Companies that stand to gain These companies make vaccines, anti-virals and other products likely to be in big demand if the avian flu turns deadly, investment research firm TrendMacro says. Company Wed. close 2006 change Alnylam $17.23 29.0% Avant Immunotherapy $2.31 22.9% Avi $6.98 102.3% BioCryst $19.16 14.4% Carrington Labs $6.85 44.8% Chiron $45.70 2.8% Crucell $24.96 -2.5% Embrex $10.00 -27.8% Gilead Sciences $62.70 19.3% Generex $3.22 288.0% Hemispherx $3.74 72.4% MedImmune $36.28 3.6% Nastech $16.87 14.6% Novavax $7.51 95.1% Quidel $11.87 10.3% Sinovac $5.11 27.4% Vical $5.30 26.2% Sources: TrendMacro, CSI

•Stocks to watch. TrendMacro, an investment strategy firm that caters to big institutional investors, created an Avian Flu Index in October that now consists of 17 health care stocks that develop vaccines, anti-virals and other products likely to be in great demand if the avian flu scare morphs from a mere threat to deadly killer...

"Why should investors care about the risk of a pandemic? Because the risk of a planetwide outbreak is very real. It's happened before," says Donald Luskin, chief investment officer at TrendMacro.

The 20th century had three influenza pandemics... How stocks do this time depends on what plays out:

•Best-case scenario. Markets will cheer if the virus never becomes transmissible from human to human. In that case, Luskin says, investors can make money investing in companies that make vaccines and testing therapies.

Examples, he says, include Gilead Sciences, the inventor of the anti-viral drug Tamiflu, which is being stockpiled by governments around the globe; Hemispherx Biopharma, which is seeking final approval for its anti-viral drug Ampligen; and Sinovac Biotech, a Chinese vaccine maker.

But, "The losers will come under severe pressure," says Heldman. Adds Luskin: "It will be like Hurricane Katrina on a global scale."

Newspaper publisher New York Times Co. on Wednesday forecast first-quarter earnings per share dropping as much as 71 percent from a year earlier, when it recorded a gain from selling its current headquarters.

First-quarter earnings per share is expected to fall to a range of 22 cents to 24 cents from 76 cents a year earlier, when it logged a gain of 46 cents from the headquarters sale.

The outlook fell short of analysts' expectations of a profit of 25 cents per share on the basis of generally accepted accounting principles.

Today, New Jersey's newly elected Jon Corzine is going to unveal a budget in which he's going to hike taxes and (supposedly) make spending cuts.

Corzine blames a "sluggish economy" and pundits are talking about insufficient revenue.

Corzine's budget is built on a tower of lies. The biggest lie that the Democrats have been pushing since McGreevey is that a "sluggish economy" is hurting state tax revenues and this necessitates increases in taxes.

First, the national economy is far from sluggish. The unemployment rate is below the average of the '70s, '80s, and the '90s. Gross domestic product has been growing nicely since 2003. Our nation's economic picture is a solid one.

Second, tax revenues are going through the roof. The way politicians talk, you would think that tax revenues are collapsing. The truth is that revenues are up considerably, and have only declined for one year in the past decade. Since the recession, revenues have rebounded in a robust fashion, increasing by 8.7% in 2003 and 7.6% in 2004.

Even with the recession taken into account, revenues are up 11% since 2000, from $18.9 billion to $21 billion in 2004. Unfortunately, during that time frame, New Jersey has spent three times that rate, increasing the size of the budget by about 30%.

In fact, the revenue increases are just as impressive as those during the economic "miracle" of the 1990s. In 1998, revenues went up by 8%. In 1999, they went up by 9.2%. In 2000, the height of the so-called "Clinton economic miracle", revenues increased by 6%. This isn't much different from the increases in 2003, 2004, and 2005.

The problem has nothing to do with revenues. This mess is purely a result of excessive spending. For instance, the reason the budget situation got worse in 2003 (when revenues were up a whopping 8.7%) is because spending increased at 16.7%.

To Governor Codey's credit, 2004 actually showed a measure of fiscal discipline by reducing spending for the first time in recent New Jersey memory. Nor are Republicans exempt from criticism, who increased spending significantly during their hold of the legislator and governor's mansion in the 1990s.

There is considerable waste in the New Jersey state budget. Last year, for instance, New Jersey spent $27 million to "restore confidence in government". I have no confidence in New Jersey government. I would have a lot more if they didn't spend so much damn money.

The biggest hole in the NJ budget has nothing to do with prisons, stupid programs to "restore confidence in government", public colleges, aid to veterans, child welfare, or helping out the elderly.

73% of New Jersey's budget is spent on property tax relief. This does little more than subsidize the waste of municipalities.

New Jersey can cut its state budget to the bare bones, but it will continue to grow because we indirectly subsidize waste among all of our municipalities, on which there are few limitations.

The best way to deal with our budget mess would be to pass an amendment limiting the growth of municipal budgets across the state to a reasonable rate of 3% (or perhaps even a freeze). The "property tax relief" segment of the budget would be under control, taxes wouldn't have to increase, draconian cuts in spending wouldn't be necessary, and property taxes would cease their warp-speed rate of increase.

McCain, who didn't seem to mind being called a right-winger in a newspaper scorned by Republican primary voters, reacted with a stock line.

"I'm nominating him for a Pulitzer prize," the senator said.

$217 billion of foreign profits were returned to America in 2005, which represents 1.7 percent of Gross Domestic Product (GDP). An additional $100 billion is set to come over in 2006. This money has just started being put to use for capital investment, job creation, share repurchases, dividend increases, and merger and acquisition (M&A) activity. ASA's

“For all the talk about outsourcing and the growing protectionist sentiment in Washington, this real-time experiment demonstrates U.S. international tax policy matters when companies make their investment decisions... Rather than attempting to drive down other countries’ competitiveness, policymakers should realize the first step is to raise U.S. competitiveness. Permanently lowering the tax burden on repatriated profits, if not eliminating taxes through a territorial system, would be a good first step towards improving America’s ability to compete in the global marketplace.”

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Posted by Donald L. Luskin at 9:03 AM | link    

Monday, March 20, 2006