Shares of Vivus traded higher after the FDA approved the company’s supplemental New Drug Application for an improved formulation of PANCREAZE® (pancrelipase) for use in the treatment of exocrine pancreatic insufficiency due to cystic fibrosis and other conditions.
California-based biopharmaceutical company Vivus Inc. (VVUS:NASDAQ) today announced that “the U.S. Food and Drug Administration (FDA) has approved the supplemental New Drug Application (sNDA) for an improved formulation of PANCREAZE® (pancrelipase) Delayed Release Capsules that extends the shelf life to 36 months across all PANCREAZE dosages.”
The company reported that PANCREAZE is indicated for the treatment of exocrine pancreatic insufficiency (EPI) due to cystic fibrosis or other conditions. The firm advised that it worked closely with its PANCREAZE manufacturing partner Nordmark Arzneimittel GmbH & Co on obtaining the FDA approval and that the sNDA was based on the amended terms of the contract manufacturing agreement between the two firms which was first previously announced in June 2019.
The company’s Chief Executive Officer John Amos commented, “The approval of this sNDA is an important milestone for VIVUS and for the patients with EPI we seek to treat…It highlights our ability to derive additional value from our marketed products and allows patients to store PANCREAZE for longer periods of time, which may help to reduce their out-of-pocket expenses. We also expect that the 36-month shelf life will limit the amount of returned product and, over time, will lower our overall supply chain costs. We look forward to working with Nordmark and our supply chain and commercial partners on the transition to the improved formulation.”
The firm advised in the release that PANCREAZE, which was originally approved in 2010, is “a pancreatic enzyme preparation consisting of pancrelipase, an extract derived from porcine pancreatic glands, as well as other enzyme classes, including porcine-derived lipases, proteases and amylases.” The company explained in further detail that the pancreatic enzymes in PANCREAZE act like digestive enzymes physiologically secreted by the pancreas.
The company noted that that PANCREAZE is for use in the treatment of people who cannot digest food normally because their pancreas does not make enough enzymes due to cystic fibrosis and other conditions. The firm claims that PANCREAZE, which contains a mixture of digestive enzymes from pig pancreas, may help the human body use fats, proteins and sugars from food.
VIVUS is headquartered in Campbell, Calif., and is a biopharmaceutical company focused on development and commercialization of innovative therapies for patients with serious unmet medical needs. The company’s commercial products include Qsymia®, which is indicated for the treatment of obese and overweight patients and PANCREAZE®, used in treatment of exocrine pancreatic insufficiency (EPI). The firm stated that EPI affects many patient populations, including patients with cystic fibrosis, chronic pancreatitis, celiac disease, diabetes, both type 1 and type 2, inflammatory bowel disease and HIV infection.
Vivus has a market capitalization of around $24.5 million with approximately 10.64 million shares outstanding and a short interest of about 6.3%. VVUS shares opened greater than 30% higher today at $3.02 (+$0.72, +31.30%) over yesterday’s $2.30 closing price. The stock has traded today between $2.82 and $3.97/share and is currently trading at $3.80 (+$1.50, +65.22%).
Disclosure: 1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None. 2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. 3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. 4) The article 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. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 5) 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. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. 6) This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.
Maurice Jackson of Proven and Probable speaks with Andy Schectman, president of Miles Franklin Precious Metals Investments, about the rationale for buying precious metals and the best values at this time.
Maurice Jackson: Joining us for a conversation is Andy Schectman, the president of Miles Franklin Precious Metals Investments. Recently we discussed the prudence of implementing ratios as an effective strategy for readers in identifying buy and sale signals for their precious metals portfolio. Today we’re going to expand the narrative further on buy signals and discuss the best values right now, what to buy should we experience a broken-down system, and a very important topic protecting your financial legacy. Before we begin, Mr. Schectman, for first time readers, who is Miles Franklin Precious Metals Investments?
Andy Schectman: This month Miles Franklin is celebrating our 30th year in business in Minneapolis. We’re a family owned company. We have eclipsed $6 billion in transactions without ever having a customer complaint, ever. We maintain an A+ rating with the Better Business Bureau. We’re one of fewer than 25 companies ever approved by the United States Mint as an authorized reseller of their product and in a federally non-regulated industry and we’re very proud of that reputation. We really are an association with people like yourself and Rick Rule and other icons in the industry. We’re very proud of all of our accolades and of our reputation, but the state of Minnesota where we’re located could care less about our reputation.
That’s the only state in the industry in the United States that regulates the precious metals industry. We are licensed, we are bonded, and we are background checked. Everyone in the company from clerical staff to salespeople to principals like myself. Background checked every single year, continuing education and compliance that’s mandatory, and a surety bond that has made most of the competition throughout the United States boycott Minnesota. What it means in essence, we have a great reputation, but the state of Minnesota puts an exclamation point on that basically guaranteeing the safest transaction in the precious metals industry.
Maurice Jackson: Andy, before our interview you made a valid point there, that really should be the theme for today’s interview and that was the central banks are preparing and so should we. That really resonated with me because all too often I find many investors focus on the Federal Reserve and what their next move is on interest rates and how the secondary market will respond. Just what exactly are central banks doing and why?
Andy Schectman: In the 1990s all the central banks signed on to what was called the Washington Agreement, and I could never understand why they all wanted to sell their gold and so fast, and the central banks with the Washington Agreement were limited to 500 metric tons per year, the amount that they could sell, so as to not completely destabilize the precious metals market. I remember that’s when Gordon Brown and the Bank of England finished selling all of their gold as it approached $280 an ounce. Didn’t make a whole lot of sense to me. To this day it still doesn’t. There were four reasons that would’ve pushed them into doing that. Number one, gold doesn’t pay interest. Number two, gold costs money to store. Number three, the return is not predictable. There’s volatility, but the biggest reason, the fourth reason, was the tier three asset status where the amount calculated on a balance sheet was only equal to 50% of the value.
So the denigration of the balance sheet, the inability to sell bonds and to transact international business by a factor of 50% would have made the central banks want to line up to sell their gold. As of April 1 of last year, as you know, the reclassification of gold through the Basel III agreement to the only other tier one asset on the planet next to U.S. dollars and Treasuries has made these central banks run from selling gold, run to accumulating it. In 2018, they bought more gold than at any time in the previous 60 years. Last year that number was up almost 90% and this year, every small central bank from Central America to Eastern Europe is loading up on gold. They are de-dollarizing quietly and accumulating gold unlike any time I have ever seen in 30 years in this industry.
Maurice Jackson: When I think about the Federal Reserve, one of their claims to fame is that they’d like to be transparent. I cannot recall the Federal Reserve sharing the information you just shared with us with the citizens of the United States. Am I incorrect in that?
Andy Schectman: No, they don’t. Absolutely not. In fact, when I was a financial advisor a long time ago, I was Series 7 licensed, which is the ability to sell stocks. That’s back when people who sold stocks were called stockbrokers instead of financial advisors. That all changed with the internet and free trades or $9 trades by Scottrade. Everyone all of a sudden became a financial advisor instead of a trader because traders made their money per trade instead of money under management as an advisor. That’s a topic for a different day. To this day, one of the most impactful things I ever saw in 30 years in this industry was page one of the Series 7 Manual. It’s about a 300 page book. Page one, you open it up and it says, and this was the only writing on the page, it said the little man rule. The little man rule is that the little man never wins because the big investor is always ahead of the curve.
So I believe that the central banks were alerted at probably 2017 at the meeting in Basel, Switzerland. They probably were told that in 2019 this was going to go into effect. That’s why they have been accumulating gold so voraciously since 2018 and no one’s talking about it. Until the central banks have properly positioned themselves, then it’ll become front and center news. The old saying about it’s less what you know and more who you know in life really is true all too often. I think they take care of themselves. They being the central banks and the central banks by their movements are de-dollarizing and they’re taking this very seriously. Let me put it to you this way. Gold was up 18% last year. That’s one of the biggest movements that I can ever remember in a year, and no one even notices it because the stock market was up even more.
The movement in gold, I can tell you as someone who owns a precious metals company, was not due to retail investment. We had a good year last year, but our year was characterized much more by large orders by accredited and institutional size investors and less by the average person. In 2011, we were getting 200 orders per day. Last year we were down to 10% of that, but the volume we did was probably greater than 2011. All I can simply tell you is this, is that the 18% movement in gold last year if I had a gun to my head, I would say is 99% attributed to central banks accumulating it on the quiet. They’ve been doing it since 2018 and they did it in 2019 and that trend continues unabated now. At some point when the central banks have properly de-dollarized and repositioned, maybe it’ll be more front and center news, but until then that would crowd them out of their own trade. So it’s the old saying, don’t do as I say, do as I do. Well, that’s a prime example of it.
Maurice Jackson: On behalf of all of our listeners, the retail investor, the little investor, the little guy that you were referring to, thank you for sharing your words of wisdom with us because, again, this is the narrative that we don’t hear. We see price movements, but we don’t understand why and the rationale behind it. We’re truly experiencing a financial system that is breaking down and we have bubbles surrounding us. It’s not a matter of if. What everyone should consider is when and how to prepare. Can a single individual take the same actions as the central banks are taking?
Andy Schectman: Absolutely, the United States by its own admission is north of $120 trillion in debt. Just between the national debt of $22 trillion and the $53 trillion shortfall in Social Security, we’re $75 trillion in the hole. Why is that not front and center news, Maurice, everywhere? You know a trillion seconds ago was 31,688 years ago. So why the hell is that not front and center news, just like the reclassification of gold? The things that matter about the future of our country are being glossed over in favor of trying to impeach Donald Trump for trying to have Joe Biden’s son investigated. The bottom line is it’s a misappropriation of efforts and of energy and of money. The things that really matter are being completely and totally glossed over. When you look at a country that is just between those two things, $75 trillion in the hole, north of a $100 trillion in the hole in unfunded liabilities and things like Medicare and Medicaid and government, military, and pensions, and entitlements.
The U.S. is broke. As we talked about before and I heard on your interview with Bob Moriarty (click here), he mentioned the same thing I did. The largest single asset in the United States is student debt. We have $2 trillion in assets, of which $1.8 trillion is in student debt, which as he eloquently said that people like Elizabeth Warren want the taxpayer to pay for it. The biggest issue is we are a country that’s financially insolvent with nothing in the way of assets. So the most important thing is to ask yourself not how much gold and silver should I own, but what exposure do you want in a currency that is effectively broke and the most sophisticated, well-funded, and influential traders on the globe are quietly exiting stage left. That’s the most important thing. So you do what you can. You mitigate your exposure to the dollar.
One of the slides that I showed at the Sprott show last year was a slide from JP Morgan Private Wealth. This is the division of their company that works with the wealthiest investors in the world, the centi-millionaires and the billionaires and they sent a letter out to all of their clients in this division that’s created quite a stir in the industry, and it basically said that we want you to mitigate your exposure to the U.S. dollar through foreign currencies and precious metals because we believe it is inevitable that the dollar will be challenged at some point for singular world reserve status. Well, there you go. It’s about mitigating your exposure to the dollar. It’s about trying to take some of that dollar risk off the table in a non-dollar denominated asset with no counter party risk. As Doug Casey so eloquently says, gold is the only asset that is not simultaneously someone else’s liability.
When I say gold, I mean silver, platinum, and palladium, too. The bottom line is that you remove counterparty risk when you take possession of it. You remove the dollar risk. Then there’s our friends at Morningstar through Ibbotson have reminded us recently that because of the interest rates being so low, the inverse relationship between stocks and bonds used to be called risk-on risk-off. Well, that’s gone because as interest rates rise, it kills both markets. What they basically said was the only asset left on the planet that has an inverse correlation to the United States stock market are precious metals. So you have inversely correlated assets or an inversely correlated relationship between the U.S. stock market and the U.S. dollar.
You see the most sophisticated traders on the globe doing de-dollarizing. To not recognize this because of price and price alone is a huge mistake because that is the greatest tool of misdirection is price. Bottom line, how do you do it? You just simply buy what you can when you can and slowly de-dollarize. Do as the biggest and most in the know and sophisticated traders on the planet are doing. You de-dollarize best you can as often as you can.
Maurice Jackson: You referenced some household names here. One I’d like to interject, it is Rick Rule. When he makes his reference to precious metals that they are payment in full. That’s something we all should consider there. Precious metals don’t have the word note on them. They’re not an IOU. They are payment in full. Let’s switch the narrative from rhetoric to arithmetic and talk to the person listening right now and share some specific buying opportunities that you’ve identified that will maximize their precious metals portfolio because I find that all too often, most buyers don’t take advantage of the premium fluctuations within their metal of choice. What are you and your most successful clients buying right now?
Andy Schectman: First of all, let’s just talk about the pink elephant in the room and that is the silver price. There’s no question that silver is, in my opinion anyway, that silver is the most undervalued commodity on the planet. While we’re still able to get it, there’s very little that you can think of buying that is as undervalued as silver. What commodity can you buy that’s trading at a third of its peak 1980 peak? I mean you can’t think of anything that you can buy today. Any commodity from food to energy to precious metals that trade at a fraction of what they were trading for in 1980. Silver with the 86 to 1 ratio. The relative relationship between gold and silver is screaming to buy silver. So let’s just say that silver is the best buy period.
With that being said, you could also say the same thing about platinum, I guess, too because the relation between platinum and gold is at its all-time high. I think silver has more utility not only as an industrial metal, but also as money than platinum does. Platinum doesn’t have the history as money, but it’s a great value too. If I’m buying gold, I’m buying the $20 gold pieces. The numismatic gold coins are as inexpensive or on par with or only slightly higher than gold bullion coins and that is a price anomaly. If I’m buying gold on my low grade certified mint state $20 gold pieces for basically the same price as a gold eagle, that is in my career almost unheard of in terms of premium as you mentioned. It’s nonexistent and in 20072009 those coins were trading at 60+%, 70+% premium to a $1000 gold price. But even in the 1990s when gold was in the midst of a 25-year bear market, those coins traded at a 20% to 25% premium to gold spot. Now they’re 4% to 5%. It’s as good of a value in gold as I’ve ever seen.
If I’m buying silver, I think it’s very difficult to ignore the value that we find in junk silver bags, 90% by weight, dimes, quarters, and half dollars. Right now as far as their price, I remember when they were $4$6 an ounce over the price of silver and today you can get them for roughly $0.69 over silver. It’s an incredible value, an incredible bargain. Bottom line is that when you’re buying gold and silver, it’s just most important to focus on maximizing what you get, but not crossing over the penny wise pound foolish threshold by buying too large of a piece.
You always want to maintain good liquidity and flexibility. Typically I don’t go any bigger than one ounce in anything I recommend typically. Whether you’re playing poker or driving on a crowded highway or just investing, you can never have too many exits or too many outs or too many options and so I guess you could easily say in this industry by going big, by buying 100 ounce bars of silver or 10 ounce bars of gold in lieu of a one ounce piece, the savings that you get is not commensurate with the loss of flexibility. If I’m buying platinum, I’m buying one ounce platinum maple leafs. They’re probably the best buy. If I’m buying silver right now, my first choice is going to be 90% junk silver bags. If I’m buying gold, my number one choice is going to be MS61, MS62, or MS63 $20 gold pieces, which are amongst the cheapest I’ve ever seen in 30 years in this industry.
Maurice Jackson: Switching gears, let’s discuss storage and protecting your financial legacy because I believe a number of precious metals investors make a critical error right here. The biggest one in my experience is using safe deposit boxes at their banks. Andy, why would storing your precious metals in a safe deposit box not be in their best interest?
Andy Schectman: Well, there’ve been a couple of banks. I think Morgan Chase came out and said you’re not allowed to store coins or cash in a safe deposit box. Safe deposit boxes are not insured. The contents are not insured. They have nothing to do with FDIC. Furthermore, if you were to have a bank run into problems or there were a banking holiday, they’d close it down on a Friday night and you wouldn’t get into that box until they reopened. Not a good idea. Also, the banks have programs that scour the obituaries and if someone dies and it’s in the obituary, those boxes are sealed until they are opened for probate. So it would be the last place I would store my precious metals.
A safe deposit box in a major institution, a banking institution in the United States, would be the last place I would store my precious metals. I would dig a hole in the backyard and become a midnight gardener before I would do that.
Maurice Jackson: All right. Does Miles Franklin offer a more efficient, safer storage alternative?
Andy Schectman: Yes, we do. We offer several. Both domestic and international, but I would like to talk about the international storage and we actually do have a safe deposit box program in Canada, in Toronto and in Vancouver. We have been given North American exclusive on this program. We’re the only ones who have access to it. These are brand new, state of the art safe deposit boxes where there’s only one key. You as the depositor hold the one key and the only spare. Most people who have used the safe deposit box before will remember the experience of going into the facility, opening up the box with a key. At the same time, the bank administrator will put a key in. You put them in together. That’s the master key and then the box opens. With these they’re just one key. You hold the only key and the only spare.
Our safe deposit box program is fully insured. There are a few things unique about it. Number one, if you Google basic questions and answers Form 8938 you go right to the IRS website and they will say on that website that precious metals held outside the United States in a directly held fashion in a non-financial institution are not reportable. Well, the only example the IRS has ever given as to what they mean by directly held is a safe deposit box in a non-financial institution. So what differentiates our program? Number one, state of the art one key boxes instead of two. The bank does not or Brinks in this case does not hold the master key. Number two, it’s held in a non-financial institution. Brinks is not a financial institution like a bank.
Number three, it’s fully insured whereas stuff held in a safe deposit box in a bank is not insured. Lastly, the way that we bill for this is by the ounce. We’re the only one in the industry that I know of that bills by the ounce instead of by the value. In other words, if you believe gold can only go higher from here, you have a fixed rate with our storage program. So it’s not reportable to the federal government in both FACTA and FBAR because of the fact that it’s directly held in a non-financial institution. The client holds the only key and the only spare. It is fully insured.
I think maybe the biggest reason to consider owning metal outside the United States is look at what the central banks are doing. We started out this conversation by saying the central banks are preparing, so should we, but what are they preparing for?
They appear to be preparing for a dollar that runs into trouble. If the dollar runs into trouble, the first thing that the U.S. government will do, in my opinion, is create or impose currency controls because the inclination of the wealthy if the dollar starts to slide, let’s just say as we’ve talked about before, OPEC says we’re going to accept payment for oil in yuan and ruble, or let’s say the BRICS nations issue a new currency backed by gold. Or maybe it comes right out of China or whatever it is that creates panic selling in the dollar. The very first thing that the U.S. would do would be to close the window of getting money out of the country because the first inclination of wealthy people in the United States would be to buy something from another currency. They would buy Swiss denominated bonds or real estate in another currency, but in order to do that you have to first sell dollars to buy a Swiss bond or to buy a condo in Vancouver.
By doing that, you exacerbate the inflation. You increase the velocity at which things happen. So currency controls if things get bad with the dollar will be the first thing that will happen. Having money outside the country, non-reportable, fully insured, in a fixed rate structure in my opinion makes our storage program the envy of the industry and non-comparable. There is nothing like it. To be able to have money outside the country that fully is legal and no one knows about and won’t go higher in terms of its value no matter how high gold goes based upon the falling dollar, to me is much more than just storing your gold outside the country.
Maurice Jackson: Andy, last question. What did I forget to ask?
Andy Schectman: I don’t think you’ve forgotten really to ask anything, Maurice. You’re thorough as can be. The bottom line is simply this, that I think if people are concerned about things going upside down in this country and you want to buy some metal to protect at home, to me, junk silver dimes and quarters are the best choice in silver and one tenth ounce gold American Eagles are the best in gold. They’re the size of a dime. They’re clearly marked one 10th of an ounce. From a barter standpoint if people are concerned about that, those are the two things to own.
For me, my main consideration when I am either buying gold and silver for myself or recommending it to others is to maximize what we’re getting without decreasing my flexibility. Never ever compromising my liquidity. The things that we’ve talked about today. Junk silver, one 10th ounce Eagles, low-grade certified $20 gold pieces, one ounce platinum coins. These are all as liquid and vanilla as anything you could ever buy. They will maximize your liquidity and your flexibility, never compromising them. I think that if you follow that rule, you’ll never go wrong in this industry whatever you’re doing.
Maurice Jackson: Andy, for the person listening that wants to get more information regarding the safe deposit boxes, what’s the website address?
Maurice Jackson: Mr. Schectman, thank you as always for sharing your valuable insights today. For someone listening that wants to speak with you, please share your contact details.
Andy Schectman: My direct dial is 1 (800) 255-1129 or email [email protected].
Maurice Jackson: As a reminder, I’m a proud licensed representative for Miles Franklin Precious Metals Investments where we provide a number of options to expand your precious metals portfolio from physical delivery, offshore depositories, precious metal IRAs, and private blockchain distributed ledger technology. Call me 7 days a week directly at (855) 505-1900 or you may email [email protected]. Finally, we invite you to subscribe to www.provenandprobable.com. We provide mining insights and bullion sales.
Mr. Schectman, thank you for joining us today on Proven and Probable.
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
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By TheTechnicalTraders – We have been writing about the strong potential for a deeper market rotation in the US and global markets for well over 60+ days. In fact, our researchers predicted an August 2019 breakdown date based on Super-Cycle patterns that, eventually, pushed into 2020 as the US/China trade negotiations and other global news kept global markets in a low volatility bullish trend throughout the end of 2019.
We’ve highlighted some of our research posts over the past 30+ days to help illustrate the technical and price patterns that our research team has identified and shared.
Technical Analysis is based on the premise that price reflects all news and expectations the instant that news or data is known. A common term in Technical Analysis is “Bias”. This is when the price trend is substantially more Bullish or Bearish by nature or expectation. Bias occurs when investing conditions mostly eliminate risk (for the Bullish side) and opportunity (for the Bearish side). When traders feel they can enter trades without any real risks (trading Long) or when they feel there is no opportunity for the markets to rally (trading Short), then a BIAS exists in the markets.
When the global markets rotate and volatility extends to much higher levels, the markets change from a “Biased Trend” to what Technical Analysts call “True Price Exploration”. When this happens, price begins to operate under the price principles of Gann, Fibonacci and Elliot Wave theories where price attempts to rotate to new lows or highs in an attempt to “seek out” clear support and resistance levels before establishing a new longer-term “Biased trend”.
We believe the global markets are about to enter a very volatile period of sector rotation. Certain sectors may see a much deeper price exploration than others. For example, consumer product manufacturers focused on US and European markets may see very limited risks compared to the Industrial Supply sector where a global economic slowdown could really hurt their future expectations.
These two Market Sector Maps (source www.Finviz.com) highlight the change in the direction and scope of these changes over the past week and the past 30 days.
This first Sector Map is a 1 Week Sector Map
This second Sector Map is a 1 Month Sector Map
Pay very close attention to the sectors that were moderately or strongly weak in the 1-month chart and continue to weaken in the 1-week chart (Financial, Property, Telecommunications, Telecom Services, Healthcare, Biotech, Basic Materials, Industrial Goods, Lodging, Resorts, Travel, Hospitality, Food, Packaging, Textile. The list is rather impressive and it suggests this Coronavirus has somewhat panicked the markets and consumers. Yes, many of these consumers will continue to go out for food, entertainment, and other essentials – but what if 15% to 25% of them cut back on these activities and decide to stay home more often and watch movies or play games?
I remember in 1990 when Desert Storm started. Just before this war started, the US economy was clicking right along. I remember that within 10 days of the war starting, things started to change on the roadways and markets. I also noticed a change in consumer spending with a friend’s computer gaming distribution company. All of a sudden, consumers slowed their external purchasing activities and focused more on protectionist activities. We believe this same type of event is going to quickly unfold within the US and other nations as this Corona Virus extends over the next 30+ days.
This is why I believe the volatility of price and market sector rotation will continue for at least 60+ days as the globe attempts to contain and eliminate the risks associated with this virus. We understand the risks in the US and Canada are very small at the moment, but that has not stopped shoppers from emptying the shelves at the local hardware and pharmacy stores for “surgical masks” and supplies. Trust us, people are already well into the protectionist-mode and are preparing for what may happen over the next 30+ days.
This creates an opportunity for technical investors and traders. This potential for deeper price rotations and extended opportunities resulting from an end of bias volatile price exploration allows us to target very quick and exciting trades.
In part II of this research post, we’ll highlight three specific sectors we believe are poised for great trade setups as a result of the volatility and rotation in the global markets. Join us in our quest to create incredible profits from these bigger trends – visit TheTechnicalTraders.com today.
The past few months have been rough for Uber Technologies, Inc as the multi-national ride-hailing giant grappled with profitability concerns, multiple regulatory challenges and growing competition.
Price wars with competitor Lyft have negatively impacted profitability, with Uber reporting losses of $1.2 billion during the third quarter of 2019 and $5.2 billion in Q2. After US markets close on Thursday, Uber Technologies, Inc. will release its fourth quarter financial results with investors paying very close attention towards gross bookings, ride segment results and Uber eats.
Wall Street expects the ride-hailing giant to book a $1.2 billion loss, piling up Uber’s losses for 2019 at a painful $8.5 billion. Revenues are expected to hit $4.07 billion while earnings per share are seen falling to 67 cents a share, up from the 76-cents-a-share loss expected at the beginning of the quarter.
Despite all the gloom and doom, investors still remain optimistic about the company’s future. Shares have appreciated over 25% since the start of the year, as the business outlook brightened following the completion of a mega $3.1 billion takeover of Middle-East based rival Careem.
If Q4 earnings and revenues surprise to the upside, Uber shares may rally to levels not seen since early August 2019 above $40. Alternatively, disappointing quarterly earnings report may send share prices lower with $36 acting as the first key level of interest. A breakdown below this level could open the doors towards $34.50.
S&P 500 back at record highs
It was another day another record high for the S&P 500 as positive US economic data and China’s pledge to halve tariffs on $75 billion worth of US goods boosted global risk sentiment.
Speculation around central banks easing monetary policy in the face of the coronavirus outbreak injected US equity bulls with additional inspiration to push the S&P 500 to all-time highs above 3350.
From a technical standpoint, a solid daily close above 3340 may open the doors towards 3380 over the coming weeks. If 3380 proves to be reliable resistance, the S&P 500 could correct back towards 3000.
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The monthly nonfarm payrolls reports will be coming out tomorrow. The data, which will be released by the Labor Department is forecast to show a slight pick up in the payroll figures.
For the month of January 2020, US nonfarm payrolls are forecast to rise 150k. This is after the December payrolls came in below estimates at 145k. It was also the lowest payroll figures since May 2019.
The unemployment rate is forecast to remain unchanged at 3.5%, the same as last month. However, the underemployment rate which is a measure of discouraged and underemployed people fell to 6.7% which is the lowest on record since 1994.
But the wage growth, which fell to 2.9% in December is tipped to rise to 3.0% on the year ending January 2020. The labor force participation rate held steady at 63.2% during the month.
Overall, the report for December was slightly disappointing, if not mixed. There was also a downside revision to the payroll figures for the previous two months. Data for both October and November saw payrolls decreasing by about 14,000.
Most of the downside to the payrolls were driven by a decline in the manufacturing sector jobs, while services sector jobs managed to offset some of these declines.
The manufacturing sector saw a net gain of only 46,000 compared to 246,000 just the year before in December 2018.
Outlook for Payrolls in January Remain Mixed
While the estimates on both the payrolls and wage growth are somewhat optimistic, the outlook is quite mixed. There is a chance that the payrolls report could come out with a negative surprise.
Still, regardless of the outcome, the data will signal what is going on. A weaker than forecast estimates will reinforce the view that the US economy is indeed slowing down. An upside surprise at best will see only a short term reaction from the markets.
Thus, the risks are more inclined to a negative surprise than for a beat on estimates.
The markets will also be focusing on wage data. The Fed, in its recent monetary policy meeting, signaled that it will be tolerating an overshoot of the inflation target. This means that interest rates will not rise even if inflation hits above the 2% target.
Amid this policy view, wage growth in the United States will become even more important.
Despite wages running slightly higher than inflation, when removing the inflation, real wage growth is running at the lowest level since July 2018.
This could potentially be one of the key indicators to look into today’s jobs data. A sluggish pace of wage increase could see a negative reaction from the markets.
Another factor to consider when looking at the January 2020 payrolls report is the impact of Boeing. Being of the major employer in the United States, the company has been plagued by the 737 MAX issue. During the month of January, the company laid off 2,800 workers in Kansas. This is about 20% of its workforce in the region.
Further impact could be felt in the coming months.
Impact of the January Payrolls Report
Today’s payrolls report marks an end to a busy and data-heavy week. Alongside the economic reports, the US earnings season continues in the backdrop of fears of the effect of the coronavirus.
Thus, the markets will be a bit volatile into the payrolls report. The equity markets have been pulling back after hitting new highs. But we do not expect to see a reversal of this trend based on monthly payrolls data alone.
The vast majority of central banks have been embarking on some form of quantitative easing over the last couple of years. But the economic outlook for most of the world is being repeatedly cut.
This calls into question whether the policy is as effective as its proponents claim. As central banks plunge further into negative rates, it seems to be an increasingly relevant issue.
Proponents of quantitative easing – chief among them the IMF – could argue that what little economic growth we have is thanks to the policy. They could argue that things would be a lot worse without central bank easing.
They can even point to the mountains of traditional economic theory to support their position.
The Rebels
The group who argue for a change in policy and warn about the potential shortcomings of QE have some interesting allies. That is, the many members of the governing boards of the very central banks buying securities.
Calling for structural change and saying that the central bank can’t be solely responsible for reviving economic growth is a cliche at this point. But the calls have become more pronounced as the economies with the most accommodative central banks have failed to take off.
Meanwhile, the largest economy in the world – where the President is notoriously at odds with financial regulators – has record economic performance.
So, What Are the Cons of Quantitative Easing?
There is still a consensus that QE in the immediate instance of a financial crisis is useful.
Where the difference comes in is the effect of “prolonged” QE. Dissenters have likened it to an addictive drug.
It’s supposed to get a jolt of adrenaline to a lagging economy. But, financial institutions can become complacent towards injections of cheap capital to prop up bond and stock markets.
Everyone also agrees that QE has negative consequences. Low interest rates are meant to discourage savers, which means retirement funds deplete quicker, affecting the most vulnerable.
The longer QE is in place, the more the effect persists. This leads to potential bankruptcy in retirement systems, forcing up retirement ages and cutting benefits.
Conditions Aren’t the Same
The argument initially was that lowering rates or buying securities, would be a short-term policy. This would then minimize the negative effects, and the “price” would be worth paying.
The thing is, in the interim, studies have shown that the increased liquidity of QE doesn’t necessarily go where the central bank wants.
Carry trade encourages the migration of funds overseas in search of higher yields. Faced with a lack of investment returns, many savers simply hoard cash. Neither helps growth in the domestic market, even if it helps reduce the potential of inflation.
Some have argued that the massive increase in wealth inequality is due to QE. They claim it supplies cheap capital to the largest businesses and financial institutions, while the low interest rate discourages banks from offering riskier loans to small businesses.
One can point to increasing income inequality in countries with extended QE programs, such as Japan and now the EU.
Coincidence
Naturally, the situation could be a case of “correlation does not mean causation”.
QE is supposed to be applied when economic conditions are poor. But what if the economic conditions are caused by QE? With central banks continuing to cut rates, it doesn’t seem to be a question regulators are considering too much.
The US dollar continued to rally over the European morning on Thursday following another batch of solid data yesterday. The ISM non-manufacturing reading for January came in at 55.5 vs 55.1 expected. The ADP employment reading soared to 291k vs 157k expected, fuelling hopes of a strong NFP reading on Friday. The USD index trades 98.16 last, still capped by the 98.25 resistance level for now.
Euro Testing 1.10
EURUSD is under pressure again on Thursday as the USD rally continues to gain strength. EURUSD is trading back down around the 1.10 support level which as tested yesterday and is holding for now, though it looks vulnerable. Speaking in Paris yesterday, ECB head Lagarde noted the risks to the Eurozone economy and highlighted the new threat from the coronavirus.
GBP Stuck At Support
GBPUSD has been a little softer today also given the ongoing rally in USD. Tensions between the UK and EU earlier in the week as leaders set out their visions for a future trade relationship have taken some of the shine off better UK data this week. GBPUSD is anchored around the 1.2978 level.
Risk Markets Soften Somewhat
Risk assets have softened a little over early European trading today though the tone remains buoyant. News of President Trump’s acquittal has boosted US equities, seeing the SPX500 breaking out to fresh highs of 3358.63 overnight. Risk appetite has also been bolstered by emerging hopes of a coronavirus vaccine, despite the WHO stating that no cure has been found yet.
Safe Havens Pick Up
Safe havens have been a little firmer this morning, given the mild pull back in equities. Both JPY and gold have been higher against USD though are both trading lower on the week. USDJPY is now testing the bearish trend line around the 109.86 level, having broken above the 109.71 resistance yesterday. XAUUSD trades 1561.36 last, having found support at the 1554.69 level once again.
Crude Slides on Bearish EIA
Oil prices have seen a small late week recovery amidst the pickup in risk appetite seen over recent days. However, crude has run into resistance at the 52.17 level, capping the recovery for now. Yesterday, the EIA reported a further 3.4 million barrel surplus in US crude stores which is weighing on crude prices here.
Loonie Capped By Resistance
USDCAD has had a muted start to the day with price treading water around the bearish trend line from 2019 highs, capped by the 1.33 resistance level for now. Canadian trade balance data released yesterday was better than expected with the deficit narrowing to -0.4 billion from -1.2 billion prior.
Aussie Lower on Data Miss
AUDUSD has come back under pressure today also. The recovery in AUDUSD has waned a little overnight on the back of weak data with retail sales coming in below expectations at -0.5% vs -0.2% expected. AUDUSD trades .6742 last.
The Philippine central bank cut its benchmark overnight reverse repurchase rate by 25 bps to 3.75 percent, saying “the manageable inflation environment allowed room for a preemptive reduction in the policy rate to support market confidence” and ward off “the potential spillovers associated with increased external headwinds.”
The rate cut by Bangko Sentral Ng Pilipinas (BSP), its fourth since May 2019, was widely expected as Governor Benjamin Diokno on Feb. 5 said it would be better to cut interest rates sooner than later, adding the central bank is still looking to unwind the 2018 rate hikes and expects to cut rates by 50 basis points this year.
The outbreak of the coronavirus, which poses a new and unexpected risks to economic growth across Asia, boosted rate cut expectations further.
BSP raised its rate by 175 basis points in 2018 to curb inflationary pressures from a fall in the peso and then unwound 75 points of this in 2019, leaving 100 basis points to be reversed.
In today’s statement, BSP’s monetary board said inflationary expectations remain anchored within the target range of 3.0 percent, plus/minus 1 percentage point, and inflation is seen broadly steady in 2020 and 2021, with average inflation in the target range.
Upside risks to prices from the outbreak of the African Swine Fever, tight supply of rice, and the ongoing Taal volcano eruption and aftermath of typhoon Tisoy are mitigated by uncertainty over trade and economic policies that weigh on global demand while the prospects for global economic growth have weakened amid geopolitical tensions.
“At the same time, the Monetary Board noted that the spread of the 2019 novel coronavirus could have an adverse impact on economic activity and market sentiment in the coming months,” BSP said.
Inflation in the Philippines rose to 2.9 percent in January from 2.5 percent in December while the economy expanded by an annual 6.4 percent in the fourth quarter of 2019 for full-year growth of 5.9 percent, down from 6.2 percent in 2018 amid delays in the budget approval.
The government targets 2020 economic growth of 6.5 to 7.5 percent but industrial output is still contracting, with output in December down 9.5 percent year-on-year, the 13th consecutive month of a decline and the steepest fall since August 2019.
After falling steadily from March 2013 to September 2018, the Philippine peso has been rising in the last 16 months but was steady in the wake of the rate cut, trading at 50.7 to the U.S. dollar from 50.8 at the start of the year.
Bangko Sentral Ng Pilipinas issued the following statement:
“At its meeting on monetary policy today, the Monetary Board decided to cut the interest rate on the BSP’s overnight reverse repurchase (RRP) facility by 25 basis points (bps) to 3.75 percent. The interest rates on the overnight lending and deposit facilities were reduced to 4.25 percent and 3.25 percent, respectively.
Latest baseline forecasts indicate a broadly steady path of inflation for 2020 and 2021, with average inflation remaining within the target range of 3.0 percent ± 1 percentage point. Inflation expectations also continue to be firmly anchored within the target over the policy horizon. Meanwhile, the risks to the inflation outlook continue to tilt slightly toward the upside in 2020 and toward the downside in 2021. Upside risks to inflation over the near term emanate mainly from potential upward pressures on food prices owing in part to the African Swine Fever outbreak and tighter international supply of rice. Moreover, there continues to be the burden on the economy posed by the ongoing Taal volcano eruption and the aftermath of typhoon Tisoy. However, uncertainty over trade and economic policies in major economies continue to weigh down on global demand, thus mitigating upward pressures on commodity prices.
The Monetary Board also observed that prospects for global economic growth have weakened further amid geopolitical tensions. At the same time, the Monetary Board noted that the spread of the 2019 novel coronavirus could have an adverse impact on economic activity and market sentiment in the coming months.
Given these considerations, the Monetary Board concluded that the manageable inflation environment allowed room for a preemptive reduction in the policy rate to support market confidence. While recent demand indicators still point to a firm outlook for the domestic economy, the Monetary Board believes that a policy rate cut would provide additional policy support to ward off the potential spillovers associated with increased external headwinds.
Going forward, the BSP will remain watchful over emerging price and output conditions to ensure that monetary policy settings remain consistent with price stability while supporting sustained non-inflationary growth over the medium term.” www.CentralBankNews.info
On the 4-hour timeframe DJI: H4 has risen above 200-period moving average MA(200), which is rising.
We believe the bullish momentum will continue after the price breaches above the upper boundary of Donchian channel at 29523.1. A level above this can be used as an entry point for placing a pending order to buy. The stop loss can be placed below 29285.1. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (29285.1) without reaching the order (29523.1), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.
Manufacturing sector in US resumed growing in January. Will the DJI stock index continue rebounding?
Positive US data lately buoyed investor confidence US economy is not in as dire straits as bearish analysts picture after the start of recent sell-off. The manufacturing sector resumed expanding in January: the Institute for Supply Management reported its PMI (purchasing manager’s index) rose to a six-month high of 50.9% in January, versus expectations of a 48.5%. A reading above 50% indicates expansion, while below 50% indicates contraction. And total vehicle sales ticked up in January to 16.8 million from 16.7 million in December. Meantime factory orders resumed growing in December, increasing 1.8% over month after 1.2% decline in November. And services sector continued expanding in January and that at a faster pace than in previous month as evidenced by ISM non-manufacturing PMI reading of 55.5 versus 55 in December. Improving US economic data are bullish for DJI. At the same time a weaker than expected January jobs report due tomorrow is a downside risk for DJI, though the ADP reported a higher employment growth for January than 202,000 new jobs created in December.
The latest data from the Energy Information Administration showed that in the week ending Friday 31st January, US crude stores were higher by 3.4 million barrels. This was far higher than the 3 million barrel increase the market was looking for. This also continues the recent run of inventory surpluses following last week’s 3.5 million barrel increase.
Gasoline & Distillate Inventories Decline
Despite the increase in crude stores, the data showed that US gasoline inventories were down by 100k barrels. This was on the back of a 1.2 million barrel increase over the prior week. Gasoline production has been higher over the last week, averaging 9.9 million barrels per day. This is up from 9.2 million barrels per day on the prior week.
The data showed that distillate inventories, which include diesel and heating fuel, were also lower last week. Distillate inventories fell by 1.5 million barrels over the week. This was versus a 1.3 million barrel decline over the prior week. In terms of output, distillate production averaged 5 million barrels per day last week. This was down from the prior week’s levels.
Elsewhere, the report showed that net US crude imports were higher by 51k barrels per day. On the other hand, refinery utilization rates rose by 0.2% as refiner crude runs jumped by 48k barrels per day.
Crude Booted By Virus Cure Hopes
Despite the mostly bearish report from the EIA, crude prices have posted a strong recovery into the second half of the week. Sky News reported that a Chinese research team were very close to finding a vaccine for the coronavirus outbreak. The virus has weighed on crude prices over recent weeks. The reports fuelled a strong recovery in equities prices dragging oil higher. However, the WHO was quick to dismiss the claims, stating:
“There are no known effective therapeutics against this 2019-nCoV and WHO recommends enrollment into a randomized controlled trial to test efficacy and safety. A master global clinical trial protocol for research and prioritization of therapeutics is ongoing at the WHO.”
With the virus having caused such severe disruption to crude demand, an eventual cure for the virus will likely be met with a much stronger rally giving the initial price action we have seen so far. When such a cure will materialize though, is still uncertain. However, with equities prices remaining supported into the back end of the week, a further rally in crude looks likely.
Technical Perspective
The recovery in crude prices on Wednesday saw price rallying back above the 50.65 support level which is a major long-term pivot for crude. While above here, a further push higher back towards the 54.97 level (structural resistance, broken bullish trend line) is on watch. However, such a move would likely require something more concrete regarding a coronavirus cure and for now, the 52.17 level is capping the correction. To the downside, any further move lower will put the focus back on the 46.98 level next.
