Below is a link to an preview article titled "The Five Pitfalls of Active Trading" by Steve Gomez, published in Stocks, Futures, and Options (SFO), a new online magazine. Whether you trade on the exchange floor or trade online; day trading mistakes are easy to make and can be quite costly. This article is about how to avoid making those expensive mistakes.
I have not had a chance to read it all, but free information is always good as long as you can tell the information from the disinformation. After I read it I will post what I think of the information provided. Other readers out there, feel free to comment on your take on the information written in this artcle. Keep your stick on the ice, we are all in this together.
http://www.sfomag.com/eSFO/eSFO2010_10.aspx
Tuesday, October 5, 2010
Friday, July 16, 2010
Vivus Shot Down By Panel, Arena and Orexigen Hold Promise
One of the new contenders in the weight loss race that I have never recommended is Mountain View, CA-based Vivus (Nasdaq: VVUS). Vivus suffered a major setback at an important meeting with a panel of experts, set up by the FDA. The panel essentially said that the negative effects outweigh the weight loss benefit offered by the Vivus drug. The panel of experts reported in a 9-7 vote that Vivus' experimental weight loss drug should not be cleared for sale in the U.S.
The expert panel refused to recommend that the FDA approve the Vivus’ experimental diet drug Qnexa due to certain safety concerns. One of the main problems panelists saw with the treatment was that that there just isn’t enough information. The resounding sentiment was that more studies and research needed to be done, the longest studies conducted lasted only one year. Vivus shares dove almost 60% to $5.16. Furthermore, the NYSE Arca Shares tanked early this morning, after yesterdays meeting of the FDA advisory panel. The pharmaceutical Index (DRG) dropped 0.3% to 288.95 and the NYSE Arca Biotechnology Index (BTK) dropped 0.4% to 1044.18.
It is up to the FDA to approve or disapprove Vivus' combination treatment of phentermine and topiramate (Qnexa) for sale in the US, although the agency usually follows the advice of its expert panels. The FDA has set Oct 28, 2010 as the date to make that decision
What does this development mean the competition. Before the panel shot it down, many believed that Qnexa was the most effective of the three obesity drugs currently awaiting an approval decision by the FDA. (Except me, I never liked the idea of using topiramate). My reasons against this combination are as follows:
Topiramate is an anticonvulsant drug primarily used to treat epilepsy. On May 21, 2010, Ortho-McNeil plead guilty and was fined $6.14 million by the FDA for promoting Topamax (topiramate) to treat psychiatric disorders, without applying for approval and no data from a well-controlled clinical trial to demonstrate that Topamax was safe and effective to treat any psychiatric conditions. Also, preliminary data suggests that, as with several other anti-epileptic drugs, topiramate carries an increased risk of congenital malformations. This might be particularly important for women who take topiramate to prevent migraine attacks. Finally, most anti-epileptic drugs, including topiramate, have been associated with a statistically significant increase in suicidality.
I have recommended both Arena Pharmaceuticals (Nasdaq: ARNA) and Orexigen Therapeutics (Nasdaq: OREX) in past newsletters (The Small-Cap Biotechnology Feedbag). The obesity market will be worth at least $3 billion, if not much more, and the stakes are huge for obesity drug development, as an estimated two-thirds of Americans are considered overweight or obese with little in the way of pharmaceutical alternatives to diet and exercise. The Arena advisory panel will meet on September 16, 2010. It is possible that this could be smooth sailing for the drug. It’s been widely noted that Arena’s lorcaserin has the best safety profile, longest study, and Arena is the only one of these companies to have found a marketing partner.
Orexigen Therapeutics' diet drug Contrave is also up for approval. Many industry experts believe that while Contrave is safer than Qnexa, its safety profile may not be as strong as that of lorcaserin. However, in June, Orexigen presented positive data that its obesity treatment Contrave lessened symptoms of depression and improved eating control in obese patients who suffered from major depression. Furthermore, Orexigen put forward strong evidence that Contrave would have a secondary role in controlling diabetes at the annual meeting of the American Diabetes Association in Orlando, FL. An advisory panel of the U.S. Food and Drug Administration is expected to review Contrave's application on Dec. 7. 2010, which gives Orexigen even longer to address any of the problematic issues that Vivus’ panel came up with. The FDA is scheduled to make a decision on whether to approve the product by Jan. 31, 2011.
The expert panel refused to recommend that the FDA approve the Vivus’ experimental diet drug Qnexa due to certain safety concerns. One of the main problems panelists saw with the treatment was that that there just isn’t enough information. The resounding sentiment was that more studies and research needed to be done, the longest studies conducted lasted only one year. Vivus shares dove almost 60% to $5.16. Furthermore, the NYSE Arca Shares tanked early this morning, after yesterdays meeting of the FDA advisory panel. The pharmaceutical Index (DRG) dropped 0.3% to 288.95 and the NYSE Arca Biotechnology Index (BTK) dropped 0.4% to 1044.18.
It is up to the FDA to approve or disapprove Vivus' combination treatment of phentermine and topiramate (Qnexa) for sale in the US, although the agency usually follows the advice of its expert panels. The FDA has set Oct 28, 2010 as the date to make that decision
What does this development mean the competition. Before the panel shot it down, many believed that Qnexa was the most effective of the three obesity drugs currently awaiting an approval decision by the FDA. (Except me, I never liked the idea of using topiramate). My reasons against this combination are as follows:
Topiramate is an anticonvulsant drug primarily used to treat epilepsy. On May 21, 2010, Ortho-McNeil plead guilty and was fined $6.14 million by the FDA for promoting Topamax (topiramate) to treat psychiatric disorders, without applying for approval and no data from a well-controlled clinical trial to demonstrate that Topamax was safe and effective to treat any psychiatric conditions. Also, preliminary data suggests that, as with several other anti-epileptic drugs, topiramate carries an increased risk of congenital malformations. This might be particularly important for women who take topiramate to prevent migraine attacks. Finally, most anti-epileptic drugs, including topiramate, have been associated with a statistically significant increase in suicidality.
I have recommended both Arena Pharmaceuticals (Nasdaq: ARNA) and Orexigen Therapeutics (Nasdaq: OREX) in past newsletters (The Small-Cap Biotechnology Feedbag). The obesity market will be worth at least $3 billion, if not much more, and the stakes are huge for obesity drug development, as an estimated two-thirds of Americans are considered overweight or obese with little in the way of pharmaceutical alternatives to diet and exercise. The Arena advisory panel will meet on September 16, 2010. It is possible that this could be smooth sailing for the drug. It’s been widely noted that Arena’s lorcaserin has the best safety profile, longest study, and Arena is the only one of these companies to have found a marketing partner.
Orexigen Therapeutics' diet drug Contrave is also up for approval. Many industry experts believe that while Contrave is safer than Qnexa, its safety profile may not be as strong as that of lorcaserin. However, in June, Orexigen presented positive data that its obesity treatment Contrave lessened symptoms of depression and improved eating control in obese patients who suffered from major depression. Furthermore, Orexigen put forward strong evidence that Contrave would have a secondary role in controlling diabetes at the annual meeting of the American Diabetes Association in Orlando, FL. An advisory panel of the U.S. Food and Drug Administration is expected to review Contrave's application on Dec. 7. 2010, which gives Orexigen even longer to address any of the problematic issues that Vivus’ panel came up with. The FDA is scheduled to make a decision on whether to approve the product by Jan. 31, 2011.
Friday, July 9, 2010
Low Down on Penny Stocks
I am not sure I have ever written an article about Penny Stocks. But it is no secret that I primarily speculate in small-cap biotechnology, some of which could be considered penny stocks depending on your definition of penny stocks. Investopedia states “the term penny stock has evolved with the market. In the past, penny stocks were stocks that traded for less than a dollar per share. The SEC, however, modified the definition to include all shares trading below $5.” They are still called penny stocks because they are perceived as very risky investments.
Penny stocks are typically growing companies with limited cash and resources. Most penny stocks are high-risk investments with low trading volumes and limited attention from investors. These companies trade mostly on the Over-the Counter Bulletin Board (OTC BB) and Pink Sheets and are susceptible to different forms of market manipulation that are more difficult to employ in stocks found on the larger exchanges such as Nasdaq and NYSE (Investopedia).
There is a growing international epidemic of penny stock fraud instigated by greedy promoters and unscrupulous company insiders. With the nearly global access of the Internet with email and online brokers, these con artist are now finding their victims everywhere around the world. A day does not go by that I do not receive a FAX or email touting the extraordinary gains of a Pink Sheets or OTC Bulletin Board equity that I have never heard of, promising gains of incredible proportions in a very short time. More recently, there have been more and more investors around the world who have been sucked in by these securities scams. The scammers know that U.S. regulators are unlikely to investigate and prosecute on behalf of an individual investor in a foreign country who has lost his life's savings by buying into the bilge that is being sold by these con artists.
Many times, these fraudulent schemes involve selling unregistered shares of obscure public companies with few assets, negligible revenues, and dubious operations. However, many foreign investors and domestic ones as well, do not know this and do not do their DD. They take the word of a crooked salesman, without checking the financial statements of these companies, many of which you would be hard pressed to find anyway. For many foreign individual investors, the U.S.-based broker has instant credibility. The scammer relies on the fact that many people in other countries and even here in the US cannot distinguish a legitimate brokerage firm from a fly-by-night operation.
As I mention in the first paragraph, most stock schemes commonly involve shares of companies that trade on the OTC Bulletin Board, and Pink Sheets. This arena is the perfect venue for securities schemes. Regulatory resources are overwhelmed, and often focused in other directions. Furthermore, the global nature of these schemes, and the ease in which companies can issue unregistered stock and sell it overseas, makes oversight difficult, if not impossible. This type of market manipulation is less prevalent and more difficult to employ with stocks registered on the Nasdaq and NYSE.
The penny stock frauds usually rely on the garden variety "pump and dump" scheme. This is when a promoters or shady stock brokers gain control of a company and then spreads false and misleading information by saturating the Internet with spam email, Faxes, or using cold callers to inform you how you cannot afford NOT to buy in to this sure thing! In this way they spark interest in the company, pump up prices, and create an environment in which they can sell stock. Once the promoters dump their shares at a hefty profit, stock prices slide back toward oblivion. This scam takes on several variations, but the basic framework seldom differs.
StockPatrol.com has outlined a list of warning signs to look out for. If you receive a sales pitch via email, FAX, or telephone, there are a number of warning signs that should set of bells and whistles, triggering concern. If you receive a pitch that claims that an obscure company is poised to capitalize in a "hot" sector, such as homeland defense, hurricane recovery or H1N1 Flu research, or companies that claim to have (non-existent) relationships with better known, successful businesses, you probably are the target of a scammer.
If the company being promoted does not file regular public financial reports with the SEC, there has been unusual, excessive trading in a stock, or there have been sudden dramatic price swings for the stock of a company with no track record, discernible business or demonstrated revenues, all of these would be warning signs.
Companies that routinely use Form S-8 to register shares for insiders, employees or consultants, allowing promoters to flood the market instantly with registered shares that have been issued to anonymous individuals and companies are likely non-legit. If the company has little operating history, but employs numerous consultants and awards them shares, it is probably just a shell operation for crooks.
If the company sells unregistered stock overseas under Regulation S, it is likely a scam Regulation S has produced a virtually unregulated situation for offshore sale of U.S. stocks or the company has offshore investors whose principals are undisclosed.
A common scheme is as follows: The business is incorporated in Nevada especially those with Canadian connections. Nevada law allows the individuals in control of a company to make significant decisions without first notifying or gaining approval from public shareholders. This leads many tiny companies to incorporate in Nevada, have offices in Canada, retain attorneys in Florida, California or New York, and often use transfer agents housed in Utah. Their goal is to create a jurisdictional nightmare that allows them to scam investors in the U.S., Canada and around the world.
So individual investors should be wary of penny stocks. The chances of huge profits are counteracted by even bigger chances of huge losses. The warning signs are there and obvious to anyone who looks for them. The bottom line remains, as always before you invest in any security, do your DD!
Penny stocks are typically growing companies with limited cash and resources. Most penny stocks are high-risk investments with low trading volumes and limited attention from investors. These companies trade mostly on the Over-the Counter Bulletin Board (OTC BB) and Pink Sheets and are susceptible to different forms of market manipulation that are more difficult to employ in stocks found on the larger exchanges such as Nasdaq and NYSE (Investopedia).
There is a growing international epidemic of penny stock fraud instigated by greedy promoters and unscrupulous company insiders. With the nearly global access of the Internet with email and online brokers, these con artist are now finding their victims everywhere around the world. A day does not go by that I do not receive a FAX or email touting the extraordinary gains of a Pink Sheets or OTC Bulletin Board equity that I have never heard of, promising gains of incredible proportions in a very short time. More recently, there have been more and more investors around the world who have been sucked in by these securities scams. The scammers know that U.S. regulators are unlikely to investigate and prosecute on behalf of an individual investor in a foreign country who has lost his life's savings by buying into the bilge that is being sold by these con artists.
Many times, these fraudulent schemes involve selling unregistered shares of obscure public companies with few assets, negligible revenues, and dubious operations. However, many foreign investors and domestic ones as well, do not know this and do not do their DD. They take the word of a crooked salesman, without checking the financial statements of these companies, many of which you would be hard pressed to find anyway. For many foreign individual investors, the U.S.-based broker has instant credibility. The scammer relies on the fact that many people in other countries and even here in the US cannot distinguish a legitimate brokerage firm from a fly-by-night operation.
As I mention in the first paragraph, most stock schemes commonly involve shares of companies that trade on the OTC Bulletin Board, and Pink Sheets. This arena is the perfect venue for securities schemes. Regulatory resources are overwhelmed, and often focused in other directions. Furthermore, the global nature of these schemes, and the ease in which companies can issue unregistered stock and sell it overseas, makes oversight difficult, if not impossible. This type of market manipulation is less prevalent and more difficult to employ with stocks registered on the Nasdaq and NYSE.
The penny stock frauds usually rely on the garden variety "pump and dump" scheme. This is when a promoters or shady stock brokers gain control of a company and then spreads false and misleading information by saturating the Internet with spam email, Faxes, or using cold callers to inform you how you cannot afford NOT to buy in to this sure thing! In this way they spark interest in the company, pump up prices, and create an environment in which they can sell stock. Once the promoters dump their shares at a hefty profit, stock prices slide back toward oblivion. This scam takes on several variations, but the basic framework seldom differs.
StockPatrol.com has outlined a list of warning signs to look out for. If you receive a sales pitch via email, FAX, or telephone, there are a number of warning signs that should set of bells and whistles, triggering concern. If you receive a pitch that claims that an obscure company is poised to capitalize in a "hot" sector, such as homeland defense, hurricane recovery or H1N1 Flu research, or companies that claim to have (non-existent) relationships with better known, successful businesses, you probably are the target of a scammer.
If the company being promoted does not file regular public financial reports with the SEC, there has been unusual, excessive trading in a stock, or there have been sudden dramatic price swings for the stock of a company with no track record, discernible business or demonstrated revenues, all of these would be warning signs.
Companies that routinely use Form S-8 to register shares for insiders, employees or consultants, allowing promoters to flood the market instantly with registered shares that have been issued to anonymous individuals and companies are likely non-legit. If the company has little operating history, but employs numerous consultants and awards them shares, it is probably just a shell operation for crooks.
If the company sells unregistered stock overseas under Regulation S, it is likely a scam Regulation S has produced a virtually unregulated situation for offshore sale of U.S. stocks or the company has offshore investors whose principals are undisclosed.
A common scheme is as follows: The business is incorporated in Nevada especially those with Canadian connections. Nevada law allows the individuals in control of a company to make significant decisions without first notifying or gaining approval from public shareholders. This leads many tiny companies to incorporate in Nevada, have offices in Canada, retain attorneys in Florida, California or New York, and often use transfer agents housed in Utah. Their goal is to create a jurisdictional nightmare that allows them to scam investors in the U.S., Canada and around the world.
So individual investors should be wary of penny stocks. The chances of huge profits are counteracted by even bigger chances of huge losses. The warning signs are there and obvious to anyone who looks for them. The bottom line remains, as always before you invest in any security, do your DD!
Tuesday, June 22, 2010
Micro-stocks Big Payoff-Kiplinger.com
As stated many times before, I like to trade in small and micro-cap biotech stocks. My reason is that as a biologist and physiologist, and the fact that I worked my way through graduate school as a pharmacy technician, I understand the processes involved better than other sectors. I have also stated that this is a risky practice and emphasize anyone doing the same should always do their own Due Diligence.
That being said, I would like to introduce an interesting article on the risks/benefits of investing in small- and micro- cap stocks, written by James K. Glassman, executive director of the George W. Bush Institute in Dallas, Texas, published on Kiplinger.com . In it he acknowledges that one of the rules of investing is that the riskier the bet, the higher the payoff (should you win), and in the stock market, risk is typically measured by volatility. He goes on to state that it is natural to assume that if a particular group of stocks is more volatile than the market as a whole, then that group should return more than the market average. He defines small cap stocks as those with a market value of $1.5 billion or less.
Glassman uses the work of economist Rolf Banz, who in 1981, documented the propensity of riskier small-caps to outperform the overall market. However, Banz has been challenged by other economists and analysts, who argue that this propensity may simply be a transitory phenomenon. Glassman disagrees and provides compelling support for his argument that, over the long haul, the smaller the companies, the greater the returns, on average. .
Make no mistake, these stocks are very volatile and Glassman provides statistics to illustrate that fact. He also recommends instead of buying small cap stocks individually invest in a solid small- or micro-cap fund (I prefer to pick my own stocks). He also recommends you limit your exposure to micro- and small-caps to 10% of your portfolio, at most (I trade more like 25%, but that is an individual preference, as I am closer to retirement age and got a late start in the world of investing and trading).
He finally gives reasons for this small cap effect. The first is simply that little companies have more opportunity to grow. “If you choose well, you can score a ten-bagger with a company that has a market cap of $100 million, but choose poorly, you can lose all of your money.”
In explaining the second reason he references James O'Shaughnessy, author of What Works on Wall Street, who wrote that small-caps outperform "not because of market capitalization alone, but because the stocks in this category are least efficiently priced."
(I too find this to be true, but it can work in either direction, so be careful!)
This post is but a short summary of a long article, to read the article in its entirety go to: http://www.kiplinger.com/columns/openingshot/archives/micro-stocks-big-payoff.html
Happy trading!
That being said, I would like to introduce an interesting article on the risks/benefits of investing in small- and micro- cap stocks, written by James K. Glassman, executive director of the George W. Bush Institute in Dallas, Texas, published on Kiplinger.com . In it he acknowledges that one of the rules of investing is that the riskier the bet, the higher the payoff (should you win), and in the stock market, risk is typically measured by volatility. He goes on to state that it is natural to assume that if a particular group of stocks is more volatile than the market as a whole, then that group should return more than the market average. He defines small cap stocks as those with a market value of $1.5 billion or less.
Glassman uses the work of economist Rolf Banz, who in 1981, documented the propensity of riskier small-caps to outperform the overall market. However, Banz has been challenged by other economists and analysts, who argue that this propensity may simply be a transitory phenomenon. Glassman disagrees and provides compelling support for his argument that, over the long haul, the smaller the companies, the greater the returns, on average. .
Make no mistake, these stocks are very volatile and Glassman provides statistics to illustrate that fact. He also recommends instead of buying small cap stocks individually invest in a solid small- or micro-cap fund (I prefer to pick my own stocks). He also recommends you limit your exposure to micro- and small-caps to 10% of your portfolio, at most (I trade more like 25%, but that is an individual preference, as I am closer to retirement age and got a late start in the world of investing and trading).
He finally gives reasons for this small cap effect. The first is simply that little companies have more opportunity to grow. “If you choose well, you can score a ten-bagger with a company that has a market cap of $100 million, but choose poorly, you can lose all of your money.”
In explaining the second reason he references James O'Shaughnessy, author of What Works on Wall Street, who wrote that small-caps outperform "not because of market capitalization alone, but because the stocks in this category are least efficiently priced."
(I too find this to be true, but it can work in either direction, so be careful!)
This post is but a short summary of a long article, to read the article in its entirety go to: http://www.kiplinger.com/columns/openingshot/archives/micro-stocks-big-payoff.html
Happy trading!
Thursday, May 13, 2010
Factors in Today's Market Confidence
Steve Goldstein, London bureau chief at MarketWatch.com reported today that U.S. stock futures are lower as the US market is still nervous over EU Nation’s debt burdens among other news, such as the unemployment claims report and Dubai’s debt repayment.
Today the Euro continued its downturn from the $1.31 level reached in the aftermath of the EU-IMF 750 billion euro aid package, retreating below $1.26. To make matters worse, a $980 million payment that the Dubai property developer must make today is also bringing the sovereign debt crisis back into the spotlight, the British pound also moved lower after the U.K. reported a widening trade gap, oil futures dropped below the $75 a barrel, and even gold was mildly impacted, with futures falling $4 to $1,239 an ounce. The entire MarketWatch article can be read here.
In an article written by Madelina Iacob, Forbes.com, she states that EU debt problems could cut US company’s profits. The prolonged period of slow economic growth that most analysts are predicting for Europe could also have a major impact U.S. companies with heavy exposure to the Euro zone. The austerity programs used to cut fiscal deficits in Greece, Spain and Portugal will reduce growth in those countries and limit demand from consumers and businesses. Since direct sales in Europe account for approximately 10% of overall revenues for S&P 500 companies, this could in turn have an impact on second half earnings.
Companies with the largest exposure to Europe are the most vulnerable. Industries such automobile manufacturing and materials, consumer durables, services, semiconductors, insurance and capital goods, food, beverage and tobacco are likely the most susceptible to this decrease in demand. Others sectors like household and personal products, pharmaceuticals and biotechnology would not be spared either. However, U.S. banks, telecommunications services, and transportation and utilities have less exposure to Greece, Portugal and Spain, putting them in far better shape to withstand a drop in sales overseas.
Perhaps even more worrisome than the negative impacts on U.S. corporations is that the austerity measures made necessary by the severe debt levels in the EU may be a preview of what's to come for the US. The entire Forbes.com article can be read here.
Associated Press writers Stephen Bernard and Tim Paradis reported on the U.S. job market. The stated that this week’s jobs report showed that gains in the job market are proceeding slowly. First-time claims for jobless benefits dipped to 444,000 last week from an upwardly revised 448,000 the previous week. This is the fourth straight week of decline in claim; however, it hasn't been enough to signal sustainable job growth. Economists estimate weekly initial claims need to fall below 425,000 to show employers are consistently adding workers. Claims have stalled around the 450,000 level throughout the year.
High unemployment remains a major obstacle to a strong recovery. The unemployment rate jumped to 9.9 percent last month, even though employers added 290,000 jobs. Investors want to see consistent job creation as well as regular declines in claims for jobless benefits before becoming confident that the labor market is healing. The AP article can be read here.
Today the Euro continued its downturn from the $1.31 level reached in the aftermath of the EU-IMF 750 billion euro aid package, retreating below $1.26. To make matters worse, a $980 million payment that the Dubai property developer must make today is also bringing the sovereign debt crisis back into the spotlight, the British pound also moved lower after the U.K. reported a widening trade gap, oil futures dropped below the $75 a barrel, and even gold was mildly impacted, with futures falling $4 to $1,239 an ounce. The entire MarketWatch article can be read here.
In an article written by Madelina Iacob, Forbes.com, she states that EU debt problems could cut US company’s profits. The prolonged period of slow economic growth that most analysts are predicting for Europe could also have a major impact U.S. companies with heavy exposure to the Euro zone. The austerity programs used to cut fiscal deficits in Greece, Spain and Portugal will reduce growth in those countries and limit demand from consumers and businesses. Since direct sales in Europe account for approximately 10% of overall revenues for S&P 500 companies, this could in turn have an impact on second half earnings.
Companies with the largest exposure to Europe are the most vulnerable. Industries such automobile manufacturing and materials, consumer durables, services, semiconductors, insurance and capital goods, food, beverage and tobacco are likely the most susceptible to this decrease in demand. Others sectors like household and personal products, pharmaceuticals and biotechnology would not be spared either. However, U.S. banks, telecommunications services, and transportation and utilities have less exposure to Greece, Portugal and Spain, putting them in far better shape to withstand a drop in sales overseas.
Perhaps even more worrisome than the negative impacts on U.S. corporations is that the austerity measures made necessary by the severe debt levels in the EU may be a preview of what's to come for the US. The entire Forbes.com article can be read here.
Associated Press writers Stephen Bernard and Tim Paradis reported on the U.S. job market. The stated that this week’s jobs report showed that gains in the job market are proceeding slowly. First-time claims for jobless benefits dipped to 444,000 last week from an upwardly revised 448,000 the previous week. This is the fourth straight week of decline in claim; however, it hasn't been enough to signal sustainable job growth. Economists estimate weekly initial claims need to fall below 425,000 to show employers are consistently adding workers. Claims have stalled around the 450,000 level throughout the year.
High unemployment remains a major obstacle to a strong recovery. The unemployment rate jumped to 9.9 percent last month, even though employers added 290,000 jobs. Investors want to see consistent job creation as well as regular declines in claims for jobless benefits before becoming confident that the labor market is healing. The AP article can be read here.
Tuesday, May 4, 2010
PIIGS Get Slaughtered, Impacting US Markets
Stocks sank this morning after European debt problems sent another wave of pessimism through the market. European markets fell in response to uneasiness over whether a $145 billion bailout package for Greece will be approved by the 15 European Union members that would shoulder much of the cost. One concern among traders is that the size of the Greek bailout package could make it harder for the EU to rescue other countries that might need help.
How does this affect the U.S. Market? When the euro falls against the dollar, traders avoid the currency, which is used by 16 EU members including Greece. The euro hit its lowest level in a year. The U.S. investors are concerned that a stronger dollar would cut into profits for U.S. companies that heavily rely on foreign operations. When the dollar is up over the euro, overseas profits translate into less money.
The Greek debt problem is making a big impact on the markets this week, and the fallout is still far from over. There is a concern that the Greek contagion is beginning to spread to the other PIIGS. Last week, Standard & Poore’s (S & P) announced a cut to Portugal’s sovereign credit rating from A+ to A and cut Greece’s bond rating to BBB+. Following that, Spain saw its credit rating slashed, too. The Greek debt crisis has been described an economic virus, spreading among the PIIGS and triggering the euro's slide.
Day to day it's hard to keep track of all the commotion related to Europe's economic problems. Greek labor unions balk at a bailout; German politicians are stalling on their role in approving a bailout based on domestic political pressures; and some market economists argue in favor of allowing Greece to default rather than seeing through an expensive bailout package.
All the fluctuation in the markets related to the euro and the Greek debt crisis may be far from over, too, even though the EU is talking in terms of the "finishing touches" on a bailout package. On Thursday, Barclay's Capital wrote "We believe the move toward a Greek rescue package will remain a slow grind and a weight on the euro." One of the reasons given to expect more ups and downs was the political situation in Germany. Of course, the looming debt crises in Spain and Portugal have not helped, either. It's still an open question this week whether after months of back and forth over the path forward for Greece, the EU will be able to pull together and bring Greece back from the unplanned-for crisis in 2010.
Some are asking the critical question. Will the euro collapse in 2010? No one can say what exactly will happen going forward. Government structures stay in place for a long time, the US is still on its feet, for the time being. Other countries have defaulted on their loans and are still here. In the highly developed West, that is almost a given. So while the EU may not dissolve, when all this is said and done, its governmental structures will have definitely been altered.
How does this affect the U.S. Market? When the euro falls against the dollar, traders avoid the currency, which is used by 16 EU members including Greece. The euro hit its lowest level in a year. The U.S. investors are concerned that a stronger dollar would cut into profits for U.S. companies that heavily rely on foreign operations. When the dollar is up over the euro, overseas profits translate into less money.
The Greek debt problem is making a big impact on the markets this week, and the fallout is still far from over. There is a concern that the Greek contagion is beginning to spread to the other PIIGS. Last week, Standard & Poore’s (S & P) announced a cut to Portugal’s sovereign credit rating from A+ to A and cut Greece’s bond rating to BBB+. Following that, Spain saw its credit rating slashed, too. The Greek debt crisis has been described an economic virus, spreading among the PIIGS and triggering the euro's slide.
Day to day it's hard to keep track of all the commotion related to Europe's economic problems. Greek labor unions balk at a bailout; German politicians are stalling on their role in approving a bailout based on domestic political pressures; and some market economists argue in favor of allowing Greece to default rather than seeing through an expensive bailout package.
All the fluctuation in the markets related to the euro and the Greek debt crisis may be far from over, too, even though the EU is talking in terms of the "finishing touches" on a bailout package. On Thursday, Barclay's Capital wrote "We believe the move toward a Greek rescue package will remain a slow grind and a weight on the euro." One of the reasons given to expect more ups and downs was the political situation in Germany. Of course, the looming debt crises in Spain and Portugal have not helped, either. It's still an open question this week whether after months of back and forth over the path forward for Greece, the EU will be able to pull together and bring Greece back from the unplanned-for crisis in 2010.
Some are asking the critical question. Will the euro collapse in 2010? No one can say what exactly will happen going forward. Government structures stay in place for a long time, the US is still on its feet, for the time being. Other countries have defaulted on their loans and are still here. In the highly developed West, that is almost a given. So while the EU may not dissolve, when all this is said and done, its governmental structures will have definitely been altered.
Wednesday, April 28, 2010
Jim Cramer and "TheStreet" Under Fire
There is an article posted on “The King of all Trades”, a financial blog, about Jim Cramer and “TheStreet.com.” In this article, author Steve Garcia makes allegations stating “any time specific companies gain headwind, in this case Sirius XM Radio, old or simply negative press items conveniently get recirculated from the same conspicuous sources.” This technique is called by Cramer himself as fomenting. Fomenting was a tactic used by the former hedge fund manager to elicit a specific market response.
The author goes on to say that it is unethical to release old or tailored news at critical points in a company’s history to affect a specific stock reaction. He uses Sirius XM Radio as one example. To read how the author alleges that Cramer/TheStreet.com manipulated Sirius XM Radio, go here.
According to a Reuters article published March 18, 2010, the investment news website TheStreet.com was being investigated by the SEC. The probe, was related to how revenue was recorded at one of TheStreet’s subsidiaries. The probe arose after the company announced on Jan. 25, 2010 that it was restating its financial results for 2008 and 2009 due to "certain inaccuracies". You can read more about that article here.
Now all of the above was news to me. However, on March 19, 2010, Adam Feuerstein, reporter for “TheStreet.com” wrote an article about a small biotech company named Generex. Generex is in the developmental stages of producing a diabetes treatment, an insulin product that is taken orally and is absorbed through the inner lining of the mouth. The drug, in trial stages, is called Generex Oral-lyn(TM). Feuerstein’s article made numerous defamatory statements about the Generex, its management, and Generex Oral-lyn. The article made several statements that were misleading or outright misstatements; furthermore, they seemed to be made with the intent to hurt the company and/or the experimental product. If that were not enough, on March 26, 2010, Feuerstein wrote another article defending the first and it was just as obnoxious and derogatory as the first. These articles I knew about because I own Generex stock.
More recently, according to GlobeNewswire, on April 6, 2010, Generex launched a lawsuit against TheStreet.com and Adam Feuerstein in the Supreme Court of the State of New York seeking $250,000,000 in damages for business defamation, product disparagement, and injurious falsehood. Mark Fletcher, Generex’s Executive Vice-President & General Counsel stated “Feuerstein and TheStreet.com have abused their public forum by spreading categorical falsehoods about Generex and Generex Oral-lyn (TM) when a modicum of due diligence would have revealed the truth, an injury then compounded by unfounded and libelous allegation and innuendo. We are now seeking to hold Feuerstein and TheStreet.com accountable for the damage they have unjustifiably inflicted on Generex and its stockholders.”
Garcia stated toward the end of the King of all Trades article, “It is my intent to notify as many people as possible to be extremely careful about what they read and who they believe with regard to financial news. Jim Cramer is no friend to the common investor, in my opinion.”
In another article cited by Garcia, Cramer has gone as far as to describing illegal activities used by hedge fund managers to manipulate stock prices. You can read about that here.
The reason I posted all of this is to make a point. The point is aimed mainly at beggining investors, but even seasoned investors sometimes need to be reminded: Do your own Due Diligence! Do not take Jim Cramer’s or anyone else’s advice without first checking out their so called “facts”. After I read Garcia’s article, I left this comment on the page:
Great article! Everyone who has an audience should be writing about the way “TheStreet” has used unethical and most likely illegal tactics to ruin a company. I do not own SIRI, but I do own GNBT, and Adam Feuerstein outright made up his own “facts” to do harm to this stock's price.
I do not know if Cramer had anything to do with the GNBT articles, but as founder, he is responsible for the articles on his site. To make things worse, he did not even issue a statement or fire Feuerstein! Adam Feuerstein was even allowed to write another article bashing GNBT and defend his first article. I know I will never read another article from “TheStreet”.
The author goes on to say that it is unethical to release old or tailored news at critical points in a company’s history to affect a specific stock reaction. He uses Sirius XM Radio as one example. To read how the author alleges that Cramer/TheStreet.com manipulated Sirius XM Radio, go here.
According to a Reuters article published March 18, 2010, the investment news website TheStreet.com was being investigated by the SEC. The probe, was related to how revenue was recorded at one of TheStreet’s subsidiaries. The probe arose after the company announced on Jan. 25, 2010 that it was restating its financial results for 2008 and 2009 due to "certain inaccuracies". You can read more about that article here.
Now all of the above was news to me. However, on March 19, 2010, Adam Feuerstein, reporter for “TheStreet.com” wrote an article about a small biotech company named Generex. Generex is in the developmental stages of producing a diabetes treatment, an insulin product that is taken orally and is absorbed through the inner lining of the mouth. The drug, in trial stages, is called Generex Oral-lyn(TM). Feuerstein’s article made numerous defamatory statements about the Generex, its management, and Generex Oral-lyn. The article made several statements that were misleading or outright misstatements; furthermore, they seemed to be made with the intent to hurt the company and/or the experimental product. If that were not enough, on March 26, 2010, Feuerstein wrote another article defending the first and it was just as obnoxious and derogatory as the first. These articles I knew about because I own Generex stock.
More recently, according to GlobeNewswire, on April 6, 2010, Generex launched a lawsuit against TheStreet.com and Adam Feuerstein in the Supreme Court of the State of New York seeking $250,000,000 in damages for business defamation, product disparagement, and injurious falsehood. Mark Fletcher, Generex’s Executive Vice-President & General Counsel stated “Feuerstein and TheStreet.com have abused their public forum by spreading categorical falsehoods about Generex and Generex Oral-lyn (TM) when a modicum of due diligence would have revealed the truth, an injury then compounded by unfounded and libelous allegation and innuendo. We are now seeking to hold Feuerstein and TheStreet.com accountable for the damage they have unjustifiably inflicted on Generex and its stockholders.”
Garcia stated toward the end of the King of all Trades article, “It is my intent to notify as many people as possible to be extremely careful about what they read and who they believe with regard to financial news. Jim Cramer is no friend to the common investor, in my opinion.”
In another article cited by Garcia, Cramer has gone as far as to describing illegal activities used by hedge fund managers to manipulate stock prices. You can read about that here.
The reason I posted all of this is to make a point. The point is aimed mainly at beggining investors, but even seasoned investors sometimes need to be reminded: Do your own Due Diligence! Do not take Jim Cramer’s or anyone else’s advice without first checking out their so called “facts”. After I read Garcia’s article, I left this comment on the page:
Great article! Everyone who has an audience should be writing about the way “TheStreet” has used unethical and most likely illegal tactics to ruin a company. I do not own SIRI, but I do own GNBT, and Adam Feuerstein outright made up his own “facts” to do harm to this stock's price.
I do not know if Cramer had anything to do with the GNBT articles, but as founder, he is responsible for the articles on his site. To make things worse, he did not even issue a statement or fire Feuerstein! Adam Feuerstein was even allowed to write another article bashing GNBT and defend his first article. I know I will never read another article from “TheStreet”.
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