A meeting of the minds... Today's market action... Inflation is still 'sticky'... New hope for heart failure patients... A new 1,000% winner from Dave Lashmet... Bitcoin ETFs are finally official...
A 'meeting of the minds'...
As I (Corey McLaughlin) write today, I'm sitting at one of the corners of an exceedingly long U-shaped set of tables in a hotel conference room in downtown Baltimore. And I'm surrounded by some of the smartest minds in the industry...
For example, Whitney Tilson, the lead editor of our Stansberry's Investment Advisory, is currently sharing an experience from his short-selling days a few years ago. We also heard from Joel Litman, founder of our corporate affiliate Altimetry. Meanwhile, Retirement Millionaire editor Dr. David "Doc" Eifrig is sitting across from me, looking focused on his laptop.
Around 50 of my colleagues are meeting in person and virtually to brainstorm the year ahead... to bat around ideas for our readers to make money and protect their wealth... and navigate the economy and markets.
It's amazing to just sit here and listen. Everything is on the table... and I think you'll be pleased with the ideas that come from today's meeting.
This morning alone, our editors and analysts discussed a range of subjects... like what politicians might do or say to get votes leading into November's elections... what AI technology means for humans and how to spot the long-term winners... the future of the U.S. dollar... cryptocurrency... China... Japan... and more...
I can't say too much more right now, but stay tuned. You'll see more of these ideas in the pages of our newsletters this year.
Today's market action...
This morning's release of December's consumer price index ("CPI") data stirred some investor reaction. The U.S. Department of Labor's inflation gauge showed a 0.3% rise in prices from a month earlier... and a 3.4% annual gain.
Housing costs, including persistently higher rents, accounted for more than half of the rise in these CPI numbers. Rising gas and food prices also contributed. Some areas where we had previously seen deflation over the past year – like used cars – actually rose.
But here's the important part: The monthly pace of headline inflation accelerated to 0.3%, from a 0.1% gain in November and flat growth in October.
Labor market data was also released this morning, which showed initial jobless claims dropping slightly last week.
In short, not much was reported to suggest that the Federal Reserve will be inclined to pull the trigger to cut its benchmark lending rate anytime soon...
The major U.S. indexes pulled back on the news this morning across the board, and the small-cap Russell 2000 led the way, finishing down 0.7%. Longer-term yields continued to inch higher through the first half of the day but then finished slightly down. The 10-year Treasury yield is just below 4%.
The benchmark S&P 500 closed slightly lower while the Nasdaq and Dow Jones Industrial Average were up by a small amount.
Putting it all together, it looked like a day of Wall Street at least considering "higher for longer" again... much like the market behavior we saw in 2022 when a bear market was in full force.
We warned about this...
As we wrote last month, the rapid year-end rally in stocks and bonds set the stage for some disappointment in early 2024 if inflation data remained "sticky" and it became apparent that the Fed might not cut rates as soon as much of the market expected.
In particular, our colleague Mike Barrett said that trends in real estate would make it nearly impossible for the pace of inflation to crater to the point where it would convince the Fed that inflation was headed to its 2% annual target... and to cut interest rates.
In the December issue of his Select Value Opportunities advisory, Mike cited data and observations from real estate industry experts who were saying housing prices would need to drop significantly to ease headline inflation numbers.
But as we shared in the December 20 Digest, Mike said the opposite was happening...
Real estate is local, of course, but prices for homes are still rising enough generally. Listing site Redfin reported that the median U.S. home sale price was up by 3.7% in November, the largest increase in more than a year.
And, as Mike noted, that was before the recent plunge in the 10-year Treasury yield... This should also sink mortgage rates, which could actually send more buyers back into the market and push prices – and housing inflation – higher.
Mike concluded that market expectations for multiple rate cuts sooner than later were perhaps misguided. It's one big reason why he tempered his outlook for 2024, as he wrote in Select Value Opportunities last month...
The bottom line is, lower interest rates can't materialize without a drop in housing inflation... despite stock and bond investors' strong convictions to the contrary. And right now, that seems even more improbable than it did before the Fed's December 13 meeting.
This is the conundrum tempering our outlook for stocks in 2024.
If the decline in interest rates, which is already baked into stock and bond prices, doesn't happen as expected, then equity prices will likely fall and bond yields will rise.
Now, this doesn't mean Mike is saying it's time to go "all out" of stocks, but simply to tone down expectations. He said, "stock prices can eventually grind higher in 2024 [but] a temporary pullback isn't out of the question." We're seeing a grind right now.
Our colleague Greg Diamond has also been writing recently to his Ten Stock Trader subscribers that when "everyone" believes in something in the market, he's inclined to expect – or at least prepare – for the opposite to happen.
So far, Mike and Greg have both been right. And speaking of kudos, we have some to share about Stansberry Venture Technology editor Dave Lashmet, who recently alerted us to another massive winner his subscribers are enjoying. This one has to do with a recent development in health care...
Here's Dave with the details...
Late last month, Stansberry Venture Technology subscribers got a rare Christmas gift. On December 27, U.S.-based biotech firm Cytokinetics (CYTK) reported positive trial results for its heart failure pill aficamten.
This pill is designed to treat a special sort of obstructive heart failure, where you have too much heart muscle: so much that your heart can't relax before it fills. So it moves less blood.
Fortunately, this drug cuts the excess "rowers" – a protein called myosin – that pull your muscle fibers when they contract. This yields a thinner, more efficient heart muscle.
There are around 200,000 Americans who have this sort of heart failure, which is hereditary... and their fate is dire.
Until Cytokinetics' pill, these patients would be put on beta blockers to relax their blood vessels. That did not solve the problem, but it did help reduce some of the symptoms. Fortunately, Cytokinetics' new drug works on top of beta blockers for an added benefit. And the details are highly positive: The drug worked fast, and the benefits lasted. Plus, it had fewer side effects than even the control patients, more proof that folks on the drug were improving.
All of this is good news for Stansberry Venture Technology subscribers...
The long road to a 1,000% gain...
The day of Cytokinetics' announcement, the stock shot up roughly 80%. Shares went from less than $46 the day before to more than $83 and kept rising before a pullback today...
We recommended Cytokinetics in Stansberry Venture Technology in November 2017 for $7.80 per share. As of today's close, we're up 989%, nearly 10X, on our remaining position in the model portfolio.
You see, we sold half of Cytokinetics when shares doubled in May 2020 to lock in some gains and remove all our initial risk.
We do this because investing in biotechnology is hard. There are high barriers to entry for a new drug – it has to work and not cause severe side effects. After that, there's competition.
Now, Bristol-Myers Squibb (BMY) has a competing product called Camzyos, which it picked up for $13 billion. But Bristol-Myers' drug doesn't work if you're already on beta blockers.
The market is favoring Cytokinetics' drug. You can tell by Camzyos' sales figures. Camzyos was worth $16 million in sales to Bristol-Myers last quarter. That's less than the cost of the sales staff and its drug's marketing budget.
Meanwhile, Cytokinetics' drug performs better than Camzyos, and it also works if you're on beta blockers.
Our secret decoder ring seems to be working...
In Stansberry Venture Technology, we look for drug successes at mid-stage trials, how severe the disease it aims to treat is, and how much the drug is helping patients.
See, we aren't medical doctors. So the only time we'd use these drugs is as patients. That's why we keenly track side effects. We care, because we could be the end users.
So it's not just about efficacy. A safe pill or injection is just as important as its ability to fight disease. Clearly, this is also going to affect its adoption rate by doctors and patients. That's what we take into consideration when recommending drugmakers.
For example, yesterday, I issued a buy alert to Stansberry Venture Technology subscribers for a different "forgotten" heart drug with a market cap of less than $400 million, also with blockbuster potential.
What comes next for Cytokinetics...
Cytokinetics suggests it's not going to build up its own sales staff – at least in 2024. More than likely, it will sell off this drug. Or it will get bought out entirely. Either way, we win.
That's why, even after 1,000% gains, we are sticking with this stock. There's speculation that Novartis (NVS) will buy Cytokinetics, but until that really happens, it's just a rumor.
For our part, we're looking forward to two more trial results for aficamten. We track the medicine... And although Mr. Market might not know it, a pill that helps heart failure patients is worth hundreds of millions of dollars. That's what we're counting on.
Finally, today, it's official...
Late yesterday, as has been expected, the U.S. Securities and Exchange Commission ("SEC") gave the go-ahead to interested parties to offer spot bitcoin exchange-traded funds ("ETFs")... Today, 11 new bitcoin ETFs were available to trade, all for the first time...
The price of bitcoin (BTC) rose after the formal announcement and was up 6% this morning, though it pulled back later today to around $46,000. Beyond bitcoin, though, the news is a massive tailwind for cryptos, as we explained earlier this week.
For example, Ethereum (ETH), the world's second-most popular crypto, was up as much as 8% in the past 24 hours, with speculation hitting the mainstream that the SEC will greenlight listing spot Ethereum ETFs next. Whether that happens remains to be seen.
Our point is, for those who've been following along, one catalyst is down for what our Crypto Capital editor Eric Wade is saying could be the greatest crypto bull market ever – for bitcoin and other lesser-known cryptos. Two more catalysts have yet to be realized.
Existing Crypto Capital subscribers and Stansberry Alliance members can find all the details here. And we'll have more from Eric here in the weeks ahead with an update on his outlook now that bitcoin ETFs have been launched.
New 52-week highs (as of 1/10/24): Cencora (COR), D.R. Horton (DHI), Franklin FTSE Japan Fund (FLJP), Alphabet (GOOGL), Home Depot (HD), Intuitive Surgical (ISRG), Eli Lilly (LLY), Microsoft (MSFT), Novo Nordisk (NVO), NVR (NVR), Novartis (NVS), Palo Alto Networks (PANW), PulteGroup (PHM), Stryker (SYK), Trane Technologies (TT), Sprott Uranium Miners Fund (URNM), and Visa (V).
In today's mailbag, feedback on yesterday's edition which touched on politics and historic market performance in presidential election years (which shows generally positive returns)... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Corey, Love reading your stuff. Learn something every time and you make me think.
"As a historian myself I can truly say your stating, 'A look at history, for what it's worth... ' is every bit exhaustive for such a small statement and expresses it all... Thanks for being out there and not being afraid to tell it how it is. Oh, and love seeing Porter back... Can't get enough of him!" – Subscriber Jeff B.
Corey McLaughlin comment: Thanks, Jeff. Appreciate the note. In saying that line you quote, I'm trying to weigh what history tells us has happened – and what it suggests might occur again – versus keeping an open mind about the future and expecting the unexpected.
All the best,
Corey McLaughlin with Dave Lashmet
Baltimore, Maryland and Seattle, Washington
January 11, 2024
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