Monday, August 15, 2005

Trading and Icahn wrap up

Ended the BBBY trade +.59%. I don't day trade often, but I will take an opportunity when one presents itself. I rummaged through Wall Street's trash today but didn't see anything I wanted to salvage. A few banana peels, a few oil stocks. There were plenty of oils presenting themselves for an overnight swing trade, but I am too overweight right now to pick one up at this time. So I go into tomorrow with my trading portfolio in cash. I may day trade again if another opportunity presents. It is a thinly traded market these days, and mid day reversals have become commonplace recently.

I bought a few shares of TWX at the absolute bottom of the PM trough today, which should make me happy. I read after hours that the conglomerate of hedge fund money has pledged not to sell unless Icahn tells them so or 2/07, whichever comes first.

Now to look at this analytically; at first glance a hedge fund manager would be crazy to commit to this given their need to ensure that all capital performs for the partners. The allowed exit is after year end, so if there is a loss, there will be no way to get this capital out to perform and make back any deficits created from a drawn out battle, especially with mark to market accounting and year end #'s. So why was so much money committed? Well, there will be lots of guessing by the "outsiders" such as you and I. I can think of three possibilities. 1) Hedge funds are not actually committing that high a % of assets to this play - this is just roulette wheel money contributed by very large funds who can spare a little on a bet like this. 2) Ichan knows things that no one else does either about the businesses or the personalities and was able to present this info to his co-conspirators in such a way that it looks like a "sure thing" to them. 3) Icahn has given assurances that he will allow hedge funds to exit after this first meeting if it seems like TWX execs won't play ball, selling at a profit at the expense of individual investors like me who still think something will come out of this. So my strategy with this is also to bet only a few roulette chips on this play. If I do that, # 1 and #2 are in my favor. #3 I will just have to watch for very closely.


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