The PR Ziopharm should put out in my opinion, refuting false claims

Does outright fraud bother you?

Some people learned about the fraud that was Bre-X and rather than being disgusted, they wish they could have profited from it.  Bre-X soared to unbelievable highs because soil samples were seeded with gold shavings from a wedding ring, it made investors, (even institutions) think this company had uncovered a massive gold strike.

Prolific ZIOP pumper RobCos has gone all over social media sites like Twitter with an equally false claim.  He's not putting shavings from a gold ring into a core soil sample, instead he's putting out false information about a person who is bravely fighting a battle with cancer, all in an effort to boost the PPS of Ziopharm in my opinion.

What is he claiming?  Here's what he put on Twitter:

 

rc

‏@pharmamaven

$ZIOP patient #1 stage 4 failed all other therapies MRI clean almost 1 yr out vs 3-5 mos expected OS. http://www.investorvillage.com/smbd.asp?@intercooleronli …

• RETWEET
  1
• LIKES
  4
• 

10:41 AM - 24 May 2016

And here is what he put up at Investorvillage: (click on the text to visit the actual post)

• Lets all remember what this is about - giving these poor people with mostly stage 4 GBM who failed previous surgeries and treatments including some with chemo and surgeries who are expected to live 3 to 5 months hope. Charles previous treatments all failed and he is off them now - his tumor always grew back faster than it has this time on the IL-12+V treatment and he is in a few weeks going to be one yr on the new therapy after everything else failed with no tumor regrowth on this therapy. God bless him. Lets all stop the negative posts for a day and say a prayer for all of the patients on this trial and everyone with cancer. Amen.

It would be incredible news, if any of it were true, and frankly I wish it was true.  But the facts say otherwise.

RobCos aka pharmamaven sourced his information from a website written by a Mr. Peacock called ''The Brain Chancery''.  RobCos claims that patient #1 failed all other therapies, which again I wish was true.  Here is what Mr. Peacock says on his website:

• I’m going to start taking Temodar again, which is the same exact stuff that I took at the beginning, for an entire year.  One great thing is that this time, I’m going to take a much lower dosage, and I have so much less tumor in there now that this makes sense.  It has a good chance of working.  And here’s a big reason why we think so:
• Temodar doesn’t always work for everybody, and sometimes it doesn’t work at all.  But as Dr. Hu pointed out: for that year that I was taking Temodar, my cancer did not spread or grow at all.  It only shrunk.

Obviously if a treatment resulted in a tumor shrinking, then it didn't fail.  There is still no cure for cancer, treatments heretofore have been geared toward increasing life span and improving quality of life.  Yes there are individuals who have been treated by various means who remain cancer free, the patient at Duke, cancer free for four years and profiled on 60 Minutes springs immediately to mind. But even her doctors are hesitant to use the word cure.

As for RobCos claim of a ''clean'' MRI almost 1 year out.  That is another fabrication, I wish Mr. Peacock did have a cancer free ''clean'' MRI, but thankfully at least his latest MRI showed no growth according to his blog, so that is positive.  A clean, cancer free MRI is my most sincere wish for him.

Does any of this really matter though?  I mean its just one shameless Internet poster, obviously the guy behind it is morally bankrupt.  But who is RobCos or Pharmaven anyway?  I mean if people are dumb enough to believe some internet pumper, then they get what they deserve....right?  Sure, and I guess shaving a wedding ring down to falsify core samples is fair game, and defrauding people out of their money à la Bernie Madoff is okay too.

RobCos has something of a following.  He moderates the investor forum for Ziopharm at InvestorVillage, with his posts regularily being recommended 30, 40 sometimes 50+ times by users. On twitter his account boasts over 1,500 followers.

I have little doubt that there are some sad individuals out there who have seen this bogus information, and have gotten quite excited and either took out a position in Ziopharm, or added to an existing one.

''Wow!!!  This company has treated a guy and his MRI is clean after almost a year after he failed every other treatment".

Now maybe Ziopharm doesn't care that there is an individual spreading false information about their company?  I don't know.  Their CEO reportedly made something like $15 million last year, with much of that compensation being stock based.  I know in the past Ziopharm put out a press release to confront false information on their company written on a blog, but in that instance the information they were refuting was negative.

Maybe they don't care about falsehoods being shared all over social media, so long as the information has a positive spin?

Here's the PR I think they should put out, or something along these lines:

ZIOPHARM Oncology, Inc. (Nasdaq:ZIOP) today issued the following statement regarding information shared on social media sites like Twitter by an individual with various user ID names including RobCos and pharmamaven.  

The statements made by this individual are misleading and wrong.  We have made no representations of having a patient in one of our trials with a clean MRI, or of having survived almost 1 year after failing other treatments.  

While our recent PR of May 18th cited favorable interim survival results it was noted in the release that these results are early and involve only a limited number of patients. While the company is encouraged by the results we wish to repudiate the claims made by this RobCos aka pharmamaven individual on various social media sites.

I would love to see it, but I won't be holding my breath.

Knowing when its time to leave the party.....

Back on May 22nd I put up a posting on timing the perfect entry into a stock:

Sunday morning musings on timing a perfect entry....

In that piece I offered up the opinion that, with all the tools at the disposal of the big players, that even if a retail investor times things perfectly, that he/she might still see a stock drop after buying in. Sometimes its not just a question of timing the market, but of ''time in'' the market.

If entering is the yin then exiting a stock is the yang.  And as hard as it is to pull the trigger and buy, I believe selling is even more difficult.  Especially if you've done well in buying near the lows, and have made big gains.  

I want to be perfectly clear here about one point.  In this posting I am referring strictly to speculative stocks.  I'm talking about companies that are NOT paying dividends, companies that have NOT achieved profitability.  I am referring to companies that have survived and are surviving by selling their stock.

This is contrarian investing at its core.  A contrarian buy involves making a purchase when things look bad, or when things are extremely quiet with thin volumes being the norm.  In other words, buying low.  A contrarian sell on the other hand involves unloading when the news is good, when there's lots of excitement and when volumes are robust.  Selling high in other words.

Why do I consider buying low easier than selling high?  Human nature.

Buying is easy when compared to selling, even when you're buying a stock that is depressed, one that is either out of favor or below the radar.  The reason is simple enough, its because of the belief that the price will climb.  For a contrarian, seeing Fear, Uncertainty and Doubt (FUD) is a good thing and it triggers greed.  It should naturally spur some research, which in my case includes an analysis of the chart.  But once the decision to buy is made, its just a matter of making an entry. 

However selling can be incredibly difficult, and to demonstrate why I will use an example, employing my favorite hypothetical stock ABC.

ABC Industries is a quiet little company, with its stock ABC trading for $1 with volumes typically less than 100,000, although there are occasional bigger volume days that get up in and around 1 million.  You look at the chart and form a bullish opinion, and the industry that ABC is involved in, you think it could become hot.  

You pick up 1,000 shares, a small position, thinking yourself lucky because you got in for $1.  In a week or two its traded down as low as 90 cents, and you kick yourself for not being more patient. But then it starts to move, back to $1 and then to $1.50...and then in a couple months its up around $3.  You note that the volume is still thin, occasionally getting up around 1 to 2 million, but there's over 100 million shares outstanding so you hold tight.  

Then things really heat up.  ABC starts flying, its been mentioned on a popular web cast, there's lots of news coming out on the company, newsletters and analyst recommendations making the rounds.  The PPS is up around $7 now, with price targets of $15 being put out by experts.  

Things keep heating up, when it hits $10 you think maybe you should sell, but it settles there and finds support, so you hang on.  Then more excitement comes, the company makes a big announcement, they've signed a deal with another company that is projected to mean huge sales.  The PPS responds and climbs to $13 a share and you start to think that the $15 target put out by the investment bank analyst might be seriously low.

$13 a share, you've turned $1,000 into $13,000 and now you regret not having bought more.  

Then something happens, the PPS starts falling, dropping all the way back to $11 in just a couple days.  Your $13,000 has turned into $11,000.  Its still an incredible gain for an initial investment of $1,000, but its not $13,000.  You resolve that when it gets back over $12 you will sell.  But instead of rebounding it falls further, in another few days its under $10.....You've forgotten that at $10 per share you've made $9,000 in profit, instead you're thinking of the $4,000 you ''lost'' by not selling the top.

And so it goes.....

While greed keeps retailers holding the bag even after they've made big gains there are other reasons too.  Retail investors are known to fall in love with their stocks, even those that are 100% speculative, relying on share based capital to finance operations and to meet payroll.  Every company press release and filing has been read as well as all the transcripts from conference calls. Interviews have been pored over, and you may even check out stock sites to garner a sense of the overall mood. Anyone who is down on your darling stock on a social media message board is exposed as ignorant, a short seller, or both.  

So what's the bottom line?  

You've likely come across someone who has lost money on a stock, and who has expressed that common refrain:  ''Its not a loss unless I sell''.  The rationale is that eventually the stock in question will recover and that the losses will disappear at some point and possibly turn into profit.  There is merit to that point of view, but with speculative stocks if you get roped in on a lot of hype....then you could be looking at a reverse split and even bigger losses later.

Well, just as a loss isn't a loss until you sell....likewise a gain isn't a gain until you sell.  One is called a paper loss, the other a paper gain.  Until you crystallize a gain by selling you're dealing with paper gains and paper can be very fragile.

Some will bemoan selling because of income tax considerations.  I can only comment on Canada's tax laws, I don't know what the rules are in the U.S.  In Canada the capital gains exclusion rate is 50%.  What that means is that 50% of a capital gain is tax free.  So using a $10,000 capital gain as an example, $5,000 of the gain is tax free, go on vacation to Mexico or pay off your credit card (I would strongly recommend the latter).  The remaining $5,000 has to be declared as income and will be taxed at your marginal rate.  If that rate is around 20% you will need to keep $1,000 back for tax purposes, if your rate is 40% then its $2,000.   Still some nice Do Ré Mi in your pocket.

Everything goes back to one of my late great father's favorite bromides:  You'll never go broke taking profits.  Another I like is attributed to numerous people like JP Getty, the story goes that when asked how he got so rich the multi-millionaire replies:  ''I always got out too soon''.

The name of this blog is Avoid The Bag, on reflection I think another good name would have been Escape The Bag.  After all, as a retail long investor to make money on any stock you first have to buy it, in other words you have to hold the bag.  Hopefully you will escape the bag, and take some extra cash with you when you go, that's called winning the game in my books.

And if the stock you just sold keeps climbing?  Oh well....that means those who bought the shares you sold now have the chance at gains themselves, if they sell.

Again, please note....this post was specific to speculative stocks, companies that have not achieved positive earnings.  If you are absolutely convinced that the big gains you've made are in a company that is going to be the next Microsoft or Amazon, then I wish you luck and hope it works out.  Those are the exceptions to the rule, but on rare occasions they do happen.

Good luck.

Desperate ZIOP pumper cites "clean" MRI for phase I trial patient

The English language is insufficient to register my disgust with a prolific contributor to various social media platforms who has been promoting ZIOP as a winning investment.  

Verbal sword play is to be expected at places like Stocktwits, Twitter or on message boards where stocks are discussed.  Longs will tout the positives, whether real or perceived, speculating on a bullish future. Bears will naturally do the opposite.  There's lots of name calling and penis waving as debates rage, and a lot of the time it can be fun.  Conflict is the essence of a lot of entertainment.

But it can go over the top, into Enron or Bernie Madoff style pumping where information which is completely erroneous is foisted on the Internet.  

I want to be perfectly clear about something here.  This is not a reflection on Ziopharm the company. No firm, publicly traded or otherwise, can control what some morons put out on the Internet, and to expect otherwise is unrealistic.  

Years ago a SeekingAlpha writer wrote a blog which it seems was published on Forbes.com as well, with information that Ziopharm claimed was inaccurate.  The posting was removed, and based on the available information it seems Ziopharm was claiming that the author's information about a Phase II study of their drug candidate Palifosfamide was misleading and wrong.

You can read their response here:  

http://www.globenewswire.com/news-release/2012/10/19/498408/10009112/en/ZIOPHARM-Issues-Statement-Regarding-Misleading-Blog.html

That is all well and good, ultimately investors need to have good and reliable information upon which to make investment decisions.  The fact that Palifosfamide ultimately failed doesn't matter, if Mr. Pearson was putting out inaccurate or misleading information it behooves the company to set the record straight.

But its a two way street.  You can't just seek to correct falsehoods that throw a negative light on your company, and then ignore an outright lie because it has a bullish positive tilt.  And this lie is so disgusting it boggles the mind.

Here's the tweet.

 

rc‏@pharmamaven

@AvoidTheBag $ZIOP patient #1 stage 4 failed all other therapies MRI clean almost 1yr vs 3-5 mos expected OS http://www.investorvillage.com/smbd.asp?mb=16353&mn=52416&pt=msg&mid=16038066 … $XON

10:46 AM - 24 May 2016

This is absolutely disgusting.  This patient #1 being referred to writes a blog himself, and he recently uploaded his MRI onto his site.  The only thing is the author of the blog makes no representation about having a "clean" MRI.  

You can check it out yourself:  https://thebrainchancery.com/2016/05/24/show-us-your-scans/

According to Ziopharm's own PR on the subject they say that: 

• "Recurrent glioblastoma is an aggressive cancer with one of the lowest 3-year survival rates, at 3%, among all cancers" 

This gentleman has been writing about his battle with cancer since April of 2012.  That's over 4 years ago. In September of 2015 he wrote about going on Temodar "AGAIN".  Noting that the previous time he'd done it his tumour shrank.  Temodar is a brand name for Temozolomide, the generic moniker.  

What did Ziopharm say about Temozolomide in their recent PR?

• For patients who have experienced multiple recurrences the prognosis is particularly poor, with a median overall survival (OS) of 6-7 months, while OS in patients that have failed temozolomide and bevacizumab, or equivalent salvage chemotherapy, is approximately 3-5 months. (*bolding and emphasis is mine)

This guy's story is an inspiration, and to totally misrepresent the facts to pump some stock is beyond reprehensible, in my opinion its criminal.  Saying all other therapies failed when this man's tumour shrank after chemo treatment with temozolomide is disgusting.

So who is the waste of skin "pharmaven"?  He posts on Stock Twits with the same user name and on other sites including Investor Village as RobCos.  Investor Village is ground zero for pumping Ziopharm.  Someone linked up one of my posts on there, and in just one hour there were over 100 page views coming from that site, then it was taken down.  What  a shock.  

RobCos of course is the chief pumper, cheerleader and moderator of the Investor Village forum. And Ziopharm in my opinion should distance itself publicly from this Enron style pumper.

KTOV - What just happened?

A big part of the reason I write this blog is in an effort to help retail investors garner a better understanding of how the markets function and about the forces at play.  I would argue that a lot of those forces are employed to entice retailers into buying high those stocks that the smart money is selling high.  That or to sell low when the smart money crowd is looking to load up.

That's the way the market has to be.  For one group to sell high there has to be another group willing to pay the high price, and the same dynamic in reverse when stocks are low.  Obviously everyone can't be buying and selling at the same time, otherwise the markets would look like a football game with both teams lining up on the same side of the ball, both teams wanting to play offence and defence at the same time.

When it comes to the public markets I divide the players into two broad based teams.  On one side you have the industry players, and on the other its the retail herd.  

And when you look at the tools available to the smart money industry players, it shouldn't come as a surprise that its retail investors who so often end up on the wrong side of the trade.  Especially when it comes to the stocks for highly speculative money losing companies.  

Big house investment banks underwrite the offerings and secondary issues, with analysts working for these same firms.  Media outlets too many to name, investor relationship firms, email blasting chop shops.  And who is the target of this multi-billion dollar industry?  Retail investors like myself.

So now onto KTOV.  I'm not going to write anything about the fundamentals, because as I've noted so many times, all fundamental data is old information and thus already priced in as far as I am concerned.  

I wrote about KTOV on May 17th, 2016 in a post about Ziopharm that noted how an email blasting outfit called Stockreversals had touted ZIOP last year when it was a high flyer and that now their promotional chops were being used to hype KTOV. 

http://www.avoidthebag.com/2016/05/ziopharm-no-short-squeeze-and-no-buyout.html

In that post I wrote that KTOV was just the latest in a long list of stocks hyped Stockreversals.  I also posted a chart that showed KTOV climbing from around $2.50 as recently as February and closing at $6.68.  

• "Can I say with certainty that KTOV will follow the same pattern that LEJU, ZIOP, CLDN, SBOT and all the others did?  Nope, I can't.....but I would not bet against it either.  I have no doubt that those promoting KTOV will say, ''this one is different'', it always is.

That was then, holders and watchers know where it is now.  KTOV closed at $4.75 on Monday May 23rd.  That's a drop of over 25% from when I first wrote about it.  

Am I writing this to pat myself on the back?  Yeah, a little....sure.  I'm human and as prone to the sin of pride as anyone.  But I also know that a good call can be temporary, KTOV could have a big rally tomorrow and the pumpers will jump all over a guy like me saying that $4.75 was a big buying opportunity.  

In fact I expect KTOV to have some big rallies.  If the smart money is dumping, its hard to get retail investors buying and holding a stock that falls big and keeps falling.  

Long term though?  

My expectation is that KTOV will follow the same pattern as LEJU, CLDN, SBOT, MOBI and ZIOP to name just a few of the stocks that stockreversals has pounded the table about.  Go ahead and check the charts for those issues, but don't bother with CLDN.  After a 1:15 reverse split it merged with another bio tech called Eiger.  

The more important question is why do email blasting chop shops like stockreversals hype so many stocks that soar and tank?

Take a second and consider the possibility that you find out about a stock that's going to fly, one that's going to go from somewhere around $5 up to $15.  The market is all about supply and demand, you know that already of course.  So are you going to start telling anyone with a pulse and a trading account about this incredible company?  Or are you going to buy all you can and maybe let a few very close friends and family members know?  

After all, that $5 price is going to disappear pretty quickly if too many people find out about it.  If you start pumping out emails and then screaming all over sites like Twitter and SeekingAlpha the price is gonna go from $5 to $6 and keep climbing.  You'll have missed out on the chance to really load up on it.

Unless of course so much dumping happens that the climb halts and then reverses trend.  Its a zero sum game boys and girls, some get cash while others get shares.  

You've heard the old saw: "If a tree falls in the forest and nobody is around, does it make any sound"?

Well if a public company puts out good news and nobody has it on a watch list, who's going to strom in and pay the high price?  Shops like stockreversals with followers numbering in the tens of thousands can get a stock on the radar screen with lots of retail investors.  Then all you need is some good news and a climbing share price and its show time.  

I should point out that stockreversals will often mention a dozen or more stocks in their email blasts and commentary, and sometimes the stocks they include are suitable as long term investments in my opinion.  But when I see this outfit on Twitter, Stocktwits and SeekingAlpha banging their fist on the table about one particular company, that's when my Spidey Sense starts tingling.

Full disclosure, I have no position in KTOV long or short, and no intention of ever initiating one.  I also have no positions in any of the other stocks mentioned except for ZIOP.  I hold some put options on Ziopharm.  Having an opinion is great but its also fun to have some skin in the game.

Later I intend to be writing about the difference between what I consider to be investment grade stocks and those that are what I'll call "speculative grade".  For my purposes I consider those companies that have achieved positive earnings as "investment grade" because they're profitable. Companies that are burning cash and using their stock as capital to finance operations, those I consider "speculative grade".  

Retail investors love speculative stocks, because it is these stocks that typically see the biggest gains in the shortest periods of time.  But they're also the stocks that often experience the biggest drops, with retail investors all too often coming late to the dinner table and buying high before the big drop.  

Until next time.

A science lesson for investors in Ziopharm

Investors in ZIOP got quite excited by the news which just came out last week about the company's currently running Phase I trial for Ad-RTS-hlL-12 + veledimex.  The news was shared across numerous social media platforms where stocks are discussed and even on twitter.

Why were investors excited?  The subject line of the press release said it all, citing "Favourable Interim Survival Results".  That led some Ziopharm investors, many who post to stocks sites and twitter, to draw a cause and effect relationship.  Ten out of the eleven patients in the trial were still alive, ergo the trial was the reason these individuals were surviving.

If only science was that simple.

The first posting I ever wrote on Ziopharm was back in March of 2015 on Seeking Alpha where I expressed the opinion that ZIOP represented a speculative bubble.  That was when ZIOP was trading over $13 per share.  In the comment section I was roasted.   One thing in particular that I wrote served as a point of a attack for the haters.  In that posting I freely admitted that I do not have a medical or scientific background.

You can read that posting here:  http://seekingalpha.com/instablog/15663412-joe_retail/3802236-ziopharm-oncology-a-speculative-bubble-poised-to-collapse

Lacking an in depth knowledge of medicine I was deemed ill equipped to judge such a "transformational" company as Ziopharm.

In light of the excitement over this most recent "news" it appears that there are many investors in Ziopharm with even less of a scientific background than your's truly.  After all, I have taken science courses in both high school and university, and I at least understand the reasoning and rationale behind what is generally referred to as the Scientific Method.

Obviously those drawing a cause and effect relationship between this trial and patient survival do not. I can just picture some scratching their heads right now saying:  "The Scientific what"????

This is a single arm study, there is no control group nor is there a placebo group.  This is so rudimentary, but reading the comments on sites like StockTwits, Twitter, Yahoo, InvestorsVillage and InvestorsHub, its strikes me that a lot of posters have no idea what control and placebo groups are or why they're important.  That or they're being willfully obtuse in an effort to lure in the Homer Simpson types of the investment world by touting the survival results as "proof" the therapy works

Now to be clear, a phase I study doesn't need either a control or placebo arm because the goal isn't to prove something like a survival rate.  The primary goal is to simply prove safety, or efficacy if you prefer the fancier term.  Basically they need to ensure the treatment doesn't cause death or adverse events, like say a heart attack.  Secondary to safety is to determine the maximum tolerated dosage as well as any immune and biologic responses...if any.

On the primary objective of this study it appears that, at least at this early stage, its mission accomplished so far.  Ten of the eleven patients are still alive and there's no news about Adverse Events or AEs in those ten individuals.   That is excellent news in of itself.  Had there been a number of AEs and/or deaths, then they would likely have to go back to the drawing board.

As for the secondary objectives, particularly immune system response, we have a "suggestion".

CEO Dr. Cooper says in the PR that the data they have "suggests" the results are exciting.  What that means exactly, I haven't the foggiest idea.  I'm assuming it to mean that the results may be exciting, or that ultimately they may not, there isn't enough information to go on.  If the data was definitively exciting why qualify it by using the word "suggests".  

As for survival rate, that will be either proved or disproved in later trials, and those trials will be much more in depth, involving more than just 10 or 11 patients I have no doubt.

So why are control and placebo arms important?  I can't believe I'm explaining this, but its obvious from the posting I see on social media sites that a lot of people don't understand it, especially at InvestorVillage which strikes me as ground zero for the pumper crowd.

I'll deal with a placebo arm first.  The placebo effect is well known.  People receiving a sugar pill or something similar with zero medicinal value have been shown to experience healing results for years across a variety of trials and experiments.  The relationship between the mind and healing is an area that most people recognize.  Having a positive mental attitude boosts the immune system, while being depressed weakens immune response.  A patient just knowing they're receiving a treatment, that can help in achieving positive results, even if the treatment is something as useless as a sugar pill.

A control group on the other hand receives no treatment at all, not the drug therapy or a sugar pill (placebo).  The results of a drug undergoing a trial with three arms can then be measured against two variables, against those who had no treatment at all, and against those receiving a placebo.  If the drug arm doesn't outperform the placebo and control groups then you have a failed trial.  If the drug arm outperforms the other two, then you may be able to move onto the next step.  And if the performance is significant enough you may have something worthy of FDA or similar approval, ultimately a marketable drug or therapy.

Now to be as clear as possible, this is not easy stuff, not when you're dealing with a disease like cancer.  There are so many variables that it can be at best difficult and at worst impossible to run a 3 arm study.  To get the best and most scientifically responsible results, then each arm should be identical.  Same ages, sexes, races and with the same diseases at the same stages.   There can be differences in the way different racial groups respond to treatments based on varying genetic make ups.  Some populations are more prone to certain conditions than others.

With a disease like gliablastoma, I can't see being able to get 3 identical groups with the exact same characteristics, the same tumor locations and sizes, with the same treatment histories and everything else.  

Obviously with a two or three arm trial they would want to at least approximate each group, so that they are at least somewhat similar, but you're never going to get perfectly identical groups.

As noted in the PR, the results so far are incredibly early.  Only 6 patients treated 6.2 months or longer, and only 10 in total.  According to the clinicaltrials website this trial is not estimated to be fully completed until December 2018, over 2 years from now.

So why tout survival results from a trial not designed to measure that variable?  I am of the opinion, that as a public company, Ziopharm and its principles were looking to perhaps support a falling share price. There are a lot of Homer Simpson types out there who will draw cause and effect conclusions when at best all that can reasonably concluded is a correlation.

For those still unsure of the difference between cause and effect and correlation, I'll leave it to Lisa Simpson to explain it to you.

One last note, as noted in earlier postings about Ziopharm I own put options so my opinions are not without bias.

Sunday morning musings on timing a perfect entry.....

Being something of a message board and social media junkie when it comes to stocks, there's a common refrain I hear from those I suspect to be retail investors just like me.  

Retailers will often hesitate, trying to decide on the optimum entry point.  "Is now a good time to buy"?  That's something I've frequently seen on stock sites, regardless of the equity being discussed.

When is the right time to buy?  You've researched a stock, and for whatever reason you've decided you want to buy in, but you don't want to make a purchase and see it drop almost immediately by 5 or 10%.  

Deciding on the perfect time is nearly an impossible task.  

Some swear by the technicals, and will draw lines out on a chart representing traditional support levels, then they'll put a limit order in based on that analysis.  Others will keep a close watch, and when they first see it start climbing they'll jump in with a market order, hopeful of catching some momentum which will launch them well clear of their entry point.

If you play the markets long enough, sometimes you will do well, and other times not.  And I would argue that even if you make the perfect decision on an entry point, the stock you just bought could still trade down 5 or 10% and maybe even more.  

How could that be you may ask?  How could someone time their entry perfect and still see the stock they purchased drop by a significant amount?  If someone times things perfectly that means it can't drop.  Right?  

In my opinion no, and of course I will explain.  

The first thing retail investors need to understand is that they are not buying shares directly from those selling, we're not dealing with auction style markets.  It doesn't matter whether its the NYSE, the Nasdaq or OTC, or any of the Canadian exchanges.  When buyers purchase a stock they're going through a Market Maker Broker Dealer, or MM for short.

We'll use my favorite hypothetical stock, ABC which we'll say is trading around $10.  I look at level II and see that the bid is $9.95 with an ask of $10 and that there are 100 lots showing on the ask.  So we'll say I decide to buy 10 lots, 1,000 shares and I put a market order in because I'm convinced ABC is going to be moving up any day now.  

My broker will then pass the order to the house showing that $10 ask, looking to get the order filled. We'll call the brokerage that gets my order Moonshot.  There's a problem though, while Moonshot is a MM for ABC that doesn't mean that they have clients with shares to sell, or any themselves for that matter.

Moonshot could pass on the order, telling my broker to go to another house, but invariably they'll simply fill the order by going short.  If they pass then they risk getting a reputation as a non-performer.  Brokers will by-pass non-performers because in the public markets speed of execution is everything.  

Of course mine is just a small little 10 lot order, 1,000 shares.  But what if I'm not alone and a number of other investors have been watching ABC and decided that $10 is a good price to get in at.

Market Maker Moonshot could find themselves short tens of thousands of shares.  MMs are in business to make money obviously, and they're not going to want to cover off a short position by paying more than what they sold at.

So what is a MM caught short to do?

Years ago the US Department of Justice (DOJ) documented a practise they discovered that they dubbed "Moves on Request".  Basically it involves MMs asking each other to change the bid and asks being quoted in order to give off an impression that a stock is either weak or strong.  You can read about it here:  

https://www.justice.gov/atr/case-document/competitive-impact-statement-9

Using my example of ABC which MM Moonshot has found themselves short on, the DOJ article documents how a broker who is short will contact other MMs and ask them to move their bid and asks down.  This has the effect of making the market for ABC look weak and it can reasonably be expected to drive the PPS down, allowing Moonshot to cover off their short position, buying back the shares sold for $10 at a lower price.  

The opposite would be done when Moonshot or another broker finds themselves with shares to move, asking other brokers to move their bids and asks higher to give off a bullish impression.

Why would MMs co-operate in this fashion?  Its a quid pro quo system, quid pro quo meaning "you scratch my back and I'll scratch yours".  Other brokers comply because they know they'll be in a situation where they too will need to make a "move on request" because they're long or short.

So even though a retail investor may have picked a perfect entry, he could still see the PPS fall after he buys in, that's life.  Sometimes its not a matter of timing the market, but rather of time in the market.  While some will get scared off and bail on a drop in the PPS, others will hold tight.  And if the stock they've bought is a good one that is able to catch the attention of buyers, then those that showed patience will have a chance at profits.

Sometimes you get lucky, it happened to me recently with LAC, the stock for Lithium Americas.  

Regular readers (both of you) will recall that back on April 27th I did a blog posting wherein I offered up the opinion that I could see LAC dropping as low as 65 cents on the handle portion of the chart pattern I saw playing out.  

I didn't pull the number out of my rear end, it was based on the chart. Between March and July of 2015 LAC had hovered over and under that 65 cent mark, before and as the left hand side of the cup started forming.  Ultimately it was a guess based on what I perceived to be a support level.

Before I give myself too much credit though I have to admit to some impatience.  On April 27th, the same day I expressed the opinion that I could see LAC dropping as low as 65 cents, on that day I picked up another 1,000 shares at 75 cents.  The reason?  Simple, I wanted to increase my holdings a little and I was afraid of news or something coming out that would send the PPS much higher before I got a chance to add.

But I also put a limit order in at 66 cents on that same Friday Apr 27th, that was set to expire on Friday May 6th.  During the trading week of May 2nd to 6th I was going to be busy and unable to watch the trading during market hours, and if my 65 cent prediction came true I wanted to be able to add at close to that price.  

It was an order for 2,000 shares at 66 because I don't ever expect to get the bottom of a bounce. And on Monday May 2, it filled.  When I saw that LAC had traded as low as 66 cents Monday evening I checked to see if I'd gotten my fill, and was somewhat surprised to see that I had.

Good, but far from perfect.  Obviously I should have gone for the whole 3,000 at .66....then again, maybe I wouldn't have gotten the full 3,000 filled at 66 cents, I shall never know.  As it stands my average cost was 69 cents plus brokerage fees,  With LAC now trading up around 88 cents that's a gain of over 25% so I'm not gonna complain.  

Given my opinion of LAC's chart, I very much like the chances of it climbing north of $1.00 CDN. 

Please note though, with respect to my comments on LAC, this is a highly speculative investment and its not suitable for everyone obviously.  Not everyone has the same tolerance for risk, and investment objectives can vary widely.  

Getting back to the central theme of this post, timing the perfect entry, good luck.  The way I see things the board is tilted, and the  direction of the tilt does not favor the retail player.  With that being said forewarned is forearmed.

Good luck.

Lithium Americas resumes up trend, handle forming....

I last wrote about Lithium Americas on May 6th, taking note of its inclusion in the only Lithium ETF that I'm aware of, the Global X Lithium ETF.  Previous to that I put up a post about the chart on April 27th, speculating that I thought the PPS could fall back to 65 cents if the cup and handle pattern I was seeing played out.  

• April 27th Blog Posting:  Cup and Handle Forming
• May 6th Blog Posting:     LAC added to Global X Lithium ETF

On April 27th the PPS closed at 79 cents and on May 6th the close was 70 cents.  The lowest its traded between April 27th 2016 and the present is 66 cents, so if this upward move continues I won't have been far off with my 65 cent pull back call.  On Friday May 20th, 2016 the PPS closed at 88 cents for a 33% climb of that recent 66 cent low.

Here's the chart:  

If this pattern does indeed continue in the manner I'm thinking it will, (no guarantees though) then we should be seeing a closing price above the recent 94 cent close of April 19th when the pull back started and signalled the potential for a handle forming.  If that happens, then I envision LAC breaking out to a new and higher trading range north of a dollar.

Not everyone is a fan of technical analysis, or TA for short...I know there are lots of fans when T&A stands for something else though :-) 

Some view charts and TA as little more than guessing, like horoscopes and palm reading.  Those who hold this view will typically say something like "when good news comes out stocks go up, when its bad stocks go down".  And to a degree there is merit in that point of view, because often it does work out that way,

The whole idea behind TA is that it may provide an indication of future direction.  We've all heard the old saw about "buy the rumor, sell the news".  For my own part I view all the currently available fundamental data as already being priced into a stock.  And I also consider it likely that before news comes out, or before a major announcement is made, that there may be some parties in the know trying to profit from it by establishing or adding to a position.  I view investors of this kind as being what is often called "the smart money crowd".

What I look at is price volume movements, where a stock climbs on volume heavier as compared to when the price pulls back.  For me a climb of 2 cents on volume of 10 million shares trading is more significant than a drop of 10 cents on volume of just 1 million.  

***One big qualification.  I consider TA to be most reliable when a company is putting out little or no news, and is not engaging in paid promotion.***  

One of the tools available to this smart money crowd, especially when its a stock trading for less than a dollar, is short selling.  I mentioned in an earlier posting the importance I place on keeping an eye on short selling:  Why Short Interest Matters

If I see 10, 20...30% of the issued shares shorted, that to me is a warning flag.  Bears are not stupid, and if there have been some large bets placed on a stock falling, then I take that as a potential omen, a sign that bad things may be coming in the future.

In the case of Lithium Americas the short interest is nothing approaching even 10%, in fact as of May 15th 2016 its less and one single percentage point, 0.54 % to be precise.  

However the raw number is notable, its just over 1.6 million.  Considering the daily average volumes LAC is trading lately, that's a drop in the bucket.  I think its very possible that there may be those looking to accumulate LAC, and that short selling may have been used to squelch the upward move in the PPS in an effort to inject some fear and uncertainty into retail holders.  You have probably heard it referred to as shaking the tree.

Friday May 20th saw a big jump in trading with over 11 million shares trading hands when all the secondary exchanges are included, (8.8 million on the main TSX).  That jump may have been caused by Lithium America's inclusion in a Bloomberg article about SQM which references the deal they struck with LAC for 50% of their Argentinian project.  BLOOMBERG ARTICLE

If you're looking for an active forum for LAC then your best bet is Stockhouse where I post with the name ledrog.  There's a lot of speculation about SQM potentially buying out LAC.  While such a deal would not surprise me, I don't know if there's anything to it beyond idle retail banter and/or hope.

A note on LAC and any stock that I write about.  Lithium Americas is a highly speculative investment, and it is not a suitable investment for everyone.  Verify all the information I have provided, I endeavor to ensure that everything I post is accurate, but I rely on outside sources for a lot of the information I provide here and I cannot warrant that everything is accurate, and also I could make a mistake.

If you have a comment, or if  you simply wish to point out something I may have gotten wrong...please do, the comment field is open.  All I ask is for a respectful tone and no profanity or advertising.  

Peace

Ziopharm - News long on hope, vague on data.....

The primary goal of most phase 1 clinical trials is to prove safety, basically to show that a drug, therapy or treatment doesn't cause severe adverse reactions and/or death.  With the news out of Ziopharm today (May 18th, 2016) it seems that goal is being met.  They reported that their on going phase I trial of Ad-RTS-hIL-12 with Veledimex for patients with Glioblastoma has enrolled 11 patients with only 1 death.  

http://ir.ziopharm.com/releasedetail.cfm?ReleaseID=971714

The company cites the median follow up as being 6.2 months, which compares well given that this form of aggressive brain cancer typically comes with a prognosis of death in as little as 3 or as many as 7 months, depending on what treatments have already been administered according to the release.

It sounds good, and it is.  This trial is, so far, meeting the primary goal of a phase 1 trial, its proving itself to be safe.  But the data is more than a little thin and leaves lots of questions.

The first and most obvious question relates to the median figure of 6.2 months.  Median, as anyone who's taken even a high school level course in statistics knows, represents the middle point.  Given that this trial data represents 11 patients, this median figure means that 6 patients have been in the trial for 6.2 months and longer, and 5 have been in less than 6.2 months.  

Is this important?  I think it is, definitely.  Of those 5 cases that have been in the trial less than 6.2 months...How long have they been enrolled?  Is it a few weeks, a few days?  The PR doesn't say.  

Why not include that data, let the world know what the shortest and longest number of months in the trial is?   Instead of just citing a median figure why not include more information so that shareholders and prospective investors can make a more informed decision.

Instead of just saying "Overall median follow-up for patients enrolled in the trial is 6.2 months with 10 of 11 still alive".  Why not add...."with the range being from 1 month to 11 months"?  Another significant point is the one death.  At what month did it occur?  Was it at 1 month, at 2....at 10?  

I can't help but question why more data wasn't included.  Its only 11 patients, why not give the time in for each?  It wouldn't be hard, I'm sure the data is readily at hand.  

Obviously there are only 6 patients who have been enrolled for 6.2 months or longer, that much is not in question.  But presenting data on just 6 patients might seem almost desperate.  Did they include patients only enrolled for a month or two to boost the number so that it would appear more meaningful and then only cite the median figure in an effort to spin the news?  In my opinion that is a very legitimate question.

If you go to clinicaltrials.gov you can read about this trial:

https://clinicaltrials.gov/ct2/show/NCT02026271

If you check that site you will see that the estimated enrollment is 48 patients.  So 11 is less than 25% of the estimated total, and the study start date is listed as June 2015.  If they did start in June 2015, then they've been dosing about 1 patient per month on average.  The estimated primary completion date is given as December of this year, that's for the primary outcome measure, safety.

That means they're going to have to start enrolling patients at a much faster pace if they want to have any deep and meaningful data by the end of the year.

The estimated date for completion of the full study is given as December 2018.  

This is notable because Ziopharm, as everyone already knows, only projects having enough cash to maybe last to the end of 2017, and they fully disclose that they will be in need of raising more capital.

That has me thinking that this PR with very little deep or meaningful data was perhaps pushed out in an effort to prop up a falling share price.  If another secondary is coming sometime next year, and I view that as a slam dunk, then the higher the PPS is, the less dilution that will be required.  And with all the share based compensation it certainly seems logical to me that the powers that be within the company would want to shore up the falling share price.

Thoughts anyone?  As I've disclosed previously I do own put contracts so my views are not without bias.  

The perils of taking on 'The Street'

I have no illusions about this blog's significance.  My little island in cyberspace is a tiny speck, a dot on the ocean that is the public markets. That's why you will frequently see me referring to Avoid The Bag as a meaningless and insignificant little blog, (or words to that effect) because that's what it is.

Do I have bigger aspirations for this space?  Yes and no.  I would be lying if I didn't admit to some delusions of grandeur.  Of being a beacon of market wisdom and reasonable commentary, with a large following.  But I also know the dangers that would come were that ever to come to fruition, which I highly doubt will happen in any case.  

If you read the disclaimer at the bottom of this site you will see right up front something that, to me, is very important.  I have not and I will not accept any payment or compensation of any kind to write anything about any stock, either bullish or bearish.  With that being said, I do eat my own cooking, and when I'm bullish on a stock I will take out a position.  And if I'm bearish and thinking a stock is overpriced and due for a correction, I will try to profit from that as well....that's how the market functions.

But I also know that for a market to function you need two things, buyers and sellers.  Yes, I know that is obvious, but I believe it merits repeating.  

The Bath Tub 

The best analogy I have ever heard involves representing the market as a bath tub.  Let's say there is a stock that we will call ABC, and its trading for $1.  The tub will represent the market for ABC and the water level will be the share price.  At $1 we will say there is one inch of water in the tub.  Water added to the tub is the buying that occurs, selling conversely is represented by the drain.  So long as there is a reasonable balance between buying and selling, then the water level or price per share will remain about the same, the water being added equaling the water going out.

For the sake of this example we will say that ABC is a speculative stock, that the company represented is currently losing money.  We will also assume that the company has sought out a big name partner, and that if the deal is finalized the news of this partnership is reasonably expected to create a lot of excitement and buy side interest in the stock.

Although it is illegal I for one am convinced that when deals and partnerships are being negotiated and other significant developments are in the works, that there are obviously individuals in the know. And while trading on insider information is counter to the rules, I have little doubt in my own mind that there are individuals who seek to profit regardless, not directly certainly...but maybe by proxy.

Back to the bathtub.  Those who have perhaps caught wind of the big partnership plans could reasonably be expected to want in, to establish a position by going long on ABC.  Now, they could just storm in and start buying, causing the water level of the tub to rise.  The danger there is that the rising water level might cause the drain to plug, as those inclined to sell hold on tighter to their shares because of the rising price.  And other players may see the water level rising and start competing for the available shares, driving up the price and defeating the idea of buying low.  

A better method might be to borrow some shares and sell them, going short in other words.  This has the effect of taking a pitcher and scooping water out of the tub, causing the water level and hence the PPS to drop.  This brings on fear in shareholders and may induce them to sell while the PPS is low.  

And so it goes, ABC's water level stays around $1 as those anticipating the big deal load up.  As the deal gets closer those who have been loading up stop scooping water out, they cover off any outstanding short positions and start driving the PPS higher.  This often brings on the attention I just mentioned, other players see ABC's bathtub rising so they want in too.  The tub rises higher and higher, from one inch to two, and then three and then five.  ABC once worth $1 is now trading at $5.

Then the news hits, ABC has just finalized a major partnership deal with a leader in their business space.  New releases are issued, social media catches fire and ABC is being talked about in stock forums all over the Internet as buyers storm in.  Maybe the deal is announced on CNBC or other similar media outlets.

Now the tub really starts rising, in a few short days or weeks the level of water goes from five inches to ten. But don't forget the drain.  If people are buying then others must be selling.  As the tub gets up around twelve inches or $12, the water stops rising.  The volume of water pouring into the tub is still high, but an equal amount of water is going down the drain as those who got in early and cheap start leaving. 

And if the deal doesn't bring in any added revenue, if ABC is a company that issues shares to finance its business, then those who jumped into the tub with exuberance and excitement may find themselves trying to keep themselves clean with an ever diminishing supply of dirty water.  

A good analogy but not perfect

I like the bathtub analogy, but it does have its flaws.  Often there are shares that weren't bought when the PPS was at $1.  There are option grants and warrants and shares that may have been used as payment for good and/or services.  But overall this example provides an excellent general overview of how the market functions.  And I think it is most useful when considering companies that are speculative in nature, with companies that are not yet profitable and perhaps never will be.

So whats' the point

The point of this posting is in the subject line:  The perils of taking on 'The Street'.  When I reference 'The Street' I am using it as a euphemism for industry players, or market hacks as I like to call them. I am not talking about the website or news service of that name.

The stock market is a zero sum game, every trade involves a buyer and a seller, one gets shares and the other gets money.  The 'smart money' players who buy low and sell high, they need others doing the opposite, selling low and buying high.  And this latter group is invariably dominated by retail investors, the target audience of this pathetic and insignificant little blog.

I get attacked almost daily in social media for my opinions.  especially when I refuse to drink the Kool-Ade about some speculative money losing company's forward looking promise when its trading at or near its highs.   No worries, I get it.  

'The Street' is far more powerful than any little ol' Joe Retail blogger, I know that.  If this blog and my opinions were to ever get too popular, then the market would have to slap it down....and with the money that industry players have at their disposal it would be an easy thing to do.

Good luck in the markets retail players, its a shark tank...so pay attention to those sharks, they usually try to disguise themselves as playful friendly dolphins.