The Mission Report

The MissionIR Report - April 2012

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Gas Prices Rise Near 2008-Highs

The United States, the United Kingdom, France, and Japan have been in talks to ease the shock of rising oil and gas prices by releasing billions of emergency reserves onto the market. The laws of supply and demand dictate that when supply is great, prices should fall.

But the rise in the price for fuel is not an issue of supply and demand, says former Senator Byron Dorgan (D-ND), who helped shape the nation's energy policy as chairman the Senate Indian Affairs Committee and three subcommittees.

"There is no justification for the current gas prices. This is all about speculation by the people who are speculating on the price of oil and gas," he says. "We could shutdown excess speculation in commodity markets. This government should do that."

Senator Bernie Sanders (I-VT) said as much earlier this month. Sanders, along with 70 members of Congress, wrote a letter to regulators at the Commodity Futures Trading Commission (CFTC), urging immediate action on oil speculation by enacting "strong position limits" and to "utilize all authorities available to…make sure that the price of oil and gasoline reflects the fundamentals of supply and demand."

Fadel Gheit, senior energy analyst at Oppenheimer, said he blames spectators for adding "at a minimum" $20 per barrel to the price of oil. In a study of oil prices over the last five years, the St. Louis Federal Reserve determined speculation drove up oil prices by 15 percent. But those estimates are comparatively conservative. The CEO of ExxonMobil (XOM) believes speculation could be driving up oil prices by as much as 40 percent a barrel.

"These are people, by the way, who will never buy oil and never sell oil. They are actually buying and selling things they will never have from people who never had it," said Dorgan. "They are making money back driving up the price at the pump and the American people are the victims."

But for all the lambasting of Wall Street speculators for driving up energy prices, economists at IHS said Thursday they believe new regulation of commodity markets could adversely affect the U.S. economy as a whole.

"The regulations, as currently envisioned, could create a significant ripple effect through the energy economy that would reduce production, increase the cost of electricity and gasoline and ultimately affect jobs," said Kurt Barrow, vice president at Purvin & Gertz, a division of IHS. Why? By limiting commodity trading, IHS says it would make it more difficult for companies that hedge against future oil prices to manage risks.

30-Year Mortgage Dips Below 4 Percent

The average U.S. rate on the 30-year fixed mortgage fell back below 4 percent last week, staying near historic lows.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan dropped to 3.99 percent from 4.08 percent last week. In February, the rate touched 3.87 percent, the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage also fell, to 3.23 percent. That's down from 3.30 percent last week and above the record low of 3.13 percent hit earlier this month.

The low rates have made home-buying and refinancing more affordable at a time when the housing market is flashing small signs of improvement. Still, most economists say it will take years for the market to fully recover from the housing bust.

January and February made up the best winter for re-sales in five years, when the housing crisis began. And builders are more confident about the market. In February, they requested the most permits to build single-family homes and apartments since October 2008.

An improved job market may also be helping home sales. Employers have added an average 245,000 net jobs per month from December through February. That has helped reduce the unemployment rate to 8.3 percent, the lowest level in nearly three years.

Rates rose a bit earlier last month after positive economic news pushed up yields on U.S. Treasury bonds.

An improving economic outlook can lead investors to shift money from Treasury bonds to stocks. That pushes up Treasury yields.

Even with signs of improvement in housing, home prices continue to fall. Millions of foreclosures and short sales — when a lender accepts less than what is owed on a mortgage — remain on the market. And the housing crisis and recession have also persuaded many Americans to rent instead of buy, which has led to a drop in homeownership.

To calculate the average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year fixed loan was 0.7. For the 15-year fixed loan, the average was 0.8.

For the five-year adjustable loan, the average rate fell to 2.90 percent from 2.96 percent, and the average fee was unchanged at 0.8.

The average on the one-year adjustable loan dropped to 2.78 percent from 2.84 percent, and the average fee was unchanged at 0.6.

Investors Take on More Risk; Shun Commodities

Commodities, with the exception of oil, will fail to capture much of the renewed investment appetite for risky assets that has buoyed global markets this year until more clarity emerges about demand from top raw materials consumer China.

Investment has flowed into equities, emerging markets, high-yield debt, and real estate markets in the New Year after improved U.S. economic data and an injection of cheap loans to European banks boosted sentiment, but most commodities markets got only a brief boost.

Asset allocators such as Koen Straetmans at ING Investment Management in the Netherlands are finding opportunities in other risk-on trades until more data comes from China, the biggest consumer of copper, iron ore, steel, and soybeans.

"The macro-economic data out of China is rather clouded for the time being, so we'd like to see some data from March to judge whether end-user demand is really filtering through," said Straetmans, senior strategist at the group, which has about 330 billion euros under management worldwide.

"We still have a slight underweight position in commodities, whereas in equities we are still slightly overweight, so we have the risk-on trade through equities and also through real estate."

The 19-commodity Thomson Reuters-Jefferies CRB index gained as much as 7 percent by late February. But the rise has since been trimmed to 2 percent, despite a strong rise in oil futures, while world equities have gained 11 percent.

Patrick Armstrong, joint managing partner at Armstrong Investment Managers, a multi-asset investor, has been reducing his copper position since February, from 6 percent to 2 percent, taking the view that Chinese restocking is over for the time being.

"People had moved from a very risk-off position to trying to catch up with things (commodities) that have been running," he said. "In the short term we do expect cyclical pullbacks."

Data from fund flows tracker EPFR Global show that cumulative flows into commodity and energy sector funds have failed to match last year's inflows.

Commodity sector funds, which include physical and futures funds and equity funds holding related stocks such as miners, attracted some $3.5 billion globally to March 21, compared with $4.6 billion over the same period last year.

Energy sector funds, which include equity funds and oil and natural gas exchange-traded products linked to futures contracts, attracted some $2.5 billion globally, compared with $5.8 billion last year.

"We've been in an environment which should have been risk-on (for commodities), but very few investors have been prepared to act that way," said Kevin Norrish, managing director of commodities research at Barclays Bank, noting that participation in the base metals rally had been quite thin.

"That may be because there are still dark clouds on the horizon, one of which is the high oil price itself."

Many managers are keen to include crude oil in portfolios, based on political tension between the West and Iran rather than on underlying supply/demand fundamentals.

Brent crude has been a standout performer in the commodity/energy complex, shooting up 16 percent so far in 2012, as investors seek a hedge for other risk assets to protect against an oil price spike.

"Prior to the financial crisis, the last three global recessions were caused by geopolitical events that led to an oil price spike, and that is clearly relevant today. So having some oil in the portfolio seems to make sense," said Robert Farago, head of asset allocation at Schroders Private Banking.

"For the rest (of commodities), we prefer equities to commodities as a risk asset," he added.

GlobalWise Investments, Inc.

In recent news, GlobalWise Investments and its wholly owned subsidiary Intellinetics announced the execution of a new Channel Sales Partnership with B2B Computer Products, LLC. B2B Computer is a national business-to-business value-added reseller and service provider of computer hardware and software with over 35 distribution centers throughout the U.S.

A client-focused technology provider, B2B Computer has proven experience in design, product recommendation, and implementation of complex multi-vendor IT solutions. Through the newly announced partnership, B2B Computer will be able to add the cloud-based Intellivue™ ECM software to its vast array of service offerings and better serve its roster of over 24,000 clients.

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.

Uranium Energy Corp.

Uranium Energy announced it has acquired the rights to explore for uranium on the Burke Hollow Project. Located in eastern Bee County, Texas, the 17,510-acre property is approximately 50 miles to the southeast of the company's Hobson uranium processing facility, situated on the Goliad trend within the prolific South Texas Uranium Belt.

Amir Adnani, President and CEO, stated, "The Burke Hollow Project makes a significant addition to our expanding hub-and-spoke production strategy in South Texas. The exploration conducted by Total Minerals on this project in the 1990s demonstrated strong intercepts, and we are planning an aggressive drilling program to commence within the next sixty days."

About Uranium Energy Corp. (UEC)

Uranium Energy is a U.S.-based exploration and development company focused on uranium production in the U.S. The company's operations are managed by professionals who have earned a reputable profile through many decades of hands-on experience in the key facets of uranium exploration, development, and mining.

The company is the newest uranium producer in North America, operating the first new uranium mine in the U.S. in over 6 years. In 2011, Uranium Energy completed its first full year of production with a cumulative total of 236,000 lbs. of uranium produced at average cost of $16 per pound, which the company then sold at the current spot price of $52 per pound. Uranium utilizes the In-Situ Recovery (ISR) production method, which is a more cost-effective and environmentally friendly way of mining uranium.

Well financed to execute on its key programs, the company controls 28 projects in the U.S. with total resources of more than 41.5M lbs. U3O8. Uranium Energy's fully licensed and permitted Hobson processing facility is central to all of its projects in South Texas, eliminating the need to construct a new processing plant on site at each project.

Additionally, Uranium Energy controls one of the largest databases of historic uranium exploration and development in the nation. Using this knowledge base, the company has acquired and is advancing exploration properties of merit throughout the southwestern U.S., a region known as being the most concentrated area for uranium mining in the United States.

The company's strategy of acquiring exploration databases and leveraging those databases to generate acquisition targets has proven to be effective thus far. With plans to continue aggressively pursuing this strategy, Uranium Energy is well positioned to capitalize on the world's overwhelming demand for more uranium, more energy, cheaper energy, and a cleaner environment.

VistaGen Therapeutics, Inc.

VistaGen Therapeutics recently announced that it has entered into a strategic collaboration with Vala Sciences, Inc., a biotechnology company developing and selling next-generation cell image-based instruments, reagents, and analysis software tools. Together the companies aim to advance drug safety screening methodologies in the most clinically relevant human in vitro bioassay systems available to researchers today.

"Our collaboration with Vala directly supports the core drug rescue applications of our Human Clinical Trials in a Test Tube™ platform," stated Shawn K. Singh, JD, VistaGen's Chief Executive Officer. "Our high quality human cardiomyocytes combined with Vala's high throughput electrophysiological assessment capabilities is yet another example of how we are applying our stem cell technology platform within a strategic ecosystem of complementary leading-edge companies and technologies. We seek to drive our drug rescue programs forward and generate a pipeline of new, cardiosafe drug candidates."

About VistaGen Therapeutics, Inc. (VSTA)

VistaGen Therapeutics 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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