Wednesday, January 30, 2008

Fed Sees Things (Really?)

Todays cut is what economy needs. Is it enough? I'm afraid not. I'm sticking with my forecast: below 1% rate by January 2009. By mid-2009 we should see start of dollar carry trade.

I'm starting to doubt Gilead (GILD) lately. Great quarter, no doubt. But, future doesn't look great:

hepatitis B drug loses in tests against competition
hepatitis C drug doesn't show good results in tests
four Viread (HIV blockbuster drug) patents were preliminary rejected
governments sharply reduced purchases of Tamiflu (bird flu drug).

I'm not acting yet, just thinking.

Full disclosure: at the time of publication author had long position in GILD. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Monday, January 28, 2008

Trading Monkey alpha release

First alpha release of Trading Monkey is out! So far it's only a set of python scripts which allow you do download quotes from Yahoo! Finance and store them in PostgreSQL. There are also scripts for trivial processing (calculate moving average, calculate correlation between quotes). More to come.

It's here.

Thursday, January 24, 2008

AAPL is down. Cramer is in doubt. BUY!

Apple computer (AAPL) is down huge after earnings report and "weak" guidance. Jim Cramer is cautious about the stock. Last time such combination of events happened in May-July 2006. It was a huge buying opportunity. I think it is now, again. Stock trades at future P/E 21.56 and PEG 1.24. It's a buy!

Would I buy more? Apple is a biggest position in my portfolio, even at a current price, so discipline says I shouldn't. But situation is so tempting...

Apple can go even lower, so due diligence should be observed (buying in stages).

Full disclosure: at the time of publication author had long position in AAPL. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Tuesday, January 22, 2008

Buying more TSCM

Today is awful. Don't even want to talk about Fed, Cramer said everything. I'm just more pessimistic than almost everybody. I still think we'll hit Fed's rate under 1% in the beginning of 2009. And it's not gonna help much.

Depression is coming, no question anymore.

Bought even more TSCM today under $11.

Full disclosure: at the time of publication author had long position in TSCM. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Friday, January 18, 2008

Stimulus packages and reality

I really like Jim Cramer's idea of saving economy. I really don't understand Bush's plan. OK, I'd like to get some money form government, but it's smoke and mirrors. Somebody will have to pay all that government debt. On the other hand, Japan has much higher debt, so we have a long road ahead... It really looks more like Japan in 1994 every day. Same plans to save economy (with exception of Jim, but he is exceptional). Same problems. Same politicians and economists, afraid to say the word (no, not recession, depression).

I bought some more TSCM today. Surprisingly, my portfolio is up today, although just a little bit.

Full disclosure: at the time of publication author had long position in TSCM. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Thursday, January 17, 2008

Awful day, how many ahead?

It's just awful. I bought some more BAM today. I feel it shouldn't go much lower. On the other hand I had the same feeling when buying at 38. That's why I'm buying in stages.

One more little gem from Doug Kass in TheStreet.com today: link.

Jim Cramer thinks we are not going to have depression. I wish I could be so sure.


Full disclosure: at the time of publication author had long position in BAM. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Monday, January 14, 2008

Intuitive Surgical downgraded, so what?

Intuitive Surgical (ISRG) was downgraded by Wachovia on Jan 8. Next day, Jim Cramer said to sell it during Lightning Round.

This is completely wrong!

Main reason for downgrade: hospitals would spend less on expensive equipment during weak economy and possible recession. Wachovia (and Cramer) just underestimate ISRG product, Da Vinci robotic surgical system. Most analysts think it's only good for some specific operations, like prostatectomy and hysterectomy. In reality, this system can be used for almost all internal organ operations. There are reports of successful kidney cancer removal and mitral valve repair. Arithmetics is simple: patients spend much less time recovering and spending time in hospital after operation. Insurers are usually paying the same money for the same operation, so Da Vinci system saves money on every operation. Add reduced risk of litigation because of reduced risk of post-operational complications. As a result, hospitals really save money using Da Vinci.

System penetration is still low outside of US. Intuitive surgical has a lot of room to grow. That is, with Da Vinci. Company might just invent something else or buy some new inventions.

Analysts have a history underestimating ISRG. Earnings estimates were usually beaten by up to 100% in 2005-2006.

I bought ISRG in 2006 for about 115 average. Now I enjoy current price. I still think ISRG is a buy, strong buy under 250.

Full disclosure: at the time of publication author had long position in ISRG. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Friday, January 11, 2008

Bottom? Not so fast

Jim Cramer declared a bottom in financials yesterday on Mad Money. I don't think so. He's thinking that current situation is like 1990, to me it looks like 1930 (or 1990 in Japan). We need clarity on subrpime and prime writedowns. When writedowns are done, we'll have a bottom.

It's a year at least, maybe two, before we hit the bottom.

Thursday, January 10, 2008

Fed in the eyes of traders and academia

This NY Times article is scary. In short, it tells us that Bernanke and Fed are viewed by Wall Street as way behind the curve ("They know nothing", Jim Cramer) but are highly praised by economists from different universities. The problem here is that academia economists usually understand only economy of the past. They don't understand big changes in economy until those changes are, again, in the past. Examples are plenty: "You can't have both stagnation and inflation" (Keynes), original Phillips curve (and, maybe, modified one as well) etc. Another problem is the main hypothesis of current economic theories: agents (means people) behave rationally. Of course, just looking around you'll see a lot of people behaving not exactly rationally.

Wall Street is different. A lot of people there also have economic education, but they are dealing with current and future state of economy and they know that "agents" are not rational, and they don't pretend to be rational themselves. Just look around, there are thousands of books, articles, blogs teaching investors and traders how to overcome emotions (read: irrationality). In times like now I'd rather trust Wall Street than academics. Unfortunately, according to the article, most of Fed governors are academics.

Today's Bernanke speech is a good example. The whole idea of the speech is that current housing debacle is unexpected. In the real world, as opposed to academia, first signs of trouble were visible in the end of 2006, first real problems on the market appeared in April 2007 (just look at builders charts) and in August 2007 anybody with half a brain could see the biggest financial crisis since, well, Great Depression (that's when Jim Cramer said "They know nothing!"). So, it took Fed professors more than 3 months to understand what Wall Street saw immediately.

The end result: high probability of the big crisis. In the worst case, something like Japan since 1990, and Japan is not out of the woods yet. Of course, current Fed governors and other professors will explain what happened in 2008 later. That's exactly what Ben said in his speech. Oh well. And I thought that Fed just have to do what it was created for: ensure functioning of the financial system, i.e. being lender of last resort. Stable money, by the way, comes second in Fed's mandate. Explaining what happened in the past is not in this mandate.

I don't think we are up to 18 years (and no end in sight) of crisis, like Japan. US economy is much more flexible, it'll recover sooner. But "sooner" might be couple of years or a decade, only time will tell. For the nearest couple of years, it's going to be ugly. I'm accepting suggestions on when Fed's rate is going below 1%. My forecast: January 2009.

On the side note, this link probably explains strange behavior of TCSM noted in my post two days ago.

Idea of this article is borrowed from Jim Cramer. The idea that being from academia and not from Wall Street is the main problem of the Fed was stated (screamed) by Jim Cramer several times, in articles and TV shows.

Full disclosure: at the time of publication author had long position in TSCM. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Wednesday, January 9, 2008

Where is arbitrage?

Another oversold rally today. Volatility is incredible now. I just wonder, is anybody out there doing arbitrage? Or maybe main brokerages, like Bear Stearns, Merrill Lynch etc. are so deep in their internal troubles that they don't have time to do their main job, making money from market moves?

Cudos to Doug Kass, he is definitely doing his job. Anyone else?

Bought a little bit more TSCM today. It might even go lower, but I'm staging my buys.

Full disclosure: at the time of publication author had long position in TSCM. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Tuesday, January 8, 2008

Strange behavior of SNF and TSCM today

I sold some SNF today at 15.50. It's daily high is 16.82, which is incredible! I don't know what is the explanation for that. Either it's buy back by the fund itself (not likely) or somebody is buying a lot of it.
TSCM is trending down second day in a row on a slightly elevated volume. Should be a good buy under $13. Looks like some fund is selling a big position.

The end of trading day is awful. It's brutal. I want to ball up and hide like a hedgehog.

Full disclosure: at the time of publication author had long positions in SNF and TSCM. Positions can change at any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

Tuesday, January 1, 2008

2007: What a year it was!

Just calculated rate of return for my protfolio for 2007. It's 48% not counting dividends on IFN and SNF which are coming in a week. Wow!