Gadda's Garbage Truck

Well, double take and take two on almost everything.

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Location: Salt Lake City, Utah, United States

I am an amateur investor, playing with a little money on the side, and trying real hard to make genuine sense of the macro economic conditions, the Markets etc. Important Note: The writer of this blog is an amateur. I invest and write for personal enjoyment. I do not recommend stocks. I offer free consultation but you must be responsible for your own investment decisions!

Thursday, May 12, 2005

How to crack weird space cases

Random, but interesting!
How to crack weird space cases - Space News - MSNBC.com

Tuesday, May 10, 2005

DWA, Insiders, Option Activity and stuff!


A Week Ago

Just a week ago, Pixar International, Inc (PIXR) reported outstanding results based on their biggest hit thus far - "The Incredibles". Investors rewarded the shares of Pixar with a modest gain.

Dreamworks Animation

Dreamworks Animation (DWA) on the other hand was expected to come out strong with its results today, which it hoped would be due to the strong sales of the Shrek 2 DVD. The DVD did not sell well, and the stock plunged close to 19% after hours. Now as I was reading the report, I came across this link in which the journalist talked about Dreamwork Animation's CEO Jeffrey Katzenberg telling his colleagues on Monday morning (05/09/2005) that the earnings were going to be surprisingly weak. Well, I personally thought that it was illegal for a CEO to announce to his insiders that way. It could have caused some stock manipulation. I talked to a investment buddy of mine, and he says that it might be a deterrant for the insiders who already knew to sell, as it would make them privy to insider information and make their trades illegal. I had to agree with him as it is one of the rules the SEC has been trying to enforce since inception.

However, the one thing that surprised me is the amount of put volume on DWA today. The total number of puts today were 3656. This would not be too much if the average volume everyday was not 263. A increase in factor of 13.8 just before the awful earnings smells fishy!

On the call side of things, the call Volume on GlaxoSmithKline (GSK) was 108858 when compared to the average daily volume of 5941. A 1800% increase on no news, at least by the time the market closed. What happened afterwards was that they came out with a drug for heart inflammation which shows promise in their Phase I trial. Go figure!

On the other hand, I just ran my screener and found out that insiders at Chesapeake Energy (CHK) were buying stock. Not surprising since they know the most about the energy situation, and how it is going to be. Not a bad company which deals in Oil and Natural Gas Exploration and Production, with a fairly decent P/E. I do not like their cash situation though (N/A as per Yahoo Finance) and 1.7 Billion in debt. However, S & P reports show that it does fare well against its industry peers. I wonder what the insiders are seeing!

Well, one more interesting thing is that in the S & P today, there were 54 advancers to 446 decliners. The ratio is 9:1 in favor of decliners, but for me to worry, I need to see the downside to upside volume ratio also. There was no free site where I could get the upside/downside volume ratio. I came across a site called ValueLine which charges an exorbitant sum for it, and I decided to spoil their party sometime this summer by writing my own webservice for it. Maybe I can use the Google (GOOG) API. I normally dont go after technicals, but the program trading (36% of the trades executed - some dude on CNBC) can cause enough volatality to send the market into a short term tailspin.

Also, on another note, why do Hedge Funds cry so much when they lose a substantial sum of money? GM went up a not-so-great 18% and the Bonds crashed the next day causing a double whammy, yes, but how can one complain about a stock run up on genuine news? Damn, these guys make me sick!

Sunday, May 08, 2005

Mark Cuban on (Naked) Shorting

Interesting stuff. By the way, his blog, www.blogmaverick.com (link on this page under interesting blogs). He also has an awesome Q & A in this weekend's Barrons Magazine. Man I wish I had more time to read this kind of stuff!!
Mark Cuban on (Naked) Shorting

Thoughts on Oil, BRK and stuff!

Well, I am no soothsayer. But if you read my posts a week ago, you should have noted that I did expect this. The run up in the DOW and the NASD currently is a result of the decline in oil prices a while ago. The DOW and the NASD will continue to move up till this lagging indicator catches up. It has to. It is the fundamental nature of the markets, just as it is the fundamental nature of the folks at CNBC to give an opinion on almost everything - and not - what is relavant a.k.a. the news. Too bad we cannot call the pump and dump on them.

Traders worry gasoline demand will outstrip supply

Oil will have a toll on this market. Whatever President Bush does in his talks with the Kingdom of Saud might have some impact, but the bottom line is - no amount of diplomacy will override the fundamental supply-demand curve.

I dont want this to sound as if oil prices will continue to affect the market forever, but might do just the amount of damage enough to push us into a recession. Hopefully I am wrong. I for one seriously do.

Well, the lil bird on the wire tells me that there will be a run up in the DOW till the mid 10000's after which I would move into cash - and into only those equities which dont get affected by Energy. You might think there are many - but you will be surprised to know how few sectors there are that are not touched by energy prices at all.

Berkshire Hathaway - To Buy or Not to Buy

I am contemplating on buying a couple of Berkshire Hathaway shares - but I am worried on how volatile the stock might become in case either Munger or Buffet cease to run the company. The fear is well founded since both of them are 81 and 74 respectively. The only other reason I cannot get myself to make up my mind is that I dont understand exactly what BRK does. I know it is a conglomerate and I guess I better re read the company info section once more. But I do take comfort in the fact that Old Man Buffet has hedged against the dollar and diversified a lot internationally by investing in Petrochina (PTR) and buying more and more insurance companies - the one sector of companies which never lose money - ever.

Oil again.

Oil... Oil... Oil... Were people as worried and pessimistic as I am in the 70's when the oil shock happened? I did not look hard, but there was no ready documentation on the general sentiment of people there.

Misc

A couple of more things, I have been truly flattered by a couple of things - Barrons published an article called "A Bi-Polar Market?" just a day after I posted my post titled "Market Schizhophrenia?". Secondly, the topic of "Stagflation" was in this Weekend's Barrons again just a couple of days after I wrote about it. I know I ain't that good, but surely the guy at Barrons who is reading my blog can be my friend.

On another note, I got an email from New Zealand from an Old Gentleman who told me that my blog was refreshing and wished I would update it regularly - not daily , but regularly - as he could come to the blog to see something new when he visits. I did write back to him saying that this is a hobby and that I would do my best to have something up every 3 days, if my wife does not throw my computer out of the house

Monday, May 02, 2005

The story of Tysabri and Elan Pharmaceuticals

Ok, here is a story which broke some hearts, some Hedge fund (I beleive it was called Oracle funds or something), and most importantly a lot of investors. On Feb 28, 2005, Biogen Idec (BIIB) and Elan Pharmaceuticals (ELN) withdrew their potential blockbuster drug Tysabri as it was found to have caused PML (Progressive Multifocal Leukoencaphalopathy) a fatal disease affecting the central nervous system - among two of its patients in their clinical studies.

The stock prices of both the companies got trashed. Biogen fell about 50% and the stock price of ELN - more susceptible as they needed Tysabri for their survival fell close to 67%.

Investors bid up the stocks in the following days as reports emerged that Tysabri had the deadly effect on patients who would use it in conjunction with Avonex, another MS drug marketed by Biogen.

That was not the end of it.

On March 30, 2005 - A previous death in the Clinical Phase III trial of Tysabri was re-evaluated to be the result of PML - not conclusively, but it was strongly believed. The person in this case did not take Avonex as in the previous case, but he was a part of the trial for the effect of Tysabri against Crohn's disease. This third death was more like a strike 3 for ELN. Biogen had a pipeline, Elan Pharma had none. The stock price of ELN fell another 55 + %.

On Apr 27-28 Biogen and ELN reported their earnings. As expected they were lower as the companies had to set aside some money for the litigation costs, and of course, the setback they suffered from the withdrawal of Tysabri. They stated that they would present more extensive clinical test data to FDA this summer and were cautiously optimistic for the return of Tysabri into the market. Maybe they did it for the money, but they worded it well. They said that they believed that the benefits far outweighed the risks. I thought that was a great decision.

But that didn't cheer up Erica Whittaker of Merrill Lynch, who kept her sell rating on Elan. "Without Tysabri as a blockbuster product, we remain concerned that without more severe restructuring, Elan will have difficulty repaying its $2-billion-plus debt obligations in 2008 and 2011," she said in a report to clients.

In the same report, she predicts Tysabri could return to the market in early 2006 under tight restrictions that would limit to sales in peak years to $200 million to $350 million. She doesn't own shares; her firm has a non-investment-banking relationship and is a market maker in Elan's stock.

Tysabri's initial allure was not only analysts' belief that drug could produce well over $1 billion a year in treating MS but also that it held promise, based on early clinical trials, for treating the severe gastrointestinal ailment Crohn's disease and rheumatoid arthritis.

I talked to my friends mom who suffers from MS, she takes Tysabri, and swears by it. She has had MS for over 20 years, and she thinks it is one of the best drugs she has been prescribed.

I dont know if patients would be willing to be prescribed Tysabri after what has happened in the past 3 months - for the marketing for that is going to be hard.

Investors are betting big on Tysabri making a comeback. ELN shares surged more than 50% in the last 3 trading days just on the companies comments.

If this is a trading opportunity remains to be seen, but it sure is not for the faint of heart.

Sunday, May 01, 2005

AIG woes

Here is one statement from AIG's new CEO Martin Sullivan (Can't effectively blame him since Maurice "Hank" Greenberg was the CEO for a while) - "We are disappointed that we have not yet been able to file our Form 10-K," Martin Sullivan, AIG's new CEO, said in a statement. "We are working diligently to complete the filing, at the same time assuring we have accurate financial statements, rigorous accounting, greater transparency and thorough disclosure."

If Spitzer (it is obvious he is doing this for political gains - no one cares a hoot about the average investor - trust me - else he would not be running for Governor of NY) did not go after the Greenberg family - Maurice's son was the first CEO to step down from MMC. His brother is under investigation for running ACE - I wonder if we would have ever known anything was wrong with a DOW Component. Well, I as a skeptic would think that this kind of irregularity is widely prevalant - and will not be known until Spitzer makes new enemies or some one else decides to run for NY - i.e, it should suit someone's political gains. In short, we will know only after they know - and if we dont we are continuously being cheated. Its a lose-lose wager. Damn!

Anyways, it always brings me back to the way the great Warren Buffet invests - Your investment should be simple enough that you can understand. If you cannot understand it relatively easily, there is no point in investing in it. You will never marry a partner whom you don't know, would you? Insurance, for me is hard to understand. 'Nuff said.

Are oil prices being played in the current market? Let me know your thoughts if you read this post. I am planning on writing something on it once I get some time. Yes, I did not forget about GOOG yet!

Have a great start to a wonderful week!