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Monday Mourning

I am so depressed about the global situation I can’t even write about the markets…

There is no way I can buy anything in this environment, even the President is using the word shit on TV now (you’ll hear all about this tonight) so things are obviously pretty damn tense.

Somehow we are now fighting with Russia as the US is scewing up what was supposed to be a done deal allowing Russia to join the WTO. Russia is very pissed and is now messing around with oil companies like COP and CVX who were supposed to sign contracts to drill in Russia. Russia may take it out on Boeing and cancel a 22 plane order from Aeroflot so let’s watch that one (but BA was already down Friday on this rumor). We can thank our potty mouthed President for this one as his meeting with Putin over the weekend was nothing less than a disaster as the two agreed on almost nothing.

There was no skill in picking my puts last week as a monkey with a dart board could have done as well as I did. I’m a little more focused on what didn’t go down on Friday like INTC, MSFT, TXN, GLW, ERTS, DELL of all things…

Last time the Dow hit 10,700 it took a super bounce all the way back to 11,000 in just 2 days (Jun 14, 15). That was a Wednesday and Thursday though and today is not looking like a big turnaround day. One problem is that, if peace breaks out, then commodity prices will tumble and drag down the markets which would leave it up to who to lead the markets? If it’s tech, I will break out the champagne (and many tech companies report this week) but there is no way I would bet on it. We are far more likely to test 10,600 before turning than move up from here but 10,200 is very possible at this point.

We need to watch the S&P around 1,225 which it must hold but the NYSE is our primary indicator as it still rests right on its 200 dma of 7,964. The Nasdaq is beyond hopeless at 2,037 and will be in big trouble if it can’t hold 2,025 (and I see no indication that it will). There is a lot of tech reporting this week and God help us all if it goes badly.

Projections will trump actual earnings this week so be careful of any headline numbers you see but I think we are in a no win situation as weak outlooks will panic the markets while strong numbers will panic the Fed who will then panic the markets.

There is a rumor that Iran may take a deal and a statement from Isreal that they will not be moving in ground forces (YET) so oil is plunging this morning and we will get to see if it holds $76 but I don’t expect oil pumpers to go down without a fight. There is still a glut of actual crude stocks and without an actual disruption in supply there will be hell to pay on the back end of this run-up.

We should be about maxed out on fear premium for oil and gold and now we need to see if one of the dozen pending disasters that are bewing around the world turn into an actual crisis to justify the rocketing commodity prices.

The CPI reprort comes out on Wednesday and how can inflation not be up on $76 oil? This quarter has had the highest sustained oil prices ever, averaging more than 10% above last quarter. If just 10% of that increase found its way into the economy then the CPI should be over 2.5% which will reignite Fed fever.

Another fly in the ointment this week may be the SEC filing formal charges against companies regarding the options scandal. I am starting to embrace the conspiracy theory that big money was short tech long-term over Sarbanes-Oxley and that the destruction of tech has been engineered to cover the lower than expected impact of options expensing we had last quarter. It’s very cynical but the timing fits like a glove (attn. Johnny Cochran!). There are now 400 companies being questioned with about 60 looking like real targets so far.


MCD had some great same store sales numbers, up about 5% and they raised guidance for the second quarter so expect good performance from them. If the market is going to turn, they should be one of the first to recover. Of course this was a stellar call from 6/29 when I said:

Now that opposition to MCD‘s dopey China strategy has played out (see 6/20 post), we can get back to concentrating on the fact that this is a company that has $20Bn in revenues worldwide with a 15% net profit that has just spun off the year’s best IPO. The $32.50s are being given away at .50.


MAT did not disappoint me with a very strong earnings report and the Aug $15s should do well today regardless of the market but if the NYSE continues down I will take the profits and run.

My other earnings pick from Friday, CBH gave a nice report but nothing thrilling. Citibank’s mediocre performance will stop this one from working as people fear the banking sector.

APPL reports on Wednesday and Piper jumped the gun with a positive outlook that should arrest the drop at around $52 which is a shame because I wanted to buy the $52.50s this morning… Apples chart is horrifyingly ugly though and I will not pay any sort of premium in a sector where funds are fleeing at an astounding pace. If Apple misses we may get to see how low the tech sector can really go.

PD says “You think that’s overpaying? We’ll show you overpaying!” as they up their bid for Faconbridge to $55ish, about 40% higher than the double FAL had already acheived over last year’s price. Look for PD to get slammed today. Perspective: PD is a $16Bn company with a p/e of 10 that is buying Inco, which is a $13Bn company with a p/e of 27 that is buying FAL, which is a $20Bn company with a p/e of 18…

I’m keeping my eye on TEVA which is getting slammed worse than most as it is an Isreali based company. These guys have always been a takeover candidate and I think $28-30 is a real floor for these guys.

GOOG is out Thursday so that will be very exciting and could also be a tech killer or savior.

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