April 1, 2008

Market Comments for April 1, 2008

1) UBS announced $19 billion in sub prime write offs and a $15 billion equity infusion. Their illiquid toxic waste will be spun off into a separate entity. My old boss, chairman Marcel Ospel, will retire in shame. This is what sparked the 391 point rally on Wall Street. Total sub prime write offs now exceed $200 billion.

2) Lehman's Dick Fuld has asked the SEC to investigate collusion among short sellers of Bear Stearns, who coincidently have also been targeting Lehman. Fuld did the same in 1998 when a major Lehman client, Long Term Capital Management, went under.

3) Centex, the nation's largest homebuilder, sold $900 million worth of land for $161 million to a Dallas partnership. Centex will reap $250 million in tax refunds from the sale.

4) Blackstone raised $10.9 billion for a new real estate fund. This is long term bottom fishing money.

5) Some three billion people are expected to join the middle class over the next ten years, all outside of the US. They will eat more and buy more. This will be the primary driver of commodity prices for the next 5 years. We are probably in the 4th inning of a nine inning game in this boom.

6) Aloha Airlines went under, the source of many fond memories for me and my family. Expect more bankruptcies and consolidation in this area. This is your worst nightmare of a sector.


Taiwan is another country that may be worth watching. The country has just had an election which put in place a government far more sympathetic with mainland China. This will lead to a raprochement with the PRC which would greatly benefit Taiwan's economy. Taiwanese companies have better accounting standards, disclosure, and liquidity than Chinese companies, yet trade at a fraction of the mainland multiples. It is a double play in that you can expect the Taiwanese dollar to also appreciate as a result of this. The Chinese yuan is fixed against the dollar. You can participate through the Taiwan exchange traded fund EWT which has fallen 17% from $17.5 to $14.5 since late last year. You can also buy Taiwan Semiconductor directly.

Taiwan0401.png picture  by sbronte