June 19, 2008

Global Market Comments for June 19, 2008

1) Natural Gas hit a new high of $13.50.

2) Gaming revenues in Las Vegas in April were down $1 billion YOY.

3) Donald Trump believes that the US banking system is essentially closed now. Banks are only financing large deals when they get a piece of the equity. The Fed says that 15% of US homes have negative equity, creating the risk that the owners will just walk away. There are 3 million empty homes in the US now.

4) A New York court reduced the trust fund received by Leona Helmsley's Maltese dog 'Trouble' from $12 million to $2 million. The money went to her obviously litigious and aggrieved heirs.

5) Some 935 small trucking companies went out of business during Q1 2008 because of high fuel costs. The industry is rapidly consolidating into larger national carriers which are more able to pass costs onto customers like JB Hunt (JBHT), YRC Worldwide (YRC), and CH Robinson Worldwide (CHRW). These would all be great plays on an economic recovery.

6) The two hedge fund managers who ran the Bear Stearns hedge funds that went bust were arrested for criminal fraud and conspiracy for lying about 'skin in the game'. The Feds staged a highly visible 'perp walk' on TV. Again, the government is trying the "out of context email route" to expand its power and prove criminal intent, a stretch at best. They are trying to criminalize market risk.


Crude is again probing the top end of its one month range so it is time to sell out of the month calls. Today you can sell the August $155 calls for $3 which expire in four weeks. The Saudi's have called a meeting of oil producers and consumers on Sunday and the market is pricing in a big Saudi disappointment and upward price spike, driving far out of the money call volatilities to unimaginable, almost mathematically impossible to achieve levels. A short sale of 600 contracts here would yield $900,000 in premium, or 30% on a $3 million capital position.

Oil - Light Crude - Continuous Contract (EOD) Indx