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"Fear Your Peers" Randoms


When, if ever, will the shelling of the greenback matter to our economy?


Reeling from six days of service on a jury for a criminal case, I come back with an even deeper sense of dismay for our legal system, and a very troubling opinion of some of our so called "peers". Let's just say that I have observed greater analytical skills in my dogs, than what some of my fellow jurors displayed as they were deciding the next several years of another person's life. Talk about suffering from a disconnect between perception and reality. In less depressing news (as TV's JeffMacke would say):

  • I received questions on how I am using FCStone Group (FCSX) price pullback. Given my fundamental micro and macro take on this name and its niche, and thinking that yesterday's pullback was probably partly related to a poorly-received report by the Chicago Merc (CME), I have been using weakness to buy in scale. Since I am not yet done with my investment position, I continue to bid at lower prices.

  • Digging deeper into the energy infrastructure themes proposed by Prof. Krueger, "power generation boilers" is a sub-sector which has repeatedly come up as being in short supply, especially in Asia. Foreign names that would benefit from this are Organo Corp. (6368 JP) and Kurita Water Inds. (6370 JP) both on the Tokyo Exchange. As a pure lucky coincidence, Kurita is a name that I have owned since shortly after MIM-Ojai, when Jeff Saut introduced the "water theme" to the Minyanship. More locally, McDermott (MDR) has a division focused on those products, and I am also looking at Idex (IEX) and London traded Spirax-Arco (SPX LN).

  • I wasn't going to mention yesterday's Existing Home Sales data because I figured it pretty much speaks for itself. But if I were to speak for it, I'd say it supports the view that the housing debacle is in still in the early (if not the first) innings of its unwinding. As for the contagion/containment impact, I have nothing new beyond what's already been discussed ad nauseam in the 'Ville and elsewhere.

  • The action in XM Satellite Radio (XMSR) and Sirius (SIRI) since their merger announcement states in no equivocal terms that a lot of sellers believe this deal will fall through. Based on the trading mojo, my sense is that the sellers are more likely than not of the "well-informed" kind. Hence ignoring them, and believing I know better, would be foolish. If you trace my past writings on these names you'll see a consistent long term bullish bent, clouded by short term bouts of pessimism. If the Feds do shoot down the deal, I continue to think both companies will ultimately survive; notably XMSR and SIRI's bonds have held up well so far. But the road for shareholders will be long and potentially painful. Respecting, but not deferring to, the stock price message, I continue to add defined upside risk, while rolling down my insurance puts on the stock.

  • After the close is confession time for Akamai (AKAM), F5 Networks (FFIV) and Citrix Systems (CTXS). I am going into AKAM with near-term confused expectations and a very small long position. Similarly I must admit little feel for the up/down risk in CTXS; hence I have substituted stock with at-the-money calls (which for far months are only expensive as opposed to obscenely expensive), and I'm holding out-of-the-money puts against which I'll buy back stock if it heads the wrong way for the wrong reasons. As for FFIV the stock has traded heavy and "nervously" for weeks. It feels like hardened bulls have not allowed it to fall where it would discount bad news, while aggressive bears are quite convinced that a beating is coming. I am not interested in the upside from these levels, but I do stand ready to buy at $55.

  • When, if ever, will the shelling of the greenback matter to our economy?

  • Apologies to all the Minyans who have emailed me over the last week. I'll try to get to all of them, but it may take me a bit.
Position in FCSX, 6370 JP, MDR, XMSR, SIRI, AKAM, FFIV, CTXS, Euro/Dollar futures
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