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Trade: Buy SRS
Rating: 2.20 (5 votes)
Vote: 
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I bought 900 shares of the UltraShort Real Estate ProShares (SRS) today. This ETF corresponds to the twice the inverse of the daily performance of the Dow Jones U.S. Real Estate Index. In other words, it goes up 2% for every 1% drop in the underlying real estate index. It has dropped from 108 to 88 in the last few weeks, with a steep drop yesterday as a result of the Fed rate cut, presumably since the market expects a recovery in real estate as a result of the cut. I think the market is still overly optimistic in its expectation of real estate recovery. The boom in real estate over the last decade is of historic proportions, comparable to the high tech boom of the late 90s. The Yale economist Robert Shiller (the co-creator of Case-Shiller real estate indexes which underlie corresponding futures that trade on the CME) has made a careful study of real estate prices in the US over the last 100 years and found that in real terms (i.e. taking away inflation) real estate prices have basically been flat until this latest boom! See for example the graph created by Shiller to show real house prices over the past century. In a recent survey of buyer attitudes, Shiller found a large degree of denial about the markdown of prices; in fact the buildup of inventories in an indication of this denial. Home inventories will shrink and the market will clear when sellers finally accept lower prices. See also this and this for more interesting commentary from Shiller. And from today's WSJ, note the delinquencies trend in the graph on the right. I feel, therefore, that there is a reasonably high probability that real estate still has a long way to fall and a fairly low probabability that prices will continue there recent boom. SRS should do well as prices fall; I will sell my position when the it seems that the market is actually clearing as people start marking their expectations to reality; it might take a few years. Incidentally I sold a small portion of my HNSN position yesterday in order to bring the porfolio into compliance; I remain very bullish on HNSN. | ||
Trade: Buy ACUS
Rating: 1.64 (11 votes)
Vote:
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Acusphere is a small biotech that has developed a proprietary porous microparticle technology that enables control over the size and porosity of small particles (at both nano- and micro-particle scales). The company is developing developing several applications on top of this platform, in the areas of cardiology, oncology, and asthma. Its lead product candidate Imagify, a cardiovascular drug, is in Phase 3 clinical development for the detection of coronary artery disease. The company's products also include AI-850, a Phase 1 clinical trial completed product candidate that utilizes hydrophobic drug delivery system to improve the dissolution rate of a cancer drug; AI-128, a Phase 1 clinical study completed formulation of asthma drug. Here is an excerpt from a Seeking Alpha transcript of a recent presentation ACUS sales chief made to investors that I think explains their lead product pretty well: We've got a broad technology platform in microspheres... Our microspheres are porous and they could be customized depending on the application. [The Imagify molecule] is a synthetic shell [that is made of] the same sort of material that's used in disposable sutures. So, it has a long history of safe medical applications. That shell, we use that to encapsulated gas and gas as it flows through the bloodstream and through the heart, when the ultrasound sound beam hits the gas it reflects and you are able to see perfusion or blood flow in the heart. And if that blood flow perfusion measurements, that physicians are looking for to make the diagnosis of coronary artery diseases. So, we have completed our pivotal trial. And the other thing you would want to know about really all of our technologies is we have a strong patent position and a lot of protection, not only patents, but know-how wise. If you look at the market for Imagify, cardiac stress imaging procedures today, there were about 11 million procedures in 2006. And there is a lot of demographic growth factors that we all know that are pushing on that number. In today's marketplace there are primarily two ways that the initial screening of heart disease is done. Ultrasound, cardiac ultrasound, which today does not show perfusion, but shows the wall motion of the heart, is used in about 3 million of those procedures. Nuclear, a nuclear procedure is used in the larger number, that's about 8 million procedures. And nuclear is used many times, because what nuclear can do is show the perfusion of the blood flow in the heart. And the value proposition that we bring to the table is a product that you can add to ultrasound, that enables you to not only get the wall motion, but also see that perfusion of blood flow in the heart, making this total pie of 11 million procedures accessible to us as a company. Let me walk you through the benefits of ultrasound versus nuclear. One of that is cost. Nuclear is a very expensive procedure, and if you look in this area, you will that there is a number of people that are getting concerned about the growing cost of nuclear cardiac assessment. Equipment. The equipments for nuclear costs are lot more than the equipment for ultrasound, not only for the machinery, but also for the things you have to do to protect people from radiation, the lining of the room and disposal of waste etcetera. The procedure itself takes a long time. If you need to get one of these, you would have to take the whole day off from work. It typically takes at least 5 hours. There is a procedure. Then you have to wait a period of time and then you get the separate procedure. With ultrasound it's less than an hour. And availability, ultrasound is everywhere, it's ubiquitous. It's in the hospital, it's in the physician office. Nuclear has more limited availability. High radiation dose. Nuclear test expose the patient to radiation. Ultrasound has no radiation. This is particularly important in chronic heart disease, where you maybe getting tests over time as your physician follows you. And then, one other thing is convenience for the patient and control for the physician cardiologist. Nuclear stress tests are conducted by radiologist and cardiologist. The ultrasound cardiac test is done only by cardiologist. And that enables the physician to hold on to his patient, as well as follow his patient and not have to send them away to another physician and then get them back. Physicians like that, patients like that. And finally, the payers. As I started this fact, there is a lot of concern about the cost of nuclear, and the overall use of such an expensive procedure. And of course, given all the things that I have just told you, you can see that ultrasound would be cheaper. It sure seems to me that their Imagify contrast agent for ultrasound is likely to get approval from FDA since it significantly improves upon the current test in being both cheaper and much more convenient. ACUS has announced plans for filing for approval before the end of this year. And yet the stock is down a lot last year. Why? My guess is that investors are nervous about their weak cash position ($50M) and are betting that it will need to raise more money soon and hence dilute the existing shareholders. While this may happen, my bet is that they will announce some kind of partnership soon to strengthen their cash position. The news stream is therefore likely to be positive from here on out over the next few months.
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