I Wander Through Each Chartist Street to Where the Chartist Pound Does Flow

Wed, 2010/03/03 - 12:56pm | Your editor

Today I wander through each chartist street to where the chartist pound does flow, with apologies to Blake. I am quoting a report on one of our hard-to follow stocks a subscriber sent me from a chartist service in Cambridge England, so I thought it might be a good idea to share with you all my view of charts (technical analysis.) As the subscriber, Maurice F. explains, the Cambridge service dates back to when they had to insert the numbers into a page of graph paper by hand. I might add that the outfit does not use advanced Japanese candlesticks because they go back too far.

 

Charts work because they are a self-fulfilling prophesy. If enough investors follow charts showing, for example the 200-day and 50-day averages, and one of these positions is above or below the trend-line, they will all either buy or sell. If the two charts produce a so-called golden cross the push in or out will be greater, buyers above the cross or sellers below.

 

Compared to what is happening to sterling, chartism is sensible. The British currency had been on a downtrend because of worries that its budget deficit was as bad as that of Greece, fed by concern that the coming election will produce a “hung” parliament with Labour and Tories both lacking a majority. Then the Prudential plc bid to buy AIG's Asian assets got currency traders all heated about about the impact on sterling of the huge deal. Then the hedgies piled on.

 

Today the situation reversed because the price of Pru shares has fallen so low that the takeover may not take place.

 

And hedge funds' invincibility has been tarnished by the Athens govt's decision to cut deficits by euros 4.8 bn (about $6.6 bn) with tax increases, tax enforecement, caps on bonuses, and a higher retirement age. So the euro rose.

 

The impact of these moves has been to punish the Greenback. That none of this has anything to do with our own economy is self-evident. You could post hoc argue that the latest jiggling at the Fed means low interest rates will prevail for months, as some analysts have done. After all, they are paid for analyzing.

 

But in my view, forex exists in its own little box and huge sums of money move on perceptions that are not even justified by the 200-day moving average crossing the 50-day. Today, once the euro and the pound started to strengthen, so did another 13 other international currencies. There are only 17 international currencies you can trade on the Chicago Board of Trade, our leading currency market.

 

Today chartist Tom McClellan notes in the latest issue of his mcoscillator.com that while imperfect, the eurodollar futures net postion of commercial traders predicts the trend of the S&P 500 54 weeks later. So Wall St. will go up at the end of next March, maybe. (He said it was imperfect.)

 

Now for news you can act on for paid subscribers, starting with Chile and then moving on to China, Britain, Israel, Canada, South Africa, Australia, India, and Omaha.

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Wen and Wowkadaw

Tue, 2010/03/02 - 12:29pm | Your editor

Here is the latest from Bill Gross, CEO of Pimco:

He begins with the usual conundrum of sovereign debt rating ceilings. This means that a country, however badly managed, gets a higher or equal bond rating than the bonds of companies located there. The reason is that a sovereign is assumed to be more creditworthy than its “serfs” (Gross's term). He explains: Read more »

Latest Purchase

Mon, 2010/03/01 - 12:50pm | Your editor

This morning I am in deep contract negotiations and will not be filing an additional blog beyond what went out last night. I was wrong about the short-euro short-Greek bond trade unrolling fast. It is unrolling slowly maybe because some hedge fund investors already pulled back before the weekend.

My article last night began with a long quotation from John Stuart Mill which did not go out in the blue type I wrote it in. The blue marks a quotation. The reasoning behind quoting Mill was to tell you all that Global Investing is not just about making money (although we do that too.) It is also aiming at enlightening and entertaining the readers with information on what fellow humans are up to in foreign lands. The quirks and insights this provides can help us make money or increase our happiness.

I was inspired to this comment by notes emailed to me by two paid subscribers of Irish and Hong Kong nationality who were reacting to what I had to say about those places. The Irishman withdrew his charge that my calling the language of the country Erse was pejorative after I cited chapter and verse from the almost-new dictionary I used. The Hong Kong lady liked my take on Little Sweetie, an heiress who can inspire us both.

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Night Wire

Sun, 2010/02/28 - 6:13pm | Your editor

The economical advantages of commerce are surpassed in importance by those of its effects, which are intellectual and moral. It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar.

There is no nation which does not need to borrow from others, not merely particular arts or practices, but essential points of character in which its own type is inferior.

It may be said without exaggeration that the great extent and rapid increase in international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race.
(John Stuart Mill, Principles of Political Economy, 1848; Thanks to Columbia University Prof. of Economics and Law, Jadish Bhagwati, for directing me to the quotation.)


Two things are going to happen early Mar. 1, while most of us are sleeping. The first is that a bear trap will be sprung on the hedge funds and other speculators who have been shorting the euro and buying credit default swaps on Greek debt. Many of those who took short positions in the currency and the Greek bond market were copy-cats with no real experience of euro realities.


At 9:15 Monday morning (Athens time) the Finnish EU finance commissioner will meet with President Papandreou and close a deal providing finance in return for a further 4% cut in the Greek deficit. The money will come not from the state coffers of northern Europe, but from para-state entities like the Caisse des Dépôts et des Consignations of France and the Kreditanstalt fuer Wiederaufbau of Germany. The Dutch, who have no government (it fell last week), apparently are not participating. About half of Greek financing needs would be provided, about euros 24 bn.

The way I know this is that the BBC, Reuters, Bloomberg, and the Business Week, and Wall St. Journal websites all hint at the same outcome without citing sources. If any of you are hedge fund managers please set your alarm clock. If you own hedge fund shares, set your alarm clock and contact the managers

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UGF from Frida

Fri, 2010/02/26 - 1:12pm | Your editor

Vivian is running this late dispatch from Frida Ghitis today first of all because it was my fault she missed our deadline by sitting in on the conference call with the stock she wrote about. I assumed it was being held Brazilian time. Then our new Google software did not offer the accents we are accustomed to use with Portuguese. That is hardly Frida's fault either.

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Forecasting Gold Prices

Fri, 2010/02/26 - 11:42am | Your editor

"The idea that you can actually predict what is going to happen contradicts my way of looking at the world," said George Soros. This presumably explains why he told the Davos World Economic Forum that gold was a bubble at the same time as he was investing in the yellow stuff for his own account.

On Dec. 1, 2008, the National Bank of Canada's Tanya Jakusonek surveyed gold analysts to get their prediction for the price of the barbarous relic over the following four years. The estimates for this year ranged from $1013 per oz (Credit Suisse) or $1000 (CIBC, Citigroup, Dundee, Raymond James, Scotia Capital, and Salman, all liking round numbers) right down to $591 for Versant Partners, $700 for Soleil-Bradford, $720 for UBS, and $725 for Deutsche Bank. The consensus average for 2010 was $866. So whatever made Mr. Soros change his mind, he is right about prediction.

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Thursday Trades

Thu, 2010/02/25 - 1:21pm | Your editor

Today I sold Ormat at $31.07/sh, and NICE Systems at $30.41. I bought Mellanox, MLNX, at $18.51. There will be more Israeli trading tomorrow in a different sector.

Wrong Israeli Conference

Thu, 2010/02/25 - 1:01pm | Your editor

 

The market for ipo's from China is reportedly drying up, not just because people are worried about tightening credit conditions, but because of who is coming. The latest filings are for Redgate Media Group, a Beijing ad agency, and China Intelligent Lighting, of Huizhou.

It turns out that I went to the wrong Israeli stock session earlier this week. The real meeting to have attended (although the press was not invited) was the dinner session at the home of Israel Corporation head Idan Ofer. It was attended by the chiefs of Bank Hapoalim of Israel, and Goldman Sachs (Lloyd Blankfein) plus the Premier of the Palestine Authority, Salam Fayyad, along with a bunch of Israeli and Palestinian company heads and entrepreneurs. They were trying to work out how to do more business together despite politics.

But I did get a few stock ideas at the meeting with Nasdaq-listed Israeli companies at Oppenheimer & Co.

To make room for the newbies, we sell two of our current Israeli positions because I do not want to overload our exposure to Israel. More for paid subscribers follows. It is long because it covers two days of news.

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Linguistics, Prayer, Ethics, and Geology

Tue, 2010/02/23 - 7:39pm | Your editor

New York reader FBN, an Irish national, wrote to complain about my article about simulateneous translation, in which I called the Irish language "erse". He says: Read more »

Ethical drugs

Tue, 2010/02/23 - 11:42am | Your editor

Thanks to Jeffery, Dick, William, Jay, Moises, and Phil for their responses to our search for a paid video star. You will be contacted by the marketing team. Be sure to prepare your brokerage accounts to prove that you have made 50-plus percentage gains with your Global Investing stocks. I have too, but I am not considered to be a neutral observer for some reason.

 

There will be no newsletter tomorrow because I am attending an Oppenheimer conference on Israeli stocks at the same time as the water is being turned off both in my home and my office (which are in the same building.)

 

Our newsletter recommends GlaxoSmithKline, a UK drugmaker which has been in the new of late. GSK was formed by merger with SmithKline (of New Jersey) and many of the events described occurred in the USA.

 

According to today’s New York Times (Science Times), the dispute between Dr. Steven Nissen, the Cleveland Clinic cardiologist, and the British drugmaker Glaxo over the type 2 diabetes drug Avandia included not just competing press releases and medical journal articles casting doubt on each others’ research, but also a key May 10, 2007 meeting between executives of the drug co. and the cardiologist before his article came out.

 

The meeting was recorded (as is legal in Ohio) by Dr. Nissen, but he did not tell the Glaxo team.

 

Both sides knew more than they let on. The drug firm execs knew that their study, supposedly double-blind, would undermine Dr. Nissen’s contention in an as-yet-unpublished article in the New England Journal of Medicine that Avandia raised heart attack risks in diabetes patients. Dr. Nissen did not reveal the details of his study but the drug execs appear to have received an advance copy from the Journal, supposedly a no-no. They said they had contradictory data which they were not supposed to have because the large randomized RECORD trial was billed as being double-blind, and had not yet been handed to GSK.

 

Dr. Nissen’s conclusions were based on a statistically imprecise method called meta-analysis combining multiple trial data rather than patient level analyst. Meta-analysis without careful controls correcting for the mounting imprecision of the results, when I studied statistics in grad school, was what made you flunk the course. The margin of error goes up the more you combine different databases using different methodology. The cardiologist did not do a time-frame analysis of how long patients were on the drug before heart attacks occurred, which undermined his conclusions.

 

Yet after Dr. Nissen’s article appeared (when the NYTimes does not say), GSK’s head of research, Dr. Moncef Slaoui, in an internal emailed message, agreed with his conclusions that heart attack risks increased with Avandia. He said “the risk for ischemic events” ranges from “30 percent to 43 percent”. These are horrific numbers but the newspaper does not say when and to whom Dr. Slaoui sent this email, nor how it got a hold of it.

 

Nor does it tell us how Dr. Slaoui reached this conclusion.

 

Meanwhile, the US FDA, reacting to criticism in a new Senate report questioning the safety of Avandia, yesterday told doctors it is reviewing information on the drug but recommends that patients continue taking it.

At the same time, Rep. Rosa DeLauro (D., Conn.), chair of the House appropriations committee (controller of the FDA's budget) called for the FDA to remove Avandia from the market until its safety and effectiveness can be evaluated. She took up the cudgels against the drug because safer alternatives exist. A rival drug, Takeda Pharma's Actos, has been shown to lower glucose as well as Avandia while causing a lower risk of heart attacks.

 

A report published earlier (Sat.) in the New York Times based on work by the Senate Finance Committee accused Glaxo of knowing about the risk of heart attacks with Avandia, but says it hid this from the public and the FDA. The Senate report was critical of the FDA's support of Avandia, and included studies by FDA doctors who said in 2008 the drug poses serious heart-related dangers to patients and should be pulled from market.
On Mon., FDA drug division leader Dr. Janet Woodcock said data linking Avandia to heart problems has been “inconclusive.”

 

“We have possession of no new information that raises additional alarm about the drug,” she added. However, Woodcock said some people in the FDA believe the drug should be withdrawn.

 

In a statement, Glaxo noted that a public health posting on the FDA's Web site reading “There are no new FDA conclusions or recommendations about the use of rosiglitazone (Avandia) in the treatment of type 2 diabetes.”

 

Last June, GSK released the results of the RECORD study which, GSK said, showed that there is no serious risk of heart attack or death from Avandia. Woodcock said the agency got the results of the trial in mid-2009. She said the agency was looking at the RECORD data and would discuss it at an advisory committee meeting in July.

 

According to Dow Jones, Dr. Robert A. Vigersky, president of The Endocrine Society, questioned why the meeting wouldn't be held until July when the agency received the data last year. “Is that by virtue of the fact that you need that amount of time to get the data analyzed?” he asked. He added, “Is there any way this could be accelerated?”

 

Woodcock responded that the FDA needs time to “look very closely” at the study because its results are “at odds” with other studies associating Avandia with heart attacks. When RECORD was released, some doctors questioned whether it was statistically adequate enough to draw conclusions. The Senate report charged that Glaxo knew since at least 2004 that RECORD was statistically “underpowered.”

 

Investing conclusions follow for paid subscribers. While I studied statistics, I never studied heart surgery. One of my daughters-in-law is attached to the Cleveland Clinic, but not in cardiology.

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