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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Anthony@Pacific who wrote (5453)	12/23/2000 9:06:21 AM
From: Sharck	Read Replies (2) \| Respond to of 37746

Here is a question from a fellow trader: Why was JDSU and SDLI not invited to yesterdays Christmas party? Guess that can be answered with yet another question, why would a relatively obscure investment bank downgrade JDSU this close to end of year? The first part of the answer lies in what I have been suggesting here for the past several months. No one likes JDS-Fitel/OCLI/ETEK/Uniphase and soon to be SDLI better then yours truly. But those with good memories will recall when I switched from my long JDS to OCLI, then ETEK and more recently to SDLI. In a word, arbitrage. Not to many free lunches but this is one of them. Simple math here, take each share of JDSU and multiply that by 3.8 and that's what you'll get for each share of SDLI that you hold at come the merger. That's why the arbitraguer buys SDLI, because it trades at a discount and/or sells JDSU at a premium. Got it, ok. Getting to boring for the conspiracy lovers out there? Here is where it gets interesting: And back to the original question, why was JDSU/SDLI not invited to the party? Just before the downgrade came out yesterday (in the middle of the day no less, when has that ever happened before?), hedge funds sold JDSU short. This knowingly would cause SDLI to slide too as it is trading at a slight discounted ratio of 1:3.8. Great, now they load up with SDLI at an even deeper discount locking in an even greater risk free trade then they would have had they done so simultaneously, again coming at the expense of the mom and pop investor with their life savings melting away. Shame on Alex Brown & Co. Trade smart, S