A FURTHER CASE FOR CAUTION
Yesterday, Chris Brown sobered us up a bit. Today, someone going by the name Tyler Durden (“Fight Club”) smacks us around a bit more. Here.
After all that, the stock traded up 18 cents to $3.84 on 2-plus million shares in volume. This suggests people are a little positive, as they assess the Delaware Supreme Court’s ruling, but so far, only a little.
Wedbush, which “Ranked 2012 Top Stock Picking Firm” according to its website, raised its target price to $11, with this comment:
We view the decision of the Supreme Court to reverse the lower court’s 50% profit remedy and direct the court to restrict its damages to “contract expectation damages” as a victory for SIGA, and expect any subsequent damage remedy to be immaterial to SIGA. Expectation damages are designed to put the aggrieved party in the position they would have enjoyed at the time of the breach of contract, in this case, in 2006, which was prior to any ST-246 procurement contract. PIP’s “legal victory” is hollow as Vice Chancellor Parson’s has already ruled that a specific lump sum for expectation damages is “speculative, uncertain, contingent and conjectural” and therefore, inappropriate.”
The market does not agree, at least so far, and I’ve got to say that if I were the judge being overturned on appeal, I wouldn’t suddenly think the company I had branded as the villains in this dispute (SIGA) deserved to be let off with “immaterial” damages. But I sure hope Wedbush is right.
Even if they’re not, I’m happy to hold on for the reasons discussed yesterday. And just in case they are right, I couldn’t resist some July and December calls, which at their closing prices last night seemed cheap to me. (If you don’t know what calls are, good. You’ll just lose money. When will I ever learn?)
On the bullish side, here is Glenn Hudson’s take.
THE VANISHING DEFICIT — II
Joe Devney: “I agree with you. Let’s just repeal the sequester. No need to replace it, or tie it to other Congressional actions. There already exists a bill, H.R. 900, to do just that. One sentence: ‘Section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985 is repealed.’ I’ve already written to my Congresswoman (twice!) and my two Senators asking them to support it.”
☞ The idea was to force a grand bargain; but because the only piece that really affected Congressmen was flight delays — and that could be quickly fixed once it began to bite — no grand bargain was reached.
So repeal the sequester — but then keep pushing for that grand bargain.
We need modestly more tax revenue for the next couple of decades, because for the last three we’ve been leaning too heavily in the direction of private consumption — which has been great for the makers of Korean TV’s, of which I have 7 — and not quite heavily enough in the direction of public consumption — which has led to things like bridges collapsing.
We need to cut the size of the military — but let’s start by cutting the programs the Pentagon doesn’t even want, not by cutting indiscriminately.
We need to invest in infrastructure — that has to be part of the grand bargain, even though (the crazy way the government does its accounting) it adds to the deficit.
And, yes, we need to cut the growth in entitlement spending in “the out years” to show the financial markets around the world that we’re on a sustainable track . . . because if we do, we’ll have a much better chance of building the kind of economic strength that will in fact render those cuts unnecessary before they even begin to kick in. (And if we don’t, we’d more likely have to make the cuts anyway — only with less time to prepare for them, and without having had the benefit of that economic confidence along the way.)
SPEND VERSUS DO
So one more thing on this. As you know, many average Americans hate government spending. But the indispensable Rachel Maddow notes that they love much of what government does. They love those Medicare and Social Security checks, love our military, love that our meat is inspected and our planes don’t collide . . . so Rachel suggests we remind people what they’re saying when they demand the government spend less: they are demanding government do less.
That won’t end the discussion, because many people think we spend 10% of our budget on foreign aid (it’s less than 1%), or that there are tens of billions of dollars to be saved in waste and fraud (you purchase one lousy $600 hammer . . . ) — which there surely are, but (a) in a three point seven trillion dollar budget, tens of billions, while surely worth saving, don’t really mean that much; and (b) no government can operate with zero waste and fraud, hard though every government should try.
So let’s get our Republican uncles to come out for maintaining fewer bridges, helping fewer kids get the nourishment they need to concentrate in school, investing less in basic research, providing less care to wounded veterans — not let them off the hook without specifics.
Quote of the Day
A penny saved may be a penny earned, but it's one boring penny. A penny invested, on the other hand, bounces around. It gets bigger one day, smaller the next. A bit player in the drama of global finance, that penny buys a guy a balcony seat in the theater of macroeconomics.~Susan Stewart
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