I had to go back and check as Cramer is tooting his horn like he’s the only guy on the planet who made an aggressive market prediction for the year but what caught my attention is my statement on oil. $70 oil doesn’t really bother us??? That made me go back and check my charts and, wouldn’t you know it, the guy is right!
Oil was above $70 from April 1st last year through the middle of August and, while the Dow initially took it poorly and dropped about 1,000 points, it turned around in July with oil at $72.50 a barrel and we haven’t looked back since. There is still a relationship, our biggest market gains have come on pullbacks in energy pricing, but we’ve exported so much of our oil-intensive manufacturing overseas that the only effect we really have to worry about from high barrel prices is the one on the consumer and if the consumer cared they’d probably be conserving and there is certainly no sign of that!
Consumers in China are rioting over something they can’t have more of - Children! Urban Chinese are limited to one child while villagers can have two IF the first child is a girl (must be so wonderful for womens’ self esteem..). Interestingly it is the villagers that are rioting as residents of Guanxi attacked government offices after officials imposed heavy fines on families who had too many children. "The fine ($1,300) is too heavy because the annual income of the villagers was only 1,000 yuan (about $130). It is too much for people to bear," said Lu Wenhua, a town resident.
What are you willing to do "to promote economic development"?
Despite the brouhaha, where government officials and villagers threw rocks at each other until the riot squad showed up to restore calm, the mainland markets closed up another 1% this morning but the Hang Seng pulled back half a point on mild concerns over China’s many efforts to reign in growth this week. The Nikkei had another big day and the rest of Asia was happy, generally cruising along at all-time highs.
Europe is mixed ahead of our open but GSK is dragging down the FTSE and an Italian air-traffic AND flight attendant strike cancelled hundreds of flights so it’s a rough day over there. VOD, who just bought Indian telco Hutchison for $11Bn, rolled out $45 handsets for sale in Africa and India. "The cost of handsets is probably the most significant single barrier for people wanting mobile usage in many parts of the world," Mr. Schulte-Bockum said. "Every 10-pence reduction in cost means that thousands of people can afford a phone."
Vodafone plans on selling "one to two million" of these phones in the next 12 months so we will be looking to pick up NOK (we already have MOT) on any dip as this will have very little real impact on 1.1Bn in worldwide handset sales. The phones will use IFX chips but I doubt the revenues are sexy enough to move the needle on Infineon’s $10Bn top line.
Our casino shares (WYNN, LVS) should do very well as Kerkorian aimed to leverage his 56% stake in MGM and force an asset sale. It’s too bad I forgot this May 2nd comment: "MGM is just a good company in general and may be ready to move soon. I’m hoping LVS hits so I take out my putter but, if they blow it, I will pick up MGM on a bigger sell-off." Even yesterday, at 1:52 I said: "MGM still tanking, BYD still on top - very strange stuff." If this trick sounds familiar - it’s pretty much the game plan he used with GM but he has a little more control here.
Mr. Kerkorian’s trading pattern lately may explain the rise in GME, GMT and IGM stock and I’ll think about picking up shares of GMR, SGMS, GMKT, SIGM and any other stock with "GM" in the ticker as I’ve heard Alzheimer’s patients do tend to fixate…
We’ll all be fixating on the S&P again today as we make another attempt to close over 1,527, now just 2 points away. Our CSCO had a busy morning of releases including some very interesting new retail systems that should remind people of the possibilities that abound in technology stocks.
Let’s watch the FTSE and make sure they hold 6,600, London still leads the other EU indexes to a large extent. A Dow drop below 13,500 will likely be the leading sign of the party being over but the SOX are likely to be first out the door if they can’t hold 490.
Oil must stop going up if we are to gain solid footing at these levels, as I noted above, oil doesn’t really bother us as long as a 1,000-point correction doesn’t bother you so let’s hope we can keep it below $70 this year. David Fry sees a real dollar recovery in progress and that would be great but I’m not going to count on it as the dollar has hurt us so many times before:
Still, 2 weeks is right in-line with my predicted pullback in oil so let’s tell all our friends that this time things will be different and, although we know he’s a bad currency, the dollar has been with us for so many years it just doesn’t feel right keeping our accounts somewhere else - it’s a big world out there but American investors are unique in their unswerving loyalty to the currency next door.
I’ve got a good feeling about today - let’s not blow it!