IBB - Challenging 2016, Recovering 2017 and Resurgence in 2018

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

The Biotechnology cohort has finally broken out and reached a 52-week high while making up much of the lost ground during the pummeling from both sides of the political aisle during the 2016 presidential race. Tweets and excerpts from the campaign trail from Hillary Clinton, Bernie Sanders, and Donald Trump put the biotech cohort through the wringer via taking aim at drug pricing. The sustained sell-off lead to the entire cohort to sell off from all-time highs of $132 to $83 or 37% in only six months as measured via the iShares Biotechnology Index ETF (IBB). From February of 2016 through June of 2017 IBB traded in a tight range from $83 to $98 while Donald Trump continually fired shots against the healthcare sector. Any healthcare related stocks became volatile on the heels of any statement or tweet from Donald Trump. Shortly after the inauguration, Trump stated that drug companies are “getting away with murder” when speaking to the drug pricing issue. The previously proposed healthcare legislation never materialized thus a level of certainty has entered the picture, and the drug pricing threats are not perceived to be as bad as initially feared. Recently the index has had a resurgence moving to a 52-week high of $118 with a much clearer runway ahead as the political headwinds continue to abate. As the confluence of abating political threats, drug pricing certainty, merger, and acquisition activity ramps and continuity of the current health care backdrop, I feel the index has room to continue its upward trend and retrace its 2015 level of $130.

AbbVie Earnings Setting the Tone

AbbVie (ABBV) reported Q4 numbers that beat expectations and updated guidance above consensus estimates for 2018, and as a result, the stock moved up 14%. This earnings announcement stroked the entire biotech cohort and had pumped more life into the group that has seen a steady rise leading up to this statement. Other large-cap companies that have plenty of upside based on its multi-year highs include Celgene (CELG) which is off 35%, Regeneron (REGN) which is off 31% and Gilead (GILD) which is off 29% based on current prices. Even specialty pharma Allergan (AGN) is off a staggering 43% as well. All of these names may be due for a resurgence if quarterly results beat and guidance is raised similarly as AbbVie. Continue reading "IBB - Challenging 2016, Recovering 2017 and Resurgence in 2018"

Why $80 Crude Oil Is Highly Unlikely In 2018

Robert Boslego - INO.com Contributor - Energies


On January 2, 2018, Byron R. Wien, Vice Chairman in the Private Wealth Solutions group at Blackstone, issued his list of Ten Surprises for 2018. “Byron defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable,” having a better than 50% likelihood of happening.”

Byron’s Ten Surprises for 2018 includes

“The price of West Texas Intermediate Crude moves above $80. The price rises because of continued world growth and unexpected demand from developing markets, together with disappointing hydraulic fracking production, diminished inventories, OPEC discipline and only modest production increases from Russia, Nigeria, Venezuela, Iraq, and Iran.” Continue reading "Why $80 Crude Oil Is Highly Unlikely In 2018"

New Tax Laws Could Mean a Boom for Stock Buy-Back ETF’s

Matt Thalman - INO.com Contributor - ETFs


Now that the Senate has passed a tax bill and President Trump has signed off on it, investors should get ready for a few significant changes that are likely to begin happening. While the bill has been touted as a way to boost the economy and help the middle class, some economists disagree; mainly on the idea that if corporations have a lower tax bill, they will higher more workers and pay their current employee’s more money.

History has shown that when repatriated money comes back to US soil, it is largely used for share buybacks. In 2004 there was a one-time tax holiday when repatriation of foreign earnings was brought back home and taxed at a rate of 5.25%, not the usual 35%.

In 2004 fifteen companies brought back $155 billion, of the total $312 billion. Those 15 companies increased their share repurchases by 38% between 2005 and 2006. There was a clear correlation between share buybacks increasing the repatriation of overseas cash. Continue reading "New Tax Laws Could Mean a Boom for Stock Buy-Back ETF’s"

The Fed's 2018 New Year's Resolution

George Yacik - INO.com Contributor - Fed & Interest Rates


In February Jerome Powell takes over as chair of the Federal Reserve, succeeding Janet Yellen. His first order of business should be to get the Fed off its silly, outdated and nonsensical monetary policy target of 2% inflation. He and the other members of the Federal Open Market Committee should at the very least change the inflation target number, or, better yet, find a different measuring stick altogether.

One of the Fed’s mandates, we know, is to keep inflation “stable,” as noted on the Fed’s website, citing the Federal Reserve Act (the other two mandates are achieving maximum employment and moderate long-term interest rates). The current Fed has taken to defining price stability as 2% inflation. Given that the Fed already basically believes it has accomplished the other two objectives, and price inflation has been nothing but rock-solid stable for several years, it’s not clear why it’s still so determined to get inflation up to that 2% target rate, and letting that dictate its monetary policy. If prices are stable at about 1.5%, rather than 2%, doesn’t that meet the mandate, as long as prices are stable?

During the Great Depression of the 1930s the lack of inflation – more accurately, deflation – was a big problem, feeding the downward spiral in the economy for more than ten years. Since then, economists, both on the Fed and elsewhere, have been absolutely terrified of that happening again, even though we haven’t come close to it, not even during the depths of the recent Great Recession. Now that we have seemed to have finally pulled out of the last financial crisis, it’s time to put that deflation obsession to rest. Continue reading "The Fed's 2018 New Year's Resolution"

Trump: Bad Bankers Beware

George Yacik - INO.com Contributor - Fed & Interest Rates


So now President Trump has thrown himself into the discussion about Wells Fargo. Maybe now the bank will get the justice it deserves. And maybe now the message about Trump’s intentions about financial regulation will become less fake.

First a little background. Three months ago Federal Reserve Chair Janet Yellen made some pretty startling comments for a Fed chief, publicly criticizing Wells’ behavior toward its customers as “egregious and unacceptable.”

She was talking, of course, about the bank’s years-long practice of signing up its customers for checking accounts, savings accounts, credit cards and other products without asking their permission or even telling them. But since then there have been reports and admissions by the bank of several other excesses, such as charging auto loan customers for insurance they didn’t ask for, dunning mortgage customers for interest rate-lock extension fees when the bank itself caused the delays, overcharging military veterans on mortgage refinance loans, and allegedly closing customers’ accounts without telling them why it did so.

You would think that the Fed – which regulates Wells and other big banks – would have come down on the bank by now. Yet nothing’s happened since Yellen made those comments.

Then last week the president injected himself into the fray. Continue reading "Trump: Bad Bankers Beware"