April 28, 2008

Market Comments for April 28, 2008

1) Natural Gas jumps to a new post Katrina high of $11.40. Crude fell. The Atlantic hurricane season starts in four weeks. The stock market is dead, waiting for the Fed news. It was a good day for a multistrategy approach.

2) Continental Airlines pulled out of its merger with United (UAUA) three days before the announcement. After an exhaustive look at the books, Continental didn’t like what it saw. United has accelerated its merger talks with US Air.

3) Mars and Wrigley are merging with a private equity participation by Warren Buffet. Just his kind of deal. Mars is one of the best managed food companies in the US with an international brand. This is fanning speculation of a takeover bid of Hershey by Cadbury Schweppes.

4) Fact of the day: If GDP growth is at 1% per capital GDP growth is falling because the population increases by 1% a year. That is why people may feel they are in a recession.

5) USA Today and the Wall Street Journal are the only two major newspapers that grew last year. This is a dying industry. Advertisers are decamping en masse to the internet. Buy Google (GOOG).

6) One of the sectors hardest hit by the recession has been casual dining. It could be a nice recovery play when the consumer comes out of his bomb shelter. Best of breed here is Darden Restaurants (DRI) with Olive Garden and Red Lobster, followed by Chuck E. Cheese (CEC), the Wolfgang Puck offshoot, California Pizza Kitchen (CKKI), Brinker International (EAT), and Chipotle (CMG).

7) Another Fact of the day: According to Freddie Mac, during 2002-2007, $51 billion was taken out in home equity loans to meet day to day living expenses. Not good. What are people going to live on, now that the equity is gone? Expect the food bank business to boom.

8) Here is a somewhat depressing stock play. Thanks to the war in Iraq, 5,000 people a year require artificial arms and legs. A leader in this field is Stryker (SYK), an innovative maker of high tech orthopedic devices. At $62 it is down from last year’s high of $75.