the next few years. Vern is anticipating a falling one.

But the differing views don’t end there, so we thought you might like to hear his take on the market today and the message he’ll be bringing to investors across Australia with his new service…

CN: How is your view different from the other editors at Port Phillip Publishing?

VG: Without differing views there would not be a market. Everyone would either be a seller or a buyer. Differing views are healthy.

When I read the research of the other editors, we are not that dissimilar in our broad view of the global economy. They are highly critical of central bank intervention and the distortions this madness has created in markets. Our views differ on what this meddling will do to global share markets.

Some editors expect the Fed’s levitation act to support higher equity prices, whereas others have a more bearish outlook. For reasons I will explain shortly, I am in the extremely bearish camp. Also, the other key difference is in our approach to asset allocation — the other editors are very much Alpha investors (individual stock selection and trading strategies) while my investment philosophy is purely Beta (index investing). The passive investor approach.

CN: Can you expand on why you are so negative on the share market?

VG: To paraphrase Heath Ledger’s character The Joker, ‘Why sooo bearish?’

As the saying goes ‘If it walks like a duck, quacks like a duck and looks like a duck, it must be a duck’. This market looks like a Secular Bear,has performed like a Secular Bear and has P/E contraction like a Secular Bear —therefore my conclusion is it must be a Secular Bear.

Every Secular Bearmarket since 1900 has ended when the index P/E reached single figures. The S&P 500 index P/E currently sits around 20x. So unless ‘this time is different’ (the most infamous phrase in investing) a 50% reduction in P/E still awaits us from this Secular Bear market.

The P/E reduction can happen in three ways:

  1. The price remains static while earnings increase (this is what has happened since 2000). The S&P 500 is only slightly above its 2000 level while earnings have more than doubled over the past thirteen years. The S&P 500 index P/E in 2000 was 42x.
  2. The earnings remain static while the price falls.
  3. Earnings and price both fall — this is the dire (extremely bearish) outcome I think awaits us.

Think about this math:

  • Earnings $1 million x P/E 20 = $20 million
  • Earnings fall 40% (due to deflationary conditions created by The Great Credit Contraction and P/E falls to the level experienced during The Great Depression – the last global credit crisis)
  • Earnings $600,000 x P/E 5 = $3 million
  • Market correction of 85%. Ouch!

CN: So you’re betting against the central banks?

VG: The Feds are not ploughing trillions of dollars into the markets for nothing — they know what’s at stake. The world’s greatest period of Credit Expansion inflated assets well above their intrinsic value.

The Great Credit Contraction job is to deflate the asset bubble. This has not happened — yet! The Feds see it as their mission to stop the natural forces of the market. Good luck with that mission.

As the tide goes out on the market, no company (no matter how strong it is) will swim against the force of this current. It’s for this reason I prefer to invest in an asset class as opposed to individual stocks.

For the time being I do not want to be in the asset class of shares. There is far too much downside for my liking. In my opinion, the share market at current levels is high risk/low return.

When shares represent a low risk/high reward proposition, buying the ASX 200 index will be the easiest way for passive investors to participate in its inevitable recovery.

My investment approach will appeal to cautious investors looking to protect their capital in an uncertain world.

CN: What can readers expect from your new publication?

VG: As from 1 July 2013 the financial planning industry is being legislated into acting in a client’s best interest. You would think this would happen without Canberra’s intervention. However commissions, volume bonuses and institutional ownership of financial planning firms have created situations where conflicts of interest exist between the planner and the client.

What the readers can expect from the ‘Family Office’ newsletter is what Canberra is legislating for — absolutely 100% unbiased views on what I believe will assist investors protect and improve their capital.

The newsletter will be as much about education and guidance as it will be about where to invest. Any asset allocation I make will be the same one I am undertaking for my family portfolio.

Whether readers adopt the recommendations is entirely up to them. Transparent, independent advice without paying a fee that is based on a percentage of funds invested — this is the new face of financial advice.

CN: What’s a common mistake people make in regards to financial planning?

VG: Impatience. Markets will do what they have to do in their own sweet time. Trying to chase a certain return because you need it to achieve your goals is a recipe for disaster.

Patience and an understanding of the risk and reward offered by all asset classes is the best way to protect and promote your capital. Sometimes you have to stand still to go forward.

CN: Thanks for your time, Vern.

Callum Newman.
Editor, Money Morning

Join me on Google+

PS. Don’t forget if you want to keep track of the latest things we’re reading and brief commentary on events that happen through the day, check out our Google+ page and Kris Sayce’s as well.

From the Port Phillip Publishing Library

Special Report: Panic of 2013

Daily Reckoning: QE is Dead, Long Live QE

Money Morning: We’re Buying This Crashing Stock Market

Pursuit of Happiness: The Single Biggest Mistake a Technology Investor Can Make

Deadly Bacteria Is a Global Crisis: Brad Spellberg

Source: George S. Mack of The Life Sciences Report (6/20/13)

http://www.thelifesciencesreport.com/pub/na/15386

Antibiotic-resistant bacteria, like the proverbial time bomb, are poised to wreak infectious havoc on a worldwide scale. Brad Spellberg, associate professor of medicine at the Los Angeles Biomedical Research Institute and the Harbor-UCLA Medical Center, is committed to defusing the bomb with the development of new antibiotics and creative platforms. He believes investigators must look at alternative ways to deal with bad bugs, perhaps by neutralizing their toxic effects rather than killing them. In this interview with The Life Sciences Report, Spellberg explores this critical issue and names four companies with novel technologies that address this looming global crisis.

The Life Sciences Report: The first thing I want to ask is if you believe it’s a hopeful sign that young physicians are less likely to prescribe antibiotics, especially at the patient’s request? Isn’t that a sign that residents and fellows are being trained with increasing awareness of bacterial resistance, an issue that is so important to you?

Brad J. Spellberg: I have not seen data to suggest that there is a generational effect. I think we are doing a better of job of talking about it than 20 or 30 years ago, when a large segment of the medical community thought that the problem was solved and we could just move on. There is still a huge amount of room for improvement. I see young physicians, old physicians, all physiciansóand, frankly, even I have done it out of fearóprescribing antibiotics for infections that are highly unlikely to be bacterial all the time. Prescribing antibiotics for viral infections is certainly inappropriate. The other thing physicians do all the timeóand there is absolutely no generational effect in my experienceóis treat patients very broadly when narrow spectrum therapy is needed. They also treat for far longer than is needed. Both of these practices are inappropriate.

TLSR: Brad, your book, Rising Plague: The Global Threat from Deadly Bacteria and Our Dwindling Arsenal to Fight Them, was published in September 2009. We know there is a threat of pandemic, but what do you mean by dwindling arsenal? Are you talking about a lack of will or desire to tackle this problem? Why is the arsenal dwindling?

BJS: The dwindling arsenal specifically refers to the collapse of the antibiotic research and development (R&D) pipeline. We have what has been accurately termed on Capitol Hill a market failure of antibiotics. The traditional capitalistic market has not supported antibiotic trials. It has collapsed. There are a couple of companies left, but most pharmas have gotten out of the business. The root causes of the collapse include a lack of awareness. We need to take action in other areas, such as pulling antibiotics out of animal feed, but raising awareness about what’s going on is also necessary.

We also have a regulatory problem, in which the U.S. Food and Drug Administration (FDA) has been overtly hostile to new antibiotic development. There are economic problems too. Antibiotics don’t make enough money to justify economic investment by companies that need to make a profit. Pharmaceutical companies are in business to make money, and it is not realistic to expect them to take a loss for the public goodówhich suggests that we need a new economic model. We either need incentives to change the economic realities so that antibiotics become a better investment for companies pursuing profits, or we need a defense contractor-like modelóa public-private partnership modelówhereby we defray some of the costs and risks of developing antibiotic molecules. The public needs these drugs, even if companies aren’t going to make a lot of money off of them.

TLSR: What about the Generating Antibiotic Incentives Now (GAIN) Act of 2011, designed to hasten development and approval of new antibiotics? The idea was to prod the FDA into getting antibiotics through the regulatory cycle. Is it working?

BJS: GAIN was signed into law last year (2012). It is an economic incentive, and provides a five-year data-exclusivity extension to new antibiotics so that companies have more time to make money off the drugs before they go generic.

Frankly, the bipartisan passage of GAIN was a huge triumph and a signal that Congress understands there is a problem. But GAIN was not strong enough to make pharmaceutical companies come back to the field. A five-year data-exclusivity extension, which is not the same as a patent extension, does not provide economic incentives to large companies. The only companies that will benefit are those with products that have gone off patent or are about to go off patent. It gives these companies an alternative form of exclusivity to prevent generic competition that is not dependent on a patent. If a company has a lot of patent time left on a molecule, GAIN is not going to give it any additional revenue.

There were other incentives in the bill, such as priority review for important molecules, but that is of minimal value in my opinion. GAIN did not do very much to make the FDA change. The only FDA change was to require the agency to develop guidance to get critically needed antibiotics developed. That did prod the FDA a little bit. It was already working on guidelines, albeit at a slow pace. But GAIN has not changed the philosophy of the FDA. GAIN was primarily an economic incentive and not a regulatory reform bill.

Let me add one thing. We need to thank Phil Gingrey (R-GA), the congressperson who spearheaded the charge to get GAIN passed. Gingrey is a physician, and he understands at a core level the critical problem posed by not developing new antibiotics and by not having them when they are needed. My understanding is that he intends to bring up follow-on legislation that will be more focused on the FDA.

TLSR: Antibiotic developers worry that if the FDA approves a drug, there’s a chance the agency may hold itóput it on the shelfófor second- or third-line therapy, to prevent premature formation of resistant strains of bacteria. The former CEO of Optimer Pharmaceuticals Inc. (OPTR:NASDAQ) told me in 2008, while his Clostridium difficile (C. difficile, C. diff) drug Dificid (fidaxomicin) was in development, that this scenario was his nightmare. Do developers still worry that their antibiotics are going to be relegated to a second- or third-line therapy?

BJS: Well, the short answer to the last part of your question is yes. They should worry, and we should too. I’ll come back to that specifically, but you said a couple of things that make my blood boil a little bit.

First of all, the FDA has no authority to determine what standard antibiotic use should be. It cannot say, “We’re going to approve this drug, but it can only be used as a second-line or third-line therapy.” Decisions about how drugs are to be used and where are made by market forces, unmet medical needs and physician leadership.

It’s hard for me to hear Optimer complain. The reason Optimer’s drug is not first-line is because the company priced it astronomically high. If Optimer wanted its drug to be used first-line, it should have come out with a different price. A lot of physiciansókey opinion leadersóhave told the company this. It’s difficult for me to imagine a circumstance that would make fidaxomicin first-line, given its pricing structure.

TLSR: Doesn’t this antibiotic crisis cry out for a Manhattan Project, where we don’t worry so much about the return on investment or the cost of developing new platforms?

BJS: Yes, it does. There are three primary ways to think about changing the traditional return-on-investment proposition for antibiotics.

The first thing we needóand this would be in the best interest of the public, not specifically in the best interest of companiesóis to move toward the public-private partnership model. The era of public-private partnerships is already upon us. We have government agencies that are funded and empowered to invest in the development of critically needed molecules. Just a couple of weeks ago GlaxoSmithKline (GSK:NYSE), in partnership with a federal agency called Biomedical Advanced Research and Development Authority (BARDA), announced a $200 million ($200M) investment in developing a platform of antibioticsónot just one antibioticóto address antibiotic resistance and bioterrorism. BARDA has decided to move away from putting money into a single molecule program that could fail at any time. The idea is to put that money into a series of compounds, so that if one or two of them fail, there are still others that can be developed. I think this platform concept is the future.

A second way to address the issue is with pricing. Fidaxomicin, which we have spoken about, is not a good example of how pricing should be addressed. In a for-profit, capitalistic society, if a company wants to charge a high fee for a drug to justify its development, then the drug needs to hit an unmet need. It can’t be yet another skin- and soft-tissue infection drug, when we already have 20 of those. You need to go after lethal infections, where there is virtually nothing available as treatment.

That gets to these two proposals, one from the Infectious Diseases Society of America (IDSA), called the Limited Population Antibacterial Drug (LPAD) approval mechanism, and one from the trade organization Pharmaceutical Research and Manufacturers of America (PhRMA). The proposals are essentially identical and suggest a new approval pathway for high priority antibacterial drugs. They say the FDA should be empowered to approve drugs that treat lethal infections where limited alternative therapies are available based on very small clinical development programsóperhaps with as few as 30ñ50 patients exposed to the drug in phase 3óbut with a post-marketing requirement for ongoing safety assessments. A drug approved through that process would, of course, get a very restrictive label because it’s been approved after only a very small number of patients have been exposed, and would be used against only highly resistant pathogens. If you get into a population with an infection that is 50% fatal or higher and you’ve got the new drugówell, you’re in the realm of oncology-type drugs, where you can start justifying pricing like that of fidaxomicin, or even more. You have to hit a true unmeet need. You need to go after an indication that’s lethal and for which there is limited alternative therapy.

The third option would be to create other kinds of incentives, the way GAIN has attempted to, using tax write-offs and patent or data extensions. Frankly, the third option is probably the least effective. The first twoóthe public-private partnerships and changing the pricing structure so that companies stop focusing on large indications and start focusing on smaller indications, addressing unmeet needsóare more effective ways to change the net present value calculation of antibiotics.

TLSR: You said you thought the platform idea is the future. We used to think in terms of a new platform taking 25 years to develop from inception to therapies that are approved and on the market. Certainly, we need to develop new technologies to circumvent resistance to bacteria, which only has to produce a single, small gene mutationóone altered protein synthesisóto render ineffective an antibiotic that cost a billion dollars to develop. With high-throughput screening and in silico development capabilities, will we be able to develop products from new platforms in a shorter periodó15ñ20 years? Is this something that’s going to happen?

BJS: I think our experiences in high-throughput screening and the genetic revolution have had no impact. In fact, if you read the literature from the head of GSK’s antibacterial discovery performance unit, David Payne, as well as others, companies have learned that heavy investment in genomics technology to develop targeted drug discoveries for antibiotics in the 1990s failed. They’ve had to go back to traditional methods.

There is a scientific challenge because the low-hanging fruit has been plucked. The therapies that were easier to discover through high-throughput screenings have already been discovered. When researchers do the screens, they keep discovering the same stuff over and over. Companies have dealt with this reality by increasingly outsourcing the discovery component. Even companies that are still in the game, like GSK and AstraZeneca Plc (AZN:NYSE), which do have internal R&D components, are increasingly in-licensing products. They figure, “If we’re not paying for the internal discovery, we can sift through a lot more chaff to find the wheat. We can sift through hundreds of small companies and labs to cherry-pick the therapies we like.” The smaller companies and labs will have paid for and taken the risks in the discovery phase. The unfortunate reality is that, as a result of this trend, highly sophisticated, well-developed, multidisciplinary scientific teams at big companies have been dismantled in favor of the in-licensing approach.

TLSR: Let me pick your brain for a minute with regard to new antibiotic technologies. What are they? Who’s developing them?

BJS: Well, there are a few new technologies in the pipeline, and more at the preclinical and phase 1 stages. There are a variety of types. I’m not going to talk about molecules targeted to gram-positive bacteriaóthere’s no point to that, since there’s not much unmet need there. We have lots of antibiotics for gram-positive bacteria. The real resistance problem right now is among gram-negative bacteria. There are four gram-negative-targeted compounds in phase 2 and in phase 3 that I could speak to.

Cubist Pharmaceuticals Inc. (CBST:NASDAQ) has an advanced-generation cephalosporin, a ceftolozane-tazobactam (CXA-201) combination, in phase 3 trials now. The drug has good activity against multidrug-resistant Pseudomonas aeruginosa and is being developed as a first-line intravenous treatment for serious gram-negative infections.

AstraZeneca and Forest Laboratories Inc. (FRX:NYSE) are collaborating on a novel beta-lactamase inhibitor, avibactam (NXL 104), which is being combined with the broad-spectrum antibiotic ceftazidime to overcome resistant bugs. The product is in phase 3 and is intended for serious gram-negative infections including complicated intra-abdominal infections (cIAI) and complicated urinary tract infections (cUTI).

Achaogen Inc. (private) has a next-generation aminoglycoside, plazomicin (ACHN-490), which has completed phase 2 and has demonstrated efficacy against systemic infections caused by multidrug-resistant gram-negative bacteria such as Klebsiella pneumoniae and Escherichia coli (E.coli), as well as gram-positive Staphylococcus aureus (methicillin-resistant S. aureus [MRSA]).

Tetraphase Pharmaceuticals Inc. (TTPH:NASDAQ) has a novel, next-generation, fully synthetic tetracycline called eravacycline, which has completed phase 2 trials. It is being tested in cIAIs and cUTIs.

That’s a brief summary of the advanced gram-negative pipeline right now.

TLSR: Brad, you are on the scientific advisory board of Synthetic Biologics Inc. (SYN:NYSE.MKT). This company is attacking the bacterial toxins rather than the bacteria themselves. I’m thinking of the company’s oral enzyme for C. difficile and the antibody for Bordetella pertussis (whooping cough). How important are these going to be? Are they solutions?

BJS: These are some really cool ideas. The reason I like them so much is that while we certainly need to develop new antibiotics, we also need to take the pressure off antibiotics by finding alternative ways to deal with infections.

The C. diff molecule, SYN-004, is not an antitoxin. The reason people get C. diff infection is that we give them antibiotics, which kill off the friendly bacteria in the gut. That makes room for opportunistic C. diff bacteria to take hold and start causing problems. The cool idea here is that Synthetic Biologics’ enzyme destroys antibiotics in the gut. It does not get into systemic circulation, so the antibiotic can do its thing, treating the infection systemically. The enzyme prevents the antibiotic from causing the friendly fire injury in the gut.

TLSR: How far is this program from becoming a marketed product?

BJS: It has been through phase 1. A close relative was previously developed in phase 2. So the company needs to do more clinical development. The enzyme will not be available next yearóit’s going to take some years, depending on how long it takes to complete phase 2 and phase 3.

TLSR: Is SYN-004 proposed to be given with antibiotics, after antibiotics or before antibiotics?

BJS: Most likely the enzyme will be given with the antibiotic. This will come out at the clinical trials. The company will also need to find a patient population that is at high risk for C. diff infection to show a reduction of infection in the experimental arm versus the control arm, with enough events to determine statistical significance. The population of patients selected will have to have a combination of age, background, medical problems and existing antibiotic therapy that is optimal. The idea is that if a physician starts a patient on a cephalosporin, that patient is going to be at risk for C. diff infection. If the patient is given the Synthetic Biologics’ enzyme with the cephalosporin, it will protect the gut against the cephalosporin.

TLSR: What about the antibody, SYN-005, for pertussis?

BJS: The general idea is that the damage from pertussis is, as you said, from the toxin. The problem is that a physician can give antibiotics and can kill the bacteria, but the toxin has already been elaborated and caused damage to epithelial cells. The idea would be to focus on neutralizing the toxin that causes this illness, rather than on killing the bacteria.

TLSR: This sounds like forward thinkingóreally outside the box.

BJS: Yes. The reason I like the idea is it gets to this broader concept: Maybe we don’t always need to kill the bug to treat the infection. AstraZeneca’s head of infection, John Rex, says something that I love. Resistance, he says, happens because we’re trying to kill the bugs, but the bugs don’t want to die. If you don’t want to cause resistance, don’t kill the bug. Maybe you use small molecules or biologics to change the way the bug interacts with the host.

That makes so much sense when you think about it. The antitoxin idea is one example, but future ideas could involve stopping bacteria from triggering inflammation, since that’s what causes the signs and symptoms of infection. Then physicians could allow the host immune system to gradually clear the bacteria over time. If we’re not trying to kill the bacteria, there’s no selective pressure that would drive resistance and therefore change the way bacteria interacts with the host. I think these kinds of ideas are going to come to the fore over the coming one to two decades.

TLSR: This has been fascinating, Brad. It was so nice meeting you.

BJS: Thanks. Nice to meet you, too.

Brad J. Spellberg, M.D., is associate professor of medicine at the David Geffen School of Medicine at the University of California, Los Angeles, and the Harbor-UCLA Medical Center, and the Los Angeles Biomedical Research Institute. He is also the associate medical director for inpatient services, and an associate program director for the Internal Medicine Residency Training Program at Harbor-UCLA Medical Center. He received his bachelor’s degree in molecular cell biology-immunology in 1994 from the University of California, Berkeley. He then attended medical school at the Geffen School of Medicine at UCLA, where he received numerous academic honors, including serving as the UCLA AOA Chapter co-president and winning the prestigious Stafford Warren award for top academic performance in his graduating class. Spellberg completed his residency in internal medicine and subspecialty fellowship in infectious diseases at Harbor-UCLA Medical Center, where he received the department of medicine Subspecialty Fellow of the Year award. Spellberg serves on the scientific advisory board of Synthetic Biologics Inc.

Want to read more Life Sciences Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) George S. Mack conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Life Sciences Report:Synthetic Biologics Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Brad Spellberg: I or my family own shares of the following companies mentioned in this interview: Synthetic Biologics Inc. My research institute has received within the past year payments from companies mentioned in this story, including research grants or contracts from Cubist Pharmaceuticals Inc. and consulting fees from GlaxoSmithKline. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise ñ The Life Sciences Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part..

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Life Sciences Report. These logos are trademarks and are the property of the individual companies.

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Mid-Year Check-Up: How is the Investing All Star Team Doing?

By The Sizemore Letter

I genuinely enjoy following Barron’s Roundtable every year (see “Shifting Winds”).  The venerable old rag puts together a team of 10 outspoken money managers and allows them to do the journalistic equivalent of a cage fight.  The participants are free to grill each other over their recommendations, and it can get pretty intense.  Some years, I like the recommendations on offer, and other years I don’t.  But it always leaves me with something to think about.

Well, we’re about halfway through 2013; let’s see how Barron’s some of the investing all-star team are doing so far.

I’ll start with the Bond King himself, Bill Gross.  Gross is having a rough ride in 2013; none of his recommendations are positive on the year.  The SPDR Gold Trust (GLD) is down 15%, and the Pimco Total Return ETF ($BOND), BlackRock Build America Bond Trust ($BBN) and Pimco Corporate & Income Opportunity Fund ($PTY) are down 0.2%, 5.4% and 2.6%, respectively.

He may very well be the most talented bond investor in history, but even Gross took a hit by the sudden spike in Treasury yields in May.  I consider it impressive that his flagship fund, BOND, held up as well as it did.  It is a testament to Gross’ skill as a manager.  Gross reiterated his recommendation on PTY, expecting 12-month total returns in the 15% range.

Felix Zulauf has one notable success—his correct call on the short yen / long Japanese equities trade—and two notable failures—his bet on gold and on emerging markets.  His recommendation of the WisdomTree Japan hedged equity ETF ($DXJ) was up 12.7% before he exited it, and his recommendations of the iShares MSCI Brazil ETF ($EWZ), iShares FTSE China 25 ETF ($FXI) and iShares MSCI Emerging Markets ETF ($EEM) were down 10.6%, 12.6% and 8.0%, respectively, before he closed them out.

Zulauf was not the only manager to be on the wrong side of emerging markets this year; yours truly held shares of FXI in my Covestor Tactical ETF Portfolio before selling in the first quarter.

Zulauf is now “long volatility” via VIX futures and recommends shorting Hong Kong stocks via the iShares MSCI Hong Kong ETF ($EWH) and shorting the Turkish, Mexican and Polish currencies.

Brian Rogers has had a nice run in 2013, and all of his recommendations are showing gains: PNC Financial Group ($PNC)—17.8%, Kohl’s ($KSS)—23.0%, Apache ($APA)—7.0%, Avon Products ($AVP)—51.3%, Legg Mason ($LM)—28.7% and General Electric ($GE)—11.6%.

Not a bad run.   Rogers reiterates his buy recommendations on all but Avon Products and adds a recommendation to the cruise line company Carnival ($CCL), which has had a run of terrible publicity of late.  Rogers considers it an attractive contrarian pick with a sweet 3.1% dividend.

Meryl Witmer also has a spotless record thus far.  Her three recommendations from January—Spectrum Brands Holdings ($SPB), Chicago Bridge & Iron ($CBI) and Tribune Company ($TRBAA)—are up 29.7%, 28.2% and 12.7%, respectively.  Chicago Bridge & Iron was a recent purchase by Warren Buffett’s Berkshire Hathaway ($BRK-A), putting Witmer in good company.

Witmer added German chemicals company Lanxess (Germany:LXS) to her recommendations.  Lanxess is largely a play on a rebound in the European tire market.

Disclosures: Sizemore Capital is long BOND. This article first appeared on MarketWatch.

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Time to Cherry Pick the Best Dividend Growth Investments

By The Sizemore Letter

Three weeks ago, I asked if the bull market in REITs and MLPs was over, to which I replied “no.”

Bond yields may indeed be rising with the scaling back of the Fed’s quantitative easing, but few investors in or near retirement can eke out a living on today’s yields.  Even if the current payout made ends meet, there is no margin of safety for inflation at today’s levels.

A well-bought REIT and MLP portfolio offers something that bonds cannot: the potential for an income stream that rises over time.  REITs and MLPs also have built-in inflation protection in that their real assets and the rents that they generate should more than keep pace with general price inflation.

So long as there are Baby Boomers entering retirement, there should be a decent market for REITs and MLPs trading at a decent price.  And after today’s Fed-induced bloodletting, some of my favorites are now on sale.

Three weeks ago, I recommended buying shares of Realty Income ($O) and Martin Midstream ($MMLP) on any continued weakness.  I would say that yesterday’s rout qualifies as “weakness.”

And to this list I would add National Retail Properties ($NNN)—which fell a ridiculous 7.1% yesterday–and Retail Opportunities Investment Trust ($ROIC)—which is down by a comparable amount over the past two days.

Could more volatility be coming to this sector?

Absolutely.  I don’t necessarily expect it, but I certainly can’t rule it out.  This is why I recommend easing your way into these positions in stages.  Use yesterday’s bloodletting as a buying opportunity, but also keep a little powder dry in the event of another selloff.

Disclosures: Sizemore Capital is long O, NNN, ROIC, and MMLP. This article first appeared on TraderPlanet.

Pakistan cuts rate 50 bps on positive mood, lower inflation

By www.CentralBankNews.info     Pakistan’s central bank cut its policy rate by 50 basis points to 9.0 percent, its first rate cut this year, saying it was placing “a higher weight on declining inflation and low private sector credit relative to the risks to the balance of payments position.”
    The State Bank of Pakistan (SBP) – which at its two previous board meetings in April held rates steady to ensure a competitive return on rupee denominated assets and thus an inflow of needed capital – said there had been a noticeable change in sentiment following the recent political elections and a decline in inflation had helped increase the relative return on domestic assets.
    “If the economy is to reap the benefits of evolving positive sentiments and lure the domestic as well as foreign investors, then implementation of a reform oriented and credible medium term fiscal outlook is essential,” the SBP said.
    But the central bank stressed that the absence of foreign financial inflows and high fiscal borrowing remained “formidable economic challenges, especially for monetary policy,” while power shortages and security concerns remained strong impediments to growth.
    But the continuous decline in inflation along with moderate aggregate demand has improved the outlook for inflation, and without a cut in the policy rate, real interest rates would have risen and not helped support private investment, the SBP said.
    Pakistan’s headline inflation rate fell to 5.13 percent in May, continuing the declining trend since hitting 12.3 percent in May 2012, reaching its lowest level since October 2009.
    For fiscal 2013, which ends June 30, the SBP expects inflation to be at least two percentage points below its target of 9.5 percent. Last year the SBP cut policy rates by 250 basis points.
    A planned one percentage point increase in general sales taxes by the government and possible higher electricity tariffs pose a risk of inflation exceeding the SBP’s 8 percent inflation target for fiscal 2014, but the central bank said demand is expected to remain moderate, dampening inflation.
    Pakistan’s economy continues to be plagued by energy shortages and concern over basic security, with the estimate for Gross Domestic Product in fiscal 2012/13 at 3.6 percent, below the target of 4.3 percent as investments continue to decline.
    Despite the improving sentiment following the election of Nawaz Sharif as prime minister, the central bank said it had not changed its assessment of the balance of payments position. While the current account deficit remain manageable, around 1.0 percent of GDP this year, the real challenge remains the lack of financial inflows.
    In the first 11 months of the 2012/13 fiscal year, there has been a net capital outflow of $413 million.
    “Add this to the ongoing payments of IMF loans and it becomes clear that the pressure on foreign exchange reserves has not abated,” the SBP said.
    As of June 14, the central bank’s foreign exchange reserves were $6.2 billion, down from $6.7 billion as of April 5 and $8.7 billion at the end of January.
   
    www.CentralBankNews.info

Profit from Seasonal Energy Cycles: Roger Wiegand

Source: Peter Byrne of The Energy Report (6/20/13)

http://www.theenergyreport.com/pub/na/15387

For short-term traders, understanding cyclical markets is the key to profits. And with the hottest summer months ahead, natural gas could get a price boost when air conditioners start to hum, says Roger Wiegand, publisher of the Trader Tracksinvestment newsletter. In this interview with The Energy Report, Wiegand shares some promising names for investors who are ready to read the technical charts—and mark their calendars.

The Energy Report: How are the supply/demand fundamentals playing out for North American energy resources?

Roger Wiegand: Fortunately, supply is strong. The U.S. has substantial reserves of natural gas and oil. Shale gas in West Texas is a big, wide new program. The Bakken region in the Dakotas and Eastern Montana sports 7,000 producing wells. Because domestic oil and gas production in the U.S. is increasing, we are buying less petroleum from the Middle East, much to the chagrin of the dominant forces there.

The big oil producers in the Middle East want to hold the Brent price, which is worldwide oil, at around $100 per barrel ($100/bbl). In the U.S., the floor price for West Texas Intermediate (WTI) is $85/bbl. Oil production is up 10%, which normally would push the price down. But the increase in supply is offset by inflation within the energy sector. Oil could go as high as $110–115/bbl before the end of the year.

The price of oil is tied to security-based fears. Things are ugly in Syria and Turkey right now. The oil price in the U.S. could increase in response to fear of war or increasing turmoil in the Middle East. When things really get scary, as they did in Afghanistan and Iraq, there is often a $10/bbl premium in the oil price, which is a lot.

TER: Is the oversupply of gas in the U.S. an opportunity for export?

RW: Exporting liquid natural gas (LNG) with ships is very expensive. But shipyards in South Korea and Europe are actively building LNG-carrying vessels. The primary buyer of LNG is Japan. Japan overreacted when it shut down its 25 nuclear power plants after the tsunami. The price of electricity went through the roof. When I was there last year, the temperature in office buildings was kept at a toasty 80 degrees. Japan needs to turn to LNG across all of its energy fronts. Some of its nuclear power was turned back on, and it has old plants that run on coal. Electricity generation from coal is leveling off, though.

For a while, China was starting up a new coal-fired power plant every week. That is a stunning fact, but it reflects just how much power the Chinese economy requires. A lot of these plants operate with no environmental protection restrictions. Consequently, the air and water are terribly polluted in industrial and urban areas of China. But the government is doing the best it can to stimulate the provision of electricity from a range of resources: wind, solar, coal, nuclear and natural gas.

TER: Let’s focus on opportunities in the junior oil and gas sector. What promising names do you have for us today?

RW: New Zealand Energy Corp. (NZ:TSX.V; NZERF:OTCQX) is a good company. Its price recently backed off because after three major drilling expeditions performed well, the company’s share price went up tremendously and investors took profits. But the company is well funded and it controls important reserves. We advise holding on to New Zealand Energy, because the price is likely to go back up.

We recently found a solid petroleum service company in the Calgary region of Canada, Enterprise Group Inc. (E:TSX.V). It is a pipeline and construction company that provides equipment and services to regional oil and gas drillers. It was formed from a combination of three smaller companies and management has plans to expand. Keep in mind that Enterprise Group is not exploring, which can be risky. Enterprise is a pick and shovel operation and its business is very steady. If one element of its trade slows down, the other two revenue sources can pick up the slack. It had tremendous new net profits on the last report. The managers are very sharp guys. I spent an hour with them and I was very impressed. We recommended Enterprise Group at CA$0.60. The floor is CA$0.20. The intermediate price is about CA$0.45, but the current price is way above that based upon good performance.

TER: Do you think holding onto a company is a good way to hedge against cyclical downturns in the energy markets?

RW: A diversified company that performs really well is worth hanging onto it as a long-term investment. However, we are not long-term investment recommenders. I encourage people to trade if they have gained or lost a sizable amount in a stock. Of course, some folks just do not want to trade. They want to hold onto a stock for 10 or 20 years. But those who want to trade need to understand how the cycles work in the shorter term. For example, commodities generally go higher into the fall before selling off. A trader who watches the charts will take profits before the fall selling event.

I still read the old Jesse Livermore books—his investment psychology is excellent. His attitude is that a trader should not be in the market all the time. He can pick his spots and go for the best, either long or short. Personally, I have not had a lot of luck trading short, so I do not do it, and I stopped recommending it. We have had good luck with call options in the right time of year, however. But a word of caution: If you do not have the technical expertise to deal with puts and calls, do not try to do it at home.

TER: Is it wise for junior investors to put together a large portfolio under the assumption that some percentage of them will pay off over time?

RW: I advise being selective: pick a handful of good stocks with the right fundamentals and technicals. Buy and sell them in sync with the seasonal cycles for each industry.

TER: What other oil and gas service industries are out there?

RW: In a word: railroads. The Keystone pipeline has been delayed, but there is still a pressing need to transport oil and gas from the Bakken region to petroleum refineries at the Gulf of Mexico. A lot of that oil is being moved by rail. It costs more money to transport by rail, but overall it is economic right now. A big refiner in Texas, Valero Energy Corp. (VLO:NYSE), recently announced its intention to own a fleet of 12,000 rail cars by 2015. And in 2009, Warren Buffett bought the Burlington Northern Santa Fe railroad, which transports oil by tank car. Buffet does not want to see the Keystone Pipeline built because that would ruin his tank car business.

With so much oil and gas drilling in Canada and in the U.S., the service sector is where we are seeing major growth. The drillers need exploration backup, pipes, general servicing and hauling—all the things that allow the drillers to drill. Even some of the largest firms like Exxon Mobil Corp. (XOM:NYSE) buy specialized services, as it is cheaper to outsource than to create internal capabilities to do these types of jobs.

TER: What do you think about the future of coal in North America?

RW: We have liked coal for a long time. Environmentalists have tried to prevent construction of new coal-fired power plants in the U.S., and generally they’ve been successful. But we think that energy sources for the U.S. should include every type of energy. Coal still supplies 40–45% of all power produced in the U.S. Some plants are better than others. Clean coal can be done, although it costs a lot. Some utilities find it more economic to convert coal-fired plants to operate using natural gas.

TER: What’s the future of nuclear energy in the U.S.?

RW: There is a future for nuclear in North America, but it is darn slow. It takes 12–15 years to even get a permit to start up. Fifteen years is a long wait. Some of the old reactors are ready to be shut down because it costs too much to repair and update them.

TER: Please sum up the state of the energy market for short-term investors.

RW: The energy cycle doldrums do not last very long. For example, natural gas usage goes up dramatically in July and August on air conditioning demand. And many of the coal-fired power plants in the U.S. that were converted to natural gas cannot be reconverted, because it costs too much money. So the utilities are increasingly dependent on burning natural gas, which was trading way under $2 per thousand cubic feet ($2/Mcf), and now it’s up to $4/Mcf. It is headed toward $5/Mcf this year. Now is a good time to trade in that seasonally popular commodity.

TER: It was good talking to you, Roger.

RW: Thanks, Peter.

Roger Wiegand produces Trader Tracks to provide investors with short-term buy and sell recommendations and give them insights into political and economic factors that drive markets. After 25 years in real estate, Roger has devoted intensive research time to the precious metals, currency, energy and financial markets for more than 18 years. He creates a weekly column for Jay Taylor’s Gold, Energy & Tech Stocks newsletter.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

DISCLOSURE:

1) Peter Byrne conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: New Zealand Energy Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Roger Wiegand: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.

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Gold, Silver Hit New Lows, “Bullion’s Day in Sun is Long Gone”, CME Hikes Gold Margin

London Gold Market Report
from Ben Traynor
BullionVault
Friday 21 June 2013, 06:45 EDT

SPOT MARKET gold bullion prices touched fresh three-year lows Friday at $1269 an ounce before recovering a little by lunchtime in London, as stocks and commodities also regained some ground after sharp falls yesterday.

 Spot silver prices fell as low as $19.41 an ounce, as with gold their lowest level since September 2010, before they too recovered a little, as other commodities also ticked higher while the US Dollar weakened slightly.

 A day earlier, gold fell more than 5% between the London open and US close, while the S&P 500 recorded its biggest daily drop since November 11 2011, with volumes reaching a 2013 high, a day after US Federal Reserve chairman Ben Bernanke said the Fed could begin scaling down its asset purchases “later this year”.

 CME Group, which operates the New York Comex exchange on which gold futures are traded, announced yesterday it is increasing margin requirements on gold trading by 25% to $8800 per 100-ounce contract. The new initial margin requirement will come into effect after close of trading today.

 “That is definitely affecting gold,” says Joyce Liu, investment analyst at Phillip Futures in Singapore.

 “For those who cannot put out margin calls on time, they will be squeezed out even when they don’t want to get out.”

 Heading into the weekend, gold in Dollars was down 7% on the week by late morning in London, with silver down 10%.

 Gold in Sterling meantime looks set for a drop of more than 5% on the week, trading below £840 an ounce. Gold in Euros was down around 6% on the week at €982 an ounce.

 Going by London Fix prices, gold in Dollars looks set for its worst week since April, although a fix price of $1273 an ounce or below would make for the worst week since at least October 2008.

 “In the precious metals markets, nothing is simple and now we are at the lows, market sentiment is needless to say very negative,” says David Govett, head of precious metals at broker Marex Spectron.

 “I am now hearing from people how a thousand Dollars is the next stop. These are the same people who were predicting two thousand Dollars this year, so I take it all with a pinch of salt. However, there is no doubt that the bull market in gold has had its back broken and its day in the sun is long gone.”

 Over in India, traditionally the world’s biggest source of private gold demand, financial services firm Reliance Capital has suspended sales of gold. The Reliance Gold Savings Fund had assets equivalent to eight tonnes of gold under management at the end of the first quarter, newswire Reuters reports. Indian imports last month amounted to 162 tonnes, according to the country’s finance ministry.

 The announcement follows the introduction by India’s authorities of new measures aimed at curbing gold imports, such as restricting imports on consignment and raising duties to 8%. The objective is to reduce India’s current account deficit and thus support its currency.

 The Rupee however touched an all-time low of Rs.60 to the Dollar Thursday, as the Dollar strengthened and emerging market assets sold off following the Fed’s announcement.

 “We are not insulated from what is happening in the rest of the world,” India’s finance minister P. Chidambaram told a press conference in response to the Rupee’s fall.

“My request is we should not react and panic. It is happening around the world.”

 In contrast with Reliance, jeweler Shree Ganesh, which in recent years has imported around 70 tonnes of gold a year,  said earlier this week that it plans to issue short-term debt to fund bullion imports now that the rules prevent it from obtaining credit from suppliers shipping the gold on a consignment basis.

 Indian gold demand usually drops during the summer months during the period known as Chaturmas.

Ben Traynor

BullionVault

Gold value calculator   |   Buy gold online at live prices

 

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

 

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

 

European Stocks rises,recovering from sharp losses

By HY Markets Forex Blog

The European market opened green on Friday, advancing from its sharp loss on Thursday after the Federal Reserve announced the cut in its monthly bond purchases later this year and end by 2014, if the US economy continues to grow and improve.

The European Euro Stoxx 50 rose 0.35% at 2,595.47 as of 7:01am GMT, while the German’s DAX opened at 0.30% higher to 8,053.15. At the same time, the French CAC rose 0.48% to 3,716.68 and the UK’s FTSE 100 advanced 0.23% to 6,173.50.

“Markets are bracing for the day that they no longer have steroid injections to keep them going. Instead, fundamentals will become important to sustain gains in risk assets. Signs of firmer US and Chinese growth and stabilization in Europe will eventually drag markets out of their turmoil,” analysts at Credit Agricole wrote in a note.

The Global equity market ,lost ground on Thursday after the Fed Chairman Mr. Bernanke hinted a possible reduction of its quantitative easing (QE) program later this year and end it by next year if the US economy continues to improve .

Euro zone current account for April is yet to be released, as it is expected to show a surplus of 15.1 billion on a seasonally adjusted basis. Meanwhile, the European Union finance ministers are still discussing a possible direct recapitalization of the euro zone bloc’s banks to save them from falling.

The Asian shares opened at a negative territory of Friday.  The Chinese Shanghai Composite dropped 0.50% to close at 2,073.09 as of 7:01 am GMT, while the Japanese Hang Seng fell 0.64% to 20,251.76 at the same time.

 

 

 

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