May 9, 2008

Market Comments for May 9, 2008

1) Crude hits $126. Fact of the day: The US uses 25 barrels of crude per person per day, Europe 12, Japan 6, and China 1. Natural Gas hit $11.60, which I expected.

2) Google has become the oxygen of the Internet and is going from strength to strength. It has 70% of the US search market, but so far only 7% of the US advertising budget is being spent on the Internet, leaving plenty of room for growth. Its YouTube asset, which gets 130 million viewers a day, more than on a Super Bowl Sunday, hasn't even been integrated into its business model yet and has huge potential. I recommended the stock at $420 earlier this year and believe it could eventually hit $800.

3) According to the Fed outstanding commercial paper stands at $1.75 trillion, a two year low, indicating continuing credit concerns.

3) Bankruptcies in the US are up 49% YOY to 235/day.

4) Walmart earnings came in better than expected as consumers flock to low cost retailers at the expense of middle and upper tier ones. I recommended the stock at $46 in January. It is now up 24% and is approaching a four year high.

5) Both the ECB and the Bank of England left rates unchanged. While the ECB's Trichet may remain stubborn, the BOE is expected to cut rates by 25 bp, every other meeting, for the rest of the year for a total of 75 bp. Buy yen and sell the pound.

6) According to Business Week this recession is being borne entirely by men. Since November 700,000 men have lost jobs while 300,000 women have gained jobs. This may be because women work harder than men for less money and are generally nicer to be around.

7) China has just surpassed the US as the world's largest Internet user.

THOUGHT OF THE DAY

Ford may be the first US carmaker to emerge from the graveyard. They are taking the lead in introducing new hybrid models like the Escape SUV. In August it will introduce a version of its famed F-150 pick up truck that gets 60 mpg. They are doing what they can to pare legacy costs by cutting back the participation of unions and spinning off the health care liabilities of retirees. There may be a 50% move in the stock from here at $8. Raider Kirk Kirkorian thinks so, who has been a steady accumulator of the stock the last few months.

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