September 11, 2008

Global Market Comments for September 11, 2008

1) The Great Unwind of 2008 continues. Gold down from $1,100 to $740. Crude from $148 to $100.25, Natural Gas from $13.50 to $7, Silver from $21 to $10.40. The Russian stock market, with the ruble depreciation has plunged 50% since July. The best of breed commodity stocks are all down 50%, like Freeport McMoran Copper & Gold (FCX), US Steel (X), Potash (POT), Chesapeake Energy (CHK), and Joy Global (JOYG). The euro has retraced one third of a seven year up move in only eight weeks, and has hit my short term target of $1.38. Please see my earlier recommendation to short the euro at $1.58. Watch out for the snap back on all of these. They have moved too far too fast.

2) The details were released today by the promoters of the California bullet train, which will see $9.95 billion in bond issues on the November ballot. The $32 billion, 800 mile project will whisk passengers from Los Angeles to San Francisco in 2 ?? hours for $55 at a blazing 220 miles/hour, starting in 2018. The measure is expected to pass handily, as Californians always enjoy splurging on this sort of luxury.

3) Update on the foreclosure capital of the world, Stockton, California, where one out of 25 homes are in foreclosure. Prices are down 50% from the top, but unit sales are now up 300% as the scavengers pour in. Many trying to buy distressed properties find the local lenders are too overwhelmed to deal with them. The new problem: squatters and thieves who are stripping the copper wiring, copper pipes, and resalable fixtures out of abandoned houses, causing hundreds of thousands of dollars in damage, and wiping out bank equity. Solar panels, which resell on the black market for $1,000 to crooked contractors, are especially popular. Realtors are now carrying pepper spray because they don’t know who they will find on the other side of the door of houses they are showing to prospective buyers.

4) Walt Disney (DIS) has had every possible thing thrown at it this year, including high gas prices, a recession, and terrorist threats, and the lines are as long as ever. All of this has only knocked the stock down 25% from $35 to $26. CEO Robert Iger is doing a tremendous job. This is a rare chance to buy one of the world’s great brands and franchises at a discount price for a long term hold. And with the Fannie Mae bail out in place, Snow White gets to keep her castle.


One US senator in response to today’s sex scandal among Interior Dept. staff who handled oil leases: ‘It is not possible to have an arms length relationship with someone you are having sex with.’