Month: April 2014

By MoneyMorning.com.au

‘This will probably be the most bearish investment presentation you’ve ever heard…’

That was how Nick Hubble of The Money for Life Letter opened his speech at World War D last week. He wasn’t wrong…

The modern western welfare system is based on saving and investing for retirement.
The idea is you accumulate investments, which you then sell when you hang up your work-boots.

You hope that over time your investments will be worth many times what you paid for them. They will have grown enough to support your lifestyle in retirement when you sell them. And, if you’re like most people, you believe that investing inherently makes us wealthier.

But at the Grand Hyatt last week Hubble asked a crucial question: what if that assumption is wrong?

What if the buyers you expect to turn up in the stock market…property market…small business market…and other asset markets during your retirement, turn out not to be there? Without young and middle-aged Australians buying your shares, small businesses and investment properties…who will you sell them to?

Nick’s answer last week was that you WILL be able to find some buyers…but probably at prices a fraction of what they are today.

The premise of Nick’s thesis is pretty simple: There won’t be enough younger people to buy your retirement investments when you want to sell them

Why? Short answer: You never conceived enough of them.

As Nick told the audience:

‘If I had to summarise my presentation to you in one sentence, it would be this: You accumulated the greatest store of wealth in history to prepare for retirement…but you forgot you’d need someone to sell it to.

‘Investments need to be sold to someone for you to get your hands on the cash they promised, right? And you need that cash to pay for your retirement. You need it to be many times more than the amount of cash you invested over the years.

‘But if you want to make that kind of profit, you have to find someone who is willing to buy the same asset at a higher price.

‘Cynics call this person the ‘greater fool’. Well I have news for you. I will not be your greater fool…’

Nick Hubble, by the way, is 24 years old. You’d think a 24 year old telling a room full of mostly baby-boomers he’s going to ‘ruin your retirement’ would have gone down like a lead balloon. In fact many attendees found it was the most lively and entertaining talk of the whole two days. ‘Nick Hubble — what a star,’ wrote conference-goer L. McMahon, ‘Excellent, fun & thought provoking.’ (You can watch the full speech by getting a DVD of the event. To find out how click here.)

‘Truth is,’ Nick continued, ‘It’s my age that allowed me to arrive at my conclusions.
See, I know how I feel about having to fund your retirement. I don’t feel very good about it. At all…

‘And I don’t just mean paying taxes to support your pension. I’m sure the pension is not your fall-back plan anyway. What I mean is I will not be your greater fool.

‘More importantly,’ Nick continued, ‘there aren’t enough greater fools amongst Australia’s younger generations to buy all your assets. In fact, there aren’t enough of us full-stop (no matter how foolish we may be).

‘We do not have the buying power to buy the investments you are going to try and sell us to pay for your retirement. At least not at prices anywhere near what the superannuation industry is promising you…’

Nick went on to prove his case.

Demographics drive investment prices. And Australia is at a demographic turning point…as are many other places around the world.

We are indeed an ageing country. Australians aged over 65 will soon make up one quarter of the population. One in six Aussies will be aged 75 or more. A Productivity Commission research paper released last year says there is currently one person aged 100 or over for every 100 Australian babies under 12 months. By 2060 there will be 25 centenarians for every 100 babies.

This, starting now according to Nick, is going to radically alter the investment markets.

Nick asserts that one of the key reasons investment prices have been going up over long periods of time is demographic. The overall demographic trend of the 20th century made asset prices go UP. But what happens when that demographic trend reverses? Prices go down.
 
And, as Nick prophesised:  ‘Investing in the way you have been will be a losing proposition.’

To understand why, you need to see his presentation. In it Nick links Population Pyramids with the asset markets in a very clear, compelling way. If you want to be able to plan and prepare for the impact changing demographics might have on your retirement, you should check out Nick’s speech here.

Michael Graham,
Contributing Editor, Money Morning

From the Archives…

Why You Should Avoid the ‘Fake Contrarians’ and ‘Do Nothing Investors’
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By MoneyMorning.com.au

By MoneyMorning.com.au

At last week’s World War D conference we tried to make a key point.

We’re not sure if everyone got the message.

Actually, based on the feedback we received, we’re certain that not everyone got the message.

What was the message?

It was an important message…perhaps the most important message of the two-day conference. And now events are proving just how right we were to give that message…

Most investors think that being a contrarian means doing the opposite to everyone else.

It doesn’t.

Being a contrarian means being the first, or among the first, to act on a trend. By doing so the contrarian investor aims to profit from the beginning of a trend that can reward the investor handsomely to begin with, and potentially make them a fortune in the long run.

This is what we tried to explain at World War D. Only we’re not sure everyone got the message.

Bag the big gains on the Stock Market by striking early

Right now, most investors, whether they are mainstream investors or what we call ‘faux contrarians’, are more interested in trying to spot the next bust rather than looking for the next opportunity.

That’s a shame. Although there’s a lot of glory in picking a bust, it’s nothing compared to the financial glory of picking a new boom.

Here, let’s explain…

Let’s say you back a stock in a new trend that’s about to take off. And let’s say the stock is trading for 20 cents.

It’s high risk. That’s why it’s only 20 cents. But you’ve spotted a new trend that few others have noticed. So you buy it. In this scenario it pays off. A few weeks or months later, the stock is trading for $1 on the stock market. You’ve bagged a 400% gain.

Nice.

At that point, other investors get in on the same idea. They buy at $1. A few months later, the stock is trading for $10. The punters who bought in at $1 are thrilled, and rightly so.

Even though they didn’t get in early, they’ve still racked up an impressive 900% gain. That’s great by anyone’s standards. Well, almost anyone’s. But remember, you got in earlier. Instead of paying $1 per share, you only paid 20 cents per share.

It doesn’t seem much of a difference, just 80 cents. But it is. It’s a big difference. If you had invested $1,000 at $1 per share, it would now be worth $10,000 at $10 per share.

But by spotting the trend earlier and investing $1,000 at 20 cents per share, it has made an enormous difference to your returns. That’s because, with the shares now trading at $10, you’ve turned the $1,000 into $50,000.

That’s a 4,900% gain.

You’ve made five times the return, just for having the guts and the foresight to recognise an opportunity that few others had considered.

Invest while others look elsewhere

That’s the truth of being a contrarian investor. If you spot the new trends early you have the opportunity to notch up outsized gains.

But what about the risk?

Sure, it can be riskier investing in the stock market before a trend has gained momentum. But as we’ve shown you in the two examples, in both cases the maximum loss is $1,000.

The biggest risk with backing new trends is that the trend may not occur. That could cause you to lose all the money you invest. Theoretically, if you invest in a stock that has already started a trend then you should be on safer ground. But that’s not always true.

A stock can begin to take off, but reverse course if things don’t play out. So the truth is that investing at any stage of a stock’s cycle is always risky. But if you want the potential for the biggest bang for your buck, then the best (and riskiest) time to invest is when few others can see the opportunity.

That’s happening to one of the markets we’ve taken a keen interest in over the past few months…when most other investment pros have written off the sector.

We’re talking about emerging markets.

Cheers,
Kris+

PS: I’m in San Diego and Los Angeles for the next three weeks. I’ll be reporting from the ground here so the commentary may have more of a US-tinged flavour. However, my team of analysts in Melbourne and London will also keep you posted on what’s happening in the Aussie market and the opportunities in the tech sector. I’m sure you’ll enjoy it.

From the Port Phillip Publishing Library

Special Report: Mining Boom Act II

Join Money Morning on Google+

By MoneyMorning.com.au

By MoneyMorning.com.au

‘The sell-off has gone too far’

We hope to have some exciting news for you on this front over the coming days. It involves your editor putting his money where his mouth is as we seek to help you profit from one of the global economy’s most beaten-down markets.

Stay tuned for more details.

And the good news is, it looks as though we’re on the right track. As the Financial Times reports:

‘Mr Paolini says there are tactical investments to be picked up as valuations have fallen. One example is Chinese banks. “The sell-off has gone too far. Sure, non-performing loans my go to 10 per cent but their assets are in [the state’s] reserve requirements and the state has unlimited firepower. Even if the share price falls you are still getting a dividend yield of 7 per cent.”’

Mr Paolini is the chief strategist for Pictet Investment Management in London. According to the report, he puts emerging markets equities into four categories. The one that interest us the most is the first category, what he calls ‘very cheap’ markets.

These include Turkey, South Korea, Russia — and most importantly, China.

Russia and China are the emerging markets Mr Paolini favours most. And out of those two, it’s China’s economy that interests us the most, obviously due to Australia’s proximity to China.

That’s why we see this as such an exciting opportunity. China’s market is still more than 60% below the record high reached in 2007. Most mainstream and contrarian investors hate it right now because they’re focused on one thing — the potential for a crash.

We take a different view. Our view is that the worst of the crash has already happened. Now is the chance to buy a beaten-down market everyone hates, before the big new China trends starts to move.

Stay tuned for details on how we plan to help you be a part of it.

Cheers,
Kris+

PS: I’m in San Diego and Los Angeles for the next three weeks. I’ll be reporting from the ground here so the commentary may have more of a US-tinged flavour. However, my team of analysts in Melbourne and London will also keep you posted on what’s happening in the Aussie market and the opportunities in the tech sector. I’m sure you’ll enjoy it.

From the Port Phillip Publishing Library

Special Report: Mining Boom Act II

Join Money Morning on Google+

By MoneyMorning.com.au

Weekend Update | www.thepracticalinvestor.com

— VIX made a new Master Cycle low on Wednesday, but still managed to close at weekly Long-term support at 14.50.  This is the prelude to a probable run to the top of the chart that may occur over the next several weeks.  Despite the constant late-day VIX selling for the past month, it has managed to maintain a higher base since the beginning of the year..

SPX eased down to the Wedge trendline.

SPX has been stair-stepping down to close within 10 points of its year-end value at 1848.36.  It is barely hanging on to a gain for the first quarter, while the Dow is down 265 points from its year-end.  There is a good probability that SPX may finally come off the ledge that is the upper trendline of the Bearish Wedge.  In the process it may also break two important Cyclical supports at 1840.00 and 1829.00.

(Bloomberg)  U.S. stocks climbed after a two-day slide, as consumer shares rebounded amid data showing household purchases rose the most in three months. Biotechnology shares extended losses, weighing on the Nasdaq Composite Index.

The Standard & Poor’s 500 Index (SPX) added 0.5 percent to 1,857.62 at 4 p.m. in New York, trimming its loss for the week to 0.5 percent. The Dow Jones Industrial Average rose 58.83 points, or 0.4 percent, to 16,323.06 today. The Nasdaq Composite increased 0.1 percent to 4,155.759, completing the week with a 2.8 percent drop.

NDX declines to its Ending Diagonal trendline.

NDX declined beneath three major weekly supports and closed at its Ending Diagonal trendline.  It is already at a loss for the first quarter and a further decline may put last year’s entire gain of 35.9% in jeopardy.  The Cycle Top is no longer support, so there is a good probability of a fast decline once the trendline is broken.  This support must be broken to begin the change in trend.

(ZeroHedge)  Yesterday’s late bounce and this morning’s opening follow-through were heralded by many talking-heads this morning as the end of the sell-off and a great buying opportunity. Well, on the bright side, those stocks are now at least 3% cheaper having plunged from the opening highs – even as the broader indices hold in. The Momos, also considered to have seen the worst, are re-collapsing…

The Nasdaq and Russell are now red YTD once again

The Euro consolidates lower.

The Euro attempted to rally above its Ending Diagonal but failed, ending with a small loss.  It still must decline beneath its Cyclical supports to gain downside momentum.  The lower trendline of the Ending Diagonal is important, since a decline beneath it may imply a further decline to the July low.

(CNBC) – The euro fell to three-week low against the dollar on Friday, with investors wary given strong rhetoric from European Central Bank officials about its recent strength and awaiting German inflation data that could undermine it further.

Slightly soft Spanish inflation numbers led to a drop in the euro in early trade in London, with more sellers likely to line up if German inflation data, due at 1300 GMT, highlights subdued price pressures in Europe’s largest economy, traders said.

EuroStoxx resolves inside candle to the upside.

The EuroStoxx 50 index had an upside breakout this week, after a week of indecision.  This breakout appears to be an extension and may challenge its ultimate resistance at the weekly Cycle Top at 3224.02.

(Reuters) – European stocks rallied on Friday, with Milan’s benchmark index hitting a near three-year high, lifted by mounting expectations that the European Central Bank may ease policy next week to support the region’s fragile economic recovery.

Speculation that China could step in to stimulate its economy also helped lift sentiment, boosting shares of metal and mining stocks, with Anglo American up 1.5 percent and Glencore Xstrata up 2 percent.

The FTSEurofirst 300 index of top European shares ended 0.8 percent higher, at 1,332.29 points, while Milan’s FTSE MIB index surged 1.5 percent, hitting a level not seen since May 2011.

The Yen loses Short-term support, stops at Intermediate-term support.

The Yen declined beneath its short-term support at 97.81, but found Intermediate-term support at 97.09.  There is an opportunity for the Yen to rally, should this support hold.  The dollar/yen carry trade is dependent upon a declining Yen.  Despite a strong USDJPY ramp on Friday morning, there was no follow-through, raising questions of sustainability.

(Bloomberg)  Japan’s encouragement of yen depreciation to boost the economy threatens to backfire by making the country dependent on foreign investors for funding.

That’s the very same economic weakness that prompted Morgan Stanley to describe emerging-market currencies from South Africa’s rand to Turkey’s lira last year as the “fragile five.” While the yen is still regarded by investors as a safer bet than any of those developing currencies, the prospect of 33 years of current-account surpluses coming to an end may dent its appeal as a haven, according to Brown Brothers Harriman & Co.

The Nikkei is is testing Short-term resistance.

The Nikkei rallied away from its Head & Shoulders formation, but stalled at weekly Short-term resistance.  Should it resume its decline beneath the neckline, the Nikkei may drop below its weekly mid-Cycle support at 11893.85.  The Cycles Model projects a decline into early April.

(Bloomberg)  Japan’s Topix index rose for a fifth day, capping its biggest weekly advance in four months, as consumer lenders and airlines led gains.

Consumer-finance and leasing company Orix Corp. added 4.3 percent. Japan Airlines Co. climbed a second day for the biggest advance among air-transport shares. A Topix (TPX) gauge tracking brokerages rose 2.4 percent after dropping the most among the broader measure’s 33 industry groups yesterday. Yahoo Japan Corp. plunged 6.4 percent after agreeing to buy parent SoftBank Corp.’s broadband-service provider eAccess Ltd. for 324 billion yen ($3.2 billion). SoftBank slid 1.5 percent.

The Topix increased 0.8 percent to 1,186.52 at the close in Tokyo, after falling as much as 0.7 percent. The gauge’s five-day winning streak is the longest since October. The measure capped a 3.5 percent gain this week, its biggest such gain since the period ended Nov. 15. The Nikkei 225 Stock Average rose 0.5 percent today to 14,696.03.

U.S. Dollar challenges the Triangle trendline.

The Dollar eked out a small gain as it challenged the lower trendline of its massive Triangle formation.    While breaking above the trendline the dollar may also emerge above Intermediate-term resistance at 80.4.  What appears to be a temporary reversal may become a real problem for the Dollar bears.

(Investing.com) – Solid personal spending data in the U.S. sent the dollar firming against most major currencies on Friday, though profit taking cooled the greenback’s gains. In U.S. trading on Friday, EUR/USD was up 0.07% at 1.3751.

The Commerce Department reported earlier Friday that U.S. personal spending rose 0.3% in February, in line with expectations, Personal spending in January was revised down to a 0.2% gain from a previously estimated 0.4% increase.

A separate report showed that the core U.S. personal consumption expenditures price index remained unchanged at 0.1% last month, in line with expectations.

Elsewhere the revised Thomson Reuters/University of Michigan consumer sentiment index ticked up to 80.0 in March from 79.9 the previous month. Analysts had expected the index to rise to 80.5 this month.

Treasuries have a week of indecision.

Treasuries made a small gain above Long-term support at 132.32.  The Cycle high made on March 3 remains intact.  Should the March 3 high remain, we may see a surprise collapse in bonds over the next two weeks.

(ZeroHedge)  The short-end of the Treasury curve continues to reprice higher in yield (3Y +2bps) as the term structure bear-flattens with 30Y yields rallying further after the aggressive 7Y auction. 30Y yields just broke below 3.5% (-4.5bps) – the lowest level intraday since early July 2013. 2s10s are now at 2.21% – near 10-month lows – and 5s30s has plunged to 1.80% – its flattest since September 2009.

Gold extends its decline.

Gold extended its decline to challenge weekly Intermediate-term support at 1278.18.  A further breakdown may challenge the Lip of a Cup with Handle formation in the next week or so.  The potential consequences appear to be severe.

(Forbes)  Gold prices are $100 off their price peak from two weeks ago, and gold-market analysts said they’re going to watch technical charts to see how the yellow metal behaves next week and whether or not the slip in prices spurs physical demand.

June gold futures fell Friday, settling at $1,293.80 an ounce on the Comex division of the New York Mercantile Exchange, down 3.2% on the week. May silver rose Friday, settling at $19.790 an ounce, down 2.6% on the week.

Crude extends its rally.

Crude broke above Long-term resistance at 100.28 to complete a 65.7% retracement of its initial decline from its March 3 high.  This action may be setting up crude for a hard reversal next week.  A subsequent decline may lead to the Head & Shoulders formation at the base of this rally, which may be overshadowed by the Cup with Handle formation with an even deeper target.

(Reuters) – Brent crude oil rose for a fourth straight session on Friday, notching its first weekly gain since February, on promising U.S. economic data and concern that possible Western sanctions on Russia’s energy sector could disrupt global supplies.

The United States and NATO have voiced alarm over what they say are thousands of Russian troops massed near its western border with Ukraine. Russian President Vladimir Putin has reserved the right to send troops into Ukraine, home to a large population of Russian-speakers in the east.  U.S. crude oil rose for its third session on data showing consumer spending increased in February, lifted by an increase in services consumption, news that also buoyed the U.S. equities markets for most of the session. However, a dip in consumer sentiment this month offered confirmation that economic growth slowed in the first quarter.

China stocks fail at  Intermediate-term resistance.

The Shanghai Index challenge both Short-term resistance at 2057.22 and Intermediate-term resistance at 2075.88 before dropping beneath both this week.  The brief bounce called for by the Cycles Model is now complete.  It may now resume the decline beneath the neckline.  The ensuing decline may be swift and deep.  There is no support beneath its Cycle Bottom at 1936.40.

(ZeroHedge)  Over the past month, we have explained in detail not only how the Chinese credit collapse and massive carry unwind will look like in theory, but shown various instances how, in practice, the world’s greatest debt bubble is starting to burst, resulting not only in the first ever corporate default, but also in the bursting of the associated biggest ever housing bubble. One thing we have not commented on was how actual trade pathways – far more critical to offshore counterparts than merely credit tremors within the mainland – would be impacted once the nascent liquidity crisis spread.

Today, we find the answer courtesy of the WSJ which reports that for the first time in the current Chinese liquidity crunch, Chinese importers, for now just those of soybeans and rubber but soon most other products, “are backing out of deals, adding to a wide range of evidence showing rising financial stress in the world’s second-biggest economy.”

The Banking Index reverses from its Cycle Top.  

BKX reversed from its weekly Cycle Top this week at 73.97 and fell to its trading channel trendline.  It has yet to break the lower trendline of its Orthodox Broadening formation with bearish consequences.  The Cycles Model suggests a new low may be seen by mid-April, which heightens the probability of a flash crash.

(ZeroHedge)  Curious what the real, and not pre-spun for public consumption, sentiment on the ground is in a China (where the housing bubble has already popped and the severe contraction in credit is forcing the ultra wealthy to luxury real estate in places like Hong Kong) from the perspective of the common man? The photo below, which shows hundreds of people rushing today to withdraw money from branches of two small Chinese banks after rumors spread about solvency at one of them, are sufficiently informative about just how jittery ordinary Chinese have become in recent days, and reflect the growing anxiety among investors as regulators signal greater tolerance for credit defaults.

(NYTimes)   After the Cold War ended in the early 1990s, Viennese banks pushed aggressively into the newly open markets of Eastern Europe, as if rebuilding the old Hapsburg Empire one A.T.M. at a time.

The banks of Vienna were not the only Western lenders seeking to stake out the former Soviet bloc, of course. But the Austrians, for reasons of geography and history, bet big on Eastern Europe and Russia.  Now, as regional tensions with Russia rise, Austrian banks risk being caught in the financial and geopolitical crossfire.

(Reuters) – St Petersburg-based Bank Rossiya is to cease all foreign currency operations and work only with the Russian rouble in response to U.S. sanctions imposed last week, it said in a statement on Friday.

Bank Rossiya is Russia’s 15th-largest bank by assets, and the only Russian company that has so far been included on the list of individuals and entities sanctioned over Russia’s annexation of Crimea, because of its close links to businessmen seen as personal allies of Russian President Vladimir Putin.

U.S. officials said that the bank would be “frozen out of the dollar”.

(ZeroHedge)  While we are sure the governments and their IMF handlers will find a way around such annoyances as the rule of law, the Greek Supreme Court just ruled that the seizure of bank deposits due to debts to the state without previous notice was against the Constitution. We humbly suggest the Ukrainian courts be rapidly brought to a decision on the same ruling, before IMF hands start dipping into pockets.

Have a great week!

Anthony M. Cherniawski

The Practical Investor, LLC

P.O. Box 129, Holt, MI 48842

www.thepracticalinvestor.com

Office: (517) 699.1554

Fax: (517) 699.1558

Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model.  At no time shall a reader be justified in inferring that personal investment advice is intended.  Investing carries certain risks of losses and leveraged products and futures may be especially volatile.  Information provided by TPI is expressed in good faith, but is not guaranteed.  A perfect market service does not exist.  Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment.  Please consult your financial advisor to explain all risks before making any investment decision.  It is not possible to invest in any index.

The use of web-linked articles is meant to be informational in nature.  It is not intended as an endorsement of their content and does not necessarily reflect the opinion of Anthony M. Cherniawski or The Practical Investor, LLC.

GOLD: With GOLD closing higher to halt its two week correction, it now looks to extend that gain. Resistance resides at the 1,334.65 level where a violation will aim at the 1,359.00 level. Further out, resistance comes in at the 1,380.00 level where a break will aim at the 1,400.00 level followed by the 1,450.00 level. On the other hand, a failure of its recovery will mean a return to the 1277.58 level. Below here if seen will aim at the 1,250.00 level followed by the 1,230.00 level. Further down, support comes in at the 1,200.00 level. All in all, GOLD remains biased to the downside in the medium term though recovering higher.

Article by http://www.fxtechstrategy.com/commodity-technical-outlook-gold-new-44

EURUSD: With EUR weakening for a third consecutive week, further downside pressure is envisaged. But in order for this occur it will have to break and hold below the 1.3676 level and its rising trendline. However, with a rejection candle seen on Friday, recovery risk could happen this new week. Support lies at the 1.3676 level. Further down, support comes in at the 1.3600 level where a violation will target the 1.3550 level. Its weekly RSI is bearish and pointing lower supporting this view. Conversely, on a recovery higher, the pair will aim at the 1.3766 level followed by the 1.3820 level. Further out, resistance resides at the 1.3900 level where a breach will aim at the 1.3966 level. All in all, EUR remains biased to the upside in the long term but faces bear threats.

Article by http://www.fxtechstrategy.com/weekly-technical-strategist-eurusd-new-33

USDCHF: With USDCHF capping its strength at the 0.8952 level to close the marginally lower (daily chart), it faces the risk of a correction in the new week. Expect it returned above the 0.8952 level, this view remains valid with eyes on the downside. Support lies at the 0.8874 level where a violation if seen targeting the 0.8813 level. A cut through here will set the stage for a run at the 0.8750 level and subsequently the 0.8698 level. If it violates this level it will resume its medium term downtrend presently on hold. Further down, support comes in at the 0.8650 level. On the other hand, the pair will have to return above the 0.8952 level to prevent any downside incursion. This if seen will aim at the 0.8900 level with a close above here if seen will aiming at the 0.9000 level and next the 0.9050 level. Its weekly RSI is bullish and pointing higher supporting this view. All in all, the pair remains biased to the upside in the short term.

Article by www.fxtechstrategy.com

By MoneyMorning.com.au

It has been a heck of a week.

We can see now why we don’t organise these events more often.

The World War D conference in Melbourne had a star-studded lineup of big thinking contrarian investment experts.

Also on show were our own band of investment pros, such as Greg Canavan, Sam Volkering and Vern Gowdie. And of course, yours truly was there too, giving big government a well-deserved poke in the eye.

Not everyone liked our presentation. One gentleman scored us a two out of 10. We received the lowest score at the After America conference two years ago too. We’ll start to get a complex at this rate.

Was it really that bad? No. But we get why he gave your editor a rock-bottom score…

In total, the show was a resounding success.

How often do you get to see the likes of Dr Marc Faber, Jim Rickards, Richard Duncan and Satyajit Das on the same stage?

Not often.

Every conference organiser in Australia would give their right arm to secure a line-up like that.

Conference goers got to hear from the keynote speakers their views on where the global economy is heading next. It wasn’t always the most uplifting of subjects. That’s why some people can’t bear to hear about the doom and gloomy stuff.

But that wasn’t why one attendee scored our presentation so low. In fact, it was for precisely the opposite reason — we were too bullish for his liking.

Not everyone wants stocks to go up

There’s no doubt that your editors presentation was the most bullish and optimistic on the direction of the Australian and world stock markets.

We even revealed to attendees at the exclusive Alliance* cocktail party that we were actively looking to recruit an analyst to explore one of the most exciting and beaten-down sectors in the world economy — emerging markets.

(* The Port Phillip Publishing Alliance is an exclusive membership option that entitles members to receive all of Port Phillip Publishing’s current and future investment research — except trading services — for life with the payment of a one-off joining fee. The Alliance program is currently closed to new memberships.)

That’s bullish. We certainly laid ourself open to criticism for daring to talk about a rising Australian stock market when most of the other presentations were pointing the other way.

But as we noted in our presentation, that’s the key to being a good contrarian investor. You have to be prepared to buck the trend. Or as resources and military technology expert Byron King noted during his presentation, it pays to go after the most ‘hated’ stocks on the market.

Out of interest, he says that junior resources stocks are among the most hated stocks right now. It’s hard to argue with him on that point.

For many people, going to a conference like World War D isn’t about learning something new, it’s about hearing confirmation of what you already know.

The term for that is ‘confirmation bias.’

In other words, if you have a bullish tendency then you’re more likely to approve of speakers who are bullish. If you have a bearish tendency then you’re more likely to approve of speakers who are bearish.

That’s our take on the negative feedback to our presentation. The gentleman didn’t approve of our view that the Australian stock market was heading towards 15,000 points…a move that would see the index triple from its current level.

He also probably didn’t like the way we took a swipe at so-called contrarian investors. We called them ‘fake contrarians’ and ‘do nothing investors’.

Our point was that being a contrarian investor wasn’t all about taking a bearish view of the markets, buying gold, and grumbling about central bank money printing.

Real contrarian investing involves anticipating a future market move before other investors catch on. That means buying ‘hated’ stocks now before others get the same idea.

Bias or opportunity?

The truth is that anyone on the bullish side would have struggled to achieve any confirmation bias as most of the presentations were on the negative side — except your editor’s of course.

But that’s good news for real contrarian investors. The last thing you want to hear at this sort of event is that everything is fine and dandy with the world.

As a contrarian, you want to hear that things are bad, and could get worse.

The only time a real contrarian should panic is when the big bearish investors finally give up and decide to join the bulls. That’s when real contrarian investors should look to sell stocks.

But that time doesn’t look like happening anytime soon. The bearish analysis was about as doom-laden as we’ve ever seen it. And that’s not a criticism. We get their concern.

The world economy is in a terrible shape. Central bank money printing has only covered up the problems. It most certainly hasn’t fixed anything. And yet, despite it all, as we pointed out in our presentation (and doubtless to the annoyance of the gentleman who scored us two out of 10), the stock market has continued to go up over the past six years.

In fact this week the US S&P 500 index took out another high.

So, maybe we’re guilty of ‘confirmation bias’ too. Perhaps everyone is. You see in the markets what you want to see, and then you invest accordingly.

But one thing is for sure. Whatever your view of the markets, whether you’re bearish or bullish, there’s no doubt that the World War D conference was the best investment show in Australia this year.

If you were there, we hope you enjoyed it. If you couldn’t make it, you can put your name down to snap up a video recording of the event here.

Cheers,
Kris+

PS: Next week Sam Volkering’s Tech Insider will have exclusive coverage of digital expert and author of Brave New War John Robb’s speech at WWD – where he revealed how to decrease your ‘wealth burn rate’ by tapping into a new online asset trend…you can sign up to Tech Insider here.

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By MoneyMorning.com.au

By WallStreetDaily.com

Investors cheer with the thought of having mutual access to the China exchanges (Hong Kong and Shanghai). But instead of a big bang, Breakingviews’ Peter Thal Larsen argues that such a change may cause a slowdown in funds. Reuters’ Tara Joseph gleans nuggets from him.

Slow and Stead Wins the Race

Tara Joseph says, “Fresh reports, Peter, that China and Hong Kong will give each other mutual access to their markets. Now if this is true, it is big news. But we’ve heard this song before.”

Peter Thal Larsen says, “We have, and I have to say, the reports sound a bit premature. And the Hong Kong Exchange has said that even though there are talks going on with Shanghai, there’s nothing really happened, yet. But our view really is that this is not so much a ‘big bang’ as more of a sort of ‘slow slam.’ Really, there’s been a lot of discussion for many years about the possibility of allowing Chinese investors to buy shares in Hong Kong, and also allowing investors in Hong Kong to buy shares on the mainland.

“If that were to happen, that would be a big deal, but there are many reasons why it hasn’t happened, yet. And the main reason is that if you allow Chinese investors to take their money out of Hong Kong by buying shares, you would essentially be opening up China’s capital account. And that is something that China has said it wants to do in the long term, but is not something that it’s about to do any time soon. So the feeling is that even if something were to happen on this front – and it does sound like there are some discussions going on and there will be some kind of an agreement – it’s going to be gradual rather than all happen in one go.”

Hong Kong Needs a Boost

Tara Joseph says, “Understandably that it would be gradual, but for Hong Kong, it really needs this ‘big bang’ for the markets. I mean, the Hong Kong volumes are actually drying up. We saw Alibaba move over to New York. Hong Kong exchanges need something,”

Peter Thal Larsen says, “Yeah, I think that’s right. I mean, definitely there is a lot of hope. And we saw the Hong Kong Stock Exchange – its share price – rise over 5% the other day in hopes that it might be about to sign some kind of agreement. And definitely I think if that were to happen, if there were to be some sort of mutual market access, that would be a big deal both for Hong Kong and for the mainland. Clearly, if Chinese investors could get access to stocks in Hong Kong, that would increase the volumes and it would also help to reinforce Hong Kong’s position as a capital market.

“Likewise, if you could – if investors based in Hong Kong could access the Chinese capital markets more directly than the way they do at the moment… through this system of quotas and so forth, that would also be a big help for Hong Kong. But once again, I think they’ve talked about this in the past and backed away from it. We have this complicated system of quotas for investors going into China and coming out of China. And I think it’s hard to see for the broader, macroeconomic purposes that I described earlier. It’s hard to see anything really big changing on that front any time soon.”

Tara Joseph says, “Mutual market access between China and Hong Kong, it would be a very big bang, but let’s not get our hopes up too soon.”

Bottom line: Neither exchange has pulled the trigger, but if they do… the process will most likely be a slow and steady one.

The post One Country, Two Stock Markets No Longer? appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: One Country, Two Stock Markets No Longer?

Source: George S. Mack of The Life Sciences Report (4/3/14)

http://www.thelifesciencesreport.com/pub/na/venture-capitalist-ran-nussbaum-brings-big-finance-to-little-biotechs

Biotech companies don’t come into the world fully formed. Like most fledglings, they need guidance to grow, prosper and eventually thrive in public markets. Venture capitalist Ran Nussbaum of the Pontifax Group nurtures tiny biotech and medtech startups, finding capital for their growth and maturation. In this interview with The Life Sciences Report, Nussbaum discusses exciting private equity holdings that are close to going public, and makes a case for one public company he knows quite well.

The Life Sciences Report: I recently spoke with New York City-based senior biotechnology analyst George Zavoico of H.C. Wainwright & Co., who went to Israel in January. He was extremely impressed and very positive on the business climate in Israel for life sciences entrepreneurs and startup companies. Is there an advantage for a startup biotech or other type of technology company in Israel versus San Diego, San Francisco or Cambridge, Massachusetts?

Ran Nussbaum: There are many things I could mention that are to our advantage here in Israel, and that have given us a wind to our backs when it comes to biotech.

One of the biggest advantages is that the basic science is extremely solid in Israel. You can find serial entrepreneurs who know how to develop and launch drugs. I’ll give you some examples—drugs like Copaxone (glatiramer acetate; Teva Pharmaceutical Industries Ltd. [TEVA:NASDAQ]), Rebif (interferon beta-1a; Merck Serono (a unit of Merck KGaA [MKGAY:OTCPK]), Doxil (doxorubicin HCl liposome injection; Janssen Biotech Inc., a unit of Johnson & Johnson [JNJ:NYSE]) and others were discovered by professors from Israeli universities. There is so much talent here.

Also, the entire industry is based within a radius of 25 miles. Tel Aviv is a very small city, and everybody knows everybody. People even talk to each other on the street.

TLSR: Ran, what about financial incentives? How does that work in Israel?

RN: On the financial side, there are two great advantages in Israel. The first is that it is less expensive here than in the rest of the world. For a company to come up with a new compound in the U.S.—a first-in-humans molecule—it could cost $14–15M. In Israel, it costs $4–5M, tops. Second, the government of Israel has come in with a very supportive nondilutive funding program, which companies pay back only if they have an exit. That means it’s a success-based loan, which is great for startup biotech companies. They get almost half their research and development expenses from the government. It’s a real engine of the industry. You could say that Israel is a startup nation.

TLSR: As a venture capitalist, you don’t take all the risk on a given startup company. You need pharmas and others to help you fund the nascent companies in your portfolios. Is there a sufficient quantity of VCs and corporate VCs in your region to sustain an active financing market, or do you have to reach out to the West?

RN: That’s a very good question, because it has been very tough for Israeli companies to raise money in the past. But what we’ve seen happen here in the last three years is amazing. A lot of companies and other investors are now collaborating and operating in Israel.

Both the Johnson & Johnson Development Corp. and Takeda Pharmaceutical Co. Ltd. (TKPYY:OTCPK)have opened Israeli incubators. Merck Serono has also opened an incubator to support Israeli programs. Over the last three years Roche Holding AG (RHHBY:OTCQX) has built two companies in Israel—Chiasma Ltd., which is developing oral drugs, and a medical device company called Medingo Ltd. A respected life sciences investor called OrbiMed Advisors LLC (private) has invested in Israel as well. Then there’s Edwards Lifesciences Corp. (EW:NYSE), another giant, which is investing in one of our portfolio companies.

TLSR: Biotechs did quite well in the U.S. during 2013. Initial public offerings (IPOs) and secondary offerings are still raising about $1 billion ($1B)/month right now. How has the IPO market been performing in Israel?

RN: We have good IPO activity here, but Israeli companies try to avoid the Israeli market, preferring to go public in the U.S. There are no analysts in the biotech arena in Israel, which makes it hard to get a real valuation from Israeli investors. Israel is out of the equation right now as far as floating IPOs.

Outside the Israeli markets, IPOs are happening. On March 20, Jefferies and Credit Suisse tookMediWound Ltd. (MDWD:NASDAQ) public. It was an extremely nice IPO. The company has kept its head above water on the market, and has a very respectable $210M market valuation. MediWound is addressing burns and hard-to-heal wounds. Before that, Galmed Pharmaceuticals Ltd. (GLMD:NASDAQ), which is developing drugs for nonalcoholic steatohepatitis (NASH), went public. Other good companies, such as Foamix Ltd., which is developing topically applied drugs, MacroCure, a cell therapy company, and VBL Therapeutics, which is developing cancer drugs, are all trying to go public as we speak.

TLSR: Ran, can you talk about MacroCure, one of the still-private companies?

RN: MacroCure is a very unique situation, developing a cell therapy product for hard-to-heal wounds. The product is called CureXcell (a suspension of white blood cells separated from blood donated by healthy volunteers age 18-40 and activated via hypo-osmotic shock). CureXcell is applied to the wound and creates a natural balance that helps healing. It’s an approved product in Israel and has a track record, with more than 5,000 patients treated.

TLSR: Do you see this as a classic exit strategy period, where companies can go public or be acquired? Is this a good time for Israeli companies like MacroCure, for example?

RN: MacroCure is unique because it’s not a question of whether this product will work. It’s just a question of when it will be approved outside Israel. If MacroCure decides to go public and the product is approved in other countries, then it’s a $1B company.

CureXcell is in a double-blind, Phase 3 trial now, with more than 200 patients at 35 centers in the U.S., Canada and Israel. It is being tested for chronic ulcers of the feet in diabetes patients. This Phase 3 trial should be complete by August 2015. The biology will talk, and at the end of the day we will see if the company will fly or not.

TLSR: Can you talk about some of your other portfolio companies?

RN: We have several companies aiming for IPOs. BioBlast Pharma Ltd. is one of them, and will be the first to go public. The company has a cluster of clinical assets in the rare disease arena. A very strong team is leading this company: The go-to guy is Fred Price, the ex-CEO of BioMarin Pharmaceuticals Inc. (BMRN:NASDAQ), who is now the executive chairman of BioBlast.

An Israeli newspaper published a piece saying that another company of ours, Argo Medical Technologies Inc., is going public. This company has an exoskeleton technology that presents a unique opportunity for people who have been hurt in car accidents, or perhaps in the wars in Afghanistan or Iraq, enabling them to walk again. If you take a look at rewalk.com, you will understand how valuable this technology is. President Obama saw the technology when he visited Israel six months ago. We brought in an injured Afghanistan veteran, and she used the exoskeleton to walk to President Obama. We saw a tear on his cheek. The technology is a real breakthrough. Argo Medical is a great company, and we think it’s a great opportunity for the public market in the States. We are exploring this opportunity.

Alcobra Ltd. (ADHD:NASDAQ), which is in Phase 3 with metadoxine extended release for attention deficit hyperactivity disorder (ADHD), went public last year. This is not one of our companies, but we know Alcobra well. Two of the founders of Alcobra are part of the BioBlast team as well. We think it’s a winning team.

TLSR: When we spoke last, you talked about Arno Therapeutics Inc. (ARNI:OTC.MKTS). What did you find in the company that got your attention?

RN: Arno Therapeutics is out of the ordinary for us because it’s a New Jersey company, and we mainly invest in Israel. Arno was a unique situation, in which we saw a champion in the company’s chairman, Arie Belldegrun, from UCLA. He’s one of the best in the world in the urology field, and for that reason we followed up with him. He’s also the founder of another of our portfolio companies, Kite Pharma Inc. (private; also based in the U.S.). We think a lot of Dr. Belldegrun.

TLSR: Arno has moved into the clinic with onapristone. It was still preclinical when we spoke back in August 2013. Tell me about it.

RN: On Jan. 2 we enrolled the first patient, testing onapristone in post-menopausal women with progesterone receptor (PR)-positive tumors—breast and endometrial cancers. This drug could also be used in castrate-resistant prostate cancers. The company aims to have good results for the American Society of Clinical Oncology (ASCO) meeting in Chicago at the end of May.

TLSR: You have a stellar group of investors in Arno. Could you talk about that?

RN: We have gotten a lot of attention by having brilliant investors at the table, like the Soros Fund; David Bonderman, chairman of Texas Pacific Group, as well as OPKO Health Inc. (OPK:NYSE) and its chairman, Phillip Frost. All in all, this consortium of investors has given us a lot of validation. I believe Arno has a real drug, and if we get good validation during the Phase 2 proof-of-concept phase, Arno will be sold.

TLSR: You mentioned Phillip Frost. Is that a personal investment from him, or is it an OPKO investment?

RN: OPKO invested in the company side-by-side with its chairman.

TLSR: You mentioned Arno Therapeutics’ Arie Belldegrun, who is also on the board of directors of Kite Pharma. Would you speak about Kite for a moment?

RN: Kite is exploring every opportunity to bring shareholder value, and is probably the most exciting company that we’ve ever been involved in.

Everybody is talking about immunomodulation and the upcoming launch of the programmed cell death (PD-1) receptor-targeting antibody, nivolumab, from Bristol-Myers Squibb Co. (BMY:NYSE). Everybody is also talking about Incyte Corp.’s (INCY:NASDAQ) indoleamine 2,3-dioxygenase (IDO) inhibitor in phase 2, as well as other immune checkpoint targets. These are all amazing, but we think the chimeric antigen receptor (CAR) technology that Kite is working on is worth a lot. This is a potential blockbuster. The compound is very effective, and the disease indication, diffuse B-cell lymphoma, is right. We licensed an anti-CD19 CAR agent, and the company aims to start a pivotal trial within 12 months—maybe even sooner.

TLSR: How many funds do you currently manage?

RN: All in all, we have more than $220 million ($220M) in three different funds, and 30 portfolio companies. Eventually we will have 16–18 companies in our third fund, and in the next year, we will set up a fourth fund.

TLSR: When we spoke six months ago, you told me that Pontifax, based in Herzliya, Israel, was a simple venture capital (VC) operation. Are you strictly life sciences?

RN: Yes. We only do biotech, biopharma and medical devices, and we have worked with many pharma companies in true collaborations. We have a strategic alliance with Roche, and are coming up with good targets working together side-by-side. We’ve sat in deals with Pfizer Inc. (PFE:NYSE), AstraZeneca Plc (AZN:NYSE) and Novartis AG (NVS:NYSE). In the medical device arena, we have an informal collaboration with GE Healthcare Worldwide (a unit of General Electric Co. [GE:NYSE]), to invest side-by-side in Israeli medical device companies.

TLSR: I’d like to get some clarification on Pontifax’s Roche collaboration. Are you collaborating on projects directly with Roche, or are you trying to find a suitable development partner for the company?

RN: We have Roche’s wish list, and are trying to bring the company a breakthrough technology with worldwide applications. The collaboration could be for a small-interfering RNA (siRNA) molecule, an antibody or an agent to target an immune checkpoint in oncology. We come up with new programs and if they’re a go, we establish a new company.

TLSR: Ran, thanks for taking the time today.

RN: It was my pleasure.

Ran Nussbaum is a managing partner and cofounder of the Pontifax Group, which has established three funds with more than $200M under management and more than 30 portfolio companies. Over the past eight years, Nussbaum has managed the group’s activity, alongside Tomer Kariv. He also served as CEO of Biomedix and was NasVax Ltd.’s chairman of the board. Prior to joining Pontifax, he was a partner at Israel’s largest business intelligence and strategic consulting firm. Nussbaum’s work revolves around constant and active involvement in companies, providing them with strategic and business development oversight. Nussbaum serves as a board member of many of the Pontifax Group’s portfolio companies, including Kite Pharma, TheraCoat, Collplant Ltd., cCAM Biotherapeutics Ltd., Quiet Therapeutics, Fusimab Ltd. and as OCON Medical Ltd., where he is currently chairman of the board.

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 recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) George S. Mack conducted this interview for Streetwise Reports LLC, publisher of The Gold Report,The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Arno Therapeutics Inc., OPKO Health Inc. Streetwise Reports does not accept stock in exchange for its services.

3) Ran Nussbaum: I own, or my family owns, 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: All private companies mentioned in this interview are in the Pontifax Group portfolio. 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.

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