Emerging markets eyed by pension funds

According to the Thursday's Financial Times, the third largest public pension fund with a total of US$ 154 bi, California Public Employee's Retirement System (Calpers), is considering 12 emerging markets to invest (other than China, India and Russia).

The best countries were chosen: (in this order) Poland, Chile, Czech Republic, Hungary, Israel, Jordan, Malaysia, Mexico, South Africa, South Korea, Taiwan and Brazil. Turkey, Argentina and Peru were discarded due to political stability, workers laws, transparency, liquidity and volatility.

Emerging markets have just 5% of global stock capitalization and their quality is improving with better accountability and transparency.

Two New Colorectal-Cancer Drugs coming

As reported in the Wall Street Journal, ImClone's Erbitux is expected to be approved by Friday and Genentech's Avastin is scheduled to the end of March. Options on DNA and IMCL may deserve due diligence.

DNA $97.95 on 2/12/2004

IMCL $43.96 on 2/12/2004

Soros says there is an asset bubble in both US and China markets

"China's asset bubble makes it ``very difficult to find vehicles for investing'' there, Soros said. That's a problem when you consider China is the only real source of growth in Asia, a region increasingly dependent on its demand for goods.

In the U.S., record current account and budget deficits are spooking investors who wonder if the world's No. 1 economy is living too far beyond its means and that a day of reckoning is near. The euro gained 16 percent versus the dollar in the last 12 months, while the yen gained 14 percent.

``Since the decline of the dollar in the short term is beneficial for the U.S. economy, the authorities actually like it,'' Soros said. But when currencies drop they ``tend to actually pick up speed'' and ``it's a very dangerous game because it can get out of hand.''

Not one to hide his distaste for U.S. President George W. Bush, Soros donated $12.5 million during the past year to two independent advocacy groups opposing Bush's re-election. "

The Curse of the Dow Trading Range

Interesting article.

"In 1966, the great Dow bull peaked at a general market P/E of 24.1. After trading sideways for 17 years, the Dow 30 ultimately reached half fair value in March 1982, with general markets trading at 7.0x earnings, which happened to herald the very birth of one of the greatest 17-year bull market cycles in history. In 2000, the next great Dow bull peaked at a far higher general market P/E of 44.2. It may indeed again take 17 years in total, about 14 more years, for the earnings of the US stock market to catch-up with astronomical stock prices and lay solid fundamental foundations for the next major Dow 30 bull market."

Unmanned Aerial Vehicles in Defense Budget

United Industrial Corp (UIC, $18.97 on 2/3/2004) - This company has two subsidiaries: Detroit Stoker, which supplies industrial energy equipment, and AAI Corp, which develops unmanned aerial vehicles (Shadow UAV) and other air defense systems.

As per the US Dept of Defense, the proposed defense budget for fiscal 2005 contemplates products like AAI Corp develops:

"Unmanned aerial vehicles continue to receive a great deal of budgetary attention. The Air Force plans to buy four Global Hawk aircraft at $359.7 million. In addition, the service will put $336.2 million into continued Global Hawk research.

The Air Force would buy nine Predator UAV systems for $146.5 million, and the Army would procure four Shadow UAV systems for $42 million.

The unmanned combat aerial vehicle – a joint program with the Air Force, Navy and Defense Advanced Research Projects Agency – will receive $710.4 million in research and development monies. Overall unmanned vehicle research will receive almost $2 billion under the proposal."

UIC $18.97 on 2/3/2004

Taser Shorts Stunned Again

The stock trades for about 140 times its 2003 per-share earnings of $1.07 and about 121 times the 2004 full-year earnings estimate of $1.21 a share. In a related statistic, more than half the company's float is short interest, a circumstance that has repeatedly caused big gains in the stock in the absence of catastrophic earnings news.

Taser's tiny float of about 2.2 million shares exacerbates the short squeeze.