April 3, 2008

Market Comments for April 3, 2008

1) Two days of Bernanke testimony in Congress come to a close. These are like watching the most brilliant professor in the school give a lecture and the Q & A is done by only the dumbest students in the class. Listening to Alan Schwartz, the CEO of Bear Stearns, outline what happened was heartbreaking.

2) Apple is completely sold out of I Phones nationwide. The speculation is that the company deliberately allowed this to happened in order to run down inventories prior to the imminent launch of their third generation phone. When they announce the new product, which will have many new features and is intended to go head to head against Blackberry's new Pearl 9000, the stock will skyrocket.

3) The price of rice has increased from $9 to $21 in the last 12 months causing hoarding in Asia. India has announced rice export controls to prevent domestic famine. We are probably only six months away from reading about mass starvation in Africa, which can no longer afford to pay for food.

4) Weekly jobless claims jumped from 369,000 to 407,000. The big monthly number, the non farm payroll, comes out tomorrow at 5:30 AM.

5) Up to 200,000 job cuts are expected in the banking and financial sectors this year as firms rush to cut costs. Entire fixed income departments will be axed as their instruments no longer exist. Hardest hit will be New Jersey, which receives 40% of its revenues from Wall Street in some form or another.

6) A melt up in corn prices is setting up. Monday's crop report showed that farmers will plant 8% fewer acres this year. Meanwhile stocks are near record lows and ethanol demand is booming. If there is any weather problem this summer, the least bit dryness, then you could get a very rapid doubling of prices from the current price of $5.80 like we saw in wheat in February. I would be a strong buyer of Corn at current levels.

THOUGHT OF THE DAY

I believe that the stock market has temporarily hit bottom and that there is a major tradeable rally to play. You should be buying the down days from here on. On an individual stock basis this means you are risking 10% to make a 100% return or more. The risk reward ratio doesn't get any better than that. This is a great opportunity to rent stocks short term, not buy them for the long term.