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Minyan Mailbag and Paper, Plastic or Pain?


Nothing gripes a Bear more than stocks that don't go down in the face of bad news.


JeffMacke - Though I don't generally take Herb Greenberg's side in his weekly Fast Money Street Fight segments, his PALM idea isn't as crazy as it seems. You guys beat him up pretty good last night but, if you look at the bull case for Palm, it doesn't seem too far-fetched that someone might want to buy it. Professor Zucchi wrote about it back in December in "
Palm Refuses To Go Down" - not a really bullish argument for buying PALM, but more or less fighting the heavy negative sentiment for a bounce higher. What do you think?

Minyan Sean

Minyan Sean-

Thanks for the note. I can tell you I'd advise against taking the other side of Herb, particularly as a blanket rule. Herb is an extremely sharp guy who does a great deal of homework and knows how to put the pieces of a story together to make a coherent whole.

We did, in fact, beat him up pretty good last night on Fast Money but that was more a function of (1) our goal to make good television in a World Wrestling Entertainment (WWE) way and (2) the fact that Herb supported the idea that Palm (PALM) was a buy-out candidate immediately after he poo-poohed my similar point regarding Build-a-Bear (BBW). Doing a mental flip-flop in that forum, even an arguably justified one, is like wearing a prime-rib wet suit in a shark tank. Herb never had a chance.

Though I'll deny saying so if you tell him, I think you and Herb have a point on Palm; as did Fil. In a market where it's this hard to short even bad companies, the idea of betting against Palm here is too frightening for me to contemplate. Is that enough reason for me to get long the stock? No, it's not, but it is enough to keep me from being outright bearish.

As Todd-O always says, you have to respect (but not defer) to the price action. A stock like Palm, which does nothing but creep higher as the company does nothing but disappoint, is the definition of price action which demands respect; long or short.

Paper, Plastic or Pain?

Speaking of price action you have to respect, not to mention names on which Prof. Zucchi has been a great source of information, consider Whole Foods Markets (WFMI), putting on 10% plus this week after missing earnings, buying a major competitor and getting put on credit watch.

Whole Foods has been a name the bears have feasted on for more than a year, as the other supermarkets have started eating into WFMI's organic space. Did this week, when Safeway (SWY) reported solid numbers but went down, mark a change in the fortunes of the companies?

Not from where I'm sitting. At least not on an operational level. Safeway has about 1/2 the bottom-line, net margin as Whole Foods but the gap has been narrowing; not coincidentally at about the same rate as the stocks of SWY and WFMI have been moving towards one another. In the big picture, both the margins and the stocks should continue to work towards an equilibrium, of sorts.

But, in the near term, there are a lot more people betting against WFMI then there are betting against Safeway. I'm not playing it long or short but, as a sort of gentleman's bet, I'd guess that WFMI could work its way towards the upper 50's before gravity starts tugging at the stock again.

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