Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EDT, Tuesday, September 8, 2009: Winter
is approaching. Swine flu (also called H1N1) will be big. There are at least
three ways to play this:
(BCRX), Sinovac (SVA), and Simcere Pharmaceutical Group
Some news is out.
Last week, China ordered 7.3 million doses of H1N1 (swine) flu vaccine from
two domestic manufacturers: 3.3 million does from Sinovac (SVA) and 4 million
doses from Hualan Biological Engineering Inc. Both companies received SFDA approval
of their vaccines this week. All 7.3 million doses must be delivered
by September 15.
which is a cure, not a vaccine, should soon get emergency use authorization
on Seeking Alpha on Saturday:
in Review: The Flight to Fight Off the Flu
it can organize itself to meet a potential health emergency, China expeditiously
tested, approved, produced and began stockpiling H1N1 flu vaccine last week.
The swine flu strain, which began appearing late in last winters flu
season, seemed to carry a greater incidence of death than most variants of
the disease. Accordingly, the health establishment moved quickly to combat
an as-yet-to-appear major outbreak. No one wants to appear lax against a threat
that afforded authorities a chance to prepare.
(SVA) was one of the main beneficiaries of the threat. On Monday, the company
reported a panel of experts recommended approval of the product (see story).
The SFDA followed on Thursday by granting a production license and approval
for Panflu.1..As expected, the agency SFDA approved the single-injection administration
of the vaccine as sufficient to provide immunogenicity.
On Friday, China
announced an order for 7.3 million doses of H1N1 flu vaccine from two domestic
manufacturers: 3.3 million doses from Sinovac and another 4 million from Hualan
Biological Engineering (whose approval closely followed Sinovacs) .
Also, China granted emergency approval for Relenza (zanamivir), a GlaxoSmithKline
(GSK) drug that is both a prophylaxis and treatment for influenza A and B.
Simcere (NYSE: SCR) owns the exclusive right to market Relenza in China.
All of this
news caused Sinovacs shares to soar. After closing out the previous
week at $6.30 per share, Sinovac ended last weeks trading at $9.14,
an increase of $2.80 or 45%. On Monday, it briefly hit a high of $12.50, a
record price for the stock.
In order of personal
flu shots are now available: Walgreens is selling
them for $24.99. Get yours. Do it quickly before they run out. To find the nearest
Walgreens, click here.
gold is busting out. Lots
and lots of talk about gold. You can feel the momentum. Gold will go over $1,000
an ounce today.
article has achieved an Editors' Pick on Seeking Alpha:
Gold Is Still
the Opportunity of a Lifetime
was a pretty brutal time to be in the prognostication business. I had just
called Gold the opportunity of a lifetime at the end of August at a price
of around $800/ounce. By the time late October came around, the price had
fallen to around $725 and the catcalls had begun in earnest. The Keynesian
Kakistocracy was out in full force, hurling insults so rich and humorous that
I felt compelled to write some of them down. Now a year later it is time to
do another quick review and probably set myself up for yet another barrage
of hate mail if the price of Gold doesnt immediately set a course for
Yes, we are
one year removed from that column and Gold is up 25% in dollar terms at nearly
$1000/ounce. Detractors will quickly point out Golds inability to land
and stick above the $1000 level. In return, I will point at the Dollars
failed rally to 90 as measured by the USDX. Detractors will point to a lack
of interest and dividends from investing in Gold. I will point out that Gold
is not an investment; it is money. However, for those who insist on comparing
Gold to stocks, I will point out that in the year since the last article,
Gold is up 25% while the Dow Jones Industrials are down 19%. Detractors will
point out the new bull market in stocks. Ill counter with the fact that
stocks are merely in the middle of a countertrend rally within a bear market
while Golds correction last year was a countertrend move within a bull
market. Detractors will point to the save-haven status of the Dollar during
times of economic distress. Ill counter with the fact that Congress
has ensured that the Dollar will die of nearly two trillion cuts - in
FY 2009 alone. Must we really continue this?
So on the anniversary
of the beginning of the first in extremis phase of the financial crisis, were
going to look at two of the many developing situations that should give us
pause when considering the stability of our financial structures despite all
the positive rhetoric and hopefully compel us to consider how to adequately
Last week, China
released some rather earthshaking news that was barely reported by the diligent
media here in the US. And where it was reported, the significance was completely
glossed over or even ignored. The Chinese Government gave a directive to its
state banks to cut their losses on commodity related derivatives, many of
which are tied to NY and London banks. In doing so, the Chinese government
is in essence saying it no longer respects the validity of these specific
performance contracts, pointing out that without performance, there is nothing
special about the contracts. This is tantamount to a shot across the bow.
The commodities portion of the total notional value of all OTC derivatives
as of December 2008 is rather small at 0.75% of the total. Telling Wall Street
to take a long walk off a short pier in this instance will probably not destroy
the financial system in and of itself, but it will certainly give the bailout
boys a hint of what could happen if the Chinese et al (think BRIC) start backing
out of other more important areas such as interest rate swaps which were nearly
55% of the total notional value. (Data courtesy of BIS)
get a bigger image:
Even the most
diehard of Keynesians, who have never seen a deficit they didnt love,
are aware of the fact that it is much more favorable to have foreign cooperation
in your currency burying than to have to do it on your own with direct (or
around the woodpile) monetization. In that regard, they still need the Chinese
if for nothing else than maintaining the façade of vendor financing
and the maintenance of the status quo.
reacted poorly to the news last Tuesday with the Dow losing nearly 200 points
on a day where there was a bevy of green shoots economic news
in the form of ISM manufacturing data, pending home sales, and motor vehicle
sales. Financial stocks led the decline and we must wonder if the smart money
had its eyes on the Chinese as the day progressed. On Wednesday, Gold broke
out of its recent doldrums and immediately headed north. Granted the technical
patterns had been predicting the breakout for the past few weeks, but it is
rather coincidental and we have to ask if we are not beginning to see the
first shockwave from the recent Chinese action? If so, Gold gets a big thumbs
up, while paper assets get the boot.
paper tiger is going to need more paper
We've all seen
the good news that has come out on the economy in the past few weeks. While
challenges remain, evidence is building that the American economy is starting
to grow again. But no matter how challenging the environment ... the FDIC
has ample resources to continue protecting insured depositors as we have for
the last 75 years. No insured depositor has ever lost a penny of insured deposits
... and no one ever will.
The above statement,
made by FDIC boss Sheila Bair is overflowing with inaccuracies, but for the
purposes of this article, I want to focus on the last sentence. The FDICs
trust fund is dry. At the beginning of 2008, the Deposit Insurance
Fund (DIF) had a balance of approximately $52.8 Billion. By the end of 2008,
the DIF had been drained to around $17.3 Billion on the back of just 25 bank
failures. To date in 2009, there have been 81 failures, with the two largest
failures of the recession coming in the last month. At the end of Q1 2009,
the DIF balance had already been reduced to $13.1 Billion. In addition, the
list of troubled (read: dead) banks now stands at 416 as of the
FDICs latest quarterly report.
Ms. Bair, in
her statement, alluded to the notion that the FDIC sets aside reserves for
anticipated failures. The problem is that their estimates of the total impact
of failures have been categorically low during the recent run of bank failures.
In fact the actual losses have been nearly twice (1.94X) the estimates
by FDIC. In the following graphic, used in Ms. Bairs presentation, the
FDIC has estimated the cost of failures to be $32 Billion. If recent history
is any guide, the real cost is likely to be a tick over $62 Billion. Given
that the balance of the DIF is now at $10.4 Billion, Id say they have
more than a small problem.
What is even
more interesting is that Ms. Bair considers money borrowed from the Treasury
(taxpayers) and thrown into a black hole to be an asset and her chart above
fails to recognize that such a loan creates a liability as well. However,
this is indicative of our new accounting paradigm. In addition, she asserts
that the FDIC is entirely industry-funded. Not so, when theyre
tapping a Treasury credit line. While most folks are sniffing a bailout of
FDIC, I wouldnt count on it. So far, the vast majority of the bailout
money has found its way to Wall Street, not Main Street.
So while the
FDIC is bragging that no insured depositor has ever lost a penny and never
will, it must be noted that it is incorrect to assume that Congress is under
any type of mandate to bailout FDIC. When the DIF requires massive borrowing
from the Treasury, bank premiums will be increased in a vain attempt cover
the cost, which will mean higher borrowing costs for the real economy. And
if Congress does step in and bail out the FDIC, the amount will just get tacked
onto the national debt. So while large banks gobble up smaller ones and consolidate
on the back of TARP, TALF, TSLF and a dozen other emergency Fed
lending by precious metals is the opportunity to rid oneself of counterparty
The Dollar is
the ultimate example of counterparty risk as it relies on the responsible
performance of government and monetary authorities to maintain its value.
Since the two aforementioned entities have been absentee custodians of the
Dollar for so long, its value has deteriorated dramatically. Precious metals
have allowed individuals to compensate for that loss in purchasing power.
Pundits will say that Gold is a lousy investment and theyre right. The
problem with their thinking is that Gold is not an investment; it is sound
money and should be regarded as such, not with contempt as is routinely the
case in the mainstream press corps. So as we begin another September, a time
of year that seems to bring out the worst in our financial and banking system,
I will say it again - Gold continues to be the opportunity of a lifetime.
The article has
26 comments. Click here.
you wanted to know about solid state drives (SSDs). First,
the speed increase. It's pretty awesome.
huge speed increase with solid state drives
platter disk -- $100
P256 Solid State Drive (SSD) -- $675
It's totally quiet. My laptop stays much cooler. I get a little extra battery
life. It seems to be more reliable. It's really fun to work at instant speed.
Am I recommending
a hard drive that costs as much as a laptop? If you use your laptop as much
as I do, the answer is YES.
When you buy the
drive, it's raw -- no formatting, no software, no nothing. There are two ways
to make it useful.
1. You can start
from scratch. Format it. Load Windows. Load your software. Load your data. This
is slow. But you get a clean install.
2.. You can clone
your existing drive. There is only one reliable way to do this. Trust me on
this. It's taken weeks to figure this out. Buy Acronis True Image Home for $49.99.
Do not download the trial. It doesn't work. When you've downloaded the
one you paid for and installed it, use it to make a "bootable rescue CD."
Now you need to
shut down your laptop. Attach your new SSD via USB, put the bootable rescue
CD into your CD drive and start your PC. It should go straight to the CD, load
Acronis True Image. Then you follow the bouncing ball. Once it's cloned, shut
down your PC and switch drives. Do not boot with two Windows drives attached.
It will confuse your PC.
From now on, every
time you add new software or change things on your new SSD, you'll want to clone
it back to your old disk. It's good to have clone backups. Don't forget to make
daily backups of your data -- the stuff you're working on.
For more on the
Corsair P256 SSD, click here.
To buy it, click here
would you answer? This appeared in my inbox from an overseas friend:
how are you. I hope, these emails finds you well. May I ask you a question?
What do you think about cmbs? Somebody offered me to invest in a fund that
is investetdin different cmbs bonds. But I´m not sure at all, what to
do. Waht is your meaning about cmbs bond?
CMBS stands for
commercial mortgage backed securities.
America's best photographer got herself into a gigantic financial mess. The
story is headlined, "How could this happen to Annie Leibovitz? The $24
story is worth reading. Click here.
Angeles fires are horrific. Among the worst they've ever had. For
sad photos, click here.
you pick which Victoria's Secret model is the blonde? Hint:
one has lifted the wrong leg.
Congratulations. You figuredit. It was the blonde.
2009 U.S. Open Tennis Schedule: TV
coverage of the US Open is around the clock -- presently on ESPN2, ESPN2HD and
the Tennis Channel, and then later on CBS. The full schedule is on
USOpen.org. Here's today. Make sure
you watch it in high def -- which is often on a different channel. For example,
our low def Tennis Channel is 455. Our high-def Tennis Channel is 465.
A US Navy cruiser anchored in Mississippi for a week's shore leave.
The first evening,
the ship's Captain received the following note from the wife of a politically
connected wealthy factory owner:
Thursday will be my daughter Melinda's Debutant Ball. I would like you to send
four well mannered, handsome, unmarried officers in their formal dress uniforms
to attend the dance. They should arrive promptly at 8:00 PM prepared for an
evening of polite Southern conversation. They should be excellent dancers, as
they will be the escorts of lovely refined young ladies. One last point: No
At precisely 8:00
PM on Thursday, Melinda's mother heard a polite rap at the door which she opened
to find, in full dress uniform, four handsome, smiling black officers.
Her mouth fell
open, but pulling herself together, she stammered," There must be some
said the first officer. "Captain Goldberg never makes mistakes.
This column is about my personal search for the perfect
investment. I don't give investment
advice. For that you have to be registered with regulatory authorities, which
I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
You can't click on my email address. You have to re-type it . This protects
me from software scanning the Internet for email addresses to spam. I have no
role in choosing the Google ads on this site. Thus I cannot endorse, though
some look interesting. If you click on a link, Google may send me money. Please
note I'm not suggesting you do. That money, if there is any, may help pay Michael's
business school tuition. Read more about Google AdSense, click
here and here.