Those who follow the biotech world may have seen that Regeneron reported some fantastic results on its lipid-lowering drug. Much more efficacy than statins. Safety data was not reported but it seems safe to say that suggestions of hepatotoxicity that first appeared with the early statins and seem to be a fixture in use of statins for the first 6 months is a segment of the population, were not present; FDA wouldn't have hesitated to intervene if there had been such suggestion, since in FDA's eyes there are already "safe" lipid-lowering drugs on the market.

The same is true for rhabdomyolysis–essentially break down of muscle (some thing the muscle soreness often associated with statin use may be a pre-rhabdomyolysis state, but the data are anything but clear on that). It was rhabdomyolysis that was the reason Bayer's Baychol was withdrawn from the market.

There are some caveats:

1. There has long been the observation that if cholesterol levels are brought below 90-100, there is little gain in mortality (some studies suggest there may even be an increase) and that cancer risk in particular goes up. Of course, recovering from a heart attack has a higher probability than doing so from cancer. Unfortunately, I can't tell you which sites–I just don't remember.

2. There are some established drugs in the lipid-lowering space. Lipitor and Crestor come to mind. The former is generic, and it is probably finally making it onto many P&T committee lists. The latter is still patent protected and, not surprisingly, costs a bit more than the former. That's not to say that Crestor is more efficacious than Lipitor. In a given patient, one may prove to be less efficacious or better tolerated than the other. YMMV.

3. The thing that made the statin market what it is today was a series of studies by Bristol-Myers Squibb and Merck showing that use of statins was associated with lower mortality–quite a bit in fact. Since the effect of Pravachol from BMS in mortality reduction was greater than might be expected if only lipid-lowering were the explanation, there has been a persistent question over what exactly it is that statins are doing besides lowering lipids. There are suggestions that they reduce chronic inflammation (considered part of the pathophysiological process underlying atherosclerosis), reduce risk of osteoporosis (very controversial), reduce risk of gingivitis and periodontitis (Dr. Zussman is better positioned to opine on that one than I am), and some suggestions of reduced risk of Alzheimer's disease, among others. Will Regeneron's drug do any of these? We don't know. Will it even lower mortality? Again, we don't know. Such studies take some time to complete, and I'm not sure if they've even been started. There's also the comparative effectiveness matter. How much this drug will cost for each QALY (quality-adjusted life years) gained isn't yet know, and whether the drug is seen to be as good a value as the statins were when they first came to market isn't known. However, make no mistake, all of these factors will enter into the calculus of how successful, if at all, Regeneron's drug might be.

4. As one who has taken Lipitor for 13 years (horrible family history of heart disease–I keep my total cholesterol below a 100 and LDL below 75), I'm not particularly interested in switching drugs, never mind drug classes. There are many patients taking statins who, I think it's probable, think likewise. That most statins are now well off patent (and cheap generics) is another reason to stay with something of known efficacy in a particular patient. That presents a problem for Regeneron: How to convince physicians to put new patients on its drug and to convert those on statins to switch. The former may be straightforward, though the issue will be one of how much more growth can there/will there be in the lipid-lowering market. I'm agnostic-to-skeptical that there's a whole group of patients needing another lipid-lowering drug. That's not to say there aren't some, though. On the other hand, obtaining health insurance coverage may be problematic, as I'm sure that Regeneron will price the drug in the "near and dear" category (to use industry parlance), meaning high. Very high. I doubt that Regeneron will follow the Pfizer strategy of pricing the drug 10% below the leading statins (or in this case, perhaps, Crestor) for two years to gain some traction in the market, but I could be wrong. One thing to consider is that biotechs are not used to pricing competitively. Usually, they are the long entity in a market space, and they will price accordingly. As for switching patients off of statins, I guess if there are those not getting enough of a reduction, perhaps with LDLs over 140-150, there's a chance of a switch being made. There aren't that many of such people, though. All of this means that Regeneron will have some work cut out on the marketing end to get newly diagnosed hyperlipidemics onto its drug, as well as getting insurance reimbursement.

The long and short of it is the Regeneron's drug may be a game-changer in heart disease–but we just don't know enough as yet about it. The data released yesterday seem compelling, yet they are only in terms of reduction in lipid levels. Fine, except we know from the statins that something may be needed to get much benefit from a lipid-lowering drug.

For those of you liking growth stocks or story stocks, this is a company with a nice story to follow, perhaps to take a position in. For value investors (read: Mr. Melvin), enjoy using the drug (if it gets to market) but don't even thing about looking at this stock. It won't be a "value" one for a decade or two at least.

The President of the Old Speculator's Club writes: 

I wonder if any studies have been done on the increased cancer risk. A little while ago, a scientist did a study and claimed that a cancer cure could save something like $5 trillion a year. However, tagged on to the end of the study was a one sentence disclaimer to the effect that the suggested savings did not take into account that while a cancer cure could well cut down on costs, survivors might find that their longer life brought on equally (or more) expensive disabilities - like diabetes or, more likely various dementias. I've been in two post-operative cardiac exercise programs - both for several years. In that time, quite a few individuals come through - most stay for the minimum period; others, like myself continue on. One thing we long-timers watched for was the continued health of those who stayed and, if possible, those who left. The nurses at one hospital were especially diligent in keeping in touch with members of both groups. Over the years (18 to be exact), as one would expect, there have been numerous deaths. However, very, very few were due to cardiac problems - more often, cancer was the cause. So, here's the question: is the propensity for cancer among cardiac survivors an inevitable result of their survival, or can (and should) their deaths be attributed to statins. I know the latter is a popular one, but hell's bells, lawyers couldn't make a dime if it proved out that longevity was the real cause.

Kim Zussman writes: 

Life should be more expensive than death because it is more valuable, especially to survivors. The problem is that the disease lottery is zero sum: you will die of something. As medical / nutrition science advances, death rate due to some diseases has plummeted - and survivors go on to die of something else.
Hand (and voter) wringers over increasing medical expenses should start by blaming antibiotics:

"Historical Diseases Death Rates" (see first table)

The progress made with infectious and cardiovascular disease has been faster than cancer treatment (and cheaper). So don't smoke, eat fish, hit the gym, wash your hands, and prepare for the final fight with unregulated cell division.



 Please may I humbly apologize to all your readers for my arrogance in April in trying to time when the Dow would peak? The market has taught me humility!

In this new spirit of humility, may I ask can be made of the amazing spike, more than 200 points in the last half-hour of trading on the Dow on August 1?

I see it almost as proof that very short-term technical analysis does not work. According to conventional TA principles, the fall from 14,000 traces out the right-hand side of a very bearish head-and-shoulders pattern with the neckline at 13,200 and potential downside to about

As always the Market Mistress, knowing this popular interpretation well, sucks in all the bears and even drops the market down to 13,150 and below a few times to whet their appetite even further and then, without warning. does the equivalent of dropping a million tons of horse feathers on them out of a clear blue sky in the closing 30 minutes of trading!

Because of their own internal dynamics markets will always do what, if it came from a human being rather than an abstract system (even though that system is the sum total of thousands of human actions), would be instantly seen as deliberate cruelty.

But here I humbly seek wisdom. Does this mean that there are technical analysis systems which work, but only by waiting for the "tech" signals and then doing the opposite of what the signals are normally said to recommend?



 Almost Totally Right So Far - and Happy To Let The Market Be My Judge:

Let us look at what has happened in the markets since the FTSE overshot my 6480 target by about 35 points on Monday. But it peaked that day and it has not managed to hold above 6480 for more than two successive closes. It closed at 6449.4 on April 18, 2007. Such missed targets are common. The locals in a market will want to make the wise speculator not quite correct if he is foolish enough to make his stops too tight. That's why it happens. It might be called, I suppose, the bulls' last revenge! Figuratively, the animal is mortally wounded but still has enough energy left to kill the successful hunter who comes too near too soon.

A similar phenomenon characterized the last hour of trading on the Dow Jones today. Again, to put it figuratively, the blow to the heart delivered on February 27th mortally wounded the old bull. Yet it crawled back to its old high and then, tonight, in one final act of revenge, unexpectedly leapt up above where everyone expected. It killed off all the foolish gloating bears who'd come too near too soon. In other words it had put their stops too close to the market.

These figurative ways of thinking about the market may seem simplistic but they have enormous predictive power if used correctly.

So where do we go from here? In a word, down. The next three days, April 19th, 20th, and 23rd, will all see lower closing prices than the day before, on both the Dow Jones and the FTSE. This is the start of a major bear market which will last about three years and be the greatest one since 1929-32.

I, like many others and your esteemed self, am weary beyond words by perpetual bears that cry "wolf." Or should it be bear every other week? If I am wrong about this week, I am a fool and should never be taken seriously again. I am happy to let the market be my judge - and, figuratively, my executioner!

Janice Dorn writes:

My research (possibly incomplete and inaccurate) indicates that William Hutton is a pseudonym for a British geologist who bases much of his work on the prophecies of Edgar Cayce. He also calls on esoteric writings from Gurdjieff and Ouspensky, among others.

He is far from alone is this type of fear mongering. There are plenty of people who live and breathe this stuff as they prepare for apocalypse. The Association for Research and Enlightenment (with which he has been associated for 40 years and most likely founded) is based in Virginia Beach, Virginia. His mailing address also appears to be Virginia Beach. His webmaster, Jonathan Eagle, is the co-author of his book entitled: Earth's Catastrophic Past and Future. I should be so lucky to have a webmaster who can co-author books with me! 

Steve Leslie adds: 

I do not know who William Hutton is. I have no idea what his credentials are nor whom he represents if anyone or anything. He may very well be a very respected person in the financial world therefore I will withhold judgment. I wonder aloud where he did surface from and what his qualifications are. I suspect this is some sort of an incipient joke perpetuated by someone who is using the name of a former investment house in his name. I can see the subtle joke in that when E.F. Hutton talks people listen.

That said, I wish to express my view on his posting. I find his inflammatory comments entirely counterproductive and destructive. In fact, I warned this type of writing would spew forth directly around Feb 27th when the market took a very big hit. If one would like to read my column, you can find it on dailyspeculations.com titled Cowboy Up. I cautioned against listening to "nattering nabobs of negativism" who will try to rubber stamp themselves and their careers by predictions of cataclysm in financial markets.

I wonder what good possibly comes out of such grandiose and garish predictions. This reminds me of Joe Granville who built a career out of one grand call in the market, and spent the rest of his career losing money for people, or Elaine Garzarelli who in 1987 suggested there would be a major collapse in the market. She has since become less prevalent yet she still lurks in the background. There have been many comments over the years attributed to Alan Abelson and his constant harping about an overvalued market. This quintessential uber-bear who can brighten up a room just by leaving it specializes in schadenfreude. Ad an editor, who as far as I can tell has never managed money nor had any track record, he is a very flowery and entertaining writer and an interesting character but a crusty curmudgeon nonetheless.

I must say that I cannot recall whether he has ever made any money by owning stocks or if he was ever ebullient about the stock market or the United States economy or commerce in general.

Even Robert Prechter who when properly motivated can be quite a trader, and in the early 1980s won several trading championships on a national level, has been warning about a super bear cycle predicted by his work with Elliott Wave since the 1980s.

Of course, the most sanctimonious prig of them all is Warren Buffet. The Oracle of Omaha seems to have made so much money and has decided to give so much of it away that he sees no need for anyone else on the planet to make any more money that they should therefore acknowledge their pathetic lots in life and submit to a cold and heartless destiny of insignificance. I am hard pressed to recall a time when he proclaimed that it is a great time to own equities. He reminds me of the great college football coach Lou Holtz who could never find a reason why his Notre Dame football team could possibly win a football game, yet consistently stood atop the polls at the end of the football season.

Then there was the time, I went to a national conference in 1995 and attended a lecture by a very respected financial newsletter writer at the time from Montana. He was riding a crest of stardom. His views were that inventories were rising at unsustainable rates and the markets were extremely risky here and going forward. In his view, we were to enter a period of unstained growth and his predictions were that we were about to embark on a very bearish and cruel time in the market. Any casual student of the financial markets will remember that this was the beginning of the greatest stock market advance in history.

Now we fast forward to William Hutton. Here is an excerpt from his post here:

"So where do we go from here? In a word, down. The next three days, April 19th, 20th, and 23rd, will all see lower closing prices than the day before, on both the Dow Jones and the FTSE. This is the start of a major bear market which will last about three years and be the greatest one since 1929-32.

"I, like many others and your esteemed self, am weary beyond words by perpetual bears that cry "wolf." Or should it be bear every other week? If I am wrong about this week, I am a fool and should never be taken seriously again. I am happy to let the market be my judge - and, figuratively, my executioner!"

Now, I mentioned on Tuesday that historically the market tends to rally directly after tax deadline and the 5 days following the drop date are quite positive. This was based on historical numbers reaching back 13 years. I also espoused that technology tends to do well for the quarter following April 15th.

I do not know what the future will hold. It may very well be the stock market falls dramatically; we enter a phase where equity prices erode to levels approaching that of the great depression. It is possible. It is also entirely possible that a butterfly flutters its wings in China and this causes a hurricane and an ensuing tidal wave that wreaks mass destruction in California. I am sure that there are even numbers people who can tell us what the likelihood of such an event is. It is possible but not very likely.

At the end of the day, for the week and for the year it really does not matter what Mr. Hutton has to say. Nor does it matter much what I have to say or what anyone else has to say.

What matters is how one maximize the chance to make money in the markets, how we as investors can actually deploy our hard-earned capital with a positive expectation and yield, and how we utilize information profitably so our standard of living for ourselves and our family can grow substantially on a yearly basis. This is the greater good and the greatest goal.

Theories and anecdotal comments and worthless and useless. The proof is in the financial pudding.

So finally, I say to Mr. Hutton assuming he exists, in the words of Arnold Schwarzenegger, "You have been erased."



 When will US markets begin to fall long-term? My answer is simple. This week - 16th to 20th of April 2007.

Why? Two reasons.

(1) Because the panic spasm of Tuesday, 27th February 2007 led to nothing and markets have recovered. This is the moment of maximum complacency!

(2) The UK FTSE index is acting as a giant signpost!

The intra-day all-time high on the FTSE was 6950.6 on the morning of 30th December, 1999. From there it fell to a low point-again intraday-of 3287 on 12th March 2003. Calculate the difference between those two figures, multiply it by 0.876, a well-known Fibonacci ratio, and add it to 3287. The result is almost exactly 6480. Last Friday, 13th April 2007, the FTSE closed at 6462.7, a 6-year high point. There will be some opening buying tomorrow. I'm writing this at 9 in the evening, British Summer Time on Sunday, 15th April. Based on a good Wall Street close on Friday it should push that index up even higher, to about 6480.

So why won't FTSE rise above 6480? Both because of the important Fibonacci ratio point and because something in the real world (and the statistically most likely reason is the US market falling!), it will cause FTSE to move back down from 6480.

Technical analysis and fundamental analysis are both true, but there is something very deep philosophically which follows from this. Simply this, cycles and technical analysis patterns and Fibonacci ratios "know" future history! In other words, the technical analysis/cycle patterns point to a future market high or low point at some future date. Then an event in the real world (fundamental analysis) comes along to give this high or low point a reason/excuse to happen.

At first sight that sounds crazy. But I can remember, some time in July 1990, putting a very large number of FTSE prices into a cycle analysis program. The program accurately forecast a low point for mid-January 1991, and that low point did indeed happen as a result of market fears just before the start of the Gulf War, which happened as a result of Saddam Hussein's invasion of Kuwait on 2nd August 1990, some weeks after the mid-January 1991 low forecast.

The debate about whether technical analysis or fundamental analysis is true is not just like the debate between theologians about whether pre-destination or free will is true. It is directly related to it. In other words, in cycles (technical analysis) we have the patterns of predestination. In the real world of spontaneous events (fundamental analysis) we have the events which give those mathematically predictable cycles the "excuse" which they need to become true.

In fact, free will and predestination only appear incompatible because I am looking at the problem as a creature inside space-time. To the Creator looking at the so-called "problem" from outside space-time, there is no problem. His creatures, although their free will is utterly real, must bring about His unchangeable predestination. That, to me, appears incompatible, irreconcilable nonsense. But that's only because I am a limited creature in space-time and not God!!

I hope your readers find both my market forecast and my link between market analysis philosophies and theology of some interest.

Victor Niederhoffer replies:

The philosophies in this submission, which rely heavily on the persistence and predictability of untested seasonal patterns, are examples of the bearish stick-to-itiveness and durability exemplified by the writing of the duo of the Keech cult.

Much more to the point would be a numerical workout of the movement of prices in the April 15th period forward, beginning April 15th as liquidity returns to the system. Also useful would be the tested tendencies of the market in the period's subsequent period to extraordinarily momentous rises of a magnitude similar to that witnessed in the last two weeks.


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