Jim Cramer the contra-indicator; Co-developer of Cassava's potential Alzheimer's drug cited for 'egregious misconduct'; The mystery of the Adani coal imports that quietly doubled in value; This Inflation Report Won't Let the Fed Declare Victory; My visit to Rothmans

1) Someone sent me this video clip from almost a year ago, when Meta Platforms (META) reported weak earnings and the stock tumbled below $100 per share, causing CNBC's Jim Cramer – almost in tears – to apologize to his viewers:

I made a mistake. I was wrong. I trusted this management team. That was ill-advised. is extraordinary. And I apologize.

What did I get wrong? I trusted them, not myself. That I regret. I've been in this business for 40 years, and I did a bad job. I come out here and I try to help people every day, and I failed to help people, and I own that.

I know what Cramer was feeling like because I was in the exact same boat at the time...

I had recommended Meta back in 2019 as a core, long-term position in our two flagship newsletters, Empire Stock Investor and Empire Investment Report, and had ridden the stock up and then back down again.

But rather than throwing in the towel, with fresh eyes I re-examined the company and my investment thesis, shared my analysis with my readers across five daily e-mails in early November last year, and concluded that Meta was a pound-the-table, back-up-the-truck, trembling-with-greed buy.

With the stock closing yesterday at $324.16 per share, it has more than tripled since then.

The lesson here isn't to always buy a beaten-down stock (or use Cramer as a contra-indicator – though he often is one!). Rather, it's to always keep in mind what Benjamin Graham – the father of value investing and Warren Buffett's mentor – once said: "Mr. Market is your servant, not your master."

2) Two years ago in my November 3, 2021 e-mail, I wrote:

My friend and former student Gabriel Grego of Quintessential Capital Management just released a short report on Cassava Sciences (SAVA). The biotech company has a $2.3 billion market cap despite no revenue based on bullish expectations for its sole drug, Simufilam, which it claims will help treat Alzheimer's disease.

Gabriel's report, which you can read here, documents the shady backgrounds of many people associated with the company and concludes that there's no chance that Simufilam will ever be approved by the Food and Drug Administration ("FDA"). Here's an excerpt:

Simufilam, Cassava's only prospective drug, appears based on allegedly forged scientific research. Phase II trials have been conducted with numerous and serious irregularities, which appear to have allowed management to deceive investors about the effectiveness of the drug.

In our opinion, Simufilam is a worthless compound, and any touted benefit is likely the result of a combination of forgery, "cherry picking" of patients, and statistical manipulation of data, of which we have plenty of disturbing evidence.

This alleged exercise in deception has taken place with the involvement of an astounding number of questionable characters: Cassava's former Senior Clinical Research Associate is a convicted felon with a record in fraud and theft. Cassava's prominent clinical research site (whose CEO is coauthor of critical research on Simufilam), IMIC Inc., is co-owned by a former escort, stripper, and crack addict with a criminal record for consumption and possession of cocaine. IMIC's Principal Investigator has been hit with a rare and ominous FDA warning letter during recent trials. Cassava's CEO and CMO have been caught making allegedly fraudulent statements about Simufilam's predecessor Remoxy, which duly failed, devastating shareholders. Cassava's recent board addition, Richard Barry, has been involved with multiple frauds.

I'm not a biotech expert (to say the least) and haven't independently verified Gabriel's work, but knowing him and his track record, I have no doubt that his report is correct – which is bad news for this high-flying stock and its huge market cap...

The stock, which closed that day at $56.66, has mostly fallen since then and was down about 20% earlier this morning to around $14 per share, after Gabriel's charges of "forced scientific research" have been validated by this damning report: Co-developer of Cassava's potential Alzheimer's drug cited for 'egregious misconduct'. Excerpt:

Cassava Sciences, a biotech company whose work on the experimental Alzheimer's drug simufilam has been heavily criticized and is the subject of ongoing federal probes, has suffered another blow. A much-anticipated investigation by the City University of New York has accused neuroscientist Hoau-Yan Wang, a CUNY faculty member and longtime Cassava collaborator, of scientific misconduct involving 20 research papers. Many provided key support for simufilam's jump from the lab into ongoing clinical trials.

The investigative committee found numerous signs that images were improperly manipulated...

3) Another activist short seller with an incredible track record is Nate Anderson of Hindenburg Research, who exposed the widespread fraud at the Adani conglomerate, run by India's richest man, Gautam Adani (which I've covered in nine e-mails this year – archive here).

Dan McCrum and his colleagues at the Financial Times, who exposed the fraud at Germany's Wirecard, have been on the case here as well and yesterday published their latest bombshell: The mystery of the Adani coal imports that quietly doubled in value. Excerpt:

The Adani Group, the politically connected conglomerate that dominates large parts of India's economy, appears to have imported billions of dollars of coal at prices well above market value, according to customs records reviewed by the Financial Times.

The data supports longstanding allegations that Adani, the country's largest private coal importer, has been inflating fuel costs and led millions of Indian consumers and businesses to overpay for electricity.

The records show that over the past two years, Adani used offshore intermediaries in Taiwan, Dubai, and Singapore to import $5bn-worth of coal at prices that were at times more than double the market price.

Kudos to the brave investors and journalists – sadly, there are only a handful – who are willing to risk threats, lawsuits, investigations by regulators, and more to expose frauds being perpetrated on investors.

That said, as with the case of Meta, investors shouldn't blindly follow activist short sellers either.

If you own a stock targeted by activist short sellers, you should listen closely to their arguments rather than dismissing them – but they sometimes get it wrong... so at the end of the day, you must think independently and have the courage of your convictions.

4) The government released the latest monthly inflation report yesterday and it was more of the same...

Consumer prices rose 3.7% in September from a year earlier, in line with my prediction that inflation will stay in the 3% to 4% range for quite some time.

This front-page story in today's Wall Street Journal, This Inflation Report Won't Let the Fed Declare Victory, warns that inflation remains above the Fed's official target of 2%, which might lead to another rate increase, but I doubt it.

Long-term interest rates are rising – for example, the average interest rate on a standard 30-year mortgage is approaching 8% – which means the markets are doing the Fed's job for it...

5) The most important factors that will determine your business and personal success are internal: whether or not you are smart, creative, hard-working, pleasant to be around, confident without being arrogant, completely reliable and trustworthy, etc.

That said, it's a highly competitive world, and many people have these characteristics, so first impressions and appearances matter.

Forgive me if some of this appears shallow – I'm not saying that this is how the world should be, but rather how it is. Why would someone trust you to take care of them – as a banker, consultant, doctor, lawyer, money manager, etc. – if you don't take care of yourself?

In addition to staying fit, getting a decent haircut, having a dentist fix crooked teeth, etc., another important part of your appearance is clothing.

I'm a cheapskate value guy and grew up wearing mostly second-hand clothes, so it kills me to spend, say, $150 on a button-down shirt or pair of pants when I can buy similar items for $20 at Costco (I'm not the only one – see this recent WSJ article: Costco Clothing Is Cheap. WSJ Readers Love It. But Is It Actually Good Value?).

I've come to realize, however, that having sharp-looking clothes for professional settings is a smart investment. It really does make a difference, both externally (making a great impression) and internally (I feel more confident).

If you don't know anything about clothing and style (I don't), then find a store you trust.

As Buffett says, "If you don't know jewelry, know your jeweler." Ditto for clothes. I buy most of my clothes from three places, Costco (for casual, cheap clothes I wear at home, to the gym, etc.), Patagonia (for my outdoor adventures), and Rothmans, the largest independent men 's clothing store in New York City (for nice clothes). My buddy Jim Giddon is the third-generation owner of Rothmans, which is located at 222 Park Avenue South at 18th Street (there are two other locations in Bronxville and Scarsdale).

I wore a hole through the elbow of my favorite blazer that I bought there five years ago, so I went in on Saturday to get a new one – and ended up walking out with 10 items: two blazers, a jacket, a winter hat, pants, shirt, two belts, socks, and a pair of shoes. Below is a picture of me (with Jim) wearing five of them. Pretty sharp, I think!

If you want to check out Rothmans, e-mail Jim in advance at jim@rothmansny.com, tell him you're a friend of mine, and arrange a time to come in when he's there. He'll take good care of you and give you a nice discount!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.