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Welcome to my circus


"Fat Head", but in a good way


I've been remiss the last couple of weeks, and I apologize - especially given the state of the biotech sector. In the last month, we've published 28 notes and a newsletter from the home offices here in Seattle. And to think we moved to our current format because of the "grind" of writing daily market commentary. With eight notes just this week, I'm thinking daily commentary looks pretty good right now.

I wanted to run through a few things rattling around in my head. Hopefully they'll light up a neuron or two that will form into a useful thought. If not, at least I get the chance to say "howdy!"

  • A big shout to the students of University of Washington - Bothell class CSS-479. It has been my privilege working over the last 10 weeks to help you develop real-world business plans based upon your fantastic ideas. You have inspired me during what has been a very tough few months for my own business. Thank you.

  • The number one knowledge gap for biotech investors is statistics. I'm tired of it (on your behalf) and I'm going to do something about it. Stay tuned.

  • If the SEC is not actively monitoring trading in cancer companies around this ASCO meeting and doesn't do something about this problem, I may just lose hope that anyone is home at the agency tasked with leveling the playing field for investors.

  • "If the future were certain, nobody would take the other side of the trade. Successful investing is the result of successful speculation. The speculator develops several possible scenarios of future events and determines what her actions will be in advance under each scenario." -- What I Learned Losing a Million Dollars.

  • If Fannie Mae (FNM) blows up and General Motors (GM) blows up and if (if!) the world doesn't fall apart, have we done enough climbing on the wall of worry to admit to ourselves things are more resilient in the market and the economy than we thought?

  • I had a long conversation the other day with someone about the overblown use of leverage by hedge funds, sprinting for every tenth of a point, having unsafe relations with volatility (Thanks, Succo, for giving me enough education over the last year to even comprehend that part of the conversation!), and the general "stupidity" involved in the market. The intended persuasive goal from the other end of the phone connection was to persuade me the bulls were up a creek without a paddle. I asked what I thought was a simple question: "Do you really think with the explosion of long/short and market neutral hedge funds that the bulls have a monopoly on stupidity?" After I got lectured for calling my friend stupid (which I didn't, as you'll note), we agreed there are excesses on both sides of the market.

    We are in trades every day alongside people we'd rather be betting against. Every day that passes I am more firmly convinced that whichever way the market breaks (continuation of the bull market that began in 2002 or the second bear market this decade) the move will be extraordinarily fast and exceptionally disruptive to the market. Did you see what a $10 gain in Genentech (DNA) did to the entire biotech sector this week? Take a look at this and tell me a 25% up move in 2-3 weeks wouldn't make life very difficult for a significant portion of Wall Street (the NBI gained 48% in three months after the March expiration in 2003).

  • If you add up the short interest of the 159 stocks in the NASDAQ Biotech Index (NBI), it represents 11.55% of the total outstanding short interest on the NASDAQ. And no, the market cap of the NBI is nowhere near 11.55% of the total market cap on the NASDAQ.

  • I am officially addicted to my Tivo. We start watching our shows in the middle of the hour so we can skip past the commercials we don't like. (Select Play Select 3 0 Select)

  • The softball team I play on disbanded for the Fall season because the city who does our league cut the league size in half and our coach didn't get us into the queue on time. No, Flopper, I'm not making excuses. I'm just saying if anyone in the Seattle area needs a slow-pitch (ASA) pitcher who averaged 1K per game last season I'd love to join up. Can't go into MIM-2 rusty or it will force Minyan James to get a pilot's license and FAA clearance before he steps into the batter's box.

  • T-Mobile sent a message out to its subscribers who use Blackberry devices about a free update. One week later the link actually works. Sloppy

  • I just changed banks for my business and signed up for the wrong version of internet banking. A fella called me up from the bank to confirm and I told him I screwed up and would do the process over again in the other section of the web site. He told me not to worry he'd just transfer the registration internally. Spiffy.

  • The Shield, One Tree Hill, Friday Nights on the Sci-Fi channel, West Wing, Gilmore Girls, The Killers, Jet, Hoobastank, U2, Poison, Stevie Ray, Muddy Waters, Patsy Cline (my Mother's fault), Bon Jovi, Poison, The Donnas, Sheryl Crow, Mellencamp, Good Charlotte, Green Day, Kate Beckinsale. Got a problem with that?

  • Perhaps the best thing about Crested Butte is every place in town has good beer.

  • "Let me tell you some good news and some bad news about 'why' and the markets. The good news is if you're long and the market is going up, and you do not have a clue as to why, you still get to keep all the money. There is no financial penalty for being lucky. The bad news is if you are short and the market is going up but you know exactly why it is up, you do not get any money back. Now how important is it to know 'why' the market is up? Knowing why doesn't get you a rebate on your investment." - What I Learned Losing a Million Dollars

  • I have a five-hour drive ahead of me and was going to pawn the responsibility off on the wife so I could work. The rental (we're haulin' people) has satellite radio, a CD player in-dash, and comfy captain's chairs. I'm gonna drive then I'm gonna nap. Work will be here when I get back.

  • I cannot imagine anything as short-sighted as a country who outsources its service business.

  • The entrepreneur's class meets after class in a bar near campus. The gents from Harvard who declared IT (information technology) was a commodity with no strategic importance should drop by. If IT is not contributing directly to your competitive advantage, you are not doing it right.

  • 650 on the NBI.

  • Can it be a year already?

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