April 4, 2008

Market Comments for April 4, 2008

1) Non farm payrolls came in at -80,000, much worse than expected. Earlier months had big revisions downward. The biggest loser: construction at -50,000. The unemployment rate jumped from 4.9% to 5.1%. It was the most brutal report since September, 2005. As I predicted, the economic data continues to be horrific. Futures are now showing a 50% probability of another 50 bp rate cut to 1.75% at the Fed May meeting. The Dow ended up unchanged on the news.

2) The Senate is proposing giving $6 billion in emergency tax credits to the homebuilding industry. They are proposing allowing losses to be carried back six years instead of the usual two. The industry has written off $22 billion in the last two years. The stocks rocketed on the news. For individuals they are offering a $7,000 tax credit for buyers of new or foreclosed homes, a band aid at best. Still, a $6 billion package pales in comparison to the $3 trillion in US residential real estate losses in the past year.

3) Constellation Brands (STZ) announced a smaller than expected loss of only $832 million in Q4, smaller than expected. Wine sales were down 2% on the quarter for the Franciscan Oakville Estate, Simi, Ravenswood, and Arbor Mist labels. In November they bought the wine operations of Fortune Brands for $885 million adding 1,500 acres of grape production and 2.6 million cases per year of 'super premium' wine production, including Clos du Bois. The stock has fallen from $32 to $20 over the past year. The company is expecting a profit this year on the back of an increase in wine sales, especially in the premium area. The stock rose 12% on this news.

4) Copper is ready to break out to a new time high above $4. It will soon replace gold as the leading speculative metal and is also a good predictor of a recovering economy. Every Prius has 100 pounds of copper in it.

5) LA hedge fund manager John Paulson was paid $4 billion last year, the biggest payday in Wall Street history. He started highly leveraged shorting of sub prime loans in 2005. Could you ever cut a bonus check that big? I bet you could if I made $20 billion for you.

6) Robert Toll sold $244 million of his insider stock in Toll Brothers in Q1 1995 when it was above $36. It hit $14 in January when he could buy the same amount of shares back for $150 million.  Nice sale.


The good news is that Walmart (WMT) has started giving away a free bank with every toaster. The bad news is that they haven't sold any toasters yet. Also, the market has started calling the US dollar the 'US peso'.


Subscribe to our e-mail newsletter to receive updates.

Comments are closed.