Davis's Thursday Outlook

We’re not off to a very good start even though there was a drop in jobless claims this morning. Retail numbers were, as predicted, pretty bad and here’s an excellent chart from the WSJ that gives us an overview of the results. We still have many to hear from but (CC) down 11.4% in same-store sales is nasty to say the least.

(TM) didn’t have any sales problems as global sales went up 6% in 2007, which offset a very weak number in Japan (outside of Japan, sales were up 10%) and the Nikkei took that news poorly and dropped another 211 points, back below 14,500 by 112 points and looking fairly unhealthy. The Hang Seng fell 384 points in what still looks like an orderly correction as long as they can keep consolidating above 26,000 but 1,230 is just a bad afternoon away in the Chinese markets so let’s keep a close eye on them.

Toyota will have competition from Tata this year as that company unveils a $2,500 car that gets 50 miles per gallon and oil bulls are focused on more cars being sold but in a recessionary environment they should focus on these cars (and Nissan (NSANY), Ford (F), Volkswagen (VLKAY) and Renault will all be offering similar cars) REPLACING old gas guzzlers as it’s cheaper to buy this car and cut $100/month fuel consumption in half than to keep driving existing vehicles. This is just another stage of permanent demand destruction as OPEC and speculators reap what they have sown in 6 years of gluttony.

The ECB and BOE kept their rates steady, which should help the dollar out a bit and pull back oil and gold for the moment (unless our Fed drops another half point, as expected) and European stocks are falling by about half a point on our awful retail data after getting off to a good start.

Our markets are pulling back a bit in pre-market trading and oil is falling hard. This is a good time to pick up more (SU) Feb $105 puts for about $3, as they just announced higher production numbers and will pop at the open, as well as current $90 puts at $1 as we work into a strangle with the $90 calls when they hit $1. C & MER are out begging for foreign capital and SLM needs $30Bn to get out of their hole as this administration oversees the largest wholesale transfer of US assets to foreign nations since the Reagan/Bush years only this time it’s not real estate, which stays here no matter who owns it, but our banking system that is being turned over. Long-term, if you remove the Financials from the US markets, what the heck do we have left?