China just upped their GDP estimates by $300Bn, roughly the size of Turkey’s entire economy! It seems they were undercounting their service sector so the Chinese economy is 20% bigger than was previously thought. This places China as the World’s 4th largest economy but growing at a blistering pace.
Expect this information to put pressure on materials markets as all of Asia (and Australia) remain in growth mode.
Even with a robust economy, the Nikkei lost its nerve last night and gave up 300 pts so I have grave concern about today’s session in the states as well.
Europe is not doing so hot with an EU survey showing that the continent’s competitiveness is expected to lag behind the rest of the world through the end of the decade.
The dollar continues to drop so there will be no relief on the price of oil but anything can happen on inventory day.
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The gold poker game is on in full force and, as predicted way back on 11/22 (“Metallica Rules), the Arabs just lost a great big pile of chips. Although we called the pullback, I was surprised at the height they took it to before pulling the carpet out! Gold is down from $540 to $515 in just 3 days as the Asian markets have followed through with the relentless American selling.
Copper is still going up, which is strange since copper and gold often come out of the same mines. I also came across an item in Australia suggesting that gold output will be off quite a bit for the next few years so my long-term outlook on gold is still strong but I am leery about calling a bottom as $540 came as a bit of a surprise. Obviously, $500 is a bit of a psychological barrier but the 200 dma is way down at $450 so it is possible that we may see $475ish before the market looks oversold.
If you are in on NEM Jan ’07 $45s, the trade is still good as long as you sold the Jan calls, look to buy them out if they lose 75% of their value so we will have the flexibility to get out or sell down a level.
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LEH’s numbers may not have been good enough to rechallenge the high of $133 but it will be a nice buy if it pulls back to $120.
BA got a huge order from Quantis, which will propel it to new highs today. This was a nice pick on 12/3 back when the stock was $69.
CHK, a TOTD pick from way back at $30 on the 8th, is still a good buy at $33, especially if there is a pullback on gas that brings it back to $32. If you are in on the April $27.50, you are up 20%. Place a tight stop on this in case of an inventory surprise or sell the Jan $35 for $1.20, another 20% so we can get paid to ride out the data with a cap of 60% on the upside.
PKS will be taking a tumble as they tried to auction off the business and nobody showed up to bid on it. If Disney can’t get Wall Street’s attention then these guys are doomed, expect this stock to revisit $6 real soon. This is a $600M company with $2Bn in debt and accelerating losses. I like the Jan $7.50 puts for .60 (a .25 premium).
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GENZ is almost a buy, this company does not get the respect it deserves with 5x ’04s profits on 20% more revenues. Perhaps that is because Yahoo lists their p/e at 104, because it is trailing, while the company actually will earn over $1.60 per share for an actual p/e of 45. You need to be careful about trailing p/e’s as they are still reflecting ’04 numbers even though ’05 is close to done for most companies.
As the stock has climbed from $60 to $72 since July, insider selling has dropped off significantly and funds have been pouring money into this stock, especially on the dips. As a volatile company, the stock has a lot of short interest which peaked in November. There was a lot of buying of Jan $80 calls yesterday for .55 (just after earnings) but I think we have a few days to think about this one.
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BCRX did not have good enough news at their conference to break the stock up so it looks like it was a good move to sell the Jan $15 calls. Although the stock is up .28 since last Monday’s pick, the call has dropped .05 as it loses time value.
WMT picked up 140 stores in Brazil, a well liked move as it only cost them $1Bn and gave them another country to take over in one fell swoop.
NTES is almost back to ’04 levels, even with a 50% increase in revenues and a 100% increase in profits. This is a China web play which makes it suspect but it’s hard to fight the tape on this stock. I would feel better if it retests $55 before I buy.
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Bear Stearns downgraded Apple to peer perform and that may be just what it needs to bounce off the $75 it has been resting on for the past 2 days. Lat time it was downgraded it only lost $2 over 4 days in early November before going on a $12 run. This being an option week it might be fun to take the $75 put for .80 but the premium is ridiculous for 3 days and it is likely to be worthless.
If I didn’t love Apple so much I would be tempted to play the Jan ’07 $85 puts for $17.60 (a $7.70 premium) and sell the Jan $75 put for $4.20, close to 25% in just a month. The Jan ’07 $65 calls are $20 ($10 premium) so you can see which way the sentiment is going while the Jan $75 calls are $4.60.
Apple did have one $10 drop last year after April’s split, which it obviously recovered from so I am going to stay away from this one but the pricing and movement on this stock are wild!
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HET, who I consider way undervalued, have partnered up for a spot in Singapor. If the stock goes back above $68 with strength, it should be in good shape for a nice run but it still may have to retest the 50 dma of $64 before turning around.
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TSO will not continue to underperform VLO so, depending on oil today, this stock may be a great value.
http://finance.yahoo.com/q/bc?s=TSO&t=2y&l=on&z=m&q=l&c=vlo
Looking at the 2 year chart you see an almost perfect match between the two but in the month of December, the two companies veered away from each other. TSO has a p/e of 9.3 and is growing just as fast as VLO, who’s p/e is 20% higher.
I think the entire difference between these two stock is the Cramer pump factor on VLO so the question is whether this stock is undervalued or is VLO overvalued?
With all oil stocks you have to bear in mind that crude has doubled since last year but is unlikely to hit $120 a barrel next year so all of these companies will slow in growth considerably.
