Nov 19, 2015 | Macroeconomics
Loomings “Whenever I find myself growing grim about the mouth; whenever it is a damp, drizzly November in my soul; whenever I find myself involuntarily pausing before coffin warehouses… I account it high time to get to sea as soon as I can” – Herman Melville, from Moby-Dick The most interesting thing about the opening chapter of Herman Melville’s classic masterpiece, Moby-Dick, is that we, as readers, know from the beginning that something is horribly wrong when our narrator is a man who decides to go whaling with a maniac because he would otherwise be a suicidal sociopath who likes funerals and other people’s top hats. We question how reliable he is, just like economic data. Economic numbers are always such a tiny portion of the greater feast. It would be like judging a meal by tasting the lemon the chef squeezed on one of the dishes at the last moment. We have to keep digging to attain a clearer picture of what is going on. “Hurrahs!” have been thrown around quite recently. Praises for the economy have been sung, with expectations of FED hikes coming on the heels of the new employment numbers. Yet globally, while the China Shanghai Composite Index (data from Yahoo! Finance) has stabilized somewhat since its crash earlier this summer, there are still looming issues for the FED to consider. For one thing, as The Economist and others report, South Korean exports “shrank by the largest annual amount in six years, down 14.7% last month from a year earlier to under $40 billion, according to the ministry of trade, industries and energy.” South Korea...
Nov 10, 2015 | Biotechnology
It’s a common occurrence in the biotech sector; a company is doing fantastically, their stock rising, due to great news about their product, and then all of a sudden someone you’ve never heard of, someone who is “short the stock” (we’ll talk about what that means in a second) comes out and says the stock is worthless and, in the blink of an eye, the stock price tumbles. What should you do? Jump out with the crowd? Assume that the short seller is right? Or hold on tight? Let’s start with a disclaimer in the style of the short sellers who are the topic of this blog post: some of the affiliates or members of BTA have long positions in the two companies, AVXL and APDN, that we are about to mention. That’s because our point here today is not whether you can or should invest in any biotech company; it’s about what you should, and shouldn’t, look for when making those decisions. Anavex Life Sciences – What Happened? Anavex Life Sciences (AVXL) is a company working on Alzheimer’s solutions that we at BTA have been following for a while, and last week, following the release of an abstract (or pre-release summary) of news about their product testing, their stock began to freefall. This came on the heels of a tweet by Martin Shkreli, a hedge fund manager: $AVXL looks worthless. Compound is uM for sigma receptor (meaningless affinity) and rest of muscarinic. Co. confused if its agonist or ant. — Martin Shkreli (@MartinShkreli) November 5, 2015 If the name of Shkreli sounds familiar, it should. He is the...
Nov 6, 2015 | Biotechnology
It’s a common reality for too many to find a missing pair of keys perhaps in the pantry, or in the fridge, with an elderly family member in the house. But can something as a simple as a game make a difference? King’s College London signed up 7,000 people aged 50 and over for an experiment studying the effects of mental exercises and “brain training” online games on helping older people with “everyday skills.” Those over 60 years old who played the games at least five times a week were better able to perform “essential everyday tasks” such as “shopping and cooking”, according to their reported scores. The BBC quotes Dr. Doug Brown of the Alzheimer’s Society as saying, “Online brain training is rapidly growing into a multi-million pound industry and studies like this are vital to help us understand what these games can and cannot do.” He admits, however, that there is still a long way to go to determine whether these types of games can actually prevent or reverse dementia. But while many firms in the biotechnology firm, such as Anavex Life Sciences (AVXL), which we follow here at Bell Tower Associates, are looking to the brain and receptors for a solution to the question of reversing Alzheimer’s, steps like brain games can be a first step to using the power and flexibility of the brain itself to delay or mitigate the onset of dementia or cognitive...
Oct 15, 2015 | Macroeconomics
Real Wages: What are they? One of the biggest economic concerns in recent years has been the stagnation of wages, but many times, simply looking at those numbers on a paycheck—the nominal wage—is not enough to tell if wages have really gone up or down. Sometimes, it is necessary to look at real wages. Real wages measure your purchasing power—how effective the money you make is, rather than simply the nominal (or dollar) amount. It does this by subtracting inflation from nominal wage. For instance, if you are receiving the same amount of money, but everything costs more, then your real wages have actually gone down. Investopedia gives an example of real rages (or real income) thus: “if you received a 2% salary rise over the previous year and inflation for the year was 1%, then your real income only rose 1%. Conversely, if you received a 2% raise in salary and inflation stood at 3%, then your real income would have shrunk 1%.” So then, what’s the deal with real wages in the US? Well, Business Insider has an article arguing that, despite not having been paid more, you are being paid more. The above chart shows that, while nominal wages have not increased in the past year, real wages (nominal minus inflation) have. That is because inflation has been decreasing. The Liquid Gold Factor One major factor that may be influencing this type of real wage growth is the price of oil, which plummeted recently and has stayed low for quite a while. Here are the August Consumer Price Index (CPI) numbers from the Bureau of Labor...
Oct 3, 2015 | Biotechnology
The News can Hurt Sometimes Biotechnology firms have been suffering recently due to a barrage of negative news. Martin Shkreli, former hedge-fund manager, now CEO of Turing Pharmaceuticals AG, attempted to spike the price of the drug Daraprim to $750 per pill. Some claim that this is not unusual for pharmaceutical companies producing rarely-used drugs, and that Shkreli was simply to brazen about the news. Regardless, the news of the price hike attracted the attention of presidential candidate Hilary Clinton, who called the price hike “outrageous” and decided to announce that if elected, she would propose government intervention in the price of pharmaceutical drugs. That’s when it hit. Biotech stocks have dropped, and are still dropping, as a result of Clinton’s comments and the public backlash, but all is not lost! Remember, research is our best friend and it is good to remind ourselves to keep it in mind! For instance, Bell Tower Associates’ Correlation Study showed how individual biotech stocks are not correlated to the NASDAQ Biotechnology Index. What does that mean exactly? It means that not all biotech stocks are going to plummet simply because the NASDAQ is going down. For example, let’s look at Anavex Life Sciences (AVXL) again: If you notice, Anavex has not even been hit by the recent turn of events. It has stayed calm and collected; trading around the same 1.3 it has been for about a month. The NASDAQ, on the other hand, has fallen precipitously. It does not take a portfolio analyst to realize that these two are hardly correlated at all! This is just a reminder that, as stated...
