May 2010 Report

May 2010

Many are beginning to doubt how much impact $1 Trillion will have on saving Greece and the other PIIGS. The market response to the bailout was a broad sell off of 3.7% on the NASDAQ and 3.9% on the NYSE. This day also signalled the beginning of a market downtrend. Positions in GLD (SPDR gold trust ETF), PSQ (Proshares Inverse QQQ), SH (SPDR Short S&P500), and SEF (Proshares Short Financials) have benefited from the worst May since 1940.

Market Analysis: Downtrend since 5/4 continues

May 4th signaled a correction in the markets and positions were initiated in GLD (SPDR gold trust ETF), PSQ (Proshares Inverse QQQ), SH (SPDR Short S&P500), and SEF (Proshares Short Financials). These shorts have since benefited from the worst May since1940, and have lifted the portfolio to over 5% for the month.  The market has yet to show any signs of strength. May 27 could have marked a turnaround day with the NASDAQ up 3.7% and the NYSE up 3.9%, but this action came on below average volume, a sign that institutions continue to be reluctant to put money in the market. The major indices have been finding support at the 200 day moving average, an inflection point which could either see a continuation lower or a reversal into higher ground.

The Economy: $1 Trillion isn't worth what it used to be' at least for PIIGS

A $1 Trillion isn't worth what it used to be. This is evidenced with the widespread, 3% sell off response to the Eurozone's approval of the Greece bailout. The world is beginning to understand that it might not be enough. Even with the anticipated cuts in Greece, there would seem to be a cultural bias preventing changes to be implemented.  The financial overseers have no real plan to solve the problem and the stop-gaps only put out a small fire.  It very well may be a problem of insolvency rather than liquidity. Today, Greece is only the tip of a very large iceberg. Portugal, Spain, Italy and Ireland together owe $3.9 trillion in short- and medium-term debts, an amount larger than their combined GDP, estimated last year at $3.3 trillion. The problem directly hits US tax payers, as we are "required" to contribute 17% of the IMF's funding, or $48.6 billion to cover the debts of nations who spend more than they make.

A Vaccine for Cancer: Space age medicine finds its way back to Earth
Recently, an episode of Star Trek: Enterprise aired, called "Terra Nova". One of the inhabits of a lost colony of humans was diagnosed with lung cancer, which had spread to her lymphatic system. The good news is that she was cured...in one day! A vaccine was synthesized from her DNA to attack her specific cancer, kind of like a tailor made suit. More good news, this technology has recently been FDA approved. Provenge from DNDN (Dendreon Corp) is the first FDA approved cancer vaccine for prostate cancer. It will not cure cancer, but will prolong life in late stage cancers. The stock popped up 25% on over 3 times normal volume on April 29th and has since fallen back to it's 50 day moving average. Should a market rally resume, this is one to keep on your watchlist.