March 23, 2009

Global Market Comments for March 23, 2009
Featured Trades: (BAC), (JAVA), (MSFT), (IBM), (NTAP), (SNDK), (EMC), (CTXS), (CRUDE), (GOLD), (TM), (HONDA)

1) I'm sorry I'm late getting my comments out today, but I had to get my application in to manage the Treasury's latest $1 trillion bailout program. They're due April 10, and I wanted to get mine in ahead of Black Rock's.  I only have to show $10 billion in assets under management and the ability to raise $500 million. For this, the FDIC will effectively lend me interest free long term loans to buy all of the toxic assets I want at deep discount prices with 6:1 leverage. I'm sorry, but I can't resist those 'heads I win tails, you lose' trades the Feds are offering, hence the rush. This certainly takes nationalization of the banks off of the table, and makes those buyers of Bank of America (BAC) two weeks ago at $2.50 look pretty smart. The government has now shot its wad, and there is really nothing else they can do now but sit back and pray until the $3 trillion in stimulus/bailout/reliquifying they have committed to starts to work.

BACToday.png picture by sbronte

2) Has anyone noticed that the economies with the biggest infrastructure stimulus packages, the US and China, are having the biggest bounces in their stock markets? Those with a 'deer caught in the headlights' policy response, like in Europe, are seeing a much less impressive move in their markets. Gee, do you think there is a connection?

3) When Citigroup (C) fell below $1 two weeks ago it became the first Dow stock to be offered on McDonald's dollar menu.

4) IBM's $8 billion takeover bid for Sun Microsystems (JAVA) at double the previous market price has sparked an explosion in call option buying by hedge funds betting the industry consolidation trend will accelerate. The big buyers in this sector, IBM (IBM) and Microsoft (MSFT) have cash coming out of their ears, and things certainly are cheap enough. Traders loaded the boat with perennial takeover targets like Network Appliance (NTAP), SanDisk (SNDK), EMC Corp. (EMC), and Citrix Systems (CTXS). A flurry of takeover activity is a classic sign of a market bottom. The best way to play this is to buy call spreads on all of them, and hoped you picked a lottery ticket

4) Last week traders were confused and disoriented when they saw something for the first time this year. Green arrows! It's getting so I can't tell the difference between the fake financial news on Saturday Night Live and John Stewart, and the real thing.

6) Honda has triggered a price war among Japan's hybrid car makers with the launch of its new $19,000 Insight model. The price undercuts a stripped down version of the leading marquee Toyota Prius by a good 10%. Honda was able to beat the competition by using a smaller lightweight gasoline  engine, slashing weight, smaller batteries, and sharing parts with its existing Civic model. The Japanese carmaker accomplished this at the cost of a mileage drop from 46 to 43 miles per gallon compared to the Prius. These are not small stakes Honda is playing for. In October, JP Morgan predicted that global annual sales of hybrid cars will grow exponentially from 500,000 to 9.6 million by 2018. The vehicles are expected to go a long ways towards helping both the US and Japan wean themselves from unreliable foreign oil imports.


'Cash bonuses on Wall Street are going to become a dinosaur,' said Jon Corzine, governor of New Jersey, and former chairman of Goldman Sachs.