July 24, 2008

Global Market Comments for July 24, 2008

1) A $3 pop in crude sent stocks down 200 points and bonds up a point. We are not out of the woods yet.

2) Want to get rid of that barbed wire around your bicep, or your ex wife?s nickname? The tattoo removal business is booming, where laser treatments can run into the thousands of dollars. More than 50 million Americans have tattoos and 20% of them regret it. The Google of tattoo removal is Cynosure (CYNO), which has jumped from $19 to $23 in the past month. Also in this space is Palomar Medical Technologies (PMTI), up from $9 to $13. This is great news for that guy at Lompoc who had F*** tattooed across his forehead in Germanic script. What an interview killer!

3) Existing housing sales for June came in at -2.6%, or a 4.86 million annual rate, a ten year low. An amazing 40% of all sales came from foreclosures.

4) At the peak of the housing market in 2005 credit creation was $1.2 trillion. This year it is running at a $400 billion rate. Mortgage rates are at a five year high, and are higher now than when the Fed first started cutting interest rates a year ago. That is called a credit crunch. Something you don't hear about in the media is that new banking business is now the most profitable in its history. The good news is that credit creation during recessions historically bottoms out at the $400 billion level. Conventional 30 year mortgages are now at 7% and jumbos 8%.

5) Weekly jobless claims skyrocketed to 406,000, up 34,000, the highest figure in three years.

6) The Hurricane Dolly miss has hammered natural gas again, from $13.50 to $8.90, down a gob smacking 35% in two weeks. This unwind is happening so fast that we are only $1 away from entering 'buy' territory. This is how gas trades. This extreme volatility makes it the best contract to be right about, and the worst one to be wrong about. Traders will tell you that it always takes the stairs up, but the elevator down.

7) What is the difference between an actuary in England and one in Sicily? The actuary in England can tell you how many people die over the next three years. The one in Sicily can tell you how many will die in the next three years and who they are!

8) Facebook has seen subscribers grow from 40 million to 90 million in the past year. Now that the company is offering Spanish language pages it is growing at one million new subscribers a week. In interviews, founder Mark Zukerberg looks like a kid who loves the technology, but is overwhelmed by the business side of things.

July 24, 2008

Global Market Comments for July 24, 2008

1) A $3 pop in crude sent stocks down 200 points and bonds up a point. We are not out of the woods yet.

2) Want to get rid of that barbed wire around your bicep, or your ex wife?s nickname? The tattoo removal business is booming, where laser treatments can run into the thousands of dollars. More than 50 million Americans have tattoos and 20% of them regret it. The Google of tattoo removal is Cynosure (CYNO), which has jumped from $19 to $23 in the past month. Also in this space is Palomar Medical Technologies (PMTI), up from $9 to $13. This is great news for that guy at Lompoc who had F*** tattooed across his forehead in Germanic script. What an interview killer!

3) Existing housing sales for June came in at -2.6%, or a 4.86 million annual rate, a ten year low. An amazing 40% of all sales came from foreclosures.

4) At the peak of the housing market in 2005 credit creation was $1.2 trillion. This year it is running at a $400 billion rate. Mortgage rates are at a five year high, and are higher now than when the Fed first started cutting interest rates a year ago. That is called a credit crunch. Something you don't hear about in the media is that new banking business is now the most profitable in its history. The good news is that credit creation during recessions historically bottoms out at the $400 billion level. Conventional 30 year mortgages are now at 7% and jumbos 8%.

5) Weekly jobless claims skyrocketed to 406,000, up 34,000, the highest figure in three years.

6) The Hurricane Dolly miss has hammered natural gas again, from $13.50 to $8.90, down a gob smacking 35% in two weeks. This unwind is happening so fast that we are only $1 away from entering 'buy' territory. This is how gas trades. This extreme volatility makes it the best contract to be right about, and the worst one to be wrong about. Traders will tell you that it always takes the stairs up, but the elevator down.

7) What is the difference between an actuary in England and one in Sicily? The actuary in England can tell you how many people die over the next three years. The one in Sicily can tell you how many will die in the next three years and who they are!

8) Facebook has seen subscribers grow from 40 million to 90 million in the past year. Now that the company is offering Spanish language pages it is growing at one million new subscribers a week. In interviews, founder Mark Zukerberg looks like a kid who loves the technology, but is overwhelmed by the business side of things.

July 23, 2008

Global Market Comments for July 23, 2008

1) Gasoline inventories fell a surprisingly large 2.8 million barrels as cancelled summer vacations leave the system awash in excess product. Crude fell $4 to $124. Prices at the pump could fall 20 to 30 cents/gallon in the next week. If you believe crude has finally peaked, buy the refiners which have been hammered this year because of crushed margins. Valero Energy (VLO) has plummeted from $76 to $30, while Tesoro Petroleum (TSO) has vaporized from $65 to $15.

2) Roche Holdings has made an $89/share offer to buy the remaining shares of Genentech (DNA). The Swiss pharmaceutical giant, which already has majority control of the company, sees this as a natural long dollar play with the euro at $1.59. Roche plans to integrate DNA's marketing, manufacturing and back office, while leaving its option incentivised research division alone. The stock shot up 12% to $93 as traders believe Roche may raise its offer. I toured DNA's principal manufacturing facility a few years ago, and since they used the eschericia coli bacteria as their principal biosynthesis media, the whole place smelled like a pile of shit.

3) During Q1 Verizon customers sent 58 billion text messages. That works out to 1,000/customer, or 11/day. I bet my kids account for at least half of that. 80% of the US population now uses cell phones.

4) Here are more China plays. VisionChina Media (VISN) has 45,000 display ad locations and is down from $22 to $14. ATA Inc. (ATAI) processed 123 million online licensing and college entrance examinations last year, and is down from $18 to $12. It caters to the Chinese desire to upgrade standards of living through improved education and professional qualifications. Oriental Education (EDU) offers the prep courses for these exams, and it has fallen from $82 to $53. All trade on NASDAQ.

5) United Airlines (UAUA) is up 50% to $7.50 on the successful roll over of its short term debt and falling crude prices. See my earlier recommendation to buy the stock at $5 as a cheap undated put on crude.

6) The new symbol for the Bombay Sensex is ($BSE), which at 12,500 is down 45% from its January high of 21,500. This eventually will be a strong buy when the BRIC?s come back into fashion.

7) VMWare (VMW) lowered guidance and got slaughtered, the stock plunging 10%. The Palo Alto based business virtualization software company had a nice little niche until Microsoft, IBM, and Hewlett Packard piled in and ate their lunch. The stock has fallen 70% from $115 to $34 since October and the CEO got fired.

July 23, 2008

Global Market Comments for July 23, 2008

1) Gasoline inventories fell a surprisingly large 2.8 million barrels as cancelled summer vacations leave the system awash in excess product. Crude fell $4 to $124. Prices at the pump could fall 20 to 30 cents/gallon in the next week. If you believe crude has finally peaked, buy the refiners which have been hammered this year because of crushed margins. Valero Energy (VLO) has plummeted from $76 to $30, while Tesoro Petroleum (TSO) has vaporized from $65 to $15.

2) Roche Holdings has made an $89/share offer to buy the remaining shares of Genentech (DNA). The Swiss pharmaceutical giant, which already has majority control of the company, sees this as a natural long dollar play with the euro at $1.59. Roche plans to integrate DNA's marketing, manufacturing and back office, while leaving its option incentivised research division alone. The stock shot up 12% to $93 as traders believe Roche may raise its offer. I toured DNA's principal manufacturing facility a few years ago, and since they used the eschericia coli bacteria as their principal biosynthesis media, the whole place smelled like a pile of shit.

3) During Q1 Verizon customers sent 58 billion text messages. That works out to 1,000/customer, or 11/day. I bet my kids account for at least half of that. 80% of the US population now uses cell phones.

4) Here are more China plays. VisionChina Media (VISN) has 45,000 display ad locations and is down from $22 to $14. ATA Inc. (ATAI) processed 123 million online licensing and college entrance examinations last year, and is down from $18 to $12. It caters to the Chinese desire to upgrade standards of living through improved education and professional qualifications. Oriental Education (EDU) offers the prep courses for these exams, and it has fallen from $82 to $53. All trade on NASDAQ.

5) United Airlines (UAUA) is up 50% to $7.50 on the successful roll over of its short term debt and falling crude prices. See my earlier recommendation to buy the stock at $5 as a cheap undated put on crude.

6) The new symbol for the Bombay Sensex is ($BSE), which at 12,500 is down 45% from its January high of 21,500. This eventually will be a strong buy when the BRIC?s come back into fashion.

7) VMWare (VMW) lowered guidance and got slaughtered, the stock plunging 10%. The Palo Alto based business virtualization software company had a nice little niche until Microsoft, IBM, and Hewlett Packard piled in and ate their lunch. The stock has fallen 70% from $115 to $34 since October and the CEO got fired.

July 22, 2008

Global Market Comments for July 22, 2008

1) Hurricane Dolly missed, so crude fell $4 to $126, while gas deflated $1 to $9.80. Bonds collapsed and stocks avoided a collapse.

2) American Express (AMP) reported Q2 profits down 38% as the consumer spending slowdown hits, taking the stock down 15% to $36. High end customers are reducing spending while formerly middle income earners are increasing delinquencies.

3) Apple (AAPL) disappointed with their guidance on Q3 gross margins, which are expected to fall from 34% to 30%. It turns out that the IPhone business is not as profitable as the computer business. The company is now offering a free IPOD with each Mac purchase in its back to school program for students. The stock cratered 11% to $149. Also, Steve Jobs was absent from the call, again raising health concerns about the aggressive founder. The high profile vegan recently recovered from normally fatal pancreatic cancer.

4) According to Noble prize winning economist Joseph Stiglitz, the war in Iraq has cost $800 billion so far. If you count indirect costs, like the lifetime support and medical expenses for tens of thousands of military amputees and the wearing out of a good portion of our military equipment, the bill comes to $1.8 trillion. Throw in the war premium in the price of crude and it rises to $3 trillion. Stiglitz is a real firebrand, but he is right.

5) The REIT Simon Property (SPG) now owns 10% of the malls in the US and 20% of the class 'A' malls. The stock has fallen 36% from $117 to $75 to a discount to book value. Add to your buy list for when the market turns.

6) If you are looking for a white knuckle vehicle to play foreign markets consider the Claymore Fund (BXP) which focuses on frontier markets like Nigeria, Uganda, Uzbekistan, and Vietnam. The range of this ETF over the past year has been $78 to $107. If you are not looking for the E-ticket ride, look at ETF SPDR S&P BRIC 40 (BIK), which only invests in the relatively more stable growth BRICs of Brazil, Russia, India, and China.

7) Moody's has downgraded the long term debt of Lehman (LEH). Less risk taking means much fewer future profits. They might as?? well call Moody?s ?Closing the Door After the Horses have Bolted, Inc.?

8) The average length of a postwar recession is 14 months. Putting on your rosiest set of glasses, and assuming the downturn started in January, and that crude soon plummets below $100, the earliest this recession will end is early 2009. It is more likely that the recession will go on to June, 2009 and that we won't see this in the data until September, 2009.

July 22, 2008

Global Market Comments for July 22, 2008

1) Hurricane Dolly missed, so crude fell $4 to $126, while gas deflated $1 to $9.80. Bonds collapsed and stocks avoided a collapse.

2) American Express (AMP) reported Q2 profits down 38% as the consumer spending slowdown hits, taking the stock down 15% to $36. High end customers are reducing spending while formerly middle income earners are increasing delinquencies.

3) Apple (AAPL) disappointed with their guidance on Q3 gross margins, which are expected to fall from 34% to 30%. It turns out that the IPhone business is not as profitable as the computer business. The company is now offering a free IPOD with each Mac purchase in its back to school program for students. The stock cratered 11% to $149. Also, Steve Jobs was absent from the call, again raising health concerns about the aggressive founder. The high profile vegan recently recovered from normally fatal pancreatic cancer.

4) According to Noble prize winning economist Joseph Stiglitz, the war in Iraq has cost $800 billion so far. If you count indirect costs, like the lifetime support and medical expenses for tens of thousands of military amputees and the wearing out of a good portion of our military equipment, the bill comes to $1.8 trillion. Throw in the war premium in the price of crude and it rises to $3 trillion. Stiglitz is a real firebrand, but he is right.

5) The REIT Simon Property (SPG) now owns 10% of the malls in the US and 20% of the class 'A' malls. The stock has fallen 36% from $117 to $75 to a discount to book value. Add to your buy list for when the market turns.

6) If you are looking for a white knuckle vehicle to play foreign markets consider the Claymore Fund (BXP) which focuses on frontier markets like Nigeria, Uganda, Uzbekistan, and Vietnam. The range of this ETF over the past year has been $78 to $107. If you are not looking for the E-ticket ride, look at ETF SPDR S&P BRIC 40 (BIK), which only invests in the relatively more stable growth BRICs of Brazil, Russia, India, and China.

7) Moody's has downgraded the long term debt of Lehman (LEH). Less risk taking means much fewer future profits. They might as?? well call Moody?s ?Closing the Door After the Horses have Bolted, Inc.?

8) The average length of a postwar recession is 14 months. Putting on your rosiest set of glasses, and assuming the downturn started in January, and that crude soon plummets below $100, the earliest this recession will end is early 2009. It is more likely that the recession will go on to June, 2009 and that we won't see this in the data until September, 2009.

July 21, 2008

Global Market Comments for July 21, 2008

1) Crude is dead. Traders are now gunning for $120. The general consensus for commodities is that we go down for the forseeable future, and then go back up again.

2) Internet users in China are expected to increase from 250 million to 900 million over the next 5-10 years. The majority will access the net via cell phones, where gaming is the dominant application. Expect huge growth at the four horsemen of the Chinese internet sector. Baidu.com (BIDU), Netease (NTES), Sina (SINA), and Sohu.com (SOHU). All of these have just had major sell offs.

3) Just to illustrate the amount of BS is in the press about the severity of this economic downturn I have pulled out some interesting statistics:

Time Period1929-19322005-2008
Unemployment Rate25%5.5%
Bank Failures4,00014
Dow Jones Performance-89%+3%
Home Foreclosures25%3%

4) Bank of America (BAC) announced better than expected earnings. The stock has now doubled in six days, from $18 to $36. If you absolutely must own a bank, this is a good one.

5) Looking at the whole commodity universe, natural gas has been the most severely punished in this sell off, plunging from $13.50 to $10. If we get through the hurricane season without a major storm hitting gas facilities in the Gulf it could drop to the $6 handle where it would be a screaming buy. However, tropical storm Dolly is now threatening, and some companies have started precautionary evacuation of their offshore rigs.

6) MF global has seen its stock jump 86% from $3.50 to $6.50 today because it successfully rolled over the bulk of its short term debt. The stock was down 88% from its IPO price a year ago of $30.

7) An appeals court threw out the $550,000 fine against CBS for Janet Jackson's 'wardrobe malfunction' at the Super Bowl.

8) Only 1% of economists believe that we will see negative GDP growth in the second half. We won't know sure until March. I think they are being wildly over optimistic.

July 21, 2008

Global Market Comments for July 21, 2008

1) Crude is dead. Traders are now gunning for $120. The general consensus for commodities is that we go down for the forseeable future, and then go back up again.

2) Internet users in China are expected to increase from 250 million to 900 million over the next 5-10 years. The majority will access the net via cell phones, where gaming is the dominant application. Expect huge growth at the four horsemen of the Chinese internet sector. Baidu.com (BIDU), Netease (NTES), Sina (SINA), and Sohu.com (SOHU). All of these have just had major sell offs.

3) Just to illustrate the amount of BS is in the press about the severity of this economic downturn I have pulled out some interesting statistics:

Time Period1929-19322005-2008
Unemployment Rate25%5.5%
Bank Failures4,00014
Dow Jones Performance-89%+3%
Home Foreclosures25%3%

4) Bank of America (BAC) announced better than expected earnings. The stock has now doubled in six days, from $18 to $36. If you absolutely must own a bank, this is a good one.

5) Looking at the whole commodity universe, natural gas has been the most severely punished in this sell off, plunging from $13.50 to $10. If we get through the hurricane season without a major storm hitting gas facilities in the Gulf it could drop to the $6 handle where it would be a screaming buy. However, tropical storm Dolly is now threatening, and some companies have started precautionary evacuation of their offshore rigs.

6) MF global has seen its stock jump 86% from $3.50 to $6.50 today because it successfully rolled over the bulk of its short term debt. The stock was down 88% from its IPO price a year ago of $30.

7) An appeals court threw out the $550,000 fine against CBS for Janet Jackson's 'wardrobe malfunction' at the Super Bowl.

8) Only 1% of economists believe that we will see negative GDP growth in the second half. We won't know sure until March. I think they are being wildly over optimistic.

July 18, 2008

Global Market Comments for July 18, 2008

1) Crude was stable today. A big part of the selling this week has come from bank sales of crude holdings to shore up balance sheets. There was a major effort to make sure that the crude August $130 calls, where enormous positions had been built up, expired worthless yesterday, which they did. China's Olympic shut down is starting to affect all markets where they are the major player, like crude and copper. Who knew banks were such big players in this market? In every crisis there are always unexpected bodies that float to the surface.

2) If gas prices stay at current levels the decline in driving, and more driving at slower speeds will cause highway deaths to fall by 12,000/year. There will also be dramatic reductions in traffic, air pollution, and traffic noise. Land near freeways might become worth more, especially if we move to silent all electric cars. The San Francisco Bay Bridge morning rush hour toll gate back up has almost disappeared.

3) The Pakistan stock market has dropped for 15 consecutive days. It is now down 35% from its April high. Yesterday a crowd stormed the exchange and destroyed it in the hope that it would prevent further price falls. It makes our SEC's action against short sellers pale by comparison.

4) Google (GOOG) did not beat expectations with Q2 earnings so they took the stock down 10%. It shows you how demanding the market is these days.

5) Merrill Lynch sold its 20% stake in Bloomberg, which it has owned since the company?s creation by Mayor Michael in the early eighties, for $4.4 billion. This values the mayor of New York at a breathtaking $22 billion.

6) The stock market had its best three day run in five years. The bank and airline sub indexes had their best moves in history. The biggest moves were in what I call the 'imminent bankruptcy' sector: Lehman (LEH) up 80%, United Airlines (UAUA) up 60%, General Motors (GM) up 45%. GM has lost $50 billion over the last three years. Unbelievable!

July 18, 2008

Global Market Comments for July 18, 2008

1) Crude was stable today. A big part of the selling this week has come from bank sales of crude holdings to shore up balance sheets. There was a major effort to make sure that the crude August $130 calls, where enormous positions had been built up, expired worthless yesterday, which they did. China's Olympic shut down is starting to affect all markets where they are the major player, like crude and copper. Who knew banks were such big players in this market? In every crisis there are always unexpected bodies that float to the surface.

2) If gas prices stay at current levels the decline in driving, and more driving at slower speeds will cause highway deaths to fall by 12,000/year. There will also be dramatic reductions in traffic, air pollution, and traffic noise. Land near freeways might become worth more, especially if we move to silent all electric cars. The San Francisco Bay Bridge morning rush hour toll gate back up has almost disappeared.

3) The Pakistan stock market has dropped for 15 consecutive days. It is now down 35% from its April high. Yesterday a crowd stormed the exchange and destroyed it in the hope that it would prevent further price falls. It makes our SEC's action against short sellers pale by comparison.

4) Google (GOOG) did not beat expectations with Q2 earnings so they took the stock down 10%. It shows you how demanding the market is these days.

5) Merrill Lynch sold its 20% stake in Bloomberg, which it has owned since the company?s creation by Mayor Michael in the early eighties, for $4.4 billion. This values the mayor of New York at a breathtaking $22 billion.

6) The stock market had its best three day run in five years. The bank and airline sub indexes had their best moves in history. The biggest moves were in what I call the 'imminent bankruptcy' sector: Lehman (LEH) up 80%, United Airlines (UAUA) up 60%, General Motors (GM) up 45%. GM has lost $50 billion over the last three years. Unbelievable!