The equity markets are performing poorly. Banks have fallen, and there is the threat that even more bad news could hit the financial sector as Citi becomes the latest target of speculation. People do not know what to invest in, and retirement accounts have been decimated. People, no matter what they are invested in, are expressing dismay and frustration over poor stock performance.

If you are invested in the markets and have not done so already, it may be time to do some soul searching, because like it or not, investments in the markets have boiled down to their simplest form. It all comes down to faith.

Do you have faith in an economic recovery?
Do you have faith in the credit markets easing up?
Do you have faith that consumers will once again feel good about spending?

Those basic questions need to be applied to any equity you are invested in, because these are the core issues that impact nearly everything that is going to happen. When you get to a specific company, you need to ask additional questions of yourself.

Do you have faith that management and the board are acting in your best interest? It seems that the question is simple, but you really should look as deeply as possible. Stocks are performing badly, but it is not unique to one specific company. Are the woes of your investment based on outside influence that are beyond the control of management? If you remove current management, who will replace them? If you vote down a board of directors, who will be at the helm? How long will it take to replace people? What will the impact be on the stock?

For investors in Sirius XM Radio, the annual meeting is coming in late December. Among the items to be considered are the Board of Directors, An authorization to increase the authorized shares to 8 billion, and a reverse split between a range of 10 to 1 – 50 to 1.

Investors are frustrated. That is clear. The question is whether the existing management and board have the capability to steer the course, and whether they have the tools and latitude to make things happen. There are strong arguments on both sides of the proposals, but in the end it boils down to your level of faith as well as what actions will be the most prudent.

Investors should ask questions, participate, and vote. They should also be as informed as possible when they make these decisions, and think about how their action would impact the company. Whether you are for or against certain proposals, you need to think about what transpires in the event that these things actually happen.

If you are against the current board nominees, that is fine, but you need to understand that the company will then be in a position where they need to fill the board seats. Who will those seats be filled by? Will the new board members be aligned with your goals and desires for the company? Are you prepared to have a time period of flux, where new board members get up to speed with the happenings at the company?

If you are voting against the additional authorized shares, that is fine. Have you considered what that actually means? No one likes dilution. Authorizing that number of shares is a scary proposition. The company is looking for breathing room, and flexibility in how they are responding to the current markets. What happens if there is no flexibility? Would this board, or a new board have their hands tied to an extent where their choices are limited?

If you are voting against a reverse split, that is fine. Are you prepared for delisting if the stock price does not get above $1.00. Yes, delisting would take time to process, and a company can appeal, but will even the very process of delaying a delisting impact the company? No one likes reverse splits either, but these are difficult times across the board, and it is in difficult times that difficult decisions need to be made.

It boils down to faith. How much faith do you have in current management? If your answer is that you do not have faith in them, what are your solutions? If you have no solutions on the table, then you need to think deeper.

Some would suggest that there will be time later to address these issues. That is true, but that would require a special meeting, which has costs. If you want the decision to be held off, in what time-frame do you propose these decisions be made? Will holding off on some of these decisions impact the equity? Will it hamper the ability of this, or any management and board to refinance debt, etc.

I think the involvement of shareholders is a wonderful thing. I think people asking questions is prudent. I have seen ideas about refinancing that are innovative and cutting edge, but I have yet to see anyone implement them in a way that takes things to the next level. I have seen people take a stance on certain items, but not think out the next few moves. I have seen people express their votes on certain items without even having heard the Q3 call. What is transpiring with satellite radio needs more than a knee jerk reaction. It needs deeper thought, and most of all demands that you look at you level of faith not just in SDARS, but in the economy as a whole.

Position: Long Sirius XM, No Position CITI