Actually, it’s not fear. It’s pure irrationality, as top-quality stocks have been spanked down to bargain-basement levels, despite no discernable change in their businesses.

But business is still booming in the biotech sector…

Over that time, we’ve seen three huge buyouts occur in the Big Pharma/biotech area…

It started in January, with the news that Pfizer (NYSE: PFE) would shell out $68 billion to buy Wyeth (NYSE: WYE).

And things really got rolling this week, with the news that Merck (NYSE: MRK) will acquire Schering-Plough (NYSE: SGP) for $48 billion and that Roche and Genentech (NYSE: DNA) have finally concluded protracted negotiations that will see Roche buy the biotech superpower for $47 billion.

Total value of done deals: $163 billion. And in a market where access to capital has supposedly dried up.

The question is: Could these Big Pharma mergers signal a shift in sentiment and a bottom for the broader stock market?

If you’re looking for a simple, one-word answer… no.

But if you don’t take your investment advice from such in-depth, hard-hitting features as the “Lightning Round,” I invite you to keep reading…

The Credit Is There… But Only For The Right Deal

There’s no doubt that it’s tough to get credit these days. But as the merger deals above show, capital is clearly available for the right deals.

For example, in order to finance its deal with Genentech, Roche issued nearly $33 billion in notes. In addition, Pfizer received over $22 billion in loan commitments from various banks to complete its transaction. And similarly, J.P. Morgan (NYSE: JPM) slapped down $8.5 billion so Merck could fund its deal with Schering-Plough.

Again, this has occurred during one of the most fear and panic-ridden periods in stock market history. And it’s come despite frequent comparisons of the Depression Era. Listen to the media too much and you’d expect to see the world in a grainy, brown hue every time you look out the window.

Don’t get me wrong here: I’m keenly aware that the economy is in bad shape. No one has ever accused me of being a Polyanna. But my point is that it’s not necessarily all doom-and-gloom (as some would like you to believe).

These healthcare/biotech mergers indicate the beginning of a thaw in credit markets and hopefully the start of a healing process for the markets. Notice that I’m not calling it a “bottoming process” because as I said last week, I do believe we’ll see new stock market lows.

But as more deals get done, investor and lender confidence will slowly return to the market. And I do think more acquisitions are imminent – particularly within the biotech sector…

The Biotech Sector – A Wave of Consolidation

The biotech sector is likely in store for a wave of consolidation. While the above-mentioned Big Pharma companies have boosted their pipelines and created massive biopharma companies with their acquisitions, there are still many pharmaceutical companies that desperately need to fill their pipelines.

And that bodes well for biotech – particularly when you consider that the largest biotech company after Genentech is Amgen (Nasdaq: AMGN), which boasts a market cap of $48 billion.

After that, Gilead Sciences (Nasdaq: GILD), which just announced a $1.4 billion takeover of CV Therapeutics (Nasdaq: CVTX), is next at $40 billion. Then the market thins considerably, with only three companies that have market caps over $10 billion and 11 companies with market caps of $1 billion or more.

For example, Merck could buy Biogen (Nasdaq: BIIB) and Genzyme (Nasdaq: GENZ) for less than it cost the firm to buy Schering-Plough.

The point is: Even though the biotech sector has outperformed the S&P 500 during the bear market, many biotech stocks have become cheap.

In fact, pharmaceutical companies wouldn’t even need to raise capital to buy a BioMarin (Nasdaq: BMRN), or Xcelerated Profits Report portfolio member Medivation (Nasdaq: MDVN) and many others like them.

Our 2 Favorite Emotional Friends: Fear And Greed

When managements are scared they hunker down and hang on to capital. But when opportunistic executives add to their businesses – even during downturns – that kind of optimism and activity is healthy. They’re essentially expressing their confidence that conditions will improve.

Remember… emotions control the stock market as much as fundamentals. And as we’ve mentioned in previous columns, fear and greed are the two main players. So when investors see this kind of activity, they start to think about their own opportunities, rather than cowering in the corner in the fetal position like so many have for the past few months.

Big Pharma Falls For Attractive Biotech

As we’ve seen recently, Big Pharma has already fallen for some of the most attractive biotech names. And as some more choice companies begin to get snapped up, you might see a rush into the sector by other Big Pharma firms to grab the existing quality companies before someone else does.

Mix in this momentum with some speculation and that could kick prices higher, causing Big Pharma executives to pull the trigger before valuations get too expensive.

The economy is still bleeding, but these recent acquisitions indicate that the patient is no longer spurting blood all over the emergency room floor. Eventually, it will stabilize and walk on its own again.

When it does, the strongest drug companies will be the ones that took advantage of this unique opportunity to fill their pipelines with products from inexpensive biotech companies.

Source: The Biotech Sector: Big Mergers Could Mean Big Gains For Biotechnology

It will be interesting to see how the FOMC approaches this meeting. The current Fed Funds target rate is 0-0.25%, which in and of itself is rather strange. It is a moving target, not a fixed rate. Who determines which rate is used? My guess is this meeting will be used to clarify what the rate is. The Fed will either officially reduce it to 0% in a continued effort to resuscitate the economy, or lock it in at 0.25%. This would at least leave the Fed with one perceived bullet in the gun.

The rest of the week has a full slate, which starts this morning with the December Existing Home Sales report. Expectations are for a slowdown of 40k units versus the previous month, and I think that is overly optimistic. The housing reports last week both fell flat on their face so I don’t think this report, or the New Home Sales report on Thursday, will come anywhere close to expectations.

Tuesday morning sees the release of the Consumer Confidence report for January, and this one is a tough read for me. It is expected to be the same as the December reading of 38. I am not sure which one will have a bigger impact on the reading: consumers getting excited about a change in leadership, or fearful of more job cuts. I guess it all depends on when the reading was taken.

Earnings:
Mon: AXP, AMGN, CAT, HAL, MCD, TXN
Tues: BMY, DD, GILD, JAVA, YHOO
Wed: PFE, SBUX, WFC
Thurs: MMM, AMZN, CELG, CL, LLY, JNPR,
Fri: CVX, XOM, HON, PG,

Source: Fed Counts Bullets, Earnings Dominate Calendar

This from Jim:

On Nov. 19, 1984, you could have picked up shares of the emerging biotechnology firm Amgen, Inc. (NASDAQ: AMGN) for $3.63.

Those shares rose steadily for the next 20 years and were worth more than $85 as recent as 2005. Taking into account Amgen’s five splits over the past 23 years, you can knock that original 1984 price down to about nine cents a share.

It’s almost impossible to believe that a company that would cost you pennies could turn into a $100 billion pharmaceutical giant specializing in the treatment of rheumatoid arthritis, anemia and psoriasis.

But Amgen did it…and investors who saw its potential laughed all the way to the bank.

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Beat the blue chips many times over — by focusing on a “secret” market whose top-performing stocks averaged gains of over 25,000% in 2007.

FACT: In 2007 alone, savvy investors on the “secret” stock market could have turned an investment as low as a few thousand dollars into 50, 100, even 500 grand or more in value.

You simply won’t believe your eyes when I show you the TRUE numbers here…

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That story – and so many others like just it – is pretty recognizable. Replace the company’s name and a few numbers and dates, and you have just about everyone’s reason for becoming interested in the stock market.

If you didn’t think the market could make you rich, why would you waste your time with it? The fact is, only two small groups of people actually do get rich with stocks…the brokers and the penny stock enthusiasts. Let me explain…

The brokers make money off of trading stocks. Whether you buy them or sell them, your broker takes his commission. He’ll take it on big winners and big losers. He’ll take it on trades that breakeven. As long as he gets paid, that’s all that matters.

So what does he do? He tells you to buy blue chip companies — the large, established behemoths that can only go up or down a few dollars here or there. Why would you want to do that, because the broker says it’s a good idea, and he has made a bunch of money in the market, so he must be right. Wrong! Ignore those suits.

What about the penny stock enthusiasts? How did they strike it rich? Well for starters, they don’t listen to some commission-hungry broker. They find companies like our example above. You can’t get much smaller than nine cents a share. While that one was truly the best of the best — a top tier example — it’s not alone. Many others have done just as well.

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Wall Street’s Best-Kept Secret…

“Tier Two Equities” Can Pay Six Times More Than Regular Stocks… With Less Risk

For years, professional investors have quietly used “tier two equities” to lock into America’s best blue chips at a discount…for much bigger gains…even during crashing markets…

Check it out here…

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You already know the list of names that started out as penny stocks: Wal-Mart, Starbucks, Microsoft, etc… But, those aren’t flukes either.

In a famous Tweedy, Browne report back in 1983, every publicly traded U.S. stock was grouped by size. As the size of the companies in each group gets larger, the returns are smaller. The smaller the company, the larger the return. Obviously, those who invest in small companies do quite well. You could say small-caps offer a higher reward than their larger counterparts.

Let me put it this way: If you want to continue to break even (at best) while your broker gets ever richer, that’s fine. But if you want to invest in a few penny stocks and hope one becomes the next Amgen, I’m with you.

Source: The Story That Got You Interested in Stocks

• Verizon Communications Inc. (VZ) reported strong quarterly profit boosted by wireless sales. Second-quarter profit was $1.88 billion, or 66 cents a share, up from $1.68 billion, or 58 cents a share, a year earlier. Excluding items such as merger integration costs, earnings per share were 67 cents, beating the average analyst forecast for 64 cents a share, according to Reuters Estimates.

• Kraft Foods Inc. (KFT), the nation’s largest food and beverage maker, reported a 4% jump in second-quarter profit yesterday (Monday), as higher prices helped offset rising commodity costs. The company said its profit rose to $732 million, or 48 cents per share in the April-June period, up from $707 million, or 44 cents per share, a year earlier.

• Raytheon Co. said yesterday (Monday) that National Aeronautics and Space Administration (NASA) awarded it an $83 million subcontract for data and systems work the group’s Jet Propulsion Laboratory. Raytheon will work on information technology, Web development and systems engineering and design for the NASA lab, according to the Associated Press.

• Ryanair Holdings PLC (ADR: RYAAY) yesterday (Monday) recorded its first quarterly net loss since becoming a publicly listed company in 1997. The company reported a net loss of $142.5 million. Excluding exceptional charges, Ryanair landed an after-tax profit of $33 million, an 85% drop from the same period last year, the Associated Press reported.

• The Dow Jones Industrial Average Index tumbled 240 points, or 2.1% yesterday (Monday), as Wall Street again caved to investors’ anxiety about the financial sector. The Standard & Poor’s 500 Index closed down 23.4 points, or 1.9% and the tech-laden Nasdaq Composite Index was down 46.3 points, or 2%.

• Light, sweet crude for September delivery rose $1.47 to settle at $124.73 a barrel on the New York Mercantile Exchange yesterday (Monday) after militants sabotaged two oil pipelines in Nigeria and Iran claimed that it had doubled the size of its nuclear program. Prices were expected to rise some after crude’s steep nosedive over the past two weeks.

• The White House yesterday (Monday) lowered its forecast for economic growth in 2008 and 2009, and said unemployment is likely to rise as housing and financial crises take their toll. Gross domestic product (GDP) is estimated to grow by only 1.6% this year. That’s down from a 2.7% growth projection made in February.

• Amgen Inc.’s (AMGN) second-quarter profit slipped 7.6% due to restructuring charges and declining product sales. The company earned $941 million, or 87 cents per share, compared with $1.02 billion, or 90 cents per share, a year earlier. Revenue rose by less than 1% to $3.76 billion.

Source: Global Investing Roundups: Tuesday, July 29th, 2008

• Takeda Pharmaceutical Co. Ltd said yesterday (Thursday) that it would buy Millennium Pharmaceuticals Inc. (MLNM) for $8.8 billion in the largest-ever overseas acquisition by a Japanese drug maker. The friendly cash offer of $25 per share – a 53% premium the closing Millennium share price on Wednesday – is expected to improve the company’s cancer drug business.

• U.S. retail gas prices extended their record run yesterday (Thursday), the national average price of a gallon of gas rose 1.4 cents overnight to a record $3.357 a gallon, according to AAA and the Oil Price Information Service. Prices have set a string of records in recent weeks, and are 56 cents higher than a year ago.

• The number of workers applying for unemployment benefits fell by a larger-than-expected 53,000 last week the Labor Department said.  Jobless claims fell to 357,000 in the week ended April 5 from an upwardly revised 410,000 in the previous week. Still, the four-week moving average of new claims, rose to 378,250, the highest since October 2005.

• Passenger car sales rose for the sixth straight year in India, where growing demand and tax cuts sent sales up 12% to 1.2 million units from March 31, 2007 to the same day this year. “India’s economic growth story has really benefited the automakers,” R.K. Gupta, who owns shares of carmakers among the $100 million he manages at Credit Capital Asset Management Ltd, told Bloomberg. “Going forward, there are issues. Growth is going to slow in India and the higher interest rates are going to hurt.”

• China’s quarterly trade surplus fell for the first time in more than three years, as exports slowed the nation’s growth. The trade surplus shrank 10.2% to about $41.6 billion in the first quarter compared to the same period a year earlier, Bloomberg reported.

• AMR Corp.’s (AMR) American Airlines announced it canceled 933 flights yesterday (Thursday) to continue inspections on MD-80 aircraft wiring. American has now canceled 2,500 flights since Tuesday, Reuters reported. The carrier estimates 100,000 travelers have been affected by the cancellations.

• Amgen Inc. (AMGN) rose 2.39, a 5.75% increase to close at 43.98 after a ruling from U.S. District Judge William Young that Roche Holding Ltd.’s (OTC: RHHBY) anemia medicine Mircera violates patents owned by Amgen. Roche plans to appeal the ruling. Standard & Poor’s equity analyst Steve Silver said, “any legal delay in Mircera’s launch will continue to be viewed favorably for AMGN, though we expect the shares to remain volatile as the situation continues to unfold.” Silver has a hold ranking on Amgen shares, BusinessWeek reported.

• BJ’s Wholesale Club Inc. (BJ) stock gained on news that same-store sales rose more than analysts expected with a 6% increase in March, MarketWatch reported. Total sales increased 8.5% to $858.1 million for the month. Shares gained $1.43, a 4.05% increase, to close at $36.76.