Stock markets survived Shemini Atzereth (yesterday) and will probably survive the weekend.

After my Weds. screed about the dropping oil price, a long-term reader wondered if I was assuming that the Saudi acceptance of an oil price drop truly had been coordinated with US oil companies and the Arabists of Foggy Bottom.

I assumed this based on what I called “rule-based” behavior guidelines.

As always there was coordination. The oil majors are not exactly enthusiastic about a lot of shale players bringing on new oil and gas in the USA which reduces their market clout. Shale is like alternative energy, and fuel-saving in power plants, autos, and homes. It cuts our dependence on the House of Saud.

Our Dept of State however needs the Saudi regime to continue to act as a friendly ballast in the region, which requiresthat Riyadh have enough money after royal excesses to keep its population happy and fund alternatives to Islamist extremists, Moslem Brothers, and dissidents around the Gulf and the Middle East overall.

But there is another factor. As more and more shale-extraction technology develops, the cost (and the environmental risks) go down sharply. Experience pays. More on this for paid subscribers below.

Again please do not extrapolate for other commodity prices from the sagging price of crude oil. Copper, iron ore, and even gold are doing better in the present confusion. Crude oil is in a bear market, off 20% this autumn.

Reincarnated As The Bond Market

For the stock market conniptions of the past two weeks, lower oil prices were a sideline in the panicky and bizarre sell-offs.

I am reminded of the famous quip by James Carville: “If there was reincarnation, now I want to come back as the bond market. You can intimidate everybody.”

After the exit of Bill Gross from Pimco bond markets were hit with unseemly volatility. Much debt was suddenly for sale because the Pimco had to find cash to pay out withdrawals from its fund after it lost its inflation guru. This initially crushed bond prices.

Coupled with hints that the QE wind-down here would be delayed, and a mounting conviction that there will be more bond-buying in other countries (including the European Community), bond yields alternatively trended up (which pushed their prices down yields) and then fell which improved their yields. The resulting volatility hit stock markets around the world.

More from The Netherlands, both good and bad news, plus updates from Britain, Denmark, Norway, Switzerland, Israel, Ireland, Belgium, and Spain.

Franco-Dutch and “Yipes!”

*In London trading today Schlumberger Ltd shares rose 8.6% after SLB reported yesterday after markets closed. In US trading so far the stock is up 5.7% today, having fallen back from a rise at the opening of over 8%. It will soon test $100. Its share price hovered around $90 and change yesterday but rose 1.5% in the aftermarket here. This kind of movement is very hard to keep up with, so we just buy and hold.

Besides reporting sale up 9% to $12.65 bn in Q3, the Dutch wellhead services firm also told the world that neither Russian sanctions nor lower oil prices have hurt its sales. Net profit figures were even higher, because of cost controls, up 13.6% at $1.95 bn. The main reason, as you might have guessed, was the revival of the North American market, where sales rose 18% to account for more than a third of the total. All that shale drilling an d spending on production from existing wells, motivated by the need facing oil and gas companies for more volume to offset lower prices meant they used more SLB services. SLB is not cheap like oil companies but it trades at a low p/e ratio for the oildfield services giant, about 19x. It yields 1.6%. It is run by a Norwegian and its dominant shareholders are French. Morningstar says the shares are worth $145.

*Our Gemalto expert, Harry Geisel, lacked his usual aplomb when Reuters reported that Apple's new iPad Air 2 swipe-able SIM card may challenge the “moat” the digital security firm has with its smart chips for mobile phones. He wrote “yikes!” about another Franco-Dutch firm, GTOMY, added to our list last month.

Since then it was already down ~20%. Now there are fears for its euros expected 400 mn in sales from installing chips and managing payments for mobile phones. Apple Pay now will be offering its own icon-swiping option for Visa and Mastercard. GTOMY will report Oct. 23 and Harry will have to decide what we do. Total Gemalto payment services telco sales are targeted to reach euros 1 bn by 2017, a number which may have to be revised downward. In US trading GTOMY lost another 5.6% so far today after early losses at the opening of nearly double that level.

After H1's lower earnings on flat revenues, GTOMY reiterated its full-year targets of double-digit growth in profits from operations. That is why we are waiting for the next quarterly. Tech has no monopolies or moats for long.

*To comfort Harry, who besides covering stocks is also a renowned lox gourmet, his tip of Marine Harvest (MHG) on these pages was echoed last month by Benjamin Shepherd in Global Income Edge, a publication of Investing Daily. Mr Shepherd's views were reported by Dick Davis Income Digest.

The Norwegian firm is maintaining its divvie despite not making money in Q2 because of sea lice in rival offshore salmon ponds in Norway which pushed down the price of fish, one reason it is a curious pick for income. Another is that while the share price is going up nicely, the dividend comes and goes because MHG only pays shareholders if debt is under half of equity, at a rate of 75% of free cash flow. The company is part of the empire of John (ne Jan) Fredriksen and it omitted its dividend in 2012 and last year paid less out than in 2011.

Mr. Shepherd thinks growth will cover this spotty record, enthusiastic because MHG is now making its own salmon food from junk fish (and farmed salmon waste for salmon cannibals). This he calls upstream expansion. Harry was more hungry for downstream expansion, into ready meals and smoked salmon and different cuts of fish. Note that Norway has a very active salmon futures market which a savvy oil trade like Fredriksen uses to smooth out or hedge prices. For whatever it is worth, the DDD article and a revival of European markets boosted MHG.

Corn Stalks and Leaves

*Abengoa from Spain inaugurated its innovative new cellulose ethanol plant yesterday near Dodge City, Kansas, fed by biomass like corn stalks and leaves, rather than the food or feed grain itself. ABGB is Spanish but the US Secretary of Energy, Ernest Muniz, and ex-Secy of the Interior Ken Salazar both attended along with a slew of Kansans. In addition to ethanol from what ABGB calls a “second generation” enzymatic hydrolysis technology, which is patented, the plant also co-generates 21 megaWatts electricity to power its plant and also provide cheap renewable power to Stevens County. This first commercial-scale US ethanol facilities provides alternative fuel and simulataneously reduces greehouse gases.

Biotech Babies

*The latest non-US biotech ipo hit this morning, for Xenon Pharmaceuticals, and no we are not able to buy nor would we want to. The Canadian firm is selling only about 30% of its outstanding shares, at around $12/sh and Teva is buying $10 mn of the issue. The underwriters, Jefferies and Canaccord Genuity have green shoe options, why I am being value about the price and the amount at offer. These kinds of startups have a tendency to return to the well for more money as the first batch runs out. XENE studies rare diseases to figure out how to cure others, with a lipoproteine lipase drug, Glybera, already on some markets and paying milestones to XENE. It works on orphan drugs research into mutations in the ion channels (AKA channelopogies.) The sellers are private equity funds and insiders.

*Your editor feels that our dud Australian gene silencing vaccine developer, with patents on DNA-directed RNA interference (ddRNAi) is less hyped. Benitech Biopharma has been widely short-sold Down Under and is under attack from a mad scientist who writes poison pen latters to those daring to recommend BTEBY (like me).

*I also recommend Compugen, CGEN, a more visible Israeli share on Q, which is working on cancer immunotheraphy with drug major Bayer which has now paid two useful milestones (which save having to go to the well). It uses immune checkpoint (regulator) proteins it finds “in silico” (in databases it has collected) for further research. After test tube and sometimes animal use it peddles its finds to the big pharma shops which prefer to do their in-house R&D in a more limited way to cut costs from the old model, letting the scientists look into whatever interests them.

*Following the Shire-AbbVie divorce, shareholders of Alkemes plc, loaded up on its stock, with CEO Richard F. Pops doubling his holdings to a half million shares according to reports to the Dublin Stock Exchange. Insiders sell for many reasons; the buy because they think they will make money, and usually know more than other shareholders. ALKS.

*And of course there is still Galapagos NV, named after the Ecuadorian islands where Darwin discovered how closely related finch species became differentiated from one island to the next, a key to his theory of evolution. GLPYY which usually trades better as GLPGF, based on the Belgian share, develops rheumatoid arthritis and cancer meds. One batch work on a novel mode of action based on selective inhibition of JAK-1, (Janus kinase 1, a signaling tyrosine kinase protein.) The RA drug is in phase 3 trials financed by a sub of Johnson & Johnson). GLPGF also is working on other auto-immune diseases like Crohn's disease with AbbVie, and ulcerative colitis and psoriasis with GlaxoSmithKline. Despite all these contracts, GLPGF also goes regularly to the well seeking more money by issuing more shares. Earlier this month it reported on a biomolecular corrector for some of the mutations which cause cystic fibrosis, funded by the CF Foundation. Combined with a potentiator, in test tubes the corrector opens up a way to stop the most common CF mutation, F508del. It plans phase I trials before the year ends when pre-clinical studies have been completed.

So we are, for now, leaving Xenon to others.

Drug Majors

*As a stock people love to hate, GSK was off today by 2.6% in its home market, London. However, it is up 1.8% here in the former colony.

*However, stock people love like Novo Nordisk and Novartis, both recent recommendations, are up 4% and 2% respectively.

NVO is the global insulin giant and is moving into weight control drugs, as we already have reported. It is also up because the Nordic region is more upbeat than the rest of Europe. NVO is primarily listed in Copenhagen. Morningstar thinks the share is ~10% below the fair value of assets.

NVS a reformed Swiss vulture drug firm. Novartis may be gaining because its psoriasis jab secukinumab which blocks interleukin-17 inflammation looks likely to be okayed by the full FDA following the views of a review committee. It may also work against spodylitis and rheumatoid arthritis.

Even more importantly, a leukemia drug it is developing seems to be whalloping no-hope patient cases of treatment-resistant acute lymphoblastic leukemia in little kids. The trials was held with personalized CTL019 tailor made for each patient's T-cells. Nearly 90% of the patients achieved complete remissions and 78% the treated kids were still alive after 6 months and the drug now moves to more phase 2 under FDA “breakthrough status” before the launch of phase 3. The personalized T-cells were not fun to take because they cause a cytokine storm which in some cases required hospitalization. But the doctors now know they can handle this with an immuno-suppressent which blocks IL-6, tocilizomab

*Teva may get a confused ruling from the US Supremes over its patent expiry suit against clones over Copaxone (its blockbuster). The questioning has led your editor to say “first kill all the lawyers.” The US high court seems to be splitting between those who want to send the case back to the appeats court, which ruled against TEVA and those who want to send the case back to the lower court which upheld the patent. In theory the appeals court should have revisited all the logic of the lower court ruling, which was lengthy and detailed, but it did not do so. It just overruled the patent extension. Teva has a renowned legal bench but it may also gain because it converted many multiple sclerosis patients to a new 3x/week protocol for administering Copaxone, which will hold its patent longer.

Samba Update

*Cosan and Vale are em cima today perhaps because of another poll for the election Sunday week, perhaps in reaction to the resto do mundo. CZZ, VALE.