Month: December 2013

By Michael Lombardi, MBA

As I often harp on about in these pages; economic growth occurs when the general standard of living in a country gets better. You can’t say an economy is improving when a significant portion of the population is suffering. You can’t claim there’s economic growth when the poverty rate is increasing. You can’t say the economy is improving when personal incomes and savings are declining.

Looking at this a little closer…

Food stamps usage in the U.S. economy has increased 68% since 2008, with 47.66 million people, or more than 15% of the entire U.S. population, now using food stamps. Going back to 2008, there were 28.22 million Americans using some form of food stamps then. (Source: United States Department of Agriculture, November 8, 2013.)

From 2000 to 2012, the poverty rate in the U.S. economy increased from 12.2% to 15.9%—a hike in the poverty rate of more than 30% in just 12 years. In 2000, there were 33.3 million Americans living in poverty; this number grew to 48.8 million people in 2012. (Source: United States Census Bureau, September 2013.)

In 2008, the median household income in the U.S. economy was $53,644. In 2012, it was almost five percent lower at $51,017. (Source: Federal Reserve Bank of St. Louis web site, last accessed December 2, 2013.)

And because incomes have fallen and prices have risen, people have no choice but to save less.

Back in November of 2008, Americans saved an average of 6.1% of their disposable income, meaning they saved $6.10 for every $100.00 they earned after taxes. In August of this year, personal savings as a percentage of disposable income stood at only 4.7%—a decline of 23% in the average savings rate of Americans in less than five years. (Source: Ibid.)

What’s next?

In 2008, after the fall of Lehman Brothers, the real face of the U.S. economy started to emerge and the bubble that formed in the key stock indices and real estate market burst. We saw massive losses; stock prices collapsed, retirement accounts were badly damaged, and investors ran through the exit door. As we know, the markets found a bottom in 2009.

Aided by a government bent on getting the U.S. economy going (and borrowing trillions of dollars to make it happen) and a Federal Reserve that printed trillions of dollars in new money, the stock market came back as corporate earnings improved.

Now, more than 50 months into the so-called economic “recovery,” one would expect all those trillions of dollars thrown at the U.S. economy to effect robust growth. But as you can surmise by the startling statistics I just covered above, there has been very little improvement in the U.S. economy. However, the stock market has roared like never before, with the Dow Jones Industrial Average up 140% since March of 2009.

The easy money policies of our central bank have been a boon to big banks and Wall Street more than anything else. The disparity between the U.S. economy and the stock market has never been so great.

Today, easy money is still on the table and optimism towards the stock market is near a record high. Dear reader, another great bubble has been created. Yes, the stock market, it’s become a huge bubble. And when this one bursts, it won’t be pretty.

This article The Mother of All Bubbles? is originally posted at Profitconfidential

By MoneyMorning.com.au

You might have noticed the Tesla Motors [NASDAQ:TSLA] share price over the past month. It has gone from the darling child of the NASDAQ to one of the most volatile companies you can invest in.

It peaked at just over $193 at the end of September. The calls were for $200+. But on the flip side there were many (including me) who felt the stock was overvalued.

To give you a comparison, Tesla is on track to ship about 21,000Model S cars this year. Audi on the other hand is on track to ship about 1.57 million cars by the end of September.

In short, Tesla ships about 1.3% of the volume that Audi ships.

And yet Tesla’s market cap is currently $17 billion, while Audi’s is about $28 billion. It’s pretty easy to see the difference here. The sales numbers clearly don’t stack up.

However that doesn’t mean Tesla should only be worth 1.3% of the value of Audi. The technology Tesla provides is cutting edge. In fact it’s world class. Industry leading. Pioneering.

I believe Tesla will soon be the best buy on the NASDAQ.

That’s because, as I see it Tesla is the best carmaker in the world. But for likely self-serving interests, it seems the US is hell-bent on quashing this amazing, homegrown company.

It started back when Tesla decided to adopt the ‘Apple’ sales method. By that I mean Tesla planned to sell cars directly to the public. Open up a Tesla shopfront, sell the cars. Simple.

No need for dealers, no need to inflate prices. No need for a middleman. It’s the business model of the modern era. Cut out multiple handling of products and pass on the benefits to the consumers.

Except a few states have a problem with this. Namely Texas, Colorado, Minnesota, New York, New Hampshire, Massachusetts, Virginia and North Carolina. There are ongoing legislative battles preventing Tesla from selling their cars directly to the public.

Car dealers want a slice of the pie, but Tesla doesn’t want to give it to them. Nor should they. The battle seems to be in favour of the car dealers too. And it’s no coincidence that car dealers have spent over $130 million in state and federal political lobbying compared to the paltry $500,000 spent by Tesla.

But sales methods are just one aspect of the battle facing Tesla.

It seems as though US lawmakers are really afraid of things they don’t understand. Maybe that’s why 23andme are in trouble also — more on that another day.

Anyway Tesla had a bit of PR misfortune recently when three of their cars caught fire in the space of five weeks.

This sent the stock price into a tailspin. Not only that, but the good old National Highway Traffic Safety Administration (NHTSA) decided to stick its nose into this media inferno. It’s investigating if the Model S is safe and whether the car has any design flaws.

Here’s Something Worth Noting

…

All three Model S fires were kept out of the passenger cell. So no flames entered the passenger compartment. In all three accidents the car was able to instruct the driver to pull over, and exit the vehicle. And all three drivers believe the Model S design actually saved their lives.

The US National Fire Protection Association lists in their 2012 fact sheet that in 2012 there were 172,500 car fires in the U.S.

Of those 172,500 there were 300 fatalities and 800 injuries. The estimated damage bill was $1.1 billion. That equates to one highway vehicle fire every 182 seconds.

Since Tesla released the Model S to market in 2012 they’ve had three fires. And no fatalities.

In the official Tesla Blog on their website Elon Musk said this about the Model S,

‘An average of one fire per at least 6,333 cars, compared to the rate for gasoline vehicles of one fire per 1,350 cars. By this metric, you are more than four and a half times more likely to experience a fire in a gasoline car than a Model S!‘

Yet the NHTSA wants to investigate Tesla cars for design flaws? Seriously?

But it goes further. The Germans have decided they want in on the act too. Try to figure this one out…

The three Tesla fires occurred in, Seattle, Tennessee and Mexico. And because of this the German Federal Motor Transport Authority was concerned. They basically asked Tesla for a ‘please explain?’

Of course, the investigations from both the NHTSA and ‘Ze Germans’ have come up with nothing. There’s no design flaw in the Model S. In fact they’re unbelievably safe cars. Safer than most petrol cars.

But the negative publicity from these fires is beyond belief. It’s as though the government is doing everything it can to find a weakness in Tesla.

Put it like this. If Tesla continues on its way they plan to have two more electric vehicles (EV’s) come to market over the next few years. One of those is an affordable priced sedan for the masses. An affordable electric car has been Tesla’s primary goal all along.

And as EV’s become more common around the world, it means some lean times for petroleum companies. That could also mean some pretty lean times for companies like Exxon Mobil, BP and Total SA.

Now I’m going to speculate here, but my guess is that there are a lot of ‘pro-oil’ politicians in the US Congress. Just a stab in the dark there… Not to suggest any kind of political corruption of course. But well, put two and two together and sometimes you can get five.

There is literally billions at stake for carmakers, but also petroleum companies as the world goes ‘EV’. For the stockholders, it’s a worrying time.

Tesla is certainly in for a long, protracted fight in a highly profitable market. So far they’ve come through each battle with flying colours. And in my opinion they will continue to do so.

I get the impression that Musk is up for the fight. In fact these roadblocks likely spur him on even more to make Tesla a success.

But watch this space. There’s a strong tide pushing against Tesla. And at the right time it will present as a brilliant buying opportunity. Because everyone will hate the company, but from what I can see, they’ll still be the best carmaker in the world.

And if that perfect storm comes around, Tesla will be the best buy on the NASDAQ.

Sam Volkering+
Technology Analyst, Revolutionary Tech Investor

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By MoneyMorning.com.au

By MoneyMorning.com.au

If you needed a bit more evidence of how important China is to Australia, the trade figures for October should do the trick.

According to the Australian Financial Review, exports were a record $9.1 billion, double the value from sales to the United States and Japan. Sales to those markets, in fact, also happen to be in decline.

But probably here’s the key quote for all of us: ‘They [the figures] also confirm why economic data out of China is having an increasingly growing impact on the Australian dollar, local shares and interest rate expectations.‘ 

It’s also why it makes China’s recent move in to establish the ‘East China Sea Air Defense Identification Zone’ (ADIZ) so fascinating…

China Flexes Some Muscle

In case you missed the story so far, the East China Sea ADIZ is just north of Taiwan and covers the disputed Diaoyu/Senkaku islands. China and Japan both lay claim to the islands. The Chinese announced the ADIZ without warning. It also conflicts with the Japanese one already in place. 

Practically speaking, the ADIZ deals with rules concerning commercial aircraft flights. The Chinese ‘rules’ include all aircraft identifying themselves to Chinese air traffic controllers, being approved and staying in communication. That all sounds pretty tame except for the threat of the armed forces that ‘will adopt defensive emergency measures to respond to aircraft that do not cooperate.‘

Even so, who cares? Well, things might just go a little bit deeper than that. As Dan Denning argued in Scoops Lane this week, if you view it in the context of World War D, there’s a broader territorial ambition here.  

Source: Military Tech Alert, US Ministry of National Defense
Click to enlarge

At stake is not just fishing rights but also potentially lucrative oil and gas reserves under the seabed.

‘China will open up a ‘Deep Sea Base’ facility next year at the port of Qingdao, with the purpose of facilitating offshore oil and gas exploration,’ reported Dan on Thursday. ‘The East China Sea is relatively unexplored territory for oil and gas. It almost surely won’t turn out to be a new North Sea or Gulf of Mexico.

‘But in the scheme of things, there’s no doubt that China is using its growing economic power to exert more political and military influence in the Pacific. This complicates matters for Australia. Will it choose a political alliance with the US or an economic alliance with China, even if it means tacit agreement with China’s regional ambitions?‘

It’s a question that led Dan to get Byron King on the phone this week. Port Phillip Publishing subscribers can see the conversation here.

Byron is an ex US navy officer and currently an editor for a publication focused on the military. He’s also a geologist and security analyst. That’s a handy set of skills. There just some of the reasons we’ve booked in Byron to appear at the World War D  conference next year.

The big question for Byron is whether the agreements and alliances in East Asia will hold. A lot of them are relics of the Second World War and now China’s in town to shake up the old order.

‘When you take it all in,’ he wrote in a recent note. ‘China just converted a war of words with Japan into a full-blown, potential wartime scenario. The new Chinese ADIZ now clearly defines a battle space.

‘Under traditional international law, Japan could view the Chinese ADIZ declaration as an act of war. At the very least, the Chinese ADIZ is a direct military challenge to Japan.

‘Legally, there’s a troubling precedent here. If Japan — and/or other Asian nations, the U.S. and/or the U.N. — does nothing, inactivity lays legal foundations for China to make a similar ADIZ declaration that covers the South China Sea, also subject to Chinese claims and multilateral territorial disputes. But at this stage, a "South China Sea ADIZ" would be in keeping with Chinese efforts to dominate air and sea space adjacent to its coastlines.’

What’s Going on With China?

The way Byron sees the tea leaves, Asian countries suspicious of Chinese hegemony like Japan, Taiwan, South Korea and the Philippines are about to open their cheque books and ramp up defence spending. ‘Money will flow like Niagara into Asian rearmament.‘ But what’s in it for China? Here’s how he sees it:

‘I’m inclined to believe that we’ll see more Chinese actions that assert the country’s status and power. Why? Well, moves like this play to the strength and decisiveness of the Chinese Communist Party as it tackles the vast economic issues and reform that are coming home to roost.

‘Still, consider the larger perspective. If the U.S. — and certainly the aggressor of World War II, Japan! — builds an alliance of anti-Chinese Asian states, it would represent a true reversal of the tide of history. And perhaps the Communist big shots and ideologists in Beijing have misread themes of history that they believe predict Chinese dominance in Asia. We’ll all likely live long enough to see this play out.‘

The very least we can say is Australia certainly has the box seat.

Callum Newman+
Editor, Money Weekend

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By MoneyMorning.com.au

By Mitchell Clark, B.Comm.

You don’t often hear a lot about United Technologies Corporation (UTX) these days; it’s an old economy name that doesn’t seem to garner much attention from the media.

Nevertheless, the company that makes elevators, helicopters, airplane engines, and HVAC (heating, ventilation, and air conditioning) and fire/security systems continues to perform excellently. It’s a component of the Dow Jones Industrial Average, and the stock’s had an exceptional year. (See “The One Market Sector That’s Consistently Outperforming the Rest.”)

Approximately $17.0 billion of the company’s total sales in 2012 came from its “UTC Climate, Controls and Security” business. Next was “Pratt & Whitney” aircraft engines at $14.0 billion. “Otis” elevators and escalators brought in $12.0 billion in sales last year, followed by “UTC Aerospace Systems” at $8.3 billion and “Sikorsky” helicopters at $6.8 billion.

As a conglomerate with a strong constituent in aerospace, United Technologies has an excellent track record of increasing its dividends to stockholders.

 In 2012, the company increased its common share dividend by a total of 11.5%, representing its 76th consecutive year of paying dividends. According to the company, from fiscal year-end 2002 to year-end 2012, United Technologies delivered a 225% total return to shareholders, which is more than double the total return of the DOW or S&P 500.

In 2008, the company paid out $1.35 in total dividends per share. By the end of last year, that figure was $2.03 per share.

Of the company’s total sales, 40% are in the U.S. market, followed by 26% in Europe and 20% in the Asia Pacific region.

Since the recession, United Technologies’ sales, earnings, and earnings per share haven’t been all that consistent. But what has been consistent is the company’s growth in its cash dividends on common shares, and that’s a big part of this story as an equity investment. The company’s split-adjusted long-term stock chart is featured below:

Chart courtesy of www.StockCharts.com

This is a very good track record from a mature, large-cap enterprise that isn’t making headline news that often. What I like is the consistency of performance on the stock market and, more importantly, the company’s excellent track record of increasing its dividends.

If you are a dividend investor or a long-term investor who does not require quarterly income but would benefit from dividend reinvestment, you may want to consider United Technologies with its track record of increasing dividends.

United Technologies is a slow-growth business that operates at the whim of government spending and the economy in general, yet its track record on the stock market, even when excluding dividends, is excellent.

Why this stock is so successful is because of the management of its cash flow and the reliable expectation of increasing dividends going forward. It’s a powerful metric that long-term investors crave.

United Technologies is a benchmark company that I like, and it is worthy of serious consideration by long-term investors on a major share price retrenchment. For these investors, dividend reinvestment from a company that reliably increases its annual dividends is a powerful financial metric not to be ignored.

This article Long-Term Investors Shouldn’t Ignore This Key Financial Metric is originally posted at Profitconfidential

The new buzz about binary option trading has generated a lot of confusion, some serious criticism and a huge number of excited fans and traders. People are thrilled to be able to make quick decisions with simple results depending on the outcomes. Binary option trading is also called digital options trading, all-or-nothing trading, or Fixed Return Options (FROs). They’re available on all kinds of websites and anyone with a credit card can get started quickly. It’s tempting and for good reason, but it’s also important to know what you’re getting into and where you can safely conduct those binary trades.

Why Binary?

Binary option trading is binary because you select one of two options and put your money on that outcome. Still don’t understand? Maybe an example will help. Typically, you decide on the time frame. Let’s say you believe that in about 30 minutes, the stock price of a company will be higher than it is right now. You can put down $100 that says it’ll go up and in about 30 minutes, you’ll know the result. If you were correct, you get a payout. If you were incorrect, either you get a small amount back or none at all, depending on where you’re doing your binary options trading. You’re making a simple choice between stock prices going up or going down, and if you’re correct, you get money back.

There are plenty of promises out there about how much money you can make, and it’s true that you can make good money with binary options trading. But be cautious about some of those promises. As you can see, if you’re wrong all the time, you’ll end up losing a lot of money. So it pays to do a bit of research and make decisions based on what’s happening on the underlying option. Otherwise, you’re just guessing about what will happen.

How to Trade Binary Options

First and foremost, find a website that you understand. Now that you know what it means to trade binary options, those sites will make more sense. Make sure that the site and broker are reputable and that you’ve got what you need in order to make the trades. Don’t rush into anything, but plan your trades for times when you feel confident about your trades. Figure out how often you have to be correct on individual trades in order to come out ahead overall.

To learn more please visit www.clmforex.com

Disclaimer: Trading of foreign exchange contracts, contracts for difference, derivatives and other investment products which are leveraged, can carry a high level of risk. These products may not be suitable for all investors. It is possible to lose more than your initial investment. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. A Product Disclosure Statement (PDS) is available from the company website . Please read and consider the PDS before making any decision to trade Core Liquidity Markets’ products. The risks must be understood prior to trading. Core Liquidity Markets refers to Core Liquidity Markets Pty Ltd. Core Liquidity Markets is an Australian company which is registered with ASIC, ACN 164 994 049. Core Liquidity Markets is an authorized representative of Direct FX Trading Pty Ltd (AFSL) Number 305539, which is the authorizing Licensee and Principal.

By George Leong, B.Comm.

When I previously wrote about gold, prices were around $1,316 an ounce and subject to a bearish head and shoulders formation on the charts, as you can see below. (Read “Why Gold Might Only Be Good for Traders Right Now.”) I was bearish on the precious metal then and continue to be so, at least when considering it as a buy-and-hold investment rather than a speculative trading opportunity.

Spot gold has fallen below $1,225 and appears to be set to take a run at the key support level of $1,200, according to my technical analysis. The reality is that even with the 7.5% decline from early October, I would still not be a buyer at the current price, unless I wanted to trade the yellow ore and hope for a possible oversold technical bounce back above $1,250.

Chart courtesy of www.StockCharts.com

Instead, given the attractive buying opportunities in the stock market, I’d advise more conservative investors to invest their dollars in stocks, rather than gold bullion at this time.

Some of the underlying fundamentals that have traditionally supported the metal are not evident. Yes, China is continuing to accumulate physical gold, but buying by India, which is the world’s largest buyer of the precious metal, has been stalling.

In addition, the yellow metal usually receives a lift from a weaker U.S. dollar. With the greenback showing some recent strength against other world currencies, especially in the emerging markets, the precious metal isn’t seeing any support from a weak dollar.

Inflation, a historically supportive variable for the precious metal, has also been largely benign across the world economies (with some exceptions). Without inflation rising higher (in spite of the exorbitant amount of easy money being pumped into the global economy), I just don’t see why anyone, aside from speculative traders, would buy the precious metal at this point.

Traders may begin to look at gold as a speculative trade if prices head down toward $1,200 and below, as shown on the long-term chart below, which dates back to 2004. There is some decent support around $1,200, but the problem is that a failure to hold could see the metal fall towards $1,100 and $1,000, as shown by the lower blue horizontal support line on the following chart.

Chart courtesy of www.StockCharts.com

So unless you are a persistent gold bug that has remained loyal to the yellow ore since the $1,800 level in 2011, I would be hesitant to add gold as a buy-and-hold investment; instead, I continue to look for opportunities in equities. If gold prices do bounce back toward $1,300, I might consider entering the market on the short side and sell gold, as the fundamentals, at this time, don’t appear to be there. In the current market, gold investments are most beneficial to speculative traders.

This article Should Investors Hold Out for $1,300-an-Ounce Gold Before Investing?  is originally publish at Profitconfidential

Source: George S. Mack of The Life Sciences Report (12/5/13)

http://www.thelifesciencesreport.com/pub/na/not-your-fathers-diagnostics-ram-selvaraju-on-how-molecular-genomics-invigorate-the-sector

An old investment principle says the equity upside of diagnostics and tools companies can’t hold a candle to that of small biotech drug developers. Managing Director and Head of Equity Healthcare Research Raghuram “Ram” Selvaraju of Aegis Capital begs to differ. His research has uncovered small- and micro-cap companies developing sophisticated platforms in the molecular diagnostics space that are destined for significant revenue growth and profits. In his first of three interviews with The Life Sciences Report, Selvaraju lays out a handful of names with powerful technologies on the cusp of investor acceptance as huge growth plays.
The Life Sciences Report: Ram, I want to address the differences between new drug development in small companies and development of diagnostic technology in small companies. It’s clearly very difficult for a biotech company to get off the ground. Do you see advantages in investing in diagnostics versus micro-cap, early-stage drug development?

Raghuram Selvaraju: That is a very good question. There are advantages and disadvantages, as you will find when you compare any one sector to another. When we published our Healthcare Sector Update Preview earlier this year, we specifically drew investors’ attention to several factors, including the advent of the Patient Protection and Affordable Care Act, the additional data being parsed out of the human genome, the advent of next-generation sequencing becoming widely available, and more knowledge about mutations that are specifically associated with cancer, the prognosis of the disease and the likelihood of response to specific types of therapeutic regimens. With all of this together, you have the ingredients for a sea change in the molecular diagnostics space.

TLSR: So all these factors represent a material change in the diagnostics industry?

RS: Yes. In the past, diagnostics was considered a relatively humdrum subsegment of the healthcare sector. Most of the companies that played in it were primarily focused on selling high-volume, low-margin tests. That has changed relatively rapidly over the course of the past 10 years or so. Molecular diagnostics and high-content molecular diagnostic tests have become available—tests that actually guide therapy and provide value-added information regarding a patient’s prognosis, specifically in the oncology domain, but also for a wide array of other therapeutic areas.

What’s particularly interesting about this diagnostics world is that you can get a product approved through the U.S. Food and Drug Administration (FDA), but that is not the only way in which you can achieve commercial penetration. Many companies today sell a wide range of what are called laboratory-developed tests, which are regulated and certified under the Clinical Laboratory Improvement Amendments (CLIA) program. These in vitro tests are created and utilized by a single lab with a CLIA certificate for that specific test. Instead of being subject to direct FDA regulation, they are sold through CLIA-compliant facilities; the compliance with CLIA is what serves as the regulation for the test. These molecular diagnostics companies are, by definition, more risk-mitigated than biotech and pharmaceutical companies because they don’t have regulatory risk per se. The regulatory risk is in the facility, not in any specific test. As long as your facility passes muster, you can sell tests out of that facility.

In addition, molecular diagnostics companies are generating revenue from more sources than ever before. Today they derive revenue not just from sales to pathologists and hospitals, but also via collaborations with pharmaceutical companies in the development of so-called “theranostic” solutions. These approaches couple a molecular diagnostic test—a companion diagnostic if you will—with a corresponding targeted therapy that is aimed specifically at a subpopulation of patients within a particular disease area.

Because of these factors we think that, now more than ever, the molecular diagnostics space is particularly attractive to investors. It’s always been more risk-mitigated than the pharmaceutical/biotech space, simply by its nature, but margins are not as high as for a biotech or pharmaceutical product. Diagnostics represent a standard less-risk, less-reward kind of situation.

However, more reward is gradually coming into this space because molecular diagnostic tests are being priced higher, in part because they can be used to guide therapies. The diagnostics are of higher value than they were in the past. The focus has come to be on high-content, minimally or totally noninvasive tests, and that’s where we see the value accruing as we go forward.

TLSR: Ram, I want to continue for a moment with your thoughts around laboratory-developed tests and CLIA certification versus FDA approval. A company can, if it wishes, seek FDA clearance through a premarket approval (PMA) or 510(k) pathway for a test. However, when a company gets CLIA certification, without FDA clearance, isn’t it very difficult to go to the Centers for Medicare & Medicaid Services (CMS) and get reimbursement from Medicare and Medicaid?

RS: There have been a lot of changes to CMS. Companies can’t practice code stacking in a systematic manner anymore. In the past, you could assign a specific code to a particular procedure—polymerase chain reaction (PCR), for example—and every time your diagnostic method utilized that procedure, you could “stack” the code for that procedure to come up with a price for your test. If you had to perform 100 PCR reactions for a given test, and the price per PCR procedure was, say, $10 according to CMS, your price per test would then be $1,000 and CMS could not argue with the pricing.

Nowadays, companies have to achieve what’s called value-based pricing, which is primarily driven by acceptance of the test in the medical community and the generation of peer review data that would lead Medicare, Medicaid, Novitas Solutions Inc. or CMS to proactively provide reimbursement. It must meet their guidance of what is clinically meaningful and medically impactful.

Peer review data generation is easier than going the PMA route because, to get a PMA, a company probably would have to do a large, randomized, prospectively defined trial to determine the prognostic value of a particular diagnostic test. A trial generating data for a PMA could take years, depending on the indication. But a company could generate peer review data in a matter of six to nine months, and then take another six to 12 months, say, to get it reviewed and published in a peer-review journal of some significant impact. These days reimbursement can be obtained based simply on the peer review process. Many companies have managed to get reimbursement for CLIA-certified tests this way.

TLSR: How large can reimbursement get for some of these more sophisticated molecular diagnostics and prognostics?

RS: Think about Genomic Health Inc. (GHDX:NASDAQ), with its Oncotype DX test, which is currently reimbursed at around $4,000 per test. Think about Foundation Medicine Inc. (FMI:NASDAQ), a company with a recent initial public offering (IPO), which has a test that is routinely reimbursed at $5,800. Even think about a company that we at Aegis Capital recently IPOed, Cancer Genetics Inc. (CGIX:NASDAQ), which has tests that are routinely being reimbursed at anywhere from $1,300–1,800. Rosetta Genomics Ltd. (ROSG:NASDAQ), another company that we cover, managed to get reimbursement approved through Medicare’s Novitas Solutions Inc. administrator at around $3,600/test; this test is aimed at determining the origin or primary site of a cancer, called cancers of unknown primary. There are a number of companies that have not gone through the PMA or 510(k) route that have successfully managed to obtain reimbursement for tests.

TLSR: I want to switch topics and address something that concerns the molecular diagnostics industry as a whole. On Oct. 30, the U.S. District Court of the Northern District of California granted Ariosa Diagnostics Inc. (private) a motion for summary judgment and denied Sequenom Inc.’s (SQNM:NASDAQ) motion for summary judgment. That was with regard to Sequenom’s 540 patent, of which it is the exclusive licensee. Your thoughts?

RS: To give some background, the ruling you’re referring to was rendered by Judge Susan Illston, against Sequenom and in favor of the plaintiff, Ariosa Diagnostics. The 540 patent covers Sequenom’s main marketed product, the MaterniT21 test, which is aimed at prenatally diagnosing chromosomal abnormalities in a noninvasive fashion by using a maternal blood sample as opposed to amniocentesis, which has risks for both mother and fetus. Basically, the judge said that the presence of fetal cytogenetic material in maternal blood is a naturally occurring phenomenon and, therefore, cannot be patented. Accordingly, she ruled that Sequenom’s 540 patent is invalid and cannot be upheld because it covers the packaging of natural phenomenon.

Now, obviously, that is not our position. We believe that such patents include a heck of a lot more than just claiming a natural phenomenon. What the 540 patent contains is, in our view, a system for diagnosing chromosomal abnormalities noninvasively. It’s not enough to simply say that you know fetal genetic material is present in maternal blood. You have to find a reliable way of detecting its presence, of amplifying it to a significant enough extent that you can distinguish it from the maternal DNA and then, finally, you have to figure out how to interpret the cytogenetic material that is present to make a diagnosis of some import—for example, whether a particular fetus is carrying Down syndrome.

Because all these aspects are embedded in the claims of the Sequenom patent under dispute, we believe the judge made a heavy-handed, draconian interpretation of the Supreme Court ruling rendered earlier this year in Association for Molecular Pathology v. Myriad Genetics Inc., where the High Court ruled that gene patents are not valid and not enforceable because they cover genes, which occur in nature.

TLSR: My understanding is that this could be overturned. When will this case resolve?

RS: Sequenom has indicated that it will appeal this ruling. We will not have a decision for at least the next six to eight months, but we do not anticipate that the judge’s ruling will be upheld in its current form. It may be modified or it may be rejected in its entirety by the appellate court. If it’s rejected, we think that would be a very good thing for the molecular diagnostics space, not because we think that people should be allowed to patent naturally occurring phenomena, but because we believe that there needs to be some incentive for innovation to occur in the molecular diagnostics space.

Even if the Ariosa Diagnostics v. Sequenom ruling is ultimately upheld in some way, I can tell you that many companies in the molecular diagnostics space are either going to be unaffected entirely or minimally affected, because these innovators tend to continue to innovate. They generate founder intellectual property (IP) wherever they are operating.

TLSR: Let’s talk about companies. Choose one.

RS: The idea of founder IP leads me to a very good example of an innovative company, TrovaGene Inc. (TROV:NASDAQ), which I cover with a Buy rating and a price target of $10.

TrovaGene has founder IP in the detection of transrenal nucleic acids, which are shed naturally into the urine. That is certainly a naturally occurring phenomenon, but TrovaGene’s IP is not just about the presence of transrenal nucleic acids. It’s about the detection of such nucleic acids. It’s about theamplification of such nucleic acids.

Without the specific knowledge and techniques that TrovaGene possesses, simply knowing that genetic material is present in urine doesn’t help you at all. You cannot make a meaningful diagnosis about any disease with just that knowledge in hand. You need to be able to detect and amplify the genetic sequences in the urine. From our perspective, the additional IP that TrovaGene possesses is more important than the founder IP concerning the picking up of transrenal nucleic acids per se.

Even if TrovaGene were to face competition in the transrenal nucleic acid detection market, we believe the company is far enough ahead of any competitors that it would maintain a meaningful lead for a significant period of time.

TLSR: Ram, TrovaGene’s platform is indeed noninvasive. You don’t even need a needle stick to draw blood. But is the entire platform, whether it’s melanoma-focused or lung cancer-focused, about detection through the urine medium?

RS: Yes. It’s all through the urine medium. In our view, that differentiates TrovaGene as a company and puts it in a different domain than molecular diagnostics firms that have to use blood or biopsy tissues in their tests. This is probably the most noninvasive test available because it uses urine as the analyte. Urine is voided naturally several times a day. You can collect as large a volume as you need over time. It is most likely the best analyte through which to do real-time monitoring, and to allow sample concentrations so there is enough genetic material to make a meaningful diagnosis. That’s the fundamental strength of TrovaGene’s IP.

TLSR: Another company?

RS: We cover a company called Venaxis Inc. (APPY:NASDAQ), which is gearing up to report data late this year or early next year on a test for appendicitis called AppyScore. The AppyScore test, in our view, is not as accurate as some of the other molecular diagnostics offerings, but it has very substantial negative predictor value. In other words, the AppyScore test is designed to make sure that doctors know if a patient does not have appendicitis, and this should, therefore, avoid unnecessary expense, unnecessary travail and unnecessary and painful procedures for the patient.

We feel the AppyScore test has potentially significant value. The trial is aimed at securing FDA 510(k) clearance for the test. The product should be launched in H1/14. We believe this could, by itself, make Venaxis a profitable company. We have a $3.50 price target on the company.

TLSR: You have written that the AppyScore test for appendicitis is a risk-mitigated asset because the evidence of its negative predictive value is so clear. How much of that is built into the current stock price? Could that be baked in such that the stock doesn’t have a lot of upside premium when the AppyScore test is cleared by FDA?

RS: We don’t think so. We believe that investors are not giving Venaxis credit for its test. At about $1.90/share, with a $40 million ($40M) market cap, we think the current market value does not reflect the potential of this test. We could see the potential value being significantly above where our price target is today if the test is approved and on the market in the U.S. If this test were to generate $15M/year in revenue, and a 10x multiple is thrown on top of that, you’re looking at a $150M enterprise value.

TLSR: Let’s go to another one, please.

RS: Cancer Genetics, which I mentioned earlier, is a recent IPO. The company is developing some very interesting high-content molecular diagnostics solutions, focusing on both solid tumors as well as hematological malignancies, the latter of which is its principal focus at the moment.

We think that Cancer Genetics is an attractive investment at this juncture primarily because it has a diversified revenue model. It derives revenue from sales to pathologists, hospitals, academic institutions and pharmaceutical companies engaged in using its tests in conjunction with clinical development of investigational drugs.

TLSR: Cancer Genetics has a current market cap of about $131M, trading at about $14/share. Your target price is $25, which is an implied double from here. How do you arrive at that valuation?

RS: Cancer Genetics has a relatively well-publicized relationship with Gilead Sciences Inc. (GILD:NASDAQ) for development of a Gilead drug called idelalisib, which is currently under review at the FDA. If the therapy were to be approved, we believe that for every $100M worth of idelalisib sales, $12–15M worth of diagnostic revenue could directly accrue to Cancer Genetics. And Cancer Genetics has a revenue base projected for the full year 2013 of only about $6–7M. That’s a significant potential future value driver for this company.

I would also point out that Foundation Medicine is a competitor to Cancer Genetics, though it doesn’t have the same kind of product and, in fact, only has a single test on the market, whereas Cancer Genetics has five. If we look at the valuation discrepancy between Cancer Genetics, at $131M, and Foundation Medicine, at about $717M, it is very significant.

From our perspective, Cancer Genetics is, on the basis of relative risk-reward, a much more attractive investment opportunity than Foundation Medicine. Cancer Genetics has more tests on the market, a leaner organizational structure, a more diversified revenue base and the potential to generate significant revenue from sales of its test to Gilead, which has a proven, targeted therapeutic agent that could receive approval by the middle of next year. We’re not bearish on Foundation Medicine’s prospects. We simply feel that the valuation discrepancy between Cancer Genetics and Foundation Medicine is unwarranted.

TLSR: Do you follow LabStyle Innovations Corp. (DRIO:OTCBB)? Are you familiar with the company?

RS: I don’t have a rating or coverage on LabStyle Innovations currently, but we have an interest in the company because it’s developing a very interesting approach to diagnostics at the level of data capture, at the point at which the diagnostic test is administered.

What the company has come up with is a very clever paradigm for blood glucose monitoring, to gauge the effectiveness of insulin therapy in diabetics. The test is administered via a handheld device called the Dario, and results can be directly read on a smart phone (like the iPhone) or similar device. The data gathered are presented pictorially and are very easily understandable. This device could, generally speaking, be much easier for diabetics to use on a daily or hourly basis, and could achieve much broader usage as patients become much more compliant.

TLSR: How are the data stored and managed?

RS: As the glucometer and smart phone capture these data, they are stored in a cloud form. You can access the data very easily. You can use it for all kinds of real-world applications, including in clinical trials, where you’re assessing the responsiveness of particular patients to specific types of drug therapy. LabStyle is an interesting story to watch and a company investors should be aware of going forward.

TLSR: You follow Navidea Biopharmaceuticals Inc. (NAVB:NYSE). In mid-March of this year its radiopharmaceutical product Lymphoseek (technetium Tc 99m tilmanocept) was approved for lymphatic mapping of diseased lymph vessels in breast cancer and melanoma. What are your thoughts about the company and its shares today?

RS: Navidea’s shares have been beaten down dramatically recently because the company has serially disappointed on the earnings front. Navidea is trading at about $220M in valuation. It recently raised a substantial amount of money. We have had a Hold rating on this company for a substantial period of time, but we have a $2/share price target. The fact that the stock is currently trading at about $1.65/share may indicate that, at this juncture, it’s time to stop being so bearish.

As you mentioned, Lymphoseek is approved in the U.S., and the company is partnered with Cardinal Health Inc. (CAH:NYSE). It’s used in sentinel lymph node mapping, which is an important diagnostic approach for the detection of head-and-neck cancer, breast cancer and various other types of solid tumors, where physicians are looking for the telltale signs of cancer in the lymph nodes. The company has a pipeline of product candidates coming up behind, including an Alzheimer’s diagnostic, NAV4694 (fluorine-18 labeled radioisotope), as well as a potential Parkinson’s diagnostic, NAV5001 (an iodine-123 radiolabeled imaging agent).

The diagnostic tools in the company’s pipeline could be of significantly greater commercial value than Lymphoseek itself. As of right now, we don’t think the market is valuing the Lymphoseek opportunity appropriately, merely because sales initially have not been tracking. At this juncture, this is a risk-mitigated opportunity. Even though we have a Hold rating, we think that our current price target does demonstrate potential upside.

TLSR: Ram, the Alzheimer’s disease diagnostic product, NAV4694, is a PET scan radiotracer. Eli Lilly and Co. (LLY:NYSE) has a product for the same indication, Amyvid (florbetapir F 18 injection), which it got with its acquisition of Avid Radiopharmaceuticals Inc. for $800M. GE Healthcare (GE:NYSE) has a product that was approved by the FDA in October called Vizamyl (flutemetamol F 18 injection). CMS has told these companies, I believe, that it does not want to reimburse these radiotracers because it doesn’t have definitive evidence that they will help patients. Where does that leave NAV4694?

RS: Alzheimer’s is such a large market that even if we have minimal reimbursement for such a modality, a company like Navidea should be able to generate meaningful sales on the product eventually, as long as its clinical data are good. But the company has to go through the clinical development process first. At this juncture, quite frankly, nobody is giving the company any credit whatsoever for the Alzheimer’s diagnostic. It’s a free call option at this point.

TLSR: One final question. All these stocks have been weak. Does this indicate to you that this is an opportune time to pick a basket of these names?

RS: We believe so, and I obviously like the companies we’ve discussed. If you looked at cyclical trading patterns in the healthcare sector, October and the first half of November have traditionally been weak. The fact that the sector had performed so well in 2013, and the fact that seasonal weakness is generally confined to the months of October and November, would have generally indicated that the sector was due for a pullback around this time.

But we feel the worst is over, and the sector should get back to its winning ways. One of the bright spots going forward should be the molecular diagnostics sector, because there is such significant need. These high-content, high-accuracy molecular diagnostic tests bring with them the potential to guide therapy, and the potential for noninvasive real-time monitoring.

TLSR: It’s been fun, Ram. Thank you. I’ll be speaking with you again in a couple of weeks for part two of the three-part series we are doing with you. We’ll pick up on a new topic then.

RS: Thank you so much. I appreciate it.

Raghuram “Ram” Selvaraju’s professional career started at the Geneva-based biotech firm Serono in 2000, where he discovered the first novel protein candidate developed entirely within the company. He subsequently became the youngest recipient of the company’s Inventorship Award for Exceptional Innovation and Creativity. Selvaraju started in the securities industry with Rodman & Renshaw as a biotechnology equity research analyst. He was the top-ranked (#1) biotech analyst in The Wall Street Journal’s “Best on the Street” survey (2006) and went on to become head of healthcare equity research at Hapoalim Securities, the New York-based broker/dealer subsidiary of Bank Hapoalim B. M., Israel’s largest financial services group. While at Hapoalim, Selvaraju was regularly featured in The Wall Street Journal, Barron’s, BioWorld Today, and Reuters/AP. He was also a regular guest on the Bloomberg TV program “Taking Stock,” appeared with Bloomberg TV’s on-air correspondents Betty Liu and Gigi Stone and was a guest on CNBC’s “Street Signs with Herb Greenberg.” He is currently an analyst with Aegis Capital Corp.

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By Michael Lombardi, MBA

To close off the week, I’d like to offer some words of wisdom from my old friend Tony Jasansky, P.Eng. Tony has spent more than 40 years studying and analyzing the markets. He’s one of the best stock market analysts I know. Here’s what he has to say about stocks right now…

“The only obvious difference between Janet Yellen, the incoming Chair [of the Federal Reserve], and the present Chair, Ben Bernanke, is in their gender. Investors who have loved Bernanke’s monetary abandon are already placing their money on Janet being just as energetic in keeping the money pump going. In recent days, both of them emphasized that the Federal Reserve will keep interest rates low even after the monthly $85.0-billion bond purchases have wound down.

With commodities including gold in a bear market, and the bubble in bonds waiting to be deflated by the Fed’s soon-to-end bond purchases, stocks are still seen as the ‘best game in town.’ The five-year bull market probably won’t end until it reaches a bubble stage, comparable to the 2000 and 2007 tops. Observing the recent changes in indicators measuring the degree of investors’ fear and greed, my wild guess is that 2014 will be the year of another big top.

Last month, I said the overbought market conditions, measured by the price and breadth indicators, pointed to a short-term correction. Instead of the expected ‘healthy correction,’ the U.S. market moved sideways for two weeks before resuming its uptrend, lifting most indices by another 3%.

The resumption of the uptrend and the successive daily highs hit by virtually all major U.S. stock market indices have had a predictable impact on the Sentiment group of indicators. Bullishness towards stocks is getting close to the type of bullishness we see at extended stock market tops.

The generosity of the Federal Reserve and stable corporate profits, also helped by the historically low interest rates, continue to keep my Fundamental/Monetary group firmly in the bullish zone. With the benefit of hindsight, over the last four years, I could have saved myself the work of analyzing the market by paying attention only to the Fundamental/Monetary group while ignoring all other ‘distractions.’

The Technical group, which was already bearish four weeks ago, has lost more ground. The sell signal from my technical model that numerically compares the relative strength of the DJIA [Dow Jones Industrial Average] to the NYSE daily breadth and volume further contributed to the decline in the group. The declines in the Technical and Sentiment groups have moved me into [the] bearish zone. Considering the deterioration in daily and weekly indicators, I would be selling during the traditional year-end seasonal rally instead of buying stocks, as 2014 will be a very challenging year for stock market investors.”

This article 2014: The Year the Stock Market Topped Out? is originally publish at Profitconfidential

By Sasha Cekerevac for Investment Contrarians

There’s one point that I cannot stress enough in this column, and longtime readers are sure to know it: consumer confidence is extremely important for economic growth here in America.

It’s simple logic. Because so much of our economy is built on domestic spending, without an increase in consumer confidence, consumer spending will languish and we won’t have higher levels of economic growth.

Recently, new information from the Conference Board was quite disappointing. The Consumer Confidence Index dropped to a seven-month low in November to 70.4, following a decline in October as well. (Source: “Consumer Confidence Declines Again in November,” The Conference Board web site, November 26, 2013.)

Over the short term, consumer confidence declined due to people stating their concerns regarding a weakening of economic conditions. What’s more concerning is that the expectations for the next six months worsened, as people stated they were increasingly worried about their job prospects and earnings, which isn’t a surprise considering the data hasn’t been all that positive lately, especially when it comes to wage growth.

If consumer confidence is turning pessimistic over the stability of jobs or paychecks, how can we really expect the average American to increase their spending or businesses to feel more confident in expanding?

This type of uncertainty leads to slower economic growth. If you are unsure of your financial health over the next few months, chances are you won’t increase your spending, and a lower level of consumer confidence leads to muted economic growth.

Clearly, one market sector I am worried about is that of companies catering to the average American.

Chart courtesy of www.StockCharts.com

Target Corporation (NYSE/TGT) is exactly the type of company I would avoid. With consumer confidence and slower economic growth, this type of retailer is being forced to participate in extremely competitive price matching just to win that one dollar from price-conscious consumers. Of course, this leads to lower income levels and smaller profit margins.

I would continue to be very cautious about any company that sells to the average American. However, not all consumers in the U.S. economy are suffering from stagnant (and dismal) wages, declining consumer confidence, and the lack of economic growth.

The wealthy are benefiting from higher asset prices, especially in the stock market. If you were to take a look at the high-end art market, you would see that many assets in this sector are hitting record levels in spite of declining consumer confidence and nonexistent economic growth.

The following stock chart is of Sotheby’s (NYSE/BID), the famous international auction house. Clearly, this chart looks much different from Target’s chart above.

Chart courtesy of www.StockCharts.com

With the superrich segment of the global population benefiting from money printing, they’re piling their investing dollars into assets like high-end art. As a shareholder in this stock, one can profit through the company’s commission from each sale.

Your wages may not be increasing, but that doesn’t mean you can’t make money in this market. While no one can predict exactly what a stock will do, in my opinion, over the next decade, we will continue to see money printing coming from not just the Federal Reserve, but from central banks around the world. And it’s clear that all of this easy money will continue to benefit the top one-percenters, who would like nothing more than to spend this cash on some fine art.

I may not be able to afford a Picasso, but I can certainly appreciate it if I owned shares in a stock like Sotheby’s.

See Original: http://www.investmentcontrarians.com/stock-market/cant-afford-a-picasso-try-investing-in-this-stock-instead/3398/

By fxvm.net

Using a forex VPS is an excellent practice for maintaining 100% stability and availability of your MT4 platform, and expert advisors. Additionally, it is critical to automatically start MT4 in the event of a system reboot . This way, MetaTrader will restart automatically with Windows in the event of a system crash or reboot, and there will be no need to log in and start the program manually.

This is also very useful for servers running multiple MetaTrader instances, to avoid manually starting each terminal when Windows reboots.

We recently integrated auto-restart MT4 functionality into our forex VPS service, but this guide can be used with any VPS, or even a home PC.

The guide uses a free utility called  Startup Manager , which provides an easy interface for defining normal programs (.exe’s) as system services. This allows Windows to run the programs at system boot, before any user account logs in.

The application is freeware, available to download here: http://www.startup-manager-windows.com/downloads/startman.exe

Install the program, then do the following to add your MetaTrader terminal to system startup:

1. Open Startup Manager (download link above) and click the green “+” icon.

2. In the popup dialog, click Browse.

3. Locate your MT4  terminal.exe file, usually in C:\Program Files (x86)\MetaTrader 4\terminal.exe .

4. Click  OK  to add the .exe to the startup list.

5. Confirm that  terminal.exe  by  MetaTrader has been added.

Done. MT4 will now automatically restart in the event of a system reboot. There is no need to keep Startup Manager open; all changes are saved to the system registry and will take effect immediately.

Hopefully this guide was of some use. Please post if you have any questions, I will update the thread quickly!

This was a guest post by fxvm.net