WHY NTMD JUMPED
Jeff: ‘Apparently NTMD was touted by James Cramer, this lunatic who makes one bad prediction after another on CNBC.’
☞ Well, he’s a very smart lunatic, but he’s very much about short-term trading profits. I remember what I took to be a wildly inappropriate Time column he once wrote about day trading, back when everybody was quitting their jobs to sit in front of computer screens and play the market as if it were a video game. My recollection is that the column was awfully light on the only advice that 99.99% of Time readers needed on this topic (don’t do it!).
Anyway, he plugged Nitromed early Monday evening, after the close, and drove the stock up from under $17 to over $21 for a while in after-hours trading. All legal and his right to do, but I would be surprised if the folks who bought the stock at $21 Tuesday night will get to sell it for a long-term gain a year from now.
But you never know.
One scenario would have had short-sellers wake up and see that the stock had jumped 25% overnight . . . panic . . . and cover their shorts, driving the stock yet higher. At which point other shorts might have panicked – or gotten calls from their brokers requiring them to come up with more margin to cover their increased position or else cover their position, driving the stock still higher.
In fact, though, the stock did not shoot higher. It closed yesterday at $18.84 on volume of 6.5 million shares, huge for a stock with a ‘float’ of only about 20 million shares. (Some of the volume may have been accounted for by day traders who bought and sold shares throughout the day, profiting, or trying to profit, from its gyrations.)
Meanwhile, JP Morgan issued a research note Monday in which it reported that BiDil ‘logged a still disappointing 672 [prescriptions] this week, compared to 628 last week.’
They expect the numbers to pick up this quarter. ‘If we assume that there is an average of 90 pills/Rx (3 pills per day for 30 days),’ they write, ‘and using a [wholesale cost] of $1.80/pill, this week’s figure means the drug is quarterizing to $1.4 million.’
The problem for Nitromed is that, while sales may be ‘quarterizing’ to $1.4 million, expenses are quarterizing to around $30 million.
In the long run, with all the stocks in the universe vying for your attention (and land in Costa Rica! how about that!), why would you settle on a company with a single product that it sells at six times the cost of its two readily available, widely prescribed generic components?
There are no sure things, so never play this game with money you truly cannot afford to lose. But, that said – don’t sell your puts.
WHY IRAQ HAS NO ARMY
From the Atlantic – here. In small part:
In the end the United States may not be able to leave honorably. The pressure to get out could become too great. But if we were serious about reconstituting an Iraqi military as quickly as possible, what would we do? Based on these interviews, I have come to this sobering conclusion: the United States can best train Iraqis, and therefore best help itself leave Iraq, only by making certain very long-term commitments to stay.
. . . [T]he flow of dollars and effort shows that the military does not yet take Iraq-let alone the training effort there-seriously. The Pentagon’s main weapons-building programs are the same now that they were five years ago, before the United States had suffered one attack and begun two wars. From the Pentagon’s policy statements, and even more from its budgetary choices, one would never guess that insurgency was our military’s main challenge, and that its main strategic hope lay in the inglorious work of training foreign troops. . . .
America’s hopes today for an orderly exit from Iraq depend completely on the emergence of a viable Iraqi security force. There is no indication that such a force is about to emerge. As a matter of unavoidable logic, the United States must therefore choose one of two difficult alternatives: It can make the serious changes-including certain commitments to remain in Iraq for many years-that would be necessary to bring an Iraqi army to maturity. Or it can face the stark fact that it has no orderly way out of Iraq, and prepare accordingly.
WHY THE NEXT U.S. BULL MARKET MAY NOT BE AROUND THE CORNER
Also from the Atlantic – here. In part:
Once upon a time Democrats were big spenders and Republicans were fiscal conservatives. That was a while ago. Ronald Reagan’s defense buildup and tax cuts caused deficits to soar in the 1980s, and it was Bill Clinton who brought the budget back into surplus in the 1990s, partly by curbing spending. But those fiscal role reversals were timid by today’s standards. Since 2000 the Democratic Party has been left in the dust when it comes to spending.
The Republican Party is the new, undisputed champion of big government.
. . .
The present course of fiscal policy is not certain to end badly, but the risks are increasing. This summer, before Katrina, the economist Brad DeLong put the chance of a major U.S. financial crisis at 20 percent. The former Fed chairman Paul Volcker puts it at 75 percent within the next few years if we don’t change our policies.
☞ Change can’t come soon enough. In fact, that’s the worry – that it may literally not be able to come soon enough. Being an optimist, and heartened by yesterday’s results in Virginia and New Jersey, I like to think people are wising up, and that change will come.
Quote of the Day
Money, which represents the prose of life, and which is hardly spoken of in parlors without an apology, is, in its effects and laws, as beautiful as roses.~Ralph Waldo Emerson
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