***Official*** 2010 Stock Market Thread

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AgaBoogaBoo

Lifer
Feb 16, 2003
26,108
5
81
No comments on QE2? What the heck? I expect a major ramp up.

http://cache.dealbreaker.com/uploads/2010/11/Greenlight-Q3-2010-Letter.pdf

The good stuff about quantitative easing: "Other than satisfying the political need to “do something,” we believe it is doubtful that QE2 will be successful; it is hard to see how it will lower unemployment materially. With rates as low as they are, there are very few economic decisions in the real economy (like corporations deciding to build factories or hold inventories, or individuals buying houses and automobiles) that are constrained by interest rates. We believe a significant drag on economic activity has been the result of overly-burdensome regulatory initiatives, our challenged fiscal situation, legal uncertainty created by the erosion of the rule of law, and unpredictable tax policy."
 

AgaBoogaBoo

Lifer
Feb 16, 2003
26,108
5
81
GGP is the 2nd largest mall operator, Simon is #1. most funds can't buy a company in bankruptcy, but they are just out of bankruptcy now...just look at this as an IPO. So if you are a financial/REIT/real estate related mutual fund manager, don't you think you ought to own some GGP now?
Think about who you're competing with though - Bill Ackman and a horde of other experienced investors are involved there. I would be cautious getting involved knowing you have to compete against them. If there's still a deal to be had, why wouldn't they be snatching up every share available?
 
Sep 29, 2004
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http://cache.dealbreaker.com/uploads/2010/11/Greenlight-Q3-2010-Letter.pdf

The good stuff about quantitative easing: "Other than satisfying the political need to “do something,” we believe it is doubtful that QE2 will be successful; it is hard to see how it will lower unemployment materially. With rates as low as they are, there are very few economic decisions in the real economy (like corporations deciding to build factories or hold inventories, or individuals buying houses and automobiles) that are constrained by interest rates. We believe a significant drag on economic activity has been the result of overly-burdensome regulatory initiatives, our challenged fiscal situation, legal uncertainty created by the erosion of the rule of law, and unpredictable tax policy."

Invert, always invert! That is how things can become more apparent. Invert the bolded part:
"it is hard to see how it will increase unemployment materially"

QE2 will make things easier on financail institutions which is good. But inflation (that is what QE2 is about) will make indivudal debts (moretgages, credit cards, etc) less burdensome. So people will be more lilely to buy a new car, hire a landscaper, go out to dinner, etc. This clearly can not make things worse.

And the effects of what would happen if nothing were done will never be known.

FWIW, QE1 and the bailout helped out. Sadly, most people do not realize how bad things could be because of what did not happen. I am in the Warren Buffett (good comapny if you ask me) camp that thinks that unemployment would be much worse if nothing were done. Why? Invert, always invert! I'll leave it at that and let the reader chew on the idea independantly.
 
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AgaBoogaBoo

Lifer
Feb 16, 2003
26,108
5
81
Invert, always invert! That is how things can become more apparent. Invert the bolded part:
"it is hard to see how it will increase unemployment materially"

QE2 will make things easier on financail institutions which is good. But inflation (that is what QE2 is about) will make indivudal debts (moretgages, credit cards, etc) less burdensome. So people will be more lilely to buy a new car, hire a landscaper, go out to dinner, etc. This clearly can not make things worse.

And the effects of what would happen if nothing were done will never be known.

FWIW, QE1 and the bailout helped out. Sadly, most people do not realize how bad things could be because of what did not happen. I am in the Warren Buffett (good comapny if you ask me) camp that thinks that unemployment would be much worse if nothing were done. Why? Invert, always invert! I'll leave it at that and let the reader chew on the idea independantly.

Increase unemployment? You mean increase employment, decrease unemployment?

QE2 can't make that big of an impact - interest rates are already insanely low, what will this do? Can you really move interest rates much at this point?

As for the bailout - I disagree. Equity should have been wiped out and debt holders should have gotten the new equity, that's what happens in bankruptcy. If someone wanted to lend money on different terms, they could have done that, but I don't think the government needed to be involved.

Companies like Six Flags were able to be restructured without any government intervention, why did we hand money out during the bailout? Here's the issue - we gave money to the banks doing a bad job. The guys who didn't write bad loans and did a good job were placed at a disadvantage there - they saw the guys making mistakes getting money, which is just the opposite of what we should do. We should have given more money to the guys doing a good job, and there are bankers who were on the sidelines for years, because they knew things were messed up.
 

AgaBoogaBoo

Lifer
Feb 16, 2003
26,108
5
81
I've got some Aeropostale (ARO) shares, here's my reasoning:

2 things:
1. Credit for bringing this idea to my attention goes to Roark, Rearden, and Hamot Capital Management, I simply dug into it for myself, but the research is really their own
2. SSS = Same Store Sales. If you sell $10 January 2009, but $12 January 2010, that's a 20% SSS increase

Long side:
- Positive SSS leading up to recession, through it, and then following it
- Look at YOY B/S data, they've grown revenue 40% over past 2 years, however inventory has stayed flat, they're managing that really well
- Cash Flow from ops lines up with very well with income statement - earnings are likely of good quality
- Cheap on metrics, 8x 2010 FCF, 10x P/E, etc., versus ANF@ 16x 2010 FCF, P/E on 2010 data is misleading because earnings got killed (Potentially long ARO, short ANF or a basket of the peer group)
- Very clean balance sheet, no long term debt or anything like that, plenty of cash on hand. Metrics improve to 7x FCF and 8-9x Earnings for ARO if you back out their significant cash position

Short case, why it's so cheap:
- Analysts believe people traded down to ARO from ANF and other brands, they will be going back to their brands as soon as consumer incomes rise
- Analysts frequently cite ARO's significant discounting as something that will erode margins
- Not an exciting situation, company is nearing maturity. 900 stores in existence, management believes the optimal amount will be 1000-1100

My counters:
1. If you buy it at a cheap price, it will be priced for both short cases and so if reality falls short of those issues even a little bit, we'll see an upside. If any of the consumers now likes ARO and enjoys wearing it, it's possible that they will stay with the brand or split their shopping between the two stores. I don't think they'll remove the store entirely.
2. They've had significant entire-store discounts for a while, it's what drives people there. It's a part of their strategy to have everything marked down. The numbers we see already have this effect for a long time, it's nothing new, but yes, compared to competitors, they are the ones still "discounting." I believe it's mostly marketing - raise the MSRP, say store is 50% off, etc.
2a (counter to 2) - Their profit margins have been steadily improving for quite a while, that's going to end at some point, so those gains will not continue on a YOY basis. I would assume they face same sourcing pressures that others deal with though, so their cost of manufacturing and sourcing the clothing should move with the market. (Again, go long ARO and short a basket to hedge out these risks)
3. Management actually understands capital allocation and that growing revenue for revenue's sake is not beneficial? This is great, I'd love if every company was this good at it.

FWIW, ARO's management announced a $300M increase in stock buyback, stock is up 2-3% on the news. It's refreshing to see good capital allocation here.
 

richardycc

Diamond Member
Apr 29, 2001
5,719
1
81
Think about who you're competing with though - Bill Ackman and a horde of other experienced investors are involved there. I would be cautious getting involved knowing you have to compete against them. If there's still a deal to be had, why wouldn't they be snatching up every share available?

huh? I have no idea what you are talking about, when did investing become a competition? There aer enough shares available for anyone willing to buy. It's not like we are bidding on a one of kind item, It's a free market, I am not competing against anyone.
 

AgaBoogaBoo

Lifer
Feb 16, 2003
26,108
5
81
huh? I have no idea what you are talking about, when did investing become a competition? There aer enough shares available for anyone willing to buy. It's not like we are bidding on a one of kind item, It's a free market, I am not competing against anyone.
The question is the price - if it was still a good deal at the current price, wouldn't investors like Bill Ackman be buying them? They know the company inside and out, are on the board and have the CEO on speed dial, etc.

My point is that there are a *ton* of really well known investors following the whole situation, even the Simons know all about it because of their offers they made. I would be cautious investing in something with so many people competing.

Competition will lead the price to being a fair one, and that's the problem - as investors, we want something unfairly priced. We want something cheap to sell when it becomes dear.
 

richardycc

Diamond Member
Apr 29, 2001
5,719
1
81
The question is the price - if it was still a good deal at the current price, wouldn't investors like Bill Ackman be buying them? They know the company inside and out, are on the board and have the CEO on speed dial, etc.

My point is that there are a *ton* of really well known investors following the whole situation, even the Simons know all about it because of their offers they made. I would be cautious investing in something with so many people competing.

Competition will lead the price to being a fair one, and that's the problem - as investors, we want something unfairly priced. We want something cheap to sell when it becomes dear.

So you are saying the price is too high now? They have just priced the 135mil shares at $14.75 last night, those will probably all goto these "ton of really well known investors" that didn't want to buy when the company was in bankruptcy. The stock price will probably come under some pressure and hover around $14.50-$15 for a few days due some less sophisticated investors didn't understand why they are offering the share for less, etc. There are lot of these clueless investors that will lock in their profits and move on to the next hot stock. We see this all the time, so this is very normal. Unless you are well connected, or the free market shares go back down to $14.75, I doubt that you can buy a share at $14.75 right now. So if some well known investors are willing to pay $14.75/sh, do you think the price is still high? Why aren't these investors buying them all? I don't know, some just don't want to own more than 5% for disclosure reason.
 

eLiu

Diamond Member
Jun 4, 2001
6,407
1
0
HGSI got approved.

Yeah I was watching AF's live blog feed thingy.

efficacy: 10 yes, 5 no
safety: 14 yes, 1 no (that aaronson (sp) chick always votes no, wtf)
should the fda approve benelysta: 13 yes, 2 no

WIN!
 
Sep 29, 2004
18,656
68
91
Think about who you're competing with though - Bill Ackman and a horde of other experienced investors are involved there. I would be cautious getting involved knowing you have to compete against them. If there's still a deal to be had, why wouldn't they be snatching up every share available?

Shouldn't the first question be, "Is this a sound busienss model"?

They grew like bananas prior to the housing bust. Why will this not happen again? remember, man did not invent greed.
 
Sep 29, 2004
18,656
68
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Increase unemployment? You mean increase employment, decrease unemployment?

QE2 can't make that big of an impact - interest rates are already insanely low, what will this do? Can you really move interest rates much at this point?

As for the bailout - I disagree. Equity should have been wiped out and debt holders should have gotten the new equity, that's what happens in bankruptcy. If someone wanted to lend money on different terms, they could have done that, but I don't think the government needed to be involved.

Companies like Six Flags were able to be restructured without any government intervention, why did we hand money out during the bailout? Here's the issue - we gave money to the banks doing a bad job. The guys who didn't write bad loans and did a good job were placed at a disadvantage there - they saw the guys making mistakes getting money, which is just the opposite of what we should do. We should have given more money to the guys doing a good job, and there are bankers who were on the sidelines for years, because they knew things were messed up.

Ya, I was screweing up the increase/decrease terminology of my post. Sorry 'bout that.

The reason QE2 is happening is because the basic methods of stimulus like lower interest rates can no longer be used. Quantitative Easing is bascially the next step.

Regardless of what the impact of QE2 will be, what would happen if nothing were done? In my opinion, employment levels would be worse than if QE2 were to occur. Will QE2 lead to a jobless recovery? maybe. Would the liklihood of a jobless recovery (or worsening employment levels) be greater without QE2? Probably. It will be the things that don't happen that people will never see. if QE2 ends up causign a jobless recovery, people will bitch on TV without ever thinking about what would have happened with no QE2. And a vast majority of the population is to stupid to think or read about the pros/cons instead listening to the opinion of media outlets. Ya, I went there. Not directed at you but there as a genrealization abouthte mentality of the typical US citizen.

Regarding the banking bailout, you don't know what it's purpose was. It had nothing to do with emotions. The entire financial system was in the process of having the brakes applied. With no bailout, all banks ("good" and "bad") would be at risk and emplyment levels at 10% would have looked great. The entire mechanism that causes money to move between primary lenders and the smallest of banks was about to lock up. the unavailability of bridge loans alone would have been nearly catastrophic.

Don't worry, in time the bad banks will go under. One day, BAC will bea memory and WFC will be even bigger. Time will make sure of it.
 
Sep 29, 2004
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1) Does everyone here still think that newspapers are going away?

2) Have people read into this matter or is it just an assumption that was made?

I'd be interested in hearing form those that have read into the matter.

FWIW: I am long LEE and hoping to buy more at $1.50 if it gets there.
 

routan

Senior member
Sep 12, 2010
837
0
0
Yeah I was watching AF's live blog feed thingy.

efficacy: 10 yes, 5 no
safety: 14 yes, 1 no (that aaronson (sp) chick always votes no, wtf)
should the fda approve benelysta: 13 yes, 2 no

WIN!

why is HGSI down 8% AFTER approval by the FDA?
 

HopJokey

Platinum Member
May 6, 2005
2,110
0
0
why is HGSI down 8% AFTER approval by the FDA?

Downgrades by a few analysts, still digging up why.

Also, the FDA has not approved it. The advisory committee (AC) voted to recommend approval 13-2. As seen with DNDN in the past the FDA still makes the final decision and may go against an even overwhelming AC rec. This vote does makes it much more likely the FDA will approve the Lupus treatment.
 

routan

Senior member
Sep 12, 2010
837
0
0
Downgrades by a few analysts, still digging up why.

Also, the FDA has not approved it. The advisory committee (AC) voted to recommend approval 13-2. As seen with DNDN in the past the FDA still makes the final decision and may go against an even overwhelming AC rec. This vote does makes it much more likely the FDA will approve the Lupus treatment.

so no entry points at this price, yes?
 

FelixDeCat

Lifer
Aug 4, 2000
30,971
2,675
126
LVS, at $50 just yesterday, is getting hammered. Looking for a downside of $42 or below near term, with a recovery when the bull market takes it back up.

In the meantime, the cheap puts are like candy. The $42 December put jumped up from $99 to $220 per contract in two days! May double to $400 if $42 hit soon.

I dont own the put, but Im a fan of making the call.
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