July 18, 2008

Global Market Comments for July 18, 2008

1) Crude was stable today. A big part of the selling this week has come from bank sales of crude holdings to shore up balance sheets. There was a major effort to make sure that the crude August $130 calls, where enormous positions had been built up, expired worthless yesterday, which they did. China's Olympic shut down is starting to affect all markets where they are the major player, like crude and copper. Who knew banks were such big players in this market? In every crisis there are always unexpected bodies that float to the surface.

2) If gas prices stay at current levels the decline in driving, and more driving at slower speeds will cause highway deaths to fall by 12,000/year. There will also be dramatic reductions in traffic, air pollution, and traffic noise. Land near freeways might become worth more, especially if we move to silent all electric cars. The San Francisco Bay Bridge morning rush hour toll gate back up has almost disappeared.

3) The Pakistan stock market has dropped for 15 consecutive days. It is now down 35% from its April high. Yesterday a crowd stormed the exchange and destroyed it in the hope that it would prevent further price falls. It makes our SEC's action against short sellers pale by comparison.

4) Google (GOOG) did not beat expectations with Q2 earnings so they took the stock down 10%. It shows you how demanding the market is these days.

5) Merrill Lynch sold its 20% stake in Bloomberg, which it has owned since the company's creation by Mayor Michael in the early eighties, for $4.4 billion. This values the mayor of New York at a breathtaking $22 billion.

6) The stock market had its best three day run in five years. The bank and airline sub indexes had their best moves in history. The biggest moves were in what I call the 'imminent bankruptcy' sector: Lehman (LEH) up 80%, United Airlines (UAUA) up 60%, General Motors (GM) up 45%. GM has lost $50 billion over the last three years. Unbelievable!