Biotech Buyouts and Peloton Fallouts
Don’t Get Fooled Again
OK, dear readers. Today’s secret word is “tariffs.”
When you hear the secret word, scream really loud!
As if you all weren’t screaming really loud already. The Dow is down more than 400 points, and all the major market indexes have shed roughly 1% or more.
And why are we mired deep in the red today? Because President Trump said the quiet part out loud. You know when thoughts run through your head and you think: “I shouldn’t say that out loud”? That’s what happened with Trump at a London news conference this morning.
When asked about a trade deal between the U.S. and China, Trump said that a deal was “dependent on one thing — do I want to make it.” We all kinda thought he did. He did publish a book titled The Art of the Deal, after all.
But, later in that same news conference, Trump added: “I have no deadline, no. In some ways, I think it’s better to wait until after the election if you want to know the truth. But I’m not going to say that, I just think that.”
Umm … do you want to tell him, or should I? (Psst — that’s the part you weren’t supposed to say out loud!)
Luckily for both of us, the market has already spoken up … rather loudly. And it’s not happy about delaying a China trade deal until after the 2020 elections.
Adding to today’s mess, Trump is readying tariffs (screeeeam!) of up to 100% on $2.4 billion in French imports in retaliation for a new French digital-services tax.
You’d think we’re done, but no!
The U.S. is also considering increased tariffs (screeeeam!) on the EU after the World Trade Organization ruled that Airbus was receiving “market-distorting subsidies.”
At a NATO press conference this morning, Trump weighed in on the ruling: “We’re going to tax Airbus … that’s going to be very good for Boeing.”
I … I don’t even know where to start. There’s just so much to unpack here. Trump is handing out tariffs (screeeam!) like my grandfather used to pass out Werther’s Originals when the grandkids came over to visit.
What’s more, the “do I want to make it” talk about the U.S.-China trade deal … hasn’t the U.S. economy suffered enough? I’m not talking about investors or Wall Street. We’re all making out like bandits trading the ups and downs of the market this year.
We’re handing out billions in subsidies to farmers to make up for the impact of this trade war. I know they’ve suffered enough.
You know what it looks like to me when Trump says he might wait until 2020 to make a deal with China? It looks like he’s punting.
I know some of you are going to write in and tell me: “I know your politics now! You’ve tipped your hand, and I can’t trust you anymore.”
But, honestly, what do you do when you can’t force through the deal you want to make? You stall.
Either one of two things is going to happen in 2020:
One, Trump will win reelection and have four more years of leverage to push against a stalling Chinese trade delegation. (And, let’s be honest here, we know they’re stalling on several key trade points just for this reason.)
Two, Trump will not win reelection, and the next administration will have to deal with China … and that will become a political talking point for years to come.
I’m not saying this is necessarily a bad move. Politically speaking, punting the Chinese trade deal down the road is brilliant for Trump. And, if it gets the U.S. back on equal footing with the world’s second-largest economy, it’s brilliant for the country as well.
In the long run, something must be done about the Chinese trade situation.
However, punting after all the White House’s talking points said we were so close to a deal has ramifications — both economic and financial.
The question now becomes: Will President Trump once again try to calm Wall Street’s nerves? And will it believe him this time around?
On that note, I’ll leave you with a quote from former President George W. Bush: “Fool me once, shame on you. Fool me … you can’t get fooled again.”
Note: As Great Stuff was going to press, Trump downplayed Wall Street’s sell-off, calling it “peanuts” compared to making a good trade deal with China.
I guess the gloves are off now?
In that case, now, more than ever, you need a stable source of income. A voice of sanity in the coming storm. If you haven’t explored the possibilities of Ted Bauman’s The Bauman Letter, do so now.
The Good: Time for Therapy
While the rest of the market is tanking hard, the biotechnology sector is soaring. The spark for this rally is the $3 billion buyout of gene-therapy specialist Audentes Therapeutics Inc. (Nasdaq: BOLD).
Japanese drugmaker Astellas Pharma Inc. (OTC: ALPMY) said this morning that it’s buying Audentes for $60 per share in cash — more than double BOLD’s closing price of $28.61 yesterday.
With the acquisition, Astellas gains access to several revolutionary gene-therapy treatments, including pipeline treatments for Pompe disease and X-linked myotubular myopathy.
Don’t worry — I don’t know what either of those are either. Feel free to Google them later. The point is, both are rare genetic diseases that have resisted traditional drug treatments so far. Gene therapy has been the only approach that appears to be making headway.
Such is the case around the biotechnology sector. So far this year, Big Pharma companies have snapped up gene-therapy firms like they’re the latest hot fashion. And they are.
The analyst community is taking note. Piper Jaffray analyst Christopher Raymond said: “We do think with this deal now just the latest in a string of gene therapy take outs, and still many large pharma players without critical mass or meaningful exposure to gene therapy, it’s fair to ask—who’s next?”
That’s a really (really) long way of saying that Big Pharma companies have a lot of cash and want in on the gene-therapy revolution.
Now, I know you’re probably wondering: “How do I get a piece of the biotech action?” Well, friends, I have a solution for that … or, rather, Banyan Hill expert Jeff Yastine has a solution for that.
Jeff has all the details on a $450 million biotech company that is set to soar. And if you act quickly, you can get in on the ground floor before the Big Pharma firms take notice.
The Bad: 1 + 1 = Less Than 2
The steel and aluminum sectors are rallying this week following the U.S.’s reinstatement of tariffs on Brazil and Argentina. But not everyone is participating in the rally.
Typically, the acquiring company’s stock falls following such a deal, but CLF is getting hammered — down more than 11% at last check.
Why? Because, somehow, Cleveland-Cliffs is really bad at math. After running the initial numbers, analysts have figured out that the combined company would be worth less than before the merger. Yes, less.
Part of the problem is that AK Steel is one of Cleveland-Cliffs’ biggest customers. In other words, the deal lowers Cleveland-Cliffs’ iron ore profits. The other part of the problem is corporate debt. Both companies have a combined debt load of about $8 billion, while the combined market capitalization of both firms is less than $4 billion.
Someone needs a lesson in responsible borrowing.
The Ugly: Bad Viral, No Doughnut
Most ad executives will tell you that “going viral” is the best thing that can happen to a company. Those ad executives might want to check with Peloton Interactive Inc. (Nasdaq: PTON) before continuing that line of thought.
The company’s latest holiday ad for its $2,000 stationary bike and $39 subscription membership can only be described as “Black Mirror creepy.” It’s the tale of a husband who gets his wife a Peloton for Christmas and her life-changing journey with said bike.
Now, I’ve been married for more than 20 years to my lovely wife … and I know that there are certain things you just don’t surprise your spouse with. Workout equipment is one of those things.
The internet is having a field day ripping this ad apart. Aside from the horror movie references — one Twitter user “thought this was the start to a remake of cloverfield or something” — the new ad does nothing but reinforce the overly affluent, unnecessary lifestyle choice of the brand.
Apparently, you need an immaculate home and a large picture window to even own a Peloton — at least according to every single one of its ads.
If you think I’m overreacting, just look at PTON today. The stock is down more than 7% following the internet’s reaction to the ad.
Today’s marketing lesson is this: Going viral giveth, and going viral taketh away.
Speaking of workouts and getting healthy, we’re closing in on the end of the year … and that means New Year’s resolutions. That also means a flood of new members at your local gym. (Unless you own a big house with a picture window … you’re getting a Peloton!)
Regular gym members know that this phenomenon only lasts through the first month or two of the year. It’s a pain, but, like the migrating crabs of Christmas Island, it eventually goes away.
So, today’s Chart of the Week details the primary reasons why Americans stop going to the gym. (I know it isn’t a boutique gym or health club, but Peloton investors really should watch out for reason No. 1 on this list.)
Great Stuff: Feed the Beast
Oh, yes. It’s that time again.
It’s time to go tell it on the Great Stuff mountain!
You have two days to write in to GreatStuffToday@banyanhill.com if you want to make this week’s edition of Reader Feedback.
Send me your comments, questions or snide remarks.
We take all kinds here. But no cursing, please. We can’t publish that s#&%.
Here, let’s get your yodeling started:
- Are you getting a Peloton for Christmas? (If so, do you also have a large picture window to put it in front of?)
- How is following the Great Stuff Trade War Cycle chart working out for you?
- Tariffs … right?
- What do you believe is the biggest threat to the U.S. economy right now?
- Has anyone really been far even as decided to use even go want to do look more like? (It’s an old meme, sir, but it checks out.)
The answers to these questions and more can be yours for the low, low cost of dropping a line to GreatStuffToday@banyanhill.com.
Act now! Quantities of Great Stuff aren’t limited … but still, act now.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing