Archives for May 2012

May 2012 - Page 14 of 15 - Money Morning - Only the News You Can Profit From

What is the "ASCO Effect"?

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Anyone interested in biotech stock profits should know the answer to this question: "What is the ASCO Effect"?

You see, there's an annual event that offers up some huge trading opportunities, courtesy of the American Society of Clinical Oncology (ASCO).

ASCO's annual meeting always seems to have everyone's ears. That's because its "ASCO Effect" has been known to benefit biotech stocks that reveal news at the conference.

In fact, some stocks surge more than 200% in the weeks leading up to the event.

This year's meeting will be held in Chicago from June 1-June 5 – and some stocks already have started to run.

If you're interested in cashing in on this biotech stock profit opportunity, here's what you need to know.

Importance of ASCO

Created in 1964, ASCO is a not-for-profit organization started by a group of physicians from the American Association of Cancer Research (AACR). They saw a need for a professional oncology society and set out with a mission to "conquer cancer through research, education, prevention and delivery of high quality patient care."

Today, the Arlington, VA-based global organization has almost 30,000 members with 25% coming from over 100 countries. The diverse group includes clinical oncologists from all oncology specialties, sub-specialists and oncology healthcare professionals such as nurses and health care practitioners.

At ASCO's annual four-day meeting, usually held in early June, tens of thousands of attendees share ideas and learn about cancer breakthroughs from therapies and diagnostics. It also includes presentations from more than 4,000 scientific abstracts.

The organization has attracted top clinicians and investigators to administer patient care and conduct research. On its website, the organization boasts that it "will be recognized as the most trusted source of cancer information worldwide."

But it's much more than a source for thorough cancer research. Those in the biotechnology industry keep a keen eye on the ASCO meeting.

That's because of the more than 600 medicines and vaccines developed through biotechnology and clinical trials, a large majority (254) deal with cancer treatments, according to the Pharmaceutical Research and Manufacturers of America.

Behind heart disease, cancer is the No.2 cause of U.S. deaths.

The need for cancer treatments is high with an estimated 1.6 million new cancer cases to be diagnosed in 2012 while more than 577,000 Americans will die from it.

From an economic standpoint, cancer is expensive. The National Institutes of Health (NIH) estimates that the overall cancer costs of 2007 were $226.8 billion.

So for biotechnology companies focused on cancer drugs, this time of year is one that could bring a doubling or tripling of their stock price until the conclusion of the ASCO meeting.

That gain is what has been known as the ASCO Effect.

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Why the Eurozone Debt Crisis Never Really Went Away

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How many times have we been told the Eurozone debt crisis is resolved, only to have it turn up again like a bad penny?

Last year's string of good news/ bad news on the Eurozone debt crisis had the markets going up and down like a yo-yo until the routine grew so tiresome that most people stopped paying attention.

But while the crisis faded into the background, it never really went way.

Remedies that were sold as solutions haven't solved a thing.

The celebrated bailouts of countries like Portugal, Ireland, and especially Greece have served mainly to postpone real solutions that would be far more painful.

"The Eurozone politicians in their infinite wisdom have concluded that it is easier to prolong the agony than to take their medicine," said Money Morning Chief Investment strategist Keith Fitz-Gerald.

In fact, the Eurozone debt crisis is getting worse.

Collective debt among the 17 member nations is on the rise, having increased from 85.3% of GDP (gross domestic product) in 2010 to 87.2% last year. That's the highest level in the history of the Eurozone.

Unemployment in the Eurozone rose in March to 10.9%, up from 10.8% in February and 9.9% a year ago. Manufacturing also declined last month, as new orders fell for the 11th month in a row.

And the austerity imposed on the troubled PIIGS (Portugal, Ireland, Italy, Greece and Spain) to bring their budget deficits and debts under control have actually made the situation worse.

"It's done no good at all," Fitz-Gerald said of the Eurozone's efforts to deal with the debt crisis. "It's an absolute travesty."

The steep and sudden cuts in spending are pushing most of Europe back into a recession, which will eventually be felt here at home.

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Experimental Brain Injury Treatments Could Be Worth Billions

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Brain trauma is one tough and expensive field.

Each year brain injuries cost the nation roughly $50 billion. That's half a trillion every decade.

And then there's the human toll….

Brain injuries kill 52,000 people each year, making this the third leading cause of death from injury.

But there's more to this story than the death toll. Another 80,000 people a year in the U.S. survive brain injuries but go on to lead reduced lives.

Luckily, there is hope. Today we're on the verge of saving millions from the suffering brought about by traumatic brain injuries.

These insights also will lead to new treatments for such severe brain diseases as Lou Gehrig's (also known as ALS) and Alzheimer's.

And that's what the Era of Radical Change is all about — seeing friends and family survive things that a few years ago would have killed them.

It's all the result of more than 50 years of exponential growth in high tech and its effect on every aspect of science.

We are now at a tipping point in human history. Cases that once seemed doomed now offer new hope.

Brain Injuries: The Tragedy and the Hope

Unfortunately, this is a story I know all too well. It is one of the reasons why I'm deeply interested in this field.

Nineteen years ago last March, my cousin was killed in an infamous boating accident while his family looked on.

Doctors tried to save him but to no avail. His brain injuries were just too severe.

Now I wonder how my cousin would have done had that very same boat crash happened today.

As it turns out, a similar accident just occurred in our town.

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Natural Gas Reality Check: President Obama Got This One Right

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In the past two weeks, a maelstrom of emails has been hitting my inbox from concerned readers, investors, academics, and even some prominent journalists.

What's got everyone so heated?

It seems a lot of people are concerned, confused, and even outraged over a recent Executive Order signed by President Barack Obama regarding the development of unconventional natural gas formations here in the United States.

The executive order, issued on April 13, calls for greater coordination in federal oversight of "fracking" – a revolutionary, yet-still-nascent process of extracting natural gas from rock bed.

Concerns stretched from sector performance questions all the way to the highly alarming and somewhat foolish argument that such an order precipitates a "government takeover of the natural gas industry."

Now, I'm overly cautious when the government announces any role in business. But when you take a close look, this announcement is actually rather benign.

And yes, I know it's easy to get caught up in the immediacy or negative impacts of a single act. But in the age of 24-hour media, we usually only hear a fraction of the real story.

The truth is there's a lot to like here.

That's why I'd like to take a few minutes today to explore the ongoing developments in this story, set a few eager minds at ease, and explain a few benefits – yes, benefits – of this Presidential directive.

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Natural Gas Prices: A Timeline for Investors... and State Budgets

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State policy leaders around the country are going to realize the immense importance of LNG exports to the health of their economies as they struggle to pass their 2013 budgets this year.

The recent low in natural gas prices is doing more than just hamstring production around the country. It's also slashing government budget forecasts due to the loss of tax revenue associated with natural gas sales.

So much so, that states are predicting steep decreases in revenues through 2014.

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U.S. Economy Showdown: Krugman vs. Bernanke

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Nobel Prize winning economist Paul Krugman has some critical words for how Team Bernanke is handling the U.S. economy.

The Princeton University professor suggested on Bloomberg Television's "Street Smart" program Monday that U.S. Federal Reserve policy makers, under the guidance of Chairman Ben Bernanke, are "reckless" for refusing to pursue inflation.

Krugman argues that higher inflation could lower the staggering U.S. employment rate that has lingered for more than four years.

"The reckless thing is to allow mass unemployment to continue," Krugman said Monday. "We have had a massive failure of our political system that has come to accept that 8% unemployment is the new normal and there is nothing that can be done. We're in a low-key version of the Great Depression."

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Gold Prices: How to Climb the "Golden Staircase'

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When U.K. subscriber John M. wrote in this week, he got right to the point.

Asked John: "What's happening to gold prices? Why are they dropping?"

For an answer, I speed-dialed Real Asset Returns Editor Peter Krauth – our resident expert on mining and precious metals.

Peter is based in Canada, which keeps him close to the natural-resource companies that proliferate north of the border. He gave me a detailed and insightful answer to John M.'s question.

And he recommended three ways to profit – including an ETF he says is perfect for first-time gold investors.

To explain what's happened with the "yellow metal" – and to project where gold prices will go next – Peter invented a pricing theory that he christened the "Golden Staircase."

"The bottom line, Bill, is that the price of gold has simply entered a consolidation phase – much like it has done numerous times since it entered this secular bull market back in 2001," he told me.

Gold futures were at $1,662.40 an ounce yesterday – well off the yellow metal's high. Here's why.

"If you think back, when gold hit its all-time high of $1,900 last August, we were in the midst of wild speculation that the U.S. government wouldn't resolve its debt-ceiling crisis," Peter explained. "A deal in Congress was reached in time, but Standard & Poor's went on to downgrade the nation's credit rating for the first time in history. Since then, there's been considerable apathy towards gold by the general investing public, pushing its price down about 13%. What's more, government-calculated inflation looks benign, taking away from gold's luster."

And here's where it gets interesting.

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Are Junk Bonds About to Become a Victim of Their Own Popularity?

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In our current low-interest-rate environment, many investors are widening their search for more income by buying junk.

Junk bonds, that is.

More formally known as high-yield bonds – junk bonds have been on a tear lately.

With the Federal Reserve vowing to keep interest rates at or near zero through 2014, investors seeking higher-yield investments are eyeing junk bond exchange-traded funds (ETFs).

Investors dumped $31 billion into high-yield bond funds during the first quarter of 2012 according to research firm EPFR Global. That's almost four times the global demand for junk-bond funds in 2011.

Here's why.

Junk bonds are offering generous dividends at a time when most other bond investments aren't even matching the rate of inflation.

"Clients are essentially trying to replace the income they used to get from their government bonds," Hans Olsen, head of investment strategy in the Americas for Barclays Wealth, told Bloomberg News.

Indeed, one of the largest junk bond exchange traded funds, the iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) is currently yielding more than 7%, while yields on the 10-year Treasury note hover just above 2%.

But while robust demand and issuance for junk bonds is a sign of a healthy market, there are reasons for concern.

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What U.S. Consumer Spending Data Is Telling Us

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The markets slid yesterday on news that U.S. consumer spending increased by 0.3% in March, while income rose 0.4% over the same time frame. This is the first time since December we've seen income rise faster than spending.

I can't say I am entirely surprised.

As prices for "must haves" like gasoline and food continue to rise, consumers are digging into their savings to cope. This is not small potatoes, given that the average family saved a mere $38 out of every $1,000 in take home pay last month, according to the U.S. Commerce Department.

I can't help but have huge concerns about Team Bernanke's plan; no amount of stimulus is going to overcome the struggle most families are having – which is to boost savings and shed debt.

Here's the thing… if consumers can't save, then they can't buy. And if they can't buy, they can't build up the nation's wealth, which is predicated on consumer spending.

All three sets of figures in isolation really don't tell you much. But when taken together – spending, income, and GDP – they suggest our economy is too weak to put millions of Americans back to work, much less in jobs for which they are appropriately qualified.

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