What to do with your XTO Energy; plus Monday Morning Chartology
Steve Cook on Disciplined Investing

Syndication

Have You Seen This?

News

  • Make money by accessing all our Portfolios, the supporting research and Price Disciplines using our paid subscription blog, Strategic Stock Invetments. Our work is focused on making money for our Portfolios not as some academic exercise in Internet investing. Check our performance (audited)--our Dividend Growth Portfolio has beaten the S&P by 500 basis points per year for the last seven years but with a beta of only .62. (Mandatory Disclaimer: past performance is not a guarantee of future results.) We give you everything you need to duplicate our results, in particular, a strict price discipline for both Buying and Selling.

Have You Seen This?


Economics

   This Week’s Data

   Other

    Big banks are getting bigger (chart):
    http://www.ritholtz.com/blog/2009/12/tbtf-big-banks-getting-bigger/

    Treasury debt and tax receipts (chart):
    http://econompicdata.blogspot.com/2009/12/treasury-debt-to-receipts-spiking.html

Politics

  Domestic

    Stimulus: which is better, lower taxes or higher spending? (medium):
    http://www.nytimes.com/2009/12/13/business/economy/13view.html?_r=1

  International War Against Radical Islam

The Market
    
    Technical

    Whoever is buying stocks, it is not the individual (chart):
    http://www.businessinsider.com/chart-of-the-day-the-average-investor-remains-terrified-of-the-stock-market-2009-12?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock%20Chart%20of%20the%20Day%2C%20Friday%2C%2012%2F11%2F09

    Comparing gold rallies (chart):
    http://www.ritholtz.com/blog/2009/12/comparing-gold-rallies/

    Gold is rapidly approaching its 50 day moving average (chart):
    http://www.zerohedge.com/article/gold-50-dma-approaching-fast-major-support-or-breakdown-level

    The latest from TraderFeed:
    http://traderfeed.blogspot.com/2009/12/indicator-update-for-december-13th.html

       Monday Morning Chartology


 




   Fundamental
  
 
    I was going to address the ‘ I didn’t run for office to be helping out a bunch of fat cat bankers on Wall Street’ remark; but that has to wait on more important things like making money.

    This morning ExxonMobil (Dividend Growth Portfolio) made an all stock offer for XTO Energy (Dividend Growth and Aggressive Growth Portfolios).  XOM is offering .7098 shares for every share of XTO.  That is roughly a 25% premium. 

    If you own XTO you have two choices: (1) if you don’t own XOM and want to, then just hold on to your shares.  This will basically allow you to buy XOM at a discount. (2) if you do own XOM and don’t want to own more you can (a) sell XTO at the open this morning or (b) short .7098 shares of XOM for every share of XTO that you own.  From a pure investment return point of view (2) (b) is the best choice since there is a spread between the value of .7098 shares of XOM and the value of XTO.  However, you may not want or be able to short XOM, in which case you are better off selling XTO immediately.  The reason is that the risk arbitrage community will be all over this trade which means that they will be shorting XOM until the deal closes (current estimate in second quarter 2010) as long as there is spread.  That keeps downward pressure on XOM and hence the value of .7098 shares of XOM.

    Our Portfolios will be shorting XOM at the Market open this morning.
    
 








Posted 12-12-2009 5:10 PM by Steve Cook