Global Market Comments for August 21, 2008
1) Crude (USO) spiked $10 to $122 when it realized that 1% of the world's production passes through a pipeline in Georgia where the Russian invasion shows no sign of ending soon. Tropical storm Fay also brought out fears of a Gulf hurricane back to the surface. Panic buying spread across a wide range of commodities contracts, from rice to gold to natural gas.
2) The tiny island nation of Singapore, which has never won a medal in the Olympics, has offered to pay a $735,000 bounty to anyone who brings home the gold. Malaysia is offering a $300,000 prize, Greece $220,000, and the Philippines $200,000. The US pays a relatively chintzy $25,000 to its medal winners. NBC thought it died and went to heaven when it rained during the women's volleyball gold medal final. Suddenly it became an Olympic wet T-shirt contest!
3) Weekly jobless claims moderated to 432,000, down 13,000. Just noise.
4) Last week the Treasury called Credit Suisse and asked them not to cut off short term credit lines to Lehman (LEH) to head off a run on the bank. The stock tanked down to $12.50, and the stock will soon be trading at a hat size. The Treasury doesn't do this for companies that are in the pink of health. What do they know? When did they know it? What are they not telling us?
5) You only want to buy when there is blood in the streets, and Russia's invasion of Georgia is presenting us with an opportunity to do so by the bucket load. Russia's recent seizure of assets owned by BP (BP) and Royal Dutch Shell (RDS-B) has also sent a shiver down investors' backs. But the rising Russian middle class story is still alive. The Market Vectors Russia ETF (RSX) is down 36% from its June high of $59. Lukoil (LUKOY), the country's most independent oil producer, is now selling for five times earnings compared to seven times for ExxonMobile (XOM) and Chevron (CVX) and ten ties for Petrobras (PBR). Companies enjoying government political protection include Gazprom (OGZPY) and savings bank Sberbank (SBRBF). The best non energy play is wireless operator Vimpelcom (VIP). Mechel Steel Group (MTL) is down a gut wrenching 70% on fears of a tax investigation. If you really want to go out on a limb there is JSC Bank of Georgia (BGEO).
6) Rim (RIMM) launched its next generation Blackberry Bold in Canada today. The 3G smart phone designed for high end business users is thinner, faster, carries a two megapixel camera, and can use a wide range of third party financial and market tracking software. Sign me up. The phone will only be available through AT&T in the US.