SPWR (Sunpower Corp.) released its 2nd quarter 2015 EPS report on 7/28 with the market reacting favorably to the report. The price of SPWR shot up over $2.5 on 7/29 on strong volume. If you are not already in SPWR, it is strongly recommended that you enter ASAP. Highlights from the report include the company raising its earnings guidance for 2015, expects 20% earnings increase for 2016, launched their spinoff of 8point3 Energy (their joint yield company with First Solar), acquired the U.S. solar project development pipeline of Infigen Energy (totaling approximately 1.5 GW with expected project buildout to 2020), commercial segment exceeded bookings target for the quarter and commercial pipeline now exceeds $1 billion, residential segment demand in North America remains strong with bookings increasing 120% over the previous year, on track globally to increase their customers to 500,000 in 2015, and signed residential solar partnerships with three U.S. utilities, including agreements with Dominion and ConEdison Solutions for the New Jersey and New York markets. They also have made significant progress on projects currently under construction during the quarter including their 579-MW (ac) Solar Star projects for Berkshire Hathaway Energy (a Warren Buffett company) and Southern California Edison, which are now fully grid-connected.
Two new stock recommendations are LMNX (Luminex Inc.) and PDLI (PDL BioPharma Inc.), both in the biotech segment. Luminex develops, manufactures, and sells proprietary biological testing technologies and products for the diagnostics and life sciences industries worldwide. This is analogous to the company that sold picks, shovels, and mining products to the gold prospectors back during the 1849 gold rush. It was a good way to make money in a relatively reliable and steady manner. The company has growing earnings and revenues with new, “transformational” testing products in the pipeline that are progressing well.
PDL manages a portfolio of patents and royalty assets, consisting of its Queen et al. patents, license agreements with various biotechnology and pharmaceutical companies, and royalty and other assets acquired. To acquire new income generating assets, PDL provides non-dilutive growth capital and financing solutions to late-stage public and private healthcare companies and offers immediate financial monetization of royalty streams to companies, academic institutions, and inventors. PDL has invested approximately $780 million to date. PDL evaluates its investments based on the quality of the income generating assets and potential returns on investment. PDL is currently focused on intellectual property asset management, acquiring new income generating assets and maximizing value for its shareholders. The company has a P/E of 3.07 and dividend of 9.5%.
AMRI (Albany Molecular Reasearch Institute) Albany Molecular Research Inc. (AMRI) is a global contract research and manufacturing organization that has been working with the Life Sciences industry to improve patient outcomes and the quality of life for more than two decades. With locations in North America, Europe and Asia, our key business segments include Discovery and Development Solutions (DDS), Active Pharmaceutical Ingredients (API), and Drug Product Manufacturing. Our DDS segment provides comprehensive services from hit identification to IND, including expertise with diverse chemistry, library design and synthesis, in vitro biology and pharmacology, drug metabolism and pharmacokinetics, as well as natural products. API Manufacturing supports the chemical development and cGMP manufacture of complex API, including potent, controlled substances, biologics, peptides, steroids, and cytotoxic compounds. Drug Product Manufacturing supports development through commercial scale production of complex liquid-filled and lyophilized parenteral formulations. From its last EPS report on 5/5, highlights were:
- First quarter contract revenue of $75.1 million, up 47% from 2014
- First quarter royalties of $6.7 million, down 19% from 2014
- First quarter adjusted diluted EPS of $0.20 up 25% from $0.16 in 2014, including a $0.03 decrease in EPS from royalties in the current quarter
- Completed the acquisitions of SSCI/West Lafayette, Ind. and Glasgow UK businesses, broadening our capabilities in analytical and drug product development services
VRSN (Verasign Inc.) The big name in internet domain registry and associated services. Stock is trading a few dollars below it 14 year high and just reported solid earnings. Company has open ended stock repurchase plan in place. New products are being rolled out. More info will be provided in Current Recommendations soon.
RMBS (Rambus) used to be strictly a chip Intellectual Property design house that licensed its patented technology (with difficulty) to other companies. I say with difficulty because they always seemed to be tied up in legal battles and court proceedings with other companies that purportedly infringed upon their IP rights. A new management team came in a few years ago, led by CEO Ron Black that has transformed the company from one that was seemingly endlessly battling other chip companies in court to one that has taken a new collaborative path toward working with their former court adversaries and converted many of them into long term business partners (maybe the U.S. government should take some lessons from these folks) by signing them to licensing agreements to use RMBS IP technology in their respective chip designs. RMBS is also in the process of developing its own cryptosecurity system that provides a much more value added proposition to their customers as well as to RMBS’s bottom line. The company transformation is still in process but bigger contracts related to its cryptosecurity product should be awarded by the end of 2015 and start showing up to its bottom line in the 2nd half of 2016. There could be some upside surprises before that but the company is taking the conservative view to prevent unforeseen mishaps along the way. I will provide some more info in the Current Recommendation section ASAP.
EMC (EMC Corp) just reported earnings on 7/22 and the market reaction has been favorable. This looks like a good area to enter as EMC just made a 52 week low on the day of earnings and has since bounced up strongly for two days. I will follow up with more info on the EPS report soon. They are still buying back stock ($3 billion for 2015), they have cut operating expenses, and one unit of the company is growing especially fast (on the order of 30%) and starting to significantly contribute to the bottom line of the company.
PGNX as per Yahoo Finance: Progenics Pharmaceuticals, Inc. (PGNX) develops medicines for oncology in the United States and internationally. The companys primary clinical-stage product candidates include prostate specific membrane antigen (PSMA) antibody-drug conjugate, which has completed Phase II testing in chemotherapy-experienced patients and is ongoing second cohort in chemotherapy-naïve patients for the treatment of prostate cancer; 1404, a radio-labeled small molecule that has completed Phase II testing, as well as acts as an imaging agent to diagnose and detect prostate cancer; and Azedra, a radiotherapeutic product candidate, which is in Phase IIb registrational trial under special protocol assessment for the treatment of pheochromocytoma and paraganglioma. It also offers Relistor-subcutaneous injection for the treatment of opioid induced constipation (OIC) in advanced-illness patients receiving palliative care when laxative therapy has not been sufficient; and for treatment of OIC inpatients with non-cancer pain. In addition, the company develops Relistor-oral that has completed Phase III testing for the treatment of OIC. Further, it develops MIP-1095, a PSMA-targeted small molecule radiopharmaceutical that is in clinical development stage for the treatment of prostate cancer. The company has license agreement with Salix Pharmaceuticals, Inc. for the development and commercialization of Relistor worldwide; and with Amgen Fremont, Inc. to use its XenoMouse technology for generating human antibodies to PSMA, as well as has collaboration agreement with Seattle Genetics, Inc. Progenics Pharmaceuticals, Inc. was founded in 1986 and is based in Tarrytown, New York.
This stock has been exhibiting strong interest on a technical basis as the volume has greatly increased over the last several months and the price has risen over the same time period. Biotechs are a hot sector and this has some interesting developments that I will post tomorrow in Current Recommendations as I need to get some sleep. The company does not yet have any earnings, what do you expect for a biotech, but its earnings have been revised upwards to lose less money (this is how the biotech game is played). EPS report as per Yahoo: 8/6 – 8/10.
GERN is another biotech that looks interesting. As per Yahoo Finance: Geron Corporation, a clinical stage biopharmaceutical company, focuses on the development of telomerase inhibitor, imetelstat, for treating hematologic myeloid malignancies. It has collaboration and license agreement with Janssen Biotech, Inc. to develop and commercialize imetelstat worldwide for indications in oncology, including hematologic myeloid malignancies and other human therapeutic uses. The company was founded in 1990 and is based in Menlo Park, California.
This stock also looks interesting on a technical basis. I will post more in Current Recommendations tomorrow. It has not reported earnings or lack of yet. Probably around the first of August based on timing of last EPS report which was on 4/30.
MNKD is one last biotech recommendation that I will post more on tomorrow. EPS report on 8/3. As per Yahoo Finance: MannKind Corporation, a biopharmaceutical company, focuses on the discovery, development, and commercialization of therapeutic products for diabetes in the United States. Its lead product is AFREZZA inhalation powder, an insulin to control high blood sugar in adult patients with type 1 and type 2 diabetes. MannKind Corporation was founded in 1991 and is headquartered in Valencia, California.
The Nasdaq 100 (NDX) has exploded to new highs over the last week or so powered by a few well-known names such GOOG (Google), AMZN (Amazon), NFLX (Netflix), AAPL (Apple), FB (Facebook) and PCLN (Priceline). Financials have done well in concert with the big tech names spurred along by the positive reactions to the big bank earnings reports which kick off each quarterly earnings report season. The S&P 500 has not done nearly as well as the NDX since it weighed down by a lot of non-tech stocks particularly in the resource area that are still in a downtrend. The government through its central bank, the Federal Reserve, as well as its direct agents the big banks, and also through its indirect agents- hedge funds, mutual funds, and pension funds – help keep the narrative of a recovering economy alive and well as long as the stock indices can keep making new highs. The government, its central bank, and big banks have set up the investing environment to force people and institutions into the stock market since there is nowhere else for anyone to receive a reasonable yield on their savings and excess cash with such low interest rates. So pushing up a relatively few big name stocks along with the big bank stocks is an effort to make people think everything is just fine, especially the economy. I have not looked at the earnings reports of the before mentioned companies in any depth but I did read a Wall Street Journal summarizing some of them and why these stocks are getting bought. They are being bought because they are showing some revenue growth, not really good revenue growth, but possibly solid growth and growth is very hard to find in this market environment. The article did not really go on to say in any depth why growth is hard to find now other than we have been in a bull market for over six years now. But the only reason the stock market has been in a bull market for this long is because of the ability of the Federal Reserve to print money out of thin air, not because of any long sustainable economic recovery that would justify this bull market nor the prices of these inflated stocks. Funny money from central banks and stock buybacks are the two primary things that prevent the “adjusted” accounting numbers of most of these company earnings reports from looking bad to OMG. These big name stocks are also being bought because they are relatively liquid, large volume stocks which the big funds need to be able to insert and extract sizable sums of money quickly. The official first quarter GDP number showed the U.S. economy to be in contraction so even the government is losing the ability to manipulate the bad economic numbers into something that fits the government narrative. Over the last few years, the reports of companies closing numerous retail stores, laying off workers, number of small businesses declining to historically low levels, inflation adjusted wages being basically stagnant since the 1980’s, the labor participation rate at levels not seen since women first started entering the workforce in the 1970s, number of people on food stamps approaching 50 million, number of college graduates who are unable to find a job and start paying back their student loans, number of people living with their parents, and the severe decline of decent paying full-time jobs indicate that we do not have a healthy economy nor have we had one for a long time. The pockets of the economy that are still showing decent numbers like the real estate sector are dependent on the wealthy or government workers who can easily qualify for loans. The rate of U.S. home ownership has been steadily decreasing since the 2008 real estate/banking crisis and shows that the average working person who should be one of the stalwarts of a healthy economy is not doing well enough to afford a house.
But to get back to the point of these big name tech companies being bought because they are showing some revenue growth is the mentality reminiscent of the 2000 tech bubble when companies were being driven up in price because they had very good revenue growth but no actual earnings. A company that cannot show actual growth in earnings or a reasonable path to earnings growth is not a place you want to park your money. In this poor economic environment, most companies are going to be very hard placed to find any sustainable earnings growth. The Biotech sector is the other sector that has done well recently and many if not most biotech companies are notorious for not having earnings but often go up because of drug approvals at various stages of the drug approval process or buyouts by or partnerships with a pharmaceutical company. The ones with earnings are favored by a healthcare system that pays for the cost of their drugs and is independent of the economy (until the funny money runs out).
The big banks are reeking such toxicity from their derivatives books and way overleveraged balance sheets that there is no power on earth that will save them this time when things go bad, not even owning your own central bank (or owning your own government to a large degree) which has been very good to them up to now. If interest rates continue to move up at the same rate as they did in the first half of 2015 then things are going to get very interesting quickly as the upper limits of the interest rate window on their derivatives is approached. Not to mention the greatly increasing interest service costs for the U.S. government’s hugely expanded and still rapidly exploding debt.
All that said, my primary jobs are to find you good investing or trading ideas for the current or in the near term environment as well as warn you of the potential danger areas ahead and how to navigate them. I still think the financials as exhibited by the XLF and FAS ETFs will move somewhat higher. As I wrote in my previous post, I see stocks and sectors that will probably move significantly higher as to warrant taking positions in them. The current market, led by the relatively few big tech names, biotechs, and financials has shown good strength over the last week or so but the Nasdaq advance-decline line has been seriously diverging from each new high since March 2014 indicating the growing weakness in the stock market. The length and extremity of this divergence is another sign of the ill-health of the broader market and the artificial underpinnings supporting new market highs.
The artificial underpinnings meant to keep the market rising are easier to implement in a low volume environment as we have now. This a has been a low volume bull market for the most part, especially in the last few years and now we are in the summer season which is historically a lower volume time period for the markets. So it is easier for the big money to push a relatively few well selected stocks higher in this low volume environment. Not all the big players have the same intentions since the hedge funds, mutual funds, insurance companies (except AIG), and pension funds have to make money to stay in business, which is unlike the central banks and big banks (they historically get bailed out when they screw up). But whether consciously or unconsciously, they all contribute to supporting the government narrative of a recovering economy by pushing the market higher.
Now also in this low volume period of mid-summer, you see the precious metals markets being pushed much lower. A bet on precious metals is the anti-government and anti-fiat currency trade and governments do not like for themselves or their beloved paper currencies to look bad even when or especially when they know things are getting ready to fall apart economically. So while they push the stock market up, they coincidentally push the precious metals market down to support the government narrative of the recovering economy and the government is doing a damn good job for the people … Ah Ah Bullshit!
The government focuses on using the stock market as the (false) indicator of how well the economy and, thus the government is performing. The U.S. stock market is much smaller than either the U.S. Treasury markets or the U.S. dollar currency market. So the government has more direct control over the direction of the stock market than the latter two through its central bank and central bank agents – the big banks and their indirect helpers – hedge funds, mutual funds, pension funds, and insurance companies. This connection between the government narrative and rising stock market works well primarily because the U.S. government central bank is printing the world’s primary reserve currency. When the ability to print seemingly infinite amounts of currency to inflate the stock market is no longer in effect then things get really nasty very quickly. But the problem compounds exponentially when you can no longer print enough currency to also keep interest rates low if the government is already carrying ungodly amounts of debt. The reason you have to print currency to keep interest rates low is because nobody wants to buy the bonds of a heavily and over indebted entity even if they have the largest military in world. So your central bank or its proxies have to buy them to keep the interest rates down and the rigged game going for awhile longer. But if your foreign creditors start throwing the treasuries they hold on the market creating an even bigger supply than the large supply already created by the U.S. government to fund their extensive operations including world domination, then you mostly likely will see interest rates go up. Foreign creditors have been reported selling many of their Treasury holdings over the last several months and they have probably been using them to buy things that have more tangible value as I have written of in earlier posts.
The U.S. dollar currency market is also in the process of being significantly affected by exogenous activities beyond the control of the U.S. government. Foreign countries, notably the BRICS and associated countries, have prepared an alternative currency system for international transactions that bypasses the U.S. dollar and its associated SWIFT system. This will greatly decrease the need for other countries to hold U.S. dollars as reserves. This new currency system is supposed to be ready this fall. Another potential development is the Chinese Yuan currency may achieve world reserve currency status this fall and if this occurs then that would also decrease the need for countries to hold the U.S. dollar in reserve.
It appears that the U.S. financial ship is sailing itself into the perfect storm even though things seem relatively benign for the moment and the stock market is still making new highs. But it is benign only for those who have benefitted from the financial markets, government jobs and contracts, still having jobs that keep basic needs of the vanishing economy going, the relatively few successful entreprenuers and their employees, and from the wealthy spending or trying to diversify their assets into tangible goods. The more disaffected have been kept quiet or under control through food stamps, disability payments, affordable health care, working multiple jobs, unemployment payments, selling drugs or themselves, taking drugs including legally prescribed ones, and the ongoing promises of a better future. When the financial storm hits, even most of those who think this system is a good thing will most likely have a serious change of mind as well as a serious change in their economic standing.
I have been looking for sectors and/or stocks that can continue to drive the market higher and one sector that keeps popping out at me is cybersecurity. Cybersecurity is certainly in the headlines as the government Office of Personnel Management recently suffered a serious hack attack. Since we are starting earnings season here, I think you could wait until specific companies report before buying. One company that I have already recommended, AKAM (Akamai), has a cybersecurity unit that is showing very good growth and reports earnings on 7/28 according to Yahoo. Another cyber security stock is FEYE (Fireeye) which reports earnings on 7/30. AKAM has been a relatively strong stock over the last few months so it could continue up from here. You could put a buy stop above the recent four week high to guard against missing it if it continues to move up from here. The NASDAQ is somewhat overbought here after showing considerable strength over the last five days and is now running into resistance from its prior high. So I would not be surprised to see the market take rest for at least a couple of days. EMC is looking interesting here and reports earnings on 7/22. Other prior recommendations that look interesting here are SPWR (EPS report 7/29-8/3 per Yahoo) and FSLR (EPS report 8/3-8/7 per Yahoo). NMBL (Nimble Storage) has shown good growth and is another storage company, as is EMC, that reports on 8/25 but I would not be in a rush to buy this here.
The U.S. stock market looks to have bottomed with a strong up move taking place over three consecutive days starting on Thursday. Tuesday was a consolidation type day and expected after 3 relatively strong consecutive days up. More consolidation may be in the offing right here. This recent action is a little more energetic and trending than the typical grinding, choppy action we have seen over the last several months. Whether it can last remains to be seen but I do see a few stocks setting up for possible moves upward. Google, for large cap tech stocks, led the way up in this move while biotechs, financials, and the Russell 2000 also did well. I see some stocks still setting up so there is more room to upside possible. The resource/commodity areas still look in process of bottoming, but I think they look promising for the longer term investor. The Chinese large caps, as exhibited by FXI, partially filled its gap move up from Friday yesterday, which is not surprising after a strong move off its recent bottom. A little more consolidation here is probable before probably continuing higher. With the recent volatility, it could even retest its recent lows.
The gold/silver markets have continued their prior three week downward bias within a several month range dating back to 9/14 that was preceded by a slightly higher range that goes back to 5/13. So the precious metals have basically been in a trading range for a little over two years. When a market has been in a trading range for such a long time, you can usually expect a sharp move outside the trading range for an extended move at some point. I think it is very likely we are on the cusps of such a move now. July is typically an okay month for the gold and August is typically not a very good month for gold. I think it is likely that you will see the precious metals break decisively below this trading range for a sharp quick move down to 1000 and ultimately to around 950 where a major support level exists. Other than the recent price action, other reasons exist that make me believe this is a likely event. 1) The summer is a significantly lower volume period for all markets, particularly the August timeframe when many folks in the markets take a vacation prior to the close of summer. Low volume periods in the markets, make it easier for big money interests to push (manipulate) the market around, often to the downside, to incite fear into traders or holders, and to show a lack of interest in that market to the public observers. The ability to push around markets is easier in relatively small markets like precious metals. The value of the precious metals markets are especially important to the world’s big governments and their banking cohorts as fiat currencies, in general except for the U.S. dollar, have declined significantly over the last few years. When gold and silver rise sharply, it is a strong vote against the stability of the fiat currency based government regimes that also includes their fascist corporate partners. These big money and big power interests have a tremendous amount of power and profit at stake if the current system appears likely to undergo extremely difficult and extended economic times. That is why these fascist regimes go to such extraordinary lengths to make the economy appear okay along with the narrative that the governments have everything under control and that they know what is best for everyone. The U.S. regime, in particular, can do this even more than the rest of these fascist regimes. Not because they are exceptional, but because they own the world’s primary reserve currency (U.S. dollar), and that allows them to paper over problems to a much higher degree than anyone else. But this really is not a solution and only makes things much worse when an economic collapse occurs.
Let me get back to my original point of the importance to the big money/big power interests of keeping the precious metals market prices low before I really go off on the corruptness and criminality within this type of system. 2) Recent reports have shown how major U.S. banks are dominating the derivatives markets in the commodity area which includes the precious metals markets. They are shorting huge amounts of paper contracts in the precious metals COMEX markets to control and force down the price of gold and silver. 3) These are very uncertain times with the Greece/EU debt problem that could possibly have much farther reaching consequences, Puerto Rico bond default, Chinese stock market turmoil along with slowing Chinese economy and huge government debt, huge Japanese government debt and slowing economy, and exploding U.S. government debt along with its own slowing economy. There is obviously a pattern here, too much government debt and slowing or ill-performing economies. This is a condition or disease that now exists around the world and when these governments can no longer paper over and connive their way out for the short term, the consequences of their actions will be horrific.
4) Longer term interest rates have moved up significantly over the last six months and have held on to their gains. They look poised to move higher and if that occurs then the pressure on these overly indebted governments will rise greatly. Governments will print more money as they always do when faced with a crisis which will only exacerbate the problems including inflation. They will have to print more money to buy their toxic bonds that no one wants because everybody realizes that these hugely indebted governments do not have the capacity to make good on their loan payment obligations. This, in effect, is the market raising interest rates, not the central banks. The last thing any of these central banks for overly indebted governments want is for interest rates to rise. These central banks will not only have to buy their own government bonds so that their governments can keep spending, but also the bonds that are being sold by others, largely former foreign creditors.
5) The lynchpin for what happens in the future will be the ability of the U.S. dollar to weather these storms. So far, at least on the surface, it has performed admirably, at least from a relative standpoint. The global economy, not just the U.S. economy, is largely based on the U.S. dollar, so if the dollar is seriously devalued then it has huge consequences for the whole world and not just here. But the apparent strength of the dollar is really only based on perception rather than anything substantive. The best that may be said of the dollar, and even this is a stretch, is that it is the best house in a bad neighborhood as all the major governments of the world have seriously flawed economies. In my mind major/big government equals seriously flawed economy, but that is a whole other topic. If the dollar does not move significantly higher from here, then it would not be surprising to see it fall. The question then would be how far and how fast would the dollar fall. There are a number of reasons that the Fed could want to print more dollars, thus devaluing the currency, a) to prop up the stock market, especially is it starts falling, b) to allow the government to keep spending on pet projects, wars, pay off the interest on its debts, funding for gov agencies, etc., c) to keep interest rates from rising or rising too fast by buying their bonds that are thrown on the market, or d) to service higher interest charges on its debt due to higher interest rates. With the U.S. gov’s huge debt and its economy starting to contract, even based on officially released government figures, it will be harder and harder to portray the U.S. dollar as a safe port in a bad storm. You also have the Chinese Yuan currency gaining in status around the world which could seriously decrease the use of the U.S. dollars in international transactions thus decreasing the need for countries to keep dollars in reserve. Other countries have signed bilateral agreements to use their own currencies in transaction between themselves, again bypassing the U.S. dollars. These newly unwanted dollars will find their way back home to the U.S. and put pressure on maintaining the value of the dollar.
Several people that follow the markets and geo-political landscape, including Martin Armstrong and Jeff Berwick, are calling for a September/October timeframe for a major market and political event that will have serious economic consequences. Myself, I am using the gold price as a timing device for when the SHTF (sh%& hits the fan) and the September/October timeframe looks very viable and that historically has been a time for major market perturbations and crises. I think the coming sharp move down by precious metals will be a head fake, so to speak, in an effort by TPTB (the powers that be) to scare holders of precious metals as well as to give the general public the impression that their fiat currencies are just fine and coincidentally that they have everything under control. At that point nothing could be further from the truth. I believe it will be a quick bottom that will lead to a swift, strong up move that will eventually lead to who knows how high in dollar terms. In the interim, it will probably pause a bit after its initial sharp move up before moving higher. But this move will happen because of the blatant insolvency of the major world governments along with their terminally ill economies that can no longer be papered over or rigged to look like things are okay. The Greek/Eurozone debacle is not solved by a long shot and I believe this will lead to further troubles with the other heavily indebted countries within the Eurozone. Once this contagion starts it will be like a series of falling dominos that will happen quickly as the world is a very interconnected place, both economically and geo-politically. Also contributing to the synchronized demise of these major governments and the economies that they basically control, are they all use the same ill-concieved system, that greatly benefits a few while it lasts, but leads to serious corruption, criminality, unnecessary wars, inequality, destruction of the economy, and finally to collapse.
Interest rates look poised to move higher and along with that I think, in general, that you can expect to see increased rates of volatility. The VIX, the standard indicator for levels of volatility, is still trading near its lows, despite its recent upsurge. If interest rates go higher, then you can expect that to have a lot negative connotations concerning the economy that I have already discussed in earlier posts. This economy is barely on life support with low interest rates, think what will happen if they continue to go up. The same can be said of these highly indebted governments.