The Mission Report

The MissionIR Report - Mid-July 2013

In-depth analysis, timely updates, latest market news


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Company Updates


China Facing Growth Dilemma

The shift in the debate over China’s growth outlook illustrates just how far expectations have been pared back for this once-juggernaut of the world economy.

After a succession of dismal economic reports, nobody expected green shoots in second-quarter GDP numbers, which came in on target, slowing to 7.5%.

Instead, the focus is on how big the full-year slowdown will be, as China grapples with structural reform and economic rebalancing.

Somewhat more troubling is that even China’s leaders seem unsure.

In recent days, China’s Finance Minister Lou Jiwei spooked investors by reportedly saying growth may well fall below 7% for the full year. Over the weekend, however, there was a belated correction by the Xinhua news agency: Minister Lou had been misquoted and stuck to China’s official 7.5% target after all.

Before this correction, Premier Li Keqiang had already offered reassurance, saying growth must not fall below a minimum rate required to ensure labor-market stability.

This was enough for analysts at Bank of America to revive talk of stimulus or a “Li Keqiang put” to pep up growth. They argued that Li needs a stable growth environment before he can impose much-discussed industry reform.

Suggesting that Beijing can backstop growth is not exactly a new argument, but it now sounds somewhat back-to-front.

If there was one lesson from China’s stuttering performance so far this year, it is that growth will keep sliding without reform.

After all, more of the same credit stimulus was tried when Premier Li’s administration first took office. While this initially worked, the growth spurt soon faded. In the first quarter, record credit creation produced only slower growth, inflation and further falls in producer prices.

Last month, worries intensified that excessive credit may be doing more harm than good. The June spike in interbank rates looked to be a clear sign credit — estimated at 200% of GDP — has reached unsustainable levels.

Analysts at Macquarie said China faces a growth dilemma: Will it sacrifice short-term growth through reform in exchange for more sustainable long-term growth?

They argue reform must come first because it’s the corporate sector causing the slowdown in China’s economy.

These problems are threefold: subdued return on assets, ever-rising leverage and high interest rates. For growth to recover, these first need to be fixed.

Together, these three issues have reduced the effectiveness of monetary policy by requiring fresh liquidity to repay existing debt.

They are also at the heart of the dilemma for policy makers, which Macquarie calls the “asymmetrical impact of money on growth.” While more money now doesn’t lead to much faster growth, less money remains quite detrimental to growth. In fact, we have seen increasing reports in recent days of tightening credit leading to job cuts, as companies seek to preserve cash.

Given such a difficult scenario, it is hardly surprise China’s leaders appear less confident they can meet growth targets.

This has left analysts increasingly grappling for policy clues.

The take-away from the recent, apparently orchestrated spike in interbank rates was that China’s leaders were ready for more austere-looking reform.

This even led to new moniker, “Likonomics,” to describe the policy of Li Keqiang, which was taken to mean: no stimulus, deleveraging and structural reform.

But perhaps Macquarie’s policy description is more appropriate — simply a “muddle through” mixture of reform and fine-tuning measures.

Its base case is one where reform is not strong or timely enough to offset the downtrend of growth. Last week, it downgraded its growth forecast to 7.3% for 2013 and 6.9% for 2014.

The reform debate is always contentious, as it involves the Communist Party relinquishing its grip on the economy. Financial reform in particular introduces new risks, and we have already seen that these can have unintended consequences.

Recent moves to internationalize the yuan by encouraging trade settlement also ended up facilitating massive speculative currency bets through fake trade-invoicing in Hong Kong.

What’s more, the attraction of this yuan carry trade was enhanced by another de-facto deregulation measure — interest-rate liberalization through wealth-management products, which offered better returns than bank deposits.

The government has now clamped down on both illegal trade invoicing and growth in wealth-management products, which may well mean liquidity will tighten further.

Despite this, China still appears to be still pushing ahead with reform. Last week, it announced a new free-trade zone in Shanghai, which will promote cross-border commodity and capital flows, promising more deregulation in interest rates and foreign-exchange markets.

Last Friday, it also extended the Renminbi Qualified Foreign Institutional Investor scheme (RQFII) to London and Singapore — previously, the program was limited to just Hong Kong — and also raised the limit on how much can be invested.

For investor sentiment to improve, it would help if reform came quicker, so the market can get more clarity on what it might look like. After all, it is not inconceivable markets will pay more for slower, higher-quality Chinese growth.

- By Craig Stephen

Home-equity Lines Bedeviling Americans

Despite all the seemingly positive news surrounding the housing market and consumer credit this week, at least one subset of homeowners is still struggling: those with home equity lines of credit.

In 11 of the 13 loan categories tracked by the American Bankers Association — including car loans, personal loans and bank-issued credit cards — delinquency rates actually fell in the first quarter of this year, according to data released Tuesday. But delinquency rates rose in two categories. One of those was home-equity lines of credit, which saw delinquencies rise to 1.91%, from 1.85% the previous quarter (the other was mobile-home delinquencies, which increased slightly). The rise in delinquencies among home-equity lines “could continue on for a while,” says Keith Gumbinger, vice president of, a mortgage information site.

Most home-equity lines, for instance, allow borrowers to make interest-only payments for the first few years of the loan. But after that period, borrowers have to start paying down the principal. Faced with a much higher monthly payment, many borrowers are becoming overwhelmed, says James Chessen, the ABA’s chief economist.

Plus, some of those homeowners took out their home-equity lines of credit during the boom years, between 2003 and 2007, when property values were mostly rising, says Chessen. And with many of their mortgages underwater, or worth more than the sale price of their homes, many borrowers are unable to refinance, which would normally give them more time to make payments, he says. Adding to the pain is the fact that interest rates are starting to climb higher, which can potentially raise monthly payments for people with adjustable-rate mortgages.

To be sure, many banks are more willing to lend — including through home-equity lines of credit — as the job market improves and consumers become better at managing their debt, says Chessen. But for the homeowners who are nearing the end of interest-only periods and are worried they won’t be able to afford the higher monthly payments, there may be ways to avoid falling behind.

Some borrowers may get a break from another lender if their bank isn’t able to refinance the loan, says Chessen. And they should approach their lenders as soon as they expect they might start to struggle with their payments, he says. “The sooner you talk to them, the more options you may have,” says Chessen.

Homeowners should be upfront with their lenders about any financial difficulties and ask the bank to restructure the loan in a way that might make the payments more manageable, says Gumbinger. Because banks often carry home-equity lines directly on their books and would need to coordinate with another lender to foreclose on a property—when mortgages and home equity lines are not issued by the same bank—they may be willing to help a borrower out, he says. “You are not necessarily in as weak a position as you think,” he says.

For instance, some lenders might be willing to delay the start of the payment period slightly, says Gumbinger. Borrowers who know they will be on better financial ground in six months to a year might be able to request an extension, he says.

Borrowers can also ask for a longer repayment period, extending the time over which the loan must be paid back from, say, 10 years to 15 years, which could lead to smaller monthly payments, he says. And some banks may also be willing to lower the interest rate on the loan, says Gumbinger.

Treasury Bonds Rally on Retail Sales

Treasury bonds rallied Monday as a disappointing consumer-spending report eased fears that the Federal Reserve may taper bond buying in September.

In late-afternoon trade, the benchmark 10-year Treasury note was 13/32 higher in price, yielding 2.554%. The 30-year note rose 22/32 to yield 3.608%. Bond prices rise when their yields fall.

Buyers propped up the bond market following a 0.4% gain in U.S. retail sales last month, weaker than 0.8% forecast by economists. Additionally, retail sales for May were revised lower to post a 0.5% gain from 0.6% previously reported.

"The retail data was softer than expected and any such evidence supports a Fed that remains fully engaged in providing monetary stimulus for the economy," said Adrian Miller, fixed-income strategist at GMP Securities LLC. "If the data is not indicative of building growth, that will support bond prices with yields pulling back."

Fears of the main buyer pulling back from buying Treasury bonds have been the key reason behind the months-long selloff in Treasury bonds.

The Fed has been buying Treasury bonds and mortgage-backed securities at a pace of $85 billion a month since the start of 2013, aiming to keep bond yields low to stimulate consumer spending and business investments.

The 10-year yield had surged from this year's low of 1.61% on May 1, climbing as high as 2.756% on July 8, the highest level since August 2011.

Anxiety over interest rates had eased over the past week following comments on July 10 by Fed Chairman Ben Bernanke. Since his comments, the yield has been capped below 2.75%. The 10-year yield fell by 12 basis points last week, the most on a weekly basis in three months.

The Fed chief reassured investors that the central bank is not in a rush to taper its bond-buying program and that a pullback on the program doesn't mean a shift into raising interest rates.

Mr. Bernanke is scheduled to testify before lawmakers on Wednesday and Thursday and investors will parse his comments on the outlook for the bond-buying program.

"No one knows what the Bernanke will say this week but the money is on the dovish side," said Thomas Roth, executive director in the U.S. government bond trading group at Mitsubishi UFJ Securities (USA) Inc in New York.

Wall Street Close Sets New
Record Highs

After a slow start Monday, benchmark stock indexes closed at record highs again, pushing further into uncharted territory as more better-than-expected second-quarter earnings were released.

The Dow Jones industrial average closed up 19.96 points, 0.1%, to a record 15,484.26 boosted by a 2% gain in Citigroup shares -- one of the 30 blue-chip components in the index.

The broader Standard & Poor's 500 index posted its eighth straight day of gains for the second time this year, closing up 2.31 points, 0.1%, to 1,682.50. And the tech-laden Nasdaq composite index ended up 7.41 points, 0.2%, 3,607.49.

And the widely followed small-cap Russell 2000 finished up 6.78 points, 0.6%, to a record 1,043.30.

Investors are seeing a number of second-quarter earnings surprises to the upside and are also feeling more secure after weaker-than-expected economic reports on retail sales in June and business stockpiles in May. Those reports suggest that the Federal Reserve will be able to hold off for the time being on reducing its massive monthly bond purchases aimed at keeping interest rates low and boosting job creation.

"The general bias to the market is up," said David Kelly, chief global strategist at JPMorgan Funds. "You can see a clear path to economic growth in the United States."

On Friday, the Dow closed 0.02% higher at 15,464.30, the S&P 500 advanced 0.3% to 1,680.19 and the Nasdaq composite added 0.6% to 3,600.08.

In energy trading, benchmark crude for August delivery rose 13 cents at $106.46 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.04 to $105.95 in New York on Friday, driven higher by continuing tensions in Egypt and a sharp drop in U.S. crude stockpiles.

In government bond trading, the yield on the bellwether 10-year Treasury note fell to 2.56% from 2.61% Friday.

Citigroup led other bank stocks higher after the New York-based bank reported second-quarter earnings that were stronger than Wall Street's expectations Citi shares closed up 2% to $51.81.

Boeing, another Dow component, soared 3.7% to close at $105.66 after an analyst at Sterne Agee recommended buying the stock. Boeing slumped 2% Friday following a fire on an Ethiopian Airlines Boeing 787 parked at London's Heathrow airport.

In Europe, Britain's FTSE 100 index closed up about 0.6% to close at 6,586.11, the German DAX ended up 0.3% at 8,234.81 and France's CAC 40 finished 0.6% higher at 3,878.58.

Global markets were shored up as a slowdown in China's economic growth wasn't as sharp as feared.

Asian stock markets traded slightly higher on Monday on China's GDP. Hong Kong's Hang Seng rose 0.1% to 21,303.32. South Korea's Kospi rose 0.3% to 1,875.16. Japan's financial markets were closed for a public holiday.

The world's second-largest economy grew 7.5% from a year earlier in the second quarter, slowing from the previous quarter's 7.7%, but still strong enough to suggest China will meet Beijing's 7.5% growth target for this year.

Calpian, Inc. (CLPI)

Calpian recently announced that the Money-on-Mobile service offered by its Indian subsidiary is now being supported by more than 135,000 retail locations. During the month of May, approximately 53 million unique phone number customers logged into the service. Processed transaction volume for May 2013, which is measured in Indian rupees, was slightly over 887.3 million INR – an approximate 36 million increase over April 2013 processed volume.

Calpian CEO, Harold Montgomery, stated, “It has now been slightly over a year since our initial investment in Money-on-Mobile and the company has outperformed our expectations. Money-on-Mobile’s consistent growth each month indicates to us that the service has considerable room to grow in what is one of the largest consumer markets in the world.”

About Calpian, Inc. (CLPI)

Calpian, Inc. is focused on providing cutting-edge financial services in the payment processing and mobile phone-based transaction markets. In addition to earning revenue from the sale of point-of-sale terminals and various transaction fees, the company also receives strong cash flows from recurring income streams that stem from payment processing contracts in place at about 16,000 small retailers throughout the United States.

Calpian Commerce, a wholly owned subsidiary of Calpian, provides technology-focused payment solutions to assist customers in closing the gap between payment and their information technology requirements. Calpian Commerce can provide the merchant community with an integrated suite of payment services and related software enabling products by offering credit and debit card processing, ACH, mobile acceptance, and gateway payment solutions to merchants in the U.S. in traditional “brick and mortar” business environments and/or over the Internet in settings requiring wired as well as mobile payment solutions.

Money on Mobile, the fast-growing mobile payment platform known as the “PayPal” of India, has already signed up over 53 million users and more than 135,000 retailers. Only beginning to penetrate a massive mobile market, the service enables unbanked/underserved populations to handle everyday payments and transfers using simple SMS text functionality. The distribution model utilized offers strong incentives to retailers, distributors, and consumers. Historically, Money on Mobile has been growing 8-10% per month.

Calpian has established itself as a multi-faceted payments company by combining a large emerging market mobile payments service and an electronic point-of-sale payment solutions under one corporate umbrella. Led by a management team with a combined 60 years of relevant business experience, the company is a well-managed operation with exceptional growth potential in burgeoning markets across the globe.

Jameson Stanford Resources

Jameson Stanford Resources today released details on its three current projects. The company believes each of these projects represent a very credible opportunity for the extraction and sale of high quality ores and precious metals. For the full update, visit

“The preliminary geological reports have confirmed that our sites contain substantial reserves of high-grade copper, gold and silver as well as other highly marketable metals,” stated Michael Stanford, President and CEO of Jameson Stanford Resources. “We have enlisted some of the top names in the mining industry to complete testing and create the necessary assay and industry reports that we believe will translate into substantial shareholder value as we get further into our next phase of production and delivery.”

Jameson Stanford Resources (JMSN)

Jameson Stanford Resources Corp. (JMSN) is a metals and minerals exploration, development, and production company focused on the acquisition and consolidation of mining claims and mineral leases. Targeting projects located in historic mining districts, the company is currently engaged in exploration and development activities in connection with two high-grade copper, gold, silver, and base metals properties located in historic mining districts in Beaver County and Juab County, Utah.

The company’s Star Mountain project consists of 117 lode mining claims and four metalliferous mineral lease sections located in the Star Mountain range, Star Mining District. The project covers a total area of 4,998 acres with borders expanding as exploration warrants. Based on geological analysis, magnetometry studies, and reverse circulation drilling samples, the total inferred reserves at this site may ultimately involve more than 100 million metric tons of copper ore, plus precious and PGM base metals.

Jameson Stanford’s Spor Mountain project encompasses nine lode mining claims and three metalliferous mineral lease sections located in Juab County, Utah. The project covers a total area of 2,098 acres. Based on preliminary geological analysis and two prospect pit excavations, this site has been estimated to possibly involve more than 4 million ounces of silver, significant concentrations of beryllium, and other precious and base metals. The company’s Ogden Bay Minerals project nearby is another promising prospect with the potential to produce an estimated 100,000 metric tons of silica product per year, as well as other valuable minerals and metals.

Based on engineering and geophysical studies conducted by the company since inception in 2010, current mining claims and mineral properties have aggregate inferred reserves exceeding $10 billion of gross value at current market prices. In addition to initiating and expanding production operations through exploration discoveries and the development of existing mining claims and mineral properties, management’s growth strategy includes the identification and acquisition of additional under-developed mining claims and mineral leases in established mining districts.


PITOOEY! Inc. provided a comprehensive shareholder update that summarized the opportunities available in the digital advertising industry, the social media and mobile marketing services it provides, the next version of the PITOOEY! App, its recently launched C1M Affiliate Marketing Program, and the recent agreement signed with TopHat Capital.

The global digital marketing industry is expected to reach over $160 billion by 2016, according to eMarketer. Of that amount, eMarketer believes that approximately $24 billion will be dedicated specifically to mobile advertising by 2016. PITOOEY!'s services encompass both social media and mobile advertising services, so the company believes it is uniquely positioned to capture a niche in this large and rapidly growing industry.

About PITOOEY! Inc. (PTOO)

PITOOEY! Inc. is a digital marketing agency with proprietary technology designed to assist companies in establishing and developing a presence on the Internet. The company's offerings come from three distinct, yet synergistic, business groups, Choice One Mobile, Rockstar Digital, and PITOOEY!™ Mobile, with the company's flagship product, the PITOOEY!™ app.

The PITOOEY! app is a preference based, searchable ad network. Using the PITOOEY!™ platform, a partner business is able to upload broadcasts into a database, which consumers "pull" according to a profile based on their interests, previous purchases, current location, or other data. The PITOOEY! app provides businesses with a unique engagement tool while serving consumers deals, valuable content, and location-based information.

Choice One Mobile provides various services involving content creation, search engine optimization, social media management, and mobile platform optimization using "Mobile Caviar" (sm) - an array of unique processes for the distribution of mobile marketing content. Rockstar Digital develops and manages high-end digital content including site, social and mobile content management, as well as customized e-commerce.

PITOOEY! is putting the power to fundamentally change the nature of interaction between a business and their customers directly into the consumer’s hands via its powerful mobile and digital marketing capabilities. Leveraging its own marketing expertise to attract a crowd of businesses and consumers, the company is quickly capitalizing on a new era in communication that enables an unparalleled level of engagement between customer and merchant.

VistaGen Therapeutics, Inc.

VistaGen recently provided an update on its strategic financing agreement with Autilion AG. Under the amended terms, Autilion AG has committed to invest $36 million in VistaGen in consideration for 72 million shares of restricted VistaGen common stock, at a price of $0.50 per share, in a series of closings ending on or before September 30, 2013. The parties have amended their agreement, completed a first closing and scheduled additional closings to occur in July, August and September 2013.

Shawn K. Singh, VistaGen's Chief Executive Officer, stated, "I met with Autilion's team earlier this week, and we have been working closely with them since signing our agreement in April. We are confident and excited about completing this transformative financing. Building on the positive developments in our labs presented during the Annual Meetings of the Society of Toxicology and International Society of Stem Cell Research in March and this month, respectively, we look forward to accelerating our lead programs towards valuable outcomes for our shareholders."

About VistaGen Therapeutics, Inc. (VSTA)

VistaGen Therapeutics, Inc. is a biotechnology company applying stem cell technology for drug rescue and cell therapy. Drug rescue combines human stem cell technology with modern medicinal chemistry to generate new chemical variants ("drug rescue variants") of once-promising drug candidates that have been discontinued during late-stage preclinical development due to heart or liver safety concerns. VistaGen also focuses on cell therapy, or regenerative medicine, which includes repairing, replacing or restoring damaged tissues or organs.

VistaGen's versatile stem cell technology platform, Human Clinical Trials in a Test Tube™, has been developed to provide clinically relevant predictions of potential heart and liver toxicity of promising new drug candidates long before they are ever tested on humans.

By more closely approximating human biology than conventional animal studies and other nonclinical techniques and technologies currently used in drug development, VistaGen's human stem cell-based bioassay systems can improve the predictability of the drug development cycle and lower the cost of new drug research and development by identifying product failures earlier in the cost curve. According to the Food and Drug Administration even only a ten percent improvement in predicting failure before clinical trials could save $100 million in development costs, which savings ultimately could be passed on to patients.

Using mature human heart cells produced from stem cells, VistaGen has developed and internally validated CardioSafe 3D™, a novel three-dimensional (3D) bioassay system for predicting the in vivo cardiac effects of new drug candidates before they are tested in humans. VistaGen is now focused on using CardioSafe 3D™ to generate up to two new, safer small molecule drug rescue variants every twelve to eighteen months. VistaGen anticipates that these drug rescue variants will be modified versions of once-promising new drug candidates that have been discontinued by pharmaceutical companies and academic research institutions because of heart toxicity concerns, despite substantial prior investment and positive efficacy data demonstrating their potential therapeutic and commercial benefits.


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