This week I’d like to coddiwomple through making mistakes and staying data-dependent to gain a...
Meet the "MoneyMan"
04/28/2006 12:00 am EST
Investment advisor, author, and noted radio personality, Dan Frishberg hosts a daily radio show, The MoneyMan Report, on the BizRadio network. As a new speaker at The Money Shows, I'm anxious to attend his workshops. Here's a sample of his latest.
"Human beings, including investors, are natural born extrapolators. They tend to act as though they expect whatever is happening now to continue in a straight line. This is why so many investors worry so much about trade deficits, the falling dollar, rising prices, and rising interest rates. The truth is life on earth is cyclical. The best way to understand the economic and market cycles is to think in terms of circles rather than straight wavy lines.
"Wavy lines tell you everything about the past but very little about what lies ahead. When you’re moving in a circle on the other hand, you always know where you’re going next. The hotter the weather gets in summer, the nearer we are to autumn. Rising interest rates don’t run to the sky. The higher rates go, the closer we get to the point when borrowers don’t want to borrow, and lenders begin to offer better deals.
"The weaker the dollar becomes against the euro and the yen, the more attractive American products become to foreigners and the more expensive foreign imports feel to Americans. As the saying goes, the cure for high commodity prices is high commodity prices. The good news for us investors is each cyclical change brings us new opportunity.
"After a year of strength, the dollar has started to decline against both the euro and the yen, and we expect that to accelerate in the near future. One good way to take advantage of this is the ProFund Falling Dollar Fund (FDPIX) which goes up in price when the dollar falls against a basket of currencies. This allows you to make the move without the high leverage of the futures market.
"We use current market data, such as up/down volume, advance/decline, and new high/lows to construct what we call our Market Xray. This year, we see general demand for stocks declining and narrowing, as investors grow increasingly selective about what to buy, and increasingly reluctant to assume speculative risk. At the same time, investors are more willing to sell stocks than they have been since the mid nineties.
"The result is that while the indices are still fighting their way upward, fewer and fewer industries and companies are participating, and more and more of these industries and companies are already in their own private bear markets. This means diversified portfolios will continue to experience poor results, and even weaken further as we move toward terrific buying opportunities late this year or in 2007.
"Meanwhile, there are a couple of secular growth stories like copper, petroleum, and fossil fuels that could be getting overloved temporarily. Medical technology/nanotech is another secular growth story that is not getting the ink that the oil and gas companies are getting, doesn’t have the sponsorship, but could be just as profitable in the long run.
"A stock we love in this space is Immunicon (IMMC NASDAQ). Their technology allows them to count and identify the circulating tumor cells (CTCs) in a blood sample. The trend of data from this count can be used to determine if a given cancer treatment is working properly. The value here is that there are always several alternative treatments but there formerly was no way to get an early indication if the treatment was working.
"Since cancer treatments are normally expensive and have major side effects, it is extremely valuable to know as early as possible if you are on the right one. Prior to this test, it could take six months of watching tumor size and other indicators to determine if a treatment is working.
"Other things I like about the company include the fact that the product is already to market and being sold by Johnson and Johnson. In addition, IMMC owns the core technology and has protected it with 35 patents. I think insurance companies will not just pay for it but will require it since they have a major financial interest in seeing the patient on the most effective treatment as soon as possible.
"The company went public in ’04 at about $10 but slid down to about $3.50 by the end of 2005. They started out ’06 with a new CEO and the stock has been on a high-volume surge to about $5. We’re not fortune tellers, but the long range use of this technology could be a simple blood test that will detect all kinds of cancer. I expect every person in the developed part of the world might take such a test once a year for life…not a bad potential."
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