NTMD

It’s drifted down below $19 again.  The fact that some state Medicaid plans have agreed to cover BiDil has not led to the explosion in pent-up sales some bulls had hoped.  If you add up the IMS daily numbers for the week ending September 30, there were an estimated 772 BiDil prescriptions written (this is the week before several states put BiDil on the Medicaid formulary), while for the week ending October 7 (the week after these states started covering it), there were 732 – a small decrease.  Meanwhile, new scrips on Tuesday were 47, down from 54 on Monday.  For all of September, IMS reports 2,439 BiDil prescriptions written.  The rolling 7-day average as of October 11 was 87. 

With annual expenses projected by the company at $120 million or so, breakeven would be around 70,000 patients at full price.  (The company has estimated $1,800 a year from each patient.)  It’s hard to see how they will get to 70,000 patients at this rate.  Or why, long-term, insurers will go along with covering the two generic components of BiDil at six times the cost of the generics covered separately. 

If you own December or March puts (and, as always, if this is money you can afford to lose), I’d hold on. 

TIPS

John Stockman:  “Would this be a good time to buy Treasury Inflation Protected Securities?  You haven’t mentioned them for several months.”

F As a very safe core holding, maybe.  I have about a quarter of my retirement plan in 20- and 30-year TIPS – but bought at par or a little below (99 or 100 cents on the dollar), so psychologically easier to hold at this price than to buy (even though holding amounts to much the same decision as buying). 

They’ve gotten a little cheaper in the last week or two, so better to buy today than a couple of weeks ago.  Right now, the 20-year TIPS yield slightly over 2% on top of inflation and the 30-year TIPS (which actually have 27 years to run) yield slightly less.  Click here (and then scroll down) for current prices.  But remember several things.  First, both the 2% you receive and the inflation accretion you do not receive until you sell are taxed as current income, so these are best owned within a tax-deferred retirement plan.  (Otherwise, consider a TIPS mutual fund that pays out the full yield.)  Second, the price you see quoted is not the price you pay, because these bonds, which, like most bonds, started out at a $1,000 face value, have been appreciating with inflation.  To keep the numbers simple, figure that the 30-year bond is now a $1,100 bond, and because it’s selling for 129 or so – 129 cents on the dollar – each bond will cost you 129% of $1,100 (plus accrued interest and a little something for your broker).  Also, if we should have deflation for a while, that $1,100 could fall back to $1,000 (though not below).  My guess is that this would be a short-term situation – one way or another, we’re likely to have a fair amount of inflation over the next 27 years.  But it could be a long and winding road.

DIPS

Three things the stock market has going for it right now are, first, the glimmer of hope that the Sunnis will vote and things will gradually begin to go better in Iraq than most of us expect.  Second, that the Dow is lower today than it was five years ago – a rare feat in American history – which could be seen as an indication that valuations have had a chance to catch up with themselves.  Third, a general level of pessimism (it often being better to buy when people are glum than when they're optimistic).

But the list of countervailing factors is at least as long.  The housing boom that has fueled so much of the economy these last few years seems to have passed its peak.  Huge gobs of dough will be taken from consumer pockets and sent abroad to fuel our cars and furnaces.  And Detroit, still a source of significant employment, seems to have set itself up to be rolled over by Toyota – yet again.  The Prius is just so much cooler and smarter than the Chevy.  Add to this the neat trick by which we’ve turned the largest surpluses in history into the largest deficits . . . our increasing dependence on the goodwill of the Chinese and our other creditors . . . all the other debt consumers have racked up . . . and an environment in which a huge majority of the country feels we’re on the wrong track (being that, well, we are) – these are the kind of things that could throw the economy into a funk.  Add to this Katrina, Rita, Pakistan, floods in New Hampshire – New Hampshire? – indictments and subpoenas flying in Washington, with Halliburton just getting richer and richer, not to mention threats of  Avian flu and loose nukes, and you could have the stuff of a loss of confidence . . . a general “hunkering down.”

Or not. 

Maybe the market has discounted all this.  But I don’t mind holding some TIPS.  And it may not be dumb to have some cash on the sidelines, should opportunities present themselves.

QUIPS

Tom Knapp: “Did you hear about the woman who refused to pay the contractor who installed new windows?”

F Yes.  He said her bill was way overdue but she said the salesman had told her that the windows would pay for themselves in a year.

David Bruce: “I wanted to become an atheist, but I gave it up – they have no holidays. – Henny Youngman.”

David D’Antonio:  “A man goes into a bar, sits down and orders a beer.  He’s sipping the beer when a beautiful woman sits down next to him.  After a couple of minutes, she turns to him and says, ‘I'll do anything you want for $100, provided you can say it in three words.’  The guy is taken aback by this but sits and thinks for a bit and replies . . . ‘Paint my house.’”

Matt Todaro:  “Did you hear about the new pirate movie?  It’s rated ARRRRRGH!”

Have a great weekend.