Market Comments for March 6, 2008
1) Oil jumped $5 to $104.65 and Natural Gas to $9.90 on an unexpected drop in weekly inventory figures. The chairman of Exxon (XOM) made an interesting comment today. He said that 85% of the growth of oil demand last year was in countries that have artificial price controls and subsidies on oil like China. Demand will fall off a lot if these countries start making consumers pay market prices.
2) There is a rumor that Lennar Homes is in trouble because they have the worst debt/equity ratio of the listed home builders and also carry large off balance sheet items. If they don't, then they will be the best performing stock. You always want to buy the most leveraged player in a rebound.
3) The futures market is saying that there is a 50% chance that the Fed will cut interest rates 0.75% in two weeks and 100% chance that they will cut 0.50%.?? I personally think that inflation fears will limit the Fed to a 0.25% and that the market will tank.
4) 5% of al of the home mortgages in the US are now either late on their payments or in foreclosure.
5) Citibank (C) stock has dropped to a new low of $22 and they are now asking Abu Dhabi for another chunk of money which last bought at $30/share. C is rumored to be planning 37,000 lay offs this year, 10% of its total work force.
THOUGHT OF THE DAY
Once the credit write downs and the share price melt downs finish they will be followed by write ups and melt ups as the credit markets reopen. There may even be an overlap. You want to be long there.