Whew -- lot to talk about today.
First -- more comments. Ming says, "How much faith can one have in a government that encourages recklessness and irresponsibility... There are banks that are out there that are doing fine in this "crisis", why? because they weren't reckless and minimized their risk. As long as some of the banks are able to survive, the remaining ones need to go, even it wipes out the stockholders. (Sorry stocks are a gamble, always have been, always will be)"
You know what? I agree for the most part. The government is very much guilty of encouraging reckless behaviour. The tax code gives free reign to hedge funds, entitlements are out of control, pork is out of control*1, and Congresspeople actually left Washington on Monday after killing the first bill so they could go home and campaign, instead of staying around to fix the "worst crisis since the Great Depression". The FED and SEC and FDA are all
bureaucracies that put their own agendas before the public's.
Also correct is that some banks should certainly go under if they cannot compete -- that is absolutely the risk stockholder face.
(I do NOT agree that stocks are a gamble. The market can act like a casino, especially to short timers who go "all in" or misuse options. But I don't think ANYONE would say Warren Buffet is a gambler. *grin*)
I actually think the worst offenders are WE the people ourselves (in the overall sense, not you, or me, personally, of course). As Ming put it in an email, the sheer chuztpah of the folks who took mortgages they either did not understand the terms of OR couldn't repay, OR both! And to compound their sin, they then used their homes as an ATM -- buying cars and material goods on the soaring equity -- only to see it crash and walk away, leaving $750K mortgages on homes now worth $300K. And elected officials wouldn't keep enlarging entitlement programs if we didn't have our hands out. We need to look in the mirror and realize the present is a direct reflection of our past behaviour.
That said, I am seeing more and more clearly that a bailout/rescue is needed. Yes, it would be healthy for the economy in some respects to have a severe correction; some corporations ought to be bought out by others. But the staggering loss of jobs, mass foreclosures that would blight neighborhoods, and human cost argue to me that something is needed on the federal level.
Ming -- is it "fair"**2 to those who kept their debts reasonable, and lived within their means, to see those who did not saved? Of course not! But at some point fairness goes out the window to prevent a national disaster.
We should take this time however, to really look at what led us here and how to prevent similar situations in the future. It sounds like the mark-to-market rule is being suspended temporarily. The SEC supposedly is extending the no-short-selling ban on the financial companies***3 until Oct 17. We need plenty more of these kinds of actions -- I strongly encourage people to let their congresspeople know exactly what they want NOW -- they actually seem to be listening, for the moment.
The VP debates are tomorrow at 6 PDT. Watch them and learn more about the views of whoever is to be our future vice-president!
Regards,
Trond
---
* The current bailout bill passed tonight by the Senate used to be 3 pages. Now it is something like 456 pages, and 200 pages of that is pure pork, as an incentive to get votes. Among other things, THEY ARE REVOKING A $.39 TAX ON CHILDRENS' BOW AND ARROW, ARROW SHAFTS. Which Senator's kid uses arrows in bulk? This one move loses $200K in estimated revenue a year. Obama and McCain****4 both voted for the bailout.
** I don't think it "fair" that my tax dollars go to subsidize Ted Turner's peanut farm, for example.
*** And why the HELL is it limited to 700 odd "financial" companies (of which IBM and GE now qualify!!)?? If the SEC is now FINALLY acknowledging that short selling is harmful (thank you Patrick Byrne!) then the Equal Protection clause, and well as "fairness" demands all companies should be similarly protected.
**** There goes his argument that he never votes for pork. :-)
Showing posts with label short selling. Show all posts
Showing posts with label short selling. Show all posts
Wednesday, October 1, 2008
Thursday, September 25, 2008
Bailout and mark-to-market
Here’s the reason all these institutions are failing. Recent changes in the way that financial companies have to account for the loans on their books require them to value their debt at a “mark-to-market.”
This is a fancy way to say that whatever the market value of the debt is, that is what they have to say its worth. Now that the housing market is on the skids, a high risk, non-performing loan a bank made for $600,000 might only be sold for $400,000. Thus, that “loses” a third of its worth.
Remember that these are not really individual loans that we are talking here, but the CDOs that were packaged together and sold as asset-backed securities. But most people can more easily picture it in individual terms.
I do not support the government directly bailing out public companies. However, to prevent massive foreclosures and the resulting REAL pain from homeowners (yes, even silly ones who took on much more debt than they can repay), here’s an idea.
Until June 30, 2009, allow the government to refinance any home loan at today’s market value. The terms are really simple: 6% interest for ANY credit score, at 30 years, plus allowing up to 12 payments to be interest-only (pushing the loan out as many months).
We as taxpayers would eat a large chunk of change immediately; the loan mentioned above would cost $600,000 and we would only make P&I back slowly. But the taxpayers would recoup some costs over time and may even make money. With amount of bad debt of their backs, banks would not experience the credit freeze that they see now.
Part and parcel of this would be to change the mark-to-market rule. And hey, let’s throw in SEC rules to prevent ANY short selling while we’re at it.
Regards,
Trond
This is a fancy way to say that whatever the market value of the debt is, that is what they have to say its worth. Now that the housing market is on the skids, a high risk, non-performing loan a bank made for $600,000 might only be sold for $400,000. Thus, that “loses” a third of its worth.
Remember that these are not really individual loans that we are talking here, but the CDOs that were packaged together and sold as asset-backed securities. But most people can more easily picture it in individual terms.
I do not support the government directly bailing out public companies. However, to prevent massive foreclosures and the resulting REAL pain from homeowners (yes, even silly ones who took on much more debt than they can repay), here’s an idea.
Until June 30, 2009, allow the government to refinance any home loan at today’s market value. The terms are really simple: 6% interest for ANY credit score, at 30 years, plus allowing up to 12 payments to be interest-only (pushing the loan out as many months).
We as taxpayers would eat a large chunk of change immediately; the loan mentioned above would cost $600,000 and we would only make P&I back slowly. But the taxpayers would recoup some costs over time and may even make money. With amount of bad debt of their backs, banks would not experience the credit freeze that they see now.
Part and parcel of this would be to change the mark-to-market rule. And hey, let’s throw in SEC rules to prevent ANY short selling while we’re at it.
Regards,
Trond
Byrne on the bailout
Patrick Byrne, President of Overstock and one of the first to publicly talk about the dangers of naked short selling (3+ years ago!!) commented last night about the proposed bailout. There is a link at the end to sign an e-petition if these are things you agree with.
Please take 1 minute to sign! You will get an email that you have to respond to, to confirm your signature. Thanks!
-Trond
SALT LAKE CITY, Sept. 24 /PRNewswire-FirstCall/ -- Overstock.com, Inc. (Nasdaq: OSTK) chairman and CEO Patrick M. Byrne comments on President Bush's September 24, 2008 speech outlining the President's market rescue plan.
Dr. Byrne commented: "This bailout is necessary to save the bacchanal that is our US financial system. However, at the core of the administration's plan is the assumption that Wall Street is worth saving. It is not. For years Wall Street has bossed Washington, DC around like they're hired flunkies, while preying on Main Street businesses and investors.
The federal government should use this opportunity to extract from Wall Street concessions that could never be extracted were Washington in its customary subordinate position. "If American taxpayers are to bailout the Power Elite, they should attach conditions. Taxpayers should share in any upside, and gaping flaws in the current system should be fixed. Towards that end, I believe that any bailout legislation should include at least the following protections:
1. Taxpayers need to share in the upside if the bailout works, to compensate them for the risk that the administration is forcing them to take. This could be accomplished through warrants on shares in the firms being bailed out, such as those Mr. Buffett extracted from Goldman Sachs.
2. The government should impose a tax on those that benefit most from bailout -- Wall Street itself. Perhaps a 0.25% transaction tax on all securities trades is in order? Such a tax would be insignificant to investors, while be largely borne by those that are merely speculators - including those that churn trades in an attempt to manipulate the markets.
3. Bailout or none, the government must fix underlying problems in our capital market. The fixes includes:
a. Reforming our stock settlement system so that trades actually settle promptly, precisely as Congress stipulated in 1934. This can be accomplished by putting in place a market-wide mandatory pre-borrow requirement (like the SEC did in the 30-day July 15, 2008 emergency order that protected the 19 financial institutions);
b. Creating the obligation that if a naked short seller fails to deliver a share, the broker-dealer must force a mandatory buy-in (as is done in civilized countries, such as Canada);
c. Tracking trades cradle-to-grave (rather than net blocks of trades against each other), so that it is obvious who the naked short sellers are and the total amounts they are stealing;
d. Providing regular, timely disclosure of when and how many shares have failed to deliver;
e. Enforcing the rules, including significant monetary penalties and jail time.
"Keynes said that an ocean of productivity can support a bubble of speculation, but an ocean of speculation cannot support a bubble of productivity. Washington has been captured by speculators at the expense of producers.
I have long been talking about systemic risk and potential financial crisis (see http://www.youtube.com/watch?v=SIHw7C73s3E for a three- minute video from as early as October 2005). I am proposing specific steps to fix the system. For those that agree with these fixes which protect Main Street Americans, I ask you to sign the electronic petition at http://mainstreetamericans.info."
Please take 1 minute to sign! You will get an email that you have to respond to, to confirm your signature. Thanks!
-Trond
SALT LAKE CITY, Sept. 24 /PRNewswire-FirstCall/ -- Overstock.com, Inc. (Nasdaq: OSTK) chairman and CEO Patrick M. Byrne comments on President Bush's September 24, 2008 speech outlining the President's market rescue plan.
Dr. Byrne commented: "This bailout is necessary to save the bacchanal that is our US financial system. However, at the core of the administration's plan is the assumption that Wall Street is worth saving. It is not. For years Wall Street has bossed Washington, DC around like they're hired flunkies, while preying on Main Street businesses and investors.
The federal government should use this opportunity to extract from Wall Street concessions that could never be extracted were Washington in its customary subordinate position. "If American taxpayers are to bailout the Power Elite, they should attach conditions. Taxpayers should share in any upside, and gaping flaws in the current system should be fixed. Towards that end, I believe that any bailout legislation should include at least the following protections:
1. Taxpayers need to share in the upside if the bailout works, to compensate them for the risk that the administration is forcing them to take. This could be accomplished through warrants on shares in the firms being bailed out, such as those Mr. Buffett extracted from Goldman Sachs.
2. The government should impose a tax on those that benefit most from bailout -- Wall Street itself. Perhaps a 0.25% transaction tax on all securities trades is in order? Such a tax would be insignificant to investors, while be largely borne by those that are merely speculators - including those that churn trades in an attempt to manipulate the markets.
3. Bailout or none, the government must fix underlying problems in our capital market. The fixes includes:
a. Reforming our stock settlement system so that trades actually settle promptly, precisely as Congress stipulated in 1934. This can be accomplished by putting in place a market-wide mandatory pre-borrow requirement (like the SEC did in the 30-day July 15, 2008 emergency order that protected the 19 financial institutions);
b. Creating the obligation that if a naked short seller fails to deliver a share, the broker-dealer must force a mandatory buy-in (as is done in civilized countries, such as Canada);
c. Tracking trades cradle-to-grave (rather than net blocks of trades against each other), so that it is obvious who the naked short sellers are and the total amounts they are stealing;
d. Providing regular, timely disclosure of when and how many shares have failed to deliver;
e. Enforcing the rules, including significant monetary penalties and jail time.
"Keynes said that an ocean of productivity can support a bubble of speculation, but an ocean of speculation cannot support a bubble of productivity. Washington has been captured by speculators at the expense of producers.
I have long been talking about systemic risk and potential financial crisis (see http://www.youtube.com/watch?v=SIHw7C73s3E for a three- minute video from as early as October 2005). I am proposing specific steps to fix the system. For those that agree with these fixes which protect Main Street Americans, I ask you to sign the electronic petition at http://mainstreetamericans.info."
Friday, July 11, 2008
I can't resist -- one more DeepCapture story about JP Morgan and Bear Stearns...
Totally plagarized...
--------------------
Get 'em fellas!!
JP Morgan CEO is Crazy, Too. Time to Subpoena CNBC
July 9th, 2008 by Mark Mitchell
Certain journalists and convicted criminals with ties to hedge funds have suggested that we at Deep Capture are crazy because we believe some short-sellers deliberately destroy public companies for profit.
Last night, JP Morgan CEO Jamie Dimon was interviewed by Charlie Rose.
Rose said, “[Bear Stearns CEO] Alan Schwartz is quoted as saying.. that he thought [the demise of Bear Stearns] was premeditated [by short-sellers].
Dimon responded: “I would say where there is smoke, there’s fire. If someone knowingly starts a rumor or passes on a rumor, they should go to jail…This is even worse than insider trading. This is deliberate and malicious destruction of value and people’s lives. They shouldn’t go to jail for a short period of time. So if I was the SEC I’d find out who made the money and I’d investigate–emails, phone records, you name it–and I’d find out….There’s enough smoke around that I think there should be a full investigation…”
So now the CEO of JP Morgan is crazy, too. So is former Bear Stearns CEO Alan Schwartz. Lehman Brothers CEO Richard Fuld said something similar, so he must be a crackpot. The SEC itself claims to have begun an investigation. They’re all nuts.
Anyway, permit us to suggest an easy way to get this investigation moving: Send a subpoena to CNBC reporter Mark Faber.
On March 13 and March 14, Faber told CNBC viewers that a hedge fund manager – “a friend” whom he “trusts” – told him that Goldman Sachs had refused to accept Bear Stearn’s credit. This information was false. It was a deliberate, malicious rumor delivered to a friendly journalist in order to destroy Bear Stearns.
Find out who Faber’s hedge fund friend is. Case solved.
This would not be the first time that Faber reported misinformation in service to a hedge fund friend. He used to do it for Jim Cramer, back before Cramer became CNBC’s leading “journalist” – back when Cramer was running his own hedge fund. A former employee of Cramer’s hedge fund has written a book, “Trading with the Enemy,” in which he describes Cramer feeding Faber tips and illegally trading ahead of Faber’s reports on CNBC.
It is no small coincidence that a clique of journalists connected to Cramer regularly write false or misleading hatchet jobs on companies targeted by short-sellers connected to Cramer. And it is no coincidence that these same hedge funds have deliberately and maliciously sought to destroy dozens of public companies and people’s lives by circulating rumors, issuing bogus “independent financial research,” clogging Internet message boards with false information, filing bogus class-action lawsuits, getting the SEC and other government agencies to conduct dead-end investigations, and hiring convicted felons to harass CEOs. (And that’s not all; see “The Story of Deep Capture” for the gory details.)
It is also worth noting that in almost all of the companies targeted by these people, somebody has sold massive amounts of phantom stock to further drive down prices. Two companies targeted by these people are Lehman Brothers and Bear Stearns. Both have been victimized by phantom stock sellers.
We’d say somebody should investigate this. But that would be crazy.
http://www.deepcapture.com/
--------------------
Get 'em fellas!!
JP Morgan CEO is Crazy, Too. Time to Subpoena CNBC
July 9th, 2008 by Mark Mitchell
Certain journalists and convicted criminals with ties to hedge funds have suggested that we at Deep Capture are crazy because we believe some short-sellers deliberately destroy public companies for profit.
Last night, JP Morgan CEO Jamie Dimon was interviewed by Charlie Rose.
Rose said, “[Bear Stearns CEO] Alan Schwartz is quoted as saying.. that he thought [the demise of Bear Stearns] was premeditated [by short-sellers].
Dimon responded: “I would say where there is smoke, there’s fire. If someone knowingly starts a rumor or passes on a rumor, they should go to jail…This is even worse than insider trading. This is deliberate and malicious destruction of value and people’s lives. They shouldn’t go to jail for a short period of time. So if I was the SEC I’d find out who made the money and I’d investigate–emails, phone records, you name it–and I’d find out….There’s enough smoke around that I think there should be a full investigation…”
So now the CEO of JP Morgan is crazy, too. So is former Bear Stearns CEO Alan Schwartz. Lehman Brothers CEO Richard Fuld said something similar, so he must be a crackpot. The SEC itself claims to have begun an investigation. They’re all nuts.
Anyway, permit us to suggest an easy way to get this investigation moving: Send a subpoena to CNBC reporter Mark Faber.
On March 13 and March 14, Faber told CNBC viewers that a hedge fund manager – “a friend” whom he “trusts” – told him that Goldman Sachs had refused to accept Bear Stearn’s credit. This information was false. It was a deliberate, malicious rumor delivered to a friendly journalist in order to destroy Bear Stearns.
Find out who Faber’s hedge fund friend is. Case solved.
This would not be the first time that Faber reported misinformation in service to a hedge fund friend. He used to do it for Jim Cramer, back before Cramer became CNBC’s leading “journalist” – back when Cramer was running his own hedge fund. A former employee of Cramer’s hedge fund has written a book, “Trading with the Enemy,” in which he describes Cramer feeding Faber tips and illegally trading ahead of Faber’s reports on CNBC.
It is no small coincidence that a clique of journalists connected to Cramer regularly write false or misleading hatchet jobs on companies targeted by short-sellers connected to Cramer. And it is no coincidence that these same hedge funds have deliberately and maliciously sought to destroy dozens of public companies and people’s lives by circulating rumors, issuing bogus “independent financial research,” clogging Internet message boards with false information, filing bogus class-action lawsuits, getting the SEC and other government agencies to conduct dead-end investigations, and hiring convicted felons to harass CEOs. (And that’s not all; see “The Story of Deep Capture” for the gory details.)
It is also worth noting that in almost all of the companies targeted by these people, somebody has sold massive amounts of phantom stock to further drive down prices. Two companies targeted by these people are Lehman Brothers and Bear Stearns. Both have been victimized by phantom stock sellers.
We’d say somebody should investigate this. But that would be crazy.
http://www.deepcapture.com/
Wednesday, June 25, 2008
Websites
The time has come for me to explain why I placed some additional websites off to the side.
In no particular order...
The BMW Method:
No, this is NOT the car. Back when I read the Motley Fool and subscribed to its message boards (oh -- back in the good ol' days before they became a newsletter driven rag... *grin*) the BMW Method board was my favorite hangout.
(The New Paradigms board was good too -- that was where I first heard mention of Dendreon)
Here's another link that explains the methodology (http://bmwmethod.com/about.php) but in a nutshell, BMW observed how the CAGR (Compound Annual Growth Rate) of large, stable, well-managed companies tends to stay at a historical average over long periods of time. The price in the short term fluctuates wildly -- both to the high side and to the low. Using his graphs, it is visually VERY clear to see when a stock is at a compelling buy price, and likewise, when it may be time to sell.
Note - this is NOT charting or technical analysis -- but simply taking the idea of buying low and selling high into a framework of how a company is performing right now.
As an example, the Tylenol scare from Johnson & Johnson would have seen the stock price far below the long term CAGR curve... and after a little due diligence to see that the company's response was a logical and good move, and that the rest of the company's product sales were unaffected, a buy would have been in order. One wonders how some of the present day banking stocks appear on the graphs right now... but I personally would hold off for a couple more months on these financial-type stocks as I think we have some more pain and possibly consolidation to endure first.
Investor Village:
Yes, this is a stock message board. It comes with the obligatory warning that you encounter all sort of rude and idiotic posters, along with obviously paid shills to either pump or pan the stocks. But for all that, you can meet some truly amazing thinkers, scientists, and satirists.
Rule of thumb: when you read the posts on a stock board, do not post yourself for a while; absorb the interactions of the prolific posters and their styles. You don't have to copy them -- but at least understand who are the well known people. If you disagree with someone popular just to have fun, you will probably start a flame war and have people put you on ignore. Yes, it's high school all over again, and things frequently degenerate into stupid arguments.
On the plus side, you will learn some amazing things. Two of the boards I frequent are the Elan and Dendreon boards. I, who if the truth be known, abhored the life sciences in school, have learned much about Multiple Sclerosis, Alzheimer's Disease, and prostate cancer -- and can speak fairly fluently about those ills and the method of action (MOA) of various drugs to treat them. I know how FDA clinical trials are designed, and what kinds of statistical bars are set for them. And, I truly *enjoy* talking about those kinds of things now.
Of course you still have to do your own due diligence, but you can also learn things about the companies you follow that are not really a part of any news item you might read until the stock price has already reacted. For example, the Elan board dissected everything known about the Phase II Alzheimer's trial results (that were released in mid June) and in the majority, hit nearly every major aspect of the summary results squarely on the head -- which in turn meant that those who understood it would most likely be good news were already buying more shares before the release.
(It's no secret that the board consensus is that the full results to be released at the end of July are going to be stellar and bring the stock to even new heights)
As further examples, from the Elan board I have learned that the company has nearly $3 BILLION in losses over the last few years that they can use to write down future profits, meaning enormous tax savings.
And that Ireland treats royalty income ... (*ahem*) ... royally when it comes to taxes -- and they constructed their Tysabri contract with Biogen so that non-US sales are all treated as royalties.
And that they have the ability to simply say, "Now" to Eli Lilly and from that point on, they get to share 50% in costs and revenues for a different, gamma secretase-based Alzheimer's treatment that looks to be very promising also.
On the IV message boards, there are a number of nice features. You can sort by the "most recommended" posts so that you see the truly GOOD posts first and do not have to wade through fluff. You can ignore idiotic posters so that you don't even see their posts. It's easy to add boards and navigate around the site.
I am going to skip a number of people who deserve a mention, but if you look at the Elan board, look for posts from Liposghost, Jivetalkin, Doodah, Pinvestment, and OKZ. On the Dendreon board, Ocyan is the king of the science, and MingtheMerciless is worth reading for his sense of humor.
Marketocracy:
This one is easy and short -- you can create your own virtual mutual fund. To be ranked, you have to follow some simple rules that professional money managers have to follow too -- and here's the kicker: the 100 best portfolio managers actually get paid by the site, which has its own mutual funds based off those portfolios. Fun!
Frugal Upstate:
I've plugged this before, but this blog is written by one of my best friends, who happens to have a wonderful site about living frugally. The point isn't to *not* spend money, but to choose what you are spending your money on, and to enable the lifestyle where you can afford the things you truly want.
The Sanity Check and Deep Capture:
I actually think Deep Capture should be required reading before investing money in individual stocks. I don't want to sound like a conspiracy theorist, but it is totally obvious to me that hedge funds are an enormous threat to small companies, and especially biotechs. The ability to "sell short" shares of a company -- regardless of whether it is "naked shorting" or legal -- caps the stock price of companies that you and I invest in. The SEC and some of the media are unwilling to look at some of the facts and do their job.
Here are a couple examples:
The company Taser has about 60 million registered shares. At a recent annual meeting -- 80 million votes were cast.
Another company, (and the name escapes me at the moment) had one investor buy up the number of registered shares. He watched in amazement as thousands of shares continued trading on the open market over the next few weeks.
... And yet, total silence on the part of the media, Deeply Captured...
The Sanity Check is a blog by the anonymous tipper (called Bobo) who alerted Overstock CEO Patrick Byrne to the naked shorting campaign against his company, and who figures prominently in the Deep Capture story.
Please -- read Deep Capture for yourself and let me know what you think!
Regards,
Trond
In no particular order...
The BMW Method:
No, this is NOT the car. Back when I read the Motley Fool and subscribed to its message boards (oh -- back in the good ol' days before they became a newsletter driven rag... *grin*) the BMW Method board was my favorite hangout.
(The New Paradigms board was good too -- that was where I first heard mention of Dendreon)
Here's another link that explains the methodology (http://bmwmethod.com/about.php) but in a nutshell, BMW observed how the CAGR (Compound Annual Growth Rate) of large, stable, well-managed companies tends to stay at a historical average over long periods of time. The price in the short term fluctuates wildly -- both to the high side and to the low. Using his graphs, it is visually VERY clear to see when a stock is at a compelling buy price, and likewise, when it may be time to sell.
Note - this is NOT charting or technical analysis -- but simply taking the idea of buying low and selling high into a framework of how a company is performing right now.
As an example, the Tylenol scare from Johnson & Johnson would have seen the stock price far below the long term CAGR curve... and after a little due diligence to see that the company's response was a logical and good move, and that the rest of the company's product sales were unaffected, a buy would have been in order. One wonders how some of the present day banking stocks appear on the graphs right now... but I personally would hold off for a couple more months on these financial-type stocks as I think we have some more pain and possibly consolidation to endure first.
Investor Village:
Yes, this is a stock message board. It comes with the obligatory warning that you encounter all sort of rude and idiotic posters, along with obviously paid shills to either pump or pan the stocks. But for all that, you can meet some truly amazing thinkers, scientists, and satirists.
Rule of thumb: when you read the posts on a stock board, do not post yourself for a while; absorb the interactions of the prolific posters and their styles. You don't have to copy them -- but at least understand who are the well known people. If you disagree with someone popular just to have fun, you will probably start a flame war and have people put you on ignore. Yes, it's high school all over again, and things frequently degenerate into stupid arguments.
On the plus side, you will learn some amazing things. Two of the boards I frequent are the Elan and Dendreon boards. I, who if the truth be known, abhored the life sciences in school, have learned much about Multiple Sclerosis, Alzheimer's Disease, and prostate cancer -- and can speak fairly fluently about those ills and the method of action (MOA) of various drugs to treat them. I know how FDA clinical trials are designed, and what kinds of statistical bars are set for them. And, I truly *enjoy* talking about those kinds of things now.
Of course you still have to do your own due diligence, but you can also learn things about the companies you follow that are not really a part of any news item you might read until the stock price has already reacted. For example, the Elan board dissected everything known about the Phase II Alzheimer's trial results (that were released in mid June) and in the majority, hit nearly every major aspect of the summary results squarely on the head -- which in turn meant that those who understood it would most likely be good news were already buying more shares before the release.
(It's no secret that the board consensus is that the full results to be released at the end of July are going to be stellar and bring the stock to even new heights)
As further examples, from the Elan board I have learned that the company has nearly $3 BILLION in losses over the last few years that they can use to write down future profits, meaning enormous tax savings.
And that Ireland treats royalty income ... (*ahem*) ... royally when it comes to taxes -- and they constructed their Tysabri contract with Biogen so that non-US sales are all treated as royalties.
And that they have the ability to simply say, "Now" to Eli Lilly and from that point on, they get to share 50% in costs and revenues for a different, gamma secretase-based Alzheimer's treatment that looks to be very promising also.
On the IV message boards, there are a number of nice features. You can sort by the "most recommended" posts so that you see the truly GOOD posts first and do not have to wade through fluff. You can ignore idiotic posters so that you don't even see their posts. It's easy to add boards and navigate around the site.
I am going to skip a number of people who deserve a mention, but if you look at the Elan board, look for posts from Liposghost, Jivetalkin, Doodah, Pinvestment, and OKZ. On the Dendreon board, Ocyan is the king of the science, and MingtheMerciless is worth reading for his sense of humor.
Marketocracy:
This one is easy and short -- you can create your own virtual mutual fund. To be ranked, you have to follow some simple rules that professional money managers have to follow too -- and here's the kicker: the 100 best portfolio managers actually get paid by the site, which has its own mutual funds based off those portfolios. Fun!
Frugal Upstate:
I've plugged this before, but this blog is written by one of my best friends, who happens to have a wonderful site about living frugally. The point isn't to *not* spend money, but to choose what you are spending your money on, and to enable the lifestyle where you can afford the things you truly want.
The Sanity Check and Deep Capture:
I actually think Deep Capture should be required reading before investing money in individual stocks. I don't want to sound like a conspiracy theorist, but it is totally obvious to me that hedge funds are an enormous threat to small companies, and especially biotechs. The ability to "sell short" shares of a company -- regardless of whether it is "naked shorting" or legal -- caps the stock price of companies that you and I invest in. The SEC and some of the media are unwilling to look at some of the facts and do their job.
Here are a couple examples:
The company Taser has about 60 million registered shares. At a recent annual meeting -- 80 million votes were cast.
Another company, (and the name escapes me at the moment) had one investor buy up the number of registered shares. He watched in amazement as thousands of shares continued trading on the open market over the next few weeks.
... And yet, total silence on the part of the media, Deeply Captured...
The Sanity Check is a blog by the anonymous tipper (called Bobo) who alerted Overstock CEO Patrick Byrne to the naked shorting campaign against his company, and who figures prominently in the Deep Capture story.
Please -- read Deep Capture for yourself and let me know what you think!
Regards,
Trond
Monday, May 12, 2008
Buyer beware
I ran across this article on the SEC website, regarding short selling. They are basically saying that short selling is allowable to cap stock prices!! If they add liquidity when people are trying to buy, there will be no large spike in the stock price.
If people want to bet on a stock declining in value, let them buy option (puts). In fact, buying puts satisfies all three reasons given for shorting stocks.
Since most people investing in the market are out to profit from rising stock prices, it behooves us all to contact the SEC and request that short selling be stopped.
Regards,
Trond
http://www.sec.gov/spotlight/keyregshoissues.htm
A. What is a short sale?
A short sale is generally the sale of a stock you do not own (or that you will borrow for delivery). Short sellers believe the price of the stock will fall, or are seeking to hedge against potential price volatility in securities that they own.
If the price of the stock drops, short sellers buy the stock at the lower price and make a profit. If the price of the stock rises, short sellers will incur a loss. Short selling is used for many purposes, including to profit from an expected downward price movement, to provide liquidity in response to unanticipated buyer demand, or to hedge the risk of a long position in the same security or a related security.
If people want to bet on a stock declining in value, let them buy option (puts). In fact, buying puts satisfies all three reasons given for shorting stocks.
Since most people investing in the market are out to profit from rising stock prices, it behooves us all to contact the SEC and request that short selling be stopped.
Regards,
Trond
http://www.sec.gov/spotlight/keyregshoissues.htm
A. What is a short sale?
A short sale is generally the sale of a stock you do not own (or that you will borrow for delivery). Short sellers believe the price of the stock will fall, or are seeking to hedge against potential price volatility in securities that they own.
If the price of the stock drops, short sellers buy the stock at the lower price and make a profit. If the price of the stock rises, short sellers will incur a loss. Short selling is used for many purposes, including to profit from an expected downward price movement, to provide liquidity in response to unanticipated buyer demand, or to hedge the risk of a long position in the same security or a related security.
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