understanding the psychology of behavior

“Lower oil costs helped push headline eurozone inflation down to 1.6% in October, official data shows.” (article)

The one thing that got me was that the ECB has worries that lower oil costs will free consumer spending power, and that prices could then rise… hmmmm… now lets look at retail sales from one of their largest economies…

“UK retail sales experienced their worst performance in five months in October, the CBI has said.” (article)

I think their worry is not worth worring over.

“US Vice-President Dick Cheney has said that insurgents in Iraq have increased their attacks in order to influence the upcoming US mid-term elections.” (article)

Wow, all i have to say to that is ‘NO SHIT, DICK’.  BUT, THEY are not doing it, YOU and YOUR administration are causing the votes to slip away from the violence YOU are allowing (and have allowed) to take place.

YOU fucked up the mission, YOU fucked up the opportunity, YOU fucked the Iraqi people by allowing the instability to take place, YOU fucked up by blaming others instead of youself (any General that didn’t conform to YOUR thought process was RETIRED!), YOU are allowing American soldiers to die… and now YOU are blaming the future republican loss on the very people YOU allowed to gain a strong hold in Iraq.  

No Dick, YOU are influencing the elections. (And like traditional conservative republican attitude, YOU, Dick, are blaming someone else.)

In a previous post i mentioned MDRX can do around 0.77 for 2007. After a detailed review of the numbers this may not be possible in a GAAP basis as per expectations.

As for the 3rd quarter…

The quarter was nothing special, hence the initial decline. MDRX grew revenue only about 4% q-to-q, and management basically guided a similar top line growth for the 4rth by stating +225M for 2006. The reason I feel kinda uneasy is because this is a drastic slow down from previous quarters. (Although I do feel management low balled 4rth q expectations, stating in the CC that they expect the high end of estimates to be achieved.)

Don’t get me wrong, I am very bullish on MDRX and feel there is a tremendous amount of growth left… especially when the government is getting involved to push EMRs. Also, I’m seeing over a 60% earnings growth rate for the next 3 years.

As per valuation expectations…

MDRX should be trading on a free cash-flow basis valuation, not a GAAP earnings valutaion metric. The GAAP result does not give its cash-flow justice, and to use it to measure the PE and PEG is unfair, but that is for analsts to decide.

Is MDRX overvalued…

I don’t think it is, as per a GAAP basis and GAAP earnings growth (looking at most 3 yrs out). And when you look at a FCF basis, it is not. (maybe this is why it was being accumulated after 10am on Friday)

I’m interested to see how analysts decide to digest the numbers. Analyst sentiment should be out next week.

I was/am thinking about ASPV. (it seems to have consumed me ever since the rev. miss)

This is my conclusion of my thought process…

The downgrades by analysts already perpared investors for the lowering of guidance… considering they themselves lowered guidance to account for the lack of MG revenue.

IMO, they will do +200M (or just making 200M) for 2006, as management says, but I don’t think they can be trusted. Here is why…

1. They told investors that a new partnership was very near in the spring of 2006. (a lie. nothing developed)

2. They told investors the revenue short fall was due to exchange rates and royalty payments. (maybe a partial lie. The real cause, I am sure, was that prescriptions for MG ceased, affecting the top line… this may be exposed in the CC on Nov 1st.)

3. They handle PR very poorly. They don’t know how to capitalize on good or bad news. (to be nice, i’ll blame this one on inexperience)

So, with the above stated I think ASPV may pop if management gives expected guidance, but I believe this will be a good selling opportunity to get out. (unless partnerships are announced)

The technicals are still very weak, and wall street has lost all faith in management. Because I see why, I don’t think the market is being ineffecient here. Even though they are a cash cow, management’s inability to deliver and lie created this discount.

Just for kicks… here is what management needs to do, quickly, if they want to gain investor respect (especially mine) back…

1. surprise us with not just one deal, but 2, on Nov. 1st. (but seeing how beggers can not be choosers ONE deal announcement on Nov 1st will do just fine.

2. stop writing checks they can’t cash.

If management makes promises, instead of deliveries on Nov 1st, I’m sticking my head between my legs and selling. period.

Start to take a serious look at MDRX. They reported inline results (but after upping the estimates at a conf. a few weeks ago). The were/are trading at a premium, so for an inline report this decline is merited.

Right now the multiples look OK. A PEG of just above 1 and estimates look good, but I do not think these estimates factor in Taxes. I see 2007 around 0.77 w/ taxes, so the actual PEG is higher. But like anyother leader in its field, MDRX deserves its premium. It proves time and again to deliver strong growth.

Street value of certain drugs are about to go through the roof.  So all you drugies out there, start buying and storing.  Once the Mexican/America wall is build, your cheap drugs will be no more.  Interesting how basic economic principles will effect every aspect of our lives, even things that should not be. 

IMO, this will be Bush’s greatest achievement.  He will do what everyother president before him going back 30 some odd years could not (or did not) want to do… severely hinder the drug trafficing to this country.

(Granted the home grown drugs derived from prescription drugs will still be a problem. But that has always been the case in this country, and not nearly as bad as a problem as the imported stuff.)

I have to say i’ve been doing very well these past few months. Called the rally and pretty much all my trades have been winners w/the exception of one PALM (stock) trade and of course ASPV!

I’ve never seen a company make so much money, yet so hated by wall street and get pounded even further.

The company announced CellCept did not meet its MG primary and secondary endpoints w/in the 36month trial. The FDA sponsored trial already failed, so this should not be a huge surprise.

Why this is important, and negative for the company/stock…

1. this puts into question what ASPV is doing. Why did they think 36 months would do better than 12 months? Whatever they saw that indicated this to them was wrong.

2. Can they be wrong about CellCept w/the other off label use. We know for a fact that CellCept is being used, but could these failed studies make doctors question and ultimately hinder off label use?

3. Could our revenue short fall be due to number 2?

The chart is telling me more negativity, and i thought that way after the FDA sponsored MG failure. This is not good for a one product company. They need to do something asap to increase shareholder value and a purpose to keep investors.

Here is the chart…

For the past few weeks we have been having a tremendous run. IMO, it was well justified and desrved.  We were way too oversold in August, and the by the Fed holding steady, it told many many investors that the markets were very undervalued.

The stampeed upward only saw minor corrections to the daily 20 SMA.  Now, fundamentally speaking i think the markets are just fine… a little on the high side, but nothing to get nervous about unless some horrible event occurs shifting the fundamentals of the economy.  BUT, techincally speaking, I think the markets are very overbought. 

We are in need of a pull back, and I think we will get one soon.  The most of the market catalysts have been used up (ie Strong Earnings, Fed holding and good economic data) that can sustain a decent rally.  The only decent catalyst left is MSFT (more importantly Vista).

If the markets keep rising after the MSFT report, keep a strong eye on PC makers.  By the markets reaction to MSFT’s report, the market will be telling whether or not a PC cycle is in the works.  A juiced up PC cycle can cause the NAZ to keep its momentum.

IMO, looking at INTC’s chart, the recent PC cycle ended in the begining of 2004.  So we are about 3 year from a new one, which is about right for a new cycle to begin. (Cycles usually last 3-5yrs)  Now with Vista coming out, this may be justification for a new cycle to begin.  If this is the case look to HPQ, INTC, AMD and maybe DELL.  But this should be enough to sustain the Naz.  It should also be enough to potentially cause a short squeeze, especially since the Naz is currently heavily shorted. (article… thanks drtkw for the link)

All and all i think the market should correct soon, but a major catalyst still exists… so shorts becareful or u will become ur worst enemy by squeezing each other.

The BBC possed this question… Does Skilling deserve 24 yrs? (here is the article)

IMO, in short… YES. As a matter of fact the mo-fo deserves life.

Our current era is that of an investor driven society. When Enorn collapsed they single handedly put our investor driven economy into question.

Once and a while there is actually something interesting to be stated on CNNMoney

Here is the article/interview by Justin Fox w/ Michael Zielenziger. (article)

The biggest takeaway for me was that Japan still needs to change culturally (to truly promote entrepreneurialism) in order to economically change. Right now, the growth of China and the consumption of the US are hinding most of the economic structural flaws most people think are fixed.