December 31, 2011

Great Expectations

"That was a memorable day to me, for it made great changes in me. But, it is the same with any life. Imagine one selected day struck out of it, and think how different its course would have been. Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation of the first link on one memorable day."

I have great expectations for the company in 2012. But, I don't know when the gap between intrinsic and extrinsic value narrows, let along closes.

Markets can remain irrational a lot longer than you and I can remain solvent." A. Gary Shilling, Forbes (1993)

As we close out 2011 and enter 2012, I will share this prognostication: In my view, the transaction that results in the full monetization of the company (i.e., a sale) will close or be materially on its way to closing by the end of 2012. I have been of this viewpoint for quite some time (probably since the end of 2010 or early 2011).

I base this on two things: First, management's strategy, and how it has and will play out in terms of milestones, achievements and accomplishments. Second, the expiry of the so-called Bush tax cuts, where capital gains rates will increase to 25% from 15% starting in 2013.

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