July 9, 2008

Global Market Comments for July 9, 2008

1) Iran fired nine medium and long range missiles and crude did nothing. That says a lot. Last week this would have taken crude to $150. What a difference a week makes! Oil is now enjoying what economist call 'perverse elasticity'. The higher the price goes, the more people want to buy it, until demand collapses completely.

2) The stock market got hammered today, led downward by financials over fears of further write offs and further dilution. Lehman set a new low for the move, down 11% to $19.85 and is well into takeover territory.

2) My old friend John Templeton died at 95. He graciously invited my wife and I to spend a weekend at his reproduction 18 column antebellum Southern style mansion at Lyford Cay in the Bahamas, complete with black servants with livery that matched the tablecloth and upholstery. John was one of the very first foreign investors in Japan in the fifties when it was the first postwar emerging market, buying companies like Hitachi and Toyota at PE multiples of one and two.

3) The 3G IPhone goes on sale on Friday for $200, with higher service charges. Sales in 2008 are expected to reach 12 million globally, and 45 million in 2009. Apple expects to sell more than 350,000 on the first day and the lines started forming yesterday. The new phone has better sound, a GPS chip, and allows web page downloads four times faster than the previous generation. The phone has an 'Ap store' that for the first time allows thousands of third party providers to sell specialized programs. Expect the media to go bananas.

4) 50% of all corporate capital spending is now on technology.

5) Cargill has finally commercially developed the Brazilian plant stevia. Until now leaves of this exotic plant, which are 200 times sweeter than sugar, was found only in health food stores as a sugar substitute. Cargill's Rebana product will be sold as a healthy, natural alternative to Splenda and Equal.

6) Treasury Secretary Hank Poulson predicts that home foreclosures will hit an all time high of 2.5 million this year. Bad for McCain.

7) CNBC voted Texas as the most business friendly state in the country, followed by Virginia. The state has a booming economy, thanks to the oil industry, which also makes it the country's largest exporter. The Lone Star state is home to 58 of the Fortune 500 and has the best state transportation system. It has no state income tax and a pro business legal system.