Sinovac Biotech Ltd. (AMEX:SVA) is up 30.00%…

Vical Incorporated (NASDAQ:VICL) is up 16.05%…

Even staid-and-steady Indian generics brahmin Dr. Reddy’s Laboratories (NYSE:RDY) is up 3.64%…

No moonshoots, for sure, but 30% in six days beats getting getting your chest waxed. (Or so I’ve heard.)

(The pig flu picks I reserved for our HSC members were a bit smaller… and just a tad more risky. That risk’s been paying off for one stock that shot up over 20% today, for total gains of over 40% in less than a week. But I’m digging in and holding for more..)

Source: First Gains on Swine Flu Vaccine Stocks

When I asked Bin Lu, my Chinese fencing coach, earlier this summer if he’d be embarking on his annual pilgrimage to China this summer, he seemed dubious.

“Afraid they put me in quarantine,” he said. “Swine flu.”

Indeed, his hesitation seemed reasonable: A volleyball team from my son’s high school spent most of their trip to China locked up in a Beijing hotel. And the Kawasaki delegation of Japanese scouts that part of our Boy Scout troop had been preparing to host for the better part of a year canceled their visit for fear of the porcine virus.

So I knew I was facing a turning point last night when I heard that Coach Bin had left for Shanghai, sticking me with a bunch of kids signed up for fencing lessons on Thursday night.

The news today confirmed my suspicions:

Sinovac Biotech Ltd. (AMEX:SVA) has developed a swine flu vaccine that is now safe. According to reports, it protects people after a single shot.

Inoculation has caused no severe adverse reactions in the 1,614 volunteers who received it, according to the company.

“The results are the first reported anywhere in the world on a vaccine to fight the new H1N1 strain that’s sparked the first influenza pandemic in 41 years,” said the company.

With U.S. vaccine manufacturers already behind schedule producing the amounts of vaccine ordered up by the U.S. government, that means Sinovac has the inside track on the world H1N1 vaccine market.

The stock rose over 10% today. Keep an eye on the stock… if U.S. manufacturers are not catching up, this one may be a medium-term winner.

Source: Sinuvac (SVA) Reports Swine Flu Success

Many medical experts say that washing your hands with soap and water or an alcohol–based hand sanitizer are the most effective means of minimizing the spread of the swine flu.

I have been researching a small company focused on the development of pharmaceuticals for the treatment of cancer, cardiovascular, autoimmune diseases and viral infections.  BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) is presently conducting trials for a new flu treatment called Peramivir that is said to be more effective than Tamiflu.  Currently, the drug Tamiflu is the preferred treatment for swine flu.  On July 17th BioCryst Pharmaceuticals released positive results from two Phase III studies of intravenous Peramivir in patients with seasonal influenza.

If Peramivir proves to be effective in fighting seasonal influenza it could quickly become the leading anti-viral treatment for the flu.  And, BioCryst stock should head much higher if Peramivir is included in any national stockpiles of swine flu treatments.

Buying BioCryst stock is a speculative endeavor because its Peramivir drug has not been fully approved.  Please keep in mind that BioCryst is an extremely high-risk trade, as the stock is up 1,100% since November of 2008.

BioCryst Pharmaceuticals Inc. (BCRX) will announce its second quarter 2009 financial results today, July 30, 2009.   If you wish to purchase shares, you should wait until after the earnings announcement to avoid any possible downside surprises.

Best Wishes,

Ted Peroulakis

Source: The Swine Flu Play

You probably saw innumerable stories as to how the World Health Organization was warning first that this might be an epidemic, and then, that it was indeed a pandemic.

But most all of those deaths were overseas. And we’ve all read dire headlines like this before: “Ebola Hot Zone Breakout… Vietnamese Bird Flu Flies Around World… SARS in Singapore… Invulnerable strains of Staphylococcus on Gym Mats… Incurable TB on Airplanes…”

In the end, nothing ever seems to come from it all, except a lot of expensive grants, decades-long studies, and indecipherable papers claiming to statistically prove that next time around we are screwed.

The “Next Time” Is Now

It’s so easy to get numb to it. Unfortunately, I have to tell you that the “next time” really is here. And while I can’t tell you if this is genuinely a plague, I can assure you that we are looking at something of considerably greater impact than a mere bad cold.

Right now, it’s summer in England. The average daytime high is 80°. Most summers, pallid Londoners worry more about sunburn than influenza, which usually sequesters itself to the cold soggy days of winter.

But not this summer. This time, it’s different….

Spreading Like a Plague

In this year of the Swine Flu Pandemic, the rate of illness in London has quadrupled. Proven H1N1 cases have hit 1,794. But those are simply the incidents that have been forensically established.

The Royal College of General Practitioners has just reported that the incidence of “flu-like symptoms” (the euphemism for “it’s swine flu, but we can’t prove it because we have run out of test kits) has now risen to 80 of out of every 1,000 citizens in the city.

To give you a sense of scale, of just how fast this disease is spreading, last week, the figure was 20 out of every 1,000. Heck, last winter during the peak of the regular flu season it was only 60 cases out of 1,000.

When the Bankers Get Worried About the Flu…

H1N1 is spreading like, well, like a forest fire, really. And this is still just the beginning. The World Bank now reports (that’s right: the World Bank is getting involved now – an important clue we will come back to) that it expects transmission to accelerate over the next few weeks as the flu season commences in South America. And as the Bank calculates global impact, it is now factoring in a doubling of influenza mortality rates.

In its Pandemic assessment, the WHO reported that H1N1 has penetrated over 100 countries. But what you probably really want to know is what’s going on right here at home (for those of you in the States).

Here in the U.S., official H1N1 cases have surpassed the 1 million mark, with 127 official deaths. These are once again forensically proven cases – the actual figure may be substantially higher. The median age of those fatalities is 37.

And once again, this is all taking place during influenza’s weakest moment, when ambient temperatures and humidity make it difficult for airborne droplets of the virus to persist. Come winter’s dry, cold air, the rate of transmission is expected to increase tenfold.

How You Can Prepare…

This is not some tale out of history or the plot from some overheated medical novel. These facts are not conjecture or supposition.

This is happening, right here, right now. And there is little or nothing we can do to stop it.

On a personal level, you can tend any nagging health issues now, so as to be in good health prior to infection. Seventy-five percent of recorded fatalities have occurred when the victim has some underlying condition like obesity, pregnancy, asthma, diabetes or immune system problems.

You can do your best to avoid contact with obviously sick people. And to be blunt, you can stay home if and when you get sick, so the rest of us stand a better chance of getting through all this.

… And How You Can Profit.

On an investing level, I draw you back to the World Bank’s concerns. The Bank has just approved “fast-track” status of $500 million to help countries finance emergency operations to prevent and control outbreaks. This is on top of an existing $500 million credit line set up in January 2006 to minimize the threat posed to people by the highly pathogenic avian influenza virus H5N1.

And here in the States, the CDC is planning a massive immunization campaign that could include as many as 600 million doses of the H1N1 vaccine. There are five manufacturers of flu vaccine currently serving the U.S. market. Of the bunch, only GlaxoSmithKline (GSK:NYSE) also produces the post-infection anti-viral treatment Relenza.

GSK shares have already risen some 28% since last March. Come this winter, I anticipate that GSK will rise from its current price of $34.88 to just below $50. Select call options could be expected to rise as much as 236% over the same period.

And, as I have mentioned more than once over the past few months, that will pay for a lot of chicken soup and Tylenol.

Source: The Hot Zone Is Here

• Microsoft Corp.’s (Nasdaq: MSFT) Bing search engine has gained market share from rivals Google Inc. (Nasdaq: GOOG) andYahoo! Inc. (Nasdaq: YHOO) just weeks after its launch. The Redmond, Wash.-based software giant grabbed 12.1% of total U.S. Internet searches for the workweek of June 8-12, according to market research firm comScore, Inc. (Nasdaq: SCOR). That was up from the previous week’s share of 11.5% and May’s share of 8.2%. While the start is good for Bing, Microsoft Chief Executive Officer Steve Ballmer was cautiously optimistic. “We have had some very good initial response,” Ballmer said. “I don’t want to over-set expectations. We are going to have to be tenacious and keep up the pace of innovation over a long period of time.” comScore did not offer the share numbers for Google or Yahoo in the same periods, but said it would have a bigger picture for the entire month when the final tallies are in.

• Natural gas reserves in the United Stats are much bigger than once thought, according to a report released yesterday (Thursday) from the Potential Gas Committee. The country possesses a resource base of 1,836 trillion cubic feet (Tcf) and a total available future supply of 2,074 Tcf. Some, such as Texas oilman T. Boone Pickens, are pushing hard for natural gas as an alternative fuel for transportation. “I launched the Pickens Plan a year ago to help reduce our dangerous dependence on foreign oil, and using our abundant supply of natural gas as a transition fuel for fleet vehicles and heavy-duty trucks is a key element of that plan,” Pickens told The Associated Press. “On the same day this report is going out, diesel prices are again on the rise, squeezing the trucking industry. Now more than ever we need to take action to enact energy reform that will immediately reduce oil imports.”

• Shares of Carnival Corp. (NYSE: CCL) closed up more than 7% yesterday (Thursday) following news that the cruise line operator beat Wall Street earnings estimates and discounting is starting to abate. Carnival’s net income fell 32% to $264 million, or 33 cents per share for the quarter ended May 31. That compares to a net income of $390 million, or 50 cents per share. Average analyst estimates compiled by Bloomberg News had Carnival earning 29 cents per share. Executives called the rise of fares on some itineraries since the end of March “encouraging.”

• Prices of Treasury bonds fell for a second day as the U.S. government said note sales will increase to a record $104 billion next week and other reports showed the deepest recession since the Great Depression may be coming to an end.  Yields on ten-year notes, which move in opposition to prices, touched the highest in almost a week amid concern President Barack Obama’s record borrowing will overwhelm demand, Bloombergreported.  The yield gap between two- and 10-year notes widened to 2.56%, the most in over a week. “There’s so much focus on the borrowing amounts Treasury will face over the next couple of years,” said Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc. (NYSE: DB) in New York. Deutsche is one of 17 primary dealers that trade with the Federal Reserve. “There’s evidence that the economy may be turning the corner. That’s pushing yields up.“

• General Electric Co. (NYSE: GE) may have to consider the government’s new stance on regulatory reform when it restructures its giant GE Capital finance unit.  The possibility that the Federal Reserve might gain regulatory authority over the unit arose when President Barack Obama this week unveiled his proposal for the most sweeping overhaul of U.S. financial regulations since the 1930s.   He proposed the central bank oversee not just banks but “other large firms that pose a risk to the entire economy in the event of failure.”  GE investors said the label could apply to the U.S. conglomerate’s finance business, a major commercial lender. “I could definitely see that potentially becoming an issue if companies like GE and their finance arms came under more scrutiny,” said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan, told Reuters.

• Tourism in Mexico took a severe hit from the swine flu scare as Cancun, Cozumel, Los Cabos and other destinations reported fewer foreign tourists since the outbreak that began in April killed 108 people, the Mexican Health Ministry said. Cancun’s hotel occupancy plunged as low as 20% in May, when 13 inns with 5,200 rooms shut down, Bloombergreported.  It rebounded to 45% in the first week of June and is forecast to reach 60% next month, said Rodrigo de la Pena, president of the Cancun Hotel Association. That’s still down from 80% last July. “We’re recovering quicker than we thought,” de la Pena said. “The hotels have almost all their workforce back and tourists are arriving.” To fend off unemployment, the government rolled out a $91 million campaign urging Mexicans to vacation at home and encouraging hotels and restaurants to cut prices.

• Discover Financial Services (NYSE: DFS), the fourth-largest U.S. credit card network, reported a smaller-than-expected quarterly loss as it cut costs and bad loans weren’t as bad as forecast, sending its shares up more than 4%. The company’s expenses fell 10% after it cut 500 jobs and trimmed marketing costs.  Credit card default rates also remained well below levels of its bigger rivals. The Riverwoods, Ill.-based company posted a net income of $226 million, or 43 cents per share for the quarter ended May 31. That compares to a net income of $234 million, or 48 cents per share in the same period last year.

Source: Investment News Briefs Friday, June 19, 2009

It’s commonly held that when Frederick Remington cavilled to William Randolph Hearst that conditions in Cuba were not bad enough to warrant hostilities, Hearst told Remington to shut up and draw: “You furnish the pictures and I’ll furnish the war.”

The truth is, as always, somewhat more complex. Yes, a good tale of death and destruction will hold the public’s interest for a while. But it has to be something they can easily wrap their minds around. And it has to go somewhere if it’s going to have legs.

Just Because It’s Boring…

An example: For a week or so, the H1N1 Virus – a.k.a. Swine Flu – was the talk of the town. Old folks in Asia and Europe were dying, elementary schools in NYC were closing, men in white isolation suits were rushing about doing things that looked important, and the international authorities were bandying about scary words like “Level 5 Epidemic.”

All that hubbub got our attention but good – for a minute or two anyway.

But then it turned out that all we were talking about was yet another iteration of the flu. No piles of corpses on wagons. No quarantine posters on front doors warning off visitors and salesmen. Heck, all some people got were bad chest colds.

And those doctors: Who can really understand all the gobbledygook about reservoirs, global transmission paths and such? “What kind of plague is this?” people wondered. “Ah fergeddaboudit. I just wanna hear about ex-Chrysler dealers burning cars they can’t sell.”

… Doesn’t Mean It’s Going Away!

Now just because a subject isn’t holding the public’s interest at the moment doesn’t mean that it isn’t important. In fact, while the public at large may be “over” Swine Flu right now, there is every indication that it will reclaim center stage come this winter.

Just last week, the World Health Organization’s Director General, Margaret Chan, announced that H1N1 had attained official “Pandemic Status,” warning that the virus was spreading quickly around the globe, with some 30,000 reported cases in 74 countries.

View Larger Image

The authorities now tell us that this was simply H1N1’s initial wave, the first round of what might very well be a long, bruising fight. Now that it is entrenched worldwide, H1N1 is simply waiting for winter in the northern hemisphere to unload its real roundhouse punch.

And this will not be “a mere head cold.” Nor will it strike mostly the old, young, sick or poor. The WHO now reports 144 H1N1 deaths, with most of those fatalities striking adults between the ages of 30 and 50 – the prime productive figures in most economies.

Not the Plague, but Not a Mere Head Cold Either

Now please understand that I am not, repeat NOT, suggesting that this will be some kind of return of the Black Plague or such. You do not need to buy a ranch in Montana and secure it with barbed wire or anything that extreme.

What I am saying is whether we like it or not, whether we ignore it now or not, swine flu IS coming, and it WILL have an impact.

It’s that old “wisdom gap” again. Once again, we know everything we need to, but most folks are simply not paying but so much attention.

How to Cash In on the Wisdom Gap

As I have said many times in the past, wisdom gaps are the source of virtually all really good investment gains. And this time around is no different.

Back in April, we advised WaveStrength Options Weekly readers to buy call options against the British drug company GlaxoSmithKline PLC (GSK:NYSE).

GSK already manufactures the anti-viral drug Relenza, an effective post-infective treatment for H1N1, as well as most of the other flu viruses expected to attack the northern hemisphere come November. It is also one of the prime contractors developing an H1N1-specific antiviral vaccine, which should be available to doctors, hospitals and clinics by late fall.

Short-Term Gains…

The options we advised saw gains of as much as 109% last Friday when the WHO announced H1N1’s upgrade to pandemic status. But this is only the beginning of the mid-term ramp up for this well-placed drug maker.

As I sit to write, the GSK January 2011 35 Call Option contract can be purchased for $550. By mid-winter, when the flu is actually here and can no longer be ignored, GSK shares could be expected to match their 2008 highs at $59.98. That rise would push the sell price on these calls to $1,692, for gains in excess of 300%.

Now that ought to pay for your tissues and cough syrup this winter – and then some.

But all this is mere short-term speculation – a hedge against the potential impact flu will have this year. And while GSK is certainly a major soldier in this year’s battle, it is also a field general of sorts in the war to come.

… And a Long-Term Plan

GSK is forming a joint venture with China’s Shenzhen Neptunus Interlong Bio-Technique Co. to develop and manufacture influenza vaccines for China, Hong Kong and Macau, including vaccines for seasonal, pre-pandemic and pandemic influenza.

GSK will take a 40% stake in the joint venture and will contribute cash and assets equivalent to 21 million British pounds. Shenzhen Neptunus will take a 60% stake in the joint venture and will contribute cash and assets equivalent to 31 million British pounds. While it may take a couple of years for these vaccines to hit the market, the venture could assure GSK’s position at the table for decades to come.

Keep in mind that GSK was a $76 stock as recently as 1999. Forward planning like this could easily see a simple investment in GSK shares double in value over the next 12 to 24 months.

Source: The Invisible Plague

Arriba! Cinco de Mayo heralds big news for the S&P 500 this morning:

After a manic 36% bounce from its March lows, the S&P 500 has turned positive for the year. It’s now sitting on a whopping 0.4% gain, thank you very much.

But before you down the Cuervo Gold and shimmy onto the parquet for a hat dance… consider this:
The resurgence in S&P 500 is being driven by only three sectors: Consumer discretionary, materials and tech. See for yourself.

It’s hard to believe in “bull market” when two-thirds of the players are in the red.

We’re taking a closer look at tech, but for the time being — as if you need another reason to turn off CNBC — health care, utilities and consumer staples, the classic refuges for mainstream money managers, aren’t such good choices during this sucker’s rally.
“Buffett thinks his utilities and insurance businesses will do ‘quite well’ despite the recession,” says Chris Mayer, recapping Berkshire Hathaway’s annual shareholder meeting.

“Berkshire has its fingers in many different businesses, so Buffett has an eye into many parts of the economy. Buffett was mostly gloomy. Aside from utilities and insurance, he saw weakness in service and manufacturing and his other lines.

“Also interesting was a comment that he was looking more in the U.S. now than overseas. Last year, Buffett seemed to be devoting more energy abroad — I recall a trip to Germany, for instance. Now Buffett seems to find the U.S. situation more interesting.

“One other note: Buffett may not see much in manufacturing, but I’d say it is a wide spectrum. In Capital & Crisis, for instance, we own a few manufacturers in key areas of water, infrastructure and energy. They’ve turned in great results. But Buffett doesn’t see these, as they are too small for his radar screen. Too bad for him. Big advantage for us.”

In fact, Chris booked a 117% gain on just such a stock yesterday, in less than five months. Special Situations readers could have taken another 30% yesterday too, if they were following Chris’ advice. How did you do? If you’re not privy, become so here.
Stocks soared again yesterday, thanks mostly to another batch of “less awful” data. Traders started to rush in after construction spending and pending home sales data hit the tape at 10 o’clock. Both were way better than expected: Construction spending rose 0.3%, after a 1% drop in February, and pending home sales rose for the second straight month.

Of course, historically speaking, both measures are still in the dumps. But better to buy first and ask questions later… major indexes jumped 2.5-3%.
Markets are more timid today. The Dow is down about 20 points as we write — we suspect profit taking. And…
“Right now, the credit markets are broadcasting the following warning,” says Dan Amoss. “The equity of overleveraged REITs is at risk of elimination or permanent impairment. Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount a ‘garden-variety’ recession in commercial real estate.

“REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.

“REITs thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess capital during lean times. Since REITs pay out all their earnings, they cannot grow without taking on more debt. During the boom, a REIT strategy encompassing growth, leverage, and acquisitions was a virtuous cycle that led to juicy dividends and soaring stocks; in this bust, it’s morphed into a vicious cycle of dividend cuts, dilutive equity offerings, debt offerings at double-digit interest rates and bankruptcies.

“The REITs that levered up and grew too fast at the peak will go to zero in bankruptcy. Others could fall into the low single digits by year-end as the market anticipates that creditors will take title to many properties in 2009 and 2010. These developments would push the value of the REIT Index dramatically lower.”

Following that logic, Dan just handed his Strategic Short Report readers a short-REIT play with “200% profit potential.” Thanks to yesterday’s rally, it looks a whole lot juicier today… details here.
“I don’t know what in all honesty,” White House Press Secretary Robert Gibbs “government can do about it,” highlighting another industry ripe for short selling: flailing newspapers.

Of course, Gibbs assured us President Obama “believes there has to be a strong free press,” but it seems that any hope of a GM-sized bailout check from Uncle Sam was informally squashed yesterday. Alas, papers like The New York Times and McClatchy have borrowed just enough money to go out of business, but not enough to pose the all-so-critical “systemic risk” to the U.S. economy.

Only magnificent failure is rewarded in I.O.U.S.A.
Ten of the 19 banks undergoing government stress tests are going to have to raise capital… that’s the word from The Wall Street Journal this morning. Wells Fargo has now joined Citi and Bank of America on the unnofficial list of banks rumored to have been naughty.

No one will really know for sure until Thursday, when the government has promised to release results. But seriously, who’s cereberally challenged enough to believe this charade anyway?
The mighty greenback is looking knock-kneed and feeble as stocks soar. The dollar index dropped a full point, to 83.8, during yesterday’s rally. That’s a one-month low and nearly 6 points off its credit crisis high.

The dollar swing has given the euro a 2 cent shot in the arm, too. It’s up to $1.34 as we write. The pound followed suit, rising from $1.48 to $1.51 in less than 24 hours. Only the yen held pretty steady… around 98.
Gold likes it when the dollar sucks air. The spot price climbed $15 yesterday and another $10 this morning, bringing the current price up around $915 and ounce. Work it.
Oil has also been enjoying the stock rally, too. The light sweet stuff edged up higher again yesterday, this time to a 2009 high of $54.47 a barrel.
Quietly, gas has been inching back up to levels of concern. The national average price for a gallon of the cheap stuff is now solidly above two bucks… $2.07, to be exact.

Although compared to the average price this time last year — $3.61 — who’s complaining?
A bankruptcy judge OKed Chrysler’s request to tap a $4.5 billion government loan yesterday, even though holders of their senior secured debt have yet to be repaid.

Investors and funds are filing motions left and right to stop the transfer of any assets to Chrysler… at least until the company ponies up $6.9 billion in assets to cover their debt obligations.

We doubt those “evil Wall Streeters” will get their way, but… oy… this thing is already a mess.

“The gurus in Washington say that the Chrysler bankruptcy is prepackaged,” writes Byron King. “And it’s going to be fast and easy. Yeah, right. Beware hubris. Like the previous administration thought that the Iraq war was going to be fast and easy.

“I used to practice bankruptcy law. Is there a courtroom anywhere in this land that’s big enough to hold all the players in a Chrysler bankruptcy? It’s the first ‘big’ automobile bankruptcy in the U.S. since Studebaker in 1933. There’s no recipe book for doing this.

“The judge in the case might just have to book Madison Square Garden to have enough space for all the participants. And everyone is entitled to their day in court. Considering the tens of billions of dollars in play, I expect we’ll see many days in court, up to and including the U.S. Supreme Court. That should take only a few years.”

But at least you’ll be able to drive one of these afterward:

The Fiat 500: Not Currently Available Near You

“After researching, over the past 10 years, the different venues of alt energy,” writes a reader, “I have invested what I can in geothermal. There is no other source that runs 24/7, has zero ecology damage and zero carbon footprint, is available virtually under every rock and is economically less expensive than any other source. We don’t have to wait for the sun, wind or enough uranium to be mined. Oh! We don’t have to figure out how to bury the byproduct in somebody else’s backyard (NISEBY).

“It is such a no-brainer that considering any other way must mean that there are serious politics involved. Maybe the wrong people will make the money. The difference in costs could go to solving the problems raised in I.O.U.S.A. Do you suppose that Big Oil would find it a problem if the grid were run on geo? It can be done.”

The 5: We suppose they’d be annoyed, but as an investor, why choose one or the other? Byron’s Energy & Scarcity Investor has strong plays in both oil and geothermal… check it out, here.
“So what if Byron King is right,” writes a reader, “that China now controls the ‘rare earth metals’ that are integral to the manufacture of guided ballistic missiles (and all the other knickknacks that we don’t really need — and some we probably do).

“I’d rather have the Chinese control them than the delusional, slobbering cowboys in our military. Maybe they’ll do something with these metals other than design weapons whose purpose is the wholesale slaughter of human beings. Besides, what are they going to do with them? Eat them? Of course not. They’ll sell them on the world market at market price and we can go on happily making new bombs, which, it seems, is the only thing we are really good at.”

The 5: Heh. You have a good point there.
“Hey, 5,” writes the last, “thanks for the ‘tip o’ the mug’ to Red Emma’s. In this day of lunatics and liars, Red Emma’s gives us a break, helps keeps us grounded. Not enough of that around these days.”

The 5: Best coffee (and transgender anarchist poetry selection) in Baltimore.

Source: Market Comeback, Sector to Short, Berkshire Meeting, Investing in Swine Flu and More!

As a guy that has spent way too much time in rough water, I absolutely detest the clichéd phrase “a perfect storm,” but when it is apt I cannot help but use it. So here goes. This week has been a perfect storm for Mexican investors.  It physically hurt to write that sentence.

As if a bloody and growing drug war was not enough, Mother Nature threw Mexico a deadly flu outbreak and a 6.0 earthquake earlier this week. It was enough to force investors to flee back across the border.

Hard hit were the country’s pig producers like Smithfield Foods (NYSE:SFD), its cement makers like Cemex (NYSE:CX) and of course, its airports like Pacific Airport Group (NYSE:PAC). All of these companies were down by (or real close to) double-digit percentages during the week.

Even Mexico’s telephone and television providers were hit by the news. Apparently the worst symptom of the swine flu is falling share prices.

Even the Mexico peso was smacked hard on Monday, dropping by more than 4%.

Back at the feeding trough

Fortunately today has been a healthy reprieve from the fallout. There has been little to no signs of a worsening flu pandemic. People are not dropping like teenage girls at a Beetle’s concert (or an Obama sighting). And share prices have found enough of a reason to continue their climb even after a solid week of gains from the equities market.

Wall Street appears to be undecided about next week’s action, however. About half of the crowd is calling for a fizzle, while the other half is calling for more gains based on signs the economy is improving at a faster-than-expected rate (the stimulus worked!).

The answer will come from Mexico. Watch the iShares MSCI Mexico ETF (NYSE:EWW), which has the perfect ticker considering the current flu scare, over the next few trading days. It will be a strong indication of what Wall Street thinks of Mexico’s economic chances.

If the fund lags the market, I expect the equities markets to eventually turn around and follow Mexico into the red. If the ETF is a strong leader, however, it means the fears were way overblown and the equities market as a whole is undervalued.

Just as this pandemic mess appears to have started in Mexico, hints about where the American markets are headed could emerge from the region early next week.

As much as I hate to admit it, the Obama administration did the right thing by keeping the borders open. It gives us an opportunity to sneak across the Rio Grande and grab some profits.

Source: Bears vs. Bulls: What About the Pigs?

The Silverton Bank was supposedly a key cog in the Southeast, according to the Wall Street Journal, and bankers in Georgia are saying that Silverton’s collapse could take down at least 8 to 12 other banks with ties to Silverton. Domino dancing…
(All day, all day) Watch them all fall down
(All day, all day) Domino dancing
(All day, all day) Watch them all fall down
(All day, all day, domino dancing)

I’m not being flippant about this folks… I’m trying to point out that the rot on the vine is deeper than the media and the leaders of this country would have you believe them to be. I keep coming back to that interview with Ron Paul that I saw in March, where he said, “people are saying that problems in other countries are worse than ours… Those people are wrong!”

Oh, and did you hear that Boston’s most storied newspaper, the Boston Globe, is going to be shut down? And one more item… Those “stress tests”? Well, wouldn’t you know it, the results are being delayed, due to the Banks debating the findings… Well, they have that right to do so… Maybe, the regulators didn’t understand something in their accounting methods, or something like that… Unfortunately, I believe the banks’ debating will be like arguing with an umpire over balls and strikes!

OK… Enough of the blood in the streets! Let’s talk about some good things… Like last week when the Bank of Canada (BOC) decided to do a Nancy Reagan, and just say “no” to Quantitative Easing… Let’s hope they don’t end up with egg on their collective faces should they need to implement Quantitative Easing at some point in the future… But I’m sure they have weighed all the facts to this point. Canada’s Banks are in tip top shape, compared to their neighbors to the south, and I’ll explain this about the Canadian dollar / loonie once more for those new to class… When Oil returns to higher levels, the loonie will follow… This currency is so juiced by energy prices, and Oil is the Big Kahuna…

And remember what you heard here first, last month, and that is that China would be the first to come out of the economic doldrums… I had someone ask me last week, why I thought China’s stimulus worked better than anyone else’s… Ahhh grasshopper, I’ve explained that before… But again, it’s very simple… With China being a Communist Country, they can dictate not only to whom the stimulus goes to, but HOW the stimulus is used… Imagine if you will the initial $150 Billion that was sent out last spring… If there were stipulations on how it was to be spent, maybe you’d have something, or better yet… The initial $700 Billion in TARP funds… They didn’t have strings attached, and the receivers didn’t use the funds to loan out, as “requested by the Treasury”, they threw it in the nearly empty treasure chest and sat on it… See the difference in the two methods?

It appears that the so-called “decoupling” is back on the table, as China and India seem to be coming out of the economic doldrums long before the U.S., Europe, and Japan will… Hmmmm…

OK… The Chinese renminbi has begun to move higher again, just when everyone thought the Chinese would batten down the hatches on currency appreciation. This is only happening because the Chinese economy is beginning to show signs of improvement.

Those signs of improvement in China are doing wonders for the Aussie dollar (A$)… Don’t look now, but the A$ has climbed past 73-cents! Aussie’s kissin’ cousin across the Tasman, New Zealand, is not seeing the same kind of McLovin the A$ is seeing… The Reserve Bank of New Zealand (RBNZ) left the door open to further rate cuts last week, while the Reserve Bank of Australia (RBA) is giving signals that the rate cuts may be nearing an end. The Tale of Two Central Banks…

A long time readers sent me a link to a story on Morningstar regarding our fave shiny metal… Gold… Here’s a snippet…

“Jon Nadler, a senior analyst at Kitco Bullion Dealers, points out that all of the world’s above-ground gold amounts to around 0.6% of total global wealth, so even if gold were at $10,000 per ounce, the metal would only amount to 6% of total global wealth.” (I know Jon, so I just had to use his quote!)

Here’s another snippet from someone else… “Singapore, Norway, Saudi Arabia and other member nations of the Organization of the Petroleum Exporting Countries are likely already increasing their allocation to gold, or likely to do so in the coming months. They would be somewhat ignorant and financially and economically illiterate not to do so.”

Everyone at the Total Wealth Symposium in Bermuda last week was talking about Gold… I see that it has slipped back below the $900 level, which I have taken as the line in the sand for buying opportunities… Could it go lower? Of course it could, but that wouldn’t change my mind as far as a sub $900 level being a buying opportunity to get it cheaper than where most people see it going…

Did you see that China announced last week that they had increased their holdings of Gold by 76% in the past 6 years? Hmmm… No wonder the last 6 years have been so kind to holders of the shiny metal, eh?

And… How about this for some “good news”… Ford outsold Toyota in April! Now, that’s something you don’t see every day! Well, maybe when Ford was selling their pick-em-up trucks like funnel cakes at a state fair… But not often, at least not to my recollection.

OK… The data cupboard is pretty feeble this week until we get to the end of the week, where the April Jobs Jamboree gets printed. We’ll see Pending Home Sales, Construction Spending today, and then not much, until later in the week… The initial forecast for jobs in April are showing a job loss of 606K… The weekly numbers show this forecast to be quite understated… But, as I’ve explained many times in the past, the Bureau of Labor Statistic (BLS) doesn’t use those Weekly Initial Jobless Claims… The BLS uses a survey of corporations, and then puts the survey in their witch’s caldron and stirs in the Birth / Death model, and comes out with “their number”…

Bad news for my little river town this past week, as Chrysler closed down the plant that had been operating in our city since the 60’s. Good thing we decided back in the late 90’s to diversify our income stream in the city! I was an alderman then, and recall this to be my greatest fear, that the city depended on one corporate entity so much… And the alderman at that time made great strides to diversify the city’s portfolio of income streams… So… That today, when the bad news hits, it doesn’t hit as hard as it would have if no diversification had taken place. You see… The overall risk to the portfolio was reduced!

Well, what does that lesson teach us? It should teach us the diversification is the most important monetary thing anyone should be thinking about! Diversification so that the asset classes in your portfolio have a low correlation to one another. That they have different pricing mechanisms. Currencies and metals represent the best diversifying assets to your already existing portfolio of stocks, bonds, mutual funds, and land… It is a proven fact that by adding currencies and metals to a portfolio, you will reduce the over risk in the portfolio! And…. Remember… 94% of a portfolio’s return is based on asset class selection…

Just thought I would give you an example of diversification in real life, and then apply it to the lesson for today… That’s how I always tried to explain things to my kids, and the older two are teachers today, and probably use the same methods for explanation!

The U.K. is on holiday today, as they decided to do May Day on the 4th! Either way, it was a 3-day weekend for those that celebrated May Day!

Currencies today 5/4/09: A$ .7330, kiwi .5720, C$ .8415, euro 1.3230, sterling 1.4845, Swiss .8770, rand 8.38, krone 6.5750, SEK 8.08, forint 218, zloty 3.33, koruna 20.14, yen 99.30, sing 1.4815, HKD 7.75, INR 49.90, China 6.8220, pesos 13.76, BRL 2.1725, dollar index 84.77, Oil $52.89, Silver $12.61, and Gold… $890.60

Source: The Rot On The Vine Goes Deeper

]]> http://www.contrarianprofits.com/articles/the-rot-on-the-vine-goes-deeper/16138/feed 0 http://www.contrarianprofits.com/articles/precious-metals-pounded/16022 http://www.contrarianprofits.com/articles/precious-metals-pounded/16022#comments Wed, 29 Apr 2009 19:13:41 +0000 Doug Casey http://www.contrarianprofits.com/?p=16022 Gold was initially lower in Hong Kong but traded flat through to the New York open on Tuesday, at which point it plunged about $13 in a half-hour, before riding a gently rising uptrend for the rest of the day, to finish at $893.30/oz., down $12.90. Overnight, gold is slightly higher.

Platinum fared very poorly again, falling from the overseas markets through the first hour in New York, to as low as $1070 before catching a slight updraught, then trading sideways for the rest of the day, and ending at $1091, down $49. Overnight, platinum has been flat.

Silver also traded sideways through Hong Kong after an early plunge, then got taken down through London to late in the New York…