The Nikkei went up another 258 pts today. Had I moved to Japan last week like I wanted to I could have caught a 1,000 point rally. All of Asia is up nicely (India is totally on fire) and Europe is flying up on the best manufacturing gains in 5 years.
Unfortunately, a busy world means some justification for high oil so we may have to wait yet another week before it turns down. Just to show you that Iran has a better sense of humor than you think, their “military exercises” that are being conducted in the Gulf this week are code named “High Prophet” which refers to both Allah as well as their expert ability to keep oil prices near $70 despite a global glut.
We are close to the same situation we had back on Feb 2nd (see “Oil’s Well That Ends Well?”) when we correctly predicted that traders were all “feared out” and the fundamentals would take over. That call made us a ton of money as oil dropped $10 pretty much from that day through the middle of the month.
http://stockcharts.com/gallery/?%24wtic
While on the one hand I would like oil to retest $70, giving us a neat triple top, a turn here could also begin a pattern of forming lower highs and lower lows that we need if we want to get oil back to the low $50s this year.
One sign I’ve been watching that should get enormous press but isn’t is the fact that our man Chavez is looking to sell oil for $50 a barrel. That’s right, one of the chief oil agitators, a man sitting on reserves that may equal Saudi Arabia (but will not allow inspectors to verify this) wants to sell long-term contracts for $50 oil right now! Why? Because it costs $40 a barrel to produce Venezualan oil and he sees the big drop coming and wants to maintain his margins. Will there be any takers?
OPEC is rushing over there next month to talk him out of it, expect Chavez to either move way up in the ranks or break with the cartel (what can I say, he’s a nut – it could go either way!).
It was good to hold our gold on Friday as it is right back over $590 but don’t forget that in the game of gold poker, the Americans often lead the downturn by cashing in their chips and $600 will be a major psychological barrier. Platinum was dragging down the metals on Friday and it bounced right back today as well.
Don’t get all sucked in by the markets today, we are still in a fund rebalancing week and things will get bought and sold for reasons we may never understand.
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In the weekend section I said Ice Age was a DWA film, it’s not but I still like the Sept $30s for $1.10.
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GM recovered a bit on a correct rumor that they were selling a majority stake in GMAC, a deal which will raise about $14Bn which should just about let them break even this year! Next year, they are deader than dead. $14Bn is $2Bn more than GM is worth, and a lot of people are BUY BUY BUYing this morning thinking there will be a dividend.
Make no mistake about it, this is an asset sale but they are a long, long way from covering the $300Bn in debt they have on the books! GMAC is not a non-performing asset either (+$3Bn out of -$10Bn in profits), so expect profit forecasts to be lowered once people regain their sanity. I am not dumping my puts, even though they may go worthless but I am fairly positive any upside reaction today will reverse once the dust clears.
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BVN declared a nice .72 dividend which makes their $24.69 current price even more attractive, you only need to own the stock through 4/20 to collect so I like owning the stock and collecting the 3% almost as much as I like the June $30s for .60.
Way back in November we noted that something was going on with AWGI when the stock was at $15 a share. A spate of insider buying and strange movement led us to conclude something was up but we dropped the ball on it because it is hard to get excited about the funeral business. Today it was announced that they are being acquired by Service Corp for $19 a share! I don’t want to be ghoulish but this now makes SCI a great long-term play at $7.80 as they now really dominate the industry (AWGI was #2) and catastophe now equals huge profits for them while the general mortality rate will only decline for rich people…
I don’t see how I can play CME at this level. It’s just too dangerous. BOT posted phenomenal numbers but will these record volumes last? Either way it’s a good sign for a general bull market.
PD has gotten away from us so if you don’t already have it, it’s too late and if you are sitting on it, be aware that this is an all-time high and more than 50% over last year’s high. This is what gold stocks should look like but don’t:
http://stockcharts.com/gallery/?pd
N is the best remaining metal play outside the gold patch but the $50 calls are too high at $1.75.
GPS got a Jefferies upgrade that might take it through $20 so the $20 calls are a nice play for .25 (apparently someone knew this on Friday and bought 2,000 of them!).
AAPL looks like it’s on the march which makes PLAY the way to backdoor it. It has been so beaten up lately that the May $25s are only .95.
IMCL got European approval on Erbitux for certain cancers. Aug $35s give us a long look for $3.30.
MOT is selling off it’s automotive unit (another sign to get out of autos!) so expect a pop in this today. I am always in MOT unless it’s way overbought as this is a $30 stock down the road. Right now I like the May $22.50s for $1.25.
