Thursday, July 31, 2008

Thursday Intraday Update

Not a good day for many reasons, but not all is bad either, so a muted hello to all.
This morning's data was mixed, but Wall Street hates uncertainty, so the S&P and Dow are lower. Weekly employment was horrific, and GDP came in acceptable. The question now is whether the consumer will tire once the stimulus checks are cashed. Since this is an election year, we believe there is definitely another stimulus package being written, especially after Paulson and Bernanke saw this morning's jobs data.
We remind you that last week's 280 point Dow fall after the weekly unemployment number of 406K, and today's was worse at 448K, an increase of over 40K in one week!! This marks a 5 year high. So shouldn't the Dow be down at least 280 points since the numbers were worse? Well, no, since the market trades based on forward sentiment. We believe 70% of these employment woes are directly caused by high oil, and the rest by a stagnant real estate/credit market. Therefore, oil is the thorn that cannot be pushed any deeper, or the doctor "risks losing even the patient-investor". The reasons to stay positive are outlined in our "Four NEW Scenarios for Optimism" piece. The fact the Nasdaq is trading a little higher shows the dislocation we like to see when markets are close to being washed out.
Don't underestimate the power in the biotechnology sector, as evidenced by the buy out of DNA by Roche, and today's Bristol-Myers offer for Imclone (IMCL). Our readers should focus on what is working, and since both Obama and McCain are in favor of stem cell research, this opens the barn door for massive capital inflows into novel drug pipelines. Do you believe what Watson and Crick sowed at the University of Chicago over 50 years ago is finally being reaped? We sure think so. You should be excited about the biotechnology sector for the next 5 years, as the pipelines of these companies will only grow fatter with stem cell legislation.
We look to tomorrow's employment report with a more favorable view than days ago, as Wall Street seems to have accepted the ugliness of unemployment rising to 6% by year end. Please remember that our European friends double that unemployment number on average, yet their stock indexes are holding up quite nicely.
A great Thursday to all, congratulations to Garmin shorts, we look forward to making two new recommendations on Monday.
The Psychology of the Call team leaves you with this video/music relief: don't let this market action "change your world today":

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