Archive for December, 2004

Vioxx and Celebrex

Monday, December 20th, 2004

Who said that investing in drug companies was safe? Vioxx was recently recalled by Merck. now Celebrex has similar problems but Pfizer Chief Executive Hank McKinnell said that, unlike Vioxx, Celebrex won’t be recalled.

An interesting aside by the way is that now the class action lawsuits against Vioxx are getting underway and the competition is fierce. I’ve heard reports that a paid search ad targeting Vioxx goes for $15.00 and up. Good news for Google shareholders, but not for Merck shareholders…

One wonders if Pfizer’s Celebrex will start getting the same class action attention as Merck’s Vioxx. It seems that they are similar drugs with similar side effects:

Merck recalled Vioxx on Sept. 30 after a study found that a long-term use of the drug doubled the risk of heart attack and stroke. Both Celebrex and Vioxx belong to a class of drugs known as COX-2 inhibitors. They work by selectively blocking a protein called COX-2 that has been linked to inflammation.

With the FDA being criticized for not taking Celebrex off the market, Pfizer shareholders have to hope that leaving this drug (with 2003 sales of $1.9 billion) doesn’t open up more legal liability than it’s worth.

Investing outside the US

Friday, December 10th, 2004

As regular readers know, I’m a big fan of looking outside the US. I’ve written about ETFs that track foreign indexes, and am still invested in one of them. EFA is a big gainer for me thanks to the declining US dollar.

However I have to consider getting out of EFA. Europe hates the dollar’s strength because it’s not good for their economies. The dollar may not reach it’s old levels anytime soon, but if it keeps falling many economies around the world (including in Europe) will suffer. Some like Korea are already suffering.

When it is time to get out of EFA, I’ll still be looking at foreign stocks. India and China are appealing, but there may still be some European companies worth looking at.

Seth Jayson over at Motley Fool has a broad stock screen and a few reulting s uggestions. This includes a poultry company in Brazil but as a vegetarian I’m not interested in researching that one. Then there’s De Rigo in Italy: “De Rigo is, simply put, a family-run eyeglass company with a market cap of $330 million and annual sales twice that.” De Rigo might be more fun researching as they have relationships with “Escada, Fendi, Givenchy, La Perla, and Italy’s oldest brand, Lozza.”

The US dollar – Europe – intervention?

Wednesday, December 8th, 2004

Just as the US dollar’s fall threatens the Korean economy, it also threatens the European economy. In fact they are calling for the US government to intervene, but will the US fight the dollar’s slide?

Probably not. Europe says it’s unfair that they have to suffer because of the US deficit. Rob Nichols and John Snow don’t seem to be losing any sleep over it:

“It is unacceptable that Europe is paying the bill for some major imbalances in the world economy, especially the current-account and budget deficits in the US,” Grasser said.

Asked about the European complaints, US Treasury spokesman Rob Nichols said “on the issue of currencies, our views are very well known.” Treasury Secretary John Snow said last week the United States supports a strong dollar whose value is set by financial markets and indicated the Bush administration wouldn’t act to stop its currency’s decline.

“Markets can overshoot and undershoot, and they often do, but the virtue of markets is they’re self-correcting,” Snow said on December 3. “I’m not going to comment on what we might or might not do, but I will say I’ve got a deep respect for the way markets perform.”

Plus we have to remember that the US treasury doesn’t ahve much recent expereince manipulation the strength of the dollar. The dollar has been the world’s standard currency for so long that it never seemed to need manipulation. To start now would be something of a major policy change in my opinion.

The US dollar – China – Korea

Wednesday, December 8th, 2004

Many countries don’t like the US dollar falling as it weakens their exporters. Many of those same countries also need to grow their exports to China to sustain economic growth.

This is particularly true for South Korea; China is its biggest trading partner and the US is next. But with the dollar falling, and Chinese currency pegged to the dollar, South Korea is going to have a hard time finding answers, especially considering that China is not ready to reform its currency system.

As I wrote about a month ago, this does not seem like the time for me to invest in the KOSPI index.

The next global recession

Thursday, December 2nd, 2004

Here’s a scary article about how Alan Greenspan and George W. Bush did not prevent the stock market bubble of the late 1990s from turning into a crisis. They only postponed it. The arguments revolove around the budget deficit and household debt.

A little humor

Thursday, December 2nd, 2004

I know you don’t come here for jokes, but this might not be a joke. It is funny though. Mark Cuban, the Maverick owner, “claims he will soon start a stock fund that will wager on sports events, rather than on equities in the stock market.”

Is everyone investing in India?

Thursday, December 2nd, 2004

Maybe not everyone is investing in India, but enough foreign capital is coming in to push the Sensex equity index to a new high (beating yesterday’s record high). You may recall the confusion in May, but we have seen a 38% climb since then.

So is it too late ot get in? It doesn’t seem too late:

The improvement in foreign perception has been backed by a record net $7bn in foreign inflows this year – still low by south-east and east Asian standards but ahead of the $6.5bn invested in Indian equities last year. It is almost nine times the total inflows of 2002.

While the foreign investment has been increasing quickly it still hasn’t reached levels seen in other Asian economies. And the PE ratios are not as high as in many other emerging markets:

India’s price/earnings ratio, a conventional measure of equity valuations, is still below 16, relatively cheap compared to many emerging markets. Corporate earnings growth is above 20 per cent in many sectors.

Prudential likes the Indian markets due to strong earnings. Corporate earnings are expected to grow at 13.4% in 2005 for a forward PE of 11.3 Corporate earnings should not be confused with economic growth; India’s economy is expected to grow around 6% this year, and between 7%-8% in 2005.