JL: Hey, long time no chat. It’s been a few weeks since we last caught up in Taipan Daily.

CASH: Yep, happy to be back. It was great hanging out and meeting readers at the Global Opportunities Summit in San Francisco, too — even though one or two of ‘em tried to take my picture. Heh.

JL: Speaking of the San Francisco conference, you brought up a topic there well worthy of further discussion. I was hoping we could touch on that today.

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CASH: Sure. We covered a lot of profitable ground at that conference… Which topic, specifically?

JL: Remember the extended panel session on the final day, where we all talked a little bit about anything and everything? One of the things you mentioned was a “growing pressure in the system” that could result in an explosion of profitable new deals. There were some interesting dynamics there. Can you expand on that a bit?

CASH: Sure. I think the analogy that I used was a garden hose connected to a spigot with no pressure control.

JL: Right. You told a story at the conference about your dad warning you not to use a certain faucet in the yard when you were a kid. But you used it anyway, and the result was a big wet explosion (and a very mad dad).

CASH: Good memory. Yeah that’s the idea. If the nozzle is closed and water pressure builds up in the hose, things look very still and calm from the outside. But on the inside, the pressure continues to rise and rise. That can only happen for so long until something bursts.

JL: So that’s your working analogy for the hidden pressures building up in the new-issues market.

CASH: Yep. You can’t see it without observing closely, but there are two primary forces that will drive this explosion in new issues. The first is growth pressure — a dire need for investment capital. The second is private equity pressure — a need for Wall Street players to book profits on deals.

JL: Can you give more detail on these two “pressure forces”?

CASH: Sure. The first one, growth pressure, is all about small companies needing to fund growth expansion or repair a damaged balance sheet. A weak economy accentuates this. Many firms are seeing lower revenues than they expected. This means they have less working capital to expand factories, beef up the sales force, expand research and development and so on. Without investment capital, small growth companies have a hard time sustaining growth — and that’s what small caps are all about. Many of these companies will need new capital to survive, let alone thrive.

JL: So when it comes down to it, many of these guys will have to come to market as a matter of life and death. And what about the second of the two forces, private equity pressure?

CASH: That’s all about the private equity companies that own many of the companies just mentioned. When a new issue comes to market, many times it’s an exit from a private equity player’s portfolio. Selling shares to the public, in part or in full, is how private equity guys (and gals) get paid. These players can be behemoths like Blackstone or KKR or Fortress Investment Group, or they can be more low-key outfits you’ve never heard of. But the uniting factor is that all these private equity players are sitting on privately held investments that must be released to the public eventually. They’ve been holding a lot of deals back because of rough market conditions — but the pressure to book profits is building, and they won’t be able to hold back much longer.

JL: OK, that makes sense. So the sellers have a vested interest in getting stock out the door and sold to the public. They’ve had their hands tied because the market has been so rough. And now the pressure is rising. But if I recall correctly, you brought up some other points at the conference, too. Is there another piece of the puzzle here?

CASH: Yes there is. Once again, good memory. The other side of the coin is the underwriting picture. My boys at Morgan Stanley(JPM), Lehman Brothers (LEH) and Merrill Lynch (MER) are hating life right now.

JL: I can imagine morale is a bit low, at Lehman and Merrill especially. Lehman keeps getting whacked for billions, and Merrill has come out with cap in hand so many times it’s starting to be a running joke. It’s like an old Britney Spears video: “Oops, I did it again.”

CASH: You ain’t kidding! Times are tough. These are shops where even the secretaries are used to getting six-figure bonuses. Good earners get company perks like all-expenses-paid trips to the Caribbean — or at least, they used to — and the really big earners used to have monthly expense accounts that rival normal folks’ annual salary. But all that has changed in 2008, as the music stopped playing and it turned out there weren’t any chairs left. Extravagant lifestyles are being cut way, way back. Some guys are just hoping for a bonus big enough to cover their mortgage on the second house in the Hamptons.

JL: There’s a tear in my beer. Excuse me while I dab my eyes with a tissue… What’s the connection between investment banks’ pain and building pressure in the new-issues garden hose?

CASH: It’s pretty simple really. Just follow the money. These investment houses are dying to get deals done. Their balance sheets are in as rocky a shape as the small companies that need cash and the private equity players needing to cash out. They need the lucrative fees from issuing IPOs in a bad way — and they need those fees right now. Not tomorrow, but today. Heck, they need those fees yesterday.

JL: So there are really three big-pressure angles. Everybody needs those dollars… and that means the deals will start rolling, come hell or high water, and waiting for a window of opportunity matters less and less as the clock runs out and the stakes rise.

CASH: Yep, well put. You can bet that as we start to see any glimmer of hope that the market is stabilizing they will push every deal with a pulse and try to get it trading. Investors will get pitched up one side and down the other as to how great all these companies are and how clients should be backing up the truck on every deal.

JL: Something tells me these deals won’t all be home runs. They’ll be bringing out a lot of mangy dogs and trying to pass ‘em off as best in show.

CASH: You’re right about that, my friend. One thing we’ll have for sure is what we traders call a “target-rich environment.” As we’ve talked about before, some of the most important tells about how a stock will trade are the events leading up to and through the actual offering. We could see dozens of names that simply don’t have any business being public companies. But they’ll get pushed out anyways, because all parties are desperate and the underwriters value fees more than reputation at this point.

JL: And their desperation becomes our opportunity, right? You’ve said before that shorting busted IPOs can be like shooting fish in a barrel when the conditions are right.

CASH: Yeah, except traders don’t get paid to shoot fish — but they can make millions shorting dud IPOs. Just like Verso Paper (VRS:NYSE) — remember that one? — became a deathtrap for investors, dropping from $12 to $5 in less than three months. We could see more opportunity to short IPOs in the next four months than we’ve seen all year thus far.

JL: Yowza. That’s a pretty bold prediction. Verso does show the potential, though, along with other short calls you made — like the one on VMware (VMW:NYSE). We beat the drum on that one, and I know some of our readers absolutely cleaned up on it. I imagine our readers would want you to back up your opinions with a bit more than gut instinct.

CASH: On the bold prediction side, it’s not just a gut-level hunch of mine; we’re seeing the data bear this out. The second quarter of 2008, for example, saw more companies file to go public than we have seen in the previous two.

JL: But I thought the second quarter was a lot slower than normal as far as IPOs go.

CASH: Exactly! We saw more companies file, but not actually pull the trigger yet. That means they’re waiting in the wings. So not many companies have actually completed the process…

JL: And thus the pressure is building. Your garden hose analogy again.

CASH: You got it. There are some high-profile names in this pipeline, like KKR, the private equity company that rivals Blackstone. But there are also lots of smaller, less well-known start-ups. Word on the Street is that the fourth quarter could be the strongest this year in terms of actual new issues. That confirms what I’m saying about the target-rich environment we’re anticipating.

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JL: And mixed in with the dogs, it sounds like there are still a few select candidates that could run for tremendous longside gains, too. Plenty of “duds” to play on the short side, with a few home run buying opportunities for good measure.

CASH: Right, both ways as always — shucking and jiving, as you like to say. The best kind of diversification in a crazy market like this is to have opportunity on both the long and short sides. In the next few months, we’ll have lots of both.

JL: And speaking of opportunity, the open positions in IPO Confidential are building now, and we’re starting to see follow-through. I’m excited to see how those trades will play out.

CASH: Me too. It can take a little time for new positions to get rolling sometimes, but patience pays off. We could be ringing that cash register in a big way very soon.

JL: No pun intended, of course. As always, great catching up… We’ll have to do the conferences more often, too, so readers can see and hear the elusive Cash in person.

CASH: Sounds like a plan.

P.S. Read on here for Justice’s introduction to Cash McDash.

Source: Why the IPO Market Could Be Set to Explode

Today we catch up with Cash McDash once again, and he reminds us how important the Livermore mindset is in markets like these. Rather than serve up a new trade this week, Cash follows up on two winning short ideas that were highlighted right here, shared in the pages of Taipan Daily, and gives details on how they worked out. Stay tuned and stay flexible.

Warm Regards,

JL

JL: Last week, when we signed off, you had some enthusiasm brewing over your winning open positions. But then the market took a beating all week. You still want to go over one or two of those plays, or is the picture different now?

CASH: Hey, you know I’m no Mary Poppins about this market. I’ve been as bearish as anyone… so this week did nothing but make those positions even more profitable.

JL: Good to hear. I know you can flip your viewpoint from long to short pretty quickly — so I was hoping you didn’t zig when you should have zagged.

CASH: I’m hurt! But, no, actually I didn’t get hurt. I’ve been holding my own. Anyway, the deals I wanted to tell you about actually stem from a couple of freebies I gave several weeks back. Remember when you twisted my arm into sharing some choice morsels?

JL: Sure. I know you let a few slide in there. It looks like we’re close now to setting up a cleaner way for you to share these picks… but anyway, give us the recap on which names you’re referring to.

CASH: Well, the first one was back in April I believe — National Cinemedia Inc. (NCMI). That one was an IPO from 2007 that I expected to give up the fight.

JL: National Cinemedia… Weren’t those the guys running advertisements in all of the movie theaters? I think we talked about how difficult the advertising business was getting, not to mention that big-screen audiences could be down in a tough economic environment.

CASH: That’s the one. And I think I mentioned how the lower cost of home theater equipment was influencing consumers to wait for Blu-ray (or whatever the new standard is), because the experience at home is catching up. Anyway… shortly before we talked last week, the company warned that its second-quarter revenue wouldn’t meet expectations.

JL: Sounds like they pretty much met your expectations.

CASH: Yep. Definitely didn’t catch me off guard. The stock dropped from a close around $18.50 to $14 the next day. It finished the week out at $12.59. Not a bad percentage gain for those who stuck around and held their short position.

JL: Indeed. Patience is key in this business, but that one really didn’t take long to pay off. The stock was trading at the low end of its range even before the announcement came out.

CASH: Yep, this is the kind of trade that makes me a bit edgy and at the same time pretty happy. Moving on, do you remember us talking about Verso Paper?

JL: Of course. The IPO was coming out and you said “DON’T BUY IT!” Then, after it priced and traded lower, you broke a general privacy rule and told us how this was one of the niche short ideas that tend to make you a lot of money. It was another one of your giveaways.

CASH: I was feeling pretty generous there, wasn’t I? Once again, the trading pattern didn’t lie with Verso. No one wanted the IPO, and it gapped lower as it expected. Then, three weeks later, there were still no takers… and so we got another 20% haircut.

JL: Hold on a second. You speak as if there was a second event, but you’re basically saying the same thing, yes? You’re telling us twice that no one wanted the stock. They didn’t want it on the IPO, and then they still didn’t want it. What’s the difference between the initial gap down and the “three weeks later” scenario?

CASH: You’re very observant.

JL: I try.

CASH: What we saw during the first three weeks (when Verso (VRS) was trading around $10) was institutional support.

JL: But I thought you said the institutions didn’t want it?

CASH: That’s correct. But imagine the embarrassment if you are, say, Goldman Sachs (GS), and you bring this deal to market with your name on it — your reputation on the line — and then it immediately trades to zero.

JL: Ouch, right. Not a happy place.

CASH: No it isn’t. And a deal gone to pot like that would make it hard for Goldman to find buyers for its next IPO, too, because they would all be gun-shy from getting their clocks cleaned on the Verso Paper deal.

JL: I think I see where you’re going with this. So Goldman Sachs may step in and absorb some of the liquidation, meaning they buy stock, in order to prop up the price for a time. This might let their clients get out of their positions… or at least remind clients later there was a chance to cut losses quickly.

CASH: You got it. It’s a trade-off. Outfits like Goldman need to be supportive of their IPOs, but they aren’t going to keep buying a lousy stock forever. And they certainly aren’t going to publicize their actions. In fact, I never really said Goldman supported the stock price. I simply implied that it may have bought stock. I don’t want any of this coming back to me. This kind of thing is more implication than hard proof… and some of my “friends” over there wouldn’t be too happy with my sharing this information, as you know.

JL: Don’t worry, I’ve got your back.

CASH: Sure — as we both run for the back door! But seriously, this is a pretty well-known phenomenon in the institutional circles. It’s just not explained to regular investors very often, because once the secret is out, the propping-up efforts just aren’t nearly as effective.

JL: So what happened when the underwriters quit supporting VRS?

CASH: It dropped another two handles in about four days.

JL: Handles?

CASH: Trader-speak for points — dollars, in this case.

JL: Gotcha. I heard the phrase a lot in my commodity broker days, mostly referring to S&P futures. Haven’t heard it so much in relation to stocks. Trying to impress someone with a little lingo there?

CASH: Nah, I’ve just been talking to too many Jersey and Manhattan boys this week. There are only a handful of deals in play right now, but everyone feels the need to call me three or four times on each one. You know, to give me a chance to increase the size of my orders.

JL: How kind of them.

CASH: Yeah, no kidding. “Hey Cash ol’ buddy ol’ pal… don’t you want to get taken out behind the woodshed a little MORE on this latest issue?

JL: Ha ha. Well hang in there. I’m sure you’re holding your own as usual. Maybe you can tell us a little more about the new deals next week.

CASH: Sure thing. And don’t worry about me. I handle these markets well. There’s good money to be made on the downside as well as the up.

JL: No questions there. Talk to you again soon.

Source: Anatomy of a Double Play

Last week, Cash gave the raspberry to two IPOs (going so far as to highlight one as a potential short). Both names stunk up the joint, just as he expected. What came as more of a surprise, though, was a sudden flood of additional new offerings hitting the market.

This week Cash explains why new offerings can suddenly pop up out of nowhere; how he’s still making money hand over fist on the trading side; and, last but not least, he gives the scoop on an upcoming name in the red-hot shipping industry. Enjoy…

JL: So last week, you were sweating over the need to “take one for the team.” You pointed out two upcoming names, American Capital and Verso Paper, strongly hinting that both would be duds and that the second could be a good short for savvy readers. How did things turn out?

CASH: Well, both were indeed duds — just as I expected. Verso Paper (VRS) priced at $12 on Thursday morning. That was below the published range for the expected price.

JL: And I’m assuming the lower price didn’t excite anybody or inspire any value thoughts.

CASH: Oh, heck no. The lower price wasn’t indication of a better deal for investors… it was simply clear sign that the underwriters couldn’t find enough buyers for the deal, and had to price it deep in the hole just to get it done. The result was a smaller group of less-than-pleased buyers — me included — with a chunk of weak stock on their hands. The only thing to really do was sell. That’s why the stock immediately traded down two bucks, or nearly 15% of the share price. That’s no small loss.

JL: Ouch, no kidding. I’d imagine you’ll need multiple good deals to overcome that setback.

CASH: Actually, it should be easy to overcome. See, I took a portion of stock, but I did so grudgingly (if you’ll recall) and kept my allocation on the small side. I made sure my guys knew that this purchase was a personal favor, and that longer term, I expect the business relationship to work out much differently. It’s good, in a sense, because now I have “credit in the bank,” in a good will sense, when it comes to leveraging the next few deals coming out.

JL: Gotcha. And as for the American Capital Strategy (AGNC) deal, that one did just what you said it would, too. I saw the stock was priced at $20 and immediately went to a discount.

CASH: Yep. It doesn’t take a crystal ball. When you’ve been in this business day in and day out for nearly a decade, as I have, some things are just easy to see. Any IPO trader worth his salt should�ve been able to spot that outcome a mile away.

JL: So with two “cost of doing business” trades on the books, does that cut into your profits for the year? Or rather, how big was the cut? A nasty gash, or just a little nick?

CASH: Actually, there were a few other unexpected events that came up last week. Those events in the “other” category had an outsized impact on the ‘ol P&L sheet.

JL: Uh-oh. More pain?

CASH: Not hardly! Just the opposite, in fact. Surprisingly enough, there were no fewer than a dozen additional deals that came to market last week. Enough of ‘em were profitable for yours truly to push the equity curve to a brand-new high!

JL: Sounds like a pretty sweet week. You made your i-banker buddies happy by taking on some weak deals, enabling you to bank good will credits for future deals, and yet the market was strong enough for you to power past the small losses and make your investors happy, too.

CASH: Yep. Better than a poke in the eye with a burned stick, as you always say.

JL: Ha ha, true. I picked up that saying from a grizzled old stockbroker — a guy I worked for two summers back in college days. But anyhow, where did these dozen deals come from? Weren’t there only four on the calendar when we last talked?

CASH: Indeed, you counted right. There were four last time we chatted. But when we get into a market that’s been dormant and tough for an extended period of time — like we saw from September of last year through March — it creates an extra flurry of activity when conditions change. When the window opens, deals can pop up like mushrooms overnight. In fact, there’s an industry term for this kind of thing: “rapid overnight offering.”

JL: Sounds like a FedEx or UPS commercial. Or maybe some kind of clandestine military term… swift movements in the dead of night, that kind of thing.

CASH: Heh. In some ways there really is a bit of cloak-and-dagger to it. Normally you’d think a new offering benefits from press exposure — the more press the better. But with some of these more rapid-fire deals and secondary offering deals, the opposite is true. If there’s too much press beforehand, existing shareholders will sell in the face of added stock coming to market. The deals dilute their ownership in many cases, which no shareholder likes. And so, unless you have a relationship with the underwriters (as I do), you might not get the news until it’s all over.

JL: The offering and the damage done.

CASH: What?

JL: Sorry — obscure Neil Young reference. Couldn’t resist. Probably should’ve. Anyway, so existing shareholders don’t even get a say as to whether the transaction happens? Aren’t they the technical owners of the company? Why wouldn’t there be some kind of announcement or proxy vote?

CASH: The firm’s board of directors typically makes the decision. It’s perfectly legal under the docs that outline corporate governance.

JL: Nice. So a public company can dilute its shareholders pretty much at whim… this sounds like an important area for investors to be more aware of.

CASH: No kidding. I’m actually surprised how few investors pay heed to the “syndicate calendar.” There is a ton of important supply/demand information there that most folks miss.

CASH: Yes and no. In this business, there needs to be a critical mass of quantity… but the quality of the deal is important, too. You and I talk poker from time to time, and the way this week is shaping up reminds me of a key concept from Texas Hold ‘Em.

JL: Speaking of which, did I mention that I took down a large-field poker tourney 10 days or so ago? There were 180 players total, and I cut a path through 177 of ‘em. Dodging, bobbing, weaving — it was a beautiful thing. So we were down to three at the final table… me and two other guys, one a grinder and the other a full-time pro…

CASH: Um, yeah you mentioned it. You told me the story last week, remember?

JL: I did? Oh, right. Silly me. I’ll just have to gin up more stories by winning another one then. Meanwhile, I think I might know what you were going to say regarding poker analogies and this week’s IPO action.

CASH: Practicing your mind-reading skills, eh? Let’s hear it then.

JL: Well, the similarities are pretty clear. In poker, hand values are only the beginning. It’s just as important, if not more important, to have a clear bead on the competition. If your opponent is any good, he (or she) knows this, too. The game is so much more than numbers and statistics; the subtleties of human nature change everything. Greed and fear dominate the picture, too. That’s a big reason why I fell in love with poker in the first place: It stemmed naturally from my love of trading and investing.

CASH: Gosh. I must say, that was very insightful and well put. Too bad it has nothing to do with what I was getting at.

JL: Yeah yeah. I never claimed to be Miss Cleo. So fill us in then, wise guy. What were you getting at?

CASH: Well, in No Limit Hold ‘Em, as you know, there is a “dealer” button that gets passed from player to player in clockwise rotation. Before each hand begins, the two players sitting left of the “dealer” are required to ante up a fixed number of chips, known as the “blinds,” in order to seed the pot.

JL: Sure. There’s usually a big blind and a small blind, and the reason they call ‘em “blinds” is because the chips have to go in before the cards get dealt. The blinds help ensure there’s something to vie over in terms of pot size, and represent a voluntary cost of playing the game. In other words, you can’t just sit and wait for good cards without contributing in turn. You’ve got to pay to play.

CASH: Exactly. So that’s what this week is shaping up to be for me… It’s my turn to pay out some blinds. We’ve had some great cards dealt to us over the past two months, we’ve pressed our bets and made some nice bank, and now it’s time to contribute.

JL: Hmm. Methinks you’re reaching a bit with this analogy, but go on.

CASH: I think it’s a relevant parallel. The dealer is now on my right, and I’ve got to chunk some chips into the pot. Part of my bargain with the underwriters is keeping them happy, as you know. I participate in the bad deals along with the good, and use my trading skills to make the difference. To keep giving you my insightful backroom view of the IPO process, Cash is gonna have to take one for the team this week.

JL: I get it… You’re not a big fan of the deals going down this week, but you have to take some shares to keep your guys happy. This is like paying the blinds in that you do it to keep a seat at the table, with future opportunities in mind.

CASH: Yep, now you’re catching on. You know what? I don’t care what everyone says. In my book, you’re pretty sharp.

JL: Thanks, man, I appreciate tha– Hey wait a minute!

CASH: [snicker]

JL: Okay, I’ll give you that one. But when you least expect it… Anyway, back to the topic. So I guess the question now is, what kind of chips are you putting on the table? Red, green or black?

CASH: I’m trying to keep the blinds as low as I can, obviously. There’s a delicate balance between taking a big enough position to keep the underwriters happy, and keeping the position small enough to minimize impact on P&L.

JL: And by P&L, you mean profit and loss, of course.

CASH: What else would it be — power and lighting?

JL: Man, are you gonna get it…

CASH: I’m sure I will. I’m quaking in my boots here. But anyway, to give you a little more color on the stocks: The first IPO is American Capital Agency Corp (AGNC). Interestingly, the IPO is the beginning of the company. They’ve never done business before, and the founders actually have a pretty neat idea. They plan to raise a bunch of capital in the IPO offering, and then use the money to buy assets linked to residential mortgages.

JL: Oh, that sounds like an absolutely brilliant idea — buy toxic waste for 40 cents on the dollar and sell it for 50 or 60 cents, right? I suppose there could be some good money there… if the players are savvy enough and if they know how to play the vulture game without getting cute.

CASH: Right. The argument is that mortgage problems are now so widely publicized, and investor disgust so widespread, that the prices of these securities have the distress priced in. If these guys can pick up assets at 40 or 50 cents on the dollar as you say, and end up collecting 60 or 65 cents, that’s a 30%-plus return.

JL: And I would imagine with those kind of gains, they could absorb a few dud issues and still book double-digit profits. Worth a look, I guess — but I’m confused. You sound pretty upbeat on this idea, and I thought we were talking about deals set to flop.

CASH: Well, this isn’t the first “pass through” company. (That’s the lingo for their business model — that I’ve seen come through the deal pipeline.) And it seems like every time this type of structure is introduced the stock drops on the first few days of trading. Investors are savvy enough to realize that their initial IPO capital will be diluted by the expenses of the firm, the salaries and bonuses that must be paid to executives, and plenty of other little things like rent, maintenance, legal costs, technology costs and so on. All of this is taken out of the IPO capital raised before the first mortgage security is bought.

JL: So if, say, the company raises a cool $250 million, they might only have something like $230 or $240 million for investment proceeds, because a portion of that capital is already pre-committed.

CASH: Yes, that’s exactly how it works. And the stock price tends to reflect this dilution, too. So if they price it at $20, you will probably see it trade at $19.50 until investors start getting information that the capital has been put to good use, or the mortgage security prices are rising. Then the stock starts to trade on the future expectation of profits.

JL: A time delay of sorts?

CASH: That’s a fair way to put it. And so we don’t want to be long the stock until the “time delay” is worked through… and also until we get a sense of how management will actually be spending the IPO money.

JL: Gotcha. So what’s the other new issue that has you wincing in pain this week?

CASH: The second one is Verso Paper (VRS). This company supplies paper to catalog and magazine publishers.

JL: Interesting. I’ll have to check with the back office and see if we use any of their products. The publishing business still uses a lot of paper — but more and more, the Internet is starting to play a bigger role. Sending physical newsletters is obviously a bit more costly and time consuming than digital fulfillment. Not to mention the advantage of real-time delivery via the Web for more timely communications.

CASH: That long-term trend — away from paper and towards the Internet — is exactly why this IPO is going to go south. The business isn’t dead by any means, but it’s hardly thriving. There are only so many major consumers of this type of paper, and margins are getting squeezed as manufacturers like Verso compete for pieces of a shrinking pie.

JL: Doesn’t sound like all that profitable a niche.

CASH: You can say that again. The company lost $100 million last year.

JL: Yikes! And they’re going public why exactly?

CASH: Oh, management is spinning a big fat yarn about engineering a merger, needing to pay off debt, reorganizing the company to increase profitability, yada, yada, yada. So they expect to use the proceeds from the IPO to pay off their debt… and then we’re supposed to believe that they’ll get their act together and start making money.

JL: Do I detect a hint of cynicism?

CASH: Hey, it pays to be cynical in this market. Besides, you would be a grump too if you knew you had to take a long position with a 95% chance of going down the next day.

JL: True that. But, looking at this from our readers’ perspective, this seems to be an opportunity. What if someone were to short one of these names? After all, you’re pretty confident they’ll be headed south, right?

CASH: Indeed. I was going to let folks read between the lines… but you’re connecting the dots instead. Verso also represents the type of opportunity I’ll be covering in the new trading service.

JL: Oh man. I bet you just made thousands of ears perk up. What about AGNC, though, the other stock you mentioned?

CASH: AGNC is toast. There’s no opportunity there because the stock will open at a discount and likely go dormant almost immediately. But VRS has the potential to drift lower over the course of several weeks. You have to be nimble and quick, but there’s a great chance to make some profits shorting Verso Paper.

JL: Nice. I wasn’t expecting you to give out that kind of name to a broad audience.

CASH: Believe me, I won’t be making a routine habit of it. These kinds of opportunities — the real inside baseball-type stuff — are best suited for a smaller and more exclusive audience. If word gets out on the street that a connected player is spilling the beans, it would make my own trading that much harder… and might make it harder for me to dig up this kind of information, too.

JL: Don’t worry. We’ll get the kinks worked out behind the scenes so you can share your secrets with a more tightly knit circle of readers. Nobody wants to kill the goose that lays the golden trades.

CASH: Good deal. Next week we’ll talk about some more mainstream ideas — but for this week, you guys got a sneak peek into the deeper realms of Cash’s world.

JL: Yeah, thanks for that. And don’t lose too many of those black poker chips.

CASH: Oh, I won’t. And for every chip I give up, you know I’ll make even more back…

JL: I surely do. Have a great rest of the week.

by Justice Litle, Editorial Director, Taipan Publishing Group