Buzz of the Street: Bulls Still At the Helm
Some of this week's most insightful and timely vibes.
This week Wall Street got spooked by a scary selloff on Monday, giving Boo and bears more confidence in a significant correction. The ensuing rally showed that the path of maximum frustration is still in Hoofy's hands as the S&P 500 managed to close above its August trading range. Check out some of the best of the buzz and for those minyans not currently subscribed, click here for a free two-week trial.
Monday, August 17, 1009
Thoughts on BIDU
By Smita Sadana
Q: How many times has Baidu's (BIDU) 50-day simple moving average been breached since March?
A: Not even once.
Click here to enlarge
So, while it isn't there yet, it might find itself in the hands of dip buyers at the 50-day MA (currently $316), assuming the decline doesn't get virulent.
However, Bertrand Russells words are so true for trading in the market, "I would never die for a cause. I could be wrong!". As always, I would await 'proof' before I take a long position. After all, it was one of the first stocks to signal a minor divergence, with highs in July as the market was hitting new highs on 8/13
Tuesday, August 18, 2009
The Healthcare Game
By Vitaliy Katsenelson
Given my usual warning, I don't want to discuss politics in my writings for two reasons: it bores me to death and I'll upset 55% of my readers. But an investor cannot ignore politics especially today. What happens in Washington doesn't stay in Washington.
In his healthcare proposal President Obama is using a tactic described in behavioral finance as anchoring. Here's a real life example from my married life. Let's say I buy an expensive toy (usually a geeky one like an electronic gadget) for $300. My wife will ask me how much it is, and I'll respond with $600. With a stunned look on her face, her reaction is typically "You paid $600 for this?" I then come back with, "What would you say if it was $300?"
Her answer is usually something like "Ok, that would be a good price," and I'll finally admit I lied and that it is $300. She's not upset with me anymore and everyone wins. I anchored her at the higher price ($600) and then the lower ($300) now seems like a bargain. Mr. President is doing the same thing. He asked in his healthcare bill a lot more than he knows he could possibly receive. So anytime he is giving up something, like insurance companies' right to exist, he is "compromising" and republicans and taxpayers claim a small victory. This is important. The President knows he won't receive everything he asked for. He knows that the public option (a government insurance competitor - an Oxymoron if ask me) was a "no go" from very beginning. And thus he'll "compromise" it away with cooperatives.
As dust around the healthcare bill begins to settle, we are seeing hints that health insurance companies will not be euthanized and in the worst case, they may have to compete with cooperatives. Let me tell you this. As a guy who spent half of his life in Russia and has seen cooperatives, this is an antonym to competition. I have yet to meet a person who adores his HMO, but for-profit HMOs are a better evil and more importantly, more efficient than not-for-profit cooperatives. I am buying HMO stocks.
HMOs to keep on the radar include United Health (UNH) and WellPoint (WLP).
Editor's note: Vitaliy had positions in UNH at the time this was published.
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