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Just learning the ropes and soaking in as much as I can. I hope not to fall off a financial "cliff"... that word has been used to DEATH the past couple months, no? I think so anyways... I'm a Chartered Professional Accountant (Canadian CPA) with a secondary degree in Management... More
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  • What Is CHTP Hiding?

    Whenever a stock drops a significant % in one fell swoop it is a time to reflect. And there is no better time to do it than December and the renewal of a new year.

    Many commentators of CHTP have been marginalizing the recent stock plunge brushing it off as nothing more than a bad bout of tax-loss selling or a mere fall back for recent 'unexplained' surges in the shares.

    These are valid arguments especially when you consider the fact the stock was at $5 & change per share and had fallen to $1/sh. Many investors may have simply been locking in their losses all the while recouping ~20% of their losses ($5 to $1 and then regaining to just under $2).

    There are others that have argued that its all a stupid political game of cat and mouse with the FDA and the recent plunge was merely an aberration of recent uninformed investors buying in and then selling out when the unexpected news conference was given on Dec 4th. Sorry but you got to be an imbecile to think this.

    Come on, what about the huge white elephant in the room? The FDA announced right from the onset that the 306b study would not be enough without a longer time frame. So why in the world did CHTP management go ahead with the study with a timeframe not in line with the FDA's request?

    You know what is political? When you do what is asked from the FDA, you get the results you hoped for (or close to it) and you still don't get approval. Then the argument of "oh, its just ridiculous politics at the FDA" holds some water. But when they say something and you specifically don't follow their guidance? That's either just plain lazy or perhaps worse, something sinister is behind it. Why didn't management just do what was requested? When the name of the game is to grovel at the feet of FDA and follow their guidance to the letter - just put up with it and do it. But what worries me, and what should worry other investors - granted, its probably just insiders and myself at this point; all rational investors probably pulled out - is that (1) management chose specifically to go against the wishes of the FDA by doing a 4 week study instead of a 4 month study and (1) release the news very unexpectedly without prior warning or notice.

    While the chances of approval eventually are still strong and the market for the drug appears to be healthy and all the underlying fundamentals are still more or less unchanged, I hope I'm wrong when I say this (since I'm still long after all) but is management worried of something negative developing and therefore require being reported if they do a longer term study? I don't want to really create fear mongering and say it must be so but at least consider it in your risk analysis overall strategy for CHTP moving forward.

    And regarding my 2nd concern, why would anyone announce news so unexpectedly? Don't they realize that ANY shock or surprise to the markets turns out badly unless its good news on top of good news? If there is even a shred of negativity then it ends up hurting the stock price. Maybe management simply miscalculated in thinking that investors would react to their announcement with relief and reward the stock with the good news they gave. I hope that's all it is.

    Anyways, either way the ineptitude of management is staggering and perhaps they will roll up their sleeves in 2013 and do whatever they need to get this done.

    Disclosure: I am long CHTP.

    Dec 08 8:36 PM | Link | Comment!
  • Tax-Loss Selling And The "~Fiscal Cliff~"

    I have read numerous articles recently that have confused, or worse, flat out erroneously articulated ideas regarding 'tax-loss selling' and the dreaded, horrifying 'fiscal cliff'.

    I will start off with the disclaimer that I am not predicting that we will fall off the "fiscal cliff" or advising people to act upon it. I am simply trying to clarify how it may affect investors and their tax-loss selling tendencies. Naturally, the correlation will be greatly dependent upon how many people will speculate that it will happen or not.

    I will keep this brief and straight forward as income taxes tends to transform even the strongest of individuals into blubbering, crying babies (I apologize to any and all infants I may have upset with that last remark).

    Simply put, tax loss selling occurs when tax-savvy parties (individuals, institutional investors or whoever) minimize their tax liabilities by disposing of positions that are in a loss position before the fiscal year ends. Lock in losses --> income decreases --> less taxes to pay. This is particularly effective for high-tax bracket individuals.

    I don't need to reiterate in detail what the fiscal cliff is all about as there are enough pundits commenting on it but to summarize the relevant aspect here - taxes will be hiked for 2013.

    First of all, the only interrelationship between tax-loss selling and the fiscal cliff is in the increase in capital gains (short term & long term gains). I do not profess to know the details, as I am Canadian (uh oh, 95% of the people viewing this article just left), but assuming the cliff includes increased taxes to capital gain income, it relates to tax-loss selling from that stand point.

    So now, given the option, save some money now or save a lot more money later (and the difference between the two options is the increase in tax rates on capital gains between 2012 and 2013 due to the fiscal cliff), which would you choose? Sure, some will say I need that shiny new Apple whatchamacallit ASAP (or perhaps BB10 anyone?) and will take the money now and run, but is it not safe to say that there will be SOME people re-considering this approach this tax-loss selling season to preserve it for next year when it could be so much more significant?

    IMHO (in my humble opinion - to those that still may not recognize the acronym), there will certainly be some tax-loss selling and the markets will feel a little lighter after the holidays - much like our wallets but unlike our waists; but it will be significantly less than previous years as the ultra-wealthy and the ultra-advised will hold off to preserve their losses for when they will really need it - in 2013 - once again, as I stated at the top, assuming we fall off the fiscal cliff.

    No cliff, and its business as usual for the tax-loss selling community, but to those who believe the cliff is imminent, the impact of steep tax-loss selling may not materialize.

    Let's all use this information to critique and re-think our past preconceptions and hopefully we will all be rewarded financially from Ol' St. Nick this season. Happy holidays!

    Disclaimer: I am a Canadian Chartered Professional Accountant, CA and as such, I have no positions on this topic, and no plans to initiate any positions within the next 72 hours.

    Dec 05 11:58 PM | Link | Comment!
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