April 7, 2008

Market Comments for April 7, 2008

1) The big news of the day was the Washington Mutual (WM) bail out. The troubled bank will receive $5 billion in financing through the issuance of high yielding common and preferred stock to a private equity fund. The stock soared 35% on the news in a market that closed unchanged on the day.

2) A lot of opposition is building in Washington to the housing bailout bill by free marketeers. There is talk of privatizing profits, but socializing risk, of giving homebuilders a free call on the market.

3) British Airways says that business travel is off 5% as the recession starts to take hold. Talk about an industry that can't catch a break.

4) I Tunes have become the largest music retailer in the world with 4 billion tracks sold since 2003, thanks to the runaway success of the IPOD. It sold 200 million tracks just on Christmas day, 2007 alone.

5) What is the top performing stock in the S & P 500 year to date? Pulte Homes, up 47%, a stock I recommended in early February as part of my homebuilder screen and listed in my March US stock portfolio.

6) NBC has said that advertising for the Beijing summer Olympics is 75% sold out, well ahead of expectations. This is a good leading indicator showing that many companies believe that the US will start coming out of the recession by the summer.

7) March saw record cash inflows into short oriented ETF's, another good contrary indicator presaging a rising stock market.

8) Interesting fact of the day: Late fees on credit cards totaled $12 billion last year. Go Visa, Master Card, and Amex!

THOUGHT OF THE DAY

On my return from the Grand Canyon I saw modern mining equipment being unloaded at a number of old gold mines. With gold at $1,000 an ounce the economics of extraction are returning to these historic sites. Many of these have not been worked for 60 years when gold was last at $32 an ounce. I also saw dozens of amateur sluice miners bobbing around in inner tubes in the Kern river panning for gold 49er style.