June 24, 2008

Global Market Comments for June 24, 2008

1) Rumors of an Israeli attack on Iran drove crude up to $138. It then fell back to $136. 72% of US consumers now want to buy a hybrid car but will have to contend with a long waiting list to get one. 49% are willing to pay a $5,000 premium for the fuel efficient cars. 26.8% of US oil production now comes from offshore, which is why drilling in Florida and California has become such a hot political issue.

2) The IRS is increasing its per mile expense allowance for driving personal cars for business purposes from 50.5 cents/mile to 58.5 cents/mile from July 1.

3) Shanghai had its worst week in the market in 12 years. Hyperinflation is slamming emerging market economies and stock markets as high food and fuel prices feed though. Vietnam and Russia are now suffering 25% inflation rates.

4) Hilton Hotels plans to build 300 new hotels in Asia over the next 10 years in addition to the 47 they currently have. Follow the money.

5) Dow Chemical is raising prices by 25%, something that will filter through to the entire US economy. Dow will spend $32 billion on energy costs this year, up four times in five years.

6) The S&P/Case Shiller national home price index fell 15% in April, the sharpest drop on record. Worst off were Las Vegas and Miami, down by -27%, followed by San Francisco, down -22%. Condos in Miami are trading at 40 cents on the dollar. The Midwestern cities like Chicago, Cleveland, and Denver, which never went up much, are seeing only single digit price falls and may be close to a bottom.

7) Office Depot is seeing ‘unprecedented’ price increases from suppliers, indicating that inflation is about to hit the US big time. Shorting long dated Treasuries is a no brainer here. Treat every three point bond rally as a gift to sell into. Treasuries are going to do this year what sub prime loans did last year.

8) According to the Conference board, the US economy is about to fall off a cliff. Its consumer confidence index fell from 58.1% in May to 50.4% in June, an all time low and one of the most rapid falls on record.

June 24, 2008

Global Market Comments for June 24, 2008

1) Rumors of an Israeli attack on Iran drove crude up to $138. It then fell back to $136. 72% of US consumers now want to buy a hybrid car but will have to contend with a long waiting list to get one. 49% are willing to pay a $5,000 premium for the fuel efficient cars. 26.8% of US oil production now comes from offshore, which is why drilling in Florida and California has become such a hot political issue.

2) The IRS is increasing its per mile expense allowance for driving personal cars for business purposes from 50.5 cents/mile to 58.5 cents/mile from July 1.

3) Shanghai had its worst week in the market in 12 years. Hyperinflation is slamming emerging market economies and stock markets as high food and fuel prices feed though. Vietnam and Russia are now suffering 25% inflation rates.

4) Hilton Hotels plans to build 300 new hotels in Asia over the next 10 years in addition to the 47 they currently have. Follow the money.

5) Dow Chemical is raising prices by 25%, something that will filter through to the entire US economy. Dow will spend $32 billion on energy costs this year, up four times in five years.

6) The S&P/Case Shiller national home price index fell 15% in April, the sharpest drop on record. Worst off were Las Vegas and Miami, down by -27%, followed by San Francisco, down -22%. Condos in Miami are trading at 40 cents on the dollar. The Midwestern cities like Chicago, Cleveland, and Denver, which never went up much, are seeing only single digit price falls and may be close to a bottom.

7) Office Depot is seeing ‘unprecedented’ price increases from suppliers, indicating that inflation is about to hit the US big time. Shorting long dated Treasuries is a no brainer here. Treat every three point bond rally as a gift to sell into. Treasuries are going to do this year what sub prime loans did last year.

8) According to the Conference board, the US economy is about to fall off a cliff. Its consumer confidence index fell from 58.1% in May to 50.4% in June, an all time low and one of the most rapid falls on record.

June 23, 2008

Global Market Comments for June 23, 2008

1) It is breathtaking the extent to which the markets ignored the incredible positive results of the weekend’s oil summit in Jeddah. The Saudis guaranteed to raise production from 9.4 million barrels/day now to 9.6 million barrels next month to 12.5 million barrels by the end of 2009, and 15 million after that. They provided everything but the handstands, and all the market wanted to focus on was the 1 million barrels/day lost by Nigeria. Crude rose by $4 to $138.25 after the announcement.

2) General Motors drops to $12.75, giving it a market cap of just $7 billion, making it by far the smallest Dow Jones Industrial Average component. The troubled company has launched a last ditch campaign to get rid of bulging unsold stocks of SUV’s, offering discounts of up to $7,000 per vehicle or 0% financing for 5 years. This works out to free gas for 3 years for the average driver.

3) Product promotion through social networking sites has been found to be four times more effective than conventional advertising. Procter and Gamble has been cutting new ground here.

4) Talk about a tough business! RV sales in the first four months of this year are down 26% YOY. Sales volumes are at the lowest level since 1991. Some of these behemoths get four miles/gallon. An M1 Abrams tank gets ?? mile per gallon.

5) The high cost of fuel is making major changes in trade patterns. Heavy products with low labor content that must travel long distances from China have lost their price advantage because of transportation costs. First and foremost affected is steel. Buy US Steel (X) at $175.

6) Wages in China have risen 550% since 1995, compared to 50% in the US.

7) Speculators now account for 70% of the trading in the West Texas crude contract compared to 30% five years ago. Traders must go where the money is.

8) European economies are now rapidly stagnating, led by Southern Europe. Germany is the only country that seems to be holding its own.

June 23, 2008

Global Market Comments for June 23, 2008

1) It is breathtaking the extent to which the markets ignored the incredible positive results of the weekend’s oil summit in Jeddah. The Saudis guaranteed to raise production from 9.4 million barrels/day now to 9.6 million barrels next month to 12.5 million barrels by the end of 2009, and 15 million after that. They provided everything but the handstands, and all the market wanted to focus on was the 1 million barrels/day lost by Nigeria. Crude rose by $4 to $138.25 after the announcement.

2) General Motors drops to $12.75, giving it a market cap of just $7 billion, making it by far the smallest Dow Jones Industrial Average component. The troubled company has launched a last ditch campaign to get rid of bulging unsold stocks of SUV’s, offering discounts of up to $7,000 per vehicle or 0% financing for 5 years. This works out to free gas for 3 years for the average driver.

3) Product promotion through social networking sites has been found to be four times more effective than conventional advertising. Procter and Gamble has been cutting new ground here.

4) Talk about a tough business! RV sales in the first four months of this year are down 26% YOY. Sales volumes are at the lowest level since 1991. Some of these behemoths get four miles/gallon. An M1 Abrams tank gets ?? mile per gallon.

5) The high cost of fuel is making major changes in trade patterns. Heavy products with low labor content that must travel long distances from China have lost their price advantage because of transportation costs. First and foremost affected is steel. Buy US Steel (X) at $175.

6) Wages in China have risen 550% since 1995, compared to 50% in the US.

7) Speculators now account for 70% of the trading in the West Texas crude contract compared to 30% five years ago. Traders must go where the money is.

8) European economies are now rapidly stagnating, led by Southern Europe. Germany is the only country that seems to be holding its own.

June 20, 2008

Global Market Comments for June 20, 2008

1) Crude crashes, down $7 from yesterdays high to a low of $132 on news that China is raising retail gasoline prices by 17% and diesel prices by 18%. Prices are still well below market levels and may be raised again after the Olympics to prevent rioting during the games. China accounted for 40% of the growth in world oil consumption last year. Demand destruction goes global. Watch for an imminent peak in crude.

2) German 10 year bund yields hit 4.70%, a six year high. Expect US Treasury yields to follow and bond prices to fall big. See my earlier recommendation to sell 30 bond futures at 120. This is one of the most compelling shorts out there right now.

3) There is a rising outcry to build more nuclear plants in the US, where one has not been approved for 30 years. McCain has made construction of 30 plants part of his campaign and the industry wants 100. Nuclear now accounts for 16% of the US electricity supply, compared to 39% from coal, 19% from hydro, 15% from natural gas, and 10% from oil. France gets 75% of its electricity from nuclear.

4) According to Goldman Sachs, high gas prices are hurting the $50 million a year Nevada prostitution industry, which is permitted in counties with populations fewer than 400,000. These very remote houses of ill repute rely on truckers as their principal clients. With diesel fuel at $5.50/gallon there are fewer truckers to go around. One entrepreneurial house is offering a two for one if you spend your tax rebate check there.

TRADE OF THE MONTH CLOSED!!!

The August $155 calls you sold short yesterday for $3 could be bought back today for only $1, creating a one day trading profit of $600,000. It only took a move in crude from $138 to $132, caused by the China fuel price increases, to create this profit. These kind of profits are only possible when you get one month’s worth of price movement compressed into a single day, as we are seeing in the crude market every day now. Time to take the profit and resell these again on the next spike up. No point in carrying the weekend risk with the big oil meeting on Sunday. It is also a classic example of how a hedge fund works. Find the lowest risk trade out there, wait for an event driven extreme price movement to give you a great entry point, and then leverage up. Don’t stay married to the position, bank a profit as quickly as possible. This is how well run hedge funds generate their huge returns.

June 20, 2008

Global Market Comments for June 20, 2008

1) Crude crashes, down $7 from yesterdays high to a low of $132 on news that China is raising retail gasoline prices by 17% and diesel prices by 18%. Prices are still well below market levels and may be raised again after the Olympics to prevent rioting during the games. China accounted for 40% of the growth in world oil consumption last year. Demand destruction goes global. Watch for an imminent peak in crude.

2) German 10 year bund yields hit 4.70%, a six year high. Expect US Treasury yields to follow and bond prices to fall big. See my earlier recommendation to sell 30 bond futures at 120. This is one of the most compelling shorts out there right now.

3) There is a rising outcry to build more nuclear plants in the US, where one has not been approved for 30 years. McCain has made construction of 30 plants part of his campaign and the industry wants 100. Nuclear now accounts for 16% of the US electricity supply, compared to 39% from coal, 19% from hydro, 15% from natural gas, and 10% from oil. France gets 75% of its electricity from nuclear.

4) According to Goldman Sachs, high gas prices are hurting the $50 million a year Nevada prostitution industry, which is permitted in counties with populations fewer than 400,000. These very remote houses of ill repute rely on truckers as their principal clients. With diesel fuel at $5.50/gallon there are fewer truckers to go around. One entrepreneurial house is offering a two for one if you spend your tax rebate check there.

TRADE OF THE MONTH CLOSED!!!

The August $155 calls you sold short yesterday for $3 could be bought back today for only $1, creating a one day trading profit of $600,000. It only took a move in crude from $138 to $132, caused by the China fuel price increases, to create this profit. These kind of profits are only possible when you get one month’s worth of price movement compressed into a single day, as we are seeing in the crude market every day now. Time to take the profit and resell these again on the next spike up. No point in carrying the weekend risk with the big oil meeting on Sunday. It is also a classic example of how a hedge fund works. Find the lowest risk trade out there, wait for an event driven extreme price movement to give you a great entry point, and then leverage up. Don’t stay married to the position, bank a profit as quickly as possible. This is how well run hedge funds generate their huge returns.

June 19, 2008

Global Market Comments for June 19, 2008

1) Natural Gas hit a new high of $13.50.

2) Gaming revenues in Las Vegas in April were down $1 billion YOY.

3) Donald Trump believes that the US banking system is essentially closed now. Banks are only financing large deals when they get a piece of the equity. The Fed says that 15% of US homes have negative equity, creating the risk that the owners will just walk away. There are 3 million empty homes in the US now.

4) A New York court reduced the trust fund received by Leona Helmsley’s Maltese dog ‘Trouble’ from $12 million to $2 million. The money went to her obviously litigious and aggrieved heirs.

5) Some 935 small trucking companies went out of business during Q1 2008 because of high fuel costs. The industry is rapidly consolidating into larger national carriers which are more able to pass costs onto customers like JB Hunt (JBHT), YRC Worldwide (YRC), and CH Robinson Worldwide (CHRW). These would all be great plays on an economic recovery.

6) The two hedge fund managers who ran the Bear Stearns hedge funds that went bust were arrested for criminal fraud and conspiracy for lying about ‘skin in the game’. The Feds staged a highly visible ‘perp walk’ on TV. Again, the government is trying the ?out of context email route? to expand its power and prove criminal intent, a stretch at best. They are trying to criminalize market risk.

TRADE OF THE MONTH!!

Crude is again probing the top end of its one month range so it is time to sell out of the month calls. Today you can sell the August $155 calls for $3 which expire in four weeks. The Saudi’s have called a meeting of oil producers and consumers on Sunday and the market is pricing in a big Saudi disappointment and upward price spike, driving far out of the money call volatilities to unimaginable, almost mathematically impossible to achieve levels. A short sale of 600 contracts here would yield $900,000 in premium, or 30% on a $3 million capital position.

Oil - Light Crude - Continuous Contract (EOD) Indx

June 19, 2008

Global Market Comments for June 19, 2008

1) Natural Gas hit a new high of $13.50.

2) Gaming revenues in Las Vegas in April were down $1 billion YOY.

3) Donald Trump believes that the US banking system is essentially closed now. Banks are only financing large deals when they get a piece of the equity. The Fed says that 15% of US homes have negative equity, creating the risk that the owners will just walk away. There are 3 million empty homes in the US now.

4) A New York court reduced the trust fund received by Leona Helmsley’s Maltese dog ‘Trouble’ from $12 million to $2 million. The money went to her obviously litigious and aggrieved heirs.

5) Some 935 small trucking companies went out of business during Q1 2008 because of high fuel costs. The industry is rapidly consolidating into larger national carriers which are more able to pass costs onto customers like JB Hunt (JBHT), YRC Worldwide (YRC), and CH Robinson Worldwide (CHRW). These would all be great plays on an economic recovery.

6) The two hedge fund managers who ran the Bear Stearns hedge funds that went bust were arrested for criminal fraud and conspiracy for lying about ‘skin in the game’. The Feds staged a highly visible ‘perp walk’ on TV. Again, the government is trying the ?out of context email route? to expand its power and prove criminal intent, a stretch at best. They are trying to criminalize market risk.

TRADE OF THE MONTH!!

Crude is again probing the top end of its one month range so it is time to sell out of the month calls. Today you can sell the August $155 calls for $3 which expire in four weeks. The Saudi’s have called a meeting of oil producers and consumers on Sunday and the market is pricing in a big Saudi disappointment and upward price spike, driving far out of the money call volatilities to unimaginable, almost mathematically impossible to achieve levels. A short sale of 600 contracts here would yield $900,000 in premium, or 30% on a $3 million capital position.

Oil - Light Crude - Continuous Contract (EOD) Indx

June 18, 2008

Global Market Comments for June 18, 2008

1) One airline analyst has ranked his companies according to the probability of bankruptcy. American (AMR) is at 33%, United (UAUA) is 25%, Delta (DAL) is 10%, Continental (CAL) is 4% and Southwest and Jet Blue (JBLU) are 0%. Watch out for your frequent flier points!

2) The recession is causing many consumers to switch from wine to beer to save money.

3) The GAO recommended that the Air Force reopen bidding for the next generation of tankers, pulling the $35 billion contract away from Airbus sponsored Northrop. This is huge. Northrop was just about to start construction of a plant in Alabama.

4) In July, Honda will make available only for lease in California its next generation hydrogen car, the FCX Clarity. The $600/month car gets a cost equivalent of 77 miles/gallon and has a 280 mile range. Honda introduced the first hybrid car 7 years ago.

5) As airlines discuss selling tickets by passenger weight we learn that the average American has gained 24 pounds since 1960.

6) The value traded of homes in Southern California has dropped 50% YOY. The number of transactions is down 25% and prices are down 25%.

7) Big hedge funds are hiring all of the top oil, gas, and commodities analysts on Wall Street as they move into these areas in size. As a result,??the information??the remaining brokers are telling the public is making less and less sense.

8) FedEx triggered a sell off in the stock market today when they announced disappointing earnings due to high fuel costs.

TRADE OF THE DAY

The VIX shot up to 23% today so there was a nice chance to go short the July S&P 500 July 1200 puts today for $4.50. These expire in four weeks, are 11% out of the money, and 25 of these would yield you $62,000, of 2% of your capital. Coming off of a 120 point drop in the index it would be a nice sale.

June 18, 2008

Global Market Comments for June 18, 2008

1) One airline analyst has ranked his companies according to the probability of bankruptcy. American (AMR) is at 33%, United (UAUA) is 25%, Delta (DAL) is 10%, Continental (CAL) is 4% and Southwest and Jet Blue (JBLU) are 0%. Watch out for your frequent flier points!

2) The recession is causing many consumers to switch from wine to beer to save money.

3) The GAO recommended that the Air Force reopen bidding for the next generation of tankers, pulling the $35 billion contract away from Airbus sponsored Northrop. This is huge. Northrop was just about to start construction of a plant in Alabama.

4) In July, Honda will make available only for lease in California its next generation hydrogen car, the FCX Clarity. The $600/month car gets a cost equivalent of 77 miles/gallon and has a 280 mile range. Honda introduced the first hybrid car 7 years ago.

5) As airlines discuss selling tickets by passenger weight we learn that the average American has gained 24 pounds since 1960.

6) The value traded of homes in Southern California has dropped 50% YOY. The number of transactions is down 25% and prices are down 25%.

7) Big hedge funds are hiring all of the top oil, gas, and commodities analysts on Wall Street as they move into these areas in size. As a result,??the information??the remaining brokers are telling the public is making less and less sense.

8) FedEx triggered a sell off in the stock market today when they announced disappointing earnings due to high fuel costs.

TRADE OF THE DAY

The VIX shot up to 23% today so there was a nice chance to go short the July S&P 500 July 1200 puts today for $4.50. These expire in four weeks, are 11% out of the money, and 25 of these would yield you $62,000, of 2% of your capital. Coming off of a 120 point drop in the index it would be a nice sale.