{"id":6195,"date":"2011-03-08T09:00:00","date_gmt":"2011-03-08T14:00:00","guid":{"rendered":"http:\/\/www.technologyinvestor.com\/?p=6195"},"modified":"2011-03-08T09:07:38","modified_gmt":"2011-03-08T14:07:38","slug":"in-praise-of-event-driven-investing","status":"publish","type":"post","link":"https:\/\/www.technologyinvestor.com\/?p=6195","title":{"rendered":"In praise of event-driven investing"},"content":{"rendered":"

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I recommended selling AOL when I heard it had agreed to buy the Huffington Post for $315 million, of which $300 million was cash.<\/p>\n

One reader is up 40% on his AOL puts.<\/p>\n

Personally, I think AOL will go even lower. Its business is falling apart. Its ad revenue is imploding.<\/p>\n

This is AOL’s front page at 8:10 AM this morning. Catches your attention?<\/p>\n

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AOL hasn’t a clue. Why would you read AOL “news” when you have so many other choices — including the Wall Street Journal, the New York Times, the Washington Post, and even the Huffington Post (which is very ironic).<\/p>\n

But the trend is away from hard news. It’s towards the soft “news” of your friends and their product and service recommendations — hence the explosion of Facebook.<\/p>\n

Don’t forget to load the free Facebook app on your iPhone, Android, or BlackBerry. It works really well on phones which have GPS, like the iPhone.<\/p>\n

I picked up dinner from Chipolte last night.<\/strong><\/span> It was my first brush with the Chipolte phenomenon.<\/p>\n

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The dinner was tasty, though a mush. It’s hard for me, a sophisticated gourmet (Ha!) to see what the Chipolte excitement is all about.<\/p>\n

A writer called “Jefferson Starship” wrote on the web site Seeking Alpha “4 Stocks I Wouldn’t Mind Picking Up Near 52 Week Highs.<\/em>” One was Chipolte and he wrote as his reasons:<\/p>\n

Chipotle Mexican Grill \u2013 (CMG) \u2013 Chipotle has a much higher P\/E than the two stocks mentioned above, around 44. This means that their earnings have not yet caught up to the expectations of the investors. This company is set on very sound business principles. They had 1,084 restaurants as of the end of December and they own all of them. They do not franchise and this means that each location is carefully researched for optimizing sales. Their prices are a little higher than others and that\u2019s why you see Chipotles in the places you see. However, there is clearly room for steady expansion and it will take time because of the process just explained.<\/p>\n

I think he’s nuts. This stock is not worth a price earnings ratio of 45., no matter how healthy (or cheap) last night’s dinner was.<\/p>\n

Where is this stockmarket headed?<\/strong><\/span> Caution is the simple answer. From Richard Russell:<\/p>\n

Meanwhile, the stock market seems to have gone psychotic. From their recent fear-drenched lows, the Dow and the S&P have just about doubled. It’s madness on the East coast. “Buy the techs.” “No, buy the big blue-chips.” “Wait, buy the energy stocks.” “Buy anything, but just buy.” Is out-of-control Charlie Sheen the poster boy for the new psychotic stock market?<\/p>\n

Has Ben Bernanke in his frenzy to bring back “a little inflation” whipped up yet another bubble? This is the fastest market recovery since the 1932 to 1937 post-crash market, a bull market that followed the Dow’s frightening Depression low of 41.22.<\/p>\n

There are times when you can forget technical analysis, when you can forget values, when you can forget everything you ever learned about the stock market. This is one of those times. I liken it to Charlie Sheen’s handling of his public relations. It’s a great drama and tragedy to witness. Here’s the highest paid actor in the top comedy on TV losing his marbles. Is it drugs, has he been pushed off the edge by fame and money, or is he just schizophrenic? We might ask the same of the stock market. For it’s high-drama, and a sight to behold.<\/p>\n

All our experience tells us that this is a dangerous market. It’s surged ahead ever since its February 2009 low. And what’s more, it’s been backed by an increasing amount of good news; it hasn’t been climbing the traditional wall of worry.<\/p>\n

When the stock market roars out of the bounds or when it steps beyond ordinary analysis, I stand aside and depend on my instinct. My instinct, at this point, brings up three words, “Be damn careful.”<\/p>\n

I read a lot of advisories over the weekend, and I haven’t been able to find anything by any advisor that has struck me as the bona fide answer to this market.<\/p>\n

Personally, I’ve reduced my position in DIAs to a minor amount (a manageable sum). I like to sleep peacefully at night. My own largest position continues to be in gold and silver. Although the precious metals have done well, I don’t sense or detect any insanity in this area.<\/p>\n

And my thought, as always is, “Don’t put yourself in a position to take the BIG loss.” Remember, if you take a 50% bath, you have to double your money to end up even.<\/p>\n

From Scott Udine:<\/p>\n

We still currently have 15 positions on the books but all of them are very close to their sell stop levels. Hopefully the market, which is down considerably again this morning, can turn on a dime here and make a stand, but in case it doesn\u2019t, we will be further in cash waiting for the dust to settle before we recommit. One thing that I am keeping a close eye on is the Nasdaq market, which is made up of most of the high growth names that usually act as leaders. Since this phase of the rally began in September of 2010, the Nasdaq has not closed below the 50dma (an important technical level, call me if you want an explanation). Today we are possibly going to break that streak as we are trading slightly under the 50dma right now. The close will be very important and something that I am monitoring very closely. In addition, Copper, is also rolling over and starting to break down technically. Does all this mean that the bull market is over? No, what it means is that we will continue to monitor things closely to give us clues as to what the near term future may bring and most importantly to help us protect our precious capital when need be. Right now is not the time to be swinging for the fences and trying to hit homeruns. Now is the time to tread very carefully and make sure that we do not give back too much of the nice recent gains we have all seen.<\/p>\n

My own personal view:<\/p>\n

+ No one said you had to be fully invested.<\/p>\n

+ Gold and silver continue to make sense.<\/p>\n

+ Oil will drop as soon as Libya settles down, which it will shortly. The stockmarket will then feel more comfortable. Company earnings continue skyward.<\/p>\n

+ I like event-driven investing, e.g. AOL and Chipolte.<\/p>\n

When we should be checked in?<\/strong><\/span><\/p>\n

During a visit to my doctor, I asked him, “How do you determine whether or not an older person should be put in an old age home?”<\/p>\n

“Well,” he said, “we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the person to empty the bathtub.”<\/p>\n

“Oh, I understand,” I said. “A normal person would use the bucket because it is bigger than the spoon or the teacup.”<\/p>\n

“No” he said. “A normal person would pull the plug. Do you want a bed near the window?”<\/p>\n

What does President’s Day celebrate?<\/span><\/strong><\/p>\n

I was eating lunch today with my 10 year old grandson when his mom asked him<\/p>\n

“What is tomorrow?” He said “It’s President’s Day”<\/p>\n

She asked “What does that mean?” …. I was waiting for something profound….<\/p>\n

He said “President’s Day is when Obama steps out of the White House and if he sees his shadow, we have 2 more years of unemployment.”<\/p>\n

I almost snorted my iced tea.<\/p>\n

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Harry Newton who wonders why the smallest button on the TV remote is\u00a0 MUTE.<\/p>\n

This little quiz will amuse you.<\/p>\n

Charlie Sheen v Muammar Gaddafi: whose line is it anyway?<\/strong><\/span><\/p>\n

The US actor and the Libyan leader have produced some choice lines recently. Can you distinguish between them?<\/p>\n

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  1. 1. \t\t\t\t\tI have defeated this earthworm with my words \u2013 imagine what I would have done with my fire-breathing fists\n
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    3. 2. \t\t\t\t\tYour face will melt off and your children will weep over your exploded body\n
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      3. 3. \t\t\t\t\tLife without dignity is worthless\n
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        3. 4. \t\t\t\t\tI’m extremely old-fashioned, I’m a nobleman, I’m chivalrous\n
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          3. 5. \t\t\t\t\tI am like the Queen of England\n
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            3. 6. \t\t\t\t\tI am much bigger than any rank, for those who are talking about rank, I am a fighter\n
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              3. 7. \t\t\t\t\tEvery great movement begins with one man\n
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                3. 8. \t\t\t\t\tThese resentments, they are the rocket fuel that lives in the tip of my sabre\n
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                  3. 9. \t\t\t\t\tI woke up at 4am, before dawn. You should be asleep. You\u2019re all tired after a sleepless night\n
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                    3. 10. \t\t\t\t\tThe US commission report on 9\/11 was ‘an absolute fairytale, a complete work of fiction’\n
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