October 17, 2008

Global Market Comments for October 17, 2008

1) September housing starts dropped by -6.3% to an annualized rate of only 817,000, the biggest drop in 17 years. This is the third consecutive monthly steep drop. Demographic demand is 1.2 million units/year, so this will help cut into the industry's 11 month inventory. More falling off a cliff type economic data.

2) The Baltic Dry Shipping Index ($BDI) has dropped 87% from 12,000 to 1,600 in three months, and is now pricing in Armageddon. September industrial production fell 2.4%, the sharpest drop since 1974, indicating that the US economy is falling off a cliff. China announces quarterly GDP on Monday, so look out belooooow! Pray they fake the numbers to the upside, as usual.

3) Google (GOOG) announced $1.34 billion in net profits on $4 billion in revenues for Q3, up 34%. The stock hit $310 yesterday, down 58% from its $740 high. This is a company that will see earnings grow 20% next year, is selling for 14 X earnings, has no debt, monstrous cash flow, and a near global monopoly in the search business. The internet search business may turn out to be recession proof because times of economic distress generate more searches. It is a screaming buy here.

4) The Chicago Board of Options Exchange (CBOE) filed a petition to start trading the 100% and 110% strikes in the VIX index. Yesterday it peaked at 81% and traded today at 68%. A similar filing by the New York Mercantile Exchange (NYMEX) in July to list the $200 strike in crude marked the top in that market.

QUOTE OF THE DAY

'Be fearful when others are greedy, and be greedy when others are fearful', Warren Buffet of Berkshire Hathaway, the greatest investor in history.