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dukeufinstu 44 posts  |  Last Activity: Dec 14, 2014 10:09 AM Member since: Dec 17, 2006
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  • So The Duke expects a rally. If you read me closely last week and stopped accusing me of doom and gloom you would have seen my prediction of 2175. That is because all the world's money will find it's way into our market. The only problem is that investor's perspective is changing. A few months ago everyone believed that CB had their backs. Bad news was good news, good news was good news, no news was good news. Every CB was stimulating. Today some CB are stimulating, Japan and Norway, others are doing nothing, the Fed and BOE and some are tightening, Russia and China.
    The drop in oil is inherently DEFLATIONARY and the drop is so profound that only an immediate QE program by the fed can stem the tide. I don't see that happening. That means the dollar rises, oil production rises as producers raise production to compensate for lower revenue. Unfortunately, it also means that some people use the impending stock market increase to deleverage assets. This will put further pressure on junk bonds and ultimately the market for subprime loans will close. It also means the entire market is in for a deep correction, not just SIRI. If you recognize this scenario it is because it played out in the late 20's. Oil prices collapsed before the crash.
    Anyway, the good news is that perceptions take weeks to months to change and the AAII sentiment index is still bullish. This means there will still be people buying the dip tomorrow. WW? Maybe the market will see things differently than I do. Then again, if they see it the way I do, the question is will there be any buyers there next month?
    Conn reported a loss this Q and dropped 40% in one day. Did anyone get the Duke nugget that their was still time to short it?

  • Everything in the middle east is complex so assigning simplistic explanations to the situation is a recipe for disaster which means I'm about to do just that. If you look at the Syrian civil war from the Saudi's perspective and forget about Sunni vs Shia, the Saudi's favor building a pipeline through Syria and Turkey to deliver natural gas to Europe. This would effectively isolate Russia and provide Europe with a friendly gas supplier in the future. Russia supports Assad becomes he refuses to permit the pipeline to be built. Hence civil war. It s always about the money, not the religion.
    So why is all this important? It has a profound impact on our market and now we get to speculate on what that impact will be. If you read the oil traders of the world, the optimists are telling you that we are near the bottom and oil is about to rally at any minute. A dead cat bounce, maybe, but nothing sustainable. A view of 1973/74 shows you the Saudi's are long range planners and they are willing to see this through over months if not years. Oil is usually hedged out for six months to a year under futures contracts so any experienced driller is safe over the next few months. New projects will be shelved because this will pass and oil will be sold at higher prices in 2016. You just need to survive.
    Currencies in oil producing countries will continue to get hammered. The ruble lost another 10% this week and Russia's attempt to stem the tide by raising interest rates was an utter failure. Of course, that was the point of this whole exercise. Other oil currencies also got hammered, the Norwegian krone, the Venezuelan Bolivar and the #$%$ia #$%$ to name a few. People are fearful that the junk bonds floated by shale oil operators will never be repaid so they sold them. JNK and HYG recorded new 52 week lows and new issues were pulled be
    cause the market has dried up. People sold stocks in the EM, sold EM currencies and bought dollars and this should lead to a rally in our market.

  • If you still think I have this wrong, then answer this simple question. Why didn't any oil executive or the economists they employ see this coming? No one saw this coming because the numbers they crank into their computers ON A DAILY BASIS were false. People are losing billions of dollars. Companies like Exxon follow every tick in the price of oil and employ hundreds of MBAs to do sophisticated macro analysis and NO ONE SAW THIS COMING.
    Why? The only possible explanation is that the data they relied on was bogus. There really are only two explanations or a combination of the two. First, the slowdown in China is much more serious than we have been led to believe and if this is the case then markets in most countries are vastly overpriced. A hard landing in China ripples around the world. The second explanation is that the Saudis have flooded the world with an extra 5-10M barrels of oil a day and we have a true though unreported glut. The third possibility is that we have a combination of the two possibilities that I laid out. I'm operating under the theory that the third possibility is the correct one.
    The China slowdown is beyond anyone's control and really should not have surprised anyone. The numbers coming out of China have been fiction for a while. It is the Saudi response that was stunning. In the past they would have led an OPEC cut in production that would have stabilized the price. This time they didn't do it. This was a complete surprise to the rest of the cartel and it meant throwing some of its members under the bus. Venezuela is going to default without Chinese intervention so the Saudi's aren't doing this lightly. They also aren't stupid or a US puppet so they know exactly what they are trying to achieve. In the US we tend to be ego centric so we think this is about oil shale. Our oil production will be hurt but not closed forever. We will still have the resource in the ground. So what is it about and what does it mean?

  • As I watched the tape on a late Fri. afternoon I got the distinct impression that there was something different about this sell off. People were just throwing shares out the window...selling at MARKET to get whatever they could, rather than doing limit orders which might not get executed. I spent yesterday doing some research about the role of oil in The Great Depression and studied the market after the 1973/74 oil embargo. There were some interesting similarities to the current situation.
    As far as I can determine, no one was predicting a glut of oil back at the beginning of summer. On any given day I read a couple dozen economic analysis on various topics and no one foresaw this glut. That in itself should tell you that this is a strange occurrence. No one noticed a abnormal number of oil puts in the futures market and even one of the greatest traders of oil of all time Andy Hall was on the wrong side of the trade. The explanation that you read is that we are producing an extra million barrels of oil a day and everyone accepts that explanation. The explanation is total garbage.
    The world uses 85/ 90M barrels of crude EVERY DAY. Let's use 90M as the number. In a thirty day month the world uses 2.7 BILLION barrels of oil. If we are producing an extra million barrels a day that is 30M barrels or about 8 hours of usage and you want me to believe that an extra 30M barrels per month vs. a total usage of 2.7 Billion caused a 40% drop in the overall price of oil. If you buying the current explanation then you gave up thinking a long time ago.
    On any given day the amount of crude that is pumped goes up and down by millions of barrels. There are pipeline accidents, rebels who siphon off production in Nigeria, ISIS selling oil, strikes at pumping and refining facilities, storms at sea that delay delivery. We don't have a perfect delivery system. Also at any given moment countries may be restocking or using oil from their strategic reserve. Bottom line, the story is a hoax.

  • When OPEC decided not to curb production the Saudi ambassador said we will let the market set the price. It all comes down to whether you are a low or high cost producer. Most of the old Arab countries like SA, UAE are low cost producers. Deep sea producers like Norway, Venezuela and shale oil producers in our country and Russia are high cost producers. The Saudi strategy is the Amazon strategy. Sell oil at a price where it still makes money but forces the high cost producers to lose money or make so little that it curtails the high cost producers from having enough capital to open up new sources of oil. The US is okay with this strategy since Russia production is plunging, the ruble is collapsing and Russian oil and gas interests have 500B in bonds to repay in dollars in 2015 with no source to raise those dollars except the foreign reserves that the Russian government holds. If the government lends the reserves to the companies to pay the bonds, the country will collapse. If Russia does not lend the money, the oil and gas companies will collapse.
    Over in Japan we have the BOJ doing QE and forcing the yen down. But it is falling so fast that it may become worthless. Former Japanese finance ministers are saying it is dangerous but Abe keeps telling people his plan is working and next Sunday the Japanese are going to give him a resounding election win. Apparently, being in recession means little to them.
    So how is SIRI impacted? 15% of the junk bond market consists of bonds of shale oil producers. Goodrich Petro., Sanchez Energy and Oasis Petro. have all fallen 80% in the last month. The junk bond market has gone dead because defaults are looming. The problem for SIRI is that all the money for sub prime buyers of new cars and used cars is drying up. That is why the stock fell FRI.
    So why a currency crisis. People are selling EM assets and currencies. They buy dollars and US stocks. Only problem is US exporters become noncompetitive, layoff people and we tank.

  • So what is the company doing to off set the CUR problem. First, it is extending the trial period of the new car sub. Auto producers don't care if the sub lasts six months or a year so long as the amount they pay doesn't go up. That is why you are seeing so many ads for new cars coming with a full year of SIRI. Who cancels a free year of something before the free period is up. Second, we are seeing the cut rate sub, $6.99 to Hispanics or the same for religious fanatics. It is about new subs, not making money. Third, you see the ramp up in used car dealers offering free subs but CUR infects that process also. With 10,000 dealers on board how many more are there to sign up? The truth is SIRI has one ace in the hole. Penetration rates have gone up from 66% to 71% per cent in the last 5 years. Ultimately, they will have to rise to over 90% for the subs to continue to grow. The question is whether the costs will justify revenue increase as we find ourselves back to a Treadmill to Nowhere. Paid subs growth have declined for the past two years. Expect more of the same in 2015.
    Oil prices have plummeted since I last wrote which should be great for the S&P. It will be in the short term and I am expecting a hyperbolic move to 2175 to 2200 before reality sets in and the themes I have been writing about become clearer to the market.
    In my last post I commented that the yen was at 112 and people were talking about 120. GS had a year end target of 115 and a 120 target at the end of 2015. Shows what they know. I warned you about a free fall in the yen and the potential of a destabilizing currency crisis in the world. On Fri. the yen closed at 121 and there is fear in Japan of the free fall I mentioned. I mentioned the ruble as a second currency to watch and sure enough it has lost 20% of its value since I wrote. Interesting you say but what has any of this got to do with SIRI? No one sees the connection so why should you.

  • Most investors who are long SIRI have visions of an ever increasing stream of new auto sales that will produce an endless stream of new car subs. It is a wonderful concept but not based in reality. We have discussed the Law of Big Numbers in the past and CUR is Big Numbers brother in the industrial world. This year new car and truck sales will hit 16.5 million. That is up 5.4% from last year 15.6M. The problem is we are nearing the top of the cyclical recovery in auto sales. How do I know this? CUR. Our CUR ratio is 91/92 percent. Translated that means that the plants that produce autos and trucks can only produce 17.8M vehicles a year and our production is at 92% of capacity. Theoretically we could build another 1.3M cars but in reality some manufacturers have capacity but no buyers while others need to retool to meet new designs, the Ford 150 with an aluminum body. True CUR is probably closer to 17.4-5M. CUR is one of the reasons that next years sales are projected to be 16.8 to 17M. It doesn't matter how many people want to buy a new car we are at the top of productive capacity to build them and new plants take four years to build from design inception to opening the gates.
    For SIRI this is bad news. Let's assume that sales grow 500K vehicles. SIRI has a 71.% penetration rate which means it will install 350K more radios this year than last. We also know that SIRI's conversion rate is 42% or about 150K subs over this year. The problem is that SIRI will add 1.25M new self pay subs in 2014. Apply the 1.9% churn rate to those new subs and you will get 23K a month. Multiply by 12 and SIRI will lose about 270K of those new subs next year. 2015 will be the first year since 2009 where new car sales won't grow fast enough to produce enough new subs to offset the previous years growing churn. This is a long term problem for the company.

  • I enjoyed reading all the speculation as to why I have not posted for five weeks. The Duke was involved in an M&A deal as one of our firm's clients was the subject of a takeover offer. Negotiations stretch over weeks in these types of deals. There is no such concept as a weekend and great ideas seem to manifest themselves at 2AM when you are dealing with people in multiple time zones. It is all just part of the game. Little sleep and take out food to wear you down. I learned the hard way in my first negotiation. We have a catering service on call. Sleep is still optional. The deal was struck. Our Nov. billings hit a record and now we are in due diligence for 60 days. The lawyers always win.
    In the meantime, things in the market seem to have changed but, in reality, they seemed to have brought to fruition many of the concepts that I left with you five weeks ago. SIRI raised its sub guidance again and new car sales were great in Nov. but the stock has gone nowhere (A Treadmill To Nowhere). The stock just completed its 38.2 retracement off its recent move from 3.14 to 3.64.
    The stock has many problems in the short term but with respect to new auto sales CUR is the big one facing the company. So what is CUR you ask? Capacity Utilization Ratio. So how does that impact SIRI you wonder?

  • Reply to

    Duke: A Treadmill To Nowhere--Part 4

    by dukeufinstu Nov 2, 2014 10:00 AM
    dukeufinstu dukeufinstu Nov 27, 2014 7:51 AM Flag

    LR
    Thank you for the Thanksgiving wishes and I wish you WW, Frank a happy and safe holiday. SIRI seems headed back to the $3.65 you called a week or so ago. The market is stretched beyond all rationale understanding and yet it continues higher. It is like the CB believe that any correction would get out of hand and therefore must be prevented at all costs.
    I have been working on an M&A deal for the past couple of weeks. The Memorandum of Understanding was signed on Tuesday. Be back to a Sunday post in the first week of Dec.

  • Reply to

    Convertible Notes

    by mlattari Nov 13, 2014 2:50 PM
    dukeufinstu dukeufinstu Nov 14, 2014 1:57 PM Flag

    OK let's try this again. On 12/1 SIRI will issue 273M shares to redeem the 7% convertible bonds issued at the merger. Going forward this will cut interest expense by $35M or $8.75 per Q. This will improve profits. At the end of Q3 Siri had 5.6B shares outstanding. When these shares are issued the share count will be 5.9B. SIRI said it would close its ABS buyback on 10/1 and will have 3 months more of buyback by 12/31. Maybe the share count falls back to 5.7B by 12/31.
    Some of the 273M shares have already been shorted and will be used to off set the short. Thus you should see a dip in the 12/15 SI number reported just after Christmas.
    The real question is what happens to the shares delivered to the BONDHOLDERS WHO DID NOT SHORT THE STOCK. If they hold SIRI as an investment then the price will remain stable after the conversion. IF THEY DECIDE TO SELL, then you will see a potential large decline in the stock because there are few buyers other than the company. I would expect the company to be a large buyer but Federal law would prevent them from buying enough to prevent a fall.
    We all just have to wait and see what happens.
    WW the people who loaned the shares were the hedge funds that owned them. Lease payments are a big source of income for long term holders.

  • dukeufinstu dukeufinstu Nov 12, 2014 8:25 PM Flag

    Blue
    Let's see if your question makes sense. SIRI had 5.6B plus shares outstanding at the end of Q3. In three weeks it will issue another 273M shares bringing the total outstanding share count to 5.9B. Liberty owns 3.3B leaving 2.6B outstanding. Multiple 2.6B by 5.5 and you get 9.1B. You want SIRI to buy 90% of the outstanding shares. So multiply 9.1B times .9 and you get 8.1B.
    Just explain to me how SIRI would be able to borrow 8.1B? It has about 1B in FCF so maybe in six to seven years it can do what you project. Unfortunately, you are living in a dream world. Take a look at what Wahoo said below. The company has bought back more than a BILLION shares and the stock is still stuck at $3.50.
    Here is a hint Blue. When the stock goes back down to $3.00 buy some (average down) and when it goes to $3.50 sell the $3.00 shares and enough of your high priced shares to break even. Keep doing it until you are out even. Stop dreaming and get a plan
    Duke

  • Reply to

    Duke: Post

    by dukeufinstu Nov 9, 2014 7:55 AM
    dukeufinstu dukeufinstu Nov 11, 2014 2:52 PM Flag

    LR
    Isn't SIRI merely tracking the S&P as it has been for the past 6 months? We will grind higher here for a while but they can't stop a correction between now and the end of the year 38.2% of a 220 point move.

  • The BOJ is trying the same trick. Buy bonds, depress the value of your currency so that exports increase, the cost of imports go up and you have inflation at a manageable level. It didn't work the first time so following the definition of insanity we will do it again and expect a different result. Good Luck. On Fri the yen fell from 109.21 to 112.32 or 2.85%. There is a thought it could fall to 120 per dollar. This actually makes sense since the most recent low in the yen was 145 and the high was 75 so a 61.8% retracement would be 120. The assumption is always that buyers or shorts would show up to cover at 120. But what if the yen falls too far to fast and people don't buy it. You are looking at a potential free fall that could create a crisis in the world's banking system. Can't happen you say...except it has happened in two countries this past week.
    I have told you that the strong dollar has hurt commodity prices and this has impacted the currency of resource based economies. The ruble has collapsed in recent months but how it has collapsed is troubling. When oil prices collapsed, Russia went into recession. The Russian central bank tried to prop up the ruble in Aug. by selling dollars and buying rubles. Standard procedure. It failed. In Sept. the bank bought 1300 tons of gold to prop up the currency. Standard procedure. It failed. On FRI it was expected to raise interest rates 50 basis points. It raised rates by 150 basis points. Another failure. The ruble tanked 3%. Brazil did the same but its currency fell 2.9%.
    No one sees the strains in the currency markets or the banking system. At some point they will and Flabby will have his day. You don't want to be there when it happens. 2.74/2.76 is still on the table.

  • I noticed the speculation that even The Duke must think the current downtrend is over and questioning whether I have backed off my $2.74/2.76 prediction. The current downtrend may be over but the price action of the S&P is troubling to say the least. I remember a quote I read somewhere where the author said that bubbles reach unimaginable extremes and then they double again before they burst. We are getting very close to those levels. The Fib rules (Flabby) have been around since the 13th century and about the time you think they have been repealed, they rear their ugly head and leave you with a lot of paper losses. We have moved from 1821 to 2018 or 197 points without a meaningful retracement. People have remarked that they have never seen a rally like this. Twelve straight days up with no retracement. There is talk of 2200 or more but you might want to notice that we did not break the 2019 record which at least leaves open a double top or what is known as an inside reversal pattern where we set a new high tomorrow and then close below 2018. That is what started the 9.8% decline on 9/19. However, if we keep going up, Flabby will have his day at some point and that could well manifest itself in a move like the 2010 flash crash or a 1987 event.
    But what could cause such a scenario? The BOJ set off the latest sense of nonsense and most people cheered the latest round of QE. People have forgotten that QE is an experiment but it worked for the US or so we are told so Japan is trying it. People forget there is one significant differences. The US dollar is the reserve currency so Bernutty never had to worry about a collapse of the US dollar. What do I mean. There are 85M barrels of oil sold EVERY DAY. To buy them you must pay in dollars. That meant you sold your local currency and bought dollars to pay for oil. That propped up the dollar even as the FED sought to weaken it.

  • But what about the 176M shares the company repurchased during the Q to take share count down to 5.6B you ask and the fact that we still have 2.2B left in the BB. Absolutely fantastic except you seem to have forgotten that four weeks from tomorrow the company will redeem it 7% convertible bonds and issue 273M new shares. Therefore, if it wants to keep its share count at the same level as it was on 9/30 it will have to purchase those shares on the open market at a cost of 936M (273M x $3.43). But SIRI only has a little over $100M in available cash so it is back to the bond market where SIRI qualifies to borrow 1.2B because its leverage ratio falls to 2.9 after the CB are converted to stock. No problem you say, borrow the money, buy the stock back, keep the share count even with Q3, earn 10M more in Q4 and due to rounding we can report 3 cents in Q4. Good theory but you forgot the interest expense associated with borrowing the 1.2B which will be 18 to 20M. So now SIRI has to earn 30M MORE IN Q4 than Q3 to get to 3 cents next quarter. Right? No, wrong.
    To report 1 cent more in profit next quarter SIRI would have to earn 30M more in NET INCOME. What does that word NET mean (I smell a trick here and I thought Halloween was over). Remember, SIRI always has to reduce its income by 40% due to taxes because it is working off the NOLs that were reported as income in 2012. So lets say SIRI earns 50M more next quarter in income (not revenue) next quarter. It will then reduce that number by 20M in imputed taxes so the profit is 30M. Then it will pay 20M in interest leaving 10M in net profit. That would leave 10M more in profit. This Q's profit was 136M which would make next quarters 146M. Divide 146M by 5.6B shares and you get 2.6 cents and get to report 3 cents in profit. The only problem is there is no way SIRI can increase profits by 50M in a quarter so this is an exercise in futility. The analysts have SIRI earning 2 cents next Q same as the last three Q. Do you see why?

  • So another CC has come and gone. Everyone said it was great,but where are the upgrades? The truth was this CC, like all the rest this year, was an endless treadmill to nowhere where the unknowing think this was a great quarter but the numbers tell a different story. Income doubled to 2 cents from a penny last year and in raw numbers was a 136M vs 63M. Great you say but the 2013Q3 had a one time charge of 107M for debt extinguishment. That reduced 2013 Q3 by a penny so from an operating income standpoint both years earned two cents in the quarter. To accurately compare the gross income numbers we have to take the after tax numbers for the 107M writeoff which is 60% of 107M or 64M. Add that to the reported 63M and operating income for 2013 Q3 was 127M. So to summarize, without the one time extraordinary charge in 2013 the comparisons would have been 2 cents in 2014 vs 2 cents in 2013 and 136M in income this year vs 127M last year. You want to know why the stock has gone nowhere.
    I know you want to tell me to ignore earnings per share, this is a media company and the important number is FCF. Interesting thought but you are making that argument only because you haven't looked at the FCF numbers. Q3 this year was 267M, last year was 245M. An increase but hardly blow away numbers. The big increase was in EBITDA where the quarter was 381M vs 295M last year. That is nice but the I in EBITDA is interest which EBITDA conveniently excludes and SIRI's interest payments have increased due to the 1.5B it borrowed on 5/1/14.
    For every good number there was a bad number. ARPU was up and costs were down. But this year SIRI added 433,000 new subs in Q3 vs 513,000 last year. Churn increased from 1.8 to 1.9% and the conversion rate dropped to 41% from 42%.

  • The S&P dropped from 2019 to 1821 or a total of 198 points. A 76.4 retracement of the loss would be a 151 point advance that would take us to the 1972-1974 range. If we get a close above that number I would be more inclined to agree that the decline is over. We should get a test of that range tomorrow, just in time for SIRI's CC on TUES.
    Okay, so that all very interesting you say but what does 76.4 have to do with SIRI, you ask? Back in Oct 2013 I predicted an intermediate decline in SIRI when the stock was at 3.85. In March of this year I told you the intermediate decline had morphed into a long term decline and that the stock was likely to bottom in the 2.74/2.76 range. We used Flabby to come up with that number. We started with the 2010 flash crash low of 1.27 and then took the recovery high of 4.18. When we subtracted the low from the high we got 2.91. 50% of that number is 1.45 and when you take 4.18 minus 1.45 you get 2.73. Hence the Duke's 2.74/2.76 call. If you don't like it blame Flabby, not me.
    Anyway Flabby is a convenient way to estimate how high a stock will go on a breakout or breakdown. You look at the previous move and then multiply by 1.382, 1.5 or 1.618. Lets say a stock is trading between $5.00 and 5.50 and 5.50 is a resistance level. When the stock breaks 5.50 , it is common to predict it will go to 5.69 (1.382) of 50 cents, 5.75 (1.50) of 50 cents or 5.81 (1.618) of 50 cents. Think about it and you will get the hang of it.
    So what about SIRI and 76.4% you ask AGAIN. SIRI corrected down from 3.65 to 3.14 or 51 cents. Multiply 51 times 1.764 and you get 90 cents. Take 3.65 less 90 cents and you get 2.75. Interesting coincidence. If you don't like the number, complain to Flabby, I'm just the messenger. Enjoy the CC.

  • This week the Street had its eye on the 1905 S&P level and on Monday we came close to that level but closed under it. Just when it looked like the market might fail at that level, fed governor James Bullship floated the idea of extending QE which propelled the market through the 200DMA. There will not be an an extension of QE. Then on WEN with the futures down 105 at the European, someone floated a rumor that the ECB COULD vote on a plan to buy corporate bonds in Dec and MIGHT actually begin buying them SOME TIME next year. Even though the rumor was quickly denied, it had its intended consequence and the DOW was up 200 or some such. Everyone says the downtrend is over. We are above Flabby's 61.8% retracement level so it is safe to buy stocks again. Maybe, but then again, maybe people don't really understand Flabby.
    Let's deal with a could of things first. I thought we would have a 20-25% decline off of my PREDICTED TOP of 2020. We got a 9.8% initial drop off of a real top of 2019.26. Major rallies within a downtrend are common and while this one is more than I expected, one learns to expect almost anything with the new normal. Bullship and the ECB rumor were just continuation of the Draghi "we will do whatever it takes' mantra of leading the market. At some point, just like the boy who cried wolf too often, this kind of poker bluff will get called by the market and we will see if the Emperor has any clothes in his closet.
    As for the idea that Flabby has signaled the all clear to BTD, the Duke begs to differ. Every investor knows Flabby's PRIMARY RETRACEMENT NUMBERS. 38.2, 50, 61.8 and 100%. But did you know that there are two ugly ducking step sister numbers that never make the headlines? The numbers are 23.6% and 76.4% and when you are dealing with crazy markets 76.4% has more relevance than 61.8%.

  • The second possibility is that SIRI could beat the 2 cent projected EPS. So how could they do that you ask? The last two earnings reports have contained made up paper losses that cut EPS by about a half a cent each time. If you remember when SIRI and Liberty did they 500M BB agreement it contained a contingency and that turned the contract into a derivative contract. When the price of SIRI fell at the end of each quarter in COMPARISON TO THE PRICE AT THE CLOSE OF THE PREVIOUS QUARTER, SIRI had to record a paper loss. Those paper losses have disappeared because the Liberty BB closed in the 2ndQ and I'm not aware of any one time charges in this Q. Next SIRI might surprise on the revenue line. Last Q the analysts were expecting revenue at the billion dollar level but it came in at 1B 35M (1.035B). This was the biggest positive miss in ten years. Usually revenue is within 5M of the projection. What caused the surprise. No one explained it. This time The Street is looking for flat sequential revenue at 1.040B. Can SIRI surprise again on the revenue line. Finally, SIRI's outstanding share count should fall from 5.7B to 5.5B. If you go back to my explanation of rounding on earnings you will see that SIRI would need a 138M profit for the Q to post a 3 cent profit. Without the manufactured paper losses SIRI profit would have been in the 120-125 range in Q1 & 2. So it is within the realm of possibility to get to 138M. Some companies play with the numbers to report a higher EPS. SIRI has a history of doing just the opposite so why would this time be different?
    So for the optimists out there, this is the best I can do for you...a couple of possibilities. I guess we will both have to wait for the CC and see if a trick or a treat shows up in your Halloween bag.

  • I was sitting there thinking about today's post when in walked my ego and said Duke we have a problem. Our readership is way down and people are saying you never have a kind word to say about SIRI. It is not my fault that I've been so negative about the stock. Back in Sept. 2013, I warned everyone that SIRI would miss its EPS in the 3rd Q CC in Oct. which happened. Then with the stock at $3.85 I told everyone it would begin a 5 wave down cycle that would close the existing 12/31/12 gap at 2.90. So far we have had four waves down and gotten down to 2.98. When we hit $3.09 I told everyone to go long and we played five swing trades between 3.09 and 3.24/25. Then when it broke 3.25 I said it would top out at 3.59/60 (actual 3.65) and to short it at 3.59/3.60. I think we have done pretty well. My ego said that may all be true but you are perceived as having a negative bias against SIRI. So I asked, you want me to become a mindless cheerleader like WRONGWAY and predict that the stock is going to $5.03 like he did in March, or $4.00 after the 2ndQ CC or on 8/26 that the SI would skyrocket, only to see it fall 6.3%? My ego responded, no I'm not asking for you to deal in the theater of the absurd like WRONGWAY. By now everyone has figured out he got his degree from UNC with a major in African American studies. Why don't you just stretch the truth a little, I think they call it literary license in polite circles and see what you do.
    So with the words from my ego ringing in my ears, I'm going to give you two surprises that could occur at this week's CC that could drive SIRI's price higher. The first is very simple. The company announced a third 2B BB months ago. By now the second BB is completed, but there has not been a funding of the third BB through a new issuance of bonds. The CC would be the perfect time for the announcement.

SIRI
3.47+0.02(+0.43%)Dec 19 4:00 PMEST

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Under Armour, Inc.
NYSEFri, Dec 19, 2014 4:04 PM EST
ImmunoGen, Inc.
NASDAQFri, Dec 19, 2014 4:00 PM EST
3M Company
NYSEFri, Dec 19, 2014 4:04 PM EST