Thursday, September 25, 2008


So I checked the NYSE website to see if any other additions were made to the no short list. Indeed there were, bringing the total to roughly 1,000 companies (exchange traded & over the counter combined). By the way, as of 12/31/07, the NYSE states that there are "nearly 4,000 listed companies" on the exchange. So much for capitalism, a number of companies equivalent to 25% of their listings can't be shorted.

Anyway, CVS Caremark was added this morning. Yep, that is the holding company for all of those pharmacies. Not that I am a conspiracy fan, but the only possible reason for this is to mess with hedge funds. CVS is working on acquiring Longs Drug Stores (LDG). Typically, an investor would short CVS and buy LDG to make a convergence bet. Upon announcement of an acquisition paid for in stock, the prices of the two equities in question would begin to converge to the stated payment ratio. This does not happen all at once because there is some risk that the deal may fall through (remember the Sprint & MCI deal, hedge funds lost on that one). So a small, but high return on capital, profit can be made on this bet.

And.........economic reports today: durable goods orders fell more than expected, initial jobless claims were higher than expected, GE lowered earnings guidance and equity futures were higher.

Strange days indeed.

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