InvestMacro Forex News

London Gold Market Report
from Adrian Ash
BullionVault
Frid 28 June, 09:10 EST

GOLD and SILVER both bounced in London trade Friday, only to slip back again after recording new 34-month lows overnight.

Asian stock markets closed higher but European equities slipped.

 The major currencies held steady, and government bonds were flat overall, as were commodities.

“[Mining] is not sustainable…where the gold price is at the moment,” said Nick Holland, CEO of Gold Fields – the 8th largest gold miner in 2012 – yesterday.

 “We’re going to need at least $1500 an ounce to sustain this industry in any reasonable form.”

Updating its “buy gold at $1360” recommendation of two weeks ago, “We expect gold prices around present levels to be the cyclical lows for gold,” New York consultancy CPM Group said Thursday.

 “[But] we are expecting another leg down on a short-term basis, most likely in the period from now through August.”

“Massive technical damage has been inflicted” on the gold price charts, reckons Ronni Stöferle, now producing his In Gold We Trust report for asset managers Incrementum in Leichtenstein rather than Erste Bank in Austria.

 “We are convinced that repairing the technical picture will take some time,” says Stöferle, moving his gold price target for 1 year’s time to $1480 per ounce – some 23% above Friday’s price.

Gold dealers in Dubai are meantime struggling to meet demand, according to local press reports. But Chinese and Indian households – the world’s two heaviest consumer markets – are delaying gold purchases, says the Wall Street Journal.

 “There’s no sense of a bottom for gold,” the WSJ quotes analyst Yvonne Wang at Beijing Antaike. “People don’t know when the price will stop falling.”

 Last month’s surging physical demand from China and India “more than offset continued sales by ETF funds in the Western economies,” says trade association the London Bullion Market Assocation.

 For May, its market-making members report a 17% jump in the volume of gold dealt through London, the world’s primary hub, to hit the greatest level in 12 years.

 By value, the daily average of gold bullion changing hands rose more than 11% – despite a 4% drop in the average gold price – reaching its highest level since the market peaked in August 2011.

On the supply side, “There’s going to be significant rationalizing in the gold industry,” Gold Fields’ Holland told Bloomberg on Thursday.

 “You can’t keep mines producing if they’re losing money.”

Market-development organization the World Gold Council yesterday issued new guidance on “all in” and “all-in sustaining” gold mining production costs.

 To help analysts and investors better judge the value of gold miner shares, the guidance is “intended to provide further transparency into the costs associated with producing gold,” says the Council, which is owned and funded by the world’s largest gold producer companies.

 “Sustaining costs” relate directly to current production, whilst “all-in” also includes new exploration, permitting and capital expenditure.

 The new methodology would put average gold mining costs around $1400 per ounce, the BBC reports. Gold miner shares have now fallen 40% this year, according to Bloomberg data, with major producers now slashing costs and writing down the value of mine projects acquired at sharply higher gold prices.

 Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2013

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

By HY Markets Forex Blog

The yellow metal fell to its lowest level in almost three years, dropping as low as $1,179 per ounce. Gold fell after the US Federal Reserve hinted it could cut back its stimulus program.

Gold futures fell 0.83 percent standing at $1,201.25 an ounce at 8.04am GMT, while the silver futures rose 1.70 percent trading at $18.700 an ounce at the same time.

The precious metal has dropped more than $100 over the past week, with beginning the week at $1,301.55 an ounce.

With Gold prices weighing down with more than 25% this quarter, the largest gold-backed exchange-traded fund, were trading with the same rate at 969.50 tonnes on Thursday.

The gold prices in the past years have been driven by the uncertainty of the surrounding the global economic condition after the financial crisis in the eurozone.

The US dollar Index rose 3.06% standing at 82.940, since the announcement from the Federal Reserve (Fed) last week regarding the possible cut back in the $85 monthly bond-purchase program.

Fed’s Chairman Mr Ben S. Bernanke said its might adjust the $85 billion quantitative easing (QE) program if the US economy is t move later this year.

The soaring house price, durable foods and the solid confidence numbers are expected to pick next year to ease off the QE stimulus program.

The Personal Consumption Expenditures (PCE) Price Index rose to 1.0% in May from0.7% in previous month.

The post Gold drops below $1,200, while still negative appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

The European stocks were trading slightly lower as investors await US reports on consumer prices from the region’s major economies. The market processed the previous session’s optimism over a deal on the region’s future bailout regulation.

The Stoxx 50 tumbled 0.40% to 2,609.47 as of 10.40am GMT, while Germany’s DAX lost 0.18% to 7,976.23 at the same time. The British FTSE 100 lowered by 0.11% to 6,236.80 and the French CAC 40 declined 0.48% at 3,744.09.

In France, the French Consumer Spending increased by 0.5 in May. While the German’s consumer prices data is expected to be released in the session, as well as Italy’s inflation data.

According to reports, the Japanese Industrial output rose by 2% in May. In Europe, Germany’s retail sales rose by 0.4% in May on a year-on-year basis, according to data released by the Federal Statistical Office (Destatis).

The University of Michigan Consumer Confidence report and the US Chicago manufacturing Purchasing Managers’ Index are expected to be released later in the day.

Leaders of the Eurozone European Union have agreed to proceed with establishing who would foot the bill when the banks in the bloc collapse in the future.

Small companies holding with uninsured deposits worth over 100,000 euros will suffer the consequences if a bank would require an emergency top-up.

Losses could go as high as 8% of a bank’s total liabilities, according to officials.

The post European stocks falls before U.S economic reports appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

Source: George S. Mack of The Life Sciences Report (6/27/13)

http://www.thelifesciencesreport.com/pub/na/15406

Canadian portfolio manager Hugh Cleland of BluMont Capital has chosen an interesting niche. He invests in stocks too small for mutual funds and major institutions, which allows him to get in on the ground floor and capture huge gains when the companies begin to mature. He actively participates in each company’s destiny, much like a venture capitalist. In this interview with The Life Sciences Report, Cleland discusses his “core four” and tosses in a handful of speculative tiny-cap companies that investors with enthusiasm for diligence should investigate.
The Life Sciences Report: You manage two funds at BluMont—the BluMont Northern Rivers Innovation RSP Fund and the BluMont Innovation PE Strategy (BIPES) Fund I. Describe these funds and their differences from a very high-up perspective.

Hugh Cleland: Both funds focus on the tech and healthcare sectors and invest in publicly traded small- and micro-cap companies, with a few private investments sprinkled in. The Innovation PE Strategy Fund takes a private equity approach to investing, meaning it is a six-year fund with no redemptions. In the latter half of the fund’s life, we distribute the proceeds of sales to our investors. But as far as our private equity approach, we are more hands-on, helping companies in a variety of ways, including working with existing management to ensure appropriate skill sets are represented on boards and in management, and helping to raise money and develop analyst coverage. I even sit on a few boards.

TLSR: The BIPES fund sounds more like venture capital (VC), no?

HC: It is a bit of a misnomer to call it private equity. It’s really VC—late-stage VC to be more precise.

TLSR: There are times in the life cycles of some public companies when you can actually buy them for less than you could have put them together as private equity. Is that the idea here?

HC: Absolutely. I often find that valuations in the publicly traded sub-$100 million ($100M) market cap world are lower than for comparable companies in the private world.

TLSR: How has your fund performance been last year and year-to-date?

HC: The BIPES Fund is up about 20% since inception, which was Jan. 31, 2011. We were doing much better than that at one point—up 50%—but then Neptune Technologies & Bioressources’ (NTB:TSX; NEPT:NASDAQ) production plant in Sherbrooke, Quebec, Canada, blew up on Nov. 8, 2012. Neptune was, and continues to be, one of my largest positions.

In addition, we’ve experienced a serious headwind with the unwinding of the resource bubble. The TSX Venture Exchange, where most of my companies are listed, is down almost 60% in the same two-and-a-half year period that the BIPES Fund has been in existence. The market environment has been one heck of a headwind for the stocks of companies in the fund.

TLSR: You don’t own resources, do you?

HC: I do not, but many investors who own speculative small-cap tech and healthcare companies in Canada have been overweight in the resource area for the last 5–10 years. As they have been watching their resource stocks fall by 50–90%, they seem to have been—understandably—panicking and often getting out of all their small-cap investments, including healthcare and technology investments.

TLSR: Go ahead with Neptune. Is it still a core position for you?

HC: Yes, it is. The company was on a very dramatic upward growth trajectory until last November, when the explosion occurred. It had just raised $35M to fund a significant plant expansion before that tragic event.

The company has now come forward with plans to get production going again. It is taking a different tack, with partnerships, joint ventures and outsourcing deals becoming an important part of its strategy. The company addressed the new strategy in its last conference call, and gave guidance that by Q1/14, it would have internal production capacity of about 150,000 kilograms (150kg) per year of its Neptune Krill Oil (NKO) product. The company has been talking to three different potential outsourcing partners and expects to make a decision on those by August. By the end of September, I believe that we’ll have visibility on how Neptune can have NKO production capacity in the 600K–1M kg/year range, but I don’t think the market has put that together yet. The market will be looking at this company in a much different way soon.

TLSR: I understand the company has received its first insurance payment from the accident. But if you look at the news flow from Neptune, it’s impossible not to see how many class-action lawsuits have been filed against it. This is a small company with a $182M market cap. How does it withstand such a legal assault?

HC: That was one of the pieces of very good news that came out in the company conference call on May 23. All of the suits have been dismissed. It’s over. There is no more risk from the lawsuits.

TLSR: Hugh, I know many people are familiar with krill oil, but explain to me briefly why it is better than fish oil as a cardiovascular agent.

HC: Krill is a small crustacean, not a fish. The phospholipid omega-3 oil derived from krill is increasingly being cited by many experts—both in the world of “pop health” and in the world of serious scientific work—as being superior to other sources of omega-3, including fish oil. Krill oil has four primary ingredients—eicosapentaenoic acid (EPA), docosahexaenoic acid (DHA), astaxanthin and phospholipids—compared to fish oil’s EPA and DHA. It appears that—similar to fish oil—krill oil has a very important lowering effect on triglycerides, but in contrast to fish oil, it also seems to lower low-density lipoprotein (LDL) and raise high-density lipoprotein (HDL). It is believed that the fact that the EPA and DHA in krill oil are chemically bonded to phospholipids is one of the primary reasons for the positive LDL and HDL effects. The astaxanthin is also bonded to the phospholipids. The fact that the EPA, DHA and astaxanthin in krill oil are all bonded to phospholipids makes them more bioavailable as they are metabolized in the body.

Acasti Pharma Inc. (ACST:NASDAQ; APO:TSX), Neptune’s pharmaceutical subsidiary, is one of my four largest holdings as well. We’ve been waiting for phase 2, open-label trial (NCT01516151) results for its drug candidate CaPre (a purified extract from krill oil). The company announced a few weeks ago that it finished enrolling the trial, and we expect to see results this summer. I expect the stock will have a nice run-up into those results. My expectation is that the results will demonstrate that Acasti has, at the very least, a best-in-class “fish oil drug” and may, in fact, be in possession of a blockbuster. I’m awaiting those results with some excitement and optimism. The market caps of both Neptune and Acasti are currently a fraction of where they will be if the trial results are good, and it’s been encouraging to see Acasti recently set new all-time highs on the TSX.V in Canada (it also trades on NASDAQ under the symbol ACST).

TLSR: You said the phase 2 trial with CaPre is open label. How do you get definitive, share-moving data from an open-label trial?

HC: There are actually two phase 2 trials underway right now, and the placebo-controlled double-blind phase 2 trial (NCT01455844) results are expected in Q1/14. But the open-label results are coming up shortly—likely in July.

It’s Dr. Harlan Waksal’s opinion that the open-label results will be significant enough to move the needle and will be sufficient to initiate discussions with big pharma on either partnering or a sale. Waksal was a co-founder of $7 billion ($7B) takeout ImClone Systems Inc., and today he is executive vice president for business and scientific affairs at Acasti. He also sits on the Neptune board.

I think part of the reason Dr. Waksal believes in the product is that there is a deep body of knowledge around omega-3s. The existence of this body of knowledge should mean that, if the open-label data are good enough, potential partners and investors won’t need to see the double-blind data before getting excited. Also, both of Acasti’s phase 2 trials have an unusually large number of patients (274 in the open-label trial and 429 in the placebo-controlled trial), which means there should be a higher degree of confidence than in most phase 2 trials. The bottom line is that—if the data are as good as I am expecting—the open-label study itself, in the context of the huge body of clinical data around fish oil, should be enough to catapult this stock to a whole new level.

TLSR: How much of Acasti does Neptune own?

HC: More than 60%.

TLSR: Even though Neptune owns more than 60% of Acasti, these stocks have not traded in sync. Over the last 12 months, Neptune is down 17%, while Acasti is up 37%. From my cursory view, it appears that Acasti does give some support to Neptune, which could have been hurt a lot more with these events.

HC: It’s the sum-of-the-parts underlying support to Neptune from Acasti. There were a few months after the explosion where investors could essentially get everything in Neptune—even part of Acasti—for free, meaning that for a short while Neptune’s market cap was lower than the value of its percentage ownership in Acasti. Some investors panicked out after the explosion. But for some sophisticated investors, it presented a great opportunity, and the stock is now up nicely from its December-January lows. Perceptive Advisors LLC, a very respected biotech investment group in New York City, is a 9.9% owner of Neptune. Perceptive Advisors has continued to be a key part of the shareholder base, and I think its circle has been among the buyers of the stock since the plant exploded. Perceptive Advisors clearly see the potential for dramatic gains in Neptune’s share price over the coming months and years.

TLSR: Go to your next idea.

HC: My funds own almost 13% of IntelGenx Corp. (IGXT:OTCQX; IGX:TSX.V). I cannot believe the stock is trading where it’s at, considering its achievements in the last 12 months. Its drug Forfivo (bupropion extended-release), for major depressive disorder, has been approved by the U.S. Food and Drug Administration (FDA). Forfivo is now being marketed by IntelGenx’s partner Edgemont Pharmaceuticals LLC (private).

In December 2011, a partnership with Par Pharmaceutical Companies Inc. (PRX:NYSE) was announced, and we’re expecting a regulatory filing for that drug sometime soon. The name of the drug and the details are confidential for competitive reasons. IntelGenx’s CEO has continued to emphasize the size and importance of this project without being specific.

If you look at a research report from Ram Selvaraju, who is head of equity research at Aegis Capital, you’ll see he hasn’t given this unnamed product any value whatsoever, but he still has a $3 target price on the stock, which is more than a 400% implied return from IntelGenx’s current price ($0.60). I’m expecting Ram will raise his target quite significantly after we see the filing for that undisclosed product. It should be a significant catalyst for the stock, as investors see what a large drug we’re dealing with.

Then there is the company’s thin-film rizatriptan migraine drug. This drug is being developed in partnership with RedHill Biopharma (RDHL:NASDAQ). The FDA accepted the new drug application(NDA) filing for this drug on June 18, and we now have Feb. 3, 2014, specified as the Prescription Drug User Fee Act (PDUFA) date.

Prescription migraine drugs have global sales of over $5B per year. Maxalt, the drug that IntelGenx has ported to a thin film, had sales of well over $600M in 2012, so this is not a small opportunity, although I get the sense that the Par project has significantly more upside.

Somehow, with this great pipeline and all this success, we are talking about a company with a market cap of $30M. A table-pounding buy, in my view.

TLSR: Why have IntelGenx’s shares been weak over the past month?

HC: It got hit fairly hard the last few days of May; a small overhang of warrants remains from a financing a few years ago. I expect that will get chewed through shortly, and we’ll have that cash on the balance sheet.

TLSR: Hugh, you’ve made a specialty in your professional career out of the 505(b)(2) regulatory pathway, haven’t you?

HC: Yes, I really like it. I’ll tell you about a second company utilizing the 505(b)(2) pathway: Cynapsus Therapeutics Inc. (CTH:TSX.V; CYNAF:OTCPK). It is another holding in my two funds. The company is developing a sublingual form of the injectable Parkinson’s disease drug apomorphine, which counters the debilitating “freeze-up” episodes common in Parkinson’s patients. It has made huge strides sinceyou and I spoke last November, including closing a financing of $7.3M, which greatly reduces the financing risk I have referenced. The company has also received funding from the Michael J. Fox Foundation. Have you seen the research initiation report from Senior Biotechnology Analyst Jason Napodano of Zacks Investment Research? It has everything in it.

TLSR: I’ve had one analyst tell me recently that the phase 1 bioequivalence study, for which results are expected in Q3/13, is going to be a needle-moving catalyst for Cynapsus stock. The study is in healthy volunteers, and the idea is to show that appropriate blood levels can be achieved with Cynapsus’ product, APL-130277 (sublingual apomorphine), a proposed rescue therapy for “off episodes” in Parkinson’s disease. We already know that apomorphine works for Parkinson’s patients if it gets into the bloodstream. Do you agree that the phase 1 results will be a catalyst?

HC: Yes. Bioequivalence studies are a key part of the 505(b)(2) pathway, and as such this phase 1 bioequivalence study will move the needle. It’s not going to be the biggest value creation milestone, but it’s an important milestone that—if successful—derisks the story and should create value in the shares.

TLSR: As you are well aware, this stock is up more than 25% just over the past few weeks, probably due in part to the Zacks initiation report on the company. Are there any other factors?

HC: The company raised money earlier this year, and it was very encouraging to see a specialty pharma company (Dexcel Pharma Ltd. [private]) as the lead investor, taking a 19.6% stake in Cynapsus and putting two directors on the board. But after that financing occurred, the shares were just drifting down on very little volume. The stock had, very frustratingly, drifted all the way down to $0.30/share. Then the Zacks report came out, and that has grabbed a lot of attention. The stock almost hit $0.50/share. I think that as more people become aware of the Zacks report, and as the company begins to hit its milestones, we’ll see the stock move into a sustainable uptrend.

The companies I have talked about so far are what I consider core positions, with Neptune, Acasti and IntelGenx each comprising more than 10% in the portfolios I manage, and Cynapsus being much smaller—more like 2.5%. What I will talk about now are either companies I am looking at and have not yet purchased for the two portfolios I run, or stocks that I have handled more as trading positions than as core positions thus far. My view on these stocks has been, and so far continues to be, that the risk is too high to treat them as core positions. But these stocks could represent, at least, opportunities for good trades over a 6- to 12-month time horizon. As always, investors need to do their own due diligence.

TLSR: Go ahead with another idea, please.

HC: I’ve locked in a good return on iCo Therapeutics (ICO:CVE), but I’m hopeful that phase 2 data for iCo-007, when released, will indicate strong potential for the drug candidate. Diabetic macular degeneration is the condition targeted by iCo-007, and the company just guided that the data will be out early in 2014. The study size is 208 patients, and some of the patients are being treated with a combination of iCo-007 + ranibizumab (Lucentis; Genentech, a unit of Roche Holding AG [RHHBY:OTCQX]) or laser photocoagulation.

TLSR: This stock has been weak. Are you still positive on this company?

HC: I am still positive on it, and I should mention that I do not believe that the decline in the stock is a reflection of a decreased likelihood of a successful phase 2 trial. The stock has been beaten up because, unfortunately, the company wasn’t able to come up with the nondilutive financing it expected from the JDRF (formerly the Juvenile Diabetes Research Foundation), and had to go back to the market to raise money to complete the phase 2 trial. If the results of the study are as good as the company expects, we will have a quite spectacular return from the current price. Biotech speculators should do well to accumulate a position over the summer and early fall.

TLSR: Do you have some other speculative ideas—food for thought—for investors who want to do some of their own research and digging?

HC: How about Bellus Health Inc. (BLU:TSX; BLUSF:OTCPK), which has a phase 3 asset but is trading below its cash per share, despite the fact that the company is fully funded to completion of the phase 3 study. The drug is Kiacta (eprodisate), a first-in-class proposed therapy for a terminal kidney condition known as AA amyloidosis.

The knock on this company is that the phase 3 trial won’t be fully enrolled until mid-2014, and the results won’t be out until 2017, so there would appear to be a lack of near-term catalysts. If Bellus is successful in the acquisition of Thallion Pharmaceuticals Inc. (TLM:TSX) (announced June 18), the catalyst problem will be somewhat solved, because Thallion is in the midst of a phase 2 trial with much nearer-term catalysts.

Apparently, the deal Bellus struck with Thallion actually nets Bellus $1M in cash, as well as the clinical assets, but I need to do more work to understand both the phase 3 asset and the new potential acquisition before I buy the stock for my funds. Bellus looks very interesting as a long-term value play; with the Thallion acquisition, if it goes through, there may be nearer-term catalysts that can move the stock, too.

A stock that I am revisiting after having made money on it in the past is Verisante Technology Inc. (VRS:TSX.V). Verisante, after years of development, has begun selling the Verisante Aura, a best-in-class noninvasive technology (based on Raman spectroscopy) to assist in detection of skin cancers. The Aura is approved for sale in Canada, Europe and Australia, and the company is pursuing additional approvals in Mexico and Brazil, as well as FDA approval. FDA approval should be a major catalyst for sales and for the stock.

A company that I’ve liked for a while is GeneNews (GNWSF:OTCPK; GEN:TSX), whose most immediate opportunity is with its blood test/screen for colorectal cancer, which doesn’t require stool sample collection. The underlying platform technology has numerous other diagnostic applications. The fact that David Sable, portfolio manager of Special Situations Fund in New York City, is on the GeneNews board gives me comfort that the technology is of significant value, and that the company will continue to move in the right direction.

Tekmira Pharmaceuticals Inc. (TKMR:NASDAQ; TKM:TSX) also has a platform technology and multiple shots on goal. The company uses lipid nanoparticle (LNP) technology to deliver siRNA (small interfering RNA) as well as other nucleic acids in the treatment of disease. Tekmira is developing its own RNA interference (RNAi) product candidates, including TKM-PLK1, which has completed an early-stage, first-in-humans phase 1 trial in neuroendocrine cancer.

Since its inception, Tekmira has fostered collaborative or partnership agreements with other companies in the RNAi field, including Alnylam Pharmaceuticals Inc. (ALNY:NASDAQ), Bristol-Myers Squibb Co. (BMY:NYSE), Takeda Pharmaceutical Co. Ltd. (TKPYY:OTCPK), and the U.S. government’s Transformational Medical Technologies (TMT) Program. Having made a very profitable trade in this company based on what turned out to be a correct view on the outcome of a lawsuit with Alnylam, I need to dig deeply into the Tekmira pipeline. The fact that Doug Loe of Byron Capital Markets in Toronto has afavorable view on this company is encouraging.

Isotechnika Pharma Inc. (ISA:TSX) is a $0.03 stock with a market cap of less than $6M. The company is taking its immunosuppressant compound ISA247 (voclosporin), which was originally developed for organ transplantation, and applying it to lupus. The reason I’m revisiting this stock is because Richard Glickman, formerly the CEO of Aspreva Pharmaceuticals Corp. (acquired by Galenica Group in October 2007 for $915M), is heavily involved in Isotechnika as it reconstitutes itself as a lupus drug company. I am revisiting it with an eye to participating in a recently announced financing.

TLSR: I look forward to speaking with you again in the future, Hugh.

HC: Thanks so much, George. It’s always a pleasure.

Hugh C. Cleland is an executive vice-president and portfolio manager at BluMont Capital Corp., based in Toronto, Canada. BluMont Capital acquired Northern Rivers Capital Management, which was co-founded by Cleland in May 2001, in January 2010. Cleland currently manages two funds for BluMont: the BluMont Northern Rivers Innovation RSP Fund and the BluMont Innovation PE Strategy Fund I, which takes a private equity approach to the management of publicly traded small- and micro-cap technology and healthcare stocks. Cleland worked at Interward Capital Corp. from 1998 to 2001, originally as an analyst and later as associate portfolio manager specializing in technology equities. In 1997–1998 he was research associate to the senior telecom services analyst at Midland Walwyn Inc. Cleland earned a bachelor’s degree with honors (1997) from Harvard University, and earned his CFA designation in 2001.

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DISCLOSURE:

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

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

3) Hugh Cleland: I personally and/or my family own shares of the following companies mentioned in this interview: Neptune Technologies & Bioressources, Acasti Pharma Inc., IntelGenx Technologies Corp. I personally am and/or my family is paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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Source: Zig Lambo of The Life Sciences (6/27/13)

http://www.thelifesciencesreport.com/pub/na/15404

Breakthrough therapies with billion-dollar market potential are what every biotech company seeks—and what every investor wishes for. Narrowing choices and focusing on opportunities with multibagger potential is the goal of every investor, and few do it better than Chen Lin, author of the popular stock newsletter What Is Chen Buying? What Is Chen Selling? In this interview with The Life Sciences Report, Lin focuses his analytical expertise on the biotech sector and names companies with blockbuster promise.

The Life Sciences Report: When you first spoke withThe Life Sciences Report last August, you explained why you decided to diversify your recommendations and holdings to include both resource and biotech investments. How has that been working out for you?

Chen Lin: So far, biotech has been great for me. At the time of the last interview, Sarepta Therapeutics (SRPT:NASDAQ) was doing extremely well. Later, it went on for a huge run and became the No. 1 biotech in 2012. If you check top biotechs in the past 52 weeks, published by Forbes, it’s still No. 1 or No. 2.

Neptune Technologies & Bioressources (NTB:TSX; NEPT:NASDAQ), unfortunately, suffered a tragic fire last November that stopped production and knocked down the share price. Now it’s climbing back to last year’s level. Without that event, Neptune’s stock would have done a lot better.

TLSR: Although they operate in totally unrelated industries, junior resource companies and junior biotech companies are similar in that they usually have to spend a lot of money up front and over a long period of time, often making big bets before they see positive cash flow. Is playing a biotech similar to betting that a resource company makes a big hit on a mineral property?

CL: There are a lot of similarities in the two sectors, but each trades at its own rhythm. One sector can get very hot and the other can get very cold. That’s where we are right now. Biotech is red hot, and resources are very cold. From a trader’s standpoint, I calculate the risk-reward and take advantage of the market swings.

TLSR: For some smaller biotechs, one drug can be a company maker or breaker. With all the challenges and costs associated with developing, testing and getting U.S. Food and Drug Administration (FDA) approvals, how do you decide which companies have a decent shot at becoming big winners?

CL: I always look for market leaders, and make sure a drug candidate is advancing the company cause. If the drug candidate has no competition, that’s even better. Most important, investors want to buy the best candidate in its own space. That’s the most important factor I look for.

TLSR: Some biotech stocks trade back and forth based on news, just like resource stocks. How do you decide on a good entry point?

CL: I usually go for the company that has not been discovered by the market. An investor should try to get in when the market is not paying attention. Then, hopefully, that investor can take a profit later and reduce risk.

TLSR: Do you think that playing the swings on the same stock is a good strategy, or do you look for one shot to get in and get out?

CL: I do some swings, but usually I hold on to a core position. Biotech stocks often swing wildly.

TLSR: The current market hasn’t been kind to resource companies trying to raise capital for developing properties. How is it treating biotech companies that are in the research and development (R&D) phase and need to raise capital for continuing R&D activities?

CL: We’ve seen a dramatic change in the biotech sector in the past 12 months.

There have been quite a few initial public offerings and secondary offerings this year. In general, I think the biotech market is healthy. However, it was very difficult to raise money last year and even before that—just like where we are with the resource sector now. Now money is rushing into the sector and a lot of biotechs are taking off like crazy.

TLSR: One of the big considerations surrounding drugs being developed for diseases and conditions affecting very small populations is the ultimate cost of the drug to the user. Do you consider insurance coverage in your investment research?

CL: Some of the drugs targeting these rare or orphan indications cost $200,000 ($200K), $300K or $500K per patient per year. It depends on the drug. In life-and-death situations, an insurance company usually has to cover the therapy. I’ve seen some pushback, mainly in Europe, when the cost gets significantly over $500K per year per patient.

However, especially for a magic drug that can cure a specialty disease, insurance companies seem more than happy to pay half-a-million dollars per patient per year. The Patient Protection and Affordable Care Act (Obamacare) can also help, because it brings more patients into the insurance pool, and insurance companies cannot reject patients because of preexisting conditions. Having more patients who need treatment in the pool can actually help biotech companies a lot.

TLSR: Getting back to the two companies you have already mentioned—Sarepta and Neptune—can you give us a little more detail on what’s been going on with them over the past 10 months?

CL: Sarepta has done extremely well. It is one of the top performing biotech stocks. When I researched the stock, what really moved the needle for me was a video on the Internet of a boy who was given eteplirsen, the company’s treatment for Duchenne muscular dystrophy (DMD), and started walking again. He can run and do sports. That was the “wow” that made me buy a lot more of the stock. I also bought sizable call options of the stock before the final results came out last year, and they earned me a twelve bagger when the stock hit $40/share. I’m still holding a core position of the stock.

We are living in the Internet age. Small investors can take advantage of the market opportunities like this, getting ahead of the crowd instead of always being the last ones to know. They can even get ahead of some of the big funds.

Sarepta’s stock has very high short interest now; close to 30%. Institutions own 60%. Personally, I believe it’s a very dangerous situation for the shorts. The company is going to meet with the FDA in the next quarter. If accelerated approval for eteplirsen is recommended, I believe we’ll see a huge short squeeze, and this stock can be the Tesla Motors Inc. (TSLA:NASDAQ) of biotech.

TLSR: Give us a little detail on what exactly Sarepta’s drug does.

CL: It helps the muscles of DMD patients grow. The disease causes muscle degeneration, and typically patients are in wheelchairs by their teens and often die in their 20s. The tests so far show that with eteplirsen, the patients stabilize. Some even improve. The company has announced results after 84 weeks of study, and the kids in treatment are doing very well. This is one of those magic drugs that changes people’s lives and helps patients live longer. The company has already completed phase 2b tests, and is working with the FDA for potential accelerated approval.

TLSR: When might that happen?

CL: I believe the company will meet with the FDA in Q3/13, and that is when it will decide whether to go for accelerated approval. With that very high short interest, if eteplirsen gets accelerated approval, watch out for the upside.

TLSR: Did these shorts come in at a much higher price, or are investors just now betting that the company is not going to get approval?

CL: I think the shorts came in at the current or a lower price. Those investors are already out of the money, and are probably betting the company won’t get approval and that the stock will go back to the $20 per share range, where they can cover. But if they’re wrong, the upside is huge, because those investors will be forced to cover at a much higher price. We saw the huge rise of Tesla. I think that’s the example for the shorts in Sarepta.

TLSR: So what about Neptune?

CL: Neptune stock was down because of the fire, which resulted in the deaths of several employees and multiple injuries. As I said, the stock has recovered nicely lately, and I’m looking for phase 2 results on Neptune’s krill oil derived medical product, produced by its subdivision Acasti Pharma Inc. (ACST:NASDAQ; APO:TSX), this summer. Krill oil shows promise as a treatment for hypertriglyceridemia. Also, the company plans to restart its production. Right now it’s in a holding mode.

TLSR: What has the stock done since we last talked?

CL: It was down sharply after the fire, which destroyed Neptune’s only manufacturing facility. It was $3–4/share before. Today, it’s about $3/share.

TLSR: So the facility is back online, or will be back online?

CL: Neptune is rebuilding the facility with insurance money.

TLSR: What is the closest catalyst?

CL: The next catalyst will be the phase 2 results for the Acasti product, expected this summer.

TLSR: Are there any new names that you’d like to discuss?

CL: One is AcelRx Pharmaceuticals, Inc. (ACRX:NASDAQ), which did extremely well this year. It is designing a new therapy that replaces intravenous (IV) morphine after surgery. We all have been with or seen people who recently have had surgery. Patients usually have needles stuck in their arms to inject morphine. It takes usually two nurses to double check and make sure that the right amount of morphine is being injected with a standard IV. But still, one in every nine IVs has an error. That has created a lot of potential liability for hospitals and is also bad for the patients. In addition, as a patient, placing an IV is a very uncomfortable process, and it can be hard to move around with an IV.

AcelRx has developed a revolutionary delivery product—basically a tiny tablet you put under your tongue. The tablet, part of AcelRx’s nanotab technology, is preprogrammed. This takes away potential liability and work for the hospital. The phase 3 test results were fantastic. The company will apply for approval very soon. We’ve already seen very strong insider buying. The stock tripled this year, so it’s been a winner for me.

TLSR: What do you see for upside on the nanotab, assuming it does get approval?

CL: It depends on how fast hospitals adopt this new product. The most bullish analyst reports see AcelRx as a $60/share stock, but we put a $15 target on it to be conservative. It’s a potential billion-dollar per year market. The company’s market cap right now is about $323M. I see the company as a huge success if it gets FDA approval for its technology. There is much more upside.

TLSR: When would you expect possible approval?

CL: The product should get final approval next year and then go into production.

TLSR: Are there any other new companies you’d like to discuss?

CL: There are two more companies I’d like to mention. One is Vanda Pharmaceuticals Inc. (VNDA:NASDAQ). It’s developing a therapy for totally blind people to help regulate their circadian rhythms. Our human bodies are on an internal clock that runs on a 24.5-hour cycle. With normal sight, we can adjust our clocks with daylight, but blind people cannot. This condition, known as non-24-hour disorder, turns out to be very painful for the blind. Vanda just filed for a new drug application with the FDA for tasimelteon, which has had very successful phase 3 test results. If it gets approved, tasimelteon will be the first and only drug in its class to treat non-24-hour disorder.

Vanda is a very telling stock. The stock was trading below cash three months ago. It has quadrupled in three months, making it one of the hottest stocks this year. That tells you how hard the biotech sector was hit last year. There were many who tried to short the stock because it ran too fast, but those shorts were burned badly. It’s the same thing for other sectors I’m following closely, like energy and mining. When the table turns, the upside profits can be huge.

TLSR: So are you still positive on Vanda even though it has had this run?

CL: Yes, I’m still very positive. I’m still holding the stock. I took some profit but am still holding the stock.

TLSR: How much more upside do you see from here?

CL: If tasimelteon gets approved, there’s a lot more upside. The market cap is still very cheap. It’s a potential billion-dollar company with a $214M market cap now, and $120M in cash. It’s an amazing stock.

TLSR: So you have another one you want to talk about?

CL: The last is a company called Apricus Biosciences Inc. (APRI:NASDAQ). The company makes an erectile dysfunction (ED) drug, like a Viagra (sildenafil citrate; Pfizer Inc. [PFE:NYSE]). Viagra is orally administered and can only help 50–55% of the population because people cannot take Viagra if they have a heart condition or diabetes, etc. Apricus’ drug, Vitaros, can cover the rest because it is a cream that is applied locally. Major pharmaceutical companies like Abbott Laboratories (ABT:NYSE) andNovartis AG (NVS:NYSE) have already licensed this product, signing for milestone payments of almost $100M plus additional double-digit royalties, in most cases.

But the company’s market cap is still tiny. It’s still around $85M. One day, one of the big pharmas will say, “Why do I need to pay hundreds of millions in royalties when I can buy the company for the same price?”

I like the company’s new management, because it just got rid of the poison pill (shareholders’ rights agreement) that opened it to a bidding war. Recent stock weakness was due to the company doing a secondary offering. I believe once the shares go to stronger hands, the stock can make a major move. It just got European Union (EU) approval for Vitaros. It will find new partners and get new milestone payments. For the next 6–12 months, we could have a dozens of positive catalysts. I believe the stock will move much higher. This is the only biotech stock that didn’t go parabolic for me this year, but I think it could be the next to move.

TLSR: Where is it trading now?

CL: Around $2.50. With an $85M market cap and an ED drug that has billion-dollar per year potential, Apricus can be worth billions. And the company has already received EU approval. So Vitaros can be on the market in 6–12 months.

TLSR: How would this product be priced relative to something like Viagra, Cialis (tadalafil; Eli Lilly and Co. [LLY:NYSE]) or other competitors?

CL: It is up to the company’s partners to price it. I think Vitaros will be priced similarly, if not higher, than other ED drugs because the company is trying to help certain patients who cannot take Viagra or Cialis.

TLSR: What’s your recommended strategy for investors who want to play biotech stocks at this point, considering that they seem to be in a bull market rather than a bear market?

CL: I believe biotech is in the first leg of what could be a multiyear bull market. Right now, there is a lot of low-hanging fruit. I would look for companies with unique products that are best in class, and that have no or little competition. Usually, those kinds of companies are very hard to find later in a bull market.

All the companies I talked about, with the exception of Sarepta, have market caps far below $1 billion, and have at least a few billion dollars’ potential. They are low-hanging fruit. All are well financed and have the great upside.

TLSR: I suppose a lot of these are probably potential takeover targets at some point, too.

CL: I believe many, if not all, are takeover candidates by big pharmas that need to replace pipelines and are looking for new drugs.

TLSR: It was good talking with you again, Chen.

CL: Thank you, Zig. I appreciate the opportunity to talk with you.

Read Chen Lin’s recent interviews in The Gold Report and The Energy Report.

Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors, Inc. While a doctoral candidate in aeronautical engineering at Princeton, Lin found his investment strategies were so profitable that he put his Ph.D. on the back burner. He employs a value-oriented approach and often demonstrates excellent market timing due to his exceptional technical analysis.

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

DISCLOSURE:

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

2) The following companies mentioned in the interview are sponsors of The Life Sciences Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Chen Lin: I own or my family owns shares of the following companies mentioned in this interview: Apricus Biosciences Inc., Vanda Pharmaceuticals Inc., AcelRx Pharmaceuticals Inc., Sarepta Therapeutics Inc., Neptune Technologies and Bioressources Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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

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

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

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

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

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

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

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Source: Peter Byrne of The Energy Report (6/27/13)

http://www.theenergyreport.com/pub/na/15401

Here’s the situation: North America is swimming in cheap natural gas, whereas international markets are thirsty for it and paying a premium. Now that the DOE is beginning to approve LNG export permits, North American producers have major incentive to drill, baby, drill. To get an expert perspective on the coming LNG supply shift, The Energy Report turned to Cantor Fitzgerald Analyst Sam Wahab, who keeps tabs on global oil and gas developments from his base in London. This is a must-read interview for anyone who wants to profit from a potentially massive shift in natural gas fundamentals.

The Energy Report: Sam, how will an increase in the export of liquefied natural gas (LNG) from the U.S. affect the price of that increasingly abundant commodity?

Sam Wahab: LNG export potential is a very hot topic at the moment, given the significant disparity in gas prices in the U.S. and almost everywhere else in the world. Depressed U.S. gas prices provide an investment opportunity. Low prices have already contributed to a resurgence in the U.S. petrochemical industry. Utility companies are shifting away from coal to using natural gas for electricity generation. If the U.S. becomes a major exporter of LNG, there will be good opportunities for companies with expertise to make strategic acquisitions.

The push to export natural gas stems from the fact that the U.S. simply has too much of it. Thanks to the fracking-led energy boom, U.S. natural gas prices have collapsed. Many recently drilled wells have been shut down because pumping costs more than the gas can be sold for in the market. But gas prices in other parts of the world are not nearly so low. In Europe, gas prices are five times higher than in the U.S. That disparity offers an incredible incentive for energy companies to put their gas on a ship and send it abroad.

TER: Are there any other political and economic obstacles to ramping up U.S. exports?

SW: The Department of Energy has 20 export applications pending. Most of the applications are from smaller firms, but the facilities can be used to ship gas for big oil companies, including BP Plc (BP:NYSE; BP:LSE), Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE), Exxon Mobil Corp. (XOM:NYSE), or Chevron Corp. (CVX:NYSE). The government has been taking a cautious approach on exports. The Energy Information Administration reports that as natural gas exports increase, gas prices may rise between 3–9% which translates into a 1–3% increase in utility bills for residential consumers. Overall, manufacturing job losses due to increased exports should be minimal, and should be more than offset by the positive economic effects of increased drilling and greater export revenue.

American manufacturers remain concerned that too much export could drive up the price of natural gas, which is a key energy source for making plastics and polymers and industrial chemicals. But manufacturers have recently launched more than 100 new projects designed to take advantage of America’s low natural gas prices, and they have invested billions of dollars creating half a million new jobs. Going forward, manufacturers claim that 5 million jobs could be on the line if exports are not handled properly, although they are cautiously comfortable with the fairly slow pace of export approval. No one expects that all 20 permits will be approved.

TER: American consumers are used to cheap natural gas. Do you see a backlash if prices increase?

SW: I do not see prices increasing significantly unless exports are rolled out on a large scale. America is sitting on more gas than it is going to use domestically for quite an extended period of time. There will be a squeeze on the end-consumer if prices do rise, but I do not expect a huge backlash. The U.S. consumer has enjoyed an extended period of low gas prices following the U.S. shale boom: All things must come to an end.

TER: Is an increase in the possibility of massive U.S. exports of liquid natural gas a positive sign for junior explorers and producers in North America and Europe?

SW: Access to a large market with higher spot prices will always be positive for junior explorers in the U.S., as that will invariably increase the commerciality of exploration and development. This is especially important following the long period of consolidation in the U.S. market, and the dramatic fall in exploration for gas following the U.S. shale boom.

In Europe, the last few years have seen a significant, albeit unsuccessful drive to replicate the U.S. using the same fracking techniques employed in North America. Juniors, such as San Leon Energy Plc (SLE:LSE; SLGYY:OTCBB), Aurelian Oil & Gas (which recently merged into San Leon) and 3 Legs Resources (3LEG:LON) have all capitalized on the plethora of unconventional gas resources in Europe and the continent’s comparably high gas price environment.

In the U.K., the recent listing on the shale oil and gas exploration has brought renewed focus to exploration there. IGas Energy Plc (IGAS:LSE) has just announced that its licenses in Northwest England could hold between 15 and 172 trillion cubic feet (Tcf) of gas. Although that is a preliminary estimate, it is considerably higher than was previously contemplated.

Elsewhere around the globe, a very interesting company has caught my attention: Falcon Oil & Gas Ltd. (FO:TSX.V; FOG:AIM; FAC:ESM). It operates in Australia, South Africa and Hungary. It was recently admitted to London’s Alternative Investment Market. While geographical diversification is a core aspect of Falcon’s portfolio, the company has considerable conventional resource potential across all of its assets: The company holds 14.7 million acres in total.

Falcon benefits from relationships with well established partners, namely Hess Corp. (HES:NYSE) in Australia and Gazprom (OGZD:LSE; GAZ:FSE; GAZP:MCX; GAZP:RTS; OGZPY:OTC) in Hungary. Those alliances can help to carry the company through the initial phases and provide technical skills and financial resources. Falcon is embarking on an active work program through the end of 2014 alongside these strong industry partners. Additional transactions are expected to reduce the financial exposure of derisking its substantial portfolio. Considering our expectation that Falcon’s near-term shale gas drilling in Hungary will be followed by a decision to drill five carried wells in Australia, we feel that Falcon’s current share price undervalues its material potential within its asset base.

TER: When we talked last December, you were bullish on CBM Asia Development Corp. (TCF:TSX.V) —whose share price has fallen—and Tethys Petroleum Ltd. (TPL:TSX; TPL:LSE) —whose share price has risen. What is your current view on those two firms?

SW: I remain very bullish on both companies. CBM Asia has an active year ahead with a work program that is geared toward first-stage pilot production. The company is incorporating two pilot programs, one in the Barito Basin and the other in Central Sumatra, as well as dewatering activities at the Sekayu PSC and the Kutai West CBM PSC. Significantly, the production pilots are planned in areas where CBM Asia holds operatorship, thereby avoiding reliance on outside partners. In addition, the company’s recent joint venture agreement to farm into Exxon’s Barito Basin CBM blocks, as well as potential PSCs and joint studies in the Kutai Basin, is clearly significant. In our view, the deal offers a combination of technical and financial strength, as well as the operational efficiency that will be crucial in developing the basins. This deal unlocks the upside potential identified through initial data analysis. Our model calculates the potential for 9.7 Tcf net recoverable, which, if confirmed, could be transformational for CBM Asia.

Tethys Petroleum remains on track and the share price has performed in line with expectations following the company’s farm out of its Tajik assets to Total S.A. (TOT:NYSE) and China National Oil and Gas Exploration and Development Corporation (CNODC). Tajikistan represents an entirely different proposition to investors, in our view. Tethys has a 28% effective interest in the Bokhtar PSC following the completion of the farm-out negotiation, which represents a significant proportion of the externally validated 27.5 billion barrel (27.5 Bbbl) recoverable prospective resource base.

Full details of the 2013-2014 program will be announced very shortly; however, we would expect 2013 to consist of a seismic survey and subsequent data interpretation followed by a deep exploration well in 2014. We would also expect further exploration and development drilling in Kazakhstan as the company continues to target their 1.3 Bbbl gross mean recoverable prospective resource base.

TER: Moving back across the pond, how would an increase in U.S. exports increase junior action in the Gulf of Mexico?

SW: Any increase in demand and a resulting shift in prices will invariably attract junior exploration. Nevertheless, the sheer cost involved in mounting a pure-play exploration program in the Gulf of Mexico is a barrier to entry. One company of note that I cover in the Gulf is Energy XXI (EXXI:NASDAQ). It entered the region in 2005 and purchased key assets from Exxon in 2010. The potential of U.S. exports has pushed the company to invest in the Gulf even more this year. The company budgeted a capex program of $750 million ($750M). Approximately 75% of the firm’s fiscal 2013 budget targets development drilling, and 25% of the budget targets exploration drilling.

Energy XXI has a geographically focused portfolio with some of the largest margins in the industry. It is focused on developing acquired properties while ramping up a complementary exploration program designed to provide organic growth. Also, it has more than 120 million barrels oil equivalent (120 MMboe) in proved reserves. It is set to soon produce 50,000 barrels of oil equivalent per day, of which 70% is oil. The signs look good for this company.

TER: What is the international dynamic between the use of coal by utilities and the emergence of LNG as a cheap reliable energy source?

SW: The sudden abundance of cheap natural gas has dramatically changed the way that the U.S. produces and consumes energy. Modern natural gas-fired power plants produce much cheaper energy compared to coal plants. Burning natural gas, which is mainly methane, produces far less carbon dioxide than burning coal—a modern gas-fired power plant emits roughly two-fifths the carbon a modernized coal plant emits. Some economists say it’s hard to overstate the significance of the sudden availability of cheap natural gas. In my opinion, it is the largest change in our energy system since nuclear power became part of the electricity grid 50 years ago.

However, applying simple economics, utilities might return to using more coal in the future as increased demand makes natural gas more expensive. And the developing countries are behind the U.S. in terms of replacing coal with gas. But the replacement trend is growing. Over the next 20 years, global demand for natural gas is expected to rise dramatically, fueled by rapid economic growth in Asia. With the development of LNG, many companies are positioning to take advantage of that emerging market.

TER: How much would the price of natural gas have to rise to make coal more attractive in the United States?

SW: That is a difficult figure to calculate. There are a lot of social and economic forces in play, including carbon emissions and climate change protocols that the government is trying to put in place. Governments could even prohibit the use of coal. In my opinion, gas prices could rise dramatically in the U.S., and gas would still be the preferred option over coal.

TER: What advice do you have for investors looking to enter or stay the course in gas-oriented firms?

SW: While oil and gas prices rise and fall, there is an overall resurgence in regional and global energy markets being driven by increased demand from the Asian economies, including China, India and Korea. The investment needs that accompany resurgence should set the stage for sustained merger and acquisition activity over the long-term. As for LNG, investors must consider the likely movement of supply and demand over time.

TER: Thanks so much, Sam.

SW: Thank you.

Sam Wahab began his career at PricewaterhouseCoopers (PwC), where he qualified as a prize-winning chartered accountant. On PwC’s energy team, he specialized in assurance and transaction advisory. His clients included Royal Dutch Shell and JKX Oil & Gas. Following a spell in the oil and gas research team at Arbuthnot Securities, Wahab joined Seymour Pierce in 2011. He now heads up oil and gas equity research at Cantor Fitzgerald. His coverage includes companies with global operations on multiple stock exchanges.

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

DISCLOSURE:

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

2) The following companies mentioned in the interview are sponsors of The Energy Report: CBM Asia Development Corp., Tethys Petroleum Ltd., Royal Dutch Shell Plc and Energy XXI. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

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

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

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

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

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

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

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

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

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By www.CentralBankNews.info

By WallStreetDaily.com

Our 32nd President, Franklin D. Roosevelt, provided the best public speaking advice on record: “Be brief; be sincere; be seated.”

And that’s precisely what I aim to do today, as I usher in another set of charts.

For the newbies in our midst, each Friday I handpick a few graphics to convey the most important economic and investing insights for the week.

Today, I’m dishing on the specter of a bear market, runaway real estate prices and the most dangerous income investment in the world.

So let’s get to it…

No Bear Sightings Here…

Here’s more proof that we should shrug off the recent market volatility and just keep calm and carry on.

In each of the last four years, we’ve experienced momentary pullbacks. And each time, the market ultimately resumed its upward trajectory.

I expect this go-round to be the same.

In other words, it won’t be different this time. (Is it ever?)

The Roof, the Roof…

The roof is on fire!

On Tuesday, the latest reading of the S&P/Case-Shiller Home Price Indices was released.

Year-over-year, home prices surged 12%. That’s the fastest growth witnessed in over seven years.

But we don’t need no stinking water to put out this blaze.

Like I’ve shared before, the rapid run-up in prices is a low-inventory phenomenon. And the market will naturally correct itself.

As home prices keep increasing, more homeowners will be convinced to put their houses on the market. Couple that with the almost-instantaneous 1% surge in borrowing costs we’ve witnessed, and voila!

More supply and less purchasing power will help keep a lid on prices – and, in turn, the recovery should continue unabated. Bet on it!

Junk in the Trunk

Back in October 2012, and then again in November 2012, I warned yield-hungry investors about the dangers lurking in high-yield bond funds.

In fact, I pegged them as “the most dangerous income investment in the world.”

I told you to specifically steer clear of the SPDR Barclays Capital High Yield Bond Fund (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG).

Well, I finally feel vindicated. Because the exodus has begun!

And all it took was the hint of an interest rate increase from the Fed.

Of course, the Fed’s comments also spooked bond investors of every stripe and color.

The latest mutual fund flow data reveals that investors yanked a record $61.7 billion out of bond funds this month. That’s almost $20 billion more than the previous record hit in October 2008.

Talk about a dramatic about-face. Before this month, bond funds posted inflows for 21 consecutive months, according to David Santschi, Chief Executive Officer of TrimTabs.

Even the world’s best (and biggest) bond fund manager, Pimco’s Bill Gross, suffered withdrawals. Investors withdrew just over $1.3 billion from his flagship Pimco Total Return Fund (PTTRX) in May.

Yet in his latest note to investors (see here), he’s urging them to stay the course.

“And not because we want to keep you on board [as clients],” says Gross.

Sure it’s not, Mr. Gross.

Add it all up, and at the very least, you need to get the junk out of your portfolio’s trunk if you haven’t done so already. And be very, very careful putting any new money to work in bonds right now. Stick to short-term maturities.

That’s it for this week. Let us know what you think about this column and all our work at Wall Street Daily. All you have to do is drop us an email at [email protected] or leave a comment on our website.

Ahead of the tape,

Louis Basenese

The post Friday Charts: Bear Markets, Runaway Real Estate and the Latest Fed-Induced Implosion appeared first on  | Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Friday Charts: Bear Markets, Runaway Real Estate and the Latest Fed-Induced Implosion

By MoneyMorning.com.au

We won’t say we told you so…OK, yes we will: we told you so.

Over the past few weeks most of the talk around the financial markets has been how bad things are…how the sky is falling in.

‘The yield rally is over’, ‘Sell in May and go away’, ‘Stocks will never go up again’.

Yawn. Let’s get a few things straight: the yield rally isn’t over; buying in May over the long term is actually better than not buying stocks at all; and that’s right, stocks are going back up again.

Our old nemesis, Commonwealth Bank of Australia [ASX: CBA] is now only about 5% from its peak. Odds are investors will begin playing the relative value game again soon, so that the other banks and dividend payers will return to their May highs.

Look, we’re not saying investing is easy. It’s far from that. We’re just saying that the investing environment has changed in recent years. And if you don’t concede that and adapt to it, you’re heading for a world of missed opportunities that could make a big difference to your retirement…

But what exactly do we mean when we say investing has changed? The following illustrations should explain everything. This is how investing used to work:

Source: Port Phillip Publishing
OK. That’s a bit of a simplification. But that was pretty much everything in a nutshell.

Yes, you still had to consider interest rates. After all, the two things that move share prices are earnings and interest rates.

But the actions of the central bank really were a secondary thought. Over the past 15 years, and especially the past five years, that has changed.

Now investing looks more like this:

Source: Port Phillip Publishing

Now it’s not just forecasting earnings, you need to think about the impact that will have on the market…and what impact that will have on the central banks…and what impact that will have on the market…and the impact that will have on earnings.

It’s a vicious circle and a huge bind for investors. The natural reaction is to think, ‘Why bother? It’s all too hard.’

But we take the opposite view. Rather than trying to make sense of the ridiculous, we’re simply turning back the investing clock. We know it’s impossible to guess exactly how the markets will react to a Fed statement or an economic release.

So instead, we’ve gone old school…we’ve bucked the trend by forgetting about central bankers and policy makers. We’ve gone back to analysing individual companies…

Going Old School With Your Investing

If you ask most financial advisors they’ll tell you the best place to put your money during market volatility is in the biggest and best blue-chip stocks.

To some extent we can’t argue with that. We’ve long said that you should have around 20% of your investments in dividend-paying stocks.

That’s great because it means the dividend stocks will pay you to hold them even if you don’t get capital growth. During the past few months we told you to buy more dividend stocks, even though most folks said dividend stocks were a bubble.

However, dividend stocks are the only blue-chip stocks we’d hold for the long-term during a volatile market. Because as the past year has shown you, blue-chip growth stocks aren’t immune from big falls.

It means that investors who invested for the perceived ‘safety’ of blue-chip stocks are nursing some big losses. The better approach is to look at the opposite end of the risk scale.

Doing the Opposite to What You’ve Always Thought

That means looking at speculative stocks. They could be small-cap, mid-cap or large-cap stocks, it doesn’t matter.

The idea is that you’re looking for the biggest bang for your buck. Think about it: what’s the best you can hope for with a blue-chip growth stock? 10%? 20%?

Look, it’s possible you could double your money with a blue-chip growth stock. But we’re prepared to bet against that in this environment.

That’s simply because big blue-chip stocks rely more on interest rates, central bank and government policies. They also have an established customer base they need to maintain. Even a slight economic downturn can turn a profit into a loss.

But at the other end of the scale, among the speculative stocks, it’s a different story. Most of these companies don’t have any revenue or profits to lose.

Or if they do they’re still at such an early stage of development that the growth potential far exceeds the risk of a loss.

We’re talking about companies working on a breakthrough in regenerative medicine that ‘turns back the clock’ on your body, or a company that could revolutionise the manufacturing sector and destroy China’s dominance.

Think about it this way. You could either have a bunch of your cash at risk by punting on a 20–30% gain on a blue-chip growth stock, or you could keep most of your cash (relatively) safe in the bank and just use a small part of it to punt on high-risk stocks that could bag you a gain of 100%, 200% or 500%.

Don’t Vegetate, Speculate

In short, it’s about risk versus reward and doing what you can to reduce your exposure to central bank influence.

The way we see it, if a medical or technology company breaks through with a revolutionary new idea it will have a big impact on the share price regardless of the broader macro-economic environment.

You can’t necessarily say the same thing about blue-chip growth stocks.

We admit this is a controversial view. Most financial advisors will disagree with this approach. But the reality is that investors can’t afford to invest in the conventional way in this volatile market. And neither can they afford to avoid the market completely.

The market volatility you see today will still be around in 10 years. Ask yourself, can you really afford to sit out of the stock market for that long? And as for the alternatives, a pile of cash or gold won’t build you a lasting retirement fortune.

As we’ve shown you before, the best way to build lasting wealth is to invest in businesses. The only point remaining is in which businesses should you invest?
We’ve stated our view. In a market dominated by central bankers and policy makers the best way to grow your wealth is to avoid the markets most influenced by them.

The best way we can put it is this: Don’t Vegetate, Speculate.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: Panic of 2103

Daily Reckoning: The Best Way to Invest in a Volatile Market

Money Morning: Is This Your Last Chance to Sell Before the Stock Market Sinks?

Pursuit of Happiness: Is Technology the Most Exciting Industry in the World?

[Ed note: Not everyone agrees with my view that it’s a great time to buy stocks. But that doesn’t mean I’ll censor opposing views. All I ask from contributors to Money Morning is that they provide a well-thought out and well-argued view. It’s then up to you as a free-thinking adult to decide which view makes more sense and then to act accordingly. Today our new regular contributor and family wealth expert, Vern Gowdie, takes the floor with his thoughts on the market…]

By MoneyMorning.com.au

Markets are all in a flurry – Dow down, gold down, AUD down, government bond interest rates up. The only safe place in the last month has been in cash, term deposits and USD.

But remember, it will not always be so. There will be a time to exit cash – that time isn’t just yet.

So what is causing the great sell off in non-cash investments?

• Is it China’s central bank refusing to supply liquidity to its cash strapped shadow banking system?

• Is it Bernanke hinting at merely tapering (not stopping) the Fed’s $85 billion per month bond and mortgage purchases?

• Is it Japan’s print and be damned policy?

• Is it rising unemployment in Europe?

• Is it social unrest in Turkey, Brazil and Syria?

Certainly one or more of the above global issues are having a negative impact on market sentiment.

But let’s step back a few paces and ask why they are happening. These events are not the cause; rather they are symptoms.

The Great Credit Contraction thesis that determines our asset allocation model is the cause. The events outlined above are merely the consequences of a global economy no longer supported by the debt drug.

The Squeeze is On

Markets have enjoyed a free ride on the coat tails of the central banks printing presses. History has shown us time and time again that artificial wealth creation has a limited shelf life. The volatility in markets is an indication the use-by date on this strategy is fast approaching.

The talking heads (the share brokers with their paid for comment spots on TV) make me chuckle every time they utter their nonsense on why the market has moved up or down.

Bad job data, good job data, lower than expected PMI in China, better unemployment in the US – pick any reason to validate the daily gyration. Day to day, week to week, month-to-month the market will respond to various influences. However over-arching all of this is why these influences occur.

For nearly thirty years the global economy recorded GDP growth due to the massive injection of private sector debt – baby boomer consumers living beyond their means.

Those glory days are now behind us. The baby boomer is mentally preparing for retirement. Clearing the decks of debt and trying to build a retirement portfolio.

Hundreds of millions of baby boomers in the developed world are changing their spending and savings pattern. Less spending and more saving by this demographic powerhouse equals lower growth.

This is lousy timing for governments who (for political reasons) have cultivated a big brother welfare dependency culture.

A slowing economy does not generate higher tax revenues (ask Swannie, sorry, Bowenie about this). So how does government pay for their welfare promises?

1. Increase taxes – not a good option. Numerous studies have shown that increased tax rates actually generate less tax revenue. People become dis-incentivised.
2. Larger budget deficits – this can happen for a while but even governments cannot borrow to infinity. Japan is rapidly approaching the end of their debt rope.
3. Reduce government expenditure – in the absence of a brave political leader, this will not happen until the ‘brick wall’ is plainly evident to everyone. By then it will be too late to take corrective action. Just ask the citizens of southern Europe. In the not too distant future France will also face this reality.

So the Great Credit Contraction will do the job the political and banking leaders will not do.

It Will Correct the Excesses in the Financial System

In the days before central bankers – the 1800′s and early 1900′s – depressions were reasonably frequent and relatively short lived. People behaved recklessly and the market dealt them a quick and brutal punishment. They took their medicine, licked their wounds and started again.

These days every kid gets a prize, no one gets hurt in the playground, sadistic criminals have rights, and the government is the solution to all our problems. Personal responsibility is determined by the courts, not our consciences.

Little wonder we have a financial system that reflects this culture. Policy makers cannot regulate out of existence the laws of economics, as much as the policymakers wish it were so. In the same way they can’t get rid of the laws of gravity.

The Great Credit Contraction has been slowed by the central bankers’ determination to alter the laws of economics. The events of the past month demonstrate the formidable power that is unleashed when hundreds of millions of people alter their consumption habits.

Bernanke will not taper, the Chinese authorities will change their mind and start printing, the Japanese will continue speeding towards the brick wall, Europe will also join the printing party.

These are the only actions this bunch of desperados have left.

The tanks of the Great Credit Contraction keep rolling forward. The central bankers have fired their best shots and delayed, but not stopped the advancement. The only artillery they have left in their arsenal is reams of worthless paper.

The recent volatility is a dress rehearsal for what awaits investors. When The Great Credit Contraction rolls into town, it will not take any prisoners.

All markets – except cash and term deposits – will get caught in the crossfire. Shares, property, precious metals and fixed interest will be casualties.

Baby boomer retirees with balanced portfolios will suffer such losses they are going to re-consider their retirement plans.

The policy making morons that deliver this Armageddon to our doorstep will have all wandered off on tax payer funded pensions, leaving unprotected investors to pick up the pieces.

Forewarned is forearmed – take precautions now to make your portfolio bulletproof.

Vern Gowdie
Contributing Editor, Money Morning

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From the Archives…

The 12 Most Important Rules Every Investor Must Know
21-06-2013 – Vern Gowdie

The US Economy Butterfly Effect
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Beware The Federal Reserve’s Deadly Game of Poker
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Why Thursday Could Be a Key Day for Silver…
18-06-2013 – Dr Alex Cowie

The Single Biggest Mistake a Technology Investor Can Make
17-06-2013 – Sam Volkering