WHY I BOUGHT A COMPANY THAT IS IN BANKRUPTCY TODAY & A RECENT IPO THAT I AM WATCHING LIKE A HAWK
I'll start with the one I took a position in today. I initiated a small position in DPTRQ today. This is a highly volatile bankruptcy play in a company that used to be a significant player in the energy industry. There have been actions taken since the beginning of this year to preserve shareholder equity. It is never easy to tell whether these types of restructurings will end up favoring shareholders...meaning that shareholder equity will end up being preserved as an end result of the action taken. It is not in the hands of management and up to the courts to decide. I do, however, trust what the market is telling me more than anything else. As of today, the market seems to be saying that shareholders will win. In fact, the market has been saying shareholders will win since the beginning of the year. Only at the beginning of the year it was whispering it. As of today, it is screaming it. The following is a quote from the CEO on March 20th "We are very pleased to have identified significant additional sources of value for our stakeholders (read: WE ARE THINK WE HAVE FOUND A WAY TO KEEP SHAREHOLDERS FROM GETTING COMPLETELY SCREWED), and we believe the additional time to allow proposals to develop is well justified," CEO Carl E. Lakey said. "Delta's sale process has received significant interest from a variety of companies and investors (read: WE HAVE DISCOVERED SOME REAL SOURCES OF FINANCING), and this extension is intended to facilitate the ability of those bidders to consider structuring alternatives that may preserve certain tax attributes. (read: THOSE WHO WANT TO PARTICIPATE HAVE TO MAKE SURE THEY ARE NOT GETTING SCREWED BY US LIKE SHAREHOLDERS HAVE SO FAR. THEY ARE BEING DILIGENT)" Prior to this on January 20th, the company pursued DIP financing for north of $50 million in an effort to continue operations. The events of January 20th led to the initial spike in the stock from roughly .10 cents per share to near .35 cents over several days. This type of a financing is a sign that the company is interested in a restructuring...NOT a dissolution of shareholder value, followed by a fire sale of assets. The situation isn't as clear cut as another bankruptcy play I took part in a couple years back in GSIG, which is why I am not taking on a large position. I am keeping the position small so that in the event I am incorrect, it will be no more than a couple percent of the total portfolio. If I am right, the gains have the potential to be substantial,...
TODAY’S PRICE ACTION DESERVES A FOLLOW-UP TO THE BLOWOFF TOP IN LGF
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THE NEWEST IN A GROWING LIST OF COMPANIES THAT ARE UNDER HEAVY ACCUMULATION
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THE REACTION AMONGST INVESTORS TO GOLDMAN’S MEGA-BULLISH CALL IS AN EYE OPENER
I read a brief report with respect to the Goldman generational bullish call on equities this morning. Whether all of the data, charts and figures end up culminating in a bull market that is going to make money rain down from the heavens like we're all dancing on a silver pole is just a sideshow. This report will be forgotten in a matter of weeks as a new flood of information captures the attention of investors. The most interesting aspect of the report is the reaction to it. The immediate reaction is exactly what you would figure: distrust, suspicion and trickery. Why would an investment bank that has been directly or indirectly had a hand in all of the economic ills of the past decade want to create wealth for the muppets that happen to hold an account there let alone those of us who do not? This level of skepticism with regards to Wall Street reminds me very much of what I saw in the late 90's and early 2000's in the equity markets. Only now it has been thrown on its head and reversed. You see in 1999 whenever any analyst would publish a bearish report on a stock the sentiment was that they are trying to get me out of my position. They want my shares. They don't see the light. Bearishness was met with outrage, which was followed up by all kinds of facts and figures with respect to the power of the internet platform and B2B commerce and revenues from vast optics infrastructure being built in the ocean and the power of buying any brand of pet food with the click of a button. The same passionate skepticism that embraced any bearish argument in 1999 is only matched by the skepticism that greets anything long-term bullish now. Facts and figures are immediately dragged out to refute bullish claims. The analysts want my cash is the sentiment now as opposed to my shares which was the sentiment then. Now investors want to protect their precious cash that is yielding 2%. 12 years ago they wanted to protect their shares that were promised gains of 100%. Now investors want to drag out bearish data that has been seasoned and cooked on the market grilling of recent memory. 12 years ago they were dragging out bullish data that was lathered and washed in the most bullish period in a generation. The conditioning that investors have experienced over the past 12 years has had a profound effect on the ability to think openly and rationally about the potential of the equity markets, especially those of developed economies. It...
3 CHARTS TO KEEP YOU IN PEACE AND NOT IN PIECES DURING THE WEEK AHEAD
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COULD BOND INVESTORS LATE ARRIVAL BE THE CONTRARIAN INDICATOR EVERYONE HAS BEEN SEARCHING FOR?
I discussed in my last post how bond investors are not the smart money on Wall Street, but perhaps quite the opposite. Here is an illustration about their late arrival to rallies over the several months. Namely the October highs in 2011 and now recently. Whether this means that we put in an intermediate term high here is debatable. I surely won't be selling my longs based on this piece of evidence alone. However, it does deserve consideration within your secret box of market indicators and propaganda. click chart to...
MAYBE BOND GUYS AREN’T SO SMART AFTER ALL
There are certain beliefs that have always been ingrained within the fabric that makes up Wall Street. One of them is the myth of the "smart money". It is fun to think that there is always a group that gets it right, no matter the condition or circumstance. A group of men who hold the world's financial secrets inside of their Ipads or laptops. They communicate with each other on secured lines so that nobody will be able to access the secrets of their vast money making operation. They capitalize on the mistakes of the rest of us to their own benefit. The problem with the myth of smart money is that nobody can tell you who these people are. It constantly changes based on which hedge fund manager, trader or guru of the moment is having the best performance over a 1, 3 or 5 year period. Those who were considered smart money a decade ago are almost all gone, with the exception of a few individuals. Unless there really is a secret society of market savants that know what the Dow or Crude Futures are going to do before the Dow or Crude Futures know what they are going to do, I would venture to say that smart money is really just hot money. Which brings me to subject of this latest missive: Bonds investors are dumb. Yeah, I said it. Let's look at this logically, from a very ABC standpoint. We have a group of investors who are controlling enormous amounts of wealth and looking for a place to allocate that wealth. They have found a hiding place in what is rumored to be the safest asset in the world: US Treasury bonds, notes and bills. They allocate their wealth into these instruments at what are historic low rates of return. They sit in this asset class through thick and thin causing yields to flat line along the bottom of a multi-month range near all-time lows. Only recently, following a near 30% rally in a competing asset class (S&P 500) since October do they realize that their investment may be suffering from a retardation in the rate of return and they decide to begin allocating away from instruments that while safe provide little in the ways of upside and abundant risk in the near term. Does this sound like the smart money that bond investors are rumored to be? It sounds to me like a group of investors who have missed out on one of the greatest rallies in stock market history. I don't care whether you think this rally is built on the crack of a bum's...
TRADE UPDATE – EDZ
During the final hour of trading today I tweeted the following: I had this on a short leash. The strength today didn't allow me to remain hedged given the key levels we broke....convincingly I should add. Continue holding the four long positions I mentioned over the weekend. They put in a decent performance...