March 25, 2009

Global Market Comments for March 25, 2009
Featured Trades: (TM), (EBAY), (FUJI TV), (GS)

1) Now that traders are partying again on Wall Street, we have to ask, what will take the punch bowl away? The unemployment rate shooting over 10%, which could happen in April or May, would be my first pick. Losses on option ARM loans could accelerate, taking out a few dozen more regional banks, WAMU style. Another, until now apparently healthy corner of the financial market taking huge undisclosed positions in securities we've never heard of, could suddenly blow up. A giant hedge fund could close at any time, freezing existing investors in place, and dumping gigantic positions on the market. Defaults on some big, high profile commercial real estate projects could also pull the rug out from under the market. Given the magnitude of the move up over the past two weeks, we might even see a short seller bite the dust. And of course, if any of the administration's $3 trillion in bailouts/ reliquifying/stimulus hit a wall that would trigger a sell signal. Party on ebullient traders, but do so close to the exit.

2) Fuji TV, one of Japan's leading television and film producers, will soon premier a Japanese language remake of the cult wine snob film 'Sideways'. The Asian version will be released under the name 'Kami no Shizuku', or 'The Drops of God'. The merlot hating 2005 buddy film, which cost $16 million to make and earned $110 million,  won five Oscar nominations and caused pinot noir sales to soar. One big change from the original is that the new film is set in Napa Valley, not Santa Barbara's Santa Ynez Valley, enabling local producers like Frog's Leap, Berringer, and Chandon to pile on to the product placement bandwagon. Wines sales in Japan have been steadily improving the past decade, and the film's producers are targeting an affluent, sophisticated, and presumably wine drinking audience.

3) Ralph Amendolaro won the New York lottery by playing the last three digits of Bernie Madoff's prisoner ID number, 054. This is the first real money Madoff has probably ever made someone.

4) Toyota launched its Prius 2010 model today, to much fanfare. The 3G model, which boosts gas mileage from 46 to 50 mpg, carries solar panels on the roof, and offers more elegant styling, will cost around $23,000, stripped down. To date, the Japanese car maker has sold one million of the snub nosed, high backed vehicles, which account for 50% of the global hybrid market. Toyota hopes this 3G model will fight off competition from Honda's Insight and the Ford Fusion, but it won't be easy. Hybrid sales fell 31% in 2008, and the US car market is now thought to be running at an 8.8 million run rate, down precipitously from the 19 million peak. This will be the last Prius model before Toyota brings out its plug in version next year, which will run on batteries only for the first 40 miles of every trip. A 3G win would give Toyota's US traded ADR's, which have recently plunged from $138 to $58, some much needed life support.

Toyota-1.png picture by sbronte

5)  Desperate for new sources of revenue, Skype (EBAY) is pushing into the corporate market. Today it announced 'Skype for SIP,' that connects to corporate phone systems, and will begin beta testing the program with a limited number of companies. Skype will initially charge around 2.1 cents per minute for calls to cell phones and fixed lines, while calls from computers to phone systems will remain free. Ebay has long been dissatisfied with its Skype acquisition, and is thought to be shopping this subsidiary on the market.


'There hasn't been a recession yet that hasn't ended,' said Abbey Joseph Cohen, chief strategists at Goldman Sachs (GS).