Saturday, July 31, 2010

Ron Paul goes after SEC transparency

The crimes in progress on Wall Street and at the SEC continue. Financial Crash 2.0 is coming to a brokerage account near you.

Friday, July 30, 2010

Michael Krieger on politics, the economy, and gold

Fast forward to the 14-minute mark of this video to catch Michael Krieger's interview.

UBS - time to accumulate metals

Gold on the cusp of a parabolic move

John Embry of Sprott Asset Management believes gold is on the cusp of a parabolic move up, despite central and bullion bank price manipulation in the paper futures markets. Physical shortages will drive prices higher.

CNBC's Jim Cramer says ARNA is a Buy

But he also tells longs who bought ARNA at lower levels to take profits and sell half their positions. Thanks but no thanks, I'm not selling any of my shares at these levels to his short cronies who are upside down and need to cover. There is nothing wrong with taking some profits off the table, but with two big pivotal events pending (independent Advisory Committee vote and PDUFA review), I'm staying long and strong. Every investor has different objectives and time lines, so decide for yourself, and don't be swayed by media "pundits" who may not have your best interests at heart. Good luck to all longs.

Arena Pharmaceuticals [ARNA 7.95 0.97 (+13.9%) ]: ARNA is a buy, Cramer said. Thought the stock has enjoyed a big run, so investors who already have held the stock should have been taking some profits.

See disclaimers in the side bar.

Disclosure: long ARNA shares.

Kashkari flips as soon as he enters private sector

In a brief oped likely written by his 2nd year analyst or executive assistant, titled "The Cultural Challenges of Entitlement Reform" the bald one says "bailing out the financial system went directly against our shared beliefs in free markets and fair play." Yes, you read that right. This is the same person who singlehandedly devised the biggest taxpayer blank check bailout to banks in history...

"We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five percent of that is $700 billion. A nice round number." In fact, let's continue: "Seven hundred billion was a number out of the air,” Kashkari recalls….”It was a political calculus. I said, ‘We don’t know how much is enough. We need as much as we can get [from Congress]. What about a trillion?’ ‘No way,’ Hank shook his head. I said, ‘Okay, what about 700 billion?’ We didn’t know if it would work. We had to project confidence, hold up the world. We couldn’t admit how scared we were, or how uncertain." Ah yes, an uncertain and scared then-35 year old bailing out the world... And now, a grizzled and veteran Kashkari, who certainly recalls his wood chopping days with joy at the PIMCO campfires, in which Build America Bond receipts are used for kindling, is encouraging the administration to cut the benefits of the same taxpayers whose money was used to prevent the insolvency of, among others, his current employer? Yes, ladies and gentlemen, we bring you today's unbridled hypocrisy courtesy of the latest and most worthless addition to the Pimco team.

Trader Vic on hyperinflation

Fed worries about deflation

QE 2.0 is coming.

California fiscal emergency declared

Government deficits are the next black swan

As an analogy: You often have planes landing two hours late. In some cases, when you have volcanos, you can land two or three weeks late. How often have you landed two hours early? Never. It's the same with deficits. The errors tend to go one way rather than the other. When I wrote The Black Swan, I realized there was a huge bias in the way people estimate deficits and make forecasts. Typically things costs more, which is chronic. Governments that try to shoot for a surplus hardly ever reach it.

The problem is getting runaway. It's becoming a pure Ponzi scheme. It's very nonlinear: You need more and more debt just to stay where you are. And what broke [convicted financier Bernard] Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.

The Last Gasp Bubble of

The pretence of knowledge

Thursday, July 29, 2010

The ruling elite called

Government creates--and destroys jobs

A year and a half later, unemployment still remains high, and the economic recovery is a myth.


Click on chart to enlarge.

When money supply M3 (dark blue line) declines this precipitously, the chances of an economic recovery decline with it. By the way, M3 is no longer recorded as an official government statistic. Hmmm...

Almost two years of zero interest rate policies have not revived the economy or brought unemployment numbers down. 4.5% mortgage rates have not resuscitated the housing market. Fed Chairman Ben Bernanke was hinting at exiting fiscal stimulus programs a few months ago due to a "recovering economy."

I see failure. "Jobless recovery" is an oxymoron. The Fed's only hope is more monetary stimulus, more printing of USDollars, a second round of quantitative easing, debt monetization, etc., whatever opaque choice of words our government officials use. After all, they can't lower interest rates below zero.

In order to combat deflation, Bernanke's biggest fear, QE 2.0 will be implemented after the next financial crisis, to once again "save our financial system." But all it will do is stoke inflation, while debasing the Dollar, and reducing our standard of living.

Europe's 30 trillion Euro headache

SEC exempt from public disclosure

Watch the video. This financial regulation "reform" enables cover ups, instead of increasing transparency.

So much for transparency.

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

CFTC Commissioner Bart Chilton on financial regulation

In this interview, he sounds serious in implementing regulation of the derivatives markets. What's also encouraging is his enthusiasm for eliminating fraud and manipulation in the commodities exchanges, including removal of exemptions from position limits for speculators. Hopefully, this will level the playing field and promote efficient markets and price discovery.

Wednesday, July 28, 2010

Jim Rickards on the Roman Empire (part 2)

Gold confiscation: straws in the wind

This is a must-read opinion editorial on gold.

California authorities investigating Goldline's sales practices

This is a nice hit piece by ABC News' George Stephanopoulos on Goldline's executive for their alleged boiler room sales practices. Notice Goldline's Scott Carter's response to Stephanopoulos' assertion that the government can't confiscate the citizen's gold. In fact, FDR absolutely banned private gold ownership in 1933 by Executive Order. See below.

Executive Order 6102, issued April 5, 1933:

Criminal Penalties for Violation of Executive Order
$10,000 fine or 10 years imprisonment, or both, as provided in Section 9 of the order.

Soros and gold revisited

I had blogged about George Soros' head fake on gold earlier. Here is another article on his comments regarding "gold as the ultimate asset bubble," and how his message was misconstrued.

Bill Gross compares deficit spending to flushing money down the toilet

Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.”

Without acceleration in population growth, developed countries finance more consumption to maintain economic growth, the world’s biggest bond-fund manager wrote in his August commentary today on Newport Beach, California-based Pimco’s website. Leveraged spending, he said, is not a substitute for demand created by people.

“I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population,” Gross wrote. “Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence.”

Deficit spending will be unsuccessful in what Pimco calls the “new normal” because deleveraging, re-regulation and de- globalization produces structural headwinds that lead to slower growth and lower-than-average investment returns, Gross said.

Pimco, a unit of Munich-based insurer Allianz SE, managed $1.07 trillion of assets as of March 31.

Gold deal gone bad

We've heard of drug deals gone bad, but as the price of gold climbs, we're seeing gold deals gone sour.

Jim Rogers call CNBC a PR agency

At about the 3:50 minute market into this interview on CNBC Europe, Jim Rogers calls CNBC a PR agency whose purpose is to make stocks go higher. Notice how quickly they go to commercial after that comment. Jim's a billionaire who's known for his blunt, irreverent, and politically incorrect honesty. He's also been known to be on the right side of the trade a few times.

The Traders Who Make The Big Money

The Traders Who Make The Big Money

Why they refuse to do the same with gold is really difficult to grasp unless of course they are fearful of government regulators sniffing around their business. Maybe the word has gotten out that this will be the case with any hedge fund manager who dares to try to force the shorts to delivery the gold. One thing along this line – China or Russia nor mid-Eastern interests are under no such constraints and could break the back of the bullion banks tomorrow if they chose to do so. That they have not signifies that they are not through acquiring cheap gold yet.

Monday, July 26, 2010

Rodman and Renshaw analyst downgrades ARNA

Elemer Piros, analyst for Rodman & Renshaw, downgraded shares of Arena Pharmaceuticals (symbol "ARNA") a few weeks ago.

His comments:

Yet Piros argued that lorcaserin's "weak efficacy" will change the overall risk/benefit discussion when the panel convenes again. Although the drug met the FDA's requirement for a doubling in the percent of patients who lost 5 percent of their weight, it has fallen short on the other efficacy measure, showing 3.6 percent placebo-adjusted weight loss.

I guess he was unaware of the either/or efficacy clause, according to the FDA 2007 Guidance on Weight Management drugs.
c. Efficacy benchmarks

In general, a product can be considered effective for weight management if after 1 year of treatment either of the following occurs:

• The difference in mean weight loss between the active-product and placebo-treated groups is at least 5 percent and the difference is statistically significant

The proportion of subjects who lose greater than or equal to 5 percent of baseline body weight in the active-product group is at least 35 percent, is approximately double the proportion in the placebo-treated group, and the difference between groups is statistically significant

Regarding the lucrative Lorcaserin marketing agreement with Eisai, ARNA receives some of the highest revenue splits in the industry. Yet, Piros was unimpressed:

Elemer Piros, analyst with Rodman & Renshaw, dubbed the deal "meek" and "fairly modest," noting that the arrangement is "highly back-end loaded, and leaves a lot of lorcaserin commercial risk with Arena shareholders."

Note: at the time of the downgrade, shares of ARNA were trading under $3. A month later, shares are gapping up above $6 in anticipation of a positive advisory committee review on September 16, and full FDA review (PDUFA) on October 22. Piros' price target for ARNA shares is $1.

Rodman & Renshaw is an investment bank specializing in the life science/healthcare industries, among others. ARNA was looking to raise capital prior to its partnership agreement with Eisai. ARNA ended up choosing an alternate route in their latest PIPE financial deal with Deerfield.

See disclaimers in the side bar. No causal relationship implied.

Disclosure: long shares of ARNA.

Beware the analyst with an agenda
Provenge is a drug to help prostate cancer patients in the late stage of disease. Dendreaon[sp] the company that makes Provenge is a bio tech company who recently received a positive recommendation from the FDA advisory committe[sp] that Provenge is safe and the the drug work[sp] to prolong survival.
Aschoff's firm had a sell or 'short' recomendation[sp] on this stock - target price of 1.50.
After the recommendation of the FDA approval pannel[sp] the stock flew up to 18 dollars. Aschoff has been on what seems to be a personal war path against Provenge ever since.
Friedman Billings analyst Jonathan Aschoff says he was just trying to get the real story when he impersonated a doctor in early March.

Here's another article.

When the FDA’s advisory panel voted in favor of Provenge, most Wall Street research analysts were predicting a bright future for Dendreon. But as naked short sellers piled on with ever increasing gusto, hedge fund managers continued to whisper in reporters’ ears. And two Wall Street analysts did more than whisper – they shouted, day after day, that Dendreon’s treatment for prostate cancer was doomed.

One of these analysts is named Jonathan Aschoff, and he works for a financial research outfit called Brean Murray Carret & Co. The day after the advisory panel vote, in an interview with Reuters, Aschoff made the long-shot prediction that the FDA would not approve Provenge, but would instead ask Dendreon to supply additional data showing that the treatment was safe and effective–a process that could take years. Soon after, Aschoff told other media outlets that the FDA would set a “dangerous double standard” by approving Provenge because the treatment “did not meet its primary goal in two Phase III trials.”
During the first days of April 2007, Aschoff was everywhere, continuously repeating this notion that the FDA would set a “dangerous double standard” by approving Provenge. On April 9, Aschoff reiterated his “sell” rating for Dendreon, setting a target for the stock at a mere $1.50, which implied that the stock would lose more than 90 percent of its value by the end of the year. Reuters, Associated Press, CNBC and other media dutifully reported Aschoff’s comments as though they shed light on the merits of Dendreon’s prostate cancer treatment.

Aschoff’s performance raises a few basic questions. The first is, how did a Wall Street analyst know that it would be “dangerous” to approve a medical treatment? It is an odd day, indeed, when the media turns to Wall Street for wisdom on matters of science and health.
The second question is, why was Aschoff so confident that the FDA would not approve Provenge? Given that the FDA had followed its advisory panels’ decisions in 97% of cases, and in 100% of cases involving drugs for dying patients, Aschoff’s prediction seemed rather far out. What did he know that the rest of the world did not know?

One more question: Which hedge funds were paying Aschoff’s bills?

Note: shares of DNDN recently peaked above $58 after FDA approval, and have settled in at $36 as of today.

See disclaimers in the side bar.

Disclosure: no current position in DNDN, last exit was at $58. A family member still owns shares of DNDN.

The death of paper money

Bill Freeza on Rome

Speaking of Rome:

Jim Rickards on the decline of the Roman Empire

This is a must-hear interview by Jim Rickards on the (economic) decline of the Roman Empire, currency debasement, government budgets, taxation, and complexity of society.

Sunday, July 25, 2010

Russian spies are gold bugs

India unveils $35 computer

LBMA shuts down bullion bank trading data

GATA's Adrian Douglas (recently famous for facilitating the emergence of whistleblower Andrew Maguire) seems to think so, after his observation that the LBMA has decided to block "access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members." His conclusion: "There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast."

Investors could have been blindsided by the events of 2008, but anyone who misses the writing on the wall about what's going on in the bullion markets is just foolish. The bullion banks have sold far more metal than they can deliver, and more and more customers are asking them to deliver. This has led to back-door bailouts and cover-ups.

Anyone who has "unallocated" bullion should be very concerned. The LBMA itself describes owners of "unallocated bullion" accounts as "unsecured creditors." That means that the account holder has no collateral or title to any bullion.

Bullion bank unallocated account agreements require the bank only to settle in cash for non-performance. That means when the physical squeeze that is evolving takes gold and silver prices to multiples of the current price, holders of unallocated metal accounts will not get any bullion, nor will they be compensated at the prevailing market price.

Top secret America: a hidden world, growing beyond control

The potential perils of paper gold and silver ETF's

I've blogged on this topic several times, and it's worth revisiting.

The gist of the article states that the GLD and SLV ETF's are good proxies for the spot price of their respective precious metals, but in the event of "failures to deliver" physical gold and silver, the prices between the ETF's (paper contracts) and the physical prices would decouple, as the physical shortage would cause the prices of the actual metals to soar, while the ETF prices would languish. The reason is the precious metals COMEX futures contracts and ETF's are not backed by allocated bullion. They are derivatives, much like mortgage-backed securities were derivatives of the actual mortgages themselves. Buyers of said derivatives lost everything when subprime home borrowers defaulted on their mortgages. Holders of COMEX precious metals futures contracts, and the GLD and SLV ETF's would be similarly exposed to counterparty risks.

So if you believe you can trade the fluctuations of gold and silver prices, then the GLD and SLV ETF's may be a cost-effective trading vehicle. But if you are looking to hedge against inflation, currency debasement, and/or financial crisis, owning physical gold and silver may be a safer play, despite hefty premiums.

See disclaimers in the side bar.

Disclosure: no position in GLD or SLV.

The anatomy of a bear raid

"Expect Massive BEAR RAID this afternoon @ 12 30 pm central last trade 24 suggest you sell short into strength MASSIVE BEAR RAID coming.. TODAY"
- monthaphumchareon, April 28, 2009 around 11 a.m., the same day Dendreon CEO Mitch Gold was presenting Phase III clinical trial results at the American Urological Association for Provenge, an advanced prostate cancer immunotherapy approved by the FDA a year later, April 29, 2010.

"He was roundly mocked until the prediction turned out to be amazingly accurate. The stock plunged from 25 to 8 in 75 seconds. And later that very day, the company presented positive trial results."
- username "andybaron_ym" on an ARNA message board.

Avoid entering stop loss (market) orders to your broker on highly volatile, heavily manipulated stocks. It only telegraphs your intent to predator market makers who will steal your shares at much lower prices in a bear raid. Investors looking to protect their profits in DNDN got stopped out at much lower prices than their intended exit points. Entering a market order was a huge mistake.

This is a very long, but worthwhile read, full of intrigue, danger, greed, power, corruption, organized crime, and malice on Wall Street. Buyer beware.

Saturday, July 24, 2010

Iran's military forces

I was curious about Iran's military force, wanting to see how they compared to other countries like Iraq and Afghanistan, for instance. A quick glance on Wikipedia revealed some startling numbers. Boldface emphasis is mine.

* The Iranian Military consists of the Islamic Republic of Iran Army, Islamic Republic of Iran Navy, Islamic Republic of Iran Air Force, and the Iranian Air Defense Force. The regular armed forces have an estimated 420,000 personnel: the Islamic Republic of Iran Army, 350,000 personnel; the Islamic Republic of Iran Navy, 18,000 personnel; and the Islamic Republic of Iran Air Force, 52,000 airmen.[5] Iranian Air Defense Force is a branch split off from the IRIAF.[6]

* The Army of the Guardians of the Islamic Revolution, or Revolutionary Guards, has an estimated 125,000 personnel in five branches: Its own Navy, Air Force, and Ground Forces; and the Quds Force (Special Forces).[5]

* The Basij is a paramilitary volunteer force controlled by the Islamic Revolutionary Guards. Its membership is a matter of controversy. Iranian sources claim a membership of 12.6 million, including women, of which perhaps 3 million are combat capable. There are a claimed 2,500 battalions of which some are full-time personnel.[7] quotes a 2005 study by the Center for Strategic and International Studies estimating 90,000 active-duty full-time uniformed members, 300,000 reservists, and a total of 11 million men that can be mobilized if need be.[8]

Iran's military was called the Middle East's most powerful by General John Abizaid chief of United States Central Command (U.S. forces' commander in the region). However General Abizaid said he did not include the Israel Defense Forces as they did not fall into his area of operations.[9]

I'm pretty sure US military personnel won't be posing for camera crews like they did in Iraq if the Israeli/Iranian conflict escalates into war.

Ron Paul on monetary and fiscal policies

China may switch to currency basket

This is the latest hint that foreign central banks are diversifying their reserves away from the USDollar.

Van Jones: Stop worrying about the deficit

This line of thinking is exactly what's wrong with our country. Thanks to Kitty for this one.

While the federal government sinks deeper into debt than any time since World War II, former White House “green jobs” adviser Anthony Van Jones said it was time to stop worrying about budget deficits and pressure Washington to take more money from American businesses to fund larger social and infrastructure projects.

“This is a rich country. We have plenty of money, and if you don’t believe me, ask Haliburton,” Jones told a group of progressive bloggers and activists at the Netroots Nation convention Friday. “There’s plenty of money out there; don’t fall into the trap of this whole deficit argument.”

“The only question is how to spend it,” he added.

BIS gold swaps (part 2)

Thanks to Dick for bringing up this article.

See BIS gold swaps (part 1) here.

Here are my unedited comments:

I read another article which hinted that Portugal was indeed the country that swapped out their gold to cover the bills. The BIS is a very private organization that meets 10 times a year in Basel. It's in a building that has no signs. Swiss citizens pass it every day and don't even know it exists.

Think of them as a big pawn shop for central bank gold. If you need cash, whether in Euros, dollars, etc., just swap out your gold, and receive the currency requested. If you fail to repay the cash, you lose the gold. That article correctly states gold is double-counted--I'll extend that argument further and say it's counted 45 x, which means the other 44 people who think they have ownership to the gold (unallocated), don't really own that gold. They are paper certificates with no ownership rights.

I'll connect the dots, and declare if/when we transition away from the USDollar, whether it's another paper currency like the SDR, gold as priced in USDollars, will soar. In fact, eventually, the SDR will lose its luster too, because it's made up of a basket of four other paper currencies: the USDollar, yen, British pound sterling, and Euro--none of which are backed by gold either.

So they are merely replacing one paper currency for another, although the SDR will give a semblance of stability, since the devaluation risk is spread out between 4 doomed currencies, instead of one. I don't see how the Chinese and Russians will like this solution either.

But whether the SDR becomes the de facto currency or not, and whether a gold-backed currency becomes the new reserve currency, it spells doom for the USDollar, priced against gold. And since our trades are based on a higher price for gold in USDollars, we will do well. How well is the question. If the transition goes well, and the paper chase is concealed for another decade, gold will rise to $2500. If the formula doesn't work well, gold will be $6300....priced in US Dollars, of course.

I'm more convinced than ever this scenario will happen, and that markets will react violently after the Ponzi schemes of central bankers are exposed. The sad truth is that it doesn't have to happen. Imagine if gold were worth $12,000 an ounce tomorrow, ten times what it is worth right now in the spot market. All of a sudden, the US balance sheet looks a lot better, because the Assets side of the ledger just went up by a huge amount, somewhat offsetting our huge Liabilities (I'm assuming the Fed still has the gold they claim to have in Ft. Knox and the New York Fed, which is a big assumption, given there has been no independent audit since 1953).

But government officials and bankers are too worried about what soaring gold prices signal to the markets, and they're too worried their Ponzi schemes being exposed. Re-valuating gold at much higher prices would be an admission of guilty for decades of price manipulation. But it would also relieve them of the huge burden of being too under capitalized, much like an insolvent bank is.

When your crown jewels are re-valuated at much higher prices, you now have much more equity from which to make loans against. For example, if your house value increased from $1 million to $10 million, you can now tap that additional equity of $9 million and put it to work for you. Government officials and central bankers are more worried about soiling their reputations, so they continue on their search to extend the shell game, instead of focusing on fixing the structural problems of RECAPITALIZING THEIR ASSET BASE and producing income again to pay off their enormous debts.

FDR did this in 1933 by confiscating private gold at $20.67 and later re-valuating gold officially at $35. Obama and Bernanke will have to do this also, but their revaluation would have to be significantly higher for it to accurately reflect the huge supply of USDollars sloshing around worldwide, not just in the US. After all, USDollars are held in private hands, commercial banks, as well as in reserve vaults at foreign central banks. Only then will the US Dollar have any link to gold, which encourages sound monetary policy. In our mad world of derivatives, swaps, and endless printing of paper currencies, nothing is backed by nothing, which is exactly why we had the financial collapse in 2008. Lack of collateral caused the collapse of the subprime securitized mortgage bonds when prices of US residential homes went south. Until currencies are backed by gold, a repeat is inevitable.

Re-valuating central bank gold reserves to accurately reflect global money supply will re-energize the sinking world economy, at least in the developed world, as the most indebted European countries and the US have the most gold in their reserves. Emerging growth countries have a disproportionately low percentage of gold in their reserves and are accelerating their gold holdings.

Of course, central bankers won't take steps to restore gold-backed currencies for the aforementioned reasons, but when the world wakes up to the shell game they have been playing, the markets will force their hand, because gold will be priced at much higher levels.

Friday, July 23, 2010

Irrationally exuberance to unusually uncertain

Just this past week, Fed Chairman Ben Bernanke testified in front of the Senate banking panel. In opening remarks, Bernanke said, “. . . the economic outlook remains unusually uncertain. We will continue to carefully assess ongoing financial and economic developments, and we remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability."

Sounds like Helicopter Ben is expecting another "event" and is fully prepared to drop USDollars out of the sky.

Thursday, July 22, 2010

CFTC and financial regulation reform

If CFTC Commissioner Bart Chilton is correct, position limits will be imposed and enforced for derivatives trading on commodities in the COMEX Exchange. Let's see if they enforce these new laws in the precious metals pits, forcing the big bullion banks (JPMorgan Chase and HSBC) to unwind their huge naked short positions.

I'm still wary of Commissioner Chilton's enthusiasm because CFTC Chairman Gary Gensler has talked a good game, but has been slow to respond to complaints of price manipulation. He's also a former executive at Goldman Sachs. Having said that, his predecessors were asleep at the wheel for decades--probably complicit in the price suppression schemes of gold and silver, so at least his acknowledgment that futures markets need more scrutiny against price manipulation is somewhat encouraging.

Bernanke and some Democrats wish to extend Bush tax cuts

Wow, that's a nice turnabout. Good for Ben.

Employment levels

...the study concludes that taking into account the approximately 14 million new job seekers in the future, then the December 2007 unemployment rate will not be met until April 2021! Welcome to the new normal. Of course, both of these analyses assume that the economy will immediately commence growing and generating jobs at the recovery rate seen in the 2000s, when about 166,000 jobs per month were being added. With every month that this does not happen the 2021 date will continue being pushed out further into the future.

Another lie: "No more taxpayer bailouts!"

I guess Fannie Mae and Freddie Mac don't count as taxpayer bailouts.

Gold coin dealers decry new tax law

Not sure what healthcare reform has to do with buying and selling gold coins, but that's why we have a Congress. Thanks to John and Dick for submitting this.

Proof of gold price suppression

That suppression comes from trading on a net basis 45 ounces of gold for every ounce of real gold. In other words 44 ounces of paper gold are traded for each ounce of physical gold. This bogus increase in gold supply distorts the price such that it does not move in lock step with M3 but instead it moves in lock step with the amount of paper gold that is created out of thin air.

Each 44 ozs of paper gold are only backed by 1 oz of real gold but if holders of paper gold demand real gold then each 44 ozs of paper gold will need to be met with 44 ozs of physical gold and not just with one ounce; this will cause a run on the bullion banks. The price will increase and its final limit will be the price related to only real physical gold.


The inescapable conclusions are:

1) The gold price is suppressed through fractional reserve bullion banking

2) The gold market is selling on average 45 ounces of gold for every one ounce of real physical gold via “unallocated gold” (fractional reserve bullion banking). In other words the gold market is backed by only 2.3% gold

3) The true price of physical gold is currently around $54,000/oz if fractional reserve bullion banking did not exist. In the presence of fractional reserve banking with 2.3% gold backing the market price of “gold” is reduced to $1200/oz

4) The US dollar has a purchasing power that is 45 times over valued

5) The way to end gold price suppression is for investors to ensure they have allocated physical bullion preferably held outside of the bullion banking system

The Trade of the Century

The sick joke of the Gold cartel is that whether you hold dollars or unallocated gold you only have 2.3% of gold backing! However, the trade of the century is to buy actual physical metal with your dollars, or if you have unallocated gold to demand physical delivery. In this way you can trade something with 2.3% gold backing for an investment that is 100% gold.

Obscene salaries for public officials in Bell

Meanwhile, in one of Los Angeles County's poorer municipalities, the natives are sharpening their pitchforks.

China is accumulating strategic metals

Thanks to Dick for this insightful, concise article on the accumulation of strategic metals and the ongoing rise of China as an industrial giant. On the flip side, the article assesses the continuing disintegration of America's manufacturing sector, and eventual demise of its military complex.

Bernanke speaks, markets fall, and then rebound

I'm starting to get these Ben Bernanke cycles. He was in total denial, cheerleading a decrepit economy leading up to the financial meltdown in 2008. Now that the economic cliff is transparent to all, Helicopter Ben is starting to sound like a sage soothsayer.

Bernanke is the fall guy these days--he has to be the sober, bearer of bad news, and the lightning rod of criticism since he's such a killjoy for stating the obvious (the economy sucks). But his function is useful for legislators to provide rationalization for more quantitative easing, or QE 2.0. "The economy sucks, so we need to print more money" is the ongoing dialogue. QE is fancy-speak for bailouts of more industries, and more people. It sounds humanitarian, but it also suppresses growth because it saddles our broke nation with even more debt. And debt will eventually choke this once-great nation of ours into default.

Wash, rinse, repeat. Every time he speaks or testifies before Congress, markets fall because things are so bad. But then markets rebound because "Hey, helicopter Ben is going to drop dollar bills out of the sky." Of course, this only works--until it doesn't work anymore. Financial stimulus is starting to have negative impact on GDP growth, because the cost outweighs the benefits due to our exorbitant debt levels (i.e. servicing the interest on the debt is getting increasingly costly, outweighing the temporary stimulative benefits of building bridges to nowhere).

So while I will enjoy the benefits to my portfolio of potential further QE, at some point, the market will realize enough is enough. When that time comes, no one wants to be naked when the tide rolls out.

Tuesday, July 20, 2010

Employment data

These are official employment data from the US Bureau of Making Crap Up--er, I mean, Bureau of Labor Statistics:

Note the column in the middle--the percentage of Employed Men, and note the downward trend since 1973, when statistics were first compiled. In 2009, the figure had reached an all-time low of 64.5% of the male population. Any lower, and doesn't take much imagination to connect the dots.

China should cut US Treasury holdings
Zhang Monan, a researcher with the State Information Center, a think tank under the powerful National Development and Reform Commission, told the paper that China should invest more of its $2.5 trillion of foreign exchange reserves, the world's largest stockpile, in hard assets such as gold.


Examples of hyperinflation

Taking a break from the deflationist agenda, let's examine hyperinflation:

Note the many currencies which have suffered through hyperinflation. Also,

Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

* Outright lying in official statistics such as money supply, inflation or reserves.
* Suppression of publication of money supply statistics, or inflation indices.
* Price and wage controls.
* Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or something similar.
* Adjusting the components of the Consumer price index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in hoarding and extremely high demand for the controlled goods, resulting in shortages and disruptions of the supply chain. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods, further exacerbating the problem.

Of course, this could never happen in America, right? At least, not again.

Chrismas sales in July: opportunity or desperation?

Jim Cramer likes ARNA as a speculative play

Normally, Jim Cramer's endorsement is the kiss of death, since I tend to be a contrarian. He has shunned ARNA before, so I was comfortable being long ARNA. Now that shares of ARNA have almost doubled since the July 1 announcement of the marketing partnership agreement with Eisai, Cramer is jumping on the bandwagon. In all fairness, I don't always disagree with Cramer's assessments; his recommendations are just badly timed, and viewers (largely retail investors) end up buying and selling at the exact inopportune times. His viewing audience on CNBC will perhaps drive shares up some more for the time being, as he has a large following. But be careful, because Cramer's rosy predictions have been known to set up retail investors for a disappointment, as short hedge funds could manipulate shares down after the run up. The smart (and sometimes crooked) money ends up slaughtering the dumb money.

However, with this knowledge, longs might be able to wait and buy the dip. The danger is if the horse has left the barn, and shares run up further on anticipation of positive outcomes at the Advisory Committee review September 16, and of course PDUFA review on October 22. It also provides shorts an opportunity, but I don't recommend retail investors short any stock, because the potential losses are limitless, and unless you're in the know, you will lose money even if you are correct on the direction of the price, but wrong on the timing. Wall Street will whipsaw you out of your position, leaving you with losses, despite being "right."

Overall, shares are ARNA are heavily manipulated, with a huge short interest of up to 27% of the float recently. Expect high volatility. Due to recent bullish news, there is heavy buying pressure, but naked shorts will manipulate the stock in order to cover their shorts and escape intact. If the outcomes are positive, shorts without an escape hatch will get torched.

I've been long ARNA for over a year, with an average entry point above $3, way below the current price per share of $5.26. I can afford to spectate while the share price gyrates, confident in Lorcaserin's FDA approval and commercial launch--that's why I'm long. My initial buy of $5 last year was untimely, but due to my bullish conviction for ARNA, I accumulated more shares on the way down to its lows. In other words, I doubled down, a risky proposition, but potentially highly rewarding. I won't deny there were some nervous moments, but in hindsight, my conviction enabled me to accumulate more shares at lower prices. I was able to overcome fear and doubt, and the price suppression ended up being a gift--everybody loves a sale. Sometimes courage and conviction are rewarded.

I'm long, locked and loaded. I'm not interested in trading in and out of this stock. For those that are, good luck to you.

See disclaimers in the side bar.

Disclosure: long shares of ARNA, short January ARNA put options.

Monday, July 19, 2010

Analyst upgrades on ARNA

See disclaimers on the side bar.

Disclosure: long ARNA shares, short January ARNA put options.

Sunday, July 18, 2010

Lorcaserin on MSNBC

The smart money (early adopters, hedge funds) was in on ARNA below $3. Now that MSNBC is reporting on Lorcaserin, the big money (mutual funds, pension funds) will roll in while it crosses $5 (institutional buying threshold).

The learned crowd (retail investors who watch the news) will buy in at $25 after it's on NBC, probably after FDA approval. The masses will pile in at $50 when it's on Oprah.

Retail investors include the Hollywood socialite scene after FDA approval. There will be a buzz among celebrities, media reps, talent agents; the whole Hollywood ecosystem, with celebrity MD's getting supply to their top clients.

Just before Oprah validation, the gossip columnists will get a hold of the testimonials, and within a couple weeks, the housewife in Kansas will be demanding it from her family doctor.

That's how the media works when they grab a hold of something with traction.

Of course, this is contingent on FDA approval. The medical community will have legitimate concerns about off-labels and black markets (witness the shenanigans associated with HIV cocktails among body builders, for instance), but the safety profile for Lorcaserin is a HUGE advantage. Legitimate drugs can be misused and abused, so the studies ARNA did on addiction are also a positive. Just my opinion.

See disclaimers on the side bar. Any mention of direction and price targets is pure speculation and not a specific recommendation or prediction.

Disclosure: long ARNA shares, and short ARNA put options.

Saturday, July 17, 2010

ARNA shares gain on VVUS' Qnexa rejection

As usual, some analysts really don't get it.
Separately, Barclay Capital analyst Dr. Jim Birchenough maintained a more conservative "Equal Weight" rating on Arena, saying the FDA seems to have a high hurdle for new obesity drugs and lorcaserin could face its own issues with regulators. Those issues could include adequacy of weight loss and heart valve risks.

According to the recently released New England Journal of Medicine article on Lorcaserin:

Serial echocardiography was used to identify patients in whom valvulopathy (as defined by the Food and Drug Administration) developed.

Among 2472 patients evaluated at 1 year and 1127 evaluated at 2 years, the rate of cardiac valvulopathy was not increased with the use of lorcaserin.

Competing currencies in Michigan

New types of money are popping up across Mid-Michigan and supporters say, it's not counterfeit, but rather a competing currency.

Right now, you can buy a meal or visit a chiropractor without using actual U.S. legal tender.

They sound like real money and look like real money. But you can't take them to the bank because they're not made at a government mint. They're made at private mints.

The U.S. Treasury Department says the Coinage Act of 1965 says "private businesses are free to develop their own policies on whether or not to accept cash, unless there is a state law which says otherwise."

"This establishment accepts any form of silver, gold, chicken, apple pie, if someone works it out with me," said Jeff Kotchounian of Deerfield Chiropractic. "I've taken many things."

Jeff Kotchounian says he's used this Ron Paul half troy ounce of silver to get $25 worth of gas from a local station.

While the government and banks don't accept them, many others do.

Bullion is outperforming mining stocks

Gold is the anti-currency

In an era of fast money and currency destruction, bullion is real money. Central banks are buying bullion, hedge funds and other institutional investors are buying bullion. And the world’s largest creditor – China – is diversifying out of dollars and buying bullion.

“When the price of gold moves, gold's price isn't moving; rather it is the value of the currencies in which it's priced that is changing.”

– John Tamny, economist, H.C. Wainwright Economics

Most investors’ portfolios are heavily weighted in currency-denominated financial assets (stocks and bonds), but few comprehend the extent of their purchasing power loss. The numbers in Figure 5 may help put things in perspective: in the past ten years, the US and Canadian dollars, the UK pound and the euro have, collectively, fallen more than 70 percent in value if measured in that universal unit of money, gold. In effect, investor portfolios have lost 70 percent of their purchasing power. Currency destruction, while it is accelerating, is by no means a recent event, however. Since 1913 (not coincidentally the year the US Federal Reserve was formed) the US and Canadian dollars have lost a staggering 96 percent of their value. Is this trend likely to come to an end? Not in the foreseeable future.

At the end of 2009, America’s total debt was approaching 100 percent of GDP, but most investors are unaware of another, far bigger burden: trillions of dollars in unfunded liabilities for Social Security, Medicare and Medicaid. Money the government promised to taxpayers for Social Security has instead been borrowed for its own use. Money the government promised to fund future Medicare and Medicaid benefits and military/government pensions has not been set aside at all. Richard Fisher, a member of the Federal Open Market Committee, believes total US debt – including Medicare and Social Security – is over $122 trillion (Figure 6). This is more than $390,000 for every man, woman and child in the US, and the number keeps rising.

“Fiscally, we are in uncharted territory. Because of this gigantic deficit, our country’s ‘net debt’ is mushrooming… no one can know the precise level of net debt to GDP at which the United States will lose its reputation for financial integrity.”

- Warren Buffett, Chairman, Berkshire Hathaway

Gold as a haven

BIS gold swaps

My take away: central banks are running out of gold, so in lieu of outright selling their inventory, they are swapping it out for currency, with the hope of recovering the gold in the future. If they default, the BIS keeps the gold bullion, similar to a pawn broker.

See disclaimers in the side bar.

Disclosure: long gold and silver, long precious metals mining shares.

Who is buying US Treasuries?
The reason: in it we read that in May 2010, China dumped $33 billion in Treasuries, bringing its total to the lowest since June 2009. Furthermore, Japan also offloaded $8.8 billion in bonds, as did the Oil Exporters. Yet total foreign Treasury holdings increased from $3,957 billion to $3,964 billion almost exclusively as a result of ongoing exponential UK accumulation. It is time someone in the mainstream media asked just who is doing all this "UK-based" buying? It is not hedge funds, which operate out of Caribbean Banking Centers,...

Yet in what is (and continues to be) the most perverse observation, that proceeds without any questions from the mainstream media, the otherwise broke UK, once "bought: a stunning amount of Bonds, or just over $28 billion in the month of May, consisting of $27 billion in Bonds, and $1.3 billion in Bills. The "UK" accumulation patterns continues growing in an exponential pattern, and the country which owned "just" $180 billion in USTs in December, has doubled its holdings to $350 billion in less than half a year.

This is increasingly appearing as shadow Fed debt monetization operation, operating out of the United Kingdom.

Let me break down Bond Markets 101. The Fed and US Treasury have to issue a lot of debt in the form of US Treasury bonds (long expiry) and US Tresury bills (expirations of less than a year). They are basically IOU's with a coupon promise to pay a certain interest rate to the lender (i.e. bond investor). They have to issue trillions in debt to fund our overspending government. As long as demand is there for this debt (i.e. buyers), the yields or interest rates buyers demand will remain relatively low.

However, if supply exceeds demand, yields must increase in order to attract buyers. Hence, interest rates rise. Higher interest rates are problematic for the economy, because loans of all types are indexed to said bond yields. For instance, 30-year mortgage rates may be indexed to 10-year US Treasury yields. If interest rates rise, fewer homes and cars are purchased, and fewer businesses borrow money to fund their operations. That's why sharply rising interest rates are detrimental to economic growth.

Now, the Fed and US Treasury know this, and they know that foreign appetite for US Treasury bonds is waning--and for good reason. The US government is broke, and will never be able to pay back their debt obligations. But in order to maintain a semblance of the status quo (i.e., the US government is the borrower of last resort, the borrower with the highest credit rating), the Fed must artificially create demand and thus, prop up bond prices, while simultaneously suppress yields and interest rates (remember: when bond prices increase, yields decrease, and vica versa, by definition).

In other words, the Fed is buying its own US Treasury bonds, in order to keep interest rates low--and they're doing it surreptitiously through banking affiliates in the UK, in order to not spook the bond markets (which are several orders of magnitude larger than equities markets). But with this so-called debt monetization (which is really acceleration of the printing of currency), the Fed is flooding the market with USDollars, which ultimately devalues the currency. Once the bond market vigilantes wake up to this, they will drive the USDollar down even further, much like a predator senses weakness in its prey.

George Soros did exactly this in 1992 to the British Pound Sterling, driving rates up and bankrupting the UK. Remember: when a sovereign nation's currency is devalued, bond investors demand higher yields in order to compensate for the extra devaluation risk. Combine that with high sovereign debt levels, and bond prices plummet in a self-fulfilling death spiral. This, of course, devalues the currency even further, into a debt spiral with no escape. This also happened to Greece, Portugal and Spain recently, which had to issue bonds at much higher interest rates when high sovereign debt levels spooked the bond markets. In a nutshell, due to high debt levels, their creditworthiness was downgraded, causing their borrowing costs to soar.

The US, of course, has a huge advantage because the USDollar is the world's reserve currency, and that it can issue debt in USDollars, while the 16 Euro zone countries can only raise debt through Euros. Hence, the Fed can hide our Federal government's insolvency by issuing even more debt to pay off previous debts. But as any sane person knows, no household can solve their debt problems with more debt. It's the same for corporations, states, municipalities, and yes, sovereign nations like the US Federal government. Eventually, the creditors go into collection mode. And apparently, our biggest creditors in China and Japan have told the US government "enough is enough."

So the Fed is forced to go offshore with our allies in the UK to hide their purchases of its own US Treasury debt, because the American public has bailout fatigue--we now understand digging a deeper debt hole has bad consequences. This signals desperation on the government's part, and the gargantuan US Treasury bond market may be on its last legs. The shell game can be extended as long as confidence in the USDollar is intact. But when the "con" is up, the bursting of the bubble in the US Treasury bond market will be cataclysmic--much larger than the subprime mortgage bond market bubble.

Many entities may hold US mortgage-backed securities, but every sovereign entity holds USDollars and/or US Treasuries in their foreign reserves. When that bubble bursts, the global financial system itself would collapse.

Gold and silver may be the last currencies standing. Which is another reason why central bankers abhor increasing prices in precious metals, as it signals a crisis in confidence of paper currencies.

See disclaimers in the side bar.

Disclosure: long TBT, long gold, long silver.

Lorcaserin video

Lorcaserin's visibility is increasing with the peer-reviewed article in the New England Journal of Medicine, as indicated in this video.

Friday, July 16, 2010

Pregnancy, VVUS and ARNA

This post came from an ARNA message board.
First of all there will never be any human pregnancy prospective studies done. All proven teratogens are known from retrospective studies or case control studies or studies done on animals. This is true of any drug brought to market.

To prove that an agent is a teratogen one might show:

•It is more often associated with individuals having a specific defect than with appropriately matched controls.
•A specific malformation or group of malformations is consistently associated with exposure to the teratogen.
•Biologic plausibility; the agent was present at the time in organogenesis when the anomaly would have to occur. As an example, it is unlikely that exposure to drug X in the third trimester would cause a cleft palate because the palate closes in the first trimester.
•The anomaly was less common before the presumptive teratogen was introduced. Phocomelia (missing upper parts of arms or legs), as an example, was almost nonexistent before the introduction of thalidomide.
•Experimental animals will develop the anomaly if given the presumed teratogen at the appropriate stage of organogenesis.

The BIG difference is that VVUS had a known teratogen!!!.
Using your logic no drug would ever be approved for lack of pregnancy studies.


ARNA analysts

Let's break down who got it right and who got it wrong on VVUS and ARNA.

Thumbs up to Cowen & Co. and Piper Jaffray for getting it right, and understanding the importance of safety in FDA approval decisions.

Thumbs down to JPMorgan and Adam Feuerstein of for getting it completely wrong. At least JPMorgan and Adam are smart enough to reverse course on ARNA--after Qnexa's rejection.

Big thumbs down to Rodman & Renshaw analyst Elmer Piros for downgrading ARNA with a price target of $1.

Recall Jonathan Aschoff, a Brean Murray Carret & Co. analyst, at one time had a sell rating on DNDN with a $1.50 price target. DNDN shares recently had a high of over $58.

Is Wall Street crooked? You decide.

Thursday, July 15, 2010

FDA panel rejects VVUS' Qnexa, citing safety worries
Vivus’s Qnexa, the first of three new anti-obesity drugs under FDA review this year, came before one of the agency’s advisory committees today — and it was a swing and a miss. The panel recommended against approval, with 10 panel members voting against it and 6 in favor, as the WSJ reports.

Trading in the company’s shares was halted at $12.38. But shares in Arena, which makes one of the other experimental drugs, lorcaserin, were up more than 9% in after hours trading, to $4.30. Shares in Orexigen, which makes the other drug, Contrave, fell 10% in after-hours trading, to $4.50. Contrave is similar to Qnexa in that it, too, is a combination of existing drugs.

The problem wasn’t Qnexa’s effectiveness. But panel members said that safety concerns, such as birth defects, depression, and a high heart rate experienced by some study participants, were worrisome in light of the fact that the drug might be taken by millions of otherwise healthy people over many years. They wanted longer-term data than the company had available in order to assuage safety concerns.

Advisory committee votes 10 - 6 No on Qnexa

As I expected, the independent advisory committee voted 10 - 6 (one panel member later changed his vote) against Qnexa being recommended for FDA approval. Shares in VVUS were halted this morning, but when trading resumes, the shares will plummet.

Shares of ARNA, a competitor to VVUS in the anti-obesity sector, gapped up 34% to a high of $5.72 in anticipation of the vote. After the Qnexa outcome, ARNA shares dropped in sympathy below $4, down approximately 10% for the day. However, upon further inspection, lack of sufficient safety data doomed Qnexa, but ARNA's Lorcaserin has a strong safety profile. Hence, I believe shares of ARNA will rebound leading up to its September 16 advisory committee review.

Edit: as I posted this, ARNA shares are recovering close to their previous close above $4 in after-hours trading. All that volatility, and ARNA ended up its round trip near yesterday's close. What a wild day of trading!

Wall Street was bullish on Qnexa's efficacy, but once again, safety ruled.

See disclaimers on the side bar.

Disclosure: no position in VVUS (and glad). Long ARNA shares.

NEMJ article on Lorcaserin

For those who can't wait for the hard copy, here's a thread on the ARNA message board.

New England Medical Journal peer review on Lorcaserin

Boldface is my emphasis.

Background: Lorcaserin is a selective serotonin 2C receptor agonist that could be useful in reducing body weight.

Methods: In this double-blind clinical trial, we randomly assigned 3182 obese or overweight adults (mean body-mass index [the weight in kilograms divided by the square of the height in meters] of 36.2) to receive lorcaserin at a dose of 10 mg, or placebo, twice daily for 52 weeks. All patients also underwent diet and exercise counseling. At week 52, patients in the placebo group continued to receive placebo but patients in the lorcaserin group were randomly reassigned to receive either placebo or lorcaserin. Primary outcomes were weight loss at 1 year and maintenance of weight loss at 2 years. Serial echocardiography was used to identify patients in whom valvulopathy (as defined by the Food and Drug Administration) developed.

Results: At 1 year, 55.4% of patients (883 of 1595) receiving lorcaserin and 45.1% of patients (716 of 1587) receiving placebo remained in the trial; 1553 patients continued into year 2. At 1 year, 47.5% of patients in the lorcaserin group and 20.3% in the placebo group had lost 5% or more of their body weight (P<0.001), corresponding to an average loss of 5.8±0.2 kg with lorcaserin and 2.2±0.1 kg with placebo during year 1 (P<0.001). Among the patients who received lorcaserin during year 1 and who had lost 5% or more of their baseline weight at 1 year, the loss was maintained in more patients who continued to receive lorcaserin during year 2 (67.9%) than in patients who received placebo during year 2 (50.3%, P<0.001). Among 2472 patients evaluated at 1 year and 1127 evaluated at 2 years, the rate of cardiac valvulopathy was not increased with the use of lorcaserin. Among the most frequent adverse events reported with lorcaserin were headache, dizziness, and nausea. The rates of serious adverse events in the two groups were similar.

Conclusions In conjunction with behavioral modification, lorcaserin was associated with significant weight loss and improved maintenance of weight loss, as compared with placebo.


The justification for using lorcaserin to manage obesity is not greater efficacy than currently available drugs, but rather an apparently much better safety and adverse-event profile and very clear-cut beneficial effects on risk factors for type 2 diabetes and cardiovascular disease. Where lorcaserin will fit into the management of obesity remains to be seen. Future studies could investigate the potential for improved weight-loss efficacy by combining lorcaserin with other receptor-selective weight-loss compounds such as analogues of glucagon-like peptide 1. Given the history, we will need to be doubly sure about the safety of lorcaserin, used either alone or in combination with other weight-loss drugs.

Valvulopathy is why fen-phen was withdrawn in 1997, after 18 million subscriptions were written in 1996. Pfizer (formerly Wyeth, formerly American Home Products) set aside $21 billion for class action lawsuits.

The potential for a weight management treatment is staggering. Perform your own due diligence.

See disclaimers in the side bar.

Disclosure: no position in PFE. Long shares of ARNA. Short put options in ARNA.

Topiramate not recommended for treatment of obesity

Topiramate is one of two generic compounds in Qnexa, the other being phentermine. Qnexa is being reviewed by an independent advisory committee today, and will receive full review by the FDA on October 28. Draw your own conclusions.

Disclosure: no position in VVUS.

More excerpts from FDA briefing document on Qnexa

"When assessed as a group, the incidence of cognitive-related adverse events was 1.7%, 2.0%, 5.6%, and 7.8% in the placebo, low-dose, mid-dose, and high-dose PHEN/TPM groups, respectively. The most common adverse event related to cognitive dysfunction was disturbance in attention."

"Approximately 30% of individuals treated with high-dose PHEN/TPM experienced a
serum bicarbonate <21 mEq/L compared to 5.9% of individuals treated with placebo."

"A higher proportion of PHEN/TPM-treated individuals experienced a categorical
increase in heart rate compared to placebo treated individuals (>20 bpm: 19.6% high-dose PHEN/TPM versus 11.9% placebo)."

"Six individuals in the placebo group (atypical angina, coronary artery disease, left main coronary disease) and five individuals in the PHEN/TPM group experienced a non-fatal serious adverse event related to cardiac ischemia defined within this subclass. An additional placebo-treated individual died of cardiorespiratory arrest. Coronary artery disease was the most common adverse event within the placebo group and myocardial infarction was the most common adverse event within the PHEN/TPM-treated group."

"The incidence of depression-related adverse events in the PHEN/TPM clinical trials was 3.4% in the placebo group, 5.0% in the low-dose PHEN/TPM group, 3.8% in the mid-dose PHEN/TPM group, and 7.7% in the high-dose PHEN/TPM group."

These adverse side effects are problematic for Qnexa, in my opinion. We should find out more in today's independent advisory committee review, and the October 28 PDUFA event.

Jim Grant believes QE 2.0 is coming

Thanks to my friend Dick for spotting this interview. I've been positing all alone more quantitative easing by the Fed (i.e. printing more money) is built into the cake.

Grant's thoughts on new Fed additions:

"I think the first order of business will be to try once more to print enough dollars to make something happen in the U.S. economy.”

On San Francisco Fed President Janet Yellen:

“Janet Yellen has had 36 opportunities to vote on monetary policy at the Federal Open Market Committee and she has voted ‘Aye, yes’ 36 times. 36 for 36 times. Now, has the Fed been right 36 consecutive times? No. I think that Janet Yellen is a well credentialed, consensus-hugging economist straight out of the Fed HR department. She is ideal from the point of view of the Fed bureaucracy. She will make not one ripple.”

On MIT economist Steve Diamond and Maryland state banking regulator Sarah Bloom Raskin:

“I’ve never met them but I suppose they are charming. They certainly are well credentialed. They may well have an avocation in monetary theory, but that is not their vocation. Their vocation, in the case of Professor Diamond, is fiscal policy, pensions, social security, he is an authority. He's mentor of Ben Bernanke so he’s a formidable academic.”

"Sarah Bloom Raskin is a formidable regulator. But neither is a formidable thinker about the nature of money or about the history of money or about how the Fed might paradoxically make things worse by doing what it does trying to make things better, which I think is the great question. These are people who, I think, are unlikely to oppose novel solutions to our fundamental monetary dilemma which is that the U.S. dollar is a faith-based currency of no intrinsic value that is manipulated by the Fed and the consequences of the manipulation are often quite different from what was intended. That’s the problem."

On Fed monetary policy:

"Deflation is a funny thing. It's a word that is much in the news, much in the markets, but is all too infrequently to find. So the Fed says that deflation is broadly declining prices. But could not also be progress? In other words, if the world produces more at lower prices, is that so bad? Americans spend half of their weekends, it seems, looking for bargains.”

"So what I blame the Fed for, among other things, is a lack of intellectual rigor and forthrightness."

On Federal Reserve Chairman Ben Bernanke:

"I think this is not being forthcoming with us, the people, about the nature of his concerns."

"In 2003, he was all deflation all the time. Well now the Cleveland Fed's median CPI was like 1.7 percent year-over-year, now it's 0.5 percent year-over-year. So where is the concern?"

"I think the concern will surface. We'll see more on Friday when the CPI comes out. But I think something ahead of the markets is a likelihood of the Fed stepping on the gas once more, so called quantitative easing - I think that's likely to happen…The Fed is already clearing its throat. You can see this in the newspaper leaks."

Wednesday, July 14, 2010

Irrelevant politics
So what’s happening? Just a few years — in some cases just a few months — after sweeping into office with promises of “change” and a quick clean-up of their predecessors’ messes, leaders of major democracies from across the political spectrum are in being swept right back out.

Did they turn out to be incompetent, or their policies wrong-headed? There’s hardly been enough time for either verdict. But if not that, what?

The answer, in a word, is debt. When an economy’s borrowing passes an historically identifiable point it loses the ability to navigate from crisis to solution. In the case of Europe, Japan, and the U.S., the range of choices has narrowed to only two, inflation and austerity, and neither are working.

When Europe tried inflation by promising to bail out the PIIGS countries, the euro collapsed, as the global markets correctly saw an oversupply of paper currency on the horizon. When it switched to austerity, workers across the continent saw their livelihoods threatened. Either way, the folks in charge get blamed and have a tough time holding their jobs.

The headline reads: "Fed: Full Economic Recovery Could Take 5-6 Years".

Gee, it took this long to finally admit it? Notice how financial TV (i.e. government mouthpiece) is spinning it as if they had called this all along. What about hope and change? What about green shoots? What about Keynesian stimulus? What about the V-shaped recovery? Oh, that's right: that's so five minutes ago.

Financial media and government economists are pathological liars. They missed the two biggest bubbles in human history: the internet bust and subprime mortgage crisis. At least the Fed is now making an attempt to restore its credibility, espousing fiscal discipline and responsibility. This call for austerity will last about 3 months.

It's an election year, after all, and states, counties and municipalities are going belly up. Don't be surprised if a financial crash is engineered, as justification for a gargantuan bailout in the trillions. Indeed, "We're the government; we're here to help."

The government expects us to have the memory of a gnat, so it would not surprise me if they will use another financial crisis to help us forget cries for fiscal and monetary discipline. This time it won't be banks that are too big to fail. It will be states too fat to starve. Wash, rinse, repeat...

Tuesday, July 13, 2010

Zuckerman blasts Obama

US credit rating downgraded--by China

Qnexa briefing documents for advisory committee (update 3)

"Lastly, the safety profile associated with long term use of Qnexa is not known. It is notable that phentermine was approved only for short term use (“a few weeks”) for patients with obesity. Topiramate was approved for long term use, but in a population (epilepsy or migraine prophylaxis) that may have important clinical differences than patients who seek treatment for obesity."

Questions to the Advisory Committee
1) Taking into account the results of the assessments made with the PHQ-9 and the Columbia Suicidality Severity Rating Scale (C-SSRS), please comment on the significance of the increased adverse event reports of depression, anxiety, and sleep disorders in subjects treated with Phentermine/Topiramate (PHEN/TPM).
- If approved, please discuss need for monitoring, possible monitoring strategies, and contraindications for use.

2) Please comment on the potential significance of the increased adverse event reports of disorders of attention, memory, language, and other cognitive disorders in subjects treated with PHEN/TPM.
- If approved, please discuss need for monitoring and possible monitoring strategies.

3) Please comment on the potential clinical significance of the metabolic acidosis determined by decreases in serum bicarbonate levels with PHEN/TPM treatment.
- If approved, please discuss need for monitoring, possible monitoring strategies, and contraindications for use.

4) Please comment on the potential clinical significance of the increase in heart rate observed in PHEN/TPM treated individuals.
- If approved, please discuss need for monitoring, possible monitoring strategies, and contraindications for use.

5) Given the doses of topiramate in PHEN/TPM, please comment on whether you believe PHEN/TPM poses a teratogenic risk to the target population for weight loss.
- If you believe it does pose a risk, please comment on how this risk should be managed in women of child-bearing potential if PHEN/TPM is approved.

6) Based on the current available data, do you believe the overall benefit-risk assessment of PHEN/TPM (QNEXA) is favorable to support its approval for the treatment of obesity in individuals with a BMI ≥30 kg/m2 or ≥27 kg/m2 with weight-related co-morbidities?
- Vote: Yes/No/Abstain

"The incidence of TEAEs [treatment-emergent adverse events] in the cardiac arrhythmia subclass was higher in the QNEXA Top-dose group (4.7%) and Mid-dose group (4.2%) than in the placebo group (1.8%). Palpitations, increased heart rate, and tachycardia represented 36 of the 41 cardiac arrhythmia TEAEs in the Serious cardiac adverse events were examined in all subjects included in the Integrated Safety Analysis of the NDA. Overall, there were eight cardiac SAEs in the QNEXA groups (N=2559) and nine in the placebo group (N=1719). The relative risk was 0.60 (95% CI: 0.23-1.54), QNEXA vs. placebo. The incidence of TEAEs in the is 1-year cohort. Palpitations and increased heart rate are expected and dose-related side effects of phentermine and phentermine-containing products. The cardiac arrhythmia TEAEs were primarily mild or moderate in severity and were serious for 4 (0.3%) subjects in the placebo group, 2 (0.4%) subjects in the Mid-dose group, and 2 (0.1%) subjects in the Top-dose group ischemic heart disease subclass was low (0.4% overall) and similar for the treatment groups."

Although not a requirement for approval of a fixed-dose combination product, the Division looks more favorably on combination products that exhibit a potentially meaningful improvement in the safety profile compared to the individual components. In addition, the applicant has theorized that some of the expected side effects of the two drugs alone may be “mitigated by oppositional pharmacodynamic effects associated with the other component.” In particular, the cognitive slowing observed with topiramate treatment may be lessened with co-administration of phentermine.

Disclosure: no position in VVUS.

VVUS shares increase on Qnexa efficacy, despite safety concerns

Shares of Arena Pharmaceuticals and Orexigen also rise in sympathy with Vivus. Briefing documents for Qnexa's upcoming review by an independent advisory committee this Thursday (July 15) revealed Qnexa's efficacy for weight loss, but also expressed concerns regarding adverse side effects. The FDA has assigned a PDUFA date of October 28, 2010, for review of Qnexa's NDA.

See disclaimers on the side bar.

Disclosure: long ARNA shares.

Monday, July 12, 2010

Silver, gold ratio

Gold is starting to gain traction in mainstream airwaves, but silver is the forgotten stepchild. If gold prices soar in the coming years, silver will go parabolic.

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Disclosure: long gold and silver.