by Steve McDonald, Bond Strategist, The Oxford Club
Friday, February 8, 2013
In focus this week; Bristol-Myers Squibb (NYSE: BMY) and blood thinners, a huge buy recommendation on gold and the sitfa.
Bristol Myers Squibb, one of the stalwarts of the pharmaceutical world, announced recently the approval of a new stroke prevention drug; Eliquis.
It is intended to replace Coumadin, a blood thinner, and is also a viable alternative for those who could not use Coumadin and have had to rely on aspirin alone for stroke prevention.
Eliquis has far fewer side effects than Coumadin and less bleeding than aspirin causes.
New drugs are always good news but this one has a one very special quality. Users of this drug have to stay on it for life! That fact alone separates it from most drugs.
BMY estimates there are 3 million potential users in the U.S. and 8 million worldwide. 11 million users who have to have it for life; that’s big!
Sales are expected to reach $4.5 billion by the end of the decade.
According to the Wall Street Journal, BMY’s partnership with Astra Zeneca (NYSE: AZN) and Sanofi (NYSE: SNY) has created a very promising pipeline of new drugs, but BMY’s marketing machine is the real ace in the hole.
David Risinger of Morgan Stanley expects a new diabetes drug by Astra Zeneca, which saw a very underwhelming response from the market, to do much better because of BMY’s worldwide marketing and sales expertise.
Barron’s thinks, despite BMY’s high price right now, patient investors who step up can expect a rich, long term return from this major drug player that is showing all the signs of getting even bigger.
A very good dividend of 3.8%, a long history of raising its dividend and partnerships that are boosting the most important part of a pharmaceutical company, its pipeline; it is all adding up to a very good long term story in an essential industry.
BMY, I know it’s been around forever, but take a second look.
(Note: BMY is a staple of The Oxford Club’s Perpetual Income Portfolio. It’s gained about 35%, including dividends, since it was added in August of 2011. Marc Lichtenfeld still rates it a “Buy.”)
Is Gold a Buy?
A huge – and I mean a huge – new gold buy recommendation.
Bill Gross, the bond king, one of the street’s most respected mentors, said in a recent Barron’s article that there is an impending credit explosion worldwide, a credit supernova, and owning real assets, gold, is one of the few ways to survive it.
According to Barron’s, since the dollar decoupled from gold in the 70’s credit has skyrocketed from a total in the US of $3 trillion dollars in 1971 to the current level of $56 trillion, trillion! Our GDP is only $14 trillion.
Our credit system was described in a Barron’s article as one big Ponzi scheme and that eventually we will be borrowing money just to pay the interest on our debt.
And, when the return on investable assets is so low that the risk outweighs the return, our current zero percent interest rates seem pretty low, the credit system, which he describes as fragile, will be out of time and the countdown to implosion will begin.
Gross’ recommendation for investors; plan for inflation, get use to much slower growth, invest globally, be aware of property rights and under what conditions governments can confiscate our money and property, that doesn’t sound like good news, and transition from financial to real assets, gold, commodities, anything that can’t be reproduced as quickly as credit!
When Bill Gross, one of the ultimate insiders of our credit system, recommends gold as one of the only ways to profit from our credit mess, everyone need to take a second look at the yellow metal.
Never in the 30 years I have been in the markets have I ever owned gold.
But, even I am looking over my shoulder these days and gold is beginning to look like something I have to consider.
Gold is regaining its shine. Take a look at this one…
SITFA: Shanghai Edition
And last, but not least, the sitfa
This week’s slap in the kisser comes from Shanghai, and it’s for all those people out there who think our cost of living is high.
This will floor you.
In order to get a license plate, that will allow you to drive on the elevated highways in Shanghai, which according to a Wall Street Journal article is the only way to get anywhere in Shanghai, you first have to enter a lottery for a license plate and expect to pay as much as $12,000. Not for a car, $12,000 is just for the license. $12,000!
And, prices are rising an average of $320 a month! And, this just keeps getting better, you have to pay a fee just to get in the lottery.
According to a Mrs. Dong, who was quoted in the article, the alternative is your car just sits there. I’m not sure if it sits in traffic or at home.
Of course you can pay $16,000 up front and avoid the lottery. That’s about the same price in Shanghai as a Peugeot 307.
I wonder how the poor people are getting around Shanghai.
And I thought parking tickets were getting stiff.
P.S. I recommend you take a look at a new presentation by my friend and colleague David Fessler. Its about a bold $1.2 trillion project which could greatly alter the future of the US – and the wealth of those who invest. For the presentation, click here.