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HPQ Board: Intel Outside?

September 13, 2006

Dear Fellow Options Trader,

There were two stories this week that captured my fancy and also that of the financial community. The first was the story of Patricia Dunn, chairwoman of the Hewlett-Packard (HPQ) board, and the board's investigation into who was leaking information to the press from that body. Ms. Dunn is stepping down from her position amid the scandal.

Having served on a few boards in my time, I must say that leaks are major issues that deserve serious examination. In July 1999, Carly Fiorina became the first woman ever to serve as CEO of a company in the Dow Jones Industrial Average. Allegedly, these boardroom leaks were at least partly responsible for the end of Ms. Fiorina's tenure at HPQ in 2005.

And who among us thinks the only information leaked from that boardroom was shared with the press and done intentionally to hurt Ms. Fiorina? My proprietary HeatSeeker program scans for unusual buying patterns in stocks, options and futures. And when someone leaks information from within a company it can impact the value of that particular stock (or a merger, special dividend, etc.). The act of acting on -- or passing along -- this information is what insider trading is all about!

Did information leak about Hewlett-Packard's takeover of Compaq in 2002? Did information leak about Hewlett's acquisition of AppIQ in October 2005? Did information leak about HPQ's purchase of business technology optimization software provider Mercury Interactive (MERQ) in July of this year? You get the idea. Leaks -- whether from the CIA to The New York Times, or from a disgruntled board member to the press -- can be very damaging.

I'm not saying I condone the methods used to obtain the leaker's identity, but I was amazed that the journalistic feeding frenzy overlooked the obvious. Boards of companies have possession of material, non-public information and, as such, should avoid the temptation to disclose stories about what goes on behind closed doors.

The other story involves a man I'm happy to call my friend, Chicago Mayor Richie Daley. "Da mayor" vetoed that ludicrous living wage ordinance for big-box retailers such as Wal-Mart and Target. Don't get me wrong -- I'm all for workers making a living wage. But I don't think that Chicago (or any other city) should single out just those with $1 billion in sales and 90,000-square-foot stores.

What about the clerk at the 7-Eleven? Shouldn't he get a living wage? Shouldn't the checkout lady at the local grocery store be able to earn a living wage at her job? Of course they should. But the Chicago City Council saw fit to only target the big-box retailers with a minimum $10-per-hour wage, plus $3-per-hour benefit.

Come on, guys -- why only Home Depot, Lowe's, Wal-Mart and Target? Oh well, this is the same group of bozos who banned the sale of foie gras in Chicago, so what did we really expect?

Good luck trading and remember -- pigs get fat, but hogs get slaughtered, so don't be a hog.


Jon "Doctor J" Najarian
Editor
ChangeWave Options Trader

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