LakeView Asset Management Blog

We Have Moved Our Blog To TheFinanceProfessor.com

2008-04-16T21:08:00.002-04:00

Scott Rothbort, "The Finance Professor", has moved the LakeView Asset Management Blog to the all new TheFinanceProfessor.com website.

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Amylin Stock Is Catching A Bid

2008-04-01T11:26:00.001-04:00

Amylin Pharmaceuticals (AMLN) has really been on a tear these past two trading days. As a long term holder of AMLN this is a pleasant development. However, I have to ask why the sudden jump in the stock over the past two trading sessions? There are several reasons for the sudden rise of AMLN of which any one or a combination of could be causing the rise. Here are some of those causal factors:

• The stock was simply too oversold and short interest climbed too high
• With all of the negative news about Zetia from Schering Plough (SGP) and Lipitor from Pfizer (PFE) and other statins perhaps someone finally woke up to the fact that diabetes treatment is all that much more important and the big cap pharmaceutical companies may be forced to buy AMLN
• The decline of the inhaled insulin product lines gives AMLN approved and commercially available products – Byetta and Symlin - more credibility and sales potential.

I continue to believe that AMLN Byetta LAR long acting formulation will be approved and once that occurs we will see a huge jump in analysts estimates and future sales. That is at least a year out but well worth the wait as Byetta and Symlin sales continue to grow.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AMLN --- although positions can change at any time.

MasterCard Deal With Ameriprise to Benefit MasterCard

2008-03-10T11:15:00.000-04:00

Over the weekend MasterCard (MA) announced that it entered into an arrangement with Ameriprise Financial (AMP) whereby AMP would be issuing MasterCards and debit cards. This has to be a big letdown for AMP former parent American Express (AXP) and the soon to be public Visa. AMP has over 2 million clients all of which would be eligible for the new cards. As MA takes no credit risk, this would yield accretive processing fees for MA.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of MA--- although positions can change at any time.

Dow Jones Blows Opportunity To Revitalize Its Industrial Index

2008-02-11T14:53:00.000-05:00

When Dow Jones announced its decision to replace Altria (MO) and Honeywell (HON) with Bank of America (BAC) and Chevron (CVX) today, the brand now owned by News Corp (NWS) totally blew its opportunity to modernize the Dow Jones Industrial Average Index (DJIA/DIA/DDM). The price weighted DJIA is just plain out of touch with today's investors and professional money managers.

I will be on Fox Business Network's Happy Hour - also owned by NWS - tonight to discuss with my friend and the show's co-host Cody Willard what NWS needs to do to make the DJIA relevant once again. The show airs at 5PM EDT and is repeated at 11PM EDT.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of BAC and DDM--- although positions can change at any time.

Observations Of Omniture

2008-02-08T12:10:00.000-05:00

I was happy that my investment club members at Seton Hall were around to watch, listen and observe the Omniture (OMTR) earning release, conference call and after hours trading activity last evening. The stock got slammed after hours on a great quarter and guidance. I showed the kids how the stock was being walked down by 100 share sales constantly hitting the bid after hours. The stock dropped roughly 13% before the conference call began. This was a major gift to anyone who could trade after hours. More importantly, I pointed out that one could not read into that low volume after-hours blitzkrieg. During the conference call OMTR regained some ground as the after-hours manipulation ceased. It is now up 10% on the day in a real trading session. If you believe as I do in the long term growth of internet advertising then I suggest taking a look at OMTR. Oppenheimer recently put out a well written report on the stock.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of OMTR--- although positions can change at any time.

Basic Materials Soap Opera Gets More Interesting

2008-02-01T11:01:00.000-05:00

Rio Tinto (RTP) is surging after Alcoa (AA) and Chinalco (Aluminum Corp of China) take a 12% stake in RTP. BHP Billiton (BHP) has an open offer for RTP which RTP continues to rebuff. In the meantime Freeport-McMoRan (FCX) looks like the ugly girl sitting in a chair in the corner at the high school dance. As this soap opera plays out don't be surprised if RTP jilting of BHP overtures results in BHP going after FCX.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of FCX--- although positions can change at any time.

5 Reasons To Buy McDonald's Right Now

2008-01-28T23:44:00.000-05:00

Here are 5 reasons why you want to buy McDonald’s (MCD) off the back of today’s irrational sell-off:

The flat same store sales for December will not be repeated as MCD guided to a 1.5% comp for January.
Fiscal and monetary stimulus will benefit MCD
The stock has corrected 20% from where I already alerted long term investors to take some of the stock off the table
Growth in China
Expansion of McCafe concept in Germany which I believe will eventually be MCD direct competition to Starbucks (SBUX) in the US

I added stock on today's pullback.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of MCD --- although positions can change at any time.

2008 Jim and Judy O’Brien Financial Markets and Economic Colloquium at Seton Hall University’s Stillman School of Business

2008-01-07T19:19:00.000-05:00

On Wednesday January 30, 2008 I will be hosting the 3rd annual Jim and Judy O’Brien Financial Markets and Economic Colloquium at Seton Hall University’s Stillman School of Business in South Orange, New Jersey.

This year we will kick off the colloquium at 4:30 PM with a student research presentation reviewing investment opportunities associated with potential election outcomes. The Stillman School of Business is the twice reigning NYSSA Challenge Champions. Following that presentation our panel of market experts will discuss their thoughts on the economy and financial markets for the year ahead. At last year's colloquiuim we adeptly pointed out the risks inherent in the credit markets and identified many individual stock opportunities as well.

This year’s panel includes Doug Kass of Seabreeze Partners; Tony Dwyer, Equity Market Strategist, FTN Midwest Securities: Gregory Peters, Morgan Stanley’s Chief U.S. Credit Strategist and Director of Global Fixed Income Research & Economics; Brian Reynolds, Chief Market Strategist of M.S. Howell & Co.; Cody Willard, host of Fox Business News’ Happy Hour; and, myself, Scott Rothbort.

The best news is that this is all free. The Stillman School of Business is making this event open to the public. Please mark your calendar now and I hope to see you at this great event. Parking is free and directions are available on the Seton Hall website.

10 Things That I Will Not Miss About 2007

2007-12-30T10:38:00.000-05:00

This content originally appeared on TheStreet.com’s RealMoney Silver on Dec. 20.

Another year has passed. I hope that you are all a year healthier, wealthier and wiser. As I have done for each of the past five years, and back by popular demand, I would like to share with you the "10 Things That I Will Not Miss About 2007" -- and do not want to see or hear ever again.

Here we go (in no particular order).

1. "They’re trying to make me go to rehab, I said, 'No, no, no.'" Amy Winehouse, Britney Spears and Lindsay Lohan all checked into and out of (and sometimes back into) substance abuse programs this year. Why not? It seems like the optimal thing to do.

The entire world keeps downloading their songs (and movies) through Apple's (AAPL) iTunes despite their misdeeds. It seems like these pop idols are just auditioning for the reality series "Celebrity Rehab With Dr. Drew," which will premiere on Viacom's (VIA) VH1 on Jan. 10, 2008.

As much as the Mitchell Report on performance-enhancing drug use in Major League Baseball may have been flawed, nevertheless, fans of baseball have turned against the slugging and pitching juicers like Barry Bonds and Roger Clemens. The same can be said of Marion Jones and Floyd Landis in their respective sports.

To the singers, actors and athletes who abuse substances and expect our adoration, I say, "No, no, no."

2. Crude oil going to $100. Eventually, crude oil will get there, however, it might not happen just yet. The incessant prognostication, pontification and speculation surrounding crude oil hitting $100 a barrel is nauseating.

Do some homework and own oil services companies such as Schlumberger (SLB) or Diamond Offshore (DO) because no matter if crude oil is $80 or $100 or $120, we still need to get more of this stuff out of the ground.

3. Scott Boras can't play bridge. Scott Boras has the premier baseball player of our generation, Alex Rodriguez (A-Rod), as his client. A-Rod plays on the biggest stage in baseball, Yankee Stadium. A-Rod had an option to stick around for three more years at a huge salary that even dwarfs those of the bank CEOs who lose billions of dollars.

So what does Boras do? He instructs his client to opt out of the contract. I am talking about a real contract, not contract bridge. So what does A-Rod do? He calls a real bridge player, Berkshire Hathaway (BRKA) CEO Warrant Buffett.

The Oracle of Omaha then dials up some of his buddies at Goldman Sachs (GS) . You know Goldman Sachs, it is the only financial institution on the planet in which the members of its staff earned their bonuses the old-fashioned way, by making money for shareholders.

Goldman Sachs happens to be a partner with the New York Yankees in the YES network. Goldman Sachs, Warren Buffett and the Steinbrenners know when they have a stronger hand and arrange for a contract extension at the original terms that the Yankees offered to A-Rod, less what the Yankees were supposed to receive from the Texas Rangers.

Scott Boras has met his match and holds no trump cards. I think that Max Bialystock could have given A-Rod better advice.

4. Judge shows. It started out with Judge Wapner. That was fun. It was original.

Now on the air we have Judge Judy Sheindlin, Judge Marilyn Milian, Judge Joe Brown, Judge Greg Mathis, Judge Cristina Perez, Judge Glenda Hatchett, Judge Maria Lopez, Judge Alex Ferrer and Judge Lynn Toler. Pardon me if I missed a few.

You can channel surf and watch courtroom shows back to back for hours on end. If you don't believe me, then take a day off and try it. I have had enough of these silly judge shows.

All is not lost, though. Here is an idea that I will offer to my friends Jim Cramer of General Electric's (GE) CNBC and Cody Willard of News Corporation's (NWS) Fox Business News, as long as I get the creative credit and a paid co-producer role: Judge Jim or Judge Cody. I would even put on a uniform and play bailiff.

Here is how it would work:

Voiceover: Real stocks! Real investors! Judge Jim is in the courtroom! Welcome to "Investors' Court." Long Louie bought Sharper Image (SHRP) on Broker Blowhard's research recommendation. He is suing for bad gift ideas.

Of course it goes both ways. Maybe we hear this:

Voiceover: Real stocks! Real traders! Judge Cody calls the court to order! Welcome to "Traders' Court." Short Sally shorted Google (GOOG) based on Hedge Fund Harry's newsletter. She is suing for short-sighted advice.

Gentlemen, start your gavels!

5. Junk email. Last year, I was so concerned for that poor Nigerian prince who emailed me when he could not get his $5 million out of the bank. Then again, because I was so inundated with emails from his other several hundred princely paupers, I decided that it was best to charge $3 million as an upfront fee to help them in their endeavor to free up their lost money.

I had no takers.

Well, as it turned out, those princes must have solved their problems, because I don't hear from them anymore. Now I have a bigger problem, though. It has to do with -- how shall I put this? -- my manhood.

I did not think that after siring six children that I had such a problem, but it appears that some people think otherwise because I receive dozens of emails a day for cheap mail order pharmaceuticals like Pfizer's (PFE) Viagra and Eli Lilly's (LLY) Cialis.

To those spammers, when it comes to size, I would be worried about positions in Pfizer and Eli Lilly, both of which I would not be long.

6. ADP payroll report. Annually, I name the most overexposed metric of the year. For 2007, Automatic Data Processing's (ADP) National Employment Report gets the nod.

The self-serving ADP report, which is released two days before the monthly Bureau of Labor Statistics report, has a poor track record of predictability and accuracy.

I am tired of listening to the press coverage that the ADP report receives. What is even worse is the Pavlovian response (both buying and selling) that is triggered when the report is released.

7. Election polls. Bill Clinton was a virtual unknown at this point in the 1992 campaign. He won the election. The media has now started to coronate his queen as the next President of the United States. Along comes another Razorback, Mike Huckabee, and polls begin to change.

Let me remind people that Iowa caucuses and New Hampshire primaries and Zogby polls do not decide who will be the next President. In fact, our constitution provides for a general election and an arcane process of selecting a Prez and his/her trusty sidekick the Veep.

So please take your polls and shove 'em.

8. Naming market tops and bottoms as if they were sport stadiums. The duct-tape bottom? The Blackstone (BX) top? I am sick and tired with these nom de markets.

How about we sell naming rights to bull markets and bear markets to companies? Even better, we should sell naming rights for a particular quarter.

How does the Baidu (BIDU) Third Quarter of 2008 sound to you? Maybe that would draw some buying interest for NYSE Euronext (NYX) stock.

9. Overused commercials. Sometimes too much of a good thing can be bad. If I have to hear one more of Anheuser-Busch's (BUD) Bud Light "Real Men of Genius" commercials on my car radio, I am going to crash my vehicle into a brick wall. The first few were entertaining and original, but now they are downright moronic.

MasterCard (MA) is one of the great investment stories of 2007 and should continue to return value to shareholders in 2008. Those "Priceless" commercials, however, are just too painful to watch anymore.

The "Cavemen" series of commercials for Berkshire Hathaway's (BRKA) Geico yielded a failed TV show. (Technically, it is on hiatus.) With the TV writers on strike, maybe it's time to give Geico's gecko his own show.

10. The Fed is cutting rates to bail out hedge funds. It certainly sounds good if you want to be politically correct in an economic sense, however, the Fed is only responsible for monetary, not fiscal, policy.

Furthermore, the Fed is interested in economic growth and financial market stability; it could care less about the profitability or "going concern" status of an individual entity, unless that would cause a systemic event.

If you want to better understand the Fed's responsibilities, take at look at its own publication on its purposes and functions.

I am the first to criticize the FOMC for its short-sighted actions and lack of responsible communications, but thinking that the Fed, or the FOMC, is focused on bailing out hedge funds is absurd.

My best wishes for a happy and healthy holiday and New Year season to all of you and your families. Thank you for your personal notes and professional advice during the past year. I hope our RealMoney team has made this year a profitable and enlightening one for our subscribers. Last but not least, thanks to our tireless contributors and editors who work so hard every day to produce this fine product.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL, SLB, DO, GS, GOOG and MA --- although positions can change at any time.

Six Flags Roller Coaster RIde May Be Over.

2007-11-09T11:29:00.000-05:00

Six Flags (SIX) is creeping ever lower. The company reported disappointing guidance and will take a charge of about $30 million. The next stop for SIX is bankruptcy. SIX was inducted into my list of worst managed companies in the United States. Here is a thought. Eddie Lampert buys up the $2.5 billion of debt for pennies on the dollar, takes control of the company in bankruptcy court, sells the amusements off to other operators for scrap metal and then owns the prime SIX real estate for well below market value.

Wild Market Swings and a Look At 2007 Daily Results

2007-11-02T00:30:00.000-04:00

After some recent wild market swings, I felt like torturing some numbers. So, I decided to take a look at some of the big up and down days that the market has endured this year. Using the S&P500 (SPX) as the basis for the analysis, YTD inclusive to November 1, 2007, here is what I ascertained

116 positive days – Total simple aggregate return was 72.18%; simple average daily return was 0.62% per day
95 down days – Total simple aggregate return was -65.11%; simple average daily return was -.69% per day
23 days with returns greater than 1% - Total simple aggregate return was 34.24%; simple average daily return was 1.49% per day
24 days with returns less than -1% - Total simple aggregate return was -43.69%; simple average daily return was -1.82% per day
4 days with returns greater than 2% - Total simple aggregate return was 9.99%; simple average daily return was 2.50% per day
8 days with returns less than -2% - Total simple aggregate return was –21.02%; simple average daily return was -2.63% per day
Total net simple aggregate price return for days with return plus/minus 1% is -9.45%
Total price return for the SPX for the year is 6.36%

So what can we infer about the price action of the SPX from this data? While the magnitude of down days is greater than that of up days the market still remains higher as the quantity of up days is greater than the quantity of down days. Thus the down days are more taxing than up days but are harder to come by.

Panic tend to come in days of selling rather than during days of buying. i

How does this compare historically?

In 2007, 55% of trading days ended higher while 45% of trading days were in the red. From 1950 through 2006 the SPX ended higher on 53.6% of trading days.

As stated above the average up day returned 0.62% while the average down day returned -0.69%. From 1950 through 2006 for the SPX the average up day was up 0.62% while the average down day was -0.64%.

The SPX has advanced 6.36% so far in 2007 after the November 1 drubbing of -2.64%. This compares to the simple average annual return of 9.37% for that index. Of course 2007 has nearly 2 more months to go.

Thus, for all the chest thumping, foot stomping, shoe banging and emotional outbursts exhibited by bulls and bears alike this year, the simple fact is that the SPX is trading in a manner which is quite typical on an historical basis.

While the data just looks at 2007 versus historical data, I believe that this analysis can be expanded to look at individual years for which we can further parse out and query in multiple ways. Given the chance I will endeavor to do so.

Garmin Should Be Bought On Weakness As The Tele Atlas News Is A Positive Event

2007-10-31T10:05:00.000-04:00

Garmin (GRMN) reported EPS of 89 cents this morning beating already lofty expectations of 82 cents. The stock is selling off despite these results.

I can attribute this sell-off to one of three reasons. First, the old whisper number game is being played and despite GRMN reporting 78% growth in EPS was obviously not enough for the fast money crowd. Second, the stock was due for some profit taking.

The third reason is actually a reason to be buying the stock in here. GRMN announced concurrently with its earnings report the company’s intention to purchase Tele Atlas for EUR 2.3 billion or USD $3.3 billion which represents an approximate 15% premium to the bid made by rival TomTom for Tele Atlas. Recall that a few weeks ago Nokia (NOK) agreed to buy Tele Atlas’ digital mapping competitor Navteq (NVT) for $8.1 billion. The NOK/NVT deal would have left GRMN as the odd man out in terms of having a vertically integrated digital mapping source. GRMN was sold heavily on that news. Now that GRMN is in the game for Tele Atlas, the immediate reaction is to sell the acquirer. Since TomTom is not likely to go away quiet, investors may be concerned that GRMN would have to pay significantly more that $3.3 billion if a bidding war erupts. However, GRMN is far better positioned than TomTom to finance the acquisition and I think will be triumphant at the end of the day. TomTom shares are significantly lower in Europe as investors confirm that GRMN is now in the drivers’ seat for Tele Atlas.

In conclusion, the earnings plus the Tele Atlas news is a positive for GRMN and the stock should be bought on weakness, especially as it is down double digits in early trading today.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of GRMN --- although positions can change at any time.

Know Your Components of ETFs

2007-10-26T10:27:00.000-04:00

I really enjoy David Letterman and am not much of a Jay Leno fan. Maybe it is an East Coast / West Coast thing. Or maybe it’s because I was a real Johnny Carson fan and Letterman is cut from Carson’s mold. One of my favorite bits on Letterman is “Know Your Cuts of Beef.” In than spirit I have my own version today – Know Your Components of ETFs.

This comes out of a conversation with an old friend who from time to time will closely follow my recommendations. He asked me yesterday where I thought Google (GOOG) was going. I said I have a target of $750- $850. This is based on both a top down and bottom up analysis which I performed with my research team. My friend said that he owned the Internet HOLDRs (HHH), an ETF comprised of internet stocks. To his surprise, I informed him that GOOG was not represented in the HHH. I explained that HHH was mostly comprised of Ebay (EBAY), Amazon.com (AMZN), Yahoo (YHOO) and Time Warner (TWX). HHH was introduced and launched many years before GOOG came to market and is a fixed portfolio. Since he thought he had GOOG exposure but had none; he wanted to keep exposure to EBAY and YHOO; and, wanted to cut back on exposure to TWX, AMZN and the other residual stocks in the HHH comprising about 15% of the portfolio he immediately sold some (but not all) of his HHH and used the proceeds to buy GOOG.

The lesson - Know Your Components of ETFs.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of GOOG --- although positions can change at any time.

Facebook Will Not Save The Decline of the Microsoft Empire

2007-10-25T09:56:00.000-04:00

Here are my thoughts on the Microsoft (MSFT) investment in Facebook. 20 years ago the company’s operating systems burst on the scene and helped to launch the desktop computing revolution. In the process it became a virtual monopoly. MSFT was the hunted and the rest of technology was the hunters. Now 20 years later, Google (GOOG) and Apple (AAPL) have emerged to be the leading edge of technology as MSFT is still trapped in its windows mindset. MSFT is now the hunter and no longer the hunted. The Zune is a joke. XBOX is an industry laggard. Any attempt to cut in on iPhone by MSFT will likely be a failure. The leadership at MSFT is rusty at best. Bill Gates is too focused on social issues and playing cards with Warren Buffett. The small investment in Facebook will not generate any meaningful benefit to MSFT. In the end, buying MSFT based on this news is a giant mistake.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL and GOOG --- although positions can change at any time.

Disney And Its ABC Network Are The Big Winners In The New TV Season

2007-10-04T00:19:00.001-04:00

So far, in my opinion, ABC (a division of Disney (DIS)) gets my vote for delivering the best new shows of the television season. We (my wife and yours truly) really enjoy watching Dirty Sexy Money and Big Shots. Both shows are quirky, avoid the formulaic model churned out by network TV, are not retreads and don’t have Law and Order or CSI in the title. The Disney Channel release of High School Musical 2 at the end of the summer was a formulaic hit which will generate secondary revenues for DIS in the months to come. ABC also premiered Cavemen this week which we unfortunately missed but plan to catch up on and watch in the future. Two new shows premiered this summer which I also highly recommend. The first one is also an ABC show, Greek. Our kids like to watch Greek with us, especially when I interject my experiences at Pi Kappa Alpha at the University of Pennsylvania. Greek appears on the cable ABC Family channel. The other summer entry is Damages which is on the FX (a NewsCorp/Fox (NWS)) cable channel. Damages is enthralling and is something I would expect on the big screen or HBO. The show has not yet ended its season run however there will be opportunities to catch the entire series at a later date when FX repeats the shows or it gets released on DVD. Speaking of HBO, the new season of Curb Your Enthusiasm is superb and for those of you desiring a more mature, sexually explicit and intellectual selection all in one, check out Tell Me You Love Me.

So does this translate into an investible idea? Perhaps. First, I would eliminate General Electric (GE) the parent of NBC and NBC Universal. Why did NBC lack patience with Studio 60 on the Sunset Strip? CBS is stuck in CSI mode and is still a company operated by and for Sumner Redstone. I would avoid CBS as well. DIS will bore you to death but it has delivered consistent positive returns to shareholders despite some of the boardroom drama the company loves to surface every few years. I would not exactly categorize DIS as a growth company but if I was looking to down shift some risk, DIS would be a top candidate. Finally, there is News Corp (NWS). I really like what Rupert Murdoch is doing with the Dow Jones (DJ) acquisition and how it fits in perfectly with his new concept, Fox Business Network (best of luck to my dear friend and colleague Cody Willard). NWS has a similar risk profile to that of DIS. In fact, if you overlay a 5 year chart of DIS over that of NWS, the two companies’ stocks nearly tracks each other. So, I would put NWS in the same category as DIS and would be indifferent to add either one if those conditions I discussed above were presented to me.

Starbucks Downgraded - Short Thesis Playing Out

2007-09-27T00:56:00.000-04:00

Andy Barish one of the best restaurant analysts who resides at Bank of America (BAC) downgraded Starbucks (SBUX) to a sell early this morning. Barish places a $23.00 price target for the coffee themed quick service restaurant which closed at $27.69 yesterday. Supporting his call he cites: slowing growth; EPS / margin / same store sales risk to the downside; and, a contraction of the earnings multiple. BAC 2008 EPS estimate for SBUX is $1.02 versus consensus of $1.06. When initiating my recent short in SBUX I also came to the conclusion that growth was slowing, that earnings estimates will soon be reduced and that the PE had further to decline. It is nice to be in Barish’s company. Expect Barish’s peers to follow his lead in cutting EPS and price targets for SBUX.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of BAC and short shares of SBUX --- although positions can change at any time.

Opportunity in First Israel Fund

2007-09-07T11:45:00.000-04:00

The First Israel Fund (ISL) is off nearly 6% in above average volume. The sell-off eliminates the 4% premium that ISL had to its NAV and puts it slightly back into discount. However, the Israeli stock indexes were only off about ½% on Thursday and the markets are closed in Eretz Yisrael on Fridays and Saturday (Yom Shabbat). The largest holding in ISL is Teva Pharmaceuticals (TEVA). TEVA comprises about 10% of ISL holdings. TEVA received some good news today when it received a favorable court ruling allowing the company to produce a generic form of Wyeth’s (WYE) Protonix prescription heartburn medication. TEVA is off about 2/3% today and if the market was not weak I believe it would be trading higher. WYE is falling over 3%. Today is another great example of the cuffs not matching the collars and you have a nice opportunity to pick up ISL. Shabbat Shalom to all.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of ISL --- although positions can change at any time.

HAIN is Celestial

2007-08-30T10:59:00.000-04:00

Hain Celestial (HAIN) delivered a great report after the bell last night. The company earned 30 cents versus consensus of 28 cents for 4q07. For FY07 HAIN earned $1.17. Add to that good report a boost in FY08 guidance to a range of $1.38 - $1.42 versus current consensus estimates of $1.38. At the midpoint this implies 20% YOY growth. I am willing to pay 25 times earnings for HAIN. The merger of Whole Foods (WFMI) and Wild Oats (OATS) will draw more attention to HAIN from potential suitors. I am raising my price target for HAIN to $35 - $36 based on operations. On a takeover, the stock is worth $40 or more.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of HAIN --- although positions can change at any time.

We Need The SEC To Act In Order To Protect Shareholder Rights and Ensure Investor Confidence.

2007-08-15T00:23:00.000-04:00

So where is the SEC these days? They are busy checking how the big investment banks are marking their mortgage and other asset backed positions. While that is going on here is what the SEC is also doing:

Eliminating the short sale up-tick rule to allow short raids on stocks. This rule was put in place in response to the 1929 crash. For what reason was it lifted now?
Standing aside while slum dunking of options on ETFs and stocks related to ETFs takes place.
Allowing unsubstantiated rumors to be spread to the financial media despite lack of validity or corroboration.

I fully respect the SEC’s role in the financial markets. What I am saying is that there are many other issues which that regulatory body needs to address in very short order to protect shareholder rights and ensure investor confidence.

Another Volatility Spike Has Occurred

2007-07-25T00:21:00.000-04:00

With yesterday’s panic sell-off, the CBOE OEX Volatility Index once again surpassed its 200 day moving average by over 50%. This indicates another volatility spike condition similar to the one that I pointed out last month in this blog. Thus, it is time once again to look forward to a rise in the S&P 500 (SPX/SPY) over the next 20 trading days. While I was already long SPY from the last spike, I added to my positions with SPY call options.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares and calls of SPY--- although positions can change at any time.

Amylin Disapoints Analysts But Not Investors

2007-07-24T23:34:00.000-04:00

When it appeared that yesterday’s results for Amylin Pharmaceuticals (AMLN) would be met with disappointment I expected to hunker down for another round of selling. Instead AMLN was higher from the opening bell and was one of the few strong stocks in a dismal tape. While sales of its blockbuster Byetta treatment missed analysts’ expectations by a small margin, AMLN other diabetes treatment Symlin appears to be growing faster than anticipated. AMLN has a long acting formulation, Byetta LAR and an obesity treatment, pramlintide in the pipeline which should provide some excellent future revenue streams if approved. I anticipate LAR to be available in 2009.

The market for diabetic pharmaceuticals and medical testing equipment is growing because of the unfortunate increase in diabetes diagnoses throughout the world and the increasing demand for at home medical testing (for diabetes and other conditions). AMLN is my favorite pharmaceutical play. Inverness Medical Innovations (IMA) is my favorite diagnostic name. A more pure diabetic diagnostic play would be PloyMedica (PLMD). The best source for diabetic research is my friend David Kliff of the Diabetic Investor.

For more information on diabetes, go to the American Diabetes Association website.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AMLN and IMA --- although positions can change at any time.

Digested Gains in Yum Brands

2007-07-16T01:32:00.000-04:00

I reversed my strategy on Yum! Brands (YUM) after devoting more thought to the company’s quarter which it announced last Wednesday. The quarter was not as good as the headline numbers because of the significantly lower effective tax rate. Furthermore, YUM’s restaurant margins declined due to higher food costs stemming from commodity prices. Thus, with YUM rising about 2% from my last buy point, I decided to take some profits on the stock. While I still think that YUM can get to $40 by the end of 2008 and love the growth in China, I think that the back half of 2007 could be more difficult than the company has forecasted. Furthermore the weakness in the restaurant stocks and better opportunities in other sectors – such as technology, metals, mining and machinery - lead me to use YUM as a trading vehicle but not as an investment.

No position in stocks mentioned

Does Red Lobster Have to Resort to New Tactics to Attract Diners?

2007-07-01T12:11:00.001-04:00

I love to take pictures of scenes like the one above. When Darden International (DRI) reported quarterly results in June, the company highlighted difficult comps and rising seafood prices for its Red Lobster concept. Does this mean that they have to change their marketing plan? Are they trying to lure in diners with cheap haircuts? Is this a joint venture with Staples (SPLS) or is SPLS just providing the scissors? It is none of the above but nevertheless, its worth a chuckle when you see that sign above.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC did not have any positions in the companies named above--- although positions can change at any time.

Schlumberger Gets Added to the Bar Mitzvah Portfolio

2007-06-27T22:10:00.000-04:00

Schlumberger (SLB) is one of the premier oilfield service companies in the world. While I have held SLB for several months personally and for clients, the stock is turning into a much longer term holding than I originally anticipated. I am expecting 20% or more EPS growth for SLB in the next several years and consider it an excellent long term investment. Considering my projected annual growth rate in earnings of at least 20% for several years, SLB sells at a reasonable 21 times current year’s consensus and 18 times next year’s estimates. Put this together and you get a sub 1 PEG ratio stock which is a bargain. As a result, today I bought SLB for my children’s accounts (on the morning dip) thereby adding the company to the Bar Mitzvah Portfolio. SLB now joins Apple Computer (AAPL), Goldman Sachs (GS), Google (GOOG), McDonald’s (MCD) and Sears Holdings (SHLD) in the Bar Mitzvah Portfolio.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL, GS, GOOG, MCS, SHLD and SLB --- although positions can change at any time.

We Have Reached a Volatility Spike

2007-06-26T17:18:00.000-04:00

My research indicates that a volatility spike has occurred in the markets. Only on 8 occasions since 2000 has the CBOE Volatility Index (VXO) exceeded its 200 day moving average by greater than 50%. The index closed at 18.23 today versus the 200 day moving average of 11.96.

Below is a table which I prepared analyzing how the S&P 500 (SPX) performed 5 and 20 days after a volatility spike in which the VXO exceeded 50% of its 200 day moving average.

DATE	CLOSE	+5 TD	% CHANGE	+20 TD	% CHANGE

4/14/2000	1,356.56	1,429.86	5.40%	1,452.36	7.06%
10/12/2000	1,329.78	1,388.76	4.44%	1,400.14	5.29%
9/17/2001	1,038.77	1,003.45	-3.40%	1,089.98	4.93%
7/16/2002	900.94	797.70	-11.46%	884.21	-1.86%
7/19/2002	847.76	852.84	0.60%	928.97	9.58%
6/12/2006	1,236.40	1,240.14	0.30%	1,272.52	2.92%
2/27/2007	1,399.04	1,395.41	-0.26%	1,428.61	2.11%
3/1/2007	1,403.17	1,401.89	-0.09%	1,422.53	1.38%

AVERAGE			-0.56%		3.93%

Source: LakeView Asset Management, LLC

While the 5 days subsequent to this volatility spike was flat on average, 20 trading days after the spike, the SPX was up on average 3.93% and higher in 7 out of 8 occurrences. The worst performance 20 days hence was just -1.86% while the best was +9.58%. Thus, I conclude that it is time to back the boat up in index ETFs. I am currently playing this with Spyders (SPY), Ultra S&P500 (SSO) and Ultra Russell 2000 (UWM).

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of SPY, SSO and UWM--- although positions can change at any time.

Ignore the US Oil Fund ETF (USO), an ETF Failure

2007-05-21T08:45:00.001-04:00

When it comes to exchange traded funds (ETFs) no two ETFs are alike. Also, not all are successful. For every S&P 500 Spyder (SPY) or Nasdaq Qs (QQQQ) there are several lightly traded ETFs. However, the one ETF that has failed investors consistently is the US Oil Fund ETF (USO). Investors have expected this ETF to trade in concert with the price of crude oil. However, nothing could be further from the truth. Unlike the Streetracks Gold ETF (GLD) which closely tracks the price of gold, the USO is a complex ETF which has failed to deliver. Since the USO relies on the use of derivative contracts rather than physical assets and gets caught up in the vagaries of the crude oil markets – such as price contango – the USO has a built in recipe for disappointment. If you want to use exchange traded instruments to take advantage of crude oil price movements then think twice. You are better off looking for an oil services or integrated oil stock that highly correlates with crude oil prices rather than playing around with the USO.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were short shares of SPY--- although positions can change at any time.

Stock Splits Are Likely to Decline in Frequency as Companies Favor Over $100 Priced Stocks

2007-05-18T00:36:00.001-04:00

There is an interesting phenomenon in the financial markets which I believe will continue to gain traction and could have implications for investors for years to come. Now more than ever, companies are allowing their stock prices to trade and remain above $100 (or par) per share without splitting their shares to allow sub par prices.

For many years, I could only recall two companies which consistently had stocks which were priced above $100: Berkshire Hathaway (BRK/a, BRK/b) and Alleghany Corp (Y). Now I can name several of the core holdings for LakeView Asset Management, LLC which are above $100 with no indication that a split is forthcoming. These holdings are Google (GOOG), Sears Holdings (SHLD) and Goldman Sachs (GS). Many more companies are joining the ranks of over $100 priced stocks. With its recent move, Apple (AAPL) is well above $100 and despite the company having split its stock 2 for 1 on three occasions since 1987, I wonder whether AAPL will split its stock or become part of the new “century” stock issues.

While splitting a stock has no implication for an investor’s holdings or tax basis, it does have some secondary psychological effects upon investors and the markets. First, investors are trained to think in terms of round lots of shares 100, 200, etc. rather than dollar amounts when making an investment decision. Some investors would prefer buying 100 shares of a $45 stock than 1 share of a $450 stock such as GOOG even though GOOG is a better investment value than the other company’s stock. Second, bid / offer spreads will tend to widen in absolute terms but not in relative or percentage terms as the price rises. This becomes more apparent when the stock rises above $100. Third, the wider price swings in absolute terms for the century stocks will give an appearance of higher volatility and increased risk even though the price swings may be equivalent on a percentage basis. In other words, a $5 swing on a $150 stock seems more precipitous than a 50 cent move on a $15 stock. Finally, anyone who desires to enter into options related activity will require more capital since the minimum option contract for most stocks carries a multiplier of 100 shares per contract. This will scare away speculators and likely drive spreads and implied volatilities higher.

On the other hand there are some benefits to maintaining a high stock price and not splitting a stock. Higher stock prices will decrease speculative activity and likely keep shares in the hand of long term holders. Furthermore, higher stock prices can be excellent marketing tools for companies as the media attention that is paid to such issues provides greater brand recognition for a company and could enhance customer appeal.

I believe that we should expect to see an ever increasing population of stocks which will be trading above $100 in the years to come. This will be beneficial for long term shareholders but will require the undoing of a deeply rooted mindset that believes stock splits and lower stock prices are in investors’ best interests.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL, GOOG, GS and SHLD -- although positions can change at any time.

News Corp Acquisition of Dow Jones Is A Great Fit

2007-05-01T12:57:00.000-04:00

News Corp (NWS) has made a $60 unsolicited bid for Dow Jones & Co. (DJ). I believe that this is a genius move on the part of Rupert Murdoch. Here’s why:

DJ owns the Dow Jones indexes of which the Dow Jones Industrials 30 stock index is the most recognized index in the world. It may not be the most tracked index or the benchmark of choice for performance measurement but it does carry a significant amount of brand recognition.
DJ has failed to exploit its indexes. On the other hand, McGraw Hill (MHP) has successfully marketed its Standard & Poor’s brand of indexes of which the S&P 500 (SPX/SPY) is the most widely known index and index of choice for stock advisor performance benchmarking. NWS will certainly expand the Dow Jones brand of indexes doing for Dow Jones what MHP has done for S&P.
NWS is busy preparing to launch its own cable business channel. With the Dow Jones indexes, NWS will have a crown jewel index to help integrate and cross-promote its many media holdings including the yet to be launched business channel.

While the NWS bid for DJ is high, nevertheless this will cause some consternation by General Electric (GE) owner of CNBC and Time Warner (TWX). TWX is in no position to make a large scale acquisition just yet. Thus with only the Dow Jones and Standard & Poor’s brands of indexes available to media conglomerates this leaves GE to make a higher big for DJ or set its sights on MHP to parry Murdoch’s move

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of SPY --- although positions can change at any time.

First Israel Fund Soars to New Highs

2007-04-30T10:02:00.000-04:00

First Israel Fund (ISL) opened up over 4% and quickly rose to a 7% gain today in early trading on extremely high volume for that closed-ended fund. ISL now stands at a new all-time high. I first started buying ISL just over 4 years ago not only for its discount to NAV but because of the exposure that it gave me to the tech and bio-tech rich Israeli market and well as to companies which are not readily and publicly available to a US based investor. The stock traded at a 8% discount to NAV on Friday. I have not seen or heard any news for ISL today to explain the sudden price movement. The surge in ISL might indicate that some action may be taken by the ISL fund sponsors to close the discount through some rights offering or conversion. Even if that were to occur I would still hold onto my ISL as it still provides with that Israeli capital markets exposure.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of ISL --- although positions can change at any time.

It Will Be A Busy Week for Restaurant Stocks

2007-04-24T01:20:00.000-04:00

This week we get a slew of earnings from the casual dining sector with stocks such as Brinker International (EAT), Cheesecake Factory (CAKE), IHOP (IHP), Panera Bread (PNRA), Wendy’s (WEN), Burger King (BK), PF Chang’s Bistro (PFCB), Rare Hospitality (RARE), Famous Dave’s (DAVE), BJ’s Restaurants (BJRI) and Burger King (BK) all set to report. There are certain to be winners and losers amongst them. However, there are some themes worth noting before the multi-course earnings meals are delivered:

The casual dining segment has been hurt by the weather and declining traffic as evidenced by low positive or negative same store comp sales.
The substitution effect is kicking into high gear again as energy prices push diners down from the casual dining segment into the quick casual segment. McDonald’s (MCD) which reported last week and WEN and BK which report this week should benefit.
Chicken prices rose last quarter while beef prices were flat to slightly up or down depending on how purchasing and hedging strategies were executed by the chains. The creeping effect of increasing state minimum wages are beginning to take hold in the casual dining restaurant chains which derive all or most of their earnings in the US.
As with specialty retail, the high end specialty restaurants continue to grow and attract diners despite menu price increases which are being passed on to diners.

So what do you do? It’s time to get back to a barbell approach to investing in this sector. The strategy is to own a quick service and high end restaurant in the portfolio. My picks are MCD and Ruth’s Chris Steakhouse (RUTH). The only exceptions in the middle would be casual dining outliers like Benihana (BNHN) which are exhibiting strong traffic, comps and growth. BNHN might be worth a look on a dip if the stock sells off in sympathy with the rest of the sector.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of MCD, and RUTH --- although positions can change at any time.

Seton Hall University Wins the NYSSA (New York Society of Security Analysts) Investment Research Challenge Once Again

2007-04-20T00:00:00.000-04:00

Please join me in congratulating the team of students from the Stillman School of Business at Seton Hall University (SHU) - where I am on the faculty in the Department of Finance – that was victorious in the 2007 NYSSA (New York Society of Security Analysts) Investment Research Challenge. SHU has now won this prestigious competition two years in a row. The team of Andrey Botev, Megan Joseph, Theresa Ko, Bill Moore, and Angelo Stracquatanio was led by faculty advisor Dr. Andrew Yi. I have had the pleasure of teaching both Angelo and Andrey at in my classes at SHU. The SHU team recommended that investors sell shares of Tasty Baking Company (TSTY). I had the opportunity to advise the team and observe their presentation which was of professional quality. Next up for the team will be the ringing of the NASDAQ opening bell on Monday, April 23 and competing against Babson College, Chinese University of Hong Kong, and Rice University at the first ever CFA Institute Global Investment Research Challenge next Thursday, April 26th.

The best kept secret in the NYC metro area is the quality of the students and program at Seton Hall University's Stillman School of Business. If you are looking for a great full time employee or intern please let me know and I can set you up with one of our students.

The Bar Mitzvah Portfolio

2007-04-19T00:28:00.000-04:00

My wife and I have been busy getting ready for our son’s Bar Mitzvah (the fourth of our five children) which will take place in June. We allow each child to buy a new computer with their monetary gifts and the rest I will invest in a portfolio of five of my favorite stocks as part of their college custody account. These five stocks are also amongst the top holdings for the client accounts at LakeView Asset Management, LLC and me personally. What follows is what I affectionately call the Bar Mitzvah Portfolio:

Apple (AAPL) – AAPL is not just an iPod company. AAPL iTunes is the largest site for digital downloads. The company is growing its core Macintosh desktop computer sales as more users continue to migrate away from the Microsoft (MSFT) Windows operating system platform. MSFT Vista operating system is such a disaster that it turns out to be the best marketing tool for the Apple Mac. For his Bar Mitzvah computer purchase my son and I went shopping for a Mac this week at the Apple store in the Short Hills Mall. We picked out a model as we now plan to take that first big step away from Windows. AAPL is making a move into home entertainment with Apple TV. Next to launch is the greatly anticipated iPhone. My guess, and this is only a guess, is that AAPL will develop its own video game system with digital download capability to compete against the Xbox and take more business away from MSFT
Google (GOOG) – Google is set to report earnings today after the market closes and I expect the company to far exceed analyst expectations for EPS of $3.30 cents. This should come as no surprise especially as we know how strong the company’s business model is performing and how poorly Yahoo (YHOO) is executing after that company reported a disappointing quarter earlier this week. The best way to look at this relationship is in SAT terms. GOOG:YHOO as AAPL:MSFT. GOOG continues to expand its reach into advertising, the internet, and the digital media. Just last week GOOG announced that it would acquire DoubleClick and entered into a radio advertising arrangement with Clear Channel Communications (CCU). Expect this company under its very astute management team to continue to innovate and grow. A price of $600 in the next year for GOOG is not out of the question.
McDonald’s (MCD) – I have held this stock for several years. Despite the unexpected passing of two CEOs in a short period of time, the company continues to be the best managed restaurant chain in the world. You can credit: the deep pool of management talent; innovative menu changes; increased operating hours; turnarounds in Europe and Japan; and, expansion in China for MCD continued success. Just last week MCD surprised analysts and investors by guiding to significantly higher than expected 1q07 EPS and sales. On top of all this, MCD has a dividend yield of 2% which should get a boost later this year on top of a healthy stock buy back plan.
Goldman Sachs (GS) – Oldie Goldie is the investment banker to the world. When it comes to investment banking, mergers & acquisitions, investment advisory, and sales & trading GS is the New York Yankees, Los Angeles Lakers, Montreal Canadians and Green Bay Packers all rolled up into one. It’s a proven winner. GS attracts the best talent, has the best stable of clientele, is well connected politically (in the US and abroad) and should attract your investment dollars.
Sears Holdings (SHLD) – I came upon SHLD many years ago when it was still Kmart not long after Eddie Lampert took it out of bankruptcy while I was doing my research into Martha Stewart Living Omnimedia (MSO) during the several months leading up to Ms Stewart's trial. I had correctly positioned our portfolios short MSO for a guilty verdict but also bought Kmart in the process. A few months later Lampert and Kmart gobbled up Sears turning the combined company into SHLD. I highlighted SHLD as one of the most compelling investments in a LakeView Asset Management blog entry last month. Recently Lampert put a plan into motion to harvest some benefits from its Kenmore, Craftsman and DieHard brands by securitizing those intellectual properties as part of a complex structured transaction. Expect Lampert to make some savvy acquisitions in the future. When people ask me if Lampert is the next Warren Buffet I always answer “No. He’s the first Eddie Lampert.”

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL, GOOG, MCD, GS and SHLD -- although positions can change at any time.

Some Thoughts On The Shootings At Virginia Tech From a Friend

2007-04-17T13:14:00.000-04:00

Below is an email I received earlier today from a friend and colleague, Rob Fraim who runs Mid-Atlantic Securities in Roanoke, Virginia along with his business partner Chuck Hunter. All of our thoughts and prayers are with the victims, their families and the University during these difficult times.

__________________________________________________________

Some of you have contacted me over the last 24 hours or so, remembering my proximity to Virginia Tech – my town of Roanoke, Virginia and Blacksburg, Virginia being just about 35 miles apart. Folks were kind enough to ask if I had any family at Tech.

I appreciate the concern. No, my two older kids are out of school now and my youngest is still in high school. So we are all well - as well as any of us who live in this area can be that is. Roanoke and Blacksburg are closely intertwined, with Virginia Tech being the major university in the area and the alma mater of many people here. More important, there are many young people from Roanoke who are Tech students. So while the whole nation was horrified by what was taking place, here in Roanoke it was very personal – since virtually everybody knows someone there.

Yesterday as the news started hitting I called several parents here to see if they had heard from their children. With each call I felt better, as folks told me that they had spoken with their kids and that they were safe.

Then I called my friend Mike, since I knew that his son was an engineering student – a senior – at Tech. He said, “No, I haven’t reached Brian yet. He didn’t pick up his cell phone, but that’s not unusual. I’m sure he’s ok though.” Of course he wasn’t sure. He wasn’t at all sure, and we both knew that.

We watched and read the news together over the phone as more and more details came out. He noted that the first shootings took place in Ambler Johnston Hall and mentioned that he knew where that was – he himself having gone to Virginia Tech back when we were young, back before young people routinely killed each other in random mass attacks. I asked where Brian would likely be and Mike said “Most of the time in Norris Hall. That’s a long way from Ambler Johnston.”

Then, within just a minute or so we both read that it wasn’t just confined to the two shootings at Ambler Johnston. Soon, the words “Norris Hall” and “engineering” started popping up with frequency as the details began to emerge.

Mike got quiet, as did I. Then he said, “I guess I’d better go and try to reach him some more.” He promised to call me as soon as he heard anything.

I only felt a fraction of his fear. A smidgen of his panic. I only got a glimmer, a glimpse of what Mike and many other parents were experiencing yesterday. And it terrified me nonetheless.

Any parent who has ever worried about a child driving home and being later than he should, or watched as she almost toddled into traffic, or felt helpless as he was wheeled away to the operating room, can imagine what Mike and others were enduring yesterday.

I wanted to call somebody. I wanted to watch the news. I knew I should get some work done. But I left the office and walked the two blocks to my home. What I actually wanted was to see my son.

I remembered that he was at home, studying for an afternoon test at the community college where he also takes courses, and it seemed important for me to talk to him. But he wasn’t at the house after all, having decided to study at the college. Now I knew that his school wasn’t Virginia Tech and I knew that he was ok, but I still felt compelled to reach him. I made up an excuse and called him to talk about something that could have easily waited until later – knowing that if I told him that I really just wanted to hold him and hug him and hide him, he’d think the old man had gone nuts.

On my way back to work I stopped in to two little family stores in this quiet neighborhood of ours – Lipes Pharmacy to pick up a prescription and Tinnell’s Grocery for a Diet Coke. While I was in the grocery my cell phone rang and it was my office. My heart froze when they told me that Mike had called and left word for me. He had news of his son.

Brian was fine.

And his dad was fine. And my son was fine. And all’s right with the world.

Well, no. Not really.

Our quiet little neighborhood somehow didn’t seem so quiet, and Tinnell’s and Lipes didn’t feel like Mayberry anymore. Blacksburg and Roanoke are just a half an hour apart, and Blacksburg and Roanoke are forever changed.

I know I’ll never pass a Luby’s restaurant again without being reminded of Killeen, Texas. And now, let’s do a quick word association. I say “Columbine.” Do you say “pretty little purple flower” or does your mind immediately flash to the senseless and evil violence at that school?

Oh, and someone reading this is certain to question my use of the word “evil.” Let me be clear:

E-V-I-L. Or perhaps “wicked” makes my point more plainly to you. Please, please spare me the diatribes about poor little bullied and socially disenfranchised young people acting out in the only way they know how. Evil, wicked, senseless, cowardly, hurtful, despicable, and once again evil I say.

And now, Virginia Tech and Blacksburg will always be known, not as a fine school and a nice town, but instead as the place where evil once again robbed life and hope and promise. 32 people were lost, and another 22,000 or so young people lost their youth, as something wicked their way came.

And here in Roanoke, I’m not sure that things will ever be exactly the same either. You see, even if you don’t know somebody who was hurt or killed, or know their families, this is a small enough community and the degrees of separation close enough that inevitably you will know someone who knows someone who was impacted.

Classes will resume, and life will go on, and kids will learn and study and graduate. People and towns and even schools have remarkable resilience. But let’s not think for even a moment that things haven’t changed.

I’m kind of afraid that people watched the news for a moment yesterday and thought “Oh, another school shooting - what a shame” and then switched to the sports channel or MTV.

We get used to evil and violence and it doesn’t shock us the way it once did. We get hardened to it, and accustomed to it and inured to it, and we come to accept it as routine. And that’s a change that bodes poorly for us all.

“Mother, mother, there's too many of you crying

Brother, brother, brother, there's far too many of you dying

You know we've got to find a way

To bring some lovin' here today …”

Marvin Gaye – “What’s Goin’ On?”

RobFraim

Member NASD/SIPC

Brokerage Services & Consulting

For Institutions and High Net Worth Individuals

1-800-743-0295

Miss The Robinsons

2007-04-07T23:56:00.000-04:00

I took my two younger sons, aged 10 and 13 years to see Disney's (DIS) Meet the Robinsons on Saturday evening along with a neighbor and his young boys, aged 6 and 10 years. The audience was rather small but the children in attendance enjoyed the movie. In my opinion, this movie was so bad that I could not wait to leave. The father of the other boys fell asleep during the movie only to wake up for the final 15 minutes which was the best part of the flick. I would describe Meet the Robinsons was as a convoluted computer animated version of Back To The Future. After a string of highly successful and I might add enjoyable computer animated movies such as Cars, Finding Nemo, The Incredibles and both entries in the Toy Story series, DIS has finally delivered a real stinker. The opening box office weekend was disappointing and I expect the second weekend to be no better. DIS expected to have Meet the Robinsons pump up holiday DVD sales but I would expect analysts to have to lower their revenue estimates. Next up for DIS is Ratatouille which based on the previews should be a step up and more in line with the computer animated releases of the past. Ratatouille may have to be rushed to the shelves for holiday sales to make up for the shortfall I expect from Meet the Robinsons.

How To Invest Like Brooke Astor

2007-03-27T16:02:00.000-04:00

The New York Times (NYT) has had an interesting series of articles over the past year or so discussing the tug of war over control of the personal finances and estate of socialite and philanthropist Brooke Astor’s fortune. The story gets interesting as her son, Anthony D. Marshall (son with her first husband but he took the last name of her second husband) is at odds with his son Philip and the trust division of JP Morgan Chase (JPM). If you are into soap operas then stop reading now. However, if you are interested in asset management then please read on.

Today’s installment in the NYT times of the Astor/Marshall story disclosed the findings of an audit over Astor’s investments. The entire estate was valued at $131 million. Real estate accounted for $41.2 of the estate. Personal property was valued at $10.3 million including some baubles that Mrs. Astor owns. Private equity and hedge funds accounted for over 1/3 of her assets or $46.8 million. It was disclosed in the NYT that a $20.6 million investment was in the Optima Fund, L.P. hedge fund which I am not familiar with and hence have no opinion. Bonds and cash equivalents were just over $9 million. Finally stock holdings were $23.5 million.

The stock portfolio is a compendium of big cap investing including, according to the NYT: Morgan Stanley (MS), Johnson & Johnson (JNJ), Citigroup (C), Eli Lilly (LLY), Four Seasons Hotels (FS), Google (GOOG), Molson Coors (TAP), PepsiCo (PEP), Proctor & Gamble (PG), Staples (SPLS), XTO Energy (XTO) , Encana (ECA), Cimarex (XEC), Cicso Systems (CSCO) and United Technologies (UTX). MS was her largest individual holding valued at $3.4 million.

What is strange is that her grandson accused her son of mismanaging the portfolio. I guess you have to call it as you see it and the son deserves some accolades because this is one splendid portfolio with lots of big safe growth and income names. As for the other charges leveled by her grandson at her son of stealing from and mistreating Mrs. Astor, that we can leave to the courts.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of C and GOOG although positions can change at any time.

Handicapping the FOMC

2007-03-14T00:45:00.000-04:00

What can we expect from the FOMC? For one, after Tuesday’s sell-off and the concomitant rush to the safe haven of the bond market, Fed Funds futures rallied moving forward the probability of a 25 basis point ease. As we can see from the table below (source: Bloomberg Professional Service) there is a 92% chance of a 25 basis point rate cut by August.

The next 4 scheduled FOMC meetings are March 20/21, May 9, June 27/28 and August 7. Here is where we need to do some handicapping. First, I think that given the sub-prime mess and what is likely to be a baby with the bath water credit tightening reflexive reaction by lenders, I believe that we will get not only one but perhaps multiple easings this year. The first easing is always the hardest. This time around the first easing will be to remove that extra tightening from 5 to 5.25% from the FOMC last rate bump last year. The question is when? Next week the FOMC doves will circle the wagons and begin the official dialogue to set up an ease, likely pushing the hawks out of the picture. I don’t think we get the cut but we get the message that they are willing to do so if the mortgage and credit markets continue to deteriorate. The Fed Funds markets indicate a 50/50 chance of an ease by July. I think the FOMC acts at the June meeting in what will be a mild surprise. By the end of the year we could get another 25 to 50 points of easing. The yield curve will level off and then slope upward very gently. This would set the markets up perfectly for a 2^nd half rally.

Inverse and Leveraged Inverse ETF Activity May Be a Contrarian Indicator

2007-03-08T12:21:00.000-05:00

One sign that the market had gone too far to the downside was when the volume of chatter about inverse and leveraged inverse ETFs went up dramatically. I have begun to experiment with such securities recently with some success but I used them only on a test basis in limited quantities. At this juncture I hold no positions in these instruments for my clients, family or myself. However, there are now many day traders and chartists out there who are jumping into those instruments with reckless abandon. Just check out the surge in volume for the UltraShort QQQ ProShares (QID) and UltraShort S&P500 ProShares (SDS) since the beginning of the year.

I think that testing my hypothesis which I am now suggesting that these products are contrary signals is a great research project for one of my Seton Hall students. Of course, we would need significantly more data points to display meaningful results. We will get hopping on this endeavor when classes resume next week.

What Makes Sears Such a Compelling Investment and When To Buy Stock

2007-03-06T11:56:00.000-05:00

Sears Holding (SHLD) remains one of my favorite stock picks. I have written extensively about SHLD on The Street.com’s Street Insight website; have discussed the company frequently on Bloomberg Radio; and, have been widely quoted in the written press. Last week, SHLD reported a superb quarter and as usual the SHLD bears tried to cut the stock down. Every quarter they find some excuse to hammer the stock. The stock selling happens like clockwork after the quarterly report is issued. Also like clockwork is my equal and opposite reaction to this phenomena by adding more stock to my LakeView Asset Management client, family and personal positions. I think so much of SHLD that it is also in my children’s custodial accounts. Time and time again, the earnings related selling provides more opportunities to get into a publicly managed Eddie Lampert investment. Even yesterday when the stock sold off more than $2 in early trading I was back in nibbling again. SHLD closed higher on that day despite a weak market and a very bearish closing hour.

You can’t look at SHLD as just a retail story. If you did then you missed out on a 650% rise in the stock since the end of 2003.What is Lampert doing at SHLD that makes it such a compelling investment? Many things. First, he has been on an asset sale program for several years to rid the company of unwanted real estate and operations. While this is happening, he has focused on the core retail business by bringing in a professional merchandising team, focusing on margins rather than same store sales and building up the apparel department. This is now paying off. Recently, Lampert has been using his hedge fund acumen to make strategic investments through the swaps market, a business that I built up at Merrill Lynch over a decade ago. Finally SHLD has been using its strong cash flow to buy back stock. Lampert's letter to investors is a must read. The next step in this process will be for Lampert to start acting more Warren Buffett-like and acquire another company. I think that BJ’s Wholesale (BJ) is an attractive target for Lampert but could get snapped up by another smart private equity firm. I have also bought BJ for the accounts of my clients and my personal account.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of BJ, MER and SHLD, in addition Scott Rothbort owns call options in MER -- although positions can change at any time.

What Must De Done to Ensure Fair and Orderly Markets

2007-02-28T14:40:00.000-05:00

The following originally appeared in The Edge on TheStreet.com's Street Insight on 2/28/07

Investor confidence and the credibility of the regulatory and technological infrastructure of the financial markets were deeply tarnished yesterday. Years of regulatory and technological advances following the 1987 crash were destroyed in a matter of a few minutes. Here is what must be done immediately to ensure that fair and orderly markets ensue in the future:

1. The SEC experimental removal of short sales on common stock without an up-tick must be abandoned. I brought this to this site's attention last May when the practice of short selling without an up-tick was harmful to the markets. The up-tick rule was designed to prevent bear raids. Yesterday was one of the most egregious examples of such practices I can recall.

2.The SEC exemption of ETFs from short sale without an up-tick must also be removed with the exception of broad-based index ETFs that have similar futures contracts associated with that index such as the S&P 500 (SPX/SPY).

3. The practice of slam dunking and trading of married puts to stocks embedded in sector ETFs must also be prohibited and strictly enforced. This was also something that I brought to light on this site nearly three years ago. Jim Cramer picked up on these activities and we discussed it on the old "Kudlow & Cramer" show, making it a public issue. The SEC and SROs failed to pick up on the problem then and it has now festered for the last three years having finally hit a crescendo yesterday. No time is better than now to correct these problems.

4. Market data services and publications, which publicly disseminate index data that are broad based or underlie exchange traded ETFs or derivative contracts must be regulated under the Securities Act of 1933, the Securities Exchange Act of 1934 and/or one of the Commodities Acts. I will let the securities experts figure out which one applies. Regulations must then be established to enjoin these index providers to ensure the timely, orderly and accurate aggregation, calculation and publication of such information.

5. Electronic markets and hybrid markets are excellent forms of securities trading, given the technological advances of the Internet and desktop computing that we have enjoyed over the last decade. However, there is a flaw in the design of these markets. That flaw was the elimination of the perceived flawed component of the process -- the human element. Under the auction/specialist system, stocks could be halted in fast markets by the exchange or the specialist for order imbalances until price discovery could re-establish an orderly market. We are now in an electronic world whereby the last vestiges of the specialist system function as ATM machines rather than market participants. I suggest that all stocks must be assigned to a specialist -- whether listed or OTC -- who act as the primary market participant (PMP) for a stock and can halt trading for imbalances. The PMP would be designated by the listing company and approved by the SRO or SEC. Putting the human element back into the markets will be a positive, not a negative.

6. Enforce the circuit breaker program trading regulations that were enacted after the 1987 crash. Go a bit further and update those prohibitions for the more modern technologies and derivative strategies now in use. Fine or revoke licenses for blatant abuse of the circuit break rules.

7. Improve stock market surveillance techniques to update techniques and/or begin to monitor up-tick, circuit breaker, derivative and other violations.

8. In a similar manner that short interest is published by exchanges, require public companies to publish the amount of authorized stock buy backs and amounts remaining under these plans.

9. The Federal Reserve must modify Regulation T to reflect risk-based extension of credit. Even better would be an international standard for securities margin and stock lending much as the Basel Accords for international bank lending.

10. Remove time delays for stock quotations. Right now real-time quotes are available only through executing broker sites or through subscription. Any fees lost by the exchanges for current real time subscriptions can be made up by increasing exchange fees. In the end we will all pay but at least all market participants -- active, infrequent or passive -- will have equal access to market data.

At the time of this Blog entry and the Street.com articles, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC was long shares of SPY -- although positions can change at any time.

Five Things That Would Turn My Bullish Perspective More Bearish

2007-02-27T00:05:00.000-05:00

The following originally appeared in The Edge on TheStreet.com's Street Insight on 2/26/07

I am on record saying that my S&P index growth target would be 15% for 2007 with that index closing in the low 1600s at the end of the year. Right now I am sticking to that prediction. Looking into the future, I also see a good start to 2008 followed by a prolonged sluggish several months into the presidential election with a year end bullish run. That 2008 playbook is still in developmental stages of thought and I will likely be modifying and solidifying it as this year progresses.

Here are the five things that would most turn my bullish perspective to ursine in the future:

1. Inflation. Not this namby-pamby inflation that everyone has spent the last two years arguing over. You know the constant bickering about the inflationary effects of the difference between 2.5% and 3.0 or 3.5% inflation. I am talking real, hard-core, Jimmy-Carter-is-back-in-charge, high-single-digit/double-digit inflation where you bought eggs and milk on Friday because by Monday it might cost significantly more.
2. Job losses. The US continues to create jobs, not to mention jobs that are not even reported by the Bureau of Labor Statistics. Once we endure prolonged declines in jobs, i.e. job losses for let's say 3 consecutive months, then I say trouble is at hand. Another telltale sign is once the Big 5 Broker-Dealer/Investment Banks start to cut heads.
3. A big credit crunch. Not just sub-prime problems but an across the board removal of liquidity from the system. I think that the real key is in the commercial credit markets rather than the consumer credit market. Once commercial credit dries up we have a huge problem. The current sub-prime issue is similar to that of Long Term Capital Management which I was involved with. LTCM's failure caused a revaluation of credit requirements for OTC derivatives and extension of credit to hedge funds as asset classes but did not shut down liquidity across the entire system. In fact, quite the opposite, the FOMC increased liquidity to combat fear over a systemic failure emanating from LTCM.
4. An exogenous event. The unpredictable. It could be another oil embargo. Perhaps a terrorist attack. Maybe one of those Dr. Strangelove wannabes in South Korea or Iran or elsewhere does something really stupid.
5. Capitulation on the part of the shorts. Large-scale reductions in short interest. Closing down of several large dedicated short funds. When these guys have felt too much pain, the tipping point will have been reached.

The Government Should Not Pick Up The Tab For Slackers

2007-02-26T12:37:00.000-05:00

My wife and I enjoy watching certain reality TV shows together. One of those I record weekly on one of our DVRs is Trading Spouses which airs every Friday evening on Fox. It is great to see the pairing of off-beat, mismatched and/or dysfunction families. The show is in a two part format. At end of part 2 the wives who traded places are given $50,000 which they then “disburse” to their surrogate family.

This past two weeks a wife from a working class family in Boston swapped roles with a wife from a middle aged punk rock household in Washington State. The punk rockers had a home schooled daughter who was studying ballet. That was offbeat without the mommy swap. The Boston family had 3 children, two adult (early 20s) daughters and a boy in high school. As is typical, the swapping mom will allocate some of the $50,000 toward education for the other family’s kids. That makes plenty of sense and is good for everyone involved.

The two Boston daughters were real slackers. They lived at home, worked part-time evening jobs and owed their mom plenty of money for things like cell phones and a lifestyle above their means. In addition they did not lift a finger to help their mom or dad around the house. The daughters were not in college though both were of college age. At least one the daughters dropped out of college (I can’t recall). The surrogate mother provided money for one of the daughters to go back to college, causing the young lady to throw a tantrum. Her reasoning was because she did not want to spend “her” money on college but wanted the government to pay for it.

This really got me upset. I worked hard to be able to afford college. It was not the government’s responsibility to send me to college; it was the responsibility of my family and me to do so. My father died before I went to college and left my mother in a new (3 month old) house and a big mortgage. He had no PMI (could not qualify). I received some loans and qualified for work study jobs but it was not until senior year did I get a $1,000 government grant. So I worked two jobs during the school year and all summer long to pay for college. The University of Pennsylvania cost me $40,000 in 1978-1982 dollars.

I see many kids at Seton Hall, where I am a Professor of Finance who are first generation college students or come from families that cannot afford a college education. Some get government aid, some do not. However, no matter how their tuition is paid, their attitude and those of their families (some of which I have met) is to work hard, get the most out of their education and then start a career or go to graduate school.

The young lady from Trading Spouses who has already dropped out once, lives high off the hog from her parents and expects the government to pick up her tab, in my opinion does not deserve to college. There are too many more deserving kids other there which the government can make a better investment in.

Misplaced Dominance

2007-02-21T23:14:00.000-05:00

Twenty years ago this month, I packed up and moved to Tokyo, Japan when Morgan Stanley (MS) sent me over to help establish a beachhead in Japan and Hong Kong The Japanese economy and markets were the rulers of the roost across the global economy. The opening up of these markets to foreign brokerages was the biggest changes to the financial markets probably since the deregulation of fixed commission in the US markets several decades ago.

MS sent me out for “1 year” and after being there for 3 months wanted me to commit for 2 years. So, I had to adjust my own personal agenda and my wife and I got married in August 1987. We had a delayed honeymoon in November which we took in Bangkok and Phuket, Thailand (before both became popular). In Phuket, at the Club Med we had dinner with 3 other couples – one couple each representing Canada, Australia and the United Kingdom. The discussion turned to the dominance that Japanese companies and individuals were developing over the global economy. The other couples were convinced that Japan would gain control over the world’s economy. I disagreed. I said that if we sat around the same table 10 years before that, the same would have been argued about the OPEC nations with their petrodollars. Perhaps before World War I, the same might have been argued about the British Empire. And so it goes.

Now the same discussion is centering on China. Time and time again, a country’s economy finally begins to emerge and grow at a tremendous pace. These economies will attract and amass huge amounts of capital leading one to the incorrect assumption that they will dominate. On many occasions, the explosive growth is unsustainable and sometimes results in a contraction as we have seen in Japan for the better part of the last 15 years. Japan’s problems and mistakes were too numerous to mention in short order in this blog right here and now. Sometimes, those economies need to grow and fill a void left by the rest of the world. Many might have argued that the US grew too fast after WWI. That has been anything but the truth. However, we did have an awful depression in the 1930s. Considering an economy like China with well over 1 billion citizens, I have to conclude that there is more growth in its future and we are in the early stages of such growth. There will be some volatility along the way. On the other hand, as we saw with Thailand in the 1990s and now with Vietnam, such growth is speculative and unsustainable.

Global Warming ?

2007-02-14T21:32:00.000-05:00

Whenever I hear discourse about global warming in the media I don’t ignore the message but I have to chuckle a bit. If I recall, the Earth has been warming since the ice age ended millions of years ago. When we had one of the warmest months on record recently everyone was pointing to global warming as the culprit. Now that February is colder by several degrees than usual, where are the global warming alarmists? To top it all off, it snowed in Katmandu for the first time in 63 years. Let’s not also forget that global cooling can also occur. If you ask me, we need to point fingers at iced tea which may be the culprit for all weather variations and problems.

My Thoughts On The Housing and Sub-Prime Mortgage Debate

2007-02-13T23:18:00.000-05:00

Here are some of my thoughts on the very intense and emotional debate continuing on the subject of the housing market and sub-prime loans:

Housing is going to crash. Our society will soon be living in cardboard boxes. No wait, housing has bottomed and is getting better. Never mind, sub-prime foreclosures will be creating plenty of inventory for the Toll Brothers (TOL) homeowner-wanna-bes. I better check the housing blogs and chat rooms to be sure of what the real story is.

Hasn't this housing debate become more heated than a judicial appointment on Capitol Hill? It sounds like my children arguing over who gets to pick the movie we watch from On Demand. I prefer to take the higher ground. Here is what I think:

· Housing overheated about two years ago (as does any asset class that tends to attract too much speculation). The margin morons got into the real estate game and that signaled a top.

· Homebuilders recognized that:

· They needed to shrink inventory in speculative hands and slowed down construction to absorb the oversupply.

· They held too much land or land options in areas in which land was plentiful and needed to adjust and write-down accordingly.

· Housing is regional, not national. You can't compare housing in Florida or Las Vegas or Phoenix with that in suburban Chicago or New Jersey or Metro DC.

· The secondary market for housing is still strong where the jobs are. Take a look at the towns located along the Metro North or NJ Transit Midtown Direct commuter lines to New York City. New homes are being built out further on those lines and I don't expect that to diminish until all that land is built on. If the Midtown Direct could expand to Phoenix, that would be another story.

· A surge in sub-prime housing was created as:

· Hurricane relief brought a huge surge in demand for lower income sub-prime housing such as trailer homes and lower income private homes.

· Improved financial, infrastructural and crime conditions in urban centers combined with government tax and other incentives have created a environment conducive to inner city lower income single family home construction and purchasing.

· Increased employment pushed more people from rental to home buying on the margin.

· Homebuilders are in the "kitchen sink" part of the cycle in which they will write-down, sell off and reserve as much as they can. Throwing everything into the kitchen sink comes at the bottom, not the top, of a cycle.

· Our population is growing by 3 million to 4 million people per year. That amount is likely to increase, not decrease, as we age and immigration continues. Where are they all going to be housed?

Think about all the above when we consider KB Home (KBH), which is reporting. To be fair, I have a buy-write on Hovnanian (HOV). When I put it all together, I see a mixed bag -- some good, some bad -- and we may be close or at equilibrium. The top of the housing market is behind us. The bottom is here or near but those betting that the worst is yet to come will be proven wrong. What we are not at the bottom of, but are near the top of is the emotion attached to the housing and mortgage market.

Epilogue: KBH reported its 4^th quarter results. My thoughts of the earnings report and conference call is summarized below:

You cannot characterize KBH’s quarter as pretty. Cancellations are still running high even though management tried to put rose colored glasses on the fact that they seemed to decline sequentially. Gross margins were putrid. As always, we need to look forward not back. The two most informative parts of the conference call came from the peek in 1q07 and the Q&A with Ivy Zelman. So far, if the traffic and sales for 1q07 is only of about 10% then one can argue that the deterioration in the housing market is slowing down and that the worst may already have occurred. The interaction with Zelman on sub-prime was interesting. It confirms my belief that sub-prime housing is a category onto its own and is also part of the localized nature of real estate. I would expect homebuilders to begin to abandon certain states that are in secular economic decline, such as Michigan and Ohio, while waiting out the storms in Phoenix and Las Vegas.

Favoring the housing bulls is the fact that this quarter was definitely a "kitchen sink" quarter for KBH. They tossed so much out the window as part of the company's impairment and write-down that you know that the company is cleaning up the balance sheet and getting ready for the next upturn in the market. When you back out the impairments and write-downs, KBH earned about $2.26 down 34% year over year, which was less than the drop in cancellations. Furthermore, revenues rose 13% and ASPs increased as well, another point for the bulls.

My opinion is that the cyclical decline in housing is near or at an end. Furthermore, the big meaty shorts trades have already been booked. We will continue to have a high level of volatility in the sector and more trading opportunities will present themselves as the sub-prime, housing and interest rate dramas continue to unfold. The next step for this sector is going to be takeovers especially if the bears continue to push shares lower.

Finally, KBH has its own specific issue of the departure of a respected CEO and the ascension of a new individual to that role. That is always a risk for any stock. I am maintaining my positions in HOV for now.

At the time of this Blog entry and the Street.com articles, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC was long shares of HOV and short calls of HOV -- although positions can change at any time.

Five Business Hookups You Might See

2007-01-17T00:42:00.000-05:00

This column was originally published on The Street.com’s Street Insight on Jan. 11

All too often, the media and investors merely speculate about potential takeovers and start rumors. I, on the other hand, prefer to contemplate what would make a nice corporate match in a Yenta the Matchmaker-type way.

Here is my list of five mergers and acquisitions that make sense to me -- with the reasons why, and the reasons why they might not happen:

1. Sears Holdings (SHLD) to acquire warehouse retailer BJ's Wholesale Club (BJ).

Why it makes sense: Sears still has underperforming stories -- or Kmart-Sears stores that are cannibalizing one another -- and it's in the process of transforming them into new concepts or selling off their real estate. BJ is dwarfed by Costco (COST) . Sears can buy BJ and expand BJ, utilizing those superfluous Kmart-and-Sears stores to capture more of the fast-growing warehouse business from Costco and Wal-Mart's (WMT) Sam's Club. Currently, BJ's market cap is just under $2 billion. Sears has the cash and stock currency to easily pay a 20% premium to BJ shareholders and still make an accretive acquisition.

Why it might not happen: Sears' Eddie Lampert is focused on improving the merchandising in existing Sears stores and continues to experiment with new concepts such as in the Gwinnett Place Mall.

2. Morgan Stanley (MS) to acquire an investment adviser: Legg Mason or T Rowe Price (TROW).

Why it makes sense: The missing ingredient in MS' mosaic of businesses is asset management, and it's a glaring hole. MS must make inroads into this segment if it truly wants to compete with Merrill Lynch (MER) and Goldman Sachs (GS). John Mack brought in James Gorman from Merrill a few years ago, and he would be the right person to spearhead this effort.

Why it might not happen: Mack is still focused on rebuilding MS from the ruins left behind by Phillip Purcell. Furthermore, MER has already picked off the best of breed when it acquired a 49% stake in BlackRock in an asset-for-stock swap last year. Biting off LM or TROW will come at a heavy short-term price because it won't come cheap. It will be dilutive for many years.

3. Hewlett-Packard (HPQ) to acquire Palm (PALM).

Why it makes sense: Hewlett-Packard failed in its early attempt to deliver a handheld PDA several years ago. Palm has an excellent device with the Treo line of smartphones but is now facing brutal competition from Research in Motion (RIMM) and Apple (AAPL) in the consumer segment. Hewlett and the other Microsoft (MSFT) Windows-based computing companies are also facing stiff competition from Apple as the iPod halo effect continues to attract users away from Windows to Mac. A combination of Hewlett-Packard and Palm would help to energize Palm and give Hewlett another key technology to combat the ever-growing Apple. Palm needs some strong marketing and logistical expertise, which Hewlett can offer. Lastly, Hewlett can swallow up Palm for pocket change.

Why it might not happen: Hewlett-Packard might be twice shy about getting into the PDA/smart-phone business. Furthermore, HPQ is still reeling from a recent management shakeup in the wake of an ethics scandal and threats of criminal indictments.

4. General Electric (GE) to acquire Alcoa (AA).

Why it makes sense: Sure, there are rumors of an AA takeover or leveraged buyout, but those rumor-mongers are looking at the wrong suitors. Don't let one good quarter from AA fool you. This is still one of the worst-run companies in the U.S. GE is one of the best companies at managing industrials in the history of business. That is what AA needs. There is nothing fundamentally wrong with the aluminum business -- it's just that new leadership is necessary.

GE is in the process of selling the plastics business, which is a tough industry. GE can easily use the proceeds of the plastics sale to buy AA, although it has plenty of resources without the plastic sale. The deal would be immediately accretive to earnings.

Why it might not happen: GE is simply too big and may be looking to slim down rather than add on. There are other businesses beyond plastics that the company also needs to make some decisions about, namely NBC Universal.

5. Boeing (BA) to merge with or acquire Ford (F).

Why it makes sense: This sounds like a real wacky match, but the more I think about it, the more it might make sense. So hear me out. Airplane, defense, automotive and truck manufacturing all require similar (but not necessarily the same) raw-material inputs and parts. Thus, a combined manufacturing effort would have economies of scale in terms of component and material purchasing. Make the deal subject to a one-time, take-it-or-leave-it labor agreement, focusing on pensions and benefits. Get rid of the defined benefit programs. Ford Motor Credit and Boeing Capital can create a very powerful financial-services company. Consolidate the overhead and eliminate other wasted costs. A healthy Ford without all of the recent write-offs can probably make $1.50 per share. If you clean up the balance sheet, it might be more. Heck, if done right, this could be accretive to Boeing.

Why it might not happen: It's just too complex. Expecting the United Auto Workers to cave in would be expecting a miracle. Furthermore, I doubt if the Ford family egos would permit losing control of a failing company to having a hefty stake in a healthy one. I believe that they think that they would be better off to rule in hell than serve in heaven.

At the time of this Blog entry and the Street.com article, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were was long AAPL, GS, SHLD and BJ, with small legacy positions in COST and MS; long stock and calls -- MER; short PALM -- although positions can change at any time.

10 Things I Won't Miss About 2006

2006-12-31T23:20:00.000-05:00

This column was originally published on Street Insight and was republished on TheStreet.com

Another year has passed. I hope that you are all a year healthier, wealthier and wiser. As I have done for each of the past four years and will do again by popular demand, I would like to share with you the 10 things that I will not miss about 2006 (and do not want to see or hear about ever again). So, in no particular order, here they are:

Long-running network classics.

I hate to say this, but General Electric's (GE) NBC Universal has to pull the plug on Saturday Night Live. The show is simply unwatchable. I don't know if it's the feeble writing, the weak cast or both, but the show has overstayed its welcome.

NBC is not alone in needing to jettison an enduring show born in the 1970s. If Howard Cosell were still alive, Monday Night Football would send him to his grave. The broadcast team in the booth is just plain awful. We don't need some Hollywood or rock-and-roll star joining in for a quarter's worth of banter. No wonder the ratings for this weekly sporting event hit an all-time low this season. (By the way, Disney (DIS) moved Monday Night Football from ABC to ESPN, in case you didn't notice.) I will be egalitarian in my desire to never again see an oldie-but-goodie network show. CBS' (CBS) 60 Minutes has also run its course. With deference to Morley Safer and the late Ed Bradley, CBS needs to put this show to rest. I understand that the network needs a time slot for CSI: Sheboygan.

Microsoft (MSFT) Vista.

The coming of Vista has been as over hyped as the coming of Comet Kohoutek in 1973. Of course, as soon as Vista does get released -- wake me up when it happens -- then we will have to listen to the never-ending coverage and hype for the Yahoo! (YHOO) release of its Panama advertising system. I have the solution for all of this hype: Apple (AAPL) and Google (GOOG).

Celebrity babies.

I could care less about Brad and Angelina's baby, Tom and Katie's baby or Kevin and Britney's baby. Once they give a darn about my wife and five kids, then maybe I will pick up one of Time Warner's (TWX) People magazines.

Soft landing.

I did not know that the economy had hemorrhoids.

Dire consequences of an inverted yield curve.

Anyone who believes that an inverted yield curve at low levels of nominal interest rates is a sign of impending recession must still believe in the Phillips Curve. I believe that the Phillips Curve is a flawed concept. We need to understand how the yield curve is constructed. Earlier this year, I wrote the following:

"The yield curve does not worry me. The FOMC controls the short end of the curve; the marketplace controls the longer end. Now more than ever, the more expansive holding of U.S. dollars by foreign central banks is creating increasing demand on the longer-maturity U.S. government debt instruments. Thus, the yield curve is flattening out and to some extent inverting. The shape of the yield curve will no longer only be reflective of perceived economic conditions but will also include the impact of central banks on the U.S. dollar and their appetite for Treasury securities. While I hate to use the term 'new paradigm' and will not, I will say that we are going from a single variable yield curve to a multivariable model. We need to understand and respect that."

Monthly same-store-sales comparisons.

This is without a doubt the most overexposed metric of the year. (See No. 8 in last year's list for my rant on the subject of overused metrics.) My research indicates that while same-store sales are a factor in retail and restaurant earnings, they are not the sole determinant. Furthermore, margins are more important than same-store sales in determining profitability. Take Sears (SHLD), for example: Same-store sales were engineered to decline while the company focused on selling more profitable products. Shareholders are better off for that effort. We also need to wean the market off monthly sales data and move to quarterly sales reporting as several companies, including Men's Wearhouse (MW) and Yum! Brands (YUM), have done recently.

Body art.

I think that's an oxymoron. I'm disgusted whenever I see tattoos and body piercing. What really gets my goat is seeing it glorified by athletes and movie stars. This stuff is ugly and permanent. If you want to adorn your body, might I suggest a few shirts from Ralph Lauren (RL) or some jewelry from Blue Nile (NILE)? Those are far more attractive options than tattoos and body piercing.

Bad Starbucks (SBUX) jokes.

It seems that every two-bit stand-up wannabe comedian has some bad Starbucks joke. You know like: "Why is there a Starbucks on all four corners? So that people with Alzheimer's can find one." I don't want to hear another comedian say, "I will have a grande mocha latte capudrinko." That said, if you own Starbucks, this is great. Free advertising! So if I may suggest some new targets for comics' material in 2007, how about some McDonald's (MCD), Ruth's Chris Steak House (RUTH) or Taco Bell (a division of Yum!) jokes? Something like: I'll have a taco, hold the E. coli.

OTC bulletin-board solicitations.

My email and fax machines are increasingly being stuffed with stupid OTC BB ideas. The emails manage to get through spam filters, and you can't have your address taken off the distribution list. Cagey mongrels, these folks. Maybe some smart software vendor can find a solution to that problem.

Where is the SEC when we need them? How many people are losing hard-earned money by falling for the OTC BB rags-to-riches pitch? I bet many more than are being hurt by hedge funds. Instead of raising the minimum net-worth level for investment in hedge funds, how about if the SEC raises the minimum net-worth requirement for investing in OTC BB stocks? That would send those purveyors of dreck right back to the caves from which they came.

OPEC.

This group of nations cheats on one another more often than Tony Soprano cheats on his wife, Carmela. OPEC lies with the same alacrity as Tommy Flanagan back when SNL was quality entertainment. (See No. 1.) Yeah, that's the ticket.

My best wishes for a happy and healthy holiday and New Year season to all of you and your families. Thank you for your personal notes and professional advice during the past year. I hope our Street Insight team has made this year a profitable and enlightening one for our subscribers. Last but not least, thanks to our tireless contributors and editors who work so hard every day to produce this fine product.

At the time of this Blog entry and the Street.com article, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of Apple Computer (AAPL), Google (GOOG), Sear’s Holdings (SHLD), Men’s Wearhouse (MW), Ralph Lauren (RL), McDonald's (MCD), Yum! Brands (YUM) and Ruth's Chris Steakhouse (RUTH) although positions can change at any time.

2006 Restaurant Year in Review and The Menu for 2007

2006-12-28T12:59:00.000-05:00

This article was originally published including charts courtesy of CTS Trend on The Street.com’s Street Insight Long/Short Trader on Dec. 26, 2006.

So what's on your menu this week? Some left over latkes from Hanukkah? Perhaps some smoked ham cold cuts from Christmas? Looking into 2007, there are several themes in the restaurant sector that will continue to create investment and trade opportunities. So, without further ado, here is my restaurant year in review and outlook for the year ahead.

IPOs

There were several high-profile restaurant IPOs that took place in 2006. First came Chipotle Mexican Grill (CMG), which soared from the get-go and remained a Wall Street favorite for the balance of the year. The stock even caught on Friday.

The other restaurant spinoff IPO was Tim Hortons (THI). While THI had some success out of the starting gate, the stock has pretty much leveled off and has not found a strong following from analysts or investors.

Finally, Burger King (BKC) came public to join the quick-service ranks along McDonald's (MCD) and Wendy's (WEN), both of which were the source of the two above mentioned spinoffs. BKC stumbled out of the gate, but management appears to be making operational headway and also benefited from the substitution effect.

Look for continued activist shareholder activity in 2007. Don't be surprised if you see a private equity or leveraged buyout deal. CKE Restaurants (CKR) is a good trading stock that rises and falls with such speculation.

Casual Dining

It was a real up and down year for the casual dining segment. A strong start to the year was thwarted in the spring by a market correction, spiking energy prices and the fear of inflation. These companies were hit hard as traffic migrated down the food chain to the quick-service restaurants as the substitution effect took hold. Not until energy prices peaked, the market correction ended and the Fed finally pushed pause in the middle of the summer did the casual dining chains begin to rebound. OSI Restaurant Partners (OSI), which operates the Outback Steakhouse chain among others, managed to get a recent private equity buyout offer. All of the popular casual dining chains had similar chart patterns during the year. Here are some of the favorites: Applebee's (APPB), Darden Restaurants (DRI), Brinker International (EAT) and Ruby Tuesday (RI) all charted together.

Casual dining will struggle in 2007 as the concepts out there are just too homogenous. There are no new offerings that I see on the horizon. Rather, you will have to play this sub-sector as trades, looking to take a lead from economic signals. Commodity costs -- namely, energy and food -- should be watched most closely. There are some potential turnaround stories as well that could provide opportunities. One name that comes to mind is Red Robin Gourmet Burgers (RRGB), which is a great concept that has long suffered from managerial mismanagement and misdeeds. We need to watch RRGB but not rush to act.

Substitution Effect Bolsters Quick-Service Names

The quick-service restaurants were the beneficiary of the substitution effect. The stock that not only weathered the spring squall but managed to be one of the best performers of the year was McDonald's (MCD). Not far behind was Yum! Brands (YUM). I continue to like both of these stocks, especially as they both continue to expand overseas, specifically in China. YUM took a little bit of a hit in December because of an E. coli outbreak at some Taco Bell restaurants, but I believe that to be a short-term issue, and this has presented a good entry point or level at which to add to positions.

The year ahead will be all about international expansion - China, to be exact -- for quick-service names. I continue to like MCD and YUM, which are positioned for this theme. Starbucks (SBUX) is also a China play, but I am not convinced that Howard Schultz can deliver the same level of tremendous growth in 2007 as SBUX has exhibited in the past. Headwinds to SBUX include rising coffee prices and the lingering question, How long can SBUX continue to push up prices to consumers before they revolt?

Steakhouses

The steakhouses were problematic this year. The reason for this was the same woes that hurt the casual dining stocks in the spring and early summer (as I mentioned above). Adding insult to injury, these stocks could not rebound because they were hit with the double whammy of higher beef prices. I traded out of and then back into Ruth's Chris Steak House (RUTH) during the year, managing to sell just at the top and then reentering back in the fall at dramatically lower levels. I am still holding my new positions today. Here is a combined chart of RUTH and its closest high-end steakhouse rival Morton's Restaurant Group (MRT).

I really like the premium steakhouses in 2007. My favorite name remains RUTH. RUTH continues to expand not only from coast to coast but internationally in major financial center cities and high-end resort destinations. The spike in beef prices from last summer has subsided, and prices have now abated for several months. The impact of the spiked prices will have worked through the system by the first quarter of 2007. I think that estimates for 2007 are still low and that the company will grow by at least 20% in 2007 and over the next few years.

Who Wants Pizza?

The one group I played wrong this year was the quick-service pizza sector. I was long Domino's Pizza (DPZ) coming into the year and sold too early. On the other hand, I do have pizza exposure through my YUM holding, so I did not totally blow it.

When it comes to pizza, I think that this is a crowded and competitive market, and it will continue to be throughout the new year. Look for cheese prices and the economy as a gauge for trading opportunities. If you want the best of both worlds, own YUM, which has both Pizza Hut and the China growth story all wrapped up in one.

At the time of this Blog entry and the Street.com article, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of McDonald's (MCD), Yum Brands (YUM) and Ruth's Chris Steakhouse (RUTH) although spositions can change at any time.

The 2007 Seton Hall Stillman School of Business Jim and Judy O'Brien Financial Markets and Economic Colloquium

2006-12-21T13:28:00.000-05:00

Scott Rothbort w/Wall Street Guests (below)

Scott Rothbort w/SHU Students (above)

How much would you pay to attend a conference where you had the opportunity to listen to James Altucher, Jeff Bagley, Tony Dwyer, Doug Kass, Brian Reynolds, Cody Willard, and yours truly, Scott Rothbort, in person?

$999?

$599?

$199?

How about nothing? (Although donations to the Stillman School of Business Trading Room are greatly appreciated.)

And how far would you have to travel for that event?

South Orange, N.J.

That's right. On January 31, 2007, this collection of savvy market professionals will descend upon Seton Hall University for the Jim and Judy O'Brien 2007 Financial Markets and Economic Colloquium. Had you attended last year's event, you would have been properly positioned in 2006. Find out what everyone will be forecasting for 2007. It all starts at 3 p.m. I hope you can make it.

The Year in Derivatives: Amaranth 'Highlights' Tumultous Year

2006-12-19T16:03:00.000-05:00

This column was originally published on theStreet.com’s Street Insight.

As we close out this year, I wanted to review some of the highlights in derivatives this year.

1. The story with the most pervasive impact on the financial markets was that of hedge fund Amaranth. However, while the headlines were concerned with Amaranth's failure, the real story was what the hedge fund did to the energy markets. The rise and fall of crude and natural gas prices can be linked to Amaranth. The fund participated in and perhaps exacerbated the massive speculation and volatility that took place in the energy futures and options markets. However, once the marginal speculator would no longer enter the market, the music stopped.

Energy volatility and prices collapsed, and Amaranth lost billions of dollars. Comparisons were made to Long Term Capital Management (LTCM). Once again, we saw that the collapse of a large derivative speculator, whether it was the Hunt Brothers, LTCM or Amaranth, did not create a systemic financial depression. The lesson was that the system works.

2. Implied volatilities in the equity spiked when the spring correction took place but returned to lower levels as the year progressed. The VXO stands at low levels on a historical basis. This reinforces my research which indicates that high levels of volatility are predictive of market bottoms and impending rallies but low levels of volatility are just low levels of volatility and have no predictive value. It is likely that the low levels of implied volatility are the result of hedge funds seeking to generate alpha as they constantly sell both put and call options.

Unfortunately this has been a losing formula as we have seen, with options selling on the S&P 500 and individual stocks like Google (GOOG) , Sears Holdings (SHLD) and Goldman Sachs (GS) . Nevertheless, as long as there are levered players out there who need to outperform but have no other edge, it is likely that volatility will be an easy target.

3. Derivatives exchanges were all the rage. Cross-town rivals the Chicago Mercantile Exchange (CME) and the Board of Trade (BOT) agreed to merge after both stocks climbed to new highs. Futures, commodity and options volumes have soared, making these highly valuable properties big moneymakers. Following in the wake of that mammoth derivative exchange merger was the IPO of the New York Mercantile Exchange (NMX) in one of the hottest debuts for a stock in many years. Looking to the future, I expect that after the NYSE (NYX) completes its acquisition of Euronext NV it will next set its sights on a derivatives/commodities exchange as well as opportunities in the Far East. Perhaps it will try to kill two birds with one stone, if possible. My advice is to stay out of Thailand except for a vacation.

4. Options backdating was the scourge for many companies, including one of my favorites, Apple Computer (AAPL), and a company that I divorced from my portfolio, United Health (UNH) . While I am upset that many companies have been embroiled in these scandals, what really irritates me is the inability of these companies to resolve the issues on a timely basis.

The U.S. has some of the finest finance, accounting and legal minds that the world has to offer. Why does it take so long to figure out the impact of the backdated options? This can easily be done with a spreadsheet and some junior accountants. It is a shame that a company needs more than one week to figure out the accounting impact of backdated options.

5. The credit derivative market continues to grow in magnitude and importance for a wide variety of users. These users include the natural hedgers like lenders, speculators (like hedge funds) and the vendors (such as the investments banks). Expect the bears to rally around credit derivatives as the next market to achieve "bubble" status in the next year or two.

At the time of this Blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of Apple Computer (AAPL), Google (GOOG), Goldman Sachs (GS), NYSE (NYX) and Sears Holdings (SHLD).

When 'Buy What You Know' Doesn't Pay

2006-12-14T12:43:00.000-05:00

As I penned my list of the Five Worst Managed Companies in the U.S. in October, I had several other companies in mind that were being considered for the article. However, upon closer inspection, these companies had a different theme that I would now like to discuss. Today's list of five inauspicious companies has one thing in common: They are companies with great products that are bad investments. As before, my list could be longer and you may have your own favorites. Also note, that these are bad investments but could be a decent trade from time to time. Without further ado, and in no particular order, here is Scott Rothbort's list of Companies With Great Products That Are Bad Investments:

1. TiVo (TIVO): The quintessential great product bad investment company. I told my wife six years ago that we had to buy a TiVo. She had no idea what a TiVo or DVR was at the time. Six years later, we can't live without it. In fact, we still have the original box and lifetime subscription that we originally purchased. You would think that TIVO had a great concept and would be printing money. No so. By far, TIVO is the best example of how to screw up the concept of giving away razors and making customers pay for the razor blade. Since going public and now for 31 consecutive quarters, TIVO has posted a loss. The most recent quarter was the same old story for TIVO: more losses; litigation issues; fiddling with subscription packages; and, delays in collaborative agreement. Buy a TiVo but not TIVO.

2. Six Flags (SIX): What can be more fun than a day with the family at the amusement park? Well maybe a day at the ballpark, but you get my point. You have to be a real misanthrope to hate amusement parks. Disney (DIS) knows how to build and manage an amusement park. SIX, on the other hand, has managed to deliver declining returns to shareholders. In fact, a weekly chart of SIX looks like a roller coaster ride: a big climb, a rapid fall, some ups and down and then return to terra firma. SIX has been under new management for several quarters now and, frankly, they have just continued the failures of their predecessors. As an example, they managed to bungle the Great Escape in the Lake George region. The geniuses at SIX repaved the Great Escape parking lot this year (it does look good), but in doing so initiated a $10 per car parking fee for the first time ever. There is a Yiddish terms to describe this decision: chutzpah (gall, audacity, nerve). So they spent lots of cash (heavily borrowed), charged to park, and attendance declined. Spend your hard-earned cash for a day at Six Flags but not for a single share of stock.

3. Vonage (VG): Get rid of land lines, give your local telephone company the Bronx cheer and use the Internet for telephone calls. Voice Over Internet Protocol (VoIP). Sounds great. Go ahead and use it. Many people are switching. We have not switched to VoIP but would consider it some day. My sister-in-law has gone VoIP. She is satisfied. I have heard pros and cons in the VoIP debate but nevertheless, I have to say, that as a product and technology it is a great concept. VG seemed to be promoting itself for years. I call it the longest road show ever. It was also the most bungled IPO since the Wilt Chamberlain debacle back in the 1990s. If you have or plan to use VoIP be careful and don't swap your old AT&T (T) stock for VG in the process.

4. Krispy Kreme Doughnuts (KKD): If you read Jim Cramer's Confessions of A Street Addict, then you would probably know Jim as someone who lived for a Krispy Kreme and a great stock idea. Unfortunately, KKD could only deliver the former and not the latter. Those delectable delights are irresistible. Even though the "Under New Management" sign is hanging in the Krispy Kreme window, you have to wonder whether the KKD business model is or ever was viable. Sales continue to decline. The baking business has always been tough. Dunkin Donuts has been handed from owner to owner for years with relatively little success. Just look at the history of Interstate Bakeries or Tasty Baking (TSTY). Bring a dozen Krispy Kremes to your next client meeting, but don't sell them on the stock. Nothing beats McDonald's (MCD) when it comes to a food service investment.

5. Alternative Energy Stocks: Let's reduce our dependence on fossil fuels and tell OPEC to stick it where the sun doesn't shine. It's like a bad gift: It's the thought that counts. This entire asset class gets the great product bad investment nod. We can use light, water, wind, steam or bovine excrement to generate energy for all I care. But even if Earth, Wind and Fire were to sing for us, it is highly unlikely that a stand-alone company is going to make you a dime in the alternative energy sector. Maybe some big-cap companies like Archer Daniels Midland (ADP) or a utility like FPL Group (FPL) can hide their alternative energy losses under the rest of their profitable portfolios. Occasionally, a Johnny-Come-Lately alternative energy stock will go IPO and get investors all lathered up in the first few months of life only to eventually succumb to traditional valuation techniques. The pink sheets and OTC bulletin boards are littered with the carcasses of alternative energy stocks.

Here is a Web site devoted to alternative energy stocks. Go ahead, knock yourself out, and try to find a stand-alone alternative energy investment. Over the long run, these are bad investments. In the meantime, think green, and invest in Exxon Mobil (XOM).

At the time of this Blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of McDonald's (MCD) and Exxon Mobil (XOM).

The Worst-Run Companies in the U.S.

2006-12-04T22:21:00.000-05:00

The following article was originally published on The Street.com's Street Insight website (see links to the right) on October 18, 2006. In addition, I followed up with an interview on Street.com TV the following week (the link to the video also appears on the right).

As we are now deeply entrenched in the 2006 third-quarter earnings season, the question that always pops up in my mind when we are at this juncture is, what are the worst-run companies in the U.S.?

Without further ado, and in no particular order, here is my list:

Industrials: Alcoa (AA) Year to year, quarter to quarter, this is The Gang that Couldn't Shoot Straight (by the way, also the name of a great book by Jimmy Breslin). When commodity prices work against it, it delivers disappointments. When commodity prices work in its favor, never fear! It will botch it up and disappoint. Competition is never a problem for Alcoa; it does a fairly good job of competing against itself.

Technology: Lucent (LU)). How do you destroy Bell Laboratories, once the leading edge of telecommunications innovation in the world? Answer: Spin it off from AT&T (T)), load it up with debt, put lousy management in charge and lose the creative talent to the competition. At least it will soon be Alcatel's (ALA) problem. Au revoir.

Media/entertainment: Cablevision (CVC). Or should I say Dolanvison? The Dolan family has managed to destroy shareholder value while increasing their own wealth for many years. In the process, they have destroyed a New York icon, the Knicks, mismanaged another, the Rangers, sabotaged an Olympic bid, delivered lousy service to customers, made a bad investment in The Wiz, failed to grab up the old Adelphia properties on the cheap, piled on debt and then tried to rip off shareholders in last year's failed privatization offer.

After a special cash payment of $10 to shareholders in April, the Dolans were finally able to grab CVC back from shareholders just this past month. Finally, shareholders will be rid of the Dolans and, if they are smart, will invest the proceeds of their sale into a better-managed company.

Financial services: Janus Capital (JNS). We are in the middle of the biggest asset-management boom of all time, and this company has managed to move in reverse. Assets have flowed with the accompanying management fees to the competition, and this is likely to be a unidirectional movement. Don't be fooled by the recent stock performance.

Retail: It's a tie. Too close to call. Sharper Image (SHRP) and Pier 1 Imports (PIR). I actually ran a five-year comparative chart of the two companies. The relative returns were as close as a pennant race between the Tampa Bay Devil Rays and the Kansas City Royals. Relatively competitive, but absolute losers.

Sharper Image reminds me of the Scotch Tape Store sketch from Saturday Night Live in the 1970s. All that the store sold was Scotch tape. All that Sharper Image seems to sell are ionic breeze air purifier machines. Have you ever gone to one of its stores? It's where the men hang out while the women spend money at the other retailers -- you know, those retailers who know how to manage a business.

As for Pier 1, that store has more junk in it than any women I know would be caught dead living in the same house with.

I am sure you have your own nominees, especially those that have cost you performance in the past. The lesson is, when you invest in a stock, you are also investing in management.

Note: Subsequent to the publication of the article above, Alcatel's acquisition of Lucent was completed. The new company is aptly named Alcatel Lucent (ALU).

2006 Holiday Shopping

2006-11-27T17:56:00.000-05:00

On Friday, November 10, for the second straight year, I led a group of Stillman School of Business students from Seton Hall University (SHU) to the Palisades Center in West Nyack, NY for an intensive one day research project in which we surveyed and observed shoppers. The following Monday through Thursday we followed up the mall research with a nationwide survey focusing on shopping tends and preferences. Last week, SHU and LakeView Asset Management, LLC released some of our findings in the following press release:

_________________________________________________________________

HOLIDAY SHOPPING SEASON ANALYSIS IS IN!

Seton Hall University Students Forecast Holiday Shopping Trends,

in the NY Metro Area and Across the Country

Flat screen TVs are still hot, but satellite radio and Direct TV are not, and holiday season sales could be flat to somewhat higher compared to last year! These are just a few of the fascinating, fact-based predictions Seton Hall University’s Stillman School of Business students have to offer, based upon their second annual grass-roots, on-the-ground survey conducted November 10 at Palisades Center in West Nyack, New York, as well as their national telephone poll conducted November 13-16 at Seton Hall’s Polling Center.

Under the guidance of Scott Rothbort, M.B.A., professor of finance at Seton Hall and president of LakeView Asset Management, LLC, Seton Hall students interviewed over 700 respondents in total, asking a wide range of questions covering personal income, shopping preferences and plans. What are the answers?

Personal income was once again the most important factor determining how much shoppers will spend this year.
Overall, shoppers expect to spend about the same or just slightly more in the 2006 holiday season compared to the 2005 holiday season.
Given that personal income and employment are higher in 2006 relative to 2005, we are predicting that total 2006 holiday sales will rise in line or slightly greater than increases in US Gross Domestic Product over the same period of time.
Consumers prefer to stay down to earth when asked about satellite entertainment. Respondents who did not have satellite television such as Direct TV (DTV) or Dish Network (DISH) or satellite radios such as Sirius (SIRI) or XM (XMSR) overwhelmingly did NOT intend to purchase such technology.
Flat screen televisions are more likely to be purchased by current non-owners than any other technology in our survey.
When asked about fast food, respondents almost as often named Wendy’s (WEN) and McDonald’s (MCD) as their favorite fast food restaurant handily outranking rival quick service company Burger King (BKC). When it comes to pizza, nothing satisfies as much as the local pizza parlor.
Google is definitely the dominant internet search engine.
In a subject that has emerged from local grass roots efforts, we asked mall shoppers at the Palisades Center in West Nyack NY if aluminum bats should be banned in favor of wood bats. It appears that there is no decisive opinion either yes, no or not sure. However, while those agreeing to the ban were fairly evenly split between men and women, those opposed to it were almost 2 to 1 male to female, while the undecided were 1.5 to 1 female to male. This could be an issue which gets solved over the kitchen table at homes across our metropolitan area.

__________________________________________________________________________________

In addition, today, I was interviewed on TheStreet.com TV by Gregg Greenberg. We discussed our research and my thoughts on Black Friday.

At the time of this Blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of McDonald's (MCD).

Where's Mortimer and Randolph Duke?

2006-11-12T22:17:00.000-05:00

On Monday November 6, 2006 I led a group of Stillman School of Business students on a visit to the New York Board of Trade (NYBOT). While at the exchange, the students participated in a simulated commodity futures trading session. That's me wearing my old Merrill Lynch (MER) bluish/green trading floor jacket given to me by my MER floor broker friends from the Chicago Board Options Exchange (CBOE)

The event was part of the "NYBOT Ringside Goes Schoolside" program where universities in the tri-state area are invited to the exchange. The NYBOT was founded in 1870 and was known as the New York Cotton Exchange (NYCE). It provides the world's premiere futures and options markets for several internationally traded agricultural commodities including cocoa, coffee, cotton, frozen concentrated orange juice (FCOJ) and sugar.

Remember FCOJ from the Eddie Murphy / Dan Aykroyd movie Trading Places? That movie was filmed at the exchange's old site in the World Trade Center.

At the time of this Blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares and/or call options of Merrill Lynch (MER).

How To Invest By Brown Bagging It To The Game

2006-11-03T19:59:00.000-05:00

Last Sunday I went to Giants Stadium for the New York Giants / Tampa Bay Buccaneers football game, also dubbed the Barber Bowl. Accompanying me were my wife, our oldest son and some cousins. As usual we brought along some sandwiches and soda in the car and eat them on the way to the game. Having not been to Giants Stadium since last season it was not until we passed the concession stand did I once again get stadium sticker shock. So, on my trusty Palm (symbol: PALM) Treo 650 I snapped a picture of the concession stand (which is posted above). For what you can save by eating before the game by bringing your own food, drink and snack you can buy one share of Aramark Corporation (symbol: RMK), the company that runs the concessions. So the next time you go to a game, bag your own lunch and call your broker the next morning.

Decision of the Year

2006-10-22T22:18:00.000-04:00

Yesterday I joined my family for a viewing of the latest Robin Williams movie, Man of the Year. It was quite entertaining but not necessarily his best piece of work. The movie reminded me to check on the latest 2006 election polls when I returned home.

Right now the Democrats are clearly ahead in the race for the House. As for the Senate it is too close to call. If you count Joe Lieberman as a Democrat (though I am not so sure he will be siding with the party that just abandoned him), we could be looking at a 50/50 split, which means a 51 - 50 Republican advantage as the Vice President (President of the Senate) will cast any swing vote according to the Constitution

My own political views aside – for full disclosure I consider myself a Reagan Republican – my concern with the elections are the impact on the financial markets. Nancy Pelosi and Charles Rangel will no doubt in my mind seek to turn back or eliminate the Bush era tax policies. In danger are the dividend exclusion, low capital gains tax rate and final elimination of the “death tax”. They will also push to raise taxes though increased marginal tax rates or through other means. A totally Democratic Congress would make those politicians’ ambitions an ever greater probability.

When I look at the economy and the financial markets, I am not concerned with the Federal Reserve Open Market Committee’s monetary policy or corporate earnings or the housing market or even the consumer. The one single concern that I have that would cause the biggest and most immediate blow to the economy and the financial markets is a Democratic majority in both the House and the Senate. I am not talking from my own political perspective but from economic realities and the psychology of the stock market.

If a Democratic party sweep become a reality, it would trigger an investor rush to the exits. As for the 2008 Presidential elections, don't get me started.

Back To The Future

2006-10-18T22:50:00.000-04:00

I recently visited the offices of CTS Trend a real-time market data technical analysis services company located in New Providence, NJ. At Seton Hall University we run the CTS suite of technical analysis solutions: Net; ViewNet; ScanNet; and, TickNet. I highly recommend the CTS http://www.ctstrend.com/roduct for both the technical based trader and the trader/investor who desires to add technical analysis to their arsenal of trading tools.

As it turns out I spent some time with CTS President and Founder, Dr. Frank Soong. CTS is an interesting enterprise. Not only does it develop and market the technical analysis products but Dr. Soong also manages money for some large banks using his own proprietary statistical based models. Here is how the day became interesting. Early in my career when I was at Morgan Stanley I worked under Nunzio Tartaglia and Gregg van Kipnis who together pioneered “Pairs Trading” and "Black Box" statistical arbitrage trading in the 1980s. From that group came David Shaw, founder of the highly successful DE Shaw hedge fund. While also at Morgan Stanley, I worked with the team of professionals who developed the global program trading business. As Dr. Soong began to describe his trading systems and ravel off some names of people who he has worked with or subscribe to his models, it was like a flashback my early days on Wall Street at Morgan Stanley. Dr. Soong did not know or know of Nunzio Tartaglia, the very gentlemen who broke ground for people such as Dr. Soong and David Shaw. After all of these years, it is quite heart warming to see that the legacy of these early pioneers lives on in a new generation of statistical arbitrage money managers.

Spamalot Was A Bargain - CSNY Was Scamalot

2006-10-09T21:11:00.000-04:00

Recently my wife and I attended a Broadway presentation of Spamalot. Spamalot is a stage adaptation of the movie Monty Python and the Holy Grail with some bits thrown in from the movie Life of Brian and the original Monty Python's Flying Circus BBC television shows. It was delightful and I wholeheartedly recommend catching the show on Broadway, in London's Theatreland or on a road show. We sat in the orchestra in seats that cost $110 (plus the $1.25 facility fee) each. The show kept us entertained for 2 hours and as is the trademark of a successful Broadway musical, other members of the audience were heard singing or humming the tunes on the way out.

Let's contrast this with this summer's CSNY or Crosby (David), Stills (Stephen), Nash (Graham) and Young (Neil) Concert. Titled the Freedom of Speech '06 Tour which we caught this summer at SPAC (Saratoga Performing Arts Center). Let me be very clear, I am not here to discuss politics. Rather I want to discuss the poor value offered by this year's CSNY concert tour. For $176 per seat, we also sat in the orchestra for what I hoped would be an enjoyable 3 plus hour concert with some old college friends. To begin with, Stephen Stills should have stayed home. His voice was shot and frankly reminded me of the ballplayer who limps onto the field well past his prime. About 90 minutes of the concert was devoted to CSNY's politics and anti-Bush diatribes. To add insult to injury, they did not sing many of their classic tunes including, to my astonishment, Suite: Judy Blue Eyes. Anyone who paid the top dollar that CSNY was asking for this concert deserved to hear the group’s greatest hits and not a litany of political musings. If I wanted political commentary, I would turn on the television on Sunday mornings and listen to many political views for absolutely nothing. CSNY should be ashamed for charging exorbitant prices and not delivering a consummate product.

Monty Python's Spamalot or CSNY Scamalot. The choice is simple. We Won't Get Fooled Again (Sorry, that's The Who or what's left of them, who also toured this summer). As to CSNY, here's a message from Monthy Python and myself - Always Look on the Bright Side of Life. That's my Freedom of Speech.

McCarthyism comes to Major League Baseball

2006-10-03T22:02:00.000-04:00

While I am appalled at the use of steroids in major league baseball (and all sports for that matter), the whole turn of events in the steroid investigations feel like a flashback to McCarthyism. Back in those dark days, if you were accused of being a communist you either gave up the names of other "communists" or were blacklisted. Now we are seeing the same type of activity when focused on steroid use in baseball. It all started with the Balco investigations. This led to retired baseball player Jose Conseco telling all in his book Juiced. In it Conseco points fingers at all of the "users" around him using spotty facts in the process. The intent besides selling books was to deflect attention away from Conseco to others such as Mark McGwire and Sammy Sosa. Now we get the accusatory finger from journeyman pitcher Jason Grimsley who (likely with the help of his defense attorneys) implicated sure-to-be Hall of Fame pitcher Roger Clemens and his close teammate Andy Pettitte. Grimsley's house was searched after he admitted to using human growth hormone (HGH). Grimsley then agreed to cooperate with investigators, no doubt agreeing to give up other names in exchange for his own freedom. Sounds to me like McCarthyism in the ballpark.

I hope this does not take away from the most joyous time of year for baseball fans - the playoffs and the fall classic, the World Series.

As for my picks this fall, here they go:

AMERICAN LEAGUE DIVISION SERIES

Detroit Tigers vs. New York Yankees - The Bengals had the best start in MLB under manager extraordinaire Jim Leyland. However, they also managed to stumble their way in the last half of the season losing the division title on the final day of the regular season after getting swept by the inept Kansas City Royals. The Yankees are too deep to fall victim in the best of five ALDS. Yanks in 4.

Oakland Athletics vs. Minnesota Twins - As bad as the Tigers were since the All-Star break, the Twins were one of the best teams (along with the Yankees) in the back half of the season. Oakland has a good pitching staff but their bats don't scare opposing pitchers. The veteran Frank Thomas is several years removed from his prime but could show flashes of his old self in a short series. Twinkies in 5.

AMERICAN LEAGUE CHANMPIONSHIP SERIES

Minnesota vs. NY Yankees - Both teams were hot in the second half of the season with the Yankees sporting the best record in baseball along with the cross town NL rival NY Mets. Hitting advantage goes to the Yankees. The starting pitching is even and a Johan Santana (Twins) match up with Chien-Ming Wang (Yanks) could occur twice and create some classic pitching duels. When it comes to hitting the Yankees are head and shoulders above the Twins. The Homer Dome in the Twin Cities could be a sandbox for the Yankee Hall of Fame lineup. Yanks in 6.

NATIONAL LEAGUE DIVISION SERIES

NY Mets vs. LA Dodgers - The Mets were the best team in the NL and the most consistent throughout the season. The Trolley Dodgers ended strong to capture the Wild Card. While the Mets will go without Pedro Martinez in this best of five round, I believe that the Metropolitans are still the better team without him. LA has a nice line-up of veterans players but the power in the Mets lineup will more than compensate for Martinez' absence. Willie Randolph will also out manage Grady "I Should Not Have Left Pedro Martinez In" Little. Amazins in 4.

St. Louis Cardinals vs. San Diego Padres - A very religious match up. The Pads sport the career saves leader Trevor Hoffman. That still does not make him the best reliever of all-time or at the current time for that matter. Despite the Cards late season swoon they still have the best hitter in the game, Albert Pujols. Pujols will make sure that Hoffman does not get to do his job. Red Birds in 4.

NATIONAL LEAGUE CHAMPIONSHIP SERIES

St. Louis Cardinals vs. New York Mets - In a 7 game series I believe that the starting pitching advantage swings to the Cardinals favor as: the Met's Martinez is out; Tom Glavine only has one start in his tired arm and his career in the post season is spotty at best; and, Steve Trachsel is unreliable. This leaves only the ageless El Duque to carry the starting pitching on his shoulders. The Mets bullpen will be tested. The Cards still have Pujols. I predict an upset with the Cards winning in 6.

WORLD SERIES

St. Louis Cardinals vs. New York Yankees. A rematch of the 1964 World Series in which Bob Gibson led the Cards to a victory and was well documented by David Halberstam in October 1964. Starting pitching, bullpen, hitting, manager, coaching advantage all go to the Yankees. Sure the Cardinals have Pujols but the Yanks have perhaps the most potent lineup with Damon-Jeter-Abreu-Sheffield-Matsui-Rodriguez-Giambi-Posada-Cano. Not close but I will give the Cards a game. Yanks in 5.

Mistakes Market Strategists Make, Type II Errors and Elimidate

2006-09-24T20:54:00.000-04:00

Jeffrey Miller, PhD, a fellow academic and professional money manager discussed on his blog, A Dash of Insight, errors made by market strategists and others by looking at descriptive statistics in a simplistic manner. This was also discussed by Brett Steenbarger on Trader Feed. I discussed this in my class at Seton Hall University. Here are my thoughts:

1. Using a single variable model increases the risk of Type II or ß errors. Thus you have to increase the variables and thus degrees of freedom in your statistical study to arrive at what is considered a statistically significant model.

2. Anecdotal observations are interesting as starting points but are a mean not an end in research.

3. All too often market strategists and other individuals make the mistake of form fitting data to meet their pre-conceived bias. In other words, they are trying to prove a conclusion by finding data to support the conclusion rather than derive a conclusion from a set of observations.

4. You need to back test under various conditions with multiple queries. Failure to do so will just induce more Type II errors.

I used a very simple example with my students by asking them if they watch the Syndicated TV show Elimidate as it was something that they can relate to. Most did watch (as I admit so do I from time to time). On Elimidate, four contestants go on a date with a single member of the opposite sex. The contestants are then eliminated one at a time by the single dater until a winner is selected from the four suitors. Then I asked the students to be honest and acknowledge if they try to guess the eventual winner at the beginning of the show. Again they overwhelmingly said yes. Oh course, I explained to them that their selection was made solely on their own bias based upon their own desired result, not that of the individual who was making the determination of the four contestants. It is not until more research was done by the single dater making the selection into the personalities of the four contestants was a winner determined.

As to the impact of the Federal Open Market Committee’s decision to pause or end an interest rate tightening cycle, I discussed with the class work that I published on TheStreet.com’s Street Insight where I was able to conclude that the end of a tightening cycle was positive for certain sectors of the market, such as the broker-dealers/investment banks. I pointed out that at the same time, the end of the tightening cycle might not fare as well for other sectors and suggested that they perform more research on their own at the Seton Hall Trading Room.

Lastly, there are some excellent market strategists who are top notch in my book. I am not implying that all market strategists are in any way guilty of using slipshod methods in their analysis, so its best that you know who is the best out there. In my book and in no specific order, theses are amongst the best:

Brian Reynolds - MS Howells
Tony Dwyer - FTN Midwest Securities
Richard Bernstein - Merrill Lynch

At the time of this blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares or calls or Merrill Lynch (MER).

TIme For a New Refrigerator

2006-09-13T23:41:00.000-04:00

After 18 years our refrigerator stopped refrigerating. The freezer worked but that was no help. So first thing on Monday morning I accompanied my wife on a mission to seek out a new refrigerator/freezer. The potential list of retailers was Home Depot (HD), Best Buy (BBY) and Sears (SHLD).

We recently bought a new front and storm door to our house from Home Depot who was also contracted to install the doors. We still have a credit card dispute with HD who tried to charge us more money after the installation. I have never seen anyone shopping for home appliances at HD. Also, we do not know of anyone who bought a home appliance there. We did buy our kitchen oven at Expo but alas, HD shut that concept down several years ago. Thus, HD was crossed off the list. We have had good experiences at Best Buy recently for purchases and installation of a Pioneer HDTV plasma television and a Sony (SNE) HDTV LCD television. However, we were able to take advantage of 12% coupons and zero percent financing at BBY. This time around we had no coupon. In addition, just like HD, we have never seen nor heard of people shopping for home appliances at BBY.

So, we trudged to Sears. As it turned out we had a 10% discount coupon for Sears’s home appliances. In addition, we have bought our dishwasher, clothes washer, clothes dryer and trash compactor at Sears. I also like to shop where I invest and as many people know, SHLD is one of the top holding for my clients, family and me.

Now we had to decide on a style and model. With a family of seven (six since we have one in college) plus frequent family and guest visitors, a large sized refrigerator / freezer is necessary. Our old refrigerator was 25 cubic feet. A similar size was necessary. We took measurements at home before leaving for Sears so we could make sure that a new unit would fit in the old space. There are 3 styles of refrigerator / freezer combinations. First is the side by side. We don't like that style. Actually we have one at the lake house (not our choice, it came with the house) but for our normal lifestyle it does not work. Then there is the freezer top / refrigerator bottom style which was like the unit that just died. Finally, a newer style called the trio was also available. The trio style has a freezer on the bottom and then two French style doors for the refrigerator on top. We decided on the Black Kenmore Elite 24.7 cu. ft. TRIO (see the picture above). It also comes with a water / ice dispenser on the left door. We could not use the 10% discount coupon because the unit was already on sale for about 12% off of the normal price. In addition we received a rebate for the delivery charges and were not charged for removal of the old unit.

Hopefully we won't have to deal with this situation for another 18 years. Instead now I may have to remodel the kitchen.

At the time of this blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of Sears Holdings (SHLD).

Professor Cody Willard

2006-09-11T20:39:00.000-04:00

Congratulations to Professor Cody Willard, the dynamic hedge fund manager, Real Money.com contributor, blogger and band leader who scaled the Ivy Tower today to begin another aspect to his life, that of Adjunct Professor at Seton Hall University.

For those of you not aware, I am a full time professor at Seton Hall University, in addition to managing my own Investment Advisory business, LakeView Asset Management, LLC. Each and every Thursday (this semester) a group of students will be joining me in the Stillman School of Business' Trading Room (see picture above) to view and discuss Jim Cramer’s Mad Money which appears from 6 to 7PM. From time to time other guests from Wall Street or TheStreet.com will join us. Feel free to came and participate.

On Average There are 2 Sneakers to a Box

2006-09-07T20:35:00.000-04:00

While shopping at the Aviation Mall in Queensbury, NY we stopped by a shoe store to look for some back to school foot attire. I came across a box of Puma sneakers and snapped this picture on my Palm (PALM) Treo 650. While hard to read, if you look closely enough, in the lower left hand corner of the box in the picture is printed Average Contents 2. The mathematician that I am began to wonder. Does Puma sell some boxes with 1 sneaker? Does Puma then offset that with boxes of 3 sneakers? Is there an arbitrage whereby I can buy 2 boxes of 3 sneakers and sell them as 3 pair?

College Tuition

2006-09-06T12:55:00.000-04:00

I had an interesting discussion with my graduate assistant Michael Cavallaro on the topic of fixed versus variable college tuition. As it turns out I just paid my first round of tuition for my son. It turns out that his tuition plan is fixed, that is to say you pay not by credit but by semester. This was how I paid my way through the Wharton School at the University of Pennsylvania. On the other hand Seton Hall is on a variable or pay by credit formula. That’s how I paid my MBA bill at NYU’s Stern School of Business. I don’t think that there is a right or wrong way of pricing college tuition. It really depends on the structure of the institution’s classes, faculty and endowment. Universities which rely on large class size and have large endowments can favor a fixed tuition plan. Those which focus on small class sizes and rely on adjuncts more than permanent faculty and do not sport large endowments find it best to go the variable route.

I will say that having shopped around recently; some schools are definitely overpriced relative to the quality of their academic product in many respects. Please note that Penn, Seton Hall and NYU are not amongst those overpriced versus lesser quality institution. Quite the opposite, I think those schools offer great value. However, when selecting a college keep in mind the quality of the education and outplacement versus the tuition. As with the stock market, there are always bargains, blue chips and underperformers out there.

Back to School

2006-09-05T14:26:00.000-04:00

Welcome to the LakeView Asset Management Blog hosted by myself, Scott Rothbort. I hope to share with you some of my thoughts from the world of investments, academia and the world in general.

Today (or shall I say, this week) is back to school. So far, my observations at retail stores indicate that we have a very brisk and healthy back to school season. In particular, I saw lines and heavy shopper activity at Staples (SPLS) and Sears (SHLD). I have held SHLD for our client accounts since the stock was Kmart.

Today SHLD is up on strong volume with the stock price advancing above the level at which it closed the day before announcing earnings in August. Helping the stock today is information fresh from the SHLD 10-Q in which the company disclosed a nearly 2.3 million share buyback. More buybacks are no doubt on the way.

On the day of the earnings release, I spoke on Bloomberg TV about some of my thoughts on Sears and its ace Chairman, Eddie Lampert.

At the time of this blog entry, Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of Sears Holdings (SHLD)