Which Way Wednesday?

November 15, 2006

446

Was that it or are we just getting started?

Japan took some profits today but the Hang Seng (who barely pulled back) jumped 200 points, just 70 points shy of another new high.

The CEO of WuMart (Chinese version of Wal-Mart) resigned under investigation for some sort of shenanigans. The stock has gained 85% since its IPO in 2003 and we were just having a conversation about CMED and why I don’t like Chinese stocks so here’s a good example. At least when our CEOs get investigated you have 3 or 4 years before they have to resign!

Speaking of China, Wikimedia (my favorite on-line reference) is back on-line in China. This is a very interesting policy change so I hope it sticks…

Speaking of free press, Al-Jazeera launches their English news channel today, which will bring them to more homes globally than Fox news! I’d love to A/B those two networks on the same story!

Europe is in a pretty good mood this morning (must be that Al-Jazeera zoo crew!) with all the exchanges pointing higher. I’m going to start watching the FTSE (the Euro Dow) to see if they can break out of that 6,250 range to make a new top.

Meawhile, everyone is shorting this top so either everyone is right or we will reach escape velocity on a lot of short covering this week and next.

Let’s keep an eye on INTC, whose 4% gain drove the markets yesterday. I will be thrilled if we can hold these new tops and we need tech leadership to keep this party going and a commodity pullback may stall things today.

Questions for the day:

Does the Dow hold 12,200?
Can the S&P maintian 1,390?
Is the NYSE serious about 8,850?
Will 2,425 be support for the Nasdaq?

The Russell also bears watching at 780 but it is pure greed to expect them to hold a 2% 2-day gain. As long as our majors don’t pull back more than half a pont, we are in fine, fine shape!

Oil is in for a bumpy ride today so good luck to all as I will be at meetings most of the day and will miss the fun.

Crude is expected to build 1.2M barrels and a small draw on distillates is expected. As Zman properly points out, the pump crew makes a big deal about a year over year demand increases but neglects to mention that last year’s demand was depressed by 2 hurricanes that disrupted the country for weeks!

We’ll see if $59 firms up as a new top and hopefully we’ll get another bottom test at $58.39 before the day is out. Once oil breaks below $58 I think we may have a clear path to $57.15 and our 5% mark of $56.89.

Austrian refiner OMV’s profits were down 27% this quarter as “the recent volatility in oil market and a softening in crude prices since August, along with significantly lower refining margins, resulted in weaker figures.” Hmmmmmmm!

You won’t hear this from US pumpers but Australians are very concerned about Chinese demand dropping rapidly! LME Copper stocks are up 38% since mid-October, at the highest level since May 2004, when copper was at $112 (now $312).

Can copper pricing be sillier than oil pricing based on the same myth of infinite Chinese demand? Stay tuned!

Meanwhile, let’s keep tight stops on MRB and NAK, who have both made plenty of money for us but may be endangered by this news.

Gold has been holding up but won’t do well on a serious decline in other metals and the low-inflation news in the US and Japan isn’t going to help it any. I’m still looking at $615 as a break point but gold can hit that in an hour of trading on a bad day.

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Airbus is taking their one working A380 on tour and AirAsia is trying to help out by SAYING (not actually ordering) they will need 60 more planes next year.

“We’re finding the A320 to be a phenomenally profitable aircraft,” AirAsia Chief Executive Tony Fernandes said in an interview yesterday. “I believe within the next 12 months that AirAsia will need to look at another order. I believe it will be a confirmation of the 30 options and a further 30 [A320s].”

Mr. Fernandes said that this was his personal view and emphasized that AirAsia’s board has made no decision yet to purchase any additional A320s. “There has been no study. It’s just my gut feel,” he said by telephone from AirAsia’s headquarters in Kuala Lumpur.

Interesting Fact: AirAsia is 51% owned by Thailands Shin Corp – the Prime Minister’s family company!

As I reported long ago, these are the ultra discount deals that BA had the smarts to walk away from last year and Airbus clients are now worried about the company’s financial health and ability to deliver needed planes, hence the pump-fest!

Meanwhile can BA get any more good news? Apparently so – GE and others are looking to lock in $10Bn worth of planes before Boeing has to close the book on ’07 as they just can’t deliver any more planes!

[Chart]

I love it when one of my favorite stocks (GE) does business with another! If Mr. Fernandes changes his mind and wants a 787 Dreamliner, he will have to wait until 2013 for Boeing’s next available slot…

Meanwhile, kicking a guy while he’s down, US trade officials are pressing a complaint against Airbus on improper subsidies.

I couldn’t be happier with 10/24’s BA Jan ’08 $90s, at the time we took them as a cheap entry to a potential income producer but I’m in no hurry to start selling calls against them just yet!

Speaking of airlines – my bottom call on Delta looks like a real bottom now as UAUA is making an offer! On the 5th, at $1.04, I said about the Jan ’08 $2.50s: “Now I can just put them away and forget about them or just set a sell at .15 (.10 is not worth it) and hope for some exciting news between now and then.”

I think this may qualify as exciting news already!

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Unfortunately, I’ll be missing out on today’s action but I’m expecting the CPI to confirm the PPI, giving us more of the same, perhaps after a little pullback but don’t forget that tomorrow is our big day!

We have HPQ, DELL, ADSK, MRVL, CRM, SBUX, SHLD and BKS all reporting tomorrow as well as WSM (who we have) and GMCR who we don’t have but never pulled back.

They don’t have options so I’m not that excited about them but I do like Green Mountain at $41.50 as they have a major deal with MCD that will “filter” into the earnings in the future.

IBM and C are taking a position in China’s Guangdong Development Bank with development being the key word for IBM who looks to make inroads to lucrative IT consulting contracts in the world’s fastest growing economy.

You’ve got to love it when TYC, a $60B company that is followed by 14 analysts, beats expectations by 26%! That did include 12 cents worth of special items but revenue also beat by 2.5%. The company should be held back by further options shenanigans but I’ll be looking to buy on any dip as I think we already knew these guys had problems! Dec $30s might be nice, hopefully around .50.

In a dead dull industry – SCI is already buying AWGI, who have earnings today but the SCI Jan ’08 $7.50s have virtually no premium at $2.10 and give you a 4.5:1 leverage on your money on a pretty safe bet that people will continue to die and neglect to haggle over pricing when they do.

I don’t get the low expectations for TTEK and the Dec $20s are a fun craps bet at .20.

I would have to assume that SWRG had a good quarter as it’s a popular power lunch spot so I don’t get the 7% drop yesterday (they are closing one location). I’m not playing but it’s very interesting.

I can’t believe they’re having a Nasdaq party without inviting BEAS. They beat last quarter by 16% but 29 analysts say they will make just .14 this quarter. Even more interesting, this stock has 10 holds and 5 sells but very few shorts. Dec $15s are $1.10 but do carry the risk of being wiped out on tonight’s earnings! Perhaps covering with the $15 puts for .25 would be smarter but I’m not going that way.