All day and every day, some of the stock market's best and
brightest traders and money managers share their ideas, insights,
and analysis in real time on Minyanville's
Buzz & Banter
Here is a small sampling of the 120+ posts seen on the Buzz &
Banter this week:
Tuesday, December 10, 2013
) opened below Monday's breakout pivot point and immediately
extended to a test of its 20 DMA.
However, in so doing, Gilead Sciences wiped out the past 11 days'
range and the last 3 days of gains.
Notably, Gilead Sciences left a Gilligan sell signalon Monday , on
gapping up to a new 60-day high and closing at or near session
lows, a bearish News Reversal Day (reversing on good news). The
Gilligan signal did a good job of telegraphing today's weakness.
Bearishly, Gilead Sciences has turned its 3-Day Chart back down
immediately following a new high. This is occurring since Gilead
Sciences is violating the last 3-Day Chart circled low from
Below, see a Gilead Sciences daily chart from October 29 with its
Stabbing back below the prior swing high from late October with
authority leaves Gilead Sciences in a weak position.
Gilead Sciences may be symptomatic of what I gall "Gapism," which
is often times seen in several leading stocks when the major
indices are carving out a high, leaving many players without a
hoped for graceful exit.
Click to enlarge
Treasury Seasonality... No More
While I'm hammering out my main fixed income themes for next year,
I thought about seasonality and the corporate issuance market.
I took a look at the historical seasonality of Treasury yields
Typically, Treasury yields tend to decline in the winter months
because corporate issuance is slower during those months. New
borrowing then picks up as the new year turns, particularly from
financials. However, with a few exceptions, the corporate calendar
doesn't have a season anymore. For munis and agencies yes, but
corporates no. Because there isn't a lack of hedging demand in the
rates market during the winter months, this would generate downward
pressure on yields. No more.
With the advent of forward guidance in 2011 - where the Federal
Reserve said rates will stay low for X period of time - it has
pulled forward all sorts of corporate borrowing, fixed or floating.
Unfortunately, not so for consumer borrowing. I'm very curious to
see what will happen when rates rise for two reasons. How will
corporate bond buyers react? My guess is no real difference unless
there is market disruptions. The other side is the corporations
themselves. Thus far, the majority of the issuance has been for
financial engineering or repairing balance sheet by refinancing
outstanding debt and lowering interest costs. The real growth will
happen when companies take advantage of the borrowing for business
investment or capital spending, presumably that would be the
fundamental reason why rates would rise.
, December 11, 2013
Adding MasterCard to My Potential Short List
) did a October 1 stock split. Yes, I think
) should do one. Yes, I think Apple would and should rise on that
move. But Apple is dirt cheap and severely undervalued. MasterCard
is becoming quite overvalued, especially. on a PEG basis.
MasterCard has already risen a ton and is trading at a very full
valuation after rising 3-to-4 fold from 2010 highs, which was also
multi-bagger moves from the company's IPO just a couple of years
earlier. All this is coming in front of the upcoming Square IPO, a
rapidly growing Paypal, and a
) that is still better in my opinion. Plus, I think there will be a
good amount of potential disruption in the coming yeas out of the
biggest of the tech players.
My world view is that every one of the leading and largest techs
are going to offer e-payment services. Out of this space will
likely come another winner-take-all scenario.
Can Visa and MasterCard hold onto the oligopoly they currently
maintain? Sure they can, but if they do, it's going to be a whole
heck of a lot tougher decade than the prior one was. Moreover,
there is at least a decent betting man's shot that they won't
maintain the oligopoly.
So now, MasterCard is spiking off the October 1 stock split
news, and simply put, this is setting up for another gorgeous stock
to add to the short list. In the past, I have been a huge Visa and
MasterCard bull, and I was a table pounder when Visa went public. I
have also favored MasterCard after big macro-related market
Besides my usual stock analysis, R&D, and market share work,
I know something a lot about the industry. I worked at Visa. I
rolled up the total company financials, led the finance team that
helped design the company's first multidimensional database model,
partook in the company's first bond issuance, etc.
Click to enlarge
"If Santa fails to call, the bears will roam on Broad and
I know the credit card processing model business exceedingly well.
And it may be in for some not so friendly changes in the coming
. . . Lucien Hooper, a Wall Street icon
The aforementioned quote came to mind yesterday, not because I
think there is going to be a major decline, but because I got so
many emails from folks who are worried about just that; a major
decline. As often stated, I don't think a major decline is in the
cards. In fact, I believe any pullback we get from here actually
sets up the fabled Santa rally. Admittedly, I would have preferred
to see the market's decline, which began last week, not be
interrupted by Friday's Dow Wow of some 198 points, but they don't
operate the market for my benefit. Yesterday, we got some pretty
good news, in that it appears a budget deal is at hand. For weeks I
have stated the upcoming budget discussions were not going to be
nearly as contentious as last October's, and presto, Paul Ryan and
Patty Murray announced such an agreement yesterday. This is a two
year deal to fund the government, eliminating the threat of another
shutdown. Discretionary spending is raised above sequester levels
by $64 billion over the next two years. Also on the good news side
of the ledger, the Trucking Survey had its biggest surge in six
years (there is a strong correlation, or R2, between truckers and
GDP), the Christmas tree sales surveys leaped 12% (improving the
outlook for Christmas merchandise sales), there is also a high R2
between the stock market's action prior to Christmas and
merchandise sales (currently calling for +5% sales YoY), and the
"good news" list goes on. On the downside, Residential Construction
Spending has hooked down. It is hard to see how housing weakens
much more without impacting the overall economy.
Surprisingly, the stock market turned a deaf ear to the good news
yesterday. This should come as no surprise since the timing models
have suggested a window of downside vulnerability between
mid-November and mid-December. Yesterday the
((INDEXSP:.INX)/1782.22) moved back below its recent trading range
zone of before last Friday's employment numbers. Said move also
caused the S&P 500 to see its 10-day moving average (DMA) cross
below its 50-DMA; and, you can read that as cautionary! While
yesterday's decline was intense, it failed to register as a 90%
downside day, meaning that less than 90% of total volume traded,
and total points lost, came on the downside. That means that
sellers tended to NOT be totally exhausted on the downside! This
morning it is more of the same with the preopening futures
marginally lower. So we wait, at least on a short-term trading
basis. Longer term, I remain pretty bullish, yet in the short run,
I think the outlook is sketchy...
Friday, December 13, 2013
Insys Subpoenaed by OIG
Friday the 13th came a few hours early for shareholders of
). Insys appeared in the top spot of my
4 Top Performing Biotech IPOs of 2014 story
from two weeks ago.
In a terse press release after the bell yesterday, Insys disclosed
the Office of Inspector General (OIG) of the Department of Health
and Human Services (HHS) issued the company a subpoena. According
to the release, the subpoena is connected to potential violations
of HHS programs related to the company's sales and marketing of
Subsys, its lead program.
Subsys, a version of the addictive pain killer fentanyl, is
approved only for cancer breakthrough pain. If the company is
marketing it for something else, then the federal government would
certainly get involved. When
(AEGR) CEO made some comments the FDA (which is part of HHS) saw as
potential off-label marketing, the FDA sent a warning letter.
Given the OIG sent a subpoena, it's likely this is something more
than simply minor off-label marketing. Widespread off-label
marketing would attract OIG attention. So would the drugmaker or
its employees giving kickbacks in exchange for prescriptions.
The OIG action is bad enough, but it's likely to get worse for
Insys. Subsys is also regulated by the Drug Enforcement Agency
(DEA) as a controlled substance. All of Insys' products are
controlled substances, including a product whose FDA application
was pushed back awaiting DEA action. If Insys indeed can't be
trusted to market Subsys within the law, odds are low the DEA will
look favorably on an application to sell a new drug. Shareholders
also might have to worry the DEA will pull the company's licenses
to manufacture their dronabinol products, too.
I outlined warning signs in my article. Despite a bad pedigree,
failed drug launch, and an indefinitely-delayed NDA, investors bid
this one up over $1B in valuation. That's likely going to get cut
in half or worse today as investors flee what appears to be a very
bad situation for the company.