Navigating the Biotechnology Sector

Sep 23, 2015 | Biotechnology

Getting started Buying a stock in general is a difficult decision. Will it go up? Down? Flat-line? Squiggle around in a chart on that one website I saw? The list of questions goes on. Some people can be paralyzed by the prospect of looking at a stock, much less buying one. All those different graphs and opinions! Doesn’t have to be that difficult. Having useful information and research behind you can push you in the right direction. What is biotech? Biotechnology has been around for thousands of years. It’s when someone uses living organisms to develop or create products. Some believe that the definition of biotechnology even extends to just simple agriculture: growing food! Some start with the making of beer. Now while you may know that one guy who will forever be claiming he’s a biotech engineer because he makes craft beer, in modern times, biotechnology usually refers to creating medicines or using technology to solve a wide range of medical issues in the 21st century. Why the biotech industry? Investors who look at stocks almost always take into consideration the industry itself. Where’s it going and where’s it been? If you’re buying an oil rig, you check the price of oil, car sales, etc. You find out what’s moving in the economy. Much, though not all, of the biotech industry rests on the fact that disease, sickness, and aging are still a part of life. Right now at least, someone, somewhere, is unfortunately going to be well. Someone else, fortunately, is always going to try to solve the issue. Biotechnology is at the forefront of solving these...

Did the FED Change the Rules in the Middle of the Game?

Sep 18, 2015 | Macroeconomics

Imagine you are a football player, and you just sacked the opposing team’s quarterback for a ten-yard loss. You are pumped, doing your little sack-dance, when suddenly you see the yellow flag flying and the referees come sailing in. Turns out, the NFL just changed the rules. You’re not allowed to hit the quarterback unless you’re one of the defensive linemen, and you’re just a linebacker. You now have an idea what it may be like to be in the markets following the Federal Reserve (FED)’s decision not to raise interest rates in yesterday afternoon’s press conference. FED Chair Janet Yellen made a number of remarks that raise the question: has the FED changed the rules in the middle of the game? The Former Rules The dual mandate given to the FED by Congress has long been seen as the “rulebook,” and the FED, by this rulebook, has two goals: Maximum sustainable employment Price stability, also viewed as low, stable inflation Let’s tackle employment first. The unemployment rate in August was 5.1%, and has been trending downward in the past few months, down 0.6% since January. Yellen stated in her press conference that “the labor market has shown further progress so far this year towards our objective of maximum employment,” but that “the participation rate is still below estimates of its underlying trend, involuntary part-time employment remains elevated, and wage growth remains subdued.” As far as inflation is concerned, the committee seems quite insistent on a 2% inflation target, as Yellen stated, “Inflation has continued to run below our 2% objective, partly reflecting declines in energy and import prices”...

A Sailin’ We Go

Sep 14, 2015 | Investing

The Ancients were not known to be entirely investor-savvy people. The great Aristotle believed it was unnatural for money to breed money and thus condemned investing. There are always exceptions, however. Take Marcus Porcius Cato the Elder, for example. Imagine that you’ve just returned from Spain after a successful campaign and have captured quite a bit of local silver. What could you possibly do with all that money? Well, Cato had an answer. Invest and Diversify Investing wasn’t so easy, though. No banks. No corporations. No bonds. No registered investment advisors. So what did Cato do? He bought boats… ,well, parts of boats. Here’s what the ancient biographer Plutarch wrote regarding Cato: “He used to loan money also in the most disreputable of all ways, namely, on ships, and his method was as follows. He required his borrowers to form a large company, and when there were fifty partners and as many ships for his security, he took one share in the company himself, and was represented by Quintio, a freedman of his, who accompanied his clients in all their ventures. In this way his entire security was not imperiled, but only a small part of it, and his profits were large.” While Plutarch still believed investing was disreputable, we have a clear example of an early form of diversification, or trying to invest in different assets so that your risk is minimized. Let’s look more closely at what Cato the Elder did: He ensured that all of his borrowers, or investees, formed one large “corporation” in a sense. By pooling their resources, he ensured that not only he,...

A Midsummer Night’s GDP?

Aug 28, 2015 | Macroeconomics

In William Shakespeare’s A Midsummer’s Night Dream, two young men are passionately pursuing the same girl through a magical forest, while another poor friend of the girl is loved by neither. After some comedic chaos, the two “correct” pairs marry at the end and all is good… except for one detail. An astute observer or reader will notice that behind the curtain of these lovebirds is a fairy king who secretly put a love potion in one of the young male’s eyes so he would fall in love with the correct woman. More on this later…   Act I: Set the Stage GDP numbers released seem to indicate positive growth in the US economy. Whew! After seeing the Stock markets here and abroad taking severe nose-dives and discussions of the Fed possibly changing its mind about raising interest rates, the Bureau of Economic Analysis’ newest news release sent waves of cool air down the sweaty neck of the financial world. Now, unlike Shakespeare’s play, the probability that there is a secret fairy king who is increasing Personal Consumption Expenditures for the benefit of the GDP is extremely low. Nevertheless, it would be fruitful to pull back the curtain to see behind the GDP stage before jumping to any conclusions. Act II: What does the number really mean? Enter center stage: the GDP number. What is it? What does it signify? It is usually just tied up straight to economic growth. The economy is growing again at a rate of 3.7%. Well… not quite. It is growing at a rate of 3.7% annualized rate. That means that the economy would...