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Barron's Roundtable Wrapup

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The portfolio managers convene on January 10th to discuss their top picks. The editors at Barron’s dispense these musing over three weeks. This edition continues previous themes around Gold and other commodities. This makes one wonder if the gold’s recent downdraft is just a pause that refreshes. Continue reading for a summary of the last of the three installments from this year’s roundtable.

Meryl Witmer – the recent run-up in the market has made it hard to find bargains. She and her team are looking for companies emerging from bankruptcy. Out of the blocks she surprisingly recommends a specialty chemicals company once owned by KKR and now trades for a free cash-flow multiple of 12. Returning to the original script, she recommends Tronox (TROXV), a manufacturer of titanium dioxide, which is emerging from bankruptcy. Next up is Six Flags (SIX) – more flags, more fun! She believes SIX, emerging from bankruptcy, is worth 12x earnings. Her last pick out of bankruptcy protection is Spansion (CODE), a flash memory producer which is trading at approximately 6.5x after tax cash flow.

Marc Faber – all paper currencies are doomed and WWIII has already started. His theme is LNG. As oil demand turned up and when we have war, prices will go up substantially. He notes that China and the US have little in common beyond commercial interests. As China is a supporter of North Korea and the Taliban, he wants to be hedged in case of complete disaster. His strategy is to buy commodities when supply is abundant (and cheap)…then wait. He is also likes physical gold but says you shouldn’t own it in America where the government could take it away. He likes a few gold miners and sees opportunities in water, fertilizer and potash. He believes Asia has run up, but you could still find a basket of shares yielding 5% and trading at 10x earnings. While he is bearish on currencies, he is not as bearish as some on the US Dollar. In an interesting twist, he recommends a basket of Swiss insurance stocks he thinks are trading at attractive valuations.

Mario Gabelli – looking for divestitures and break-ups (carrying on a theme I wrote about earlier). Gabelli likes a lot of stocks, I will only cover a few here. He starts with Genuine Parts (NYSE: GPC), with the average age of cars increasing the stock could see continued earnings growth. More on the natural gas theme, he likes Natural Fuel Gas (NYSE: NFG) as a way to play shale. On the break-up theme, he likes Fortune Brands (NYSE: FO) which announced it is splitting in three. He thinks the spirits business could go for 12x EBITDA. Another pick that is close to home (at least for me) is Madison Square Garden (NYSE: MSG). The company has a high value cable network and it is spending $800 million to renovate the Garden – in addition to owning the Knicks and Rangers. His play on the recovery of the industrial world is Thomas & Betts (NYSE: TNB) which is in the energy efficiency business. The stock trades at 6.5x projected EBITDA. Finally, he mentions a gold related stock – Brink’s (NYSE: BCO). BCO specializes in global logistics for the movement of precious metals and cash.  

Oscar Schafer – seeking companies that have a catalyst. Schafer likes companies that have gone public post LBO because their management knows how to maintain costs, they tend to have low tax rates (due to the stepped up basis) and generate lots of free cash flow. First up is Sensata Technologies (NYSE: ST). Formerly part of Texas Instruments (NYSE: TI), the sensor and control maker went public in March. The company has significant exposure to the auto industry. As auto sales recover, this should be additive to the company. Schafer also sees growth in its China business as the country ratchets up its standards. Once again on the spin-off theme, he recommends NXP Semiconductors (NASDAQ: NXPI) which was spun out of Philips Electronics (NYSE: PHG) and taken private. NXPI, a maker of high-performance mixed-signal solutions and semi-conductors, went public in August. In December, Google (NASDAQ: GOOG) announced it was designing the NXP standard into its latest Android platform. NXPI trades at a single digit earnings multiple. Anyone who has rented a car is familiar with his next pick – Hertz Global Holdings (NYSE: HTZ). Taken private in 2005 and back public in 2006, he believes the company is poised to take advantage of the recovery in the rental car market. The stock also trades at a single digit earnings multiple. Schafer is calling for 50%-100% upside in Quantum (NYSE: QTM), a small cap company focused on enterprise computing software. A market leader with a single digit multiple, the QTM should benefit from dislocation in the market created by Oracle’s (NASDAQ: ORCL) acquisition of Sun Microsystems. His final pick is Mako Surgical (NASDAQ: MAKO). Schafer believes the aging demographic and competition among hospitals to increase patient volumes should drive growth. Short interest is 25% of the float – the shorts worry that the high upfront costs of the company’s robot will hinder sales and the stock trades at 7x REVENUE. Schafer isn’t concerned because revenues are growing north of 50%.

 

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Tue, 07/26/2011 - 11:26 | 1494562 pama
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This will tell you why the eco-fascists an neo-cons use their apocalyptic predictions.
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Sat, 07/16/2011 - 19:04 | 1462783 hama
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It was the fault of the Japanese for allowing such a reactor to be built in that location without additional safety measures being required. That's the real story here. That and the shitty enforcement of already lax safety standards.
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Fri, 07/15/2011 - 08:25 | 1458910 hama
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Thanks earlier than in most years in April and early May, so there is a distinct possibility that despite gold and silver mining stocks normally waiting until late August

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Fri, 07/15/2011 - 08:14 | 1458879 hama
hama's picture

secret method of killing your BUSINESS that was so secret that nobody knew they did it. This is because if the STASI kills a bunch of dissidents' overtly, then their dead guys surviving friends and families could piece together what was in common among the dead that the STASI used to spy on them.
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Fri, 07/15/2011 - 08:12 | 1458875 hama
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secret method of killing your BUSINESS that was so secret that nobody knew they did it. This is because if the STASI kills a bunch of dissidents' overtly, then their dead guys surviving friends and families could piece together what was in common among the dead that the STASI used to spy on them.
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Fri, 07/15/2011 - 06:18 | 1458695 hama
hama's picture

steep downfall earlier than in most years in April and early May, so there is a distinct possibility that despite gold and silver mining stocks normally waiting until late August to put in a bottom, that the bottom may already be in.
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Sun, 01/30/2011 - 02:12 | 917474 steve from virginia
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Confiscation is a red herring. If the point was to arrive where confiscation was a necessity the government would not have the resources to deploy.

Better to worry about what your gold will purchase. When gold is ripe for 'confiscation' there will be nothing much of value to trade it for. Most of what Americans consider 'value' is just worthless junk, like Cadillac Escalades, stocks and large, cheaply- made tract houses. Much of what is 'worth' in this country is used up, burned, exported or paved over. Got gold, what else?

Sun, 01/30/2011 - 02:59 | 917498 topcallingtroll
topcallingtroll's picture

I read that in europe during the war a guy was trying to trade his gold for stuff.  People weren't interested in his gold.  they were interested in his watch or if he had any skill he could trade, or other commodities such as cigarettes, but there was little interest in gold.  He said perfume and lipstick were great barter items, also pantyhose, but he could not get anywhere close to gold's real value if he traded it.  I spent a lot of time in south america and witnessed various crises either up close and personal or vicariously through friends. If you have to sell your gold during hard times you aren't going to get it's full value.  Right now with all the shit going on in venezuela do you know what is most popular?  Droids and Iphones, Ipods, and even new cheap mp3 players.  Any venezuelan who has an import export business is laundering money and sneaking stuff in illegally such as electronics without paying customs.  Even with inflation and a Bolivar that constantly loses value they have little interest in gold. If you wonder how they get that stuff to run on their networks they are master hackers and are proud of the reputation in south america as the best thieves.

Sun, 01/30/2011 - 01:03 | 917408 Lord Koos
Lord Koos's picture

IMO it's silly to worry about consfiscation, it didn't work in the 30s very well & is likely to fail if they try it this time as well.  But I still recommend buying gold locally with cash rather than leaving a paper/digital trail buying online and/or with a credit card or wire transfer.  At any rate I lost all my gold in an unfortunate boating accident last year.

Sun, 01/30/2011 - 03:03 | 917507 topcallingtroll
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I was about to offer condolences.  Then I realized I should offer congratulations!  My wife knows that if I pass and they ever look for assets that should be there, that she is to eventually admit with appropriate shame and tears that I blew it all on hookers, drugs, and gambling before my death.  I went on such a binge the last six months and she just didn't know what to do, where to turn.

Sat, 01/29/2011 - 22:57 | 917265 Dr. Gonzo
Dr. Gonzo's picture

Gold confiscation is impossible to do when it's buried in a field or hidden in a wall. Back in the 30's they got the easy pickings from safe deposit boxes and bank vaults during the 3 day bank holiday. Citizens could own 5 oz and it was loosely enforced since it is completely unrealistic. Gold confiscation would totally backfire if they tried it. Not going to happen and no one is going to voluntarily return their gold. Gold is not stored in bank vaults anymore so they could only get Sprott's gold but I think his vaults are in Canada since he is not stupid so they would be shit out of luck. They might confiscate GLD as a ploy to trick people when it get busted for having no gold. Can't have the public loosing faith in our honest financial institutions.

Sat, 01/29/2011 - 23:38 | 917312 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Confiscate GLD's what, tungsten?

Sun, 01/30/2011 - 00:43 | 917381 Freddie
Freddie's picture

LOL!  Last week Fred Hickey who is on the panel said he was buying Sprott because he did not want his gold in the USA.  Hickey is more a tech guy and does some mining reseach.  He said he was worried about the USA imploding.

Sat, 01/29/2011 - 21:17 | 917097 topcallingtroll
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what traditionally happens in an extended crisis is that those who have cash can pick up gold for cheap from those who need it who have lost their jobs and need to buy necessities.  the history of most collapses is that those with the cash will make a bundle when people with non cash assets need money.  I think the most recent example was ecuador.  You have to have the resources to make it through the first year of a crash if you happen to lose your job, otherwise you will likely be selling your assets at a nice discount.

Sun, 01/30/2011 - 02:36 | 917488 topcallingtroll
topcallingtroll's picture

the last major currency blow up that I recall hearing people talk about how they only got about fifty cents on the dollar for their gold and jewelry was ecuador.  It was the same in argentina. If you need money fairly quickly after a crisis you will likely have to sell at a discount.  Best to stock up on other stuff too.  Most people would have to sell their stuff if they went six to twelve months without a job.  Crises have a way of forcing people to part with things they wish not to part with. Can runaway inflation happen?  sure.  but when the dust starts to setttle and a huge number of people are unemployed anyone having to sell stuff to make ends meet will likely find that they aren't being offered what they expected.  It was a great time to buy gold and jewelry from the newly poor people in argentina first and ecuador second.  Those with money made instant twenty and thirty percent profits from buying at a huge discount in one market then aggregating it and selling at a slight discount in other markets, a primitive form of arbitrage.  I speak Spanish fairly well and spent a lot of time in south america so I keep up with that area more closely than others, but I do think this is generally applicable in most crises.  when newly poor people have to cough up their assets they don't get a good deal. I couldn't take advantage of those deals though even though they were offered to me due to my conscience.  I much prefer to smuggle ipods into venezuela.  Back in the old days it was mp3 players.  Margins are really good and I am doing the Lord's work by fucking with Hugo Chavez.

Sat, 01/29/2011 - 23:36 | 917308 Mr Lennon Hendrix
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When governments crumble, their fiat paper does no better.

Sat, 01/29/2011 - 22:31 | 917237 Fred Hayek
Fred Hayek's picture

Um, is every extended crisis the same?

What if the cause of the extended crisis is an inflation driven economic collapse?  In such an instance, you could have all the reserve notes in the world and it would do you no good.

Sat, 01/29/2011 - 21:53 | 917171 lunaticfringe
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You are like an idiot only worse. Maybe an idiot on acid. Ecuador? Lose your job? Dude you have no idea wtf you are talking about.

Sat, 01/29/2011 - 22:13 | 917204 Reese Bobby
Reese Bobby's picture

Incilvility flag/junk.

Anger issues?

 

Sat, 01/29/2011 - 22:15 | 917208 lunaticfringe
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Dude. Read the comment. If you agree, I will be outnumbered 2-1.

Sat, 01/29/2011 - 21:43 | 917151 Milestones
Milestones's picture

Could not have said it any better. Getting thru the first 90 days will scare the shit out of most persons.          Milestones

Sat, 01/29/2011 - 21:13 | 917086 topcallingtroll
topcallingtroll's picture

you know I was in goldminers for a while.  I just can't stomach these 60 and 70 pe ratios, as pe ratios are traditionally developed, with trailing earnings and not minus the "one time" expenses that reoccur in various guises each year.  I haven't looked at them recently, so maybe they have changed.  Yes I understand it is leveraged to the price of gold.  That's what scares me!  I might as well buy an option or play in the futures market.  I just like low pe stocks and cheap asset classes, not that I can find much right now.  Sugar was the last reviled asset class in the commodities a few years ago.  Now everything is fully priced.  what to buy now?  Probably emerging market small caps with good dividends.  The wisdom tree fund has taken a hit recently  DGS and all this rioting really won't effect the price of oil much longer, because no one not even the moslem brotherhood wants to shut the suez down.  So I'm going to start looking at going long natural gas, emerging small caps, and maybe short oil in a few days.  Natural gas wait a while though.  It may be too late to play it this round.  I know everyone disses UNG but I watch it closely and I'm going all in if it drops to 5.60 again to play it for another round.  Just be careful about expiration.

Sat, 01/29/2011 - 21:32 | 917134 mcarthur
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+1.  For many years I would buy/sell bullion and went long GLD periodically but the miners are priced for only one outcome- $2,000 gold.  I have no problem with this but I also invest on current or trailing parameters not what Sprott predicts.  I spent a few years in M and A at a major Canadian miner and the only way you can get the spreadsheets to work is to assume prices would rise substantially and then use discount rates less than the cost of capital. Not for me.  Miners like Agnico Eagle will talk about $500/oz costs but they put $350/oz into capital plus the cost of capital and will still come in at 30:1 PE.  Scary stuff, but many have stomachs for it.  I'll stay on the sidelines. 

Sun, 01/30/2011 - 09:16 | 917636 Monkey Craig
Monkey Craig's picture

Thank you for explaining your experience in the field. Though I love gold and have been buying the  bullion for years, I never understood the miners. They seem to be very difficult to analyze and you have to place your faith in management (moreso than a company like KO, PEP or PG which have consumer products sold around the world).

Sun, 01/30/2011 - 15:02 | 918149 RockyRacoon
RockyRacoon's picture

Miners did extremely well in the 1930s because one could not own gold -- so, miners became the next best option.  The country being on the gold standard made miners a no-brainer.  Today we do not have a gold-backed currency so the miners are just another industry in many ways.   It's easier now to hold physical gold than a stock in a miner.   As for confiscation, there is much more low hanging fruit than gold.  When/if gold is confiscated the times will be very bad.  Nothing other than food/water/shelter/lead will be of much value anyway.

Sat, 01/29/2011 - 20:18 | 916996 Bearster
Bearster's picture

While I think it's good for everyone to think about risk and hold some gold off shore (for Americans and non-Americans), I don't think it's likely that the US gov't will try to confiscate again.  None of the factors that were important in 1933 even apply today:

 - people don't think of gold as money

 - they don't use or circulate gold coins

 - gold is not widely owned

 - the gov't wouldn't likely get alot, as voluntary compliance would be low

 - gold confiscation would be widely unpopular

 - with a simple change of the tax deferral rules, they could effectively grab a far larger pie: the 401K and IRA accounts and force people to buy "retirement bonds" or else lose their deferral status and have to pay early withdrawal penalties plus income tax.  If this was done after a big market plunge, a lot of people would love the idea of a "guaranteed" 5% return or whatever sweetener they put on it.

Sat, 01/29/2011 - 22:16 | 917209 DoChenRollingBearing
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Two thoughts Bearster!

1)  .gov grabbing the 401ks and IRAs is a real risk.  Argentina did that a few years ago as that was the last easy money for their .gov to grab.  They put all those private pension plans into Argentine long bonds.  I have read (but do not KNOW) that these private plans are the last big pot of easy money to snatch HERE.  Disclosure: I cashed in my IRA in late 2008, payed the penalties and taxes and have rested easy on that ever since.

2)  I agree that if you can get some gold stashed away overseas that you should.  I have!  My physical gold is in 5 different places, all very secure.  I also AGREE that a gold confiscation is unlikely, but it is possible.  FOFOA makes a convincing case that even .govs will welcome, sooner or later, their citizens owning gold.  Gold will provide much of the capital to rebuild America, after the SHTF (my words, not FOFOA's).  And I also agree that few would comply...  Hell, I could just AIRMAIL a 1 oz Gold Eagle for each pallet of Korean bearings for our company in Peru...

Sat, 01/29/2011 - 22:29 | 917233 Gimp
Gimp's picture

Totally agree. Cashed out my 401K a couple of years ago and paid the penalty. Just a matter of time before the government forces them into bonds of some type.

Sun, 01/30/2011 - 00:35 | 917373 lunaticfringe
lunaticfringe's picture

I did the same thing. I bought land and gold with my dough. Those brainiacs can buy and sell paper. Eventually that will trade back to its intrinsic value.

Sat, 01/29/2011 - 22:29 | 917232 Gimp
Gimp's picture

Totally agree. Cashed out my 401K a couple of years ago and paid the penalty. Just a matter of time before the government forces them into bonds of some type.

Mon, 01/31/2011 - 17:53 | 921880 earnyermoney
earnyermoney's picture

Did you do cost benefit analysis yourself or go to a professional.

Sat, 01/29/2011 - 21:49 | 917165 lunaticfringe
lunaticfringe's picture

The days of government seizing my shit are over with. I'm an alchemist. I can turn gold into lead. Come get some.

Sun, 01/30/2011 - 00:36 | 917375 Freddie
Freddie's picture

Back in FDR's day - not that many people had guns like today.  Today many homes had ARs, AKs and more.

Sat, 01/29/2011 - 20:49 | 917048 dracos_ghost
dracos_ghost's picture

- with a simple change of the tax deferral rules, they could effectively grab a far larger pie: the 401K and IRA accounts and force people to buy "retirement bonds" or else lose their deferral status and have to pay early withdrawal penalties plus income tax.  If this was done after a big market plunge, a lot of people would love the idea of a "guaranteed" 5% return or whatever sweetener they put on it.

Already in the works. The gov wants to restrict investment options under the guise of Investment Security(ie Treasuries only).

Your 401(k) would look more like an annuity.

http://www.whitehouse.gov/sites/default/files/microsites/100226-annual-r...

- gold confiscation would be widely unpopular

 

It was unpopular when FDR did it too.

 

Sat, 01/29/2011 - 20:25 | 917010 Jasper M
Jasper M's picture

+1; a thinking man's post.

Sat, 01/29/2011 - 19:53 | 916954 mcarthur
mcarthur's picture

Faber- "He likes a few gold miners and sees opportunities in water, fertilizer and potash."  Talking his book no doubt.  I take Grantham's view on gold but the fertilizers are an interesting one, until about August anyway.  Capacity is working flat out across NPK and inventories are shockingly low in the entire pipeline.  But I suspect potash prices will be kept down by the monopoly this year to ensure the BOD of BHP rejects building their first operation in Canada since the financial model will not hold up under $500/t.

Sat, 01/29/2011 - 21:23 | 917112 topcallingtroll
topcallingtroll's picture

potash has had a nice run already but I tend to agree.  Unfortunately this is a widely held belief that potash and fertilizer are opportunities.  This usually means the opportunity has already passed by the time someone talks about it in Barron's

Sat, 01/29/2011 - 21:56 | 917175 mcarthur
mcarthur's picture

Nitrogen and phosphate are low margin businesses whereas potash has plenty of barriers to entry so I am a little mystified why prices have not risen quickly, hence my BHP conspiracy theory.  I kind of chuckle since if you were to add up all the claims I have made at ZH wrt what I have done in my career to date I should be 100 years old but believe it or not, I am currently the project manager of one of the major potash expansions in Saskatchewan.  Mining engineers get around.

Sat, 01/29/2011 - 19:47 | 916944 DollarMenu
DollarMenu's picture

FWIW-

Gabelli was not convicted.

As they all do, he paid a 'settlement'.

So, only slightly soiled, not really dirty. lol

 

Sat, 01/29/2011 - 19:43 | 916937 bank guy in Brussels
bank guy in Brussels's picture

« ... Marc Faber ... He is also likes physical gold but says you shouldn’t own it in America where the government could take it away. ...»

Marc has that one right! He understands America and its so-called 'rule of law', ha! It will be Confiscation City.

What was brilliant about the American rulers, was realising that they could so beat down their people mentally, in other ways, that they could confiscate the guns toward the end instead of early in game, perhaps when they come to get the gold as well ...

Even while many lower-class Americans, nearly impoverished, have long fantasised that their guns constituted 'freedom' while they submitted to being robbed of everything else.

For those Americans who don't know ... Continental Europeans (not the US 'poodle' the UK, where they did do a fascist confiscation of all known private handguns in the 90s) ... Continental Europeans have not forgotten the Nazis ... so people here have plenty of gold - and guns as well, actually - that are well-secured, and lots of gold and assets in Switzerland or further abroad, too, 'just in case' the Nazis or someone similar comes back.

Sun, 01/30/2011 - 04:57 | 917548 Dismal Scientist
Dismal Scientist's picture

The UK has not forgotten the Nazis either, since we lost a lot of lives fighting them. You fucking arrogant idiot.

Sun, 01/30/2011 - 06:20 | 917565 Bagbalm
Bagbalm's picture

Then why did you allow yourselves to be disarmed? Remember "An Englishman's home is his castle?" When they decide to starve you or stuff you in railroad cars and send you off to the final solution like Ukraine or Cambodia maybe you will get it.

Sun, 01/30/2011 - 06:59 | 917575 Dismal Scientist
Dismal Scientist's picture

Another idiot. UK gun laws were tightened in 1987 and 1996, following massacres perpetrated by unstable sociopaths (Hungerford and Dunblane). Before that though, it was still tough to be able to register a handgun anyway, the UK has always been tougher on gun control than most countries.

I for one, am glad about that. Since it means that retards like you could not be an owner of one here. Your comments about starvation and railroad cars indicate you are a) living in the past or sadly for you, a country where that might be possible b) a provocative twat c) have no clue about the UK.

Its most likely all of those. Sucks to be you.

Sat, 01/29/2011 - 23:05 | 917271 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The US gov couldn't handle Katrina.  How are they going to confiscate guns and gold?

Sun, 01/30/2011 - 08:47 | 917622 I need more cowbell
I need more cowbell's picture

Indeed. How's that war on drugs going, some 40-50 years along? The black market thrives here and everywhere. Only an idiot these days would surrender their gold, and the idiots aren't holding it are they?

Sun, 01/30/2011 - 00:05 | 917341 Bananamerican
Bananamerican's picture

Gold was the last Depression's confiscation prize back when the dollar was backed by gold...

This Depression they'll come for your Hewlett-Packard....

Sat, 01/29/2011 - 19:23 | 916901 WTF2
WTF2's picture

The usual suspects could not bring themselves to recomend shorts.  I think they should reconvene after taking their losses in the coming week.  Gaballi should stay home, Barron's has some nerve having a convicted crook on the panel.

Sat, 01/29/2011 - 21:25 | 917118 topcallingtroll
topcallingtroll's picture

as opposed to all the unconvicted ones on many of their previous panels?

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