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End-of-week thoughts


So you wanna dance with me, baby?


A few thoughts as we skitter off to our two-day respite...

• The biotech market has bottomed... for this week. That's not much value add, but when all of the biotech pros I'm talking with are on a buyer's strike, next week looks a little uncertain. Factor in a macro market that is as ADD as Toddo and...

• Happy Birthday Professor Macke.

• If this (slightly risqué) video resembles your investing activity lately, might I humbly suggest you spend this weekend rethinking your strategy.

• Might the reintroduction of Tsyabri be the lift the biotech sector needs to really bottom? I hope that's not what everyone is waiting for because that's 2H-2005 news at best.

• I have this little woodpecker tapping away in the back of my head. The little bugger keeps telling me that something isn't right about the recent ODAC panel discussing Iressa. The ODAC panel was given strict instructions to not discuss whether Iressa should be kept on the market, only if the manufacturer has done a good job communicating to people the failed trials. That strikes me as an incredibly dumb use of their time since you'd (if you were in biotech or oncology) have to be living under a rock to not know this story. Oncology division head Dr. Richard Pazdur hates this drug as its approval was forced down his throat. That woodpecker keeps asking me over and over whether Dr. Pazdur is going to yank the drug and, if so, what the biotech market will think about that.

• Let's assume a company has one outstanding share owned by Sally. Bobby wants to short shares in the company, so Sally's broker loans her share to Bobby. Bobby sells that share to Jim. Bobby really doesn't like the fundamentals and wants to short some more. Jim's broker loans his share to Bobby who sells it to Joan. Who gets to vote in the next shareholder election, Sally, Jim, or Joan? When I don't have to spend a couple of hours explaining that to finance professors, journalists, or regulators because they already understand it will be a good day.

• Insider buying (the legal kind) is big in biotech - the biggest of any of the small cap sectors. While not a bad thing, in my experience this doesn't mean a whole lot. I mean who's a bigger optimist than the people who actually work for the company? I've learned the hard way insider sales prior to a big data release or between drug approval and launch do mean something. If that happens to you, get some put coverage quick. I've also learned that if an executive at a biotech company does some fancy deal with derivatives in regards to their stock, that's a good indication the management team is not as smart as you thought.

• I might be wrong on this, but since it came to light in 2001 that the CEO and CFO of Titan Pharmaceuticals (AMEX:TTP) effectively bought puts against their stock in the mid-$60s, the company has never held a conference call with a Q&A session. The transaction was done prior to when Form 4s became electronically available and was never subsequently disclosed in any of the company's SEC filings. We found out about it when they filed a Form 4 to close the transaction. At $2.50/share. We dropped coverage, needless to say.

• Thank goodness for Brian Reynolds.

• Is it just me or has this been a great week for content here on the 'Ville?

And finally...

It is perfectly clear to me most of what I have learned in the past few years about the market simply doesn't apply any more. The rise of derivative use and the rise of market-neutral trading strategies have created such a complicated web of interactions across all types of asset classes a completely new strategy - and I mean COMPLETELY new - is necessary.

The only reason the old strategies work is because everyone else is using them, too, and the only way you can match performance or outperform is if you are at least a little ahead of everyone else. Why's the market so whippy? For any hope of outperformance, everyone has to pull the trigger a little bit earlier on entries and exits.

This trend was the reason we bailed on TA-based stock picking in favor of fundamental analysis. I've been returning to my roots, so to speak, and have been doing much more technical work lately. What I thought was bad in 2001 (when we shifted our strategy) is excruciatingly bad now. Please don't take that to mean I believe TA has no utility. That is obviously false. What I mean is trigger points must be earlier, stops must be set tighter, and per-trade profits must be narrowed to retain the kinds of risk/rewards we enjoyed at the turn of the century.

I wish I could tell you what that new strategy is, but I am still searching for it. I do believe it will be, unfortunately, sector-specific (or at least my home sector of biotech will require a special spin).

I do know one thing for certain, however. If there were an asset class where you could make purchases of media outlets based upon where you might read about the new strategies first, I'd be overweight Minyanville.

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