August 7, 2008

Global Market Comments for August 7, 2008

1) Today was the day of the AIG shock, which reported an H1 loss of $13.6 billion. All of the credit default swaps they wrote are coming back to roost. The news took the Dow down 220.

2) Whole Foods (WFMI) is suspending its dividend, canceling new store openings, and offering more low cost food in the wake of a 31% decline in earnings. The Texas based food retailer, also known as 'whole paycheck' by its long suffering clientele, has seen its stock plunge 74% from $70 to $18 in the past two years.

3) If the predictions of Chinese Olympic prowess prove correct, China will have invested $7 million per medal in training costs.

4) Last year PG&E obtained 47% of its energy from natural gas, 11.7% from renewable sources like hydro, solar, and biomass, and 4% from coal. The company is gearing up for a big increase in demand for electricity from plug in cars over the next decade.

5) Weekly jobless claims hit a 6 ½ year high of 455,000.

6) Citibank has agreed with the SEC to buy back $7 billion in auction rate securities. These short term municipal notes were sold as a quasi money market instruments to high net worth individuals, but ended up becoming totally illiquid when the credit crisis hit. C needs this like a hole in the head. The stock dropped 4%. The settlement is expected to hit other investment banks, like Lehman (LEH), with a tidal wave of litigation.

7) It is clear that the big three auto makers are about to become the big two. General Motors (GM) and privately owned Chrysler are in a race to go under. Ford (F) now appears to be the strongest, or least weakest of the trio.

8) Pending home sales for June were up a surprising +5.3%, but still down -12.3% YOY. Sales were strongest in markets like Sacramento and Las Vegas where the biggest price falls have occurred. More than 40% of are sales are still from foreclosures.