Monday, March 02, 2009

So long 7,000, we hardly knew ya..

Boy, that was ugly. Another 4% drop on little news outside of the AIG bailout that we all knew was coming. The carnage was widespread and as I said last night the weather probably didn't help any today. The sentiment is extremely negative right now which in the perverse world of Wall Street can often lead to sharp reversals. I won't be surprised by another false rally, but it seems like every rally loses steam before it can get started.

If we don't get a meaningful rally in the next few weeks, I think we're going to be in for a really rough ride because we might see a new wave of mutual fund redemptions as the public realizes their 401ks are getting whacked again.

A really skilled technical analyst that has been spot on in predicting the market as of late has reiterated her predictions of S&P 500 going to 600 and then potentially 400. Again, I'm a fundamental analyst and I don't believe in the value of technical analysis but consider this analogy ---

Let's say you sell hot chocolate at the Rockerfeller Center Skating Rink. However, you notice a trend that on days when it snows, hot chocolate demand plummets and ice cream demand soars. Fundamentally, this makes no sense, but you can fight the trend and go out of business.

Consider the closing prices of some of the following Bluest of Blue chips stocks ---

GE - $7.60
Alcoa - $5.49
Dow - $6.94
Microsoft - $15.79
Pfizer - $11.66
Int'l Paper - $5.12


This is completely off-topic, but what an interesting read over at the NY Times on the state of the MRI/Scanning industry.

"Insurers pay the same for a scan done on a 10-year-old machine as one on the latest model, though the differences in the images can be significant.

Insurers do not distinguish between scans that are done poorly or done well or read by less- or more-qualified doctors. Aside from mammography, whose standards were established by a law that went into effect more than a decade ago, the field is largely unregulated. And increasingly, doctors refer patients to scanning centers they own and profit from."

This seems like an easy fix - No reimbursement from Medicaid or Medicare for scans done on machines put in service prior to 2007. I have a sense that many in the medical establishment don't want improved scans because it may reduce the number of unnecessary (but profitable) surgeries.


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