Welcome Back

Hello out there again!
I had a decent Thanksgiving. Thankfully for us we went to my wife's uncle's house for Turkey day. He is an Ear-Nose-Throat Dr. and was able to check out my oldest son's illness. He had strep. After finding a Rite Aid that was open all day on T-Day and getting a 'scrip for amoxocillin, B was on the road to recovery. What a trooper. He was clearly in pain and tired. So he slept a lot during his time off. I have to say, though, that he could've have been much worse for the illness.
As for the rest of the family, we had a good time. I didn't actually eat any turkey,
I had a whole lot of food, though.
Not much else interesting going on. Kind of wish I had some external money coming in from outside, moonlighting type of work. Not sure how that would happen. Things like that don't really find me.
Anyway, the market has been a real bummer. I am fearing that it will get much, much worse before it gets better. I am going to try an bail out of some of my stocks as soon as they see the light of day (a.k.a. a profit, even if small). I fear the U.S. economy is on the way to a recession.
Interesting topic, talk about making money. Usually, before a corporate acquisition, the company being acquired goes through a somewhat predictable cycle. (So does the buyer... we'll get back to that in a moment).
The news hits the street and the company being bought is at say $38/shr. The acquisition specifies a buy-price of $42/shr. Therefore, once can assume that the stock will reach $42 in value. This causes an immediate jump in price to near, but below, the target buy-price. See this graph as an example:
CBH gets bought
Notice the upswing after the acquisition news came out in the beginning of October. So over time CBH falls back in line with the market. But remember, come March when the acquisition happens (and possibly upon the news of the approval by the OCC), the stock will convert to TD Banknorth stock at the equivalent of $42/shr. At a current price of $65/shr. that means you would get somewhere in the ballpark of .65 share of TD per share of CBH. Near the acquisition date, though, the trading price will be pretty close to the sale price.
As an example, see MBNA. Notice that after the large drop (due to them severing more people than expected in March), the stock recovers back to the $21.50/shr. range. Then, after the announcement of the acuisition in June, the stock spikes to near the $26+ acquisition price, dips a little and then closes above $27 around acquisition time. So you can time the buy between the announcement and the actual sale to make a "guaranteed" return. As an example, buy CBH at $35 now and sell prior to the March conversion at $40-$42. Easy money right? It gets sweeter...
Post-conversion the acquiring company always drops. Why? Because of valuations. TD made $4 billion in 2006. If it now has acquired CBH, that means more shares outstanding (based on the above ratio). So, initially, the stock price will plunge as the earnings/shr. looks inordinately low. Over time this will correct itself. See Bank of America's share price around the time of the MBNA acquisition:
MBNA sinks another profit
Notice the large drop around July 1st, when the acquisition went through. (Also notice the recovery by the end of 2005, once merger and speculation details settled out and the profits started to roll in).
Bottom line is this:
1. Buy CBH LONG now at the basement price of $35/shr.
2. Sell CBH LONG at $40-$41 around the end of February, beginning of March
3. Buy TD Banknorth (TD) SHORT around the beginning of March
4. Sell TD Banknorth (TD) SHORT after it's drop has begun (perhaps wait a week or two to maximize profits)
5. Buy TD Banknorth (TD) LONG directly after your SHORT sale.
6. Sell TD Banknorth later, once it has recovered and gone up.

This will net you some $$. Just review the MBNA-BAC merger and others to verify.
Don't know what buying/selling SHORT is? Check this out: Shorting


OK, so enough of that. I am looking into trying out for the Series 7 certification, since I seem to have an interest in investing and providing advice.
Well, have fun out there.
Talk to you all soon!
-K