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More Florida Auto Dealerships Closing (update with video)

Just days after Bill Heard announced the closing of 13 Central Florida dealerships, today comes news more are closing.

Courtesy Pontiac Buick GMC in Longwood, Fla. is closing its doors, a spokesman for the dealership’s owner said Thursday.

The spokesman said that it is part of a strategy to reduce the number of dealers of these auto lines and not because of economic problems for the company. Since Auto Nation (AN) has other locations and other dealers sell similar cars and trucks, the Longwood dealerhship needed to close because of a shrinking market. It is the only Courtesy dealership closing.

Here is a video on the Bill Heard closing:

AutoNation is capturing market share without spending a single penny to do so. This is precisely the scenario Auto/nation CEO Mike Jackson predicted in my interview with him.

When things turn, Jackson may just be the last guy standing selling cars to people..


Disclosure (“none” means no position):Long AN
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Einhorn Interviewed in "Worth"

David Einhorn has granted “Worth” an interview in which he talks about short selling, Allied Capital (ALD), and Lehman..

WORTH: Let me ask about some of the labels the press has given you: “Short-seller.
David Einhorn: It’s not really the right description. We’re long and we’re short, and most days I’d much rather the market go up than down. But we do find some bad companies doing bad things and we sell them short, and I think that’s a good thing.

That label is often used as a pejorative.

Indeed.

What’s wrong with being a short-seller?

Well, first of all, a lot of people don’t understand it. They don’t understand whether short-seller means “short term”—they get confused with that. They don’t like the idea that you’re effectively betting that something bad happens. People want other people to succeed; they want the stock market to go up. I want other people to succeed; I want the stock market to go up.

But I do think that there is a social value in identifying companies that are doing bad things and betting against them. I’ve seen the demise of a fair number of these companies, and it’s not because we’ve bet against them, it’s because these were flawed companies. And our country, our markets, our economy are better when companies that are flawed or cheating are replaced by better ones.

Some people argue that this isn’t the right time to expose such companies, because they may fail and damage an already shaky economy.

How do you define when the right times are and when the not-right times are? The best way to handle this is to not put your business into a position where, if things don’t go exactly the way that you hoped, you’re forced to not tell the truth about your balance sheet.

Let me read you a sentence that appeared in the New York Times recently in a piece about you and Lehman Brothers: “For eight months now Mr. Einhorn, a rabble-rousing hedge fund manager, has pilloried the venerable Lehman Brothers in an effort to drive down the bank’s stock price, which he is betting against.”

How many things in that sentence would you take exception to?

Other than “David Einhorn,” I think everything.

“Rabble-rousing”?


A Washington Post journalist referred to me as a “cocky punk.” It’s interesting to see how folks are willing to engage in this.

The most loaded part of that sentence is probably the characterization, “in an effort to drive down the bank’s stock price.” That’s a common charge made against you in the context of Lehman and Allied—that you’re talking down these companies purely out of financial self-interest.


It’s self-evidently true that if the stock goes down we are positioned to make a profit. The question is, is that the whole story? And the answer is, it really isn’t.

If you talk about a stock, it’s not going to go down because you talked about it. It’s only going to change in price, up or down, based upon whether you add significant new information or analysis into the market. So the purpose of talking about the stock is to add information into the market, and if people find it old news or unpersuasive, more likely than not, they’re going to take the opposite side.

I’ve stood up and talked about lots of stocks where there’s been absolutely no reaction in the stock after I talked about it. And that’s fine too.

Why is it so hard for people to believe that a hedge fund manager could speak out on an issue for motives unrelated to profit?

DE: People believe what they want to believe, and the hedge fund industry’s press is miserable.

One of the things that must have been a real challenge for you, during the controversy over your short of Allied Capital, was this suspicion and distrust of hedge funds.


It’s the same thing as the, “Disregard what David has to say because he shorted the stock” argument, told by the management, who has all of their eggs in the stock. Who’s more biased in this equation? The short seller?

[Short-selling] is what it is and everybody can see it for what it is. Yet there’s this free pass given to management. They’re just supposed to promote and say whatever they want to say, and not tell the truth if that’s what it takes. And this is somehow acceptable.

I think the same [paradox] is true for the hedge fund industry. It’s boiled down nicely in the current credit crisis. The banks and the investment banks have had a very effective media campaign which basically says, ‘You have these lightly regulated, unregulated, whatever, hedge funds, that are the secret systemic risk—this is the monster. And what you really need to do is deregulate us and do something about those guys.’

We’ve seen that the hedge fund industry has acquitted itself pretty darn well as the credit crisis has unfolded. But the vast majority of banks and investment banks were taking on excessive risk with poor controls and pretty flawed thinking. And creating the exact same system risk many times over, many times bigger than anything that was imagined about the hedge funds.

And hedge funds don’t have government help to fall back on.

Hedge funds appreciate that if they do a bad job, if they blow themselves up, there’s nobody there who’s going to bail them out. They’re going to lose their business, they’re going to lose their reputation, their customers are going to lose their money, and it’s just going to be a sorry experience for everybody.

But if a big investment bank, like Lehman Brothers, makes a big mistake with their accounting because they didn’t have adequate systems, they believe that the Treasury or the Fed will bail them out.

The rest of this interview with David Einhorn will appear in the October issue of Worth magazine.


Disclosure (“none” means no position):
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Friday’s Links

Greenspan, AMBAC, twitter, Steelers

This is true

– I think this is fairly accurate

– A great way to have conversations

– The fact they are being sold????? Rooney’s family should be shot

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CVS is Now a Financial?

So, when did CVS (CVS) become classified as a financial?

The SEC has added
CVS to the “short selling ban” that was initially restricted to financial companies. The reason? CVS, one of the biggest US drugstore groups, said on Thursday it was added to the list because it ran Caremark, the prescription benefit manager.

This is just insane. Just ban short selling altogether. The rules are being changed in a daily basis. If investors or traders do not know from day to day what the rules are, they just will not do anything. Why place a bet when the gov’t can come in tomorrow and wipeout your position? Why?

This comes just after SEC Commish Chris Cox asked to regulate the credit default market. If there is a god in heaven that request will be declined until he is replaced. Either regulate or don’t, whatever, but you just cannot “make it up as you go along”.

Cris Cox needs to go…just get out..

No one benefits when it gets done that way..

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Congressional Sanity

Check out Rep Paul Kanjorski this mornings…..this is good stuff


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David Einhorn Practices What He Preaches

This is great stuff…….

From Nasdaq

The following NASDAQ-listed company has been voluntarily removed from the SEC’s original list of Included Financial Firms:
* Greenlight Capital Re, Ltd. (GLRE). Effective Wednesday, September 24, 2008, this company will not be subject to the restrictions of the SEC’s Emergency Order.

So, while people can yell, scream and curse those like Einhorn who publicly short stocks and are not afraid to tell the world they are, they is one name they cannot call him. Hypocrite.


Disclosure (“none” means no position):none
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Longs Drug Receives FTC Notice and Letter From Walgreen’s CEO

This is getting good…


From the SEC filing

Longs Drug Stores Corporation (“Longs”) (NYSE: LDG) today announced that the Federal Trade Commission (the “FTC”) has requested that Longs provide the FTC with documents and information in connection with Walgreens’ (NYSE, NASDAQ: WAG) unsolicited, non-binding expression of interest to acquire Longs. In the detailed 25-page request, the FTC stated that it was investigating whether Walgreens’ proposed acquisition of Longs “may substantially lessen competition among Retail Pharmacies in various portions of California, Nevada and Hawaii.” In addition, the FTC requested information regarding several markets that had not been examined in the FTC’s previous review of the proposed Longs-CVS transaction, including Longs’ operations in Hawaii and Longs’ mail order business. The FTC may add to the request as its investigation progresses. Longs intends to cooperate in the FTC’s investigation.

Here is a time-line of events between Walgreen’s and Longs.

Also, Walgreen (WAG) CEO Jeffery Rein sent the following letter (letter below) the Longs CEO Warren Bryant

Dear Mr. Bryant:

We have carefully reviewed your September 17th letter and are disappointed with your unwillingness to discuss our proposal. We continue to believe that our proposal is a “Superior Proposal” or, at a minimum, represents a “bona fide Acquisition Proposal” that “will lead to a Superior Proposal,” as defined in the Agreement and Plan of Merger, dated August 12, 2008, with CVS Caremark Corporation (CVS). It is clear that your stockholders agree. As you have been unwilling to speak with us, we have no option but to address the points raised in your September 17th letter in this letter. In your September 17th letter, you take the position that Walgreens is not willing to accept the inherent regulatory risks in connection with an acquisition of Longs. This statement is not accurate. We are confident that the combination of Longs and Walgreens would receive all required regulatory approvals in a reasonable period of time and do not believe that anything even approaching the threshold of divestitures that we already have agreed to in our proposal would be required. We believe that your advisors would agree with this conclusion. If there is any confusion, we want to make clear that our commitment to divest covers the stores and assets of both Longs and Walgreens. We also believe that your position overstates the significance of this concern, as the outcome of the FTC process will be apparent before you would terminate your agreement with CVS.

We also believe that you have significantly overstated the regulatory risk. The retail pharmacy business is highly competitive. Upon consummation of the proposed transaction, the combined Walgreens/Longs will account for less than 35% of the retail pharmacies in almost every metropolitan area where the two companies both participate. In the few areas where the combined share of stores would exceed 35%, it would do so by only a small margin, and additional competitive influences, such as mail order, competition from health plan pharmacies and the potential for new entry and expansion by existing competitors should ensure that those areas remain highly competitive. In that regard, CVS has recently announced plans to expand in several parts of Northern California, independent from the Longs transaction, further eroding current market shares in those areas.

We believe that the regulatory review process will be successfully completed without undue delay for several reasons: (1) our team is already working with the FTC and has been from the first day that our proposal was announced, (2) the FTC is familiar with Longs, having completed a process recently in connection with the CVS transaction, (3) if necessary, we are prepared to discuss remedies with the FTC at an early stage, and (4) we are working closely with our real estate and operating partners on a parallel process to provide any necessary solution or remedy. In order to address any divestitures that may be required, we have partnered with experienced real estate investors. Our real estate partners have significant experience in your markets and have a strong track record of success in partnering in strategic transactions. Klaff Realty, LP (“Klaff”) is a privately owned real estate investment company based in Chicago, Illinois that engages in the acquisition, redevelopment and management of commercial real estate throughout the United States. To date, Klaff and its partners have acquired portfolios in excess of 112 million square feet of retail and office properties with a value in excess of $6 billion and its current portfolio of properties consists of approximately over 40 million square feet of retail space and distribution centers across the United States. Lubert-Adler Management Company, L.P. (“Lubert-Adler”) is a real estate private equity firm specializing in acquisitions and redevelopments through joint ventures with local operating partners. Since its inception in 1997, Lubert-Adler has invested in over $15 billion of real estate assets.

Over the last several years, Klaff and Lubert-Adler (collectively, “KLA”) have co-invested, in some cases as members of a consortium, in a number of very significant acquisitions. These include a portion of the Albertsons privatization ($2.3 billion acquisition of 661 stores including in-store pharmacies), Cub Supermarkets in the Chicago market ($25 million acquisition of 25 stores including in-store pharmacies), Shopko ($1.2 billion acquisition of 204 stores) and Rex Stores ($83 million acquisition of 87 stores). As a direct example, KLA and its partners successfully operated Albertsons and then sold certain stores to other first-class operators, such as Save Mart in Northern California and Publix in Florida. In New Mexico, the consortium acquired additional stores and expanded Albertsons’ footprint. In addition to their broad retail investment experience, we have chosen KLA as a partner due to the depth of the west coast and drug store management team that will work with Walgreens. Each of Klaff and Lubert-Adler have significant experience working with operating partners and we continue discussions with additional potential operating partners. With respect to the proposed transaction, KLA has agreed, subject to due diligence, to acquire Longs or Walgreens stores and other assets that may be required to be divested to obtain the required regulatory approvals for the transaction.

In your September 17th letter, you argue that Walgreens is not proposing to compensate Longs stockholders for any potential delays in consummating a transaction with Walgreens. Our $75.00 per share cash offer is superior to the CVS transaction. Relative to the CVS offer of $71.50 per share, our $75.00 proposal will return a higher value to Longs’ stockholders and the fact that they will continue to receive dividend payments will mitigate the impact of the time required to obtain the required regulatory approvals. As indicated in our initial proposal, we are prepared to agree to terms and conditions that are at least as favorable to Longs stockholders as those in the CVS merger agreement.

You should have no concern with our ability to finance the proposed transaction. Walgreens is highly rated from Standard & Poor’s and Moody’s, has a strong balance sheet and has sufficient liquidity and access to the necessary capital required to consummate the proposed transaction. We have had discussions with our financing sources and we are confident in our ability to secure committed financing prior to Longs terminating the merger agreement with CVS and entering into an agreement with Walgreens.

Our proposal is compelling—it would deliver superior value to Longs stockholders relative to the CVS transaction and can be consummated without undue delay. We again request that we be given an opportunity to conduct customary due diligence pursuant to the terms of your agreement with CVS as soon as possible. Although we would unquestionably prefer to work directly with you to complete a negotiated transaction, we are prepared to take our transaction directly to your stockholders. We are available to meet with you and your advisors as soon as possible to discuss our proposal and to answer any of your questions. We, as well as KLA, are prepared to commit all necessary resources to quickly complete due diligence and negotiate a mutually acceptable agreement.

Between Pershing’s Bill Ackman, Walgreen’s and now the FTC, Longs is going to have to explain to shareholders in the end why they turned down a superior offer.


Disclosure (“none” means no position):None
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Altria Turns Tables

After decades of defending itself against lawsuits. Altria (MO) is

From Marketwatch

Philip Morris USA said it filed a suit to overturn a San Francisco law that would ban convenience drugstores from selling tobacco products. Altria is the Richmond, Va., tobacco company. Philip Morris said late on Wednesday that it sued in U.S. District Court for the Northern District of California, asking the court to declare the ordinance unconstitutional. The city Board of Supervisors has passed the law, and a separate suit in state court has also challenged the ordinance, Philip Morris said. “Although called a ban on sales,” the law suppresses “communications directed to adult smokers, in violation of our constitutional rights,” said Joe Murillo, Altria client-services vice president and associate general counsel, said in a statement

This is great. Tobacco is a legal product. You cannot ban the sale of a legal product to those legally allowed to use it, period. It is also nice to see Tobacco go on the offensive rather than sitting back.

Next up, Master Settlement Refunds

Disclosure (“none” means no position):Long MO
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Thursday’s Links

Bogle, Value Investing Congress, SEC, Ouch

Anyone else going?

The witch hunt begins

– Maybe limits on exec compensation is not so bad?


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AutoNation CEO Mike Jackson in Las Vegas (video)

Here is a video interview with AutoNation CEO Mike Jackson at the opening of an AutoNation BMW dealership in Las Vegas. AutoNation sells 10% of all Mercedes and 5% of all BMW’s (BMW) in the US.


Disclosure (“none” means no position):Long AN, none
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Sears to Unveil 3-D Interactive Website

Sears will soon unveil a one of a kind online shopping experience.

Multi-Unit Franchise Reports

Sears (SHLD), IBM (IBM) and My Virtual Model, Inc. today unveiled a first-of-its-kind 3D visual search and e-commerce capability for Sears.com that will significantly improve and enhance a consumer’s online shopping experience. Sears is the first retailer to apply both a visual search and virtual model to an entire catalogue online.

The updated Sears site, powered by IBM WebSphere Commerce and My Virtual Model, will allow consumers to recreate their in-store shopping experience online by enabling them to search for merchandise using images versus words, and to virtually “try on” selected items using a personalized model of themselves to ensure that the style, color, pattern and fit are right before purchasing.

The Sears site will enable shoppers to search on a specific style — such as long-sleeve tunic shirts or cropped cargo pants — and find products from the company’s expansive catalogue of clothing, shoes and accessories using 3D images versus words. Shoppers can create countless combinations using a virtual model they can build and personalize to match their measurements — height, weight, body shape — and a headshot photo to ensure that the style, color, pattern and fit are right. The 3D angle allows users to view garments on themselves from the front, side and back, and shoppers can also email images of their looks to friends and family to help them make final purchasing decisions.

“Sears is transforming the online shopping experience by offering consumers cutting edge visual search and virtual model capabilities,” said Rob Mills, vice president, Sears Online Business Unit. “By allowing shoppers to visually search for and view items in 3D, to see how they’ll actually look on themselves in various combinations, and virtually share their finds with friends and family, Sears is providing shoppers with a superior social and e-commerce experience that we believe will increase satisfaction and loyalty.”

This is fascinating and what will be interesting is how much the new site and its capabilities cut down on returns. It seems a given that in an online order, something will be returned, Sears could save a small fortune drastically reducing this.

It also ought to add substantially to sales as an interactive site can capture customers…


Disclosure (“none” means no position):Long SHLD, none
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AutoZone Adds $500 million to Buyback

Less than a week after improved earnings, AutoZone returns cash to shareholders.

AutoZone (AZO) announced that its Board has authorized the repurchase of an additional $500 million of the Company’s common stock. Including the additional authorization, the cumulative share repurchase authorization approved by its Board since 1998 totals $6.9 billion.

AutoZone also announced that Luis P. Nieto was elected to the Company’s Board of Directors. Mr. Nieto is President, Consumer Foods for ConAgra Foods Inc., one of the largest packaged foods companies in North America. Prior to joining ConAgra, Mr. Nieto was President and Chief Executive Officer of the Federated Group, a leading private label supplier to the retail grocery and foodservice industries from 2002 to 2005.


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Largest US Chevy Dealership To Close Doors

Remember my interview with AutoNation CEO mike Jackson? His words today seem prophetic..

Here was the exchange:
Todd Sullivan: The Kiplinger Report estimates that about 1,200 dealerships across the US are going to close this year, mostly domestic brands, do you see that as an accurate assessment or do you see more than the 1,200?

Mike Jackson: I think it could well be more as we’ve hit a tipping point on sustainability. It’s not just going to be small ones, its going to be big ones also. The retail distribution system was never rationalized and the domestic share moved from 70% to 50%, if you look at the number of dealerships that came out that period of time was very minor vs what was done in the manufacturing side and the white collar side. With any decline in industry value with that overcapacity situation, you’ve hit an inflection point that is going to lead to a rapid decline in the number of dealerships out there, particularly domestic.

The situation was sustained with a bond of loyalty that went just beyond just economics with a resilient business model. But that bond has been broken and the business model cannot handle these types of declines with that type of overcapacity. I think its hit an inflection point and you’re going to see massive amounts of automotive real estate be converted over to other business uses. Families that have been in the business 40, 50, 60, and 70 years are going to say “this is it and I’ve had enough, I’m getting out”.

Full Interview

Today this news:
Bill Heard Enterprises, the country’s top Chevrolet dealer group, is closing the doors at all of its 13 dealerships at the end of business today, according to a person with knowledge of the situation.

Bill Heard Enterprises, of Columbus, Ga., ranks No. 13 on the Automotive News list of the top 125 U.S. dealership groups, with 2007 group revenue of $2.13 billion.

AutoNation is going to pick up market share “through attrition” as Jackson said in the interview. As the things Jackson said in the interview begin to come to fruition, one has to also look at what he said about his own company.

“Significant postponed demand” were the three words that stick with me. Cars are still aging and still need to be replaced. When the current credit condition ends, and it will, Jackson and AutoNation will be in the pre-eminent position to caputre that “postponed demand”.

Got to give it to the guy, he really called this one…

Disclosure (“none” means no position):Long AN
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Borders CEO George Jones Interview

I just finished an interview with Borders Group (BGP) CEO George Jones

It it we discussed:
1- The retail book business
2- Borders.com
3- Pershing Square
4- Liquidity
5- The Future

It was a very informative talk. The future is very bright there indeed…


Disclosure: Long BGP
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Buffett Talks About Goldman Deal (video)

Berkshire’s (BRK.A) Warren Buffett talks about Goldman Sachs (GS), Paulson and the $700B.


Disclosure (“none” means no position):Long GS, none
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