The Mission Report

The MissionIR Report - Mid-December 2013

In-depth analysis, timely updates, latest market news


Market News

Company Updates


American Airlines Fined for Misleading Fliers

American Airlines was fined by the Department of Transportation on Wednesday after its agents allegedly told customers that some of the airline's fees were government-imposed taxes, reports CNN.

The DOT said it found that American (AAL) agents had offered customers inaccurate information "on a number of occasions" in 2012 and 2013. Pop-up windows on the airline's website also labeled fees, such as fuel surcharges, as taxes, the department said.

DOT spokesman Bill Mosley said regulators saw the issue as "mostly a matter of not training their agents as well as they could, not a deliberate attempt to deceive passengers." American agreed to pay a $60,000 fine and provide additional training to staff members.

"We expect airlines to be truthful to their customers when they provide information about their fares," Transportation Secretary Anthony Foxx said in a statement. "We will continue to take enforcement action when airlines fail to disclose their fares fully and accurately."

American recently merged with US Airways to create the world's largest airline, resolving an antitrust lawsuit from the Department of Justice. The company said it never misstated the total price of transportation for customers, but acknowledged that there had been "instances where some of the price components of the total fare were inadvertently mischaracterized, inconsistent with American Airlines policy and training."

"Our employees have received additional training to help ensure that price components are accurately and effectively communicated to our customers consistent with American's policy," American said.

Bond Funds Limp through Worst Year Ever

Forget about the bond bloodbath in 1994. This is shaping up to be the worst year in history for bond funds, reports CNN.

Investors have pulled out $72 billion from bond mutual funds this year through the first week of December, according to data from TrimTabs.

This is the first time in nearly a decade that investors have taken more money out bond funds than they've put in -- and it tops the previous record from 1994 when investors withdrew almost $63 billion. That year, the 10-year Treasury yield rose from just under 6% to over 8%. (Bond yields rise when investors are selling bonds and pushing prices lower.)

Rising interest rates have also been the catalyst for the rush out of bonds this year. "

The 'taper talk' that started in May proved to be a huge inflection point for the credit markets," said CEO of TrimTabs David Santschi, referring to Federal Reserve chief Ben Bernanke's hints that the central bank could begin to scale back, or taper, its $85 billion a month in bond purchases.

The Fed began the first of three massive bond buying programs at the end of 2008 in the aftermath of the financial crisis. The goal of this quantitative easing was to keep long-term interest rates low, and in turn, stimulate the economy and the stock market.

But ever since Bernanke mentioned the possibility of tapering, bond investors have been spooked. The 10-year Treasury yield rose from 1.6% May to almost 3% by September, when economists and investors initially expected the Fed to take action. In fact, investors had continued to plow money into bonds up until May. The outflows have all occurred in the final seven months of the year.

When the Fed chose not to taper, the 10-year Treasury yield fell back to around 2.5% by October. But rates have crept higher again as taper talk has resumed. The 10-year currently is yielding around 2.88%.

"The reaction to the prospect of 'tapering' among retail investors has been pretty violent even though the Fed hasn't made any changes to its bond buying program," said Santschi. "What will happen when the Fed actually takes action?"

Citing the recent strength in the economy, particularly the job market, some experts think there's a chance the Fed could announce plans to begin tapering at its next policy meeting on December 18. But most anticipate the central bank will wait to pull the trigger until early next year, after Bernanke's term is up and Janet Yellen assumes the role as Fed chair.

Bond investors aren't the only ones getting hurt by the tapering fears. Big investment firms with a focus on the bond market have suffered too -- especially Pimco and its "bond king" Bill Gross.

His Pimco Total Return fund (PTTRX), which is down 1.6% in value this year (see correction below), has lost nearly $37 billion of its assets this year. That's the most among bond funds according to Morningstar.

The second biggest loser, Vanguard Inflation-Protected Securities fund (VIPSX), has lost almost $14 billion in assets.

Earlier this year, Pimco Total Return lost its title as biggest mutual fund in the world to the Vanguard Total Stock Market Index Fund (VITSX), which now boasts nearly $300 billion in assets.

But Gross isn't the only bond guru having a tough time.

Rival bond fund manager Jeffrey Gundlach's DoubleLine Total Return Bond Fund (DBLTX) has lost nearly $4 billion this year.

But while bond mutual funds have been bleeding assets, bond exchange traded funds have managed to pull in $6 billion. Still, that's the weakest level of inflows since 2007, when ETFs, and bond ETFs in particular, were still in their infancy.

Gold Springs Higher to Clip Slim Weekly Gain

Gold futures bounced higher at the end of last week after a hefty loss in the prior session, reports MarketWatch, poised for a modest gain on the week, as traders readied for next week’s Federal Reserve meeting and possible news on the fate of the central bank’s bond-buying program.

Gold for February delivery tacked on $10.80, or 0.9%, to $1,235.70 an ounce on the Comex division of the New York Mercantile Exchange. For the week, futures prices traded about 0.6% higher.

Gold prices in the previous session tumbled more than $30 an ounce, their biggest one-day drop since October, amid growing concerns that the Fed could taper its monetary stimulus next week.

March silver also added 23 cents, or 1.2%, to $19.68 an ounce after a drop of 4.4% on Thursday. Prices were up roughly 0.8% from the week-ago close.

“Taper-talk is dominating the headlines ahead of next week’s Fed meeting and we have seen some pretty wild swings in Comex Gold futures as a result,” Tyler Richey, an analyst for the 7:00’s Report, which offers daily markets commentary.

A December/January/March taper of quantitative easing is “largely priced into gold at current levels and we don’t expect much of a move lower unless the amount of taper is materially above $10 billion-$15 billion, he said in emailed comments. The Fed has been buying $85 billion each month in Treasurys and mortgage-related assets since January.

In a research note dated Thursday, analysts at J.P Morgan Cazenove lowered their forecasts on gold — by 10% to $1,263 for 2014 and by 12% to $1,275 for 2015. They left their 2014 and 2015 forecast for silver at $21.38 and $22, respectively.

Next year will be characterized by tapering and low U.S. inflation, with the downside exacerbated by the re-emergence of producer-price hedging, the J.P. Morgan analysts said. Read about commodities guru Jim Rogers’s thoughts on gold and silver investing.

For now, however, gold prices got an added boost immediately following news early Friday that wholesale prices declined for a third straight month, with the producer-price index down 0.1% in November.

That was another data point showing the economy could handle more inflation, said Jeffrey Wright, managing director at H.C. Wainwright LLC. The data also backs up the case to extend QE asset purchasing by the Fed, he said.

The market has stalled in December, not far from its all-time highs. But while most observers think Fed policy is foremost on investors minds, Marketwatch’s Mark Hulbert thinks there may something else behind the moves.

For now, the $1,200 level appears to offer support for gold.

Gold prices are finding some “value buying” whenever they get close to the $1,200 level, said Jason Rotman, president of Lido Isle Advisors.

If the Fed does announce a taper next week, “we look for gold to re-test the $1,200 level and possibly head to 2013 lows near $1,180, he said. If there is no taper, he expects for a “fairly significant” gold rally, heading towards $1,275.

The “lack of near-term positive gold-price catalysts and the recovery in the stock markets have prompted holders of the SPDR Gold Trust to liquidate their holdings, which have fallen 39% this year to 827.6 metric tons,” analysts at Sharps Pixley said in a daily note Friday. “Expected near-term Fed tapering and the retrenchment of the largest gold consumer, India, due to its government’s import curbs, are the two big factors hurting gold prices this year.”

Futures prices for the metal have fallen 26% this year, with U.S. equities performance outpacing the overall commodities market for three years in a row.

Greenback Climbs Higher Ahead of Fed Meeting

The U.S. dollar rose against the euro and pound but fell against the yen at the end of last week, as investors continued to focus on the outcome of next week’s Federal Reserve meeting.

“The dollar is extending gains today as the fundamental backdrop improves in the US,” said Kathleen Brooks, research director at, in a note. She highlighted Thursday’s retail-sales data and the bipartisan budget deal, which passed in the House and should avert a government shutdown in January.

“This wasn’t what the market expected, hence the sharp reaction in the dollar in the last 24 hours,” she said of the deal.

Fed officials have said a potential reduction in the central bank’s monthly bond purchases will be dependant on data, with close attention paid to the labor market. The U.S. economy created 203,000 jobs in November, beating expectations. The Fed’s bond buys, currently set at $85 billion a month, have been understood to weigh on the dollar.

The euro fell to $1.3717 from late Thursday’s $1.3748, while the British pound eased to $1.6284 from $1.6345.

Data released Friday showed a third-consecutive decline in U.S. wholesale prices in November. The ICE dollar index, which compares the U.S. unit to six rivals, rose to 80.291 from 80.202 late Thursday in North America. The WSJ Dollar Index edged up to 73.52 versus 73.48.

The dollar traded at ¥103.26, near Thursday’s ¥103.30. The dollar earlier hit an intraday high of ¥103.917, according to FactSet, crossing into territory not seen since October 2008 when the collapse of Lehman Brothers helped spark a global selloff across many asset classes. The 2008 crisis had sent investors rushing into the yen, in part as a safe haven, but also to unwind carry trades funded with the Japanese currency.

Japanese monetary policy is also in focus, with the Bank of Japan due to issue a policy decision at the end of next week. Investors will be watching to see whether the central bank adds to its current stimulus program, as a hike in Japan’s national sales tax slated for April could be a drag on growth.

RBC Capital Markets strategist Michael Turner also cited a focus on Japan’s Government Pension Investment Fund, which is considering expanding its portfolio. Reports on Friday said a panel advising the fund had suggested, among other things, partnering with a foreign fund.

The euro, which hit its own five-year high against the yen earlier in the week, fell to ¥141.66 from ¥142.33 late Thursday.

Producer Prices Stumble Again in November

U.S. wholesale prices declined for the third-straight month in November but seemed to stabilize when measured on an annual basis, according to data released Friday.

The U.S. Department of Labor said the producer-price index fell 0.1% in November, after a 0.2% drop in October and a 0.1% fall in September. Prices last fell for three months in a row at the end of 2012.

Meanwhile, the core producer-price index, which excludes food and energy, increased 0.1%.

The November report matched expectations of economists polled by MarketWatch.

The broad index was weighed down by gasoline prices, while the core rate was boosted by higher prices for light trucks and farm equipment.

Wholesale energy prices declined 0.4% in November after a 1.5% drop in October. Prices declined broadly, with big declines in home heating oil and diesel fuel.

Food prices were flat in November after a 0.8% gain in the prior month.

Further back the production pipeline, the wholesale price index for intermediate goods, such as the cloth used to make clothes or stamped metal parts used in heavy machinery, fell by 0.5% last month.

Crude prices — the cost of raw materials — fell a sharper 2.6% in November, the biggest drop since June 2012.

Crude energy materials — these are raw products entering the market for the first time — saw a 6.6% price drop in November, led by a decline for petroleum.

“With prices so low at the beginning stages of production, it is very hard to see any upside risk for core finished goods prices over the next year or so at least,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Over the past 12 months wholesale prices increased 0.7% in November, up from 0.3% rise in the prior month, which was the smallest increase in five years. This is the first gain in the annual inflation rate since June.

Meanwhile core producer prices have gained 1.3% over the past year, down from 1.4% in October, but up from a low of 1.1% in August.

Analysts said this suggests that inflation remains low but is not getting any lower.

Consumer prices have also been running low this year.

Economists don’t have a good story on why inflation is so low, especially since the Federal Reserve is adding so much stimulus to the economy. The Fed is has been buying $85 billion each month in Treasurys and mortgage-related assets since January.

“While indicators of growth in the U.S. appear to be picking up, inflationary pressures remain very subdued, today highlighted by a marginal decline in producer prices,” said Andrew Grantham of CIBC World Markets.

Analysts said that low inflation gives the Fed room to keep buying assets. The central bank will meet next week to set monetary policy.

Some Fed watchers expect the central bank to begin to taper the rate of its asset purchases, while others think policy makers will wait until early next year to make the move.

Advaxis Inc. (ADXS)

ABC News recently featured Advaxis’ ADXS-cHER2, its proprietary immunotherapy for treating breast cancer and canine osteosarcoma, in an article entitled “Bone Cancer Vaccine for Dogs Shows Promise for Breast Cancer.” The company’s phase 1 canine osteosarcoma study evaluated the safety and efficacy of ADXS-cHER2 in companion dogs. The study was conducted by Dr. Nicola Mason at the University of Pennsylvania School of Veterinary Medicine. Results of the study show the dogs that received Advaxis immunotherapy are living significantly longer than the dogs whose owners chose not to participate in the study.

Advaxis also recently announced it has received Orphan Drug Designation from the U.S. Food and Drug Administration Office of Orphan Products Development for lead drug candidate ADXS-HPV to treat head and neck cancer associated with human papillomavirus (HPV).

About Advaxis Inc.

Advaxis, Inc. is a clinical-stage biotechnology company developing the next-generation of immunotherapies for cancer and infectious diseases. The company’s immunotherapies are based on a novel platform technology that uses live, bio-engineered bacteria to secrete antigen/adjuvant fusion protein(s) that redirects the powerful immune response all human beings have to the bacteria to fight off cancer and disease. A second effect is to reduce the immune suppressive cells cancer tumors recruit to protect themselves from immune attack by over 80%. It is this combination that makes Advaxis special.

The company has more than fifteen distinct constructs in various stages of development, many in strategic collaborations with recognized centers of excellence such as the National Cancer Institute, Cancer Research – UK, the Wistar Institute, the University of Pennsylvania, the University of British Columbia, the Karolinska Institutet, and others.

Advaxis’ lead construct, ADXS-HPV, is currently in phase 2 clinical development for recurrent/refractory and advanced cervical cancer, anal cancer, and HPV caused head and neck cancers. This important construct was recognized as the Best Therapeutic Vaccine (approved or in development) at the 5th Annual Vaccine Industry Excellence (ViE) Awards by the vaccine industry and the journal Expert Reviews of Vaccines.

The estimated global market for immunotherapies is projected to exceed $37.2B by 2012, with cancer vaccines forecast to grow into an $8B market. Protected by 75 issued and pending patents, Advaxis is extremely well-positioned to capitalize on the burgeoning opportunities in the healthcare sector as it advances the development of next-generation treatments for today’s most challenging diseases.

Chanticleer Holdings, Inc. (HOTR)

It’s been a busy month for Chanticleer Holdings, as the company most recently announced that it now maintains majority ownership of Just Fresh Restaurant chain. Earlier this week Chanticleer executed its Assignment, Assumption, Joinder and Amendment Agreements with JF Restaurants, LLC and JF Franchising Systems, LLC, owners of the Charlotte-based Just Fresh Restaurant chain. With the finalization of this transaction, Chanticleer now holds 51% preferred membership interest in both entities.

Marking its eight international location, Chanticleer announced the upcoming grand opening of its Hooters restaurant in South Africa’s capital, Pretoria. The company has also entered a binding Letter of Intent to purchase all of the outstanding shares of Dallas Spoon, LLC and Dallas Spoon Beverage, LLC (collectively “Dallas Spoon”), the companies which own and operate Spoon Bar & Kitchen in Dallas, Texas.

Furthermore, Hooters Brazil, in partnership with Chanticleer Holdings, is establishing a fourth Hooters location in Brazil with its inauguration projected for April 2014. This new location is the first outside the state of São Paulo. Chanticleer also announced that it has made a $500,000 investment in the new Beacher’s Madhouse to be located in Las Vegas, Nevada. Beacher’s Madhouse is a variety show and nightclub known for its world renowned, eclectic performances. The theater is currently located in Los Angeles, Calif., and on New Year’s Eve is slated to open an additional location in Las Vegas.

About Chanticleer Holdings, Inc.

Chanticleer Holdings, Inc. owns and operates Hooters® branded restaurants in emerging international markets. As one of the most well-known restaurant brands in the world, Hooters has a menu that consists of moderately-priced American bar food and the world-famous Hooters girls. The company has ownership interests in the parent company of the Hooters brand, Hooters of America (HOA), four Hooters restaurants in South Africa, one restaurant in Hungary, one Hooters restaurant in Australia, and the exclusive franchise rights to develop and operate Hooters restaurants in three of the most populous states of Brazil: Rio De Janeiro, Minas Gerais, and Espirito Santo.

The first Hooters® restaurant opened October 4, 1983, in Clearwater, Florida. Today there are more than 412 Hooters restaurants in 28 countries. During its history, Hooters has continued to rank high amongst the industry's growth leaders. The Hooters concept has stayed true to its roots with its beach-themed concept, logo, uniform, menu and ambiance being similar to what existed in its original store, and has proven successful in small-town America, major metropolitan areas, and internationally.

In 2011, Chanticleer, together with a group of major private equity investors, acquired Hooters of America (HOA) and its largest franchisee Texas Wings, Inc. Today HOA is the Atlanta-based operator and the franchisor of over 430 restaurants in 28 countries. Chanticleer has rights to develop and operate restaurants in South Africa, Hungary, and parts of Brazil, and has joint ventured with the current franchisee in Australia, while evaluating several additional opportunities.

Chanticleer's core growth strategy involves expanding the Hooters® brand in emerging markets and other rapidly developing global economies. The rising number of middle class consumers in emerging markets is driving the demand for recognized international brands. Targeting underpenetrated international markets with proven market success, the company aims to achieve consistent, above-average growth rates and favorable financial returns for its shareholders.

CytRx Corp. (CYTR)

CytRx reported immensely positive data from its Phase 2b clinical trial comparing aldoxorubicin to doxorubicin in patients with soft tissue sarcoma. The company reported that patients with soft tissue sarcomas who accepted treatment of aldoxorubicin had statistically significant better outcomes than those who were treated with doxorubicin, the standard treatment for this type of cancer. The primary endpoint was progression-free survival - aldoxorubicin expressed 80-100 percent superiority over doxorubicin based on this measurement.

The company also in late November said it has initiated a phase 2 clinical trial with the company’s aldoxorubicin for the treatment of unresectable glioblastoma multiforme (GBM), a deadly form of brain cancer. The open-label, multi-center study is designed to investigate the preliminary efficacy and safety of aldoxorubicin in subjects with unresectable GBM whose tumors have progressed following prior treatment with surgery, radiation and temozolomide.

About CytRx Corp.

CytRx Corp., a biopharmaceutical research and development company, specializes in the enhanced delivery of proven oncology therapies to treat cancer. The company’s novel linker platform technology can be utilized with multiple chemotherapeutic agents and could allow for greater concentration of drug at tumor sites while minimizing side effects.

Aldoxorubicin, the company’s flagship compound, is an improved version of the widely used chemotherapeutic agent doxorubicin. CytRx is conducting a global phase 2b clinical trial comparing aldoxorubicin to doxorubicin as a treatment for 1st-line soft tissue sarcomas. Top-line results are expected in Q4 2013. Preparations are underway for a phase 3 trial in 2nd-line soft tissues sarcoma to begin in Q1 2014 based on results from a completed phase 1b/2 clinical trial. The FDA granted CytRx a Special Protocol Assessment (SPA) for the phase 3 clinical trial. The company is conducting a phase 1b pharmacokinetics clinical trial and in Q4 2013 plans to start a phase 2b trial in glioblastoma multiforme (stage IV brain cancer) and a phase 2 trial in Kaposi’s sarcoma.

With no debt and significant cash resources, CytRx has the capital position necessary to support near and mid-term milestones across its entire oncology pipeline. CytRx also has rights to two additional drug candidates, tamibarotene and bafetinib, for which it plans to seek a partner for further development.

ForceField Energy, Inc. (FNRG)

ForceField Energy has been awarded a contract with the Comptroller General's Office of the Republic of Costa Rica, which oversees the use of public funds to improve the management of public finances, to supply and install its SL3 LED street lights in the government agency's parking facility. In addition, the company announced it has formed a strategic alliance with the University of Costa Rica ("UCR") to support a demonstration project to study the health benefits of LED lighting on professors and university employees as well as the impact on academic grades of attending students.

ForceField also said it has entered into an agreement with QSR International ("QSR"), a multi-brand Master Franchise restaurant developer with 145 restaurants located in 15 countries throughout Latin America and the Caribbean. The agreement calls for the purchase and installation of ForceField's LED lighting products at two QSR restaurants, with the potential for a roll-out of ForceField's lighting solutions across the remaining QSR International owned, operated and under-development restaurants. The installation is expected to be completed before the end of December 2013.

About ForceField Energy, Inc.

ForceField Energy, Inc. is an international manufacturer, distributor, and licensee of alternative energy products and solutions. ForceField has two primary segments through which it focuses on the largest and fastest-growing areas of the global renewable energy market: industrial waste heat recovery and conversion, and commercial LED lighting products.

TransPacific Energy (TPE), a subsidiary of ForceField Energy, has patented a technology that uses “waste heat” from various industry processes and other sources to provide clean electricity. The subsidiary’s process directly captures and converts heat from the heat source, without any heat transfer fluids, at temperatures from 80ºF up to 900ºF. This is a far broader range than any other competing systems on the market, unlocking a countless number of new applications.

TPE sells systems directly to customers for their installation and operation. The company owns, installs and operates ORC systems, sells electricity, licenses its technology for specific applications and markets and conducts research and development for new ORC applications and renewable energy.

Through its exclusive multinational distribution agreement with Lightsky, ForceField has a firm foothold in the commercial lighting products industry as well. The LED lighting market is growing at a 32% compound growth rate because of the absence of dangerous chemicals, government regulation phasing out old lighting technology, 50-70% lower energy costs, exceptionally long life, and beautiful illumination.

Methes Energies, Inc. (MEIL)

Methes recently announced its intent to acquire OTC Energy Technologies Inc. ("OTC"), including all of OTC's technologies and knowhow relating to the conversion of several types of biomass into a chemical quality syngas, which can be converted into renewable alcohols such as ethanol and methanol, renewable hydrocarbons such as jet fuel and gasoline. The addition of OTC technologies to Methes' portfolio of products will allow Methes to compete more fully in the multi-billion dollar renewable fuels market, and to start to compete in the multi-hundred billion dollar general transportation fuels market.

In other company news, Methes reported that 18 rail cars were shipped out of its Sombra, Ontario, biodiesel facility in October for a total of over 485,000 gallons – this is the company’s highest monthly level of shipment this year, surpassing the previous monthly high of 8 rail cars in April. The company has begun discussion with the current lender to increase the facility to allow producing even more biodiesel. At the current run-rate, the company says it is on track to produce as much biodiesel in the fourth quarter of 2013 than the entire FY12.

About Methes Energies, Inc.

Methes Energies uses its own proprietary technology to produce high-quality biodiesel processors and systems to capitalize on the growing demand for renewable energy, surging energy prices, and the value of biodiesel as a practical and realistic long-term replacement for conventional diesel fuel. The Company’s processors are flexible and can use a variety of virgin vegetable oils, used vegetable oil and rendered animal fat feedstock, allowing operators to take advantage of feedstock buying opportunities. Methes Energies also markets and sells high-quality biodiesel fuel produced at its 1.3 MGY (5 MLY) showcase production facility in Mississauga, Ontario, and at its 13 MGY (50 MLY) facility in Sombra, Ontario, to customers in the U.S. and Canada.

Methes Energies’ broad range of expertise and solutions include all aspects of the engineering, manufacturing, production, logistic, marketing and distribution processes. Among other services, the company leverages its cutting-edge biodiesel processors, pre-treatment systems, and other solutions to address real and specific biodiesel production challenges for large and small-scale biodiesel producers and entrepreneurs seeking to produce their own fuel.

In 2007 the company introduced the Denami 600, the industry’s first compact, full automated continuous flow biodiesel processor designed to run on a wide variety of feed stocks. This reliable, cost-effective and superior method of producing top-grade biodiesel exceeds current ASTM standards.

The company also sells feedstock to its network of biodiesel producers, selling their biodiesel production and providing clients with proprietary software to operate and control their processors. Methes Energies remotely monitors the quality and characteristics of its clients' production, upgrades and repairs their processors as necessary, and advises clients on adjusting their processes to use varying feedstock to improve the quality of their biodiesel.


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