Mr. Sensitive

December 16, 2011

FSX Friday Update

Filed under: Uncategorized — lbej @ 17:06

The markets drifted lower again this week, holding on to decent gains in the 5-9% range for the quarter, and not too bad by half in the context of the level of worry reflected in the current headlines as well as the predictions rolling in for 2012.  There’s an undercurrent of panic and a separate stream of I-told-you-so running throughout the markets—equities, bonds, commodities and currencies—that is driving the action at the margins, but not in the main.  That’s an important point, and it doesn’t grab the reader or viewer the way hysterical squealing does, but it does move more money.  Most of the bad stuff that might have happened in 2011 didn’t happen.  Profits didn’t collapse; the U.S. didn’t fall back into recession (probably); food and energy prices didn’t rise prohibitively or fall precipitously; Europe didn’t unravel; China didn’t lose control of inflation or wreck its growth trajectory.  The Dow Industrial Average is up about 3 percent and the S&P 500 is down about the same amount.  I think back to 2008 and the beginning of 2009, and the tone of the talking heads on a day when the Dow is down 500 is the same now—with the index starting at 12,000—as it was then, when we were below 7,000.  Unlike March 2009, the people who move money clearly don’t believe the sky is falling, even if you can’t tell that listening to the people who talk about money.  Does that mean the sky isn’t falling?  Not necessarily.  But the risk of a boy-who-cried-wolf scenario is rising.  The time may come when the public needs to pay attention and push the politicians to act, and if we all have financial-panic fatigue, we may not be up to the challenge.  So calm the hell down.

I have two things to say about Zynga, which priced its IPO last night and started trading today.  First of all, the Zynga people and the Angry Birds people are the reason why I hate smartphone commercials.  Smartphone commercials show people going to exotic places and doing engaging things all made possible by their phones, and that is so much pandering nonsense that it makes me want to smash the next iPhone I see.  Facebook and all the devices on which one can view it don’t help people get out; they make it so people feel no need to go anywhere, ever.  Your status updates should just say ‘updating my status,’ because isn’t that what you’re actually doing?  Ugh.  The second frustrating thing about the ZNGA IPO is the lamentation about it pricing at $10 and then trading right around $10 all day before closing a little below $10.  Why is the IPO a flop?  It’s not.  The purpose of an IPO is to raise capital to fund business activities, and the perfect price is the one that raises the most money possible.  If the price is too high, the company won’t be able to place all the stock it wants to sell, and potential investors will push back until the price is lowered by the underwriters.  If the price is too low—what everyone participating not-so-secretly wants—the stock pops when it starts trading, but that pop represents money that the company left on the table by selling its stock for too little.  It looks to me like ZNGA priced just right.  It’s only a flop in the eyes of the rich clients of the underwriters who always score allotments of hot stocks at the IPO price and then flip them for a profit on the first day (company insiders are prevented from doing this, but the brokerage clients of the underwriters aren’t).  If the consequence of IPOs like Zynga’s is that underwriters only bring companies public that ought to go public and sell them to the public at the price the public ought to pay, I’m afraid you won’t be able to convince me, CNBC, that it’s a bad thing.

The Family Stock Index kept pace with the major averages this week, but only as a consequence of an unlooked-for Friday surge of 200 points in what was a flat market overall.  But for all that, keeping pace resulted in a 3.5% decline and a closing level of 10,691, solidly below 11K yet again and clinging to a gain for the fourth quarter.  I’m increasingly skeptical of that gain—now at 6.8% vs. 12.3% at the end of October—because it all came in that one month.  The FSX had closed lower for each of the previous six months, April through September, and then rallied mightily, only to fall again in November and December.  That’s eight down months out of nine, and the October rally doesn’t seem terribly credible in that context.  Perhaps not coincidentally, October was the month in which the Eure siblings managed a coordinated visit, and now that it seems clear it won’t happen again over the holidays, the index is slumping yet again.  All the October gains haven’t dissipated yet, but I’m afraid it looks more likely that they’ll be further frittered away rather than built upon over the last two weeks.


  • Justin (WOLF) +12%.  Sources indicate a resolution to the job drama is near at hand.  It’s a shame, really; I thought Occupy Wall Street had a real shot at snagging Justin and Icarus.  Alas, I don’t know if Justin has one of those masks from V For Vendetta, and I don’t think they let you into Zucotti Park without one.
  • Zondro (ZQK) +8.8%.  No real catalyst here, just a valuation call.  Zondro has solidified his position as the #1 dog during the course of the year and is a high-probability pick to move into the #1 overall pet position before 2012 is over, yet he came into the week nearly 40% lower than year-earlier levels.  I like him as a strong buy going into 2012 and if I was trying to generate alpha on top of the standard index weightings I would definitely overweight him here.
  • Icarus (FLOW) +0.9%.  Two months ago I might have slapped a buy rating on Icarus based on the same type of valuation call I find myself making on Zondro now.  But while Zondro’s 28% return in the weeks that followed handily beats the 8% move in the FSX overall, it’s nothing compared to the 65% surge in Icky.  I would think that a new 9-to-5 for Justin would mean less playtime for Icarus, and thus a more restrained market performance, but perhaps investors are thinking that, longer-term, steady paychecks translate into premium kibbles.  Or maybe Icky’s just looking forward to a new source of litterbox morsels when Justin takes him to visit Charlotte and her new cats.


  • Dustin (DST -5.5%), Lisa (LSI -5.4%) and Lucas (LEI -15%).  If you didn’t want Jenny to eat all the cho-chos, you could’ve just said so.  There’s no need to take it out on the FSX like this.
  • Lulu (LULU -5.3%) and Marisa (MOLX -8.1%).  The noose of winter is tightening on the cats.  Lulu’s disposition is such that she’s better served generally when she’s able to spend time out of doors and out of earshot.  As for Marisa, Katie is fed up with her refusal to get off our bed during the night, kicks and tugs on the bedspread be damned.  The market is clearly afraid that everyone other than me will turn against them; thus, when investors realize that already happened a good three years ago or so, we could be in for a cat rally.
  • Ruby (RBY) -9.3%.  If you’re constantly traveling, are you really going anywhere?  The market hasn’t been a big fan of airlines this year; Delta, Southwest, US Air, and American Airlines, respectively, are -28%, -32%, -39%, and -95%/bankrupt over the last 12 months.  Ruby herself is sitting on a 35% decline year-to-date; if she’s going to live like an airline and trade like an airline, I might as well make her one next quarter.
  • Legacy Lee (LEE) -11%.  Katie says we’re done with Legacy Lee, and who am I to argue?  Future Me is on pace to wrap the first seven chapters and 40,000-plus words of this book on schedule this weekend, and those numbers are too gaudy for even the grizzliest bears to gainsay.
  • Future Lee (MSTR) -11%.  What’s the expression?  Plus ça change, plus c’est la même chose; the more things change, the more they underperform the market.
  • Zero (FRZ) -19%.  Zero and I are looking for seed money to start our own hedge fund.  We’re going to pick companies to represent ourselves in the FSX while simultaneously shorting the bejeezus out of them in our hedge fund, then make huge profits on top of our sweet management fees.  And we’re going to lever up the fund something like 100- or 200-to-1; what could possibly go wrong?
Name Ticker 12/16/2011 Change
Brinkley BCO $25.27 +0.03
Charlotte ICE $117.68 -5.21
Dustin DST $46.00 -2.70
Icarus FLOW $3.55 +0.03
Jenny LEN $18.77 -0.87
Justin WOLF $2.70 +0.29
Katie CATY $13.95 -0.01
Lee MSTR $108.68 -12.79
Legacy Lee LEE $0.68 -0.08
Lisa LSI $5.42 -0.31
Lucas LEI $2.08 -0.37
Lulu LULU $45.26 -2.54
Marcus MCS $12.26 -0.09
Mario T.E. PBY $10.83 -0.27
Mario T.Y. SUP $16.11 -0.24
Marisa MOLX $22.76 -2.00
Nicole B. NI $22.53 +0.28
Nicole L. COL $53.70 -0.24
Reagan REGN $53.00 -0.38
Ruby RBY $3.62 -0.37
Wilson WILC $4.70 +0.14
Winston HWD $10.32 -0.55
Zero FRZ $0.35 -0.08
Zondro ZQK $3.46 +0.28


  1. If you make me an airline, it has to be USAir, as that’s the airline I fly on 99.9% of the time.

    Comment by Ruby Machi — December 19, 2011 @ 14:08 | Reply

    • I’ve left it in Katie’s hands now. I don’t think she has any unresolved childhood issues but you never know–you may end up as a tugboat company.

      Comment by lbej — December 19, 2011 @ 15:37 | Reply

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