April 24, 2008

Market Comments for April 24, 2008

1) Europe is seen as being 12-18 months behind the US economic cycle and they could well be cutting interest rates later this year. This will cause the euro, crude, gold, and Treasuries to fall sharply and the dollar, global stocks, junk bonds, munis, and sub prime loans to rise. Who knows, even real estate might start to recover. This is the call to make in financial markets this year.

2) The necessity to follow markets 24 hours a day couldn't be more evident with Apple shares last night. When the earnings came out after the close the stock trade from $160 to $170. When the guidance came out hours later the stock dropped from $170 to $155. It then rallied back to $170. This all happened overnight in OTC trade.

3) Arby's is buying Wendy's. I'm sure this will have a big impact on your dietary preferences. What is next? Chicken burgers?

4) New home sales for March came in at -8.5%. The inventory of unsold homes reached 11 months, the highest since 1981. Prices were down an average of 13% YOY, and that doesn't include generous buyer incentives.

5) The reason for the global food shortage is that the average farm size in Asia is 1-2 acres compared to 500 acres in the US. Farming benefits greatly from economies of scale.

6) The government has moved to criminalize rumors. The SEC charged an individual with market manipulation for spreading a false rumor about Blackrock's bid for Alliance Data Systems. The person first shorted the stock and made $26,000 on the trade after a 17% fall in the stock. Next they will criminalize thinking.

7) One of the few commodities that has gone down in the past year is lumber, which has been the obvious victim of the housing crisis. The futures contract has plummeted from $460 to $190, down 60%. Going long the commodity could be a nice recovery play. It is also a foreign demand play as the US is still a major exporter of wood. Alternatively, you could buy Weyerhaeuser (WY) which has dropped from $85 to $58, Temple Inland (TIN) $50 to $10, or Louisiana Pacific (LPX) $27 to $8. Another play is Brookfield Asset Management (BAM), an investor in forests.

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