We postponed the Prohost Letter we planned to post this past Monday until the market’s fits come to an end, which we believe they will. Indeed, the market unexpectedly acted as if it is suffering from petit mal without being diagnosed with epilepsy. The sudden market switch from rallying to tumbling is unexplainable considering that the usual criteria for a stock market suppression are nonexistent. We remembered, however, that the current market’s acute attack is not unprecedented, which is why we decided that the best thing we do is resort to history. Similar unexpected dives have indeed occurred during economic strength in the past. Although the causes have not been explained, by looking at history, at least we could learn how long the crises had lasted, how they ended, and what happened during the following year.
What did we find?
Most of these market’s acute attacks were short-lived and most analysts’ attempts to use them to predict the future economy have failed to come near what has actually occurred then after. An article written today by Paul Krugman is worth reading in the New York Times OP-ED section. We believe it is by far more balanced than the hundreds of articles thrown at us since the market has dipped. Trying to explain the plummet, Dr. Krugman wrote, “About the Plummet: If there was any news item behind it, it was Friday’s employment report, which showed a significant although not huge rise in wages. Now, rising wages are a good thing. In fact, the failure of wages to rise much until now has been a deeply frustrating deficiency in the otherwise impressively durable economic recovery that began early in the Obama administration.”
The current market’s plummeting in an undeniable good economy, which happens to occur in the absence of the factors known to cause Bear Markets remain inexplicable. The current plummeting cannot be a correction as many analysts called it when they, themselves, are forecasting almost equal numbers of overvalued and undervalued stocks.
How can a plummeted ship, which takes down with it all publicly-traded firms without exception, be correcting the undervalued stocks filling its deck?
When analysts put targets for stock prices, these targets reflect the values of the firms as calculated by the expert analysts. The targets tell whether the stocks are undervalued or overvalued. Individual correction of the stocks is the only fair way and is usually made by the investors themselves through selling the overvalued and buying the undervalued stocks.
Sinking the ship into a hysterical selling is unfair and unacceptable unless the market has become inflated, which no fair analyst has described it as such.
Let’s see what will happen. Yet, regardless of what happens, the Prohost Letter will be posted on Thursday, The Week in Review on Saturday and Prohost news and articles before, in between and after the posting of the Letter and the Week’s review.
Biotechnology is on the river without return towards creating breakthrough technologies and drugs, including cures for diseases that have never had treatments. There is a tremendous take-over trend for all biotech firms, the small and the large as long as their technologies and products happen to be breakthroughs.
The biotech industry is here to accomplish a great revolution in life-science and we are determined to stay with it regardless of the risk of markets’ plummeting that would occur during strong economies and that could not be explained.
Prohost Forward-Looking: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives. Also, investing in stocks includes certain risks. Our advice is that you better consult with your own financial adviser before making an investment decision.