June 25, 2008

Global Market Comments for June 25, 2008

1) Weekly crude inventories fell 1 million barrels vs. an expected build of 900,000 barrels. Crude fell $6 from $138 to $132. See my earlier trade of the month to short deep out of the money crude calls. The Dept. of Energy put out a forecast that crude could reach $186/barrel by in 22 years, or by 2030. Wow, that's a big help! If it doesn't happen by next Thursday!

2) The Fed left rates unchanged at 2.0%, but warned that the 'risk of inflation is high.' Long bonds got decimated. See my earlier countless recommendations to short long bonds. My friend Richard Fisher of the Dallas Fed, who comes from the only part of the country that is still growing, was the sole dissenting vote at the last Fed rate cut. He is the Fed's uber inflation hawk.

3) Stocks rallied on the fall in crude. See last week's trade idea to short the July 1200 puts, which plunged from $6 to $1.50.

4) The NY State Court of Appeals ruled in favor of Dick Grasso on four of the six counts against him regarding his $180 million compensation package from the New York Stock Exchange. The other two counts will probably be dropped.  A rare victory for a defendant in a financial case where prosecutors are attempting to expand the reach of the law ex post facto.

5) February durable goods came in at unchanged in May and down -0.8% ex defense goods. The number was weak, but not as bad as expected, so the stock market rallied.

6) RIM's stock (RIMM) got slaughtered after hours, down 10%, on disappointing earnings, despite the addition of 2.3 million subscribers in Q1. One of the 'four horsemen' during last year's tech boom, the stock is a buy here at $130.

7) New home sales in May were down 2.5% MOM to the second lowest level on record.

8) My old Morgan Stanley colleague's firm, M&A boutique Greenhill & Co. (GHL), dropped 10% today to $56. One good M&A deal and it will pop back up to last year's high of $80.