Dear New World Investor:

The Consumer Price Index report was worse than I or, apparently, most everyone else expected, resulting in a whopping 4.3% drop in the S&P 500 and 1,276 point on the Dow Jones Industrials. About 30% of the CPI is related to real estate, where the data lags reality by 9 to 12 months. So last year’s jump in house prices and monthly rentals is showing up now.

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The Fed’s other important metric, employment, also is a lagging indicator. So with their eyes firmly fixed on the rear-view mirror, they are sure to announce a 75-basis point increase in the Fed funds rate next Wednesday, and there’s a 20% chance they’ll go for a full percentage point. The Fed hasn’t raised rates by a full percentage point in 40 years.

They probably will do the 75-basis point hike in September, followed by 50-basis point hikes in November and December, which would take the funds rate to 4.00%-4.25% by the end of the year. Because they look at lagging indicators, the Fed always causes bubbles by keeping interest rates too low for too long, and then causes a recession by raising them too late and too high for too long.

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The European Central Bank raised interest rates from 0% to 0.75%. President Christine Lagarde said rates need to rise more due to high inflation. A rallying euro and declining dollar should support a long-term rally in the S&P 500.

Meanwhile, in the real world the National Federation of Independent Business survey shows a sharp slowdown in expected price increases:

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Market Outlook

The S&P 500 lost 2.6% since last Thursday, including its eighth 3% drop in 2022 versus just one 3% bounce. The Index is down 18.1% year-to-date. The Nasdaq Composite also lost 2.6%. Over the past 25 years, there haven’t been too many days when every big tech stock dropped. Last Tuesday was one – every member of the Nasdaq 100 declined. Here’s what happened next:

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The Composite is down 26.2% for the year. The small-cap Russell 2000 dropped 1.2% and is down 18.7% in 2022.

Seasonally, the second half of September is tough, and stocks bottom in October for the December quarter rally. Over the last 40 years, the S&P 500 has been down 2%+ in the second half of September 10 times and up 2%+ only twice.

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And in SPX down years it’s rare for the low of the year to happen before August. We may retest or even break the June 16 low this fall.

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If the S&P earnings per share are going to be about $230 in 2023 and a 14x to 18x forward price/earnings multiple is the correct valuation, then simple math tells us that the probable S&P 500 range is 3220-4140. The fractal dimension fully consolidated with this week’s move, so a new trend could start anytime. As I always say, the trend could be in either direction, but the most likely direction is to extend the previous trend – in this case, down.

Top 5

Changes this week: None

Near-Term – chronological order
AAPL Apple – September new iPhone introduction
OIL iPath Pure Beta Crude Oil Exchange-Traded Note – crude should rise quickly
GBTC Grayscale Bitcoin Trust – Bitcoin is coming out of one of its periodic sharp drops
META Meta – Bounce from overdone selloff
VLD Velo3D – Rapid revenue growth; low market cap

Long-Term – alphabetical order
GRPH Graphite Bio – second-generation genetic editing
NVTA Invitae – the winner-take-most of genetic testing
META Meta – a leader in the metaverse
RKLB Rocket Lab – #2 to SpaceX in space
VLD Velo3D – Return manufacturing to the US

Economy

The Atlanta Fed’s GDPNow model for September quarter real GDP fell sharply again to +0.5%. The weakness was in real personal consumption expenditures growth and real gross private domestic investment growth. The Blue Chip economists’ consensus is trending down at a slower rate and now is at +1.2%. I still think we’ll see a weak but positive print, although we’re in a recession anyway.

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Coming Events
All times below are ET, and most presentations and slides are archived on the companies’ websites so you can listen to them.

Saturday, September 17
MDNA – Medicenna – 5:30am – The Promise of Interleukin-2 Therapy Conference

Monday, September 19
AG – First Majestic – Through 9/21 – Gold Forum Americas
CMPS – Compass Pathways – 3:05pm – Cowen Novel Mechanisms in Neuropsychiatry Summit
CDE – Coeur Mining – 6:50pm – Gold Forum Americas

Tuesday, September 20
MDNA – Medicenna – Two poster presentations – International Cytokine & Interferon Society annual meeting

Wednesday, September 21
SCYX – ScyNexis – 3:00am – International Society for Human and Animal Mycology
MDNA – Medicenna – 10:00am – Annual meeting
RKLB – Rocket Lab – 1:30pm – Investor Day and Neutron Development Update
FED MEETING – 2:00pm

Thursday, September 22
Fall Equinox – 9:04pm

via GIPHY

Friday, September 23
RKLB – Rocket Lab – Unspec. – BofA Industrial Innovation Summit

The $20-For-$1 Stocks

Say you put $2,000 into a stock that goes from 50¢ a share to $10. The $2,000 turns into $40,000. Then you put the $40,000 into another stock that goes from 50¢ to $10. That turns the $40,000 into $800,000. You did it with two stocks, and never risked going negative more than $2,000. (Not that you won’t be mad at me if the first one works and then the second one doesn’t, taking your $40,000 to Money Heaven.)

If you can afford it – and it would not be too big a position in your portfolio – putting $2,000 into each of these 12 speculative biotechs might be a good way to start.

The market capitalizations of these recommendations are typically very low. At the same time, Initial Public Offering valuations had moved very high. We were seeing $750 million to $900 million valuations for a good preclinical/Phase 1 IPO, and even $300 million to $500 million for mediocre Phase 1s. I don’t see how investors make 5x to 10x in a reasonable, three- to four-year period if they buy at those valuations. How many biotechs have moved north of $10 billion within 5 years after pricing an IPO in the $700 million to $900 million range? Hardly any. Buying these out-of-favor, fallen, or forgotten companies that can get important products through the FDA at very low market capitalizations seems like a much better strategy to me.

Risks

Development-stage biotechs are subject to investor sentiment swings from wildly optimistic to excessively pessimistic – mostly the latter recently. After the Primary Risk for each company, I’ve added the clinical stage of their lead product, the probable time of their first FDA approval, and the probable time of their next financing.

As always, you need to think about an appropriate position size. You could buy a full position upfront and then just hold on, or buy some upfront and leave room to add more on the inevitable financings, transient clinical trial setbacks, and the like.

Algernon Pharmaceuticals (AGNPF – $3.97) got approval to start a Phase 1 trial in the Netherlands of an intravenous formulation of AP-188 (DMT) for the treatment of stroke. The trial will be conducted at the Centre for Human Drug Research in Leiden. They expect to dose the first patient in the December quarter. AGNPF is a Hold for the Phase 2b IPF/chronic cough results.
Primary Risk: Ifenprodil fails in clinical trials.
   Clinical stage of lead product: Phase 2/3
   Probable time of first FDA approval: 2023
   Probable time of next financing: 2022

Aptose Biosciences (APTO – $0.70) said the new G3 formulation of luxeptinib, designed for rapid and efficient absorption, demonstrated approximately an 18x improvement in oral bioavailability relative to the original G1 formulation in 15 patients. They plan to amend the protocol of the existing Phase 1 a/b trial in relapsed/refractory acute myeloid leukemia patients to determine if it can achieve desired exposures and deliver clinical responses while continuing to demonstrate a favorable safety profile. APTO is a Buy under $2.50 for a $30 target in a buyout.
Primary Risk: Either drug fails in clinical trials.
   Clinical stage of lead product: Phase 1a
   Probable time of first FDA approval: 2025
   Probable time of next financing: Mid- to late-2023

Invitae‘s (NVTA – $3.48) joined other clinical experts in releasing a new commentary in the Journal of Clinical Oncology Precision Oncology, underscoring the importance of universal germline testing for all patients with solid tumor cancers. The paper reports a meta-analysis of multiple clinical publications supporting universal testing, independent of age, stage, family history, or type of cancer.

It reports that for cancer types such as pancreatic and ovarian where universal genetic testing is already recommended, 13% and 20% of patients (respectively) have identifiable actionable heritable gene mutations. In comparison, the actionable inherited gene mutation rate for patients with other cancer types is similar: breast 11%, endometrial 13%, prostate 14%, kidney 13%, bladder 14%, testicular 13%, colorectal 13%, liver 14%, and stomach 14%.

Furthermore, it reports that between 5%-13% of patients with cancer with heritable gene mutations are missed by current restrictive testing guidelines and are unable to benefit from associated precision treatment and clinical trial benefits.

The new CEO did a fireside chat at the Morgan Stanley Global Healthcare Conference (AUDIO HERE and TRANSCRIPT HERE). His main message was: “We are navigating towards really becoming a cash flow positive company and doing that in a manner that allows us to still continue to grow the business.” Exactly why we own the stock. Buy NVTA under $10 for a first target of $50 and eventually $100+ when they become the Amazon of genetic testing.
Primary Risk: A competitor starts taking significant market share.
   Clinical stage of lead product: NM
   Probable time of first FDA approval: NM
   Probable time of next financing: Not needed

Medicenna (MDNA – $0.89) entered a clinical trial collaboration and supply agreement with Merck to evaluate MDNA11, Medicenna’s “beta-only” long-acting IL-2 super-agonist, in combination with KEYTRUDA, Merck’s anti-PD-1 (programmed death receptor-1) therapy, in Medicenna’s ongoing Phase 1/2 trial designed to assess the safety and efficacy of MDNA11 as a monotherapy and in combination with KEYTRUDA in patients with advanced/metastatic solid tumors. Buy MDNA under $3 for a first target of $20, then maybe $40.
Primary Risk: Their drugs fail in the clinic.
   Clinical stage of lead product: Entering Phase 3
   Probable time of first FDA approval: 2023
   Probable time of next financing: March 2024

Biotech & Digital Dominators MegaShift
There are at least four ways to make money in the stocks of these large, growing, dominant companies. You can:
* * Buy a stock and hold it
* * Buy a stock and write a call option against it
* * With a Level IV options account, write an out-of-the-money put option
* * With a Level IV options account, write an out-of-the-money put option and use part of the premium to buy an out-of-the-money call option

Apple (AAPL – $152.37) analysts already are saying demand for the new iPhones and the new $800 Apple Watch Ultra looks strong. JPMorgan wrote: “iPhone demand indications are strong following the launch, and while similar to last year the mix continues to be more favorable towards Pro models, lead times for the two Pro models are already more extended relative to last year. Delivery lead times have already reached extended lengths one day after launch vs. extended lead times one week post-launch for the iPhone 13. Amongst the remaining products, lead-time based demand indication for the Apple Watch Ultra is quite strong as well.”

Believe it or not, Apple is now the most heavily shorted of all stocks in the U.S. markets. This distinction previously belonged to Tesla, which had been the most heavily shorted stock for over two years, but now is #2. I’m sure we all wish the AAPL shorts as much success as the TSLA shorts – none.

Ted Lasso won its second Emmy for Outstanding Comedy Series at the 74th Primetime Emmy Awards. AAPL is a Buy under $150 for new iPhone rollouts and augmented/virtual reality products.

Corning (GLW – $32.61) got another $103.8 million funding from the Department of Health and Human Services’ Biomedical Advanced Research and Development Authority to support its planned manufacturing expansion of advanced, high-quality pharmaceutical glass tubing and vials to help the health care industry rapidly scale manufacturing. Your tax dollars at work. GLW is a Buy under $33 for the 5G cellular buildout, followed by the smartphone upgrade to use 5G services. My first target is $60 in 2023 .

Gilead Sciences‘s (GILD – $65.00) settled with five generic companies to protect Descovy from competition until October 2031. That gives them plenty of time to transition to an every-six-months injection to prevent HIV infections. GILD is a Long-Term Buy under $70 for a first target of $100.

Meta Platforms (META – $149.55) started testing the ability to start Community Chats directly in Messenger so people can connect with their communities in real time around the topics they care about on both Facebook and Messenger via text, audio and video. META is a Buy under $250 for a $400 target in 2023 or 2024.

SoftBank (SFTBY – $18.78) will recognize an $18.24 billion gain on the sale of part of its Alibaba shares. SFTBY is a Buy under $25 for a first target of $50 in the next two years.

Other Tech

Velo3D (VLD – $4.84) sold seven Sapphire systems to Kevton Technologies, a contract manufacturer serving the space, aviation, defense, and oil & gas industries. VLD is a Buy up to $6 for my $50 target as Velo3D’s high-tolerance metal parts printing business grows.
Primary Risk:A new 3D metal printing competitor emerges.
   Probable time of next financing: None needed

Inflation MegaShift

Gold ($1,674.00) had a tough week, closing below the 61.8% retracement level and below $1,700. BUT this just extended the extreme consolidation – it is not a new downtrend. Gold is forming a double bottom around the critical two-year support level at $1,675 – 1,685. I don’t expect a breakdown – it looks to me like the last four or five weeks are a final attempt to drive out the weak hands.

The Commitment of Traders report showed Managed Money (hedge funds and big speculators) back to a net short position in gold futures contracts. The two prior years with persistent net short positions, 2015 and 2018, were at major gold bottoms before big rallies. This provides a lot of buying pressure when gold turns up.

We also may be seeing the beginning of a big short squeeze in silver. The cost to shortsellers to borrow the iShares Silver Trust (SLV) has skyrocketed over the last two weeks, with borrow fees hitting 7.15%. A replay of the Hunt Brothers 1980 silver squeeze could be about to commence. The physical squeeze has already collapsed COMEX and LBMA inventories. Now we simply wait for the price action to follow.

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If you are looking for a lottery ticket, SLV call options are too cheap. Otherwise:

A Bag of Junk Silver ($19.10) is a Buy for a hold until 2021-2022.
Primary Risk: Prices of precious metals fall due to US dollar strength.

Global X Silver Miners Exchange-Traded Fund (SIL – $23.88) is a Buy up to $30 for a first target of $50 when silver gets back over $40. The silver miners should outperform both the large and junior gold miners in the next upleg for precious metals that will run until 2020-2022.
Primary Risk: Prices of precious metals fall due to US dollar strength.

Sprott Physical Gold and Silver Trust (CEF – $15.59) is a Buy under $18 for a target price of $30.
Primary Risk: Prices of precious metals fall due to US dollar strength.

Cryptocurrencies
Cryptocurrencies are a diversifying asset that offer a unique opportunity to make (or lose!) a lot of money quickly. You can easily buy Bitcoin and other cryptocurrencies at Coinbase, Block, or Robinhood.

Bitcoin (BTC-USD on Yahoo – $19,813.34) fell under $20,000 as ethereum was “sold on the news” today – down 10% – as it converted from proof-of-work to proof-of-stake. Bitcoin has been able to recover from these dips recently and should do so again.

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BTC-USD, ETH-USD, GBTC and ETHE are Strong Buys.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

Oil – $85.10

Crude oil is mired in the mid-$80s, down around 30% since its peak in early June, even though:

* * The draws from the Strategic Petroleum Reserve are scheduled to end in a few weeks
* * It’s been an extremely quiet hurricane season, and that could change (see below)
* * China’s COVID-19 severe lockdown policy is likely to end soon if Xi Jinping wants to keep his job
* * Europe’s energy crisis is more likely to escalate than resolve as temperatures drop, with major natural gas-to-oil switching on tap
* * The Iran deal is already dead

It’s a major energy crisis and you need to own OIL. The July 2026 Crude Oil Futures (CLN26.NYM – $53.16) are a Buy under $55 for a $200+ target.

The iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $30.03) is a Buy under $36 for an $80+ target.

* * * * *

Sept 10th marks the average peak of the Atlantic hurricane season (and 2/3 of the named storms happen between Aug 20th and Oct 10th). So far this year, we have been rather lucky, with not a single hurricane threatening the US (and its oil/gas output).

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* * * * *

Your following @WifeyAlpha Editor,

Michael Murphy CFA
Founding Editor
New World Investor

All Recommendations

Check out the complete Portfolio page HERE.

Buys
These are the stocks everyone needs to own because transformative events are happening over the next year or two, and I expect to hold them long-term.

$20-for-$1
  Aptose Biosciences (APTO – $0.70) – Buy under $2.50, ultimate target $30
  Bellerophon Therapeutics (BLPH – $1.29) – Buy under $5, first target $30, then $100
  Compass Pathways (CMPS – $14.64) – Buy under $20, hold a long time for a 10x return
  Graphite Bio (GRPH – $3.67) – Buy under $9, hold a long time
  Inovio (INO – $2.10) – Buy under $7, hold a long time
  Invitae (NVTA – $3.48) – Buy under $10, first target $50, then $100+
  Medicenna (MDNA – $0.90) – Buy under $3, first target $20, then maybe $40
  ScyNexis (SCYX – $2.87) – Buy under $2, target price $20, then $50

Other Biotech
  TG Therapeutics (TGTX – $7.30) – Buy under $7, target price $25+

Tech Dominators
  Apple Computer (AAPL – $152.37) – Buy under $150 for new iPhones
  Corning (GLW – $32.61) – Buy under $33, target price $60
  Gilead Sciences (GILD – $65.00) – Buy under $70, target price $100
  Meta (META – $149.55) – Buy under $250, target price $400
  SoftBank (SFTBY – $18.78) – Buy under $25, target price $50

Other Tech
  First Trust NASDAQ Cybersecurity ETF (CIBR – $41.674) – Buy under $40; 3- to 5-year hold
  Fastly (FSLY – $9.86) – Buy under $20; 2- to 5-year hold to $80+
  PagerDuty (PD – $24.57) – Buy under $30; 2- to 5-year hold
  QuickLogic (QUIK – $6.76) – Buy under $10, target price $40
  Liberty Media Acquisition Corporation (LMACA – $9.86) – Buy under $10, target price $20 to $30
  Rocket Lab (RKLB – $5.10) – Buy under $13, target price $30+
  Velo3D (VLD – $4.84) – Buy under $6, target price $50

Inflation
  A Short-Sale or REO House – ($447,000) – Buy while fixed mortgage rates are low
  Bag of Junk Silver – ($19.10) – hold through silver bull market
  Sprott Gold Miners ETF (SGDM – $20.60) – Buy under $28, target price $50
  Sprott Junior Gold Miners ETF (SGDJ – $24.78) – Buy under $39, target price $100
  Sprott Physical Gold and Silver Trust (CEF – $15.59) – Buy under $18, target price $30
  Global X Silver Miners ETF (SIL – $23.88) – Buy under $30, target price $50
  Coeur Mining (CDE – $2.84) – Buy under $5, target price $20
  First Majestic Mining (AG – $7.71) – Buy under $11, next target price $23
  Paramount Gold Nevada (PZG – $0.36) – Buy under $1, first target price $10
  Sandstorm Gold (SAND – $6.23) – Buy under $10, target price $25
  Sprott Inc. (SII – $36.51) – Buy under $40, target price $70

Cryptocurrencies
  Bitcoin (BTC-USD – $ 19,813.34) – Buy
  Grayscale Bitcoin Trust (GBTC – $12.10) – Buy
  Ethereum (ETH-USD – $1,470.68) – Buy
  Grayscale Ethereum Trust (ETHE – $11.21) – Buy

International & Other Recommendations
  EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ – $29.81) – Buy under $38 for a $66 target in 12 to 18 months
  KraneShares Bosera MSCI China A Share Fund (KBA – $32.34) – Buy under $40 for a three- to five-year hold
  Morgan Stanley China A-Shares Fund (CAF – $14.64) – Buy under $18 for a three- to five-year hold
  KraneShares CSI China Internet ETF (KWEB – $27.67) – Buy under $40 for a double over the next three years
  Acreage Holdings (ACRDF – $1.02) – Buy under $2 for the Canopy Growth merger
  Mongolia Growth Group (MNGGF – $1.40) – Buy under $1.30; long-term hold

Energy
  Crude Oil Futures – July 2026 (CLN26.NYM – $53.16) – Buy under $55; $200+ target
  iPath Pure Beta Crude Oil Exchange-Traded Note (OIL – $30.09) – Buy under $36; $80+ target
  Energy Fuels (UUUU – $6.73) – Buy under $8; $30 target

Holds
These are holds but not sells – yet. They could get moved back to one of the buy categories if their prices drop or outlook improves, or they could become sell recommendations in the future.
  Algernon Pharmaceuticals (AGNPF – $3.97) – Hold for IPF/chronic cough trial
  Akebia Biotherapeutics (AKBA – $0.37) – Hold for FDA meeting
  Arch Therapeutics (ARTH – $0.02) – Hold for buyout

Publisher: GwynRose LLC, 5348 Vegas Drive, Suite 868, Las Vegas, NV 89108

New World Investor does not act as a personal investment adviser or advocate the purchase or sale of any security or investment for any specific individual. The recommendations and analysis presented to members are for the exclusive use of members. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. Recommendations are subject to change at any time. Nothing in this presentation should be considered personalized investment advice. No communication to you by Michael Murphy or any of our employees or contractors should be deemed as personalized investment advice.

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