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Lessons From Google's Pop


Key off earnings reaction, not the numbers.

Hello from New York where I'm strongly considering breaking out the shorts for tonight's Fast Money. That's right Minyans, during the dog days of summer it's all business above the desk, all shorts an flip-flop wearing party underneath.

I refuse to be subject to the tyranny of men wearing woolen pants in the heat as if I were some sort of neo-redcoat pillaging the land of Patriot colonists in the eighteenth century. Maybe that's how you roll but not me; no, not this American. These colors don't run and these legs get their sun. Deal with it, King George!

Here's what else I'm watching and railing against today:

  • Okay, so I should have gone ahead and put my money on black by getting long Google (GOOG) before the numbers. In retrospect, the negativity made a good long-side shot. Of course, if gambles didn't seem obvious and lucrative in retrospect, no one would take silly risks on anything.

  • One gamble that still makes more sense to me is the financials. It isn't about the wild upside pay-off, it's about risk/reward. I simply like companies that can either miss terribly like Citigroup (C) and Merrill Lynch (MER) or come in flat like Wal-Mart (WMT) and Intel (INTC) and see their stocks go higher a lot more more than I like the Google $75 up or $75 down ideas.

  • A couple email responses: The reason Wendy's (WEN) lags the Burger Kings (BKC) and McDonalds (MCD) of the world is that WEN isn't run nearly as well. WEN's franchisees tend to despise corporate, the company has bungled Nelson Peltz' quasi buyout bid and the stock is in painville. It's never too late to sell a dog and the Wendy's rally seems like an opp.

  • Sirius (SIRI) has simply gotten killed by the government with the delays in the XM Satellite (XMSR) merger. Northwest (NWA) and Delta (DAL) are going to be allowed to create the country's largest airline in less than half the time it's taken (so far) for two obscure companies with 14 million users in a 350 million user market to be given the green-light to get together. Value is being destroyed with every passing month the SIRI and XMSR deal gets delayed. This makes it a very hard stock to love.

  • But I still like SIRI more than the airlines which are ever and always a sell. Something to consider when you hear the American Airlines (AMR) of the world whine about jetfuel is this: the companies actively hedge. They have entire hedging departments. In theory, these hedging programs would minimize, if not eliminate, the pain of rising fuel. Instead the airlines hedging pooh-bahs seem to be the only folks on earth betting against oil at this point and have been for two years. The business model for airlines simply stinks. They're neither fully private nor fully regulated, leaving them in a bootstomping limbo that can't be solved by mergers or any other investment banking exercise.

  • As a member of the ACL club on my left leg, I got a sick feeling when I heard Tiger Woods had another operation on his left knee. He's Tiger Woods, dammit, but you don't really realize how much torque you put on your left leg until you get a few lightning-bolt stingers running up your body on the follow through. Remember that stuff I said about the feeling of a perfectly struck 3-wood? Searing knee pain is exactly the opposite.

  • Speaking of commodity hedging (and we were a couple bullets ago), Electronic Arts (ERTS) is trying to teach Take-Two (TTWO) about "backwardization" by offering less for the company further in the future than ERTS is willing to pay in the near term. That doesn't seem like a good way to win over TTWO shareholders who are banking hard on a well-previewed release of Grand Theft Auto IV next week. GTAIV is a lead-pipe cinch to make enormous bank in the first month, meaning TTWO would have to vote in favor of a low-ball bid just as they're getting confirmation of a huge hit title. Seems to me ERTS isn't at all serious about getting TTWO.

  • And, yeah, I'm still long partially swallowed Activision (ATVI) though the meat of the video game trading opp is gone.

With that I'm off to get some outdoor time to tan up the calves prior to making a run for the city. If it gets any nicer outside I may have to be dressed to party below and above the desk tonight. See how the Brits like that.
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Position in INTC, ATVI

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