E-motions: Vol. No. 1, Issue No. 14 Brought to you by California News Tech (OTC BB: CNTE)

By: Tai Nicolopoulos E-Motions Writer 11/04/2005

Panic, Drug Hoarding Primary Symptoms of Bird Flu

 E-Motions Podcast

1. Emotions in Focus: Panic and Panacea

     Whenever there is an impending crisis, especially related to public health and safety dangers, a particular brand of fear threatens to erupt. This kind of wide spread panic often involves short-sightedness, virulent gossip, and sometimes even anti-social, selfish behavior. The societal devolution does not end there. Someone is always there to fuel the frenzy and take advantage of the situation.

     The most recent source of this sort of panic has been avian flu virus H5N1. Governments, health organizations and individuals all over the world fear the spread of this bird flu, which originated in Asia and has been spreading throught bird populations in the Americas and Europe. While only a small number of people world wide have contracted the primarily avian virus, their fatality rate is uncomfortably high, and experts have voiced concern that the virus may mutate into a form more dangerous to humans. Pandemic influenzas can indeed take a terrible toll, the certainty of such a mutation is unclear. In any case, it certainly seems disproportionate with public reactions. The World Health Organization and other groups have stated that hoarding Tamiflu and other such medications is inappropriate and unnecessary, and may actually make it difficult for those who truly need the medicine later this cold and flu season to get it. Despite these admonitions, companies like Roche Pharmaceuticals, the maker of Tamiflu are turning a swift profit, and have done little to dissuade people from stockpiling of their products.

     Furthermore, last Thursday, October 27th, the AMEX Biotechnology Index dipped 1%, as some of its largest holdings went down on bad news about delayed drug approvals. Some stocks, however, did not suffer from this sector-depressing influence. British drug maker GlaxoSmithKline, Inc. (NYSE: GSK) went up in the wake of announcements that it would have a bird flu vaccine ready in a matter of months. Seemingly, such companies will experience elevated stock prices even if this Winter’s flu strain is different than expected, and they are forced to simply throw away many doses of these vaccines. While in the long term it is difficult to determine which pharmaceutical companies actually have useful products, in the short term it is at least possible to determine which companies use public fears to make their stocks go up.

Presented By:

2. The Big Movers and Why

     On Tuesday, October 25th ABAXIS, Inc. (Nasdaq: ABAX) went up 20.61% on a positive earnings report. ABAXIS, Inc. produces a number of medical tests, predominantly blood-related, for humans and animals. While ABAXIS does not produce flu medication, it was also able to ride the avian flu trend and avoid the depressing effects felt throughout much of the biotech sector. In particular, ABAXIS makes an easy-to-use panel of tests for use in birds and reptiles that delivers results within minutes, reporting on a wide variety of symptoms, including those related to the flu. Another benefit of the panel is that it can be used for hundreds of species of exotic birds, the import of which into Europe and the United States has created much of the anxiety surrounding avian flu H5N1. With so much panic and speculation surrounding if, when and where this flu will mutate and become wide spread in humans, monitoring the health of birds around the world has suddenly taken on new importance. This sense of urgency, combined with strong earnings, made ABAXIS a sure bet this quarter.

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3. How to Use the News

     In the face of continuing fears about a flu pandemic, or future foci of public panic, it becomes relevant to consider that someone will always turn a profit on impending disaster. Whether it was producers of duct tape and anthrax vaccines after 9/11, or construction and oil pipeline companies after Hurricane Katrina, everyone wanted to buy in. Whether or not a product or service is actually widely required after a disaster is almost unimportant, as long as enough people believe that that a company offers is necessary. For instance, after 9/11 terrorism experts asserted that the feasibility of producing airborne anthrax was low, and that sealing homes with duct tape and plastic sheeting was highly unnecessary. Furthermore, the need for anthrax vaccines outside of postal centers and specific government mail rooms was also almost non-existent. In the case of Hurricane Katrina, investors bid up lumber and construction companies in areas so far removed from the Southern rebuilding effort that were unlikely to profit from it.

     In order to determine which types of industries, or particular companies, will profit from public panic, it is important to follow the news closely. Analyze what people are most afraid of, not necessarily what actually happened or is likely to happen. Pick up on early opinions from analysts about which sectors are likely to get bid up. From there narrow your investment choices down to companies which offer the best products and services in these areas, ideally before they get a chance to promote their fortunate position heavily in the media and their stock prices go up.

4. Last Week in Media Sentiment

     Recent correlations between MediaSentiment.com's thumbs up / thumbs down recommendations for Heads Up™ rated companies and subsequent day price highs and lows show a strong relationship. The correlation between ratings for MediaSentiment.com selected stocks and their highs and lows the next day is 90%. Therefore, this week, MediaSentiment™ gave an edge up to 90% to smart investors who used Heads Up™ recommendations to trade on intraday volatility!

     All figures reflect all MediaSentiment Heads Up™ recommendations for the week of October 24, 2005 through October 28, 2005, rating companies on the day of their quarterly earnings releases correlated with their stock highs, lows, closing prices and daily volumes for the subsequent day.

5. Links you can use

Doctors Struggle with Demand for Bird Flu Drug
ABAXIS Launches 'Avian/Reptilian Profile Plus'
Bird Flu Test Results Due

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