(Note there will be a short, free, conference call early next week. Comments will be concise and you will be able to comment or ask questions…stay tuned! TB)
…today is a very special day as it marks his 36th anniversary in the wacky world of investments. It is even more special today because IF employment data is strong and stocks rally he will have to concede (although he still contends it is a countertrend rally. But what is even more eerie is that the selloff in stocks began on Dec. 26, his birthday, and since then the Dow is down 6.6%, so if it ends here it would be doubly bad for TB. Look: from the high on 12/26 of 14198 the Dow dove 11.7% which is of itself strange for end of year and the first month of the new year…then it bottomed on 1/22 and is up 5.7% since then.
The overnight equity markets are rallying although the dollar is doing little and Gold is up $12(?). As for bonds they are selling off (TB suspects the rally yesterday in both stocks and bonds was due to spec accounts putting on both trades simultaneously then depending on the employment data they will take off the losing leg…what say you? The rally is due to two things: the first is an unsolicited bid by Microsoft, announced at 3:30am EST, of Yahoo! for $44.6B so immediately the shorts covered as it closed at a six year low yesterday. MSFT said they approached Yahoo! a year ago but were rebuffed. So this time they made it clear they want a thorough consideration (note that Yahoo! director Terry Semel announced he was stepping down yesterday). The offer is an option of cash or .95 of MSFT shares. YHOO spiked 60% in overnight markets, while MSFT is down $2. Consider the following:
*MSFT is up 6.7% (8.1% with dividends reinvested, yield is 1.35%) over the past 12 mos.Since the 11/2/07 high of $37.50 though it is -12.7%.
*YHOO is down 32% over the past 12 months, no dividend, and down 43% since the 10/26/07 high and is now at a six year low.
It is obvious nothing will be done at this offering price and it will be bid up…that won’t be good for MSFT…meanwhile GOOG is -5% overnight. But the thinking is: wow! all stocks are CHEAP! Not!
So will this type of fervor be enough to rally the market? Look, it’s all about credit!
Of course we are overlooking that subprime lossses have risen to $146B…globally now as Europe has now joined the fray, and get this: JPMorgan Chase gave impoverished Erie Co. PA, $750,000 for new school buildings…all well and good but they failed to disclose to them that IF interest rates fell, rather than increased they would get a cash call…yep, that is Jamie Dimon’s bank and what they didn’t tell them according to transcripts was that they made $1 million in fees on the deal…more than the school district got!…in the past four years in Pennsylvania alone they piched at least 500 deals totalling $12 billion…you do the math but that would be $15B in fees! If this all sounds familiar to you it is because of those CDS that were sold to the little town in Norway TB wrote about…again…no mention of margin calls…ya have to love the integrity of bankers…forget the investment bankers we already knew about them!
Forgot to mention that Donald Ratajczak predicted that 18 months from now or whenever the economists finally get their act together they will put the start of the recession at Dec. 2007…TB agrees! Mainly because the early Thanksgiving produced another week of sales in November robbing from Dec. Who cares…whether it is official or not this is a recession and it will take a long time to get out of it. How can we with puny acts like the now $60B in the TAF auction or this phony stimulus package (along with the late checks due to the revised AMT levels). TB wouldn’t be so bearish if we, as individuals, hadn’t borrowed to the hilt for the past 25 years saying: it can’t happen here…well it is! Deal with it!
OH! OH! Payrolls just came out and they are DOWN 17,000 jobs in January…how they gonna explain that?…don’t worry, they’ll find a way!
Last night, TB heard Kudlow back on his Goldilocks rant AND predicting an 800 point rally on the Dow! Oh but there is more…money manager David Kotok trumped him by predicting a 1500 point rally: same old arguments…subprime is overdone…monoline insurers aren’t a problem as banks will bail them out…on the muni side only and THAT folks is not the problem…it is those insurance contracts on CDS!
You will never make a dime listening to these idiots..by the way the other panelists all disagreed, snickering! Like Dubya, TB dodged a bullet and was right on the payrolls so he doesn’t need to eat crow. IF. perchance, we rally it is the euphoria of MSFT/YHOO!
Have a great weekend and just step back from the markets for now…k?
TB
Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and in no way reflect the views of anyone other than himself. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. No fee…nothing to sell…merely observations of events in the marketplace offering a non-mainstream viewpoint…sometimes…usually? Hope you find it useful.
Copyright TBD Capital LLC February 1, 2008
