happy christmas

Just a quick note before I dash out....

I think a lot of disappointment today was due to the build up that everyone had put on the announcement and the anti-climatic way in which it was delivered.

I guess there are two types of person involved in both CNP and CER at this stage: traders and longer term investors. It strikes me that the traders were the more disappointed of the two parties, especially (I imagine) if you are on T+1, T+2 or have a highly leveraged position. Even worse if you are funding from a credit card. I'm not saying the longer-term folks weren't upset, probably just less so.

You may want to consider that your reaction to the events today is probably more a reflection on you rather than the market or the company in which you have chosen to invest. I often think about situations this way and it certainly helps me.

I may have said before that we at Swap & Co. are full time, long-term value / contrarian investors and have very substantial positions in both CNP and CER. To be successful in our game you have to try and work out what is going to happen and when. But as Warren B says, if you can work out the 'what', the 'when' is less important. We always stick by this.

Just after the market for CNP opened late this afternoon, as we watched the sellers build and the price drop, my trusted offsider turned to me with a knowing glance and said "My word, it's Christmas" (actually it was "It's f'n Christmas" but this is a family forum). In the following 18 minutes, we increased our holding of CNP by just over 20%, that's right 20%. Our deepest thanks go out to whoever was on the other side of those trades and whatever impulse caused you to sell. We'd also like to than our other investment, QBE, for going up 2.4% today and giving us the opportunity to spend more money.

Anyway, why do we think it's Christmas and why did we buy more? Well, in my opinion the announcement today contained two pieces of news:

1. The company is not going into administration or liquidation. I have been saying this since late Dec (you can check my posts) but today IMO it was confirmed. If the company was going to go, it either would have already or it would have gone today.

2. An extension is all but in-the-bag. The question is: how long? Our money is on 5 months but 12 is a possibility.

So to be armed with both these pieces of information, to see the price drop and know we have potentially another 7 days before d-day, we heard the sleight bells a'ringing.

By the way, you probably noticed CER hardly moved today. Given the debt for CER is contingent on extension for CNP, if anyone though CNP was in trouble, CER would be going with it. This may appear surprising until you think it through. As I have said before, CNP is dominated by day-traders and retail investors CER is dominated and owned by instos. Which one panicked briefly today?

There's no getting away from the fact that this was not the best PR and was a pretty terse announcement given the magnitude of the issues at hand. Having said all this though, we have no comprehension of the complexities involved in what Glenn et al are trying to achieve and if the brother needs another 7 days to work through it, that's fine by me.

Happy Christmas everyone.


(Don't forget to contribute to the "Give Swap a Red Heart Campaign". Add me to your Favourite User List if you find my general level of posting to be useful - or better, if you have made money from them!)