August 15, 2008

Global Market Comments for August 15, 2008

1) There is a nightmare scenario unfolding in the commodities markets where the meltdown is explained not by just a two week slowdown for the Olympics, but by an unfolding global recession. Four out of five of the world's largest economies are now at or in recessions. Natural Gas has plunged -41%, platinum -37%, silver -34%, gold -23%, and corn -19% from their June highs. Crude is down -23% and hit $111 this morning. The dry shipping index has collapsed a gut wrenching 40% from $110 to $65. Bad news for stocks, but great for the dollar, which hit $1.47 against the euro and $1.85 against the British pound this morning.

2) The National Association of Realtors says that Q2 prices were down 16.3% YOY and that sales volume was down 16.7%. The biggest drop in sales was in California, down -25% where foreclosures are still a major part of the market.

3) George Soros bought 1.35% of Lehman (LEH) in June according to disclosures out this morning. He probably paid $20-$30 for the stock against a July low of $10 and a current $17.

4) The University of Michigan consumer sentiment index for July rose from 61.2 to 61.7. Factory utilization dropped to 79.9%.

5) The credit markets don't believe in the current stock market rally one iota. Spreads are worsening, and are almost back to the March lows. The spread for 30 year mortgages over Fed fund has widened from 20 basis points a year ago to a record 460 basis points today, indicating that banks are accelerating their withdrawal from lending markets. The Treasury auction last week was a blow out success as banks sold mortgages and bought government paper. Speculation is rife over where the next shoe is to fall. The lead candidates: securitized credit card loans, car loans, and commercial real estate loans.

6) Multimedia handsets are rapidly taking over the Internet, and may own it by the end of 2010. By the end of this year, 50% of all internet access will be through smart phones like Apple's (AAPL) Iphone and Rim's (RIMM) Blackberry. In China, 400 million users already access the net solely through cell phones. Both Google (GOOG) and Microsoft (MSFT) are racing to reorient their strategies to take advantage of wireless applications which must be written with two inch screens and slower speeds in mind, but are ultimately more profitable than those sold for desktops and laptops. Desktops are expected to survive in offices, but laptops may become a dinosaur. The big beneficiaries of this new mega trend will be Qualcom (QCOM), Nokia (NOK), and the very cheap Motorola (MOT).


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