The Mission Report

The MissionIR Report - Mid-August 2012

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Housing Market: In Recovery Mode or Not?

One of the key questions both economists and investors have to ask themselves is whether the U.S. housing market is finally in recovery mode or still just half way through a lost decade, with home prices already down a third from the 2006 peak?

The answer to this question is important to the future of the American economy, at least according to the International Monetary Fund (IMF). It said recently that the housing market is vital to eventually boosting economic growth and reducing high levels of unemployment in the United States. The IMF forecast that there will be a need for about 1.5 million homes to be built annually over the next five years. One of its economists, Gian Maria Milesi-Ferretti, said "it [housing] is clearly going to be something that will help U.S. growth over the medium term."

And indeed there are signs of recovery from the bottom in the housing market. Home prices (Case-Schiller home price index up three months in a row) and new home sales (up about 20% from a year ago) are on the rise. Inventories of unsold homes are also declining thanks largely to record low mortgage interest rates. Additionally, the latest National Association of Home Builders' housing market index rose solidly in all regions of the country to an overall 35 reading in July, a five-year high and well ahead of expectations. The monthly gain from June's 29 reading was the largest in almost 10 years.

As usual, Wall Street momentum players have jumped well in front of what they perceives as a trend, pushing the prices of home building stocks up until they are on pace for a record year. Goldman Sachs recently upgraded the sector to 'attractive'. The Standard & Poor's Supercomposite Home Builders index is up about 50% so far this year, which is nearly five times the gain of the S&P 500 index. Among the leaders in the index are PulteGroup (NYSE:PHM), Lennar (NYSE:LEN), Toll Brothers (NYSE:TOL) and DR Horton (NYSE:DHI). Publicly-listed homebuilders make up about a quarter of total new home sales in the United States and that percentage is rising every year.

However, Wall Street may have jumped the gun. After all, this not your father's housing market; great shifts in the U.S. economy over the last 10 years have changed housing market dynamics for good. Among the factors affecting today's housing market is the fact that many homeowners are still "underwater" on their mortgages. Add to that 15 years of stagnant or declining income for many households and the record levels of student loan debts – more than $1 trillion – and you have a scenario which acts as a brake on household formations via younger people buying houses. First-time home buyers in 2011 made up only 37% of home purchases versus 51% in 2010. Stringent mortgage requirements by banks are also a major factor behind the drop in first-time home buyers.

Take a look at the obstacles that recent college graduates – the largest group of first-time home buyers – face. They are starting out as the most indebted generation of Americans ever, with an average of $25,000 in student loan debt. They are entering a labor market where the number of people with jobs is at a 30-year low, wages are falling in many sectors, and those with jobs face decreasing health and retirement benefits. None of these factors are conducive to making young people run out and buy a home.

The basic fact is that the housing market and income generally move in lockstep with each other, and real median household incomes of Americans are still stuck at the same level they were under the Clinton administration in 1996. This means that the housing market will remain troubled for "an extended period of time," according to senior economist at housing data company CoreLogic, Sam Khater, in an interview with Reuters.

Pulte's CEO Richard Dugas told Wall Street analysts home sales are still "preposterously low" when compared to historical trends. But at least things seemed to have bottomed, laying a new foundation for the future. Most economists expect home prices to be stable this year and project a modest rise of 2% in prices in each of the next few years. It's a good start, but conditions will likely improve at a more rapid pace in the housing market only if and when the U.S. sees an improvement in its employment situation.

Retail Sales Gain Hints at
Stronger Growth

Retail sales rose in July for the first time in four months as demand climbed broadly for everything from cars to electronics, a sign consumers could drive faster economic growth in the third quarter.

Retail sales rose 0.8 percent last month, the largest gain since February and well above analysts' expectations, data from the Commerce Department showed on Tuesday.

A separate report showed U.S. producer prices climbing in July at the fastest pace in five months even as energy prices fell.

The retail sales data bolsters the view that the slowdown in economic growth during the second quarter will prove temporary.

The report could give some relief for President Barack Obama, whose November re-election bid has been imperiled by a sour jobs market. Republican challenger Mitt Romney is focusing his campaign on the weak economy that has plagued Obama's presidency.

Economists polled by Reuters had expected retail sales to rise 0.3 percent. U.S. stocks opened higher yesterday on the data along with yields on U.S. government debt. The dollar rose against the yen.

Job creation in the United States slowed dramatically in the second quarter as economic growth cooled to a 1.5 percent annual rate. In June, sales at U.S. businesses slipped the most since March 2009, the Commerce Department said in a separate report.

Still, some economists think data showing stronger exports will lead the government to revise upward its estimate of growth during the second quarter.

Hiring picked up last month although the unemployment rate still rose to 8.3 percent.

Pointing to a strong increase in consumer spending in July, the so-called core measure of retail sales - which excludes autos, gasoline and building materials - rose 0.9 percent. That was the biggest gain since January.

Strength in consumer spending could help corporations doing business in the United States. Home Depot raised its earnings outlook on Tuesday as the world's largest home improvement chain beat Wall Street's profit estimates in the latest quarter.

U.S. Wholesale Prices Rise Slightly in July

According to the Labor Department, wholesale prices in the country rose 0.3% last month as higher food costs offset another decline in energy costs. Analysts surveyed by MarketWatch expected a rise of 0.2%.

Core producer prices, excluding volatile food and energy, rose 0.4% — higher than analysts' expectations of a 0.2% increase.

The July gain in PPI was the largest since February. In June, the headline PPI rate had risen 0.1%, while the core rate had risen 0.2%.

The severe drought in the Midwest appears to already be hitting prices.

Wholesale food prices in July rose 0.5% for the second straight month. Corn prices rose 34.5%, the biggest rise since October 2006.

But analysts have been playing down how much higher food prices will impact inflation.

"Historically, food prices have not been a significant driver of U.S. inflation compared with energy or core prices," said Peter Newland, an economist at Barclays Capital, in a recent research note.

Wholesale inflation has been trending lower in recent months.

In the 12 months ending in July, producer prices rose 0.5%, the smallest gain since October 2009. The annual inflation rate peaked at 7.1% in July 2011 and has been falling steadily ever since.

Minus food and energy, those prices have climbed 2.5% — the smallest year-over-year gain since June 2011. The core rate peaked at a 3.1% rate in February and has since turned lower.

Energy prices fell 0.4% at the wholesale level in July, data showed.

Prices for intermediate goods fell 0.9% in July, as energy goods fell 1.6%. This offset a 1.4% gain in intermediate foods and feeds prices. Excluding food and energy, prices for intermediate goods fell 0.9%, the largest drop since December 2008.

Prices for crude goods climbed 1.8% and crude foodstuffs rose 5.2%. This was the biggest increase in crude food goods since February 2011.

Cardium Therapeutics, Inc.

Yesterday, Cardium Therapeutics issued a press release detailing its financial results for the second quarter ended June 30, 2012, as well as reported on recent developments including: (1) agreement with Advanced Biosciences Research, an affiliate of bioRASI, for the planned commercialization of Excellagen® physician-use wound care product in the Russian Federation and the CIS; (2) agreement with Angel Biomedical for the manufacture of Excellagen and to assist Cardium in filing for a CE Mark for the potential marketing and sale of Excellagen in the European Union; (3) selection of Excellagen as one of the top ten podiatry innovations in 2012 by Podiatry Today publication; (4) publication of important research findings that have been incorporated into the treatment protocols of the Company's Generx® ASPIRE Phase 3 / registration study for patients with advanced coronary disease; and (5) introduction of the Neo-Chill Nutra-App® to the Company's MedPodium® healthy lifestyle product platform.

To read our full report, click the following link: Cardium Therapeutics, Inc. (CXM) Announces Latest Developments and Financial Results of Q2 2012.

About Cardium Therapeutics, Inc. (CXM)

Cardium Therapeutics, Inc. is a health sciences and regenerative medicine company focused on acquiring and strategically developing new and innovative products and businesses to address significant unmet medical needs. Comprised of large-market opportunities with definable pathways to commercialization, partnering, and other economic monetizations, Cardium's current portfolio includes the Tissue Repair Company, Cardium Biologics, and the company's in-house MedPodium Health Sciences healthy lifestyle product platform.

The company's lead commercial product Excellagen® topical gel for wound care management recently received FDA clearance for marketing and sale in the United States. In addition to plans to advance the product's commercialization in the U.S. and internationally via strategic partnerships, the company plans to develop new product extensions for additional wound healing applications and is working towards securing approval for marketing and sale in South Korea and through the CE Mark application process in the European Union.

Generx®, Cardium's lead clinical development product candidate, is a DNA-based angiogenic biologic designed to treat patients with myocardial ischemia due to coronary artery disease. Cardium recently initiated its Generx Phase 3 / registration study in Russia. Consistent with its capital-efficient business model.

Cardium is also actively evaluating new technologies and business opportunities. The company utilizes its team's skills in late-stage product development to bridge the critical gap between promising new technologies and product opportunities that are ready for commercialization. Cardium is dedicated to building on its core products and product candidates to continually create new opportunities for greater success. Leveraging the advantages of its capital-efficient, asset-based business strategy, the company provides a diversified and more balanced portfolio of risk/return opportunities with the chief objective of providing long-term shareholder value.

Duma Energy Corp. (DUMA)

Duma Energy recently announced that it has entered into an agreement to acquire Namibia Exploration, Inc. ("NEI"). Through the acquisition, Duma has rights to a 39% working interest in an onshore Namibian petroleum concession measuring approximately 5.3 million acres. According to Chairman and CEO Jeremy G. Driver, the exploration potential of this large concession is high and preliminary data is encouraging.

Despite the additional discoveries of world-class oil and gas reserves by companies such as Kosmos and Tullow PLC, Africa remains vastly under-explorered. Major and independent players such as Chevron and Hyperdynamics have secured huge acreage positions and are budgeting billions of dollars for exploration. The Owambo Basin, where Duma's concession is located, has all of the key ingredients for becoming a major oil province, including source rocks that extend into southern Angola, one of the top oil producers in Africa.

About Duma Energy Corp. (DUMA)

Duma Energy Corp. is an aggressive growth company actively producing oil and gas in the domestic United States, both on and offshore. Leveraging its technical expertise, promising portfolio, and strong financial condition, the company plans to utilize domestic revenues and cash flow to fund its rapid growth through acquisition, while participating in transformational projects with the potential of providing exponential returns for shareholders.

The company's primary goal for fiscal year 2012 and beyond is to drive earnings growth. The company also aims to pursue listing on major exchange(s) to provide better visibility and liquidity to shareholders and financial partners. Already producing and generating revenue from oil and gas in Texas, Illinois, and Louisiana, Duma projects domestic production to exceed 1,000 barrels of oil equivalent per day (boepd) by the end of 2012; with 2,500 boepd projected by the end of 2013.

Duma was founded in 2005 and began trading on the OTCBB in 2009 via registration. In 2006, the company began producing from its first properties in Texas and soon after added production in Louisiana. In 2009, its new CEO Jeremy G. Driver came on board. Within one year, Mr. Driver had identified and negotiated an acquisition that would fundamentally reshape the company. This acquisition was made possible by the large direct cash investment by Mr. Driver and his family, as well as other investors.

The company uses only industry standard and time-tested technologies, and avoids unproven "resource plays" and other opportunities that are heavily dependent upon high commodity prices. Not bound by any geographical location or operational strategy, Duma's management team is focused on developing its existing portfolio while pursuing additional opportunities that provide rapid growth, leveraging growing revenue, cash flow, and reserves to accelerate its growth strategy.

GlobalWise Investments, Inc.

GlobalWise Investments yesterday reported its Q2 2012 financial results. In addition to achieving record revenue growth of 146% quarter-over-quarter, the company improved gross profit by 959% and recognized a 69% reduction in total operating expenses. GlobalWise's new channel sales strategy and superior ECM software solutions were the main catalysts for the unprecedented growth.

Management currently expects to exceed $3.3 million in annual revenue in 2012 vs. $1.7 million in 2011, exiting the year at an annualized revenue run rate for 2013 in excess of $5.0 million. GlobalWise will be increasingly well positioned for growth and profitability in future periods as projected revenues increase, operating expenses continue to decline as a percentage of revenue, and the cost of continuing as a public company normalizes.

About GlobalWise Investments, Inc. (GWIV)

GlobalWise Investments, via wholly-owned subsidiary Intellinetics, Inc., is a leading-edge technology company focused on Enterprise Content Management (ECM) solutions for the digital age. The ECM industry continues to grow rapidly as a result of unrestricted proliferation of digital content within today's business environment. Leveraging its proprietary cloud-based computing software, GlobalWise is poised to capture a significant market share of this burgeoning industry.

GlobalWise's ECM service is delivered to customers via five unique delivery models which cover the spectrum of business needs: Cloud/Saas (Software as a Service), Hardware Vendor Integrated Service, Software Vendor Integrated Service, Premise (Client-Server), Hybrid (Premise & Cloud/Saas).This diversity gives advanced security & privacy features with an on-demand structure needed for large Tier 3 and Tier 4 businesses that are currently underserved by the market.

The Intellinetics platform defines a new industry benchmark and game-changing approach by combining advanced virtualization & automated content management with an open and service-oriented architecture using web services. The company provides strategies, tactics, and technologies used to manage paper and digital assets from capture to long-term archive, without the need for manual processes conducted by a full time employee.

GlobalWise's management boasts a combined total of over 150 years in ECM leadership and industry experience. The ECM industry is expected to exceed $5.1 billion by 2013 with Gartner predicting a compound annual growth rate of 9.5%. IBM Market Insights predicts adoption of cloud computing to grow by 26% CAGR between 2010 through 2013. Leveraging management and key department heads, Intellinetics has a strong foundation from which to capture significant market share within the lucrative $149 billion Business Software & Services industry.


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