June 18, 2008

Global Market Comments for June 18, 2008

1) One airline analyst has ranked his companies according to the probability of bankruptcy. American (AMR) is at 33%, United (UAUA) is 25%, Delta (DAL) is 10%, Continental (CAL) is 4% and Southwest and Jet Blue (JBLU) are 0%. Watch out for your frequent flier points!

2) The recession is causing many consumers to switch from wine to beer to save money.

3) The GAO recommended that the Air Force reopen bidding for the next generation of tankers, pulling the $35 billion contract away from Airbus sponsored Northrop. This is huge. Northrop was just about to start construction of a plant in Alabama.

4) In July, Honda will make available only for lease in California its next generation hydrogen car, the FCX Clarity. The $600/month car gets a cost equivalent of 77 miles/gallon and has a 280 mile range. Honda introduced the first hybrid car 7 years ago.

5) As airlines discuss selling tickets by passenger weight we learn that the average American has gained 24 pounds since 1960.

6) The value traded of homes in Southern California has dropped 50% YOY. The number of transactions is down 25% and prices are down 25%.

7) Big hedge funds are hiring all of the top oil, gas, and commodities analysts on Wall Street as they move into these areas in size. As a result, the information the remaining brokers are telling the public is making less and less sense.

8) FedEx triggered a sell off in the stock market today when they announced disappointing earnings due to high fuel costs.

TRADE OF THE DAY

The VIX shot up to 23% today so there was a nice chance to go short the July S&P 500 July 1200 puts today for $4.50. These expire in four weeks, are 11% out of the money, and 25 of these would yield you $62,000, of 2% of your capital. Coming off of a 120 point drop in the index it would be a nice sale.

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