1. Case-Shiller 20 City Index of Home Prices: The NYTimes.com has a helpful interactive chart in the paper this morning showing the rise and subsequent fall of home prices in the 20 cities included in the Case-Shiller index. Some of the cities that did not experience parabolic type rises in prices between 2002-2006, such as Dallas, Denver and Charlotte, had far smaller declines between 2007 to 2009. Although Nashville is not included in this list, I would expect its chart to be similar to Charlotte. California was one of the epi-centers of easy money fueling unsustainable increases in home prices. The index includes three California cities- San Francisco, Los Angeles and San Diego. Although home prices in those cities fell significantly, they have already started to turn up noticeably in these charts. I would have expected those cities to fall hard and then to recover more quickly. Housing prices in four other cities, where the problems were more severe-Phoenix, Las Vegas, Miami, and Detroit, appear to be stabilizing and starting to turn back up after severe declines. The recovery will be slower in those cities than in the 3 California cities. I view the current trends in many of these cities included in the index as positive, indicating that the fall in most areas is over and the recovery in prices has already started in several areas.
USA Today has a story on its front page this morning titled "Housing prices rounding a corner?". I would not ask that question rhetorically. I believe that the bottom has been found and the upturn has already started with some localities recovering quicker than others.
2. BOUGHT 100 Ariad Pharmaceuticals at $2.55 (owned-Lottery Ticket) (see Disclaimer): I now own 200 shares of ARIA with the purchase this morning of 100 shares of ARIA in my traditional IRA at $2.55. The other 100 has been in a taxable account since last summer. I will trade the shares bought today aggressively while holding onto the shares in the taxable account waiting on more results in ARIA's main drug candidate currently in Phase III trials. I placed the shares bought today in a regular IRA and will include those shares in the next ROTH conversion in case they blow up. That way, I can recover part of the decline, indirectly, by paying less tax on the transfer from the regular IRA to the Roth IRA. This process has been an integral part of my asset management since last October and has worked extremely well, as I managed to transfer securities near their lows and then have them recover in price after the transfer, with some being sold just recently after doubling in price after the conversion.
I did not want to bust a brain cell trying to evaluate the recent news emanating from Ariad, besides I am not equipped to evaluate it anyway. I did manage to read a recent Barclay's report on the firm that was released on 7/27/2009 after the release of some clinical results for Ariad's Bcr-Abl inhibitor AP24534. This is what caused the pop in Ariad's price on Monday. Lottery Tickets Ariad Pharmaceuticals and Webster Financial Barclay's has an overweight on the stock with a $11 target, as shown in this report dated 7/27/09. Barclays calls the results from this early stage trial to show "proof of concept", meaning the data suggests anti-tumor activity including hematologic, molecular and cytogenetic. I do not have a clue what all of that means. I did read the press release and I do understand the statement that 19 out of 23 patients at the highest dosage had no disease progression which is evidence that the disease is being controlled by the drug. ARIAD Bcr-Abl Inhibitor - AP24534 The more important drug for this small biotech, at least over the short and intermediate terms, is the one that caused the pop yesterday that is involved in multiple trials with Merck as Ariad's partner. Ariad Pharmaceuticals The news yesterday caused an initial spike in the stock and a lot of selling into that spike, indicating to me that many market participants viewed the news less favorably than others. Still, even after the intra-day correction yesterday, the stock closed at $2.8, up from the Friday close of $1.73.
I then read a report released yesterday from Barclay's discussing those early stage trials of ridaforolimus in combination with Herceptin and Avastin. The analyst just commented that the data released by Ariad yesterday "suggests potential synergy." I would agree with the analyst that the most important trial involving this drug is the Phase 3 trials for Sarcoma, possibly with more detail released at the ESMO conference in September. If the results of that trial turn sour the stock will likely suffer a significant fall in my opinion, and the risk of having success or failure hinge mainly on one compound is always acute.
3. Daimler (Bond position only): I recently bought 100 shares of a Trust Certificate, GJL, than contains a senior bond issued by the U.S. Daimler subsidiary and guaranteed by Daimler. DAI reported its third consecutive quarterly loss (1.51 U.S Dollars) this morning, but the results were better than expected and the stock rose in European trading. The truck business seems to be the primary culprit, with revenues plunging 60%. Another factor that reduced sales comparison was Daimler relinquishing its stake in the bankrupt Chrysler effective June 3, 2009. GJL is discussed in a prior post: Bought Another 100 of GJL Bought 100 GJL/More on Sarah-My Favorite Politico/TIP/ This TC is lightly traded with large bid/ask spreads. For my last trade, the bid was $20.50 and the ask was at $21 with no volume. I placed a limit order at $20.6 and it was filled immediately. GJL is a synthetic floating rate security that pays the greater of 3% or 1.25% over the 3 month Treasury Bill rate. Given the low T Bill rates, the guarantee is the applicable rate now. The 3 month T Bill rate would have to increase to over 1.75% to trigger the floating rate. The underlying bond matures in November 2013, which is the maturity date for the TC also, as usual, and the TC par value is $25. The underlying bond information (a fixed coupon unlike the TC) can be found at FINRA - Investor Information - Market Data - Bonds - Bond Detail. I currently own 200 GJL, equally divided between taxable and retirement accounts. Interest is paid monthly.
4. Just Another Example of Hypocrisy: Yesterday, I focused on Charlie Rangel, the Democrat Chairman of the House and Ways Committee, who is so eager to impose new "moral" taxes to be paid by others, while evading his own tax obligations with verve, zeal and apparent immunity reserved to the those with influence. Today, I will just mention a Tennessee state senator from the GOP tribe, a married gentleman by the name of Paul Stanley, who has spoke out against Planned Parenthood, saying unmarried people should not have sex. Yes, need I say more about his positions on family values. Apparently, it is not okay to have sex before marriage but it is just fine to have sex with a young female intern who is not your wife. As I have come to expect, the Tennessee legislators are a constant source of entertainment for an aging free thinking codger. The affair was exposed after the woman's boyfriend allegedly tried to extort the preacher senator with pictures of the liaisons. Personally, I have not seen the pictures but Stanley admitted to the TBI that he took some pictures of the young lady-au naturel- in his Nashville apartment . The boyfriend is now in the slammer. The young ladies former husband is also in jail for attacking a man with a hammer after allegedly offering to pay for sex. The local news is reporting that the young lady admitted in a police report some years ago to being a crack cocaine user.
5. USATODAY Discovers the Rally in Corporate Bonds: The rally in corporate bonds has been ongoing for most of 2009. On page 1 of the business section in USA Today, the paper reports this "news". Really, a successful investor has to find the news before it occurs to journalists that something has changed in the market. I do subscribe to this paper, but it is available free on the internet.
6. ConocoPhillips (owned): As expected, COP reported a large drop in earnings for the 2nd quarter, compared to a year ago, reporting earnings at 87 cents a share, two cents ahead of the First Call consensus estimate. The refining part of the business swung to a 52 million dollar loss from a 664 million dollar gain in the second quarter of 2008.
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