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Biotech Bonanza: 2021 Outlook In A Post-Pandemic Year

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As 2020 has slipped into the rear-view mirror, it will not be a misnomer to refer to it as the year of the Biotechs.

The biotech industry was on a mission to return the pandemic ravaged world to normalcy by delivering a cure. The industry has succeeded by already delivering two vaccines for COVID-19 and treatments, with more to come as the new year begins, putting the world on a path to recovery. The monumental impact of the biopharma effort cannot be overstated. Lives will be saved, livelihoods restored, and economies rebuilt.

The Nasdaq Biotechnology Index (IBB) also achieved a major milestone during the year as it finally made a new high - five years after the one recorded in July 2015. It was a pivotal moment whose breakout gains will be achieved in 2021 and beyond.

In the 2020 outlook, we had expected the Nasdaq Biotechnology Index to be up +10% and raised it to +20% in the mid-year update. The premier Biotechnology Index rose +26% in 2020.

The year presented challenges that were unprecedented in modern history. So predicting the market was a game of luck! You could be right one month and be completely wrong the next.

In determining total returns, equally important as security selection are the times when one is invested and the investing behavior based on the investment approach. The approach served us well as the various Prudent model portfolios outperformed their benchmarks.

2020 Biotech, Healthcare and Smallcap Performanc

Prudentbiotech.com ~ 2020 Performance

Vaccines - It Doesn't Get Bigger For Biotechs...

A compelling product in a captive market worth billions of dollars is an incredible opportunity for any company. The world has to be vaccinated fast to emerge from this slow-motion tragedy. A tragedy that hasn't seen its worst moments yet, as the fatality rate will likely peak in February if the pandemic follows the trajectory of the flu season.

AllianceBernstein (AB), a financial services firm, has estimated the market to be nearly $40 billion in 2021. And the first-mover advantage will obviously be tremendous in the first-year. Premium pricing will exist in the supply agreements during the first half due to scarcity and then trend down rapidly in the second half as more lower-cost vaccines ramp up production. As demand ebbs in developed countries once first-year supplies are secured, lesser-developed countries will be served at lower pricing. The following year 2022 would likely need a new vaccine, just like the flu one, thus creating a smaller but recurring market opportunity with a lot of innovation potential. Note that there is no data yet on the longevity period for the vaccine and thus how frequently it would be needed - every year, every 2 years, etc

In 9-months the biotech industry delivered 2 vaccines approved under an Emergency Use Authorization (EUA). The first 2 vaccines, BioNTech (BNTX) with partner Pfizer (PFE) and Moderna (MRNA), raced to the finish line using a novel messenger RNA (mRNA) approach. Untested and unproven clinically against any disease thus far, this highly-suitable vaccine development approach has delivered for the world

Is the high efficacy rate the result of the mRNA approach or the ease of targeting the spike protein?

It's a highly interesting question whose preliminary answers will be available this month in January.

It has been truly amazing to record a 94% to 95% efficacy or effectiveness rate in early trial results for mRNA vaccines. This sets a high bar for other vaccines using more traditional approaches. Nearly all of them target the spike protein on the COVID-19 virus, just like the mRNA vaccines, and thus should have good effectiveness, well north of 50%. FDA has set a 50% efficacy benchmark for EUA approval.

RNA vaccines have already demonstrated a premium position based on up to 95% efficacy in early Phase 3 trial results. This would suggest that similar efforts using the mRNA approach, particularly from companies like CureVac (CVAC), can likely lead to similar results. Although, it must be observed that simply working on an RNA vaccine doesn't mean that the same 90+% efficacy level will be achieved.

Oxford University and AstraZeneca's (AZN) product can quickly become a global vaccine if results are around the 70% level. The world's largest vaccine manufacturer, The Serum Institute of India, will be one of the biggest producers of the Oxford/AstraZeneca vaccine. The AstraZeneca vaccine trials, which have been plagued by befuddling issues and amateurish data handling, had an average efficacy rate of around 70%, but unfortunately, the results are not considered reliable and robust. The genetically engineered viral vector in the vaccine, developed by Oxford University, is deemed to be the most promising for the world due to its low-cost and the effectiveness of a similar approach against Ebola. The Oxford/AstraZeneca trial continues and more reliable results are expected this month in January. Novavax (NVAX) is expected to report trial results in late January, and one of its manufacturing partners is The Serum Institute. Finally, Johnson & Johnson (JNJ) is expected to roll out its vaccine results in late January.

These three trial results in January will provide efficacy data that will answer the question if mRNA vaccines can also have higher efficacy as a major advantage besides rapid development.

Internationally, Russia has a traditional viral-vector vaccine, Sputnik V, which it claims has 92% efficacy, but it doesn't yet have reliable public data. Sinovac, a Chinese firm, is also using the tested traditional approach of an inactive viral particle in the vaccine and released its early data from the Brazilian trials showed a 78% efficacy rate, though details remain missing. Its peer Sinopharm also has vaccines with the same traditional approach in late-stage trials, with a 79% efficacy rate, but again details are sketchy and conflicting. Both companies had vaccinated over a million people in China under emergency use, prior to Phase 3 results.

...But The Market Opportunity May Not Exist For All Players in 2021

Pfizer/BioNTech and Moderna are anticipated to be the largest beneficiaries of vaccine sales in 2021 due to their first-mover status with compelling and most likely best-in-class products. They will be followed by AstraZeneca, Novavax, and Johnson & Johnson, as per the AB research report. There will be much smaller pickings if at all for others, at least in the US.

Prudentbiotech.com ~ vACCINE

A number of companies can receive FDA approval if the product achieves higher than 50% efficacy, but run the risk of not being able to scale up supplies in 2020. Most of the prominent beneficiaries of the market opportunity have received significant US government funding or have the financial wherewithal to secure raw materials, scale-up manufacturing, or enter into manufacturing alliances to ramp-up production. That is not true for all the vaccine developers, and most of them may get sidelined, even with approved products, from participating in the 2021 opportunity.

One would also believe that as more data becomes available, FDA can reconsider guidelines set during an emergency authorization, and set a higher vaccine efficacy rate for the future, thus potentially diminishing the market opportunity for relatively lower efficacy products.

- Macro Environment Supportive Of Risk-Taking

Biotechs are considered a speculative group, and such groups do particularly well in a prolonged low-interest-rate environment when risk-taking appetite is strong due to (a) low borrowing costs, and (b) low returns on interest-rate instruments. Smallcaps are also beneficiaries of such a market climate.

Biotech funding continues to soar at the venture and public level, and over one-third of the IPOs on the US markets in 2020 were of biotech companies.

We had presented the charts below in early 2020, illustrating the potential correlation between sustained low-interest-rates or low-cost-money and biotech valuations. The best period for biotechs during the past decade (2010-2019) was the ~6-year period from 2010 to 2015 when the Nasdaq Biotech Index soared nearly 400%. This was a period of a very low and stable interest rate policy.

Prudentbiotech.com ~ Nasdaq Biotech

The biotech indexes have broken out again after a prolonged consolidation. Even though there may not be a perfect causal relationship between interest rates and biotech performance, at the very least, the correlation underscores the existence of a favorable macro environment for biotechs that should continue in the years ahead, and sustain a longer-term, multi-year uptrend.

- Scientific Advances Keep Coming

The rapid development of RNA vaccines has underscored the advancing frontier of science where technology and discovery are advancing at a relentless pace, generating new treatments in a shorter time.

RNAi is now a highly prized and promising approach for drug and vaccine development, after decades of false-and-slow-starts. The space has strong momentum as it has captivated the world with Moderna and BioNTech's rapid COVID-19 vaccine development, and illustrates the rapidly advancing frontiers of drug development. RNAi medicines work upstream, almost at the pre-genetic level, then most therapeutics, and thus the gene silencing approach possesses transformational potential.

mRNA is aptly suited for vaccines. It is not hard to understand why, if one imagines working upstream at a genetic level to build defenses against antigens. Moderna and BioNTech were already focused on vaccines for various diseases including cancer vaccines, as opposed to therapeutics or drug treatments. As the speed of development and efficacy rate of COVID-19 mRNA vaccines has shown, this is a breakthrough platform and no longer a concept.

Alnylam Pharmaceuticals (ALNY) has led the charge in RNAi therapeutics when its drug Onpattro was approved in 2019, the first RNAi drug to receive the FDA blessing. It now has a growing stable of approved RNAi drugs, including the cholesterol drug Inclisiran (renamed Leqvio) which is now owned by Novartis. Arrowhead Pharmaceuticals (ARWR) has a number of meaningful programs with data readouts this year. A few others in this growing field include Dicerna (DRNA), Translate Bio (TBIO), and Arcturus Therapeutics (ARCT).

Prudentbiotech.com ~ Strong Man

Time Is The Biggest Enemy

Gene editing continues to transform medicine not only for genetics-based diseases but also in search of new drug discoveries for old maladies. Clinical trials of genome editing agents including CRISPR editors and zinc finger nucleases continue to grow. The list of players is ever-expanding from Crispr Therapeutics (CRSP), which has a partnership with Vertex Pharmaceuticals (VRTX), Editas Medicine (EDIT), and Intellia Therapeutics (NTLA), being a few. A number of smaller public and private companies are using variants of CRISPR gene-editing to make the approach more robust, precise, and less risky. Last month, Eli Lilly acquired Prevail Therapeutics (PRVL), a gene therapy player in the neurology area.


CAR-T cell therapies in oncology are advancing rapidly and also broadening out to include more clinical trials of allogeneic products, which are off-the-shelf cells as opposed to autologous products that are unique to the patient, that reduce manufacturing challenges and significantly reduce costs. There are more than 600 clinical trials ongoing in CAR-T cell therapies. Management consulting firm McKinsey forecasts CAR T-cell therapies to go from less than $1 billion in global revenues a year ago to over $10 billion in 2024.


Oncology Remains The Leading Investing Area and Neurology The Most Baffling

The fight for a cure for cancer continues with Oncology receiving the most funding in private and public financings, and the most M&A related deal activity, by far. Neurological diseases and rare diseases are also high on the list of attracting investing dollars.

Prudent Biotech.com ~ Cell

Advances on major neurological diseases, like Alzheimer's and Parkinson's, continue to be difficult and rigorous, and it's an area where progress appears to be defined more by learning what doesn't work. The beta-amyloid hypothesis is a perfect illustration. The theory postulates that the protein creates plaques in the brain, causing Alzheimer's, and thus its reduction can prevent or rollback the disease. After decades and billions of dollars spent in research, each outcome has just proven this hypothesis to be wrong, and some large players have exited from this approach. Biogen (BIIB) has continued to go down this path and may receive key approval in January for its drug Aducanumab to treat mild-Alzheimer's. If granted, it will be the first approved treatment for Alzheimer's disease and a material valuation enhancing event for biotechs.

- Strengthening M&A Activity

Biotechs are amongst the most active M&A industry groups. That's the nature of the industry - positive outcomes in mid-and-late-stage trials, particularly in oncology, can elicit strong interest from pharmaceuticals.

Prudentbiotech.com ~ Graph

As the pandemic struck, the M&A activity ebbed rapidly and in the first half of 2020 less than $10 billion of transactions were done. This changed in the second half as nearly $100 billion of deals were recorded.

Prudentbiotech.com ~ Biotech M&A 2020

A significantly more normalized environment in 2021, as the pandemic's grip weakens, low-cost money, and declining returns on internal R&D for big pharmaceuticals, are going to be highly supportive of M&A activity.

Regulatory Environment

The drug pricing issue, dormant for now, will re-emerge later in 2021 as the pandemic subsides. It may come to the forefront briefly this month as the companies put through the annual drug price increases in January. So far this month, prices for nearly 600 drugs have been raised by an average of 4.2%. This compares to January price increases for 639 drugs by an average of 6% in 2020.

There have been efforts in the waning days of the Trump Presidency to introduce new Executive Orders (EO) to reset prices. In late November, the administration had announced a policy to base the Medicare prices for 50 drugs on the lowest price paid by a group of developed nations. Another policy was aimed at eliminating drug rebates paid out to middlemen by drug companies. These policies are vulnerable to legal challenges from the industry, which is against any type of price control and indexing. It is unclear how the incoming Biden administration will deal with the EOs.

PrudentBiotech.com ~ Covid 19 medicine 2020

It can't be denied that healthcare costs are the number one public interest issue. However, the issue enjoys bipartisan support only in principle, and the paths to address healthcare costs being proposed by the two parties are poles apart. With Democrats now holding a thin majority in Congress, sweeping changes may not be possible. One would believe there will be meaningful moves, but incremental ones. Thus, the needle may not move meaningfully at least during 2021, and the impact on the healthcare industry will be restrained.

However, the threat of greater regulation is an overarching risk with the potential to upend the industry dynamics eventually in the years ahead.

Outlook

A young bull market operating in a market environment of benign monetary policy and trillions of fiscal stimulus will continue to attract money to the higher-risk and more volatile segments of the market like biotechs.

Fundamentally, biotechs continue to be well-positioned based on promising scientific advances. Technically, a breakout after a 5-year, long-term consolidation augurs well for biotechs and promises sustained gains over 2021. We anticipate the Nasdaq Biotech Index to record another 20+% return in 2021. The return expectation is simply a general framework and will need to be adjusted if market conditions deviate significantly from current expectations.

Prudentbiotech.com ~ Stock Market, Shutterstock

There will be meaningful opportunities to materially outperform the indexes. But there will be times when reducing the exposure may be best, based on the investment approach. Biotechs being a high risk-reward industry, the risk management part is quite important to build returns over time. Investors need to pursue a concrete investment strategy in biotechs, preferring a portfolio approach by investing in a basket of promising biotech companies that can assist in managing risk and overcoming mistakes that do happen.

A couple of key events to watch for in January would be the J.P. Morgan Healthcare Conference from January 11 to 14, which helps healthcare valuations, and an FDA decision on Aducanumab.

A few promising biotech companies, some of which may be now or in the past part of Prudent Healthcare or Prudent Biotech model portfolios, include Moderna, Allakos (ALLK), Denali Therapeutics (DNLI), Arrowhead Pharmaceuticals (ARWR), Fate Therapeutics (FATE), Crispr Therapeutics, Rocket Pharmaceuticals (RCKT), TG Therapeutics (TGTX), Arvinas (ARVN), Kodiak Sciences (KOD), BridgeBio Pharma (BBIO), Five Prime Therapeutics (FPRX), Beam Therapeutics (BEAM), Intellia Therapeutics (NTLA), Precigen (PGEN), Scholar Rock (SRRK), Trillium Therapeutics (TRIL), and Editas (EDIT).

Industry exposure can also be acquired through ETFs like IBB, which tracks the Nasdaq Biotech Index, and XBI which tracks the S&P Biotechnology Select Index. Biotech investing is volatile and high-risk. Investors should pursue a concrete investment strategy preferring a portfolio approach by investing in a basket of promising companies that can assist in managing risk and overcoming mistakes.


The article was published on Seeking Alpha.

The post Biotech Bonanza: 2021 Outlook In A Post-Pandemic Year appeared first on Prudent Biotech.

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Analyst reviews Apple stock price target amid challenges

Here’s what could happen to Apple shares next.

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They said it was bound to happen.

It was Jan. 11, 2024 when software giant Microsoft  (MSFT)  briefly passed Apple  (AAPL)  as the most valuable company in the world.

Microsoft's stock closed 0.5% higher, giving it a market valuation of $2.859 trillion. 

It rose as much as 2% during the session and the company was briefly worth $2.903 trillion. Apple closed 0.3% lower, giving the company a market capitalization of $2.886 trillion. 

"It was inevitable that Microsoft would overtake Apple since Microsoft is growing faster and has more to benefit from the generative AI revolution," D.A. Davidson analyst Gil Luria said at the time, according to Reuters.

The two tech titans have jostled for top spot over the years and Microsoft was ahead at last check, with a market cap of $3.085 trillion, compared with Apple's value of $2.684 trillion.

Analysts noted that Apple had been dealing with weakening demand, including for the iPhone, the company’s main source of revenue. 

Demand in China, a major market, has slumped as the country's economy makes a slow recovery from the pandemic and competition from Huawei.

Sales in China of Apple's iPhone fell by 24% in the first six weeks of 2024 compared with a year earlier, according to research firm Counterpoint, as the company contended with stiff competition from a resurgent Huawei "while getting squeezed in the middle on aggressive pricing from the likes of OPPO, vivo and Xiaomi," said senior Analyst Mengmeng Zhang.

“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now," he said.

A man scrolling through Netflix on an Apple iPad Pro. Photo by Phil Barker/Future Publishing via Getty Images.

Future Publishing/Getty Images

Big plans for China

Counterpoint said that the first six weeks of 2023 saw abnormally high numbers with significant unit sales being deferred from December 2022 due to production issues.

Apple is planning to open its eighth store in Shanghai – and its 47th across China – on March 21.

Related: Tech News Now: OpenAI says Musk contract 'never existed', Xiaomi's EV, and more

The company also plans to expand its research centre in Shanghai to support all of its product lines and open a new lab in southern tech hub Shenzhen later this year, according to the South China Morning Post.

Meanwhile, over in Europe, Apple announced changes to comply with the European Union's Digital Markets Act (DMA), which went into effect last week, Reuters reported on March 12.

Beginning this spring, software developers operating in Europe will be able to distribute apps to EU customers directly from their own websites instead of through the App Store.

"To reflect the DMA’s changes, users in the EU can install apps from alternative app marketplaces in iOS 17.4 and later," Apple said on its website, referring to the software platform that runs iPhones and iPads. 

"Users will be able to download an alternative marketplace app from the marketplace developer’s website," the company said.

Apple has also said it will appeal a $2 billion EU antitrust fine for thwarting competition from Spotify  (SPOT)  and other music streaming rivals via restrictions on the App Store.

The company's shares have suffered amid all this upheaval, but some analysts still see good things in Apple's future.

Bank of America Securities confirmed its positive stance on Apple, maintaining a buy rating with a steady price target of $225, according to Investing.com

The firm's analysis highlighted Apple's pricing strategy evolution since the introduction of the first iPhone in 2007, with initial prices set at $499 for the 4GB model and $599 for the 8GB model.

BofA said that Apple has consistently launched new iPhone models, including the Pro/Pro Max versions, to target the premium market. 

Analyst says Apple selloff 'overdone'

Concurrently, prices for previous models are typically reduced by about $100 with each new release. 

This strategy, coupled with installment plans from Apple and carriers, has contributed to the iPhone's installed base reaching a record 1.2 billion in 2023, the firm said.

More Tech Stocks:

Apple has effectively shifted its sales mix toward higher-value units despite experiencing slower unit sales, BofA said.

This trend is expected to persist and could help mitigate potential unit sales weaknesses, particularly in China. 

BofA also noted Apple's dominance in the high-end market, maintaining a market share of over 90% in the $1,000 and above price band for the past three years.

The firm also cited the anticipation of a multi-year iPhone cycle propelled by next-generation AI technology, robust services growth, and the potential for margin expansion.

On Monday, Evercore ISI analysts said they believed that the sell-off in the iPhone maker’s shares may be “overdone.”

The firm said that investors' growing preference for AI-focused stocks like Nvidia  (NVDA)  has led to a reallocation of funds away from Apple. 

In addition, Evercore said concerns over weakening demand in China, where Apple may be losing market share in the smartphone segment, have affected investor sentiment.

And then ongoing regulatory issues continue to have an impact on investor confidence in the world's second-biggest company.

“We think the sell-off is rather overdone, while we suspect there is strong valuation support at current levels to down 10%, there are three distinct drivers that could unlock upside on the stock from here – a) Cap allocation, b) AI inferencing, and c) Risk-off/defensive shift," the firm said in a research note.

Related: Veteran fund manager picks favorite stocks for 2024

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Major typhoid fever surveillance study in sub-Saharan Africa indicates need for the introduction of typhoid conjugate vaccines in endemic countries

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high…

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There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

Typhoid Conjugate Vaccine Introduction in Madagascar vaccination

Credit: IVI

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

 

The findings from this 4-year study, the Severe Typhoid in Africa (SETA) program, offers new typhoid fever burden estimates from six countries: Burkina Faso, Democratic Republic of the Congo (DRC), Ethiopia, Ghana, Madagascar, and Nigeria, with four countries recording more than 100 cases for every 100,000 person-years of observation, which is considered a high burden. The highest incidence of typhoid was found in DRC with 315 cases per 100,000 people while children between 2-14 years of age were shown to be at highest risk across all 25 study sites.

 

There are an estimated 12.5 to 16.3 million cases of typhoid every year with 140,000 deaths. However, with generic symptoms such as fever, fatigue, and abdominal pain, and the need for blood culture sampling to make a definitive diagnosis, it is difficult for governments to capture the true burden of typhoid in their countries.

 

“Our goal through SETA was to address these gaps in typhoid disease burden data,” said lead author Dr. Florian Marks, Deputy Director General of the International Vaccine Institute (IVI). “Our estimates indicate that introduction of TCV in endemic settings would go to lengths in protecting communities, especially school-aged children, against this potentially deadly—but preventable—disease.”

 

In addition to disease incidence, this study also showed that the emergence of antimicrobial resistance (AMR) in Salmonella Typhi, the bacteria that causes typhoid fever, has led to more reliance beyond the traditional first line of antibiotic treatment. If left untreated, severe cases of the disease can lead to intestinal perforation and even death. This suggests that prevention through vaccination may play a critical role in not only protecting against typhoid fever but reducing the spread of drug-resistant strains of the bacteria.

 

There are two TCVs prequalified by the World Health Organization (WHO) and available through Gavi, the Vaccine Alliance. In February 2024, IVI and SK bioscience announced that a third TCV, SKYTyphoid™, also achieved WHO PQ, paving the way for public procurement and increasing the global supply.

 

Alongside the SETA disease burden study, IVI has been working with colleagues in three African countries to show the real-world impact of TCV vaccination. These studies include a cluster-randomized trial in Agogo, Ghana and two effectiveness studies following mass vaccination in Kisantu, DRC and Imerintsiatosika, Madagascar.

 

Dr. Birkneh Tilahun Tadesse, Associate Director General at IVI and Head of the Real-World Evidence Department, explains, “Through these vaccine effectiveness studies, we aim to show the full public health value of TCV in settings that are directly impacted by a high burden of typhoid fever.” He adds, “Our final objective of course is to eliminate typhoid or to at least reduce the burden to low incidence levels, and that’s what we are attempting in Fiji with an island-wide vaccination campaign.”

 

As more countries in typhoid endemic countries, namely in sub-Saharan Africa and South Asia, consider TCV in national immunization programs, these data will help inform evidence-based policy decisions around typhoid prevention and control.

 

###

 

About the International Vaccine Institute (IVI)
The International Vaccine Institute (IVI) is a non-profit international organization established in 1997 at the initiative of the United Nations Development Programme with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health.

IVI’s current portfolio includes vaccines at all stages of pre-clinical and clinical development for infectious diseases that disproportionately affect low- and middle-income countries, such as cholera, typhoid, chikungunya, shigella, salmonella, schistosomiasis, hepatitis E, HPV, COVID-19, and more. IVI developed the world’s first low-cost oral cholera vaccine, pre-qualified by the World Health Organization (WHO) and developed a new-generation typhoid conjugate vaccine that is recently pre-qualified by WHO.

IVI is headquartered in Seoul, Republic of Korea with a Europe Regional Office in Sweden, a Country Office in Austria, and Collaborating Centers in Ghana, Ethiopia, and Madagascar. 39 countries and the WHO are members of IVI, and the governments of the Republic of Korea, Sweden, India, Finland, and Thailand provide state funding. For more information, please visit https://www.ivi.int.

 

CONTACT

Aerie Em, Global Communications & Advocacy Manager
+82 2 881 1386 | aerie.em@ivi.int


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US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever… And Debt Explodes

US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever… And Debt Explodes

Earlier today, CNBC’s…

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US Spent More Than Double What It Collected In February, As 2024 Deficit Is Second Highest Ever... And Debt Explodes

Earlier today, CNBC's Brian Sullivan took a horse dose of Red Pills when, about six months after our readers, he learned that the US is issuing $1 trillion in debt every 100 days, which prompted him to rage tweet, (or rageX, not sure what the proper term is here) the following:

We’ve added 60% to national debt since 2018. Germany - a country with major economic woes - added ‘just’ 32%.   

Maybe it will never matter.   Maybe MMT is real.   Maybe we just cancel or inflate it out. Maybe career real estate borrowers or career politicians aren’t the answer.

I have no idea.  Only time will tell.   But it’s going to be fascinating to watch it play out.

He is right: it will be fascinating, and the latest budget deficit data simply confirmed that the day of reckoning will come very soon, certainly sooner than the two years that One River's Eric Peters predicted this weekend for the coming "US debt sustainability crisis."

According to the US Treasury, in February, the US collected $271 billion in various tax receipts, and spent $567 billion, more than double what it collected.

The two charts below show the divergence in US tax receipts which have flatlined (on a trailing 6M basis) since the covid pandemic in 2020 (with occasional stimmy-driven surges)...

... and spending which is about 50% higher compared to where it was in 2020.

The end result is that in February, the budget deficit rose to $296.3 billion, up 12.9% from a year prior, and the second highest February deficit on record.

And the punchline: on a cumulative basis, the budget deficit in fiscal 2024 which began on October 1, 2023 is now $828 billion, the second largest cumulative deficit through February on record, surpassed only by the peak covid year of 2021.

But wait there's more: because in a world where the US is spending more than twice what it is collecting, the endgame is clear: debt collapse, and while it won't be tomorrow, or the week after, it is coming... and it's also why the US is now selling $1 trillion in debt every 100 days just to keep operating (and absorbing all those millions of illegal immigrants who will keep voting democrat to preserve the socialist system of the US, so beloved by the Soros clan).

And it gets even worse, because we are now in the ponzi finance stage of the Minsky cycle, with total interest on the debt annualizing well above $1 trillion, and rising every day

... having already surpassed total US defense spending and soon to surpass total health spending and, finally all social security spending, the largest spending category of all, which means that US debt will now rise exponentially higher until the inevitable moment when the US dollar loses its reserve status and it all comes crashing down.

We conclude with another observation by CNBC's Brian Sullivan, who quotes an email by a DC strategist...

.. which lays out the proposed Biden budget as follows:

The budget deficit will growth another $16 TRILLION over next 10 years. Thats *with* the proposed massive tax hikes.

Without them the deficit will grow $19 trillion.

That's why you will hear the "deficit is being reduced by $3 trillion" over the decade.

No family budget or business could exist with this kind of math.

Of course, in the long run, neither can the US... and since neither party will ever cut the spending which everyone by now is so addicted to, the best anyone can do is start planning for the endgame.

Tyler Durden Tue, 03/12/2024 - 18:40

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