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Yahoo's Scorched Earth Victory


Internet portal not any healthier for fighting off Microsoft.


Hello from New York, where "Buying Value" is 2008's version of the 1950's "Duck n' Cover" strategy for defending oneself from an atomic blast. You can be like Bert the Turtle and cover your head and neck when you see the flash of your bank shares' book value exploding, but the harsh reality is that the fallout from the blast is going to take you out regardless. Neither a catchy jingle nor blathering about being a long-term holder who doesn't care about 30% drops in, say, Wachovia (WB) over the last month is going to cure this financial fire-bombing.

Ours is not to whine nor sing, ours is to do the best we can with the market we've got in front of us. Here's how I'm going about it as I start the countdown to the traditional post-show Margarita Friday:

  • Who's having an even tougher time of it than even the General Motors (GM) of the world? How about SUV and Cross-over drive train manufacturer American Axle (AXL). In mid May AXL's union struck a deal to end a strike and "remove uncertainty from the GM relationship." GM removed even more uncertainty a couple weeks later when they announced a plan to phase out SUVs and Hummers. AXL is down 50% since.

  • One of the, um, "nice" things about being a stock talking head is it gives me a front row seat for sentiment. The fact that I've been called both "the ugliest person in the history of television" and a "perennial Sirius (SIRI) cheerleader" would suggest that we're in the "anger" portion of Stages of Grief on this sell-off. I'll cop to the ugly part, it's just not a nice thing to say. As for Sirius, I liked the stock until about month 10 of the approval process. At that point and consistently since I became spirited in a not-remotely cheerful way about the government destroying the value of a Sirius/ XMSR combination. Sadly (which is a Stage 4 emotion), the charts of XM (XMSR) and SIRI are what value-destruction looks like.

  • Need another example of value destruction? How about Yahoo (YHOO) and their scorched earth "victory" over Microsoft (MSFT). Yahoo didn't get healthier by fighting off MSFT. They signed a fishy deal with Google (GOOG), lost key executives, created a poison pill, disguised a severance plan, and failed in every way to prove they were worth anything more than the $30-something offered by Steve Ballmer. I'm not interested in re-loading a Yahoo long unless and until it goes to the mid-teens.
    In an effort to try to Heal Myself and My Book: I'd say I'm somewhere between Denial and Anger on my Microsoft long.

  • For the love of Mike, didn't Ford (F) and GM realize they had a demand problem in SUVs and trucks during any of the six years they were forced to offer zero-percent financing in the wake of 2001? Customers refused free money if it meant taking a new truck. Poker players would have called that a "tell" portending weak demand. GM responded by making the Hummers a brighter shade of yellow.

  • When trends to get emotional they end in blow-offs. From where I'm sitting, there is going to be another high-volume, panic stricken moment to step in buy the financials for a trade. The St. Patrick's Day Massacre (the Monday after JP Morgan (JPM) was handed Bear for $2) was such a moment. In contrast, today is just another lousy day for the XLF. I'm tempted to nibble but happy to wait for a better opportunity.

  • Two Longs I spend a lot of time questioning: Disney (DIS) and Hasbro (HAS). One seems undervalued, one is simply on a tear and neither is going to do well as a stock if this economy goes into a full-blown, no-doubt-about-it recession. Hey, if this Investing thing was easy everyone would do it.

  • With that I'm off to the city for the last Fast Money of the week. There are days when I leave home reasonably confident about where the market is going to close (usually near where it is when I leave). Today is not one of those days as "weekend event fear" selling is going to run headlong into "cover winning shorts and hit the beach" buy orders. Throw in some expiration and all bets are off, Minyans.

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Positions in MSFT, HAS, DIS.

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