Don’t believe the TRUMP CHEAP TALK about tax reform.  At best it will be another Bush chump change $100 tax cut. This is after all the Bush Third Term. Stock market outflows have been greater than the Bush second term when the smart money pulled out. This was shortly before the Great Recession evaporated $9 Trillion from US Citizens. What is buoying the markets? In a word, low volume and Fed loose money that has flooded banks with Tarp liquidity. August is always a low volume month because Trader Big Shots go on vacation in August. Vacation is almost over. US STOCK MARKET WARNING WILL FALL HARD FEAR BIOTECH.


Big Outflows generally portend a big tumble:

Smart money has been moving money to cash and overseas into emerging markets. We have been recommending this gradual move for months.  The parabolic move has occurred and what is left is often called the last gasp. It is usually caused by short sellers capitulating and closing positions. Thus markets appear to move up when in fact the floor to the bottom is being removed.


Why we continue undaunted to buy oil:

First off in spite of all the talking heads talking down oil, it has solidified and barely moved with the Texas Hurricane which supposedly wipes our 1/3 of use refinery capacity.  Meanwhile Russia and Saudi are extending their production cuts through June.

East Texas is underwater. This cuts gulf production and refinery production of gasoline. Refineries are in shut down mode for winter blends. So the Hurricane is a non-event. But the reduced gulf oil production in the face of lower oil cost is likely to result in reducing production.  End result… oil will rise and this is the bottom. Gasoline prices will soar. This is of course Government destroying the free marketplace by imposing blending regulations and other nonsensical conditions on refiners and US producers. It is just another government controlled business. But the US Government is not going to stop global demand which is soaring.

We like fracking sand plays:

We like Hi-Crush partners and US Silica. Both are at their multi-year bottoms yet it will be Fracking oil production that is stepped up in low dollar oil conditions. Everyone else loses money. That will be short lived. Fracking is the only truly capitalistic energy enterprise unaffected by Government price fixing and regulation. Though we believe Shale oil regions should have their own refineries and pipeline access. The Government distribution system at present is mindless. Like it or not you will have Gulf Hurricanes and they will wipe our 1/3 of the gasoline refinery business. In real Capitalism one man’s sour note is a symphony to another.

In crony capitalism and government controlled businesses the marketplace and consumers take a beating. Why not, you have the former Texas Gov. Rick the moron with hipster glasses heading up the Department of Energy. No wonder nothing is getting done and the red tape is only increasing.


In a big swoon fear Biotech:

Biotech names have soared over the last several months in hopes of FDA reduced regulation and an Obamacare repeal. Neither is going to happen. In fact if anything you are about to see Government price controls over pharmaceutical prices. Democrats want them and Trump holds this ax over big pharma when his poll numbers drop. Trump poll numbers are the lowest of any President in US History.

This is another one of these unbridled vindictive Trump moments. This nasty stuff must ride just under the surface of his smooth brain, a threat for every occasion.

That was the first unvarnished threat out of Trump’s mouth when MERCK CEO Kenneth C. Frazier jumped Trump’s manufacturing counsel.


.@Merck Pharma is a leader in higher & higher drug prices while at the same time taking jobs out of the U.S. Bring jobs back & LOWER PRICES!

Here is another inappropriate threat from Trump:

Now that Ken Frazier of Merck Pharma has resigned from President’s Manufacturing Council,he will have more time to LOWER RIPOFF DRUG PRICES!

The trouble with Biotech is twofold:

First the US is lagging. Too much government regulation has stifled development. Bush and his stem cell nonsense hurt and set the US back by ten years or more. Obamacare finished it off.  Click here for how China beat the US in human gene therapy. This appears to be yet another US pioneered industry just like semiconductors that have left the US because of regulations and Government anti-business action. These are the most brain intensive businesses that exist. They are now gone. Oh but Bartender Jobs and McDonald’s counter workers are in high demand. We are not singling out Trump. We said the same about Obama Jobs. They are low pay temporary work. Large businesses are laying off older workers and cutting retirement benefits.


Second big problem is the Politicians such as Hillary Clinton on the left and Trump who’s political stripes are essentially RINO, are both focusing on government control of drug prices. Make no mistake Trump is not a capitalist. You can tell that from his Trumpcare which eviscerated any free market incentives. It was the crony healthcare that AMTRAK or the US Postal Service would like. Bottom line there is no profit motive left in the pharma and biotech worlds. You can have all the innovation in the world but if insurance companies won’t cover it; it won’t happen.

Consider Kymriah from Norvitis at $475,000 a dose!

Novartis received the first ever FDA approval for a CAR-T cell therapy for refractory acute ALL Leukemia. It is called Kymriah(TM) (CTL019). Please, we stress this is not a cure though with the hype one might think it is a cure. The Cost for one dose is $475,000. It is a salvage drug. No insurance company is going to spring for this. In fact Insurance Companies won’t pay for stem cell transplants in persons over 54 years of age. Innovation is meaningless when you are in the dark ages of Insurance company and Government controlled medicine. Remember this drug is only useful in some refractory cases. Most children with ALL go into remission with conventional therapies and are cured with stem cells transplants which are a fraction of the cost of this Novartis drug.


I want to make this point very very clear: This drug and Car-T therapy is NOT a cure for cancer.

It is only experimental. It has been around awhile. The idea has only shown promise for some blood borne cancers to encourage remission in which there are specific markers in the surface proteins of the tumors. These markers such as bruton’s tyrosine kinase cd117 are expressed in large amounts before and during a blast crisis. The drugs target the cells that express these genes.

While the idea is interesting it only amounts to a sliver of cases that would benefit. It doesn’t touch the underlying cancer machinery that upregulates the gene expression in the first place. So NO… this is not a cure for cancer.

I have read moronic articles published by CNBC that hype the drug as the next microwave popcorn. They are naive and ignorant. Cancer is complicated. As for leukemias we have long known the chemical pathways of their regulation. Be assured only stem cell transplantation cures leukemia.


Goldman Sachs thinking:

The reason for drug companies rising when they should be falling is also due to the overseas income situation. They don’t want to pay US taxes. Trump has previously proposed to allow a tax free repatriation of this money but that notion has failed once and will likely fail again.

Even though we oppose all Taxation of Corporations, Trump tax reform is unlikely. There may be a chump change Bush style tax cut of $100 but nothing major. Trump doesn’t have the support necessary to push this through without turning the tax reform into a spending and welfare platform to attract democrats. Don’t forget that Ivanka wants paid family leave more socialism from the Grifter In Chief’s family.

Remember this: Democrats want higher taxes on everything. RINOs want it to look like they are lowering taxes when in fact they are raising them against someone else. Trump’s original tax plan proposed a new 20% tax on imported goods and no export tax. That is a huge tax increase. That would increase the cost of Iphones and Galaxy phones by 20% as well as all imported heavy steel. The United States no longer manufacturers heavy steel. This would also increase the cost of imported food products. Today over 50% of fruits and vegetables are imported supplying improve winter selections for consumers.


Try to understand that Capitalism has made all the advancements in Medicine. Trump has already destroyed any potential to eliminate Obamacare.

All the so-called one payer government systems used American medicines and surgical procedures developed from Capitalist America. But Medicine under RomneyCare, Obamacare, Trumpcare is essentially Crony Insurance Company Care. None of these models have any free market Capitalism. So innovation while interesting simply dies at the hands of government and insurance companies. To this Government or an Insurance company a refractory sick child is simply not worth $475,000.

Results vary, some children given Kymriah(TM) (CTL019) have relapsed and subsequently died of their leukemia. That is a lot of money for a hyped drug and a hyped FDA approval. Biotech stocks rarely make money. These are hot speculative stocks frequented by young novice speculators. When the adults leave the markets and clear short positions, these stocks go parabolic then they come down hard. At present we believe it is the most dangerous sector.

Why is this market so dangerous?


First the big smart money has pulled out. The Mom and Pops with their 401K mutual funds and Bonds are still in the markets. That is the dumb money. Third, the short seller have closed positions as they have taken long money out of the markets. This has lead some… rightly or wrongly to suggest the call put ratio spells an upcoming Bear Market lasting for years. Regardless conditions merit warning.

The closing of puts and shorts has created the illusion that the market is not tanking. But the problem with this is that without short seller there is no bottom to the market and the drop is akin to a freight elevator with a snapped cable. These are the conditions that cause severe crashes.

Nobody can predict a crash.

Crashes come out of the blue like a lightning strike on a sunny day. But certain conditions are regarded as unstable. These include low volume, a lack of short sellers, parabolic markets and reduced liquidity.

Our chief concern is the Bond Market. But we are not about to short it. That is the Japanese Suicide Trade of the 90s. Once again smart money is not going to play this game, they have however pulled cash out of the bond markets. Cash is the safest place to be at the moment.


One could question Trump’s mental stability till they were blue in the face or his character fitness to be President. But for Markets the endless vacillation and paper tiger threats by the US directed at North Korea are having an effect. Gold and precious metals are up. The Bond market continues at nosebleed levels. Nothing under Trump gets to the state of normalcy. It is unsettling at best that Trump would contact General Flynn at 3 AM to ask Flynn if a high dollar or low dollar was better for the economy. I am sure Wharton was delighted with that display of ignorance.

Trump’s apparent attempts to rekindle the Korean War is disturbing to global markets including Chinese American relations. For the most part up until now Markets have more or less ignored Trump as irrelevant.

At present Trump is bombing sand hills near the border of North Korea trying to show US bravado in an effort to intimidate Kim Jong Un. A psychological study would suggest that it is Trump that is being intimidated and has to resort to threats and bravado. That bully stuff has never worked in the past with Asians and could well result in a nuclear accident provoked by Trump. Markets do not like uncertainty and smart money has been leaving the markets due to the unpredictability of Trump. Fortunately so far Trump has proven to be so inept that he hasn’t accomplished anything good, bad or indifferent. He’s just bad at it.


While there is a huge amount of background noise from Trump, markets tend now to ignore him.

Meanwhile the Trump policy of Naval patrols in the Asian shipping lanes has resulted in multiple US Warship collisions with commercial ships. This has resulted in a loss of US sailors and disabled war ships. Apparently the naval ships are having difficulty spotting the 600 plus foot commercial ships in the sea lanes. Either that or these co-ed ships are engaged in other business rather than keeping watch.

Bannon was quite correct when he told Trump that North Korea did not have a military solution but only a diplomatic solution. This and the fact that Bannon brought the base to the Trump election caused more disgruntled insecurity in Trump and Trump removed Bannon.

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