Friday, September 21, 2018

Update for Portfolio Positioning as of 9/21/18

What are "situational risks", a phrase that I frequently use to describe one of the key determining facts that govern asset allocation strategies for each individual. 

College tuition for the kids may be one of those risks since it requires a great deal of after tax money, which can no longer be used to meet other financial requirements. 

Student debt is now a crippling financial factor for many youngsters. The current debt is estimated at approximately $1.5 trillion. 

My parents could afford to pay the tuition bills and all other expenses for their children, but only after my father sold his entire interest in one of his two businesses.  

For those paying tuition now, this snapshot shows what Tulane University collected in 1969 for one semester, my first at that institution: 

It is quaint in a way. For room, food, health insurance and tuition, the grand total was $1,689 or $3,378 all-in for my freshman year. I chose Tulane for two simple reasons. It was located in New Orleans and it was the only University at that time that would allow me to substitute Philosophy for Calculus. I do B.S. better than math. 

The tuition component for one semester in 1969 was $1,054 or $2,108 for one year. If I increased that number by the inflation rate to the present, the tuition would be about $22,154. The actual number now is $52,960. 

Another expense category that has accelerated over my lifetime at a far faster rate than inflation is medical costs broadly defined. 

Fidelity now estimates that a healthy 65 year old couple retiring today at 65 would need $280K over their life expectancy, just for health care costs. That estimate excludes nursing home and caregiver expenses and assumes the continuation of traditional medicare. How to plan for higher health-care costs in retirementA Couple Retiring in 2018 Would Need an Estimated $280,000 to Cover Health Care Costs in Retirement - Fidelity

When discussing these issues, I have emphasized that a "safe" portfolio of low yielding savings accounts, CDs and treasury bills will preserve capital, but will rarely provide material real total returns and will probably produce most of the time negative real rates of return before taxes. 

For the vast majority of households, those investments are not safe at all since capital is not growing fast enough to meet retirement and other major expenses items. 

Stocks have had a tremendous run since March 2009. 

This 9+ year surge has allowed me to de-risk my portfolio while still maintaining a meaningful stock allocation. 

So far this year, and without totalling up the precise number, I have sold into strength and reduced my stock allocation by somewhere close to $100K. The largest single dispositions involved the Vanguard Equity Income Fund (VEIRX) where I eliminated the remaining shares on 6/28/18: Item # 1

Each individual has to assess their own situational risks and risk tolerances when deciding what to do now. 

What I call market internals are still flashing green. Major indexes are trading above their 200 SMA lines and the various volatility indexes including the VIX are in stable patterns as defined by my Vix Asset Allocation Model. 

Fundamentals in the U.S. economy remain solid. The corporate federal income tax cut is juicing profits and funding increases in stock buybacks and dividends. 

All potential negative events that would change the current rosy outlook, however, are being ignored or dismissed; and none are reflected in current market prices.  

The major potential and easily identifiable risks include a non-temporary rise in interest rates throughout the maturity spectrum, a non-temporary burst in inflation and inflation expectations, the ongoing trade wars remaining unresolved and a possible material slowdown in new single family home construction and automobile purchases. 

I have changed recently my allocation and investment strategy. 

Since it seems more certain now that the FED will hike the FF rate 3 times within the next year, with a certain .25% hike next week and a near certain bump again in December, I am holding onto to some proceeds from maturing CDs and bonds longer than usual given the likely continuation of a persistent rise in short term rates.  

9/28/18 Meeting 100% Probability of a .25% hike
12/19/18 Meeting 87.4% Probability of Another .25% hike
7/31/19 Meeting 77.8% Probability of Another .25% hike 
The probability of a 4th .25 hike by 7/31/19 was at 37.6% yesterday.  

It makes less sense to hold onto proceeds for more than a week or so when paid into my Schwab account since the yield on my sweep account is .22%. 

Countdown to FOMC: CME FedWatch Tool

Over the past few weeks, I have been active each week in the treasury's bill auctions, focusing primarily on 1 and 3 month auctions as I anticipate higher rates when those short maturities are redeemed at par value. 

I have put the kibosh on buying bonds maturing after 2020 and in my Vanguard account, where the money market alternative is now yielding 2.11% and will increase with the FF increases. 

VMMXX - Vanguard Prime Money Market Fund | Vanguard

It is possible that the Bond Ghouls may mount another charge after defending successfully the 3.10% ten year treasury yield. If there is another move back down to 2.8%, I may unload a few more intermediate term corporate bonds as I recently did in the last bond rally and with some gusto during the bond rally last year. 

For stocks, I am slightly weighting new purchases in regional banks and BDCs who have a heavy weighting in floating rate loans tied to a spread over either the 1 or 3 month Libor rates. This is an inconsequential nip and tuck so far. In tandem, I have slightly reduced my equity REIT allocation. 

The move in marijuana stocks lately reminds me too much of the dot-com bubble from the late 1990s. I played an ETF (HMMJ:CA) for some trading gains, as previously noted, but I am staying away now. 

The problem with market timing is that the investor has to be right twice. I have read over the years comments by investors that the market was too high and they were going to wait for a 20%+ decline  to invest. I started to hear those kind of comments in 2010 and with more frequency since 2012. 

The problem with that approach gets back to the situational risks discussed earlier, and the necessity to increase capital far beyond what CDs and savings accounts can produce and have produced for a long time now. 

Looking back, the market could correct 20% from yesterday's close and still be well above where it was on election day. 

SPX Closes 

9/20/18: 2930.75

20% Correction = 2,344,6 
11/8/2016: 2,139.56

This index was around 20 when I was born. 

For youngsters, a low cost ETF fund that owns the total U.S. stock market is a good core holding. Fidelity just started one that has zero expenses and no minimums. FZROX - Fidelity ZERO SM Total Market Index Fund | Fidelity Investments Other sponsors have similar funds with a slight expense ratio. Schwab's mutual fund version is SWTSK which has a .03% expense ratio and a $1 minimum initial investment. Vanguard has a mutual fund and an ETF that track the total U.S. stock market. VTSMX Vanguard Total Stock Market Index FundVTI Vanguard Total Stock Market ETF ETF 

I suggested the other day to my youngest nephew, who just started his first year at Northwestern Medical School, to open a position in that Fidelity zero expense total U.S. stock market fund. 

The second piece of advice was to never sell a share, but to increase purchases during the inevitable market meltdowns (45+% loss over a relatively short period), bear markets and corrections. 

The last piece of advice was to reinvest the dividends. 

Planning for events that will happen in 30-60 years is a lot easier than trying to scramble at age 60 or later when the realization finally hits that the nest egg is woefully deficient.  

There will be long and short periods in his life when the market will scare the living daylights out of him. This is really simple plan and requires almost no thought other than to remember that shares can not be sold prior to retirement. 
There will be times where blood will flow in the streets. People will be panicking. If all of that is due to a nuclear war, then maybe gold and silver coins and a bunker will be the best option. Otherwise, increase the amount being invested during such periods and resist the urge to flee. 

I will mention starting a position in FZROX in my next blog, though the amount invested was light years below immaterial. It is actually an embarrassing amount. I do not need to grow capital and consequently my risk allocations have been dialed way, way back. 

Wednesday, September 19, 2018

Observations and Sample of Recent Trades: CMFN, EQH, FOMX


As expected, Donald imposed 10% tariffs on approximately $200B in China's exports that will become effective on 9/24/18. The tariffs will increase to 25% on 1/1/19. 

If China retaliates, the Duck threatened to proceed with tariffs on the remaining exports totalling $260+B or so. Trump puts new tariffs on China as trade war escalates  

While China has matched U.S. tariffs dollar for dollar so far, the value of the remaining U.S. exports is approximately $60B. China will levy 5% or 10% on that $60B. It remains unclear whether China will respond in other detrimental ways to U.S. interests. 

China's economy is not that dependent on exports or on exports to the U.S. Commentary: Trump tariffs only a weak blow to China | Reuters China's exports accounted for 18.5% of GDP last year compared to 35% in 2007, with exports to the U.S. accounting for 18% of the total exports. China has been successful over the past decade or so in increasing domestic spending as a percent of GDP. 

China will use trade war with U.S. to replace imports: state media | Reuters

It is hard for me to see China taking a knee. 

If I am correct in that assessment, China's autocratic government will be able to withstand the GOP's tariffs for as long as they want and may implement measures to inflict supply chain disruption for U.S. businesses and to undertake other activities internally designed to hurt U.S. firms operating in China.  

The Stock Jocks are not concerned about the accelerating trade war. The majority opinion remains IMO that the U.S. will win and China will take a knee in homage to the Duck. 

Jack Ma is in the minority as am I: China-U.S. trade war will last for ‘maybe 20 years,’ says China’s best known CEO - MarketWatch

I will be keeping a close eye on the USD/CNY (Chinese Yuan) exchange rate. US Dollar to Chinese Yuan Renminbi Rates The rate was near 6.25 in early April and climbed to 6.91 by mid-August before slipping some to around 6.86. The increase in the USD's value since April makes U.S. products more expensive to China's buyers and China's products to U.S. buyers cheaper. The Yuan's depreciation since April just about offsets to U.S. buyers using USDs the impact of a 10% tariff.    

Industrial production rose .4% in August. "Capacity utilization for the industrial sector moved up in August to 78.1 percent, a rate that is 1.7 percentage points below its long-run (1972–2017) average." The Fed - Industrial Production and Capacity Utilization - G.17

Europe GDP

Eurostat is currently estimated that seasonally adjusted GDP rose .4% in both the euro area (19 countries using the Euro) and the EU28. The increase Y-O-Y was estimated at +2.4% in the EU19 and +2,3% in the EU28. Generally, the Eastern European countries are growing faster.  
Industrial production was down .8% in July compared to June in the euro area and declined .1% Y-O-Y. 
Eurostat Industrial Production 

The seasonally adjusted July retail trade volume declined by .2% in the euro area compared to June. Eurostat Retail Trade for July 

The final Markit Eurozone Composite output PMI was reported at 54.3 in July. While the strength was widespread, sentiment about future conditions continued to weaken. Markit Press Release  

Servicing student debt will be a major restraint on spending  that supports the economy. How the Great Recession turned America’s student-loan problem into a $1.5 trillion crisis - MarketWatch 

Mortgage rates hit 6-week high with housing market at a crossroad - MarketWatch


Markets and Market Commentary:

The acceleration of the trade war with China, which was anticipated, caused the Stock Jocks to rejoice: 

S & P 500 at Close on 9/18/18 2,904.31 +15.51 +0.54% 

The all time high is at 2,916.5 hit intra-day on 8/29/18.

It is just ridiculous IMO to say that the move up yesterday was a relief rally. Instead, the stock market gains, occurring near an all-time high, reflect a belief that the trade wars are a non-event for the U.S. economy even in the near term and will likely be resolved soon with the U.S. standing at the top of the heap. The Stock Jocks can be prescient or delusional about the future, though the overall record in my lifetime leans toward prescient. The main delusional episode was in the period leading up to 2000.  

The federal budget deficit is likely to exceed $1 trillion in the F/Y ending 9/30/19 and that is during a peak where the economy is likely to experience peak or near peak growth.  

U.S. households are still scarred by the financial crisis, new report suggests - MarketWatch 

Stocks are pricey, but could keep climbing on ‘the Trump story,’ says Robert Shiller - MarketWatch

Next recession won’t come from household debts, prize-winning forecaster says - MarketWatch

This is why Americans are losing confidence in the housing market - MarketWatch

Asian markets hit as trade tensions escalate, sending Shanghai index to lowest since 2014 - MarketWatch (9/17/18)

I have sold out of my China stock funds. The last disposition consisted of shares in the Matthews China Dividend Fund (MCDFX). I have completely exited that fund twice. The last transaction was to sell 111+ shares at $17.95. Item # 3 (4/12/18 Post) 

I will at some point start to buy back MCDFX shares in my Schwab account, where the initial purchase can be as low as $100 and shares can be bought on a NTF basis. My gut informs me that China's stock market has not yet bottomed and timing optimal re-entry points is impossible. 



Don the Omnipotent can handle national defense issues without the assistance of mere mortals like Mad Dog Mattis: Fraying Ties With Trump Put Jim Mattis’s Fate in Doubt Donald's confidence in his own abilities knows no boundaries. 

After the Manafort plea agreement, the Bloviator-In-Chief continued his rants against the Mueller "witch hunt" last Sunday: 

Please note that in the DuckWorld Alternate Reality Universe, the economy is the "best ever" which is just more FAKE NEWS coming from the Duck's reptilian brain.  


Bret Kavanaugh and the GOP

Christine Blasey Ford alleges that Judge Kavanaugh forced himself on her when both were in high school. She describes the event as an attempted rape. She claims that Kavanaugh was drunk and another man, Mark Judge was in the room. "Christine Ford is a professor at Palo Alto University who teaches in a consortium with Stanford University, training graduate students in clinical psychology. Her work has been widely published in academic journals." 
California professor Christine Blasey Ford, writer of confidential Brett Kavanaugh letter, speaks out about sexual assault allegation - The Washington Post 

Blasey Ford's classmates send letter of support to Congress - CNN 

Kavanaugh Denies Sexual-Misconduct Claim, Keeps White House Support  

Mark Judge  has denied that it occurred. Kavanaugh Classmate Named in Letter Strongly Denies Allegations of Misconduct
Mark Judge tells Senate he 'has no memory of alleged' incident with Kavanaugh CNN Of course, he would not want to admit being involved either and admittedly suffered blackouts in his drinking years. The republicans will not allow the Democrats to call Judge as a witness. It is not sufficient for him to make statements that are not under oath. 

Donald and other republicans have made it clear that they do not want the FBI to investigate the allegation. Trump: FBI should not be involved further on Kavanaugh

Ms. Ford does not want to testify before the FBI conducts an impartial investigation. 
Read: Christine Blasey Ford's attorneys' letter requesting FBI investigation-CNN The republicans do not want that to happen, and the Democrats probably want the republicans to confirm Kavanaugh without one. 

Senator Grassley (R) has made it clear that the Senate Judiciary Committee will vote on the nomination early next week if she does not testify next Monday. 

It will take one republican to side with the Democrats on postponing the Senate Judiciary Committee's vote until the FBI completes an investigation. 

There is only one possibility, Jeff Flake, who is retiring. Members-United States Senate Committee on the Judiciary 

Ms. Ford has taken a polygraph test which she reportedly passed. 

Anita Hill passed one too, but that was meaningless of course to the republicans who voted to approve Clarence Thomas. 

Hill accused Justice Thomas of sexual harassment. Strange Justice: The Selling of Clarence Thomas by Jane Mayer & Jill Abramson Ms. Hill also told people about the harassment when it happened and those witnesses were ignored by the republicans as well.  

Senators 'failed' in 1991, Anita Hill says. But she thinks they can do better this time

Mark Judge has written for the Daily Caller and the Weekly Standard, with the former being correctly categorized as a far right publication. He is the author of “Wasted: Tales of a Gen-X Drunk,” where he briefly mentions Kavanaugh as someone who may have “puked in someone’s car the other night” and “passed out on his way back from a party.” Brett Kavanaugh’s High School Friend Isn’t Helping the Nominee’s Case This is why the republicans do not want Judge to testify. He would at best be a bad witness for Kavanaugh. 
Kavanaugh classmate Mark Judge details parties in writings - CNN 

I have noted that Kavanaugh IMO has the legal qualifications to become a Supreme Court justice. I certainly disagree with a number of his opinions, but that is not IMO a valid reason supporting a no vote for a U.S. senator. The appropriate remedy is to vote in elections.  

Back in the day, and not that long ago, republicans and democrats recognized that qualifications rather than ideology were the main issue and consequently there were unanimous or near unanimous votes in the senate for justices who were clearly liberal, conservative or reactionary. Justice Scalia, a known reactionary, was confirmed by a 98-0 vote while Justice Ginsberg's confirmation vote was 96-3.     

A no vote against Kavanaugh could be justified based on an opinion, which is reasonably justified by the evidence but far from conclusive, that he lied under oath during a previous confirmation hearing. Republicans would all vote no on a Democrat nominee who had the same exact issue. 

Brett Kavanaugh Supreme Court hearing: the perjury controversy, explained - Vox

Brett Kavanaugh and His Accuser Say They’re Willing to Testify

Trump Jr. mocks sex assault allegations against Kavanaugh


1. Small Ball-Income Generation:

A. Bought 50 CMFN at $9.19-Used Schwab Commission Free Trade:

Quote: CM Finance Inc.  (CMFN)

CM Finance is an externally managed nano cap BDC. 

Discount to Net Asset Value Per Share at $9.19 as of 6/30/18 = 26.89%

Dividend: Quarterly at $.25 per share, cut from $.3516 per quarter effective for the 2017 first quarter. 

Last Ex Dividend Date: 9/17/18 (shortly after purchase)

Dividend Yield at a $9.19 Total Cost Per Share = 10.88%

Maximum Position: 100 Shares

Net Asset Value Per Share History:

IPO at $15 with net proceeds at $14.55 February 2014 
Q/E 6/30/18: $12.57 
Q/E 3/31/18:  $12.55
Q/E 12/31/17: $12.5
Q/E   6/30/17: $12.41
Q/E   6/30/16: $11.9
Q/E   6/30/15: $14.41 

CM FINANCE Annual Report for the Y/E 6/30/18 (summary of risk factors starts at page 32 and ends at page 67)

Asset Quality as Rated by Company (page 79)

Last Earnings Report at the Time of Purchase: Q/E 3/31/18

CM Finance Inc Reports Results for its Fiscal Third Quarter ended March 31, 2018 and Announces Share Repurchase Program 

Last Earnings Report: Q/E 6/30/18 

CM Finance Inc Reports Results for its Fiscal Fourth Quarter ended June 30, 2018 

This report was released after my purchase.

"As of June 30 2018, the Company’s investment portfolio consisted of investments in 25 portfolio companies, of which 52.1% were first lien investments, 43.3% were second lien investments, 0.2% were in unsecured debt investments, 4.2% were unitranche loans, and 0.2% were in equities, warrants and other positions.  The Company’s debt portfolio consisted of 95.8% floating rate investments and 4.2% fixed rate investments." (emphasis added) 

When a first lien loan goes bad, a BDC will generally suffer a significant write-down and loss. A second lien loan could become worthless, or close to it, in a bankruptcy.  

CEO Michael Mauer on Q4 2018 Results - Earnings Call Transcript | Seeking Alpha (recent loans were first lien) 

Oppenheimer Keeps Their Buy Rating on CM Finance (CMFN)

Exchange Traded Senior Unsecured Bond: That senior unsecured baby bond is currently trading under the symbol CMFNL. CM Finance Inc. 6.125% Notes due 2023 Quote

CM Finance Inc Prices Public Offering of $30,000,000 6.125% Notes Due 2023 

2. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 2 Wells Fargo 2.8% CDs (monthly interest payments) Maturing on 9/14/20

B. Bought 2 Celgene 2.875% SU Bonds Maturing on 8/15/2020:

FINRA Page: Bond Detail (prospectus not linked)


Issuer: Celgene Corp. (CELG)

CELG Analyst Estimates

Celgene Reports Second Quarter 2018 Operating and Financial Results

10-Q for the Q/E 6/30/18 

2017 Annual Report (debt listed at page 94) 

Credit Ratings: 

Bought at a Total Cost of 99.682 (with $2 commission)

Price Paid 99.582
YTM at TC then at 3.044
Current Yield at TC =  2.8842%

An alternative to this purchase was to purchase 2 treasuries maturing on the same date:  

I could have bought 2 treasury notes with a 1.5% coupon at 97.871. The YTM is shown in the snapshot as 2.631%, but a significant part of that yield is the profit realized at maturity. The current yield at 97.871 total cost is 1.5326%. 

C. Bought 2 Biogen 2.9% SU Bonds Maturing on 9/15/2020

I now own 4. Note that I had to pay the seller almost the entire six month's semi-annual interest payment. I will receive BIIB's semi-annual payment on 9/15/18. Fidelity will include the entire semi-annual payment in my 2018 IRS Form 1099. I will deduct the interest paid to the seller from my Schedule B. The seller's 1099 will include the $27.55 in interest income that I paid in connection with this purchase. 

FINRA PAGE: Bond Detail (prospectus not linked)


Issuer: Biogen Inc. (BIIB)

BIIB Analyst Estimates

2018 Second Quarter Earnings Report

2017 Annual Report (this is the next BIBB SU bond to mature, see page F-32)
Biogen SEC Filings

Credit Ratings:

Bought at a Total Cost of  99.819  (includes $2 Fidelity Commission)

YTM at TC Then at 2.993%
Current Yield at TC 2.9053%

An alternative to this bond purchase was a 1.375% treasury note maturing on the same day:

The best price for a 2 bond purchase was then price at 97.581. Again, a significant part of the YTM is tied up in the profit at maturity.

Yield-to-Maturity (includes profit) = 2.634%

Current Yield at 97.581 = 1.4091%

The yields for the corporate bond purchase is negatively impacted by the $2 commission. The total cost for the treasury would be the same as the purchase price since Fidelity does not charge a commission for treasury trades (also true for Schwab and Vanguard).

A lot depends on one's view about the credit risk of the corporate bond compared to the treasury and whether the additional risk is worth the extra yield.

I am not currently concerned about Biogen's credit risk when buying a bond maturing in two years. Since uncertainty increases with time, I would start to generate some credit concerns for long dated BIIB bonds due to that uncertainty.

I do not currently own any CELG or BIIB bonds maturing after September 2020. I also own 2 CELG 2.25% SU bonds maturing on 5/15/19.

D. Bought 1 Treasury 2.5% Coupon Maturing on 5/31/2020

YTM at 2.613%
Current Yield: 2.5048%

Most of the YTM for this bond is produced by its coupon. I may buy several as the bond moves closer to maturity. 

E. Moody's Upgraded the Alexandria REIT (ARE) SU Bonds to Baa1 from Baa2

Moody's upgrades Alexandria's issuer rating to Baa1; stable outlook - Moody's (9/18/18)

I own two of the 2.7% bonds maturing on 1/15/20 and may at some point buy two more. 

In a Roth IRA account, I own 2 Alexandria 3.95% SU bonds maturing on 1/15/27. Bond Detail    

Alexandria Real Estate Equities Inc. Stock Quote 

3. More Small Ball:

A. Sold 30 EQH at $22.97-Used Commission Free Trade:

Profit Snapshot: $55.7

Quote: AXA Equitable Holdings Inc.

EQH Analyst Estimates

I will restart a "small ball buying program" when the price is lower than my lowest purchase price of $20.24. Item # 1.F. (6/28/18 Post) 

Closing Price Last Friday: EQH $22.22 -$0.12 -0.54% 

B. Bought 30 FOMX at $5.66 and 20 at $5.25-Small Cap Biotech Lottery Ticket Basket (used commission free trades)

Quote: Foamix Pharmaceuticals Ltd. (FOMX) 

Website: Foamix Pharmaceuticals 

Current and Maximum Position: 50 shares 

Average Cost Per Share: $5.5 

Subsequent to my first purchase of 30 shares, FOMX sold 11.67M shares at $6, with an underwriters' option to purchase an additional 1.75M shares. Foamix Announces Pricing of its Follow-on Offering of Ordinary Shares The underwriters exercised their option for another 1.75M shares bringing the total sold to 13,420,500. 
Foamix Announces Closing of its Follow-on Offering of Ordinary Shares and Full Exercise of its Option by the Underwriters  The proceeds to FOMX after the underwriters' discount was $5.64 per share. Prospectus 

This offering occurred shortly after FOMX announced positive results in a phase 3 trial for its acne drug. Unfortunately, this large offering for such a small company indicates that FOMX is actually going to try and market its acne drug when and if approved by the FDA. 

2017 Annual Report 

Chart: The stock was trading over $9 in March 2017 and plunged after FOMX announced trial results for its key compound FMX-101. Foamix Reports Topline Results from Phase 3 Trials for FMX101 in Patients with Acne (3/27/17)

Trial Results Released in March 2017: 

While the trial did meet its two primary endpoints in one trial, there was another trial where the drug failed on one of the two primary endpoints. 

Subsequent to my purchase, Foamix announced topline results for FMX-101  for moderate to severe acne. Foamix Announces Positive Topline Results from Third Phase 3 Trial (Study FX2017-22) Evaluating FMX101 Topical Minocycline Foam for Moderate-to-Severe Acne (9/11/18) This trial met both primary endpoints. 

After announcing the results after the close on 9/11, the stock popped over 50% in after hours trading. The price pop took the shares to about $9. On 9/12, the shares hit a high early in the day at $7.6 and then proceeded to decline from that high to a close at $6.12, up only $.19 from the prior day's close. FOMX Historical Prices 

This action suggests to me that that some players knew or at least strongly suspected that a large secondary offering was in the works and sold into the rally in after hours trading on 9/11 and continued to sell throughout the day on 9/12. The selling would consist of either existing positions or short sales. Then those investors would cover their shorts or repurchase positions in the secondary or thereafter.   

Closing Price Yesterday 9/18/18: FOMX $5.19 -$0.55 -9.58% (volume at 2.5M shares)

I did not see any news to account for this decline well below the recent public offering price of $6. One explanation is that the underwriters were caught holding shares and just dumped them into the market, causing in-the-know buyers to lower their bids until this market dynamic played out. 

Cowen & Co. reiterated its buy rating with a $30 price target.  H.C. Wainwright reiterated a buy and increased its price target to $14 from $12. I would be more than pleased with $10. 

There was a prior stock offering last April:  

"In April 2018, the Company raised net proceeds of approximately $16.1 million, through a direct registered offering of approximately 2.9 million shares at a price of $5.50 per share to OrbiMed Partners Master Fund Limited."

Another trial is ongoing with results expected in the 2018 4th quarter. Foamix Announces Dosing of Last Patient in Phase 3 Rosacea Studies for Minocycline Foam FMX103 

The universe of potential prescribing physicians is very large. 

My general belief is that a small clinical stage biotech company has no business trying to manufacture, distribute and market a drug except where the potential number of prescribing physicians is relatively small and most would already know about the drug's approval. There would be exceptions to that general rule, such as a drug that clearly works substantially better than any other and consequently basically sells itself. 

The fact that Foamix is actually gearing up to market this one approved mass market drug, as shown by the most recent stock offering, is viewed negatively by me. 

The company needs to sell itself.   

The second best alternative would be to license the drug to another company that has a large existing sales force specializing in skin care, receiving a large upfront payment plus milestones and a double digit royalty.    

Allergan filed a NDA for a new acne treatment that was accepted by the FDA last December. FDA Accepts New Drug Application For Seysara™ (Sarecycline) For The Treatment Of Moderate To Severe Acne

Last Earnings ReportFoamix Reports Second Quarter 2018 Financial Results and Provides Corporate Update 

Assets as of 6/30/18 (does not include recent capital raise): 

FOMX SEC Filings 

DisclaimerI am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.