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On China Security & Surveillance (CSR), I just wanted to give a brief impression of the recent transaction involving Whitehorse Technology Ltd., a company owned by its CEO. In the transaction, Whitehorse sold Exchangeable Senior Notes due 2012 to an unnamed third party investor (not affiliated with CSR) for $50 million. The Notes are backed by a pledge of 8,750,000 shares of CSR owned by Whitehorse.

In total, Whitehorse and the CEO, Tu Guo Shen own about 13,800,000 shares of CSR stock, or about 32.8% of the current fully diluted outstanding shares of 42,381,000.

The proceeds from the sale can only be used to purchase additional shares of CSR, lend as a note to CSR or to complete acquisitions for CSR. In essence, the CEO is leveraging his existing shares to purchase more shares or finance an acquisition for the Company.

Overall, I am interpreting this move as a bullish move by the Company's CEO. My only potential concern with this transaction is if he is already leveraged a portion of his stock and he was doing this to shore up the stock to prevent margin calls. However, it seems fairly unlikely that he would be able to obtain such a large not if he was in a difficult margin situation.

Additionally, from the Yahoo Finance insider transaction data, Mr. Shen has only acquired stock in the past year and has not sold any stock.

I think this is another strong signal of the future potential for CSR.

Further, I fall back on the Citadel transaction. If you will recall Citadel has invested $110 million in CSR in Convertible Notes with a 1% annual interest rate with $60 million convertible at $18 per share and $50 million at $23 per share. If Citadel decides not to convert its shares then they are redeemed at face plus a 15% rate of return for the hold period. This is a bullish structured financing. I feel very good about having a buy in price at lower levels than Citadel's conversion price.

If my position were not already 12% of my portfolio, I would be adding to the position, but I cannot prudently buy more at this time.

Disclosure: Long CSR

Source: China Security & Surveillance: Whitehorse Deal a Bullish Sign