February 29, 2008

1) Consumer confidence for January came in at a 16 year low. The market tanked 300 points. 2) MF Global incurred $141 million in unauthorized trading losses in wheat on Tuesday. On that day the market in wheat was limit down and limit up in the same day, producing an intra day range of 25%, the greatest in history for any commodity. The inside story was that the trader … [Read more...]

February 28, 2008

1) Natural Gas went ballistic today, up 5% to $9.46. Crude closed at $102.20. Fed governor Bernanke is driving prices, not OPEC. 2) Thoroughbred horse sales at Keeneland have fallen off a cliff, another leading economic indicator. 3) Incredible stat of the day: Triple 'B' rated bonds a year ago traded 200 basis points over Treasuries. Now they are 800-1,000 basis … [Read more...]

February 27, 2008

1) The big development today was the Euro which finally blasted through $1.50, which had capped it for the last three months. Short covering took it all the way up to $1.51. All of the other weak dollar plays, like gold and silver, soared to new highs. Next stop $1.55. 2) The EU hit Microsoft with a $1.35 billion fine. MSFT is the most fined company in history. The stock was … [Read more...]

February 26, 2008

1) Yesterday's 182 point rally in the last 30 minutes came from Standard & Poor's  announcement that it would maintain  bond insurer MBIA's AAA rating. They indicated they might downgrade the company later. This shows how backward looking and useless these ratings are as MBIA's bonds are already trading at B- levels. Is MBIA really the same credit as … [Read more...]

February 25, 2008

1) The spread between Treasuries and AAA rated corporate bonds is now 300 basis points, the largest since the Great Depression. At the first hint of the end of the credit crisis hedge funds will rush to buy corporates and short Treasuries against them and this spread will come screaming down. With a leverage factor of ten times this trade currently yields 30% a year. The … [Read more...]

February 22, 2008

1) A new wrinkle has developed in the housing crisis. Loans have been sold so many times that banks are unable to foreclose because they can't find the original loan documentation. This could affect up to 40% of the anticipated 1.5 million foreclosures in 2008. New businesses like youwalkaway.com have sprung up to help borrowers head off foreclosures by finding deficiencies … [Read more...]

February 21, 2008

1) The Architectural Design Services index fell sharply in January from 55 to 50. The boom, bust level is 50. Below 50 means that more business is being completed than there is new business coming in. This is the second consecutive quarterly decline. A drop in architectural services is followed by a decline in commercial construction activity nine months later. Overall, … [Read more...]

February 20, 2008

1) In the last bear market we had six false rallies of 5% over an 18 month period. Then the market was discounting both the dot com bust and 9/11. We are four months into this bear market and so far we have had two false rallies. The main driver has only been changing accounting standards. Actual defaults on sub prime loans are not enough to give this bear market legs. We need … [Read more...]

February 19, 2008

1) Sony won the format war with its blue ray DVD's. The final nail in the coffin was Walmart's announcement last week that it will no longer carry Toshiba's rival HD-DVD format machines. This is the first time that Sony has won one of these wars. Remember Betamax? 2) Credit Suisse announced $2.8 billion in write downs because of 'mispricing' by traders. … [Read more...]

February 15, 2008

1) Target (TGT) is now looking like a potential takeover candidate. When I have time I troll through 13-F filings looking for recent share accumulations. These are public disclosures filed with the SEC by hedge funds with over $100 million in assets. Five major hedge funds have started building large stakes in Target, including Eddie Lampert who took over Sears a few years ago. … [Read more...]

February 14, 2008

1) A new credit crisis has exploded on to the scene. The Auction Rate Securities Market has failed. This is a $300 billion market for floating rate notes for municipalities. It is the primary vehicle for public authorities to raise cash to pay short term bills. For example, Port Authority of New York and New Jersey bonds, which normally yield 4%, are now yielding 20%. Usually … [Read more...]

February 13, 2008

1) Masco, a major building materials supplier, announced terrible earnings, citing a fall off in new housing starts among its customers of 25-33%. The stock got slammed. Still no light at the end of the tunnel in housing. 2) Sub prime related law suits against directors and officers are skyrocketing.  In 2007 there were 191 law suits with $3.9 billion in claims initiated, … [Read more...]

February 12, 2008

1) Did you know that if the rest of the world ate like Americans the world food supply would have to increase 2.4 times? This is one of the factors driving up commodity prices. Some 24% of US corn production now goes into ethanol. Commodities markets are so small that one hedge fund could buy the entire open interest in any one of them. That is why when they go up, they go up … [Read more...]

February 11, 2008

1) Toll Brothers is seeing a 61% cancellation rate for Florida condos. The market is so bad that a family feud has erupted within the company. Even Bruce Toll's daughter, Wendy, has defaulted of the purchase of a $2.5 million unit there. 2) Amazon has announced a $1 billion share buy back. 3) Yahoo has rejected Microsoft's bid, saying it won't consider … [Read more...]

February 8, 2008

1) There are an usual number of anomalies in the market piling up right now. Tax free municipal bonds are now yielding more than taxable treasury bonds. This is happening because there are fears about the muni bond insurers going under, which is pointless since muni bonds rarely default. In normal times muni bonds yield 30% less than treasuries. Normally hedge funds would step … [Read more...]

February 7, 2008

1) Rumors are rampant that Delta is going to merge with Northwest. What would the new combination be called? Southeast? This is leading to speculation of a United-Continental merger. 2) Technology has now taken up the downside charge in the market, leaving the banks behind. Apple has dropped from $202 to $122 in three months and is approaching value stock levels. 3) … [Read more...]

February 6, 2008

1) Hillary won California, leaving her with 830 delegates vs. 740 for Obama. 2025 are needed to win, and 750 will go into the August convention uncommitted. Hilly could lock this up with the Texas and Ohio primaries on March 4. 2) Candidate Economic policies: Hillary: more spending, universal health care, freeze interest rates on sub prime loans, raise capital gains tax … [Read more...]

February 5, 2008

1) The January ISM non-manufacturers index, which accounts for 80% of the economy, dropped from 54.4 to 41.9, the lowest level since the terrorist attacks of 9-11. It's as if someone turned the lights off on the economy. The Dow dropped 560 points from yesterday's highs on the news. The market has given up nearly half of the gains from the MLK low two weeks ago. The … [Read more...]

February 4, 2008

1) China had its largest up day in history yesterday at +9%. It is up 20% from the recent low 9 trading days ago. 2) Exxon reported profits of $11.7 billion on the quarter and $45 billion on the year, the largest annual profit in US history. Amazing. The broader energy industry accounted for 40% of all US profits in 2007. 3) Bush announced his 2008-2009 federal budget … [Read more...]

February 1, 2008

Market Comments for February 1, 2008 1) If you are a breathing, sentient being in the universe you have already been inundated with news of the Microsoft/Yahoo takeover. I will just make a couple of points: a) This could spark a takeover boom in the technology area. Time Warner and AOL are already moving on potential Google takeover bids. b) This in turn could lead to a … [Read more...]