Sirius XM Cramer Wars 2
There has been a lot of reaction to my latest SiriusBuzz article regarding Jim Cramer, Goldman Sachs and a whole bunch of Sirius XM convertibles they hold. Seeing as the article deals a lot with perspectives, I’d like to offer yet another perspective. I realize that I may be beginning to sound like a person who needs heavy doses of medication with this one, but see if you can follow me on this…
Let’s assume that Cramer is in fact a Goldman puppet, as many have speculated in the past. I am not saying he is, but for arguments sake just go along with it. What if ( and I stress “what if” ) Goldman holds too many of these convertibles? What if Goldman is looking to dump these convertibles but as yet has found no takers? What if, in an attempt to create a market for these converts, they talked Cramer into a new line of thinking knowing he would announce them on national television? “Buy! Buy! Buy! The converts! “
The problem is that near as I can tell, Goldman Sachs is the number one holder of these convertibles. Next in line is Bank Of America, although they hold a miniscule position, comparatively. The implication I’m of course making is that Goldman itself would have the most to gain from these proposed convertible sales, and Cramer’s recommendation to purchase these converts benefits his former firm more than any individual investor. Broker calls client, explains how Jim Cramer recommends them as an investment also, and “BAM!,” trade is executed.
With Sirius XM’s credit rating looking to improve near term, the value of these convertibles in the open market declines, which means a drop in Goldmans portfolio. By keeping the stock price suppressed, if that is in fact what these bond bullies are doing as Cramer suggests, the convertibles become more attractive to buyers. Imagine the sales pitch of offering for sale a plus 4.00 stock for 1.40 a share, at a predetermined time that the bond bullies decide to cover. A separate argument could then be made that this is the reason that Goldman has been accumulating shares while lowering their price targets.
It’s just possible that Goldman knows these convertibles are a losing proposition for Goldman, and would like someone….anyone to take them off their hands. I know I’m not making friends with any of this, but as an unsophisticated investor, I’m doing my best to improve my understanding of sophisticated investments.
Position: Long SIRI,
No position GS, BAC
FWIW… GS began building their position in the Sirius convertibles in Q4 of 2006. Each quarter adding more. It does not appear that they are looking to sell off these bonds — as they’ve been adding more over the last 18 months.
However, I still believe that a bank, such as GS, would not hold on to these bonds without some sort of hedging against them.
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Brandon,
I am just happy and relieved you’re finally admitting Cramer is a puppet and a crooked one for that matter, if there’s such a thing as crooked puppet that is!!!!
Cramer will do just about anything for money since he’s so afraid of ending up sleeping in his car again, and this time for good. Don’t forget:
ONCE A CROOK (CRAMER), ALWAYS A CROOK (CRAMER)
What I find interesting, and tedious, in the SEC GS form 13F, for the period ending June 30, 08. It that appears that whatever hedging was being done prior to the merger was .68 shares to 1 share, put to call, for Sirius and 2.3 shares to 1 share, put to call, for XM. Also the total number of shares for Sirius under put / call contract is only 1.8 Mil sh, a small percentage of what they have invested in these bonds, $127 Mil, which represents 66.1 Mil shares @ 1.92 /sh as of 6/30/09.(the same sh market value as the put/call contract sh price for purposes of comparison)
If I’m reading this wrong, please jump in, but it would appear prior to the merge GS was Bullish with its hedge on Sirius and Bearish with its hedge on XM. It would also appear giving regardless of its indicated direction, the lack of volume of its hedge activity compared to its overall investment that they were and still are exposed to risk regarding their bonds (similar and more dramatic for XM) and decided to take an aggressive “short” strategy after the merge.
What if someone were to give you professional advice for free? My lawyer charges $75 for saying “HI”. Cramer and anyone else that gives free advice sets off little alarm bells. No one does anything for nothing.
Frigginregan’s beliefs totally mirror my own!!
In the long run we the stockholders will win.
Debt is finally defined. Regulations,defined! Ground zero is here! Mel is finally unleashed in a medium that is truly his forte. New exciting announcements, radios, packages forthcomming. It’s the perfect economic time to introduce an affordable gift. “Patience Grasshopper!!!”
Only good news is on the horizon.
cos1000, what you don’t see in 13F filings are short positions. All that is reported are long positions in convertible debt, shares, calls and puts. So there is no way of knowing what the size of their short position is. It is my opinion that they are short at least enough, to hedge against their long position of the convertible debt.
Homer985, thanks for that, I’m still trying to figure this detail out and the 13F was all that I could find, thanks to Brandon. Is there anyway of finding info on their, or anybody else for that matter, short position? This is the info that everyone throws around and yet documentation is hard to come by. I might as well get some experience in pouring through the detail while I’m getting a lesson on how this stock is losing me value in the short term.
A company and stock that shows growth and gain can’t be held down by anything … all these vast conspiracies and speculation circumvents the fact that SIXM is a high risk, very in debt, company. Do i think it will make it without a filing… 50/50% chance. Mel is amazing, and the market is bordering on a collapse. Let’s see who wins.