Technology Investor

Harry Newton's In Search of The Perfect Investment Technology Investor. Harry Newton Previous Columns
9:00 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:

BioCryst Pharmaceuticals (BCRX), Sinovac (SVA), and Simcere Pharmaceutical Group (SCR).

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.

Simcere's Relenza, which is a cure, not a vaccine, should soon get emergency use authorization in China.

This appeared on Seeking Alpha on Saturday:

China Biotech in Review: The Flight to Fight Off the Flu

Showing that 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 winter’s 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.

Sinovac Biotech (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 Sinovac’s) . 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 Sinovac’s shares to soar. After closing out the previous week at $6.30 per share, Sinovac ended last week’s 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 preference:

Normal 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.

Meantime, 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.

Meantime this article has achieved an Editors' Pick on Seeking Alpha:

Gold Is Still the Opportunity of a Lifetime

Last October 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 doesn’t immediately set a course for Mars.

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 Gold’s inability to land and stick above the $1000 level. In return, I will point at the Dollar’s 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. I’ll counter with the fact that stocks are merely in the middle of a countertrend rally within a bear market while Gold’s 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. I’ll 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, we’re 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 protect ourselves.

China’s stop-loss

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)

Click to get a bigger image:

Even the most diehard of Keynesians, who have never seen a deficit they didn’t 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.

Stock markets 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.

FDIC: The 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 FDIC’s ‘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 FDIC’s 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. Bair’s 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, I’d 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 they’re tapping a Treasury credit line. While most folks are sniffing a bailout of FDIC, I wouldn’t 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 risk.

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 they’re 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.

Everything you wanted to know about solid state drives (SSDs). First, the speed increase. It's pretty awesome.

The huge speed increase with solid state drives
To Start
Spinning platter disk -- $100
Corsair P256 Solid State Drive (SSD) -- $675
Windows XP
130 seconds
60 seconds
Photoshop CS
10 seconds
2 seconds
Word 2003
25 seconds
6 seconds
Excel 2003
5 seconds
1 second
Adobe Acrobat 8 Standard
10 seconds
1 second

Other benefits: 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. Click here. 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 or here.

What would you answer? This appeared in my inbox from an overseas friend:

Dear Harry,
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.

How America's best photographer got herself into a gigantic financial mess. The story is headlined, "How could this happen to Annie Leibovitz? The $24 million question."


the story is worth reading. Click here.

Los Angeles fires are horrific. Among the worst they've ever had. For sad photos, click here.

Can 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 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.

Melinda's Ball
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:

"Dear Captain, 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 Jews Please."

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 mistake."

"No, Madam," 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.