Just Another Manic Monday

This week we'll get a chance to see what happens to your leaps when a stock comes out of bankruptcy.

We've been buying an selling DALRQ (soon to be DAL) Jan $2.50s since 12/22 and have done quite well as they bounced from our nickel buys to as much as .30 but have flatlined at .05 since early February when we lost interest.  There's still 62 left in the LTP, worth a whopping $310 and people often ask me about buying bankrupt stocks so this will be an intereresting exercise for the week!  This leaves NWACQ as the last airline operating in bankruptcy.

We have a busy busy data week ahead of us so it's time for the famous Briefing.com chart:

Today's topspin will be applied by the Chicago PMI, which I think will be BTE as should be/better be Construction Spending at 10.  After tomorrow's ISM, the rest of the Data is pretty much noise other than Factory Orders, as long as there are no shockers in the group.  

Judging from where all the money's coming from, it's a lot more important what Europe thinks about our economy than what we think but I think buying US equities should be a no brainer for Europeans.  The dollar is possibly at a low so a rebounding dollar would buffer a good percentage of the losses they market may hand them, especially if the market declines on Fed tightening or a run in rates that would boost dollar demand.  Should the dollar continue to fall, US equities  (especially Blue Chips) should rise just like any other commodity to offset the dollar losses. 

Picking up an International giant like IBM who pays a 2% dividend and is buying back 10% of their shares with a forward p/e of 13.5 has got to seem REALLY attractive to someone who sees the company as costing just 6 Euros ($10) more than it did last April ($75).  We got out of our May $95s last week but I'm liking the Jan '09 $110s at $7.70 and we'll be selling calls against it later in the week.  This week (assuming we keep going) we will be adding several of these conglomerates to the LTP.

China's Central Bank raised reserve requirements for the 7th time in 12 months, trying to keep a lid on inflation and speculation even as the Shanghai Stock Exchange zooms on to new highs. "The past two years of experience in China has shown that [reserve-ratio] changes are an ineffective policy tool to control monetary expansion," Hong Liang, a Hong Kong-based Goldman Sachs economist, said in a research note after the increase was announced. Such ratio increases are "simply not binding on banks' capabilities to lend," Ms. Liang said.  Traders apparently agree as this move garnered just a 1% drop in the Hang Seng today, barely a flinch ahead of  a week-long holiday.

Other Asian indices were flat ahead of the holidays and Chalco (China Aluminum Corp) IPO'd with a 230% on-day gain as it joins the rank of "Duh" stocks we talked about last week that can be bought based soley on their names or missions.  Another Duh, Capital Land, Asia's largest property developer reported a 400% increase in Q1 profits over last year but that disappointed investors who thought they should do better (imagine how they would feel about BZH!).

While US brokers don't like to mention it the Japanese brokerages are heavy into commodities, with earnings skyrocketing over there but MTU warns of a slowdown ahead "warning its earnings this fiscal year will slip due to lower coal prices, heavier investment costs and fewer gains from sales of equities."

Very unfortunately for us, our ISE $50 caller will be very happy this morning as the Deutsche Boerse may be making a $68 per share offer for that exchange.  Luckily we have the Jan $45s with a $2.10 basis so we won't get hurt but I wish I would have bought out that caller for .40 on Friday!  This should throw our ICE's back in play (plenty of room on those) and also means we need to get out of our CME puts, just to be safe!  NYX may make a nice mo play this morning, remind me in comments…

The ABN deal gets messier by the second but merger mania continues unabated in Europe as E is forking over $4.8Bn (just 3.4Bn Europs) to buy some E&P assets from D.  That works out to $18.40 a barrel in case anyone cares about what oil is really worth to the people in the industry.  Meanwhile ENI (which is the name of E but not their symbol) had an gain but a miss supplying electricity to South America as their huge hydroelectric project runs into environmental concerns.  TI picked up $5.6Bn on their deal so it's a typical Monday as we wrap up another $100Bn-plus month of deal.

We need a happy Europe as my theory for the week is that the shuttered Asian markets will force Euros to flow across the Atlantic so let's watch the EU closely as either Japan or China is closed thru Wednesday and both will be down Thursday and Friday:

Don't forget Asia had a big pre-holiday sell-off but it's still up to our Transports and the SOX, who got a mixed report as March demand increased while prices paid per bit decreased.  Once again, for the 42nd consecutive year, Moore's law baffles analysts who can't figure out what Semiconductor manufacturers actually do for a living.

Also confusing analysts is the fact that the US is not the center of the Universe (or even this planet) anymore as US sales are down 10.6% while sales in Asia were up 8.1% and sales in Europe and Japan were up about 4.5%.  Does that sound bad to you.  Perhaps, but if we dig just a tiny bit deeper we see that US sales are just $3.4Bn while Japan alone is $3.95Bn and the rest of Asia is $9.66Bn.  Even Europe has passed us in manufacturing electronics for the first time, buying $3.39Bn worth of semiconductors.

Let's focus on what's important, DRAM unit sales went UP 16% but prices dipped 20% (thank you Mr. Moore).  DRAM is not an end product, it's a thing they put in stuff – I reiterate my BUYBUYBUY on BBY!  Here's Happy Trading's Chart of the Day as we watch how the SOX take the news today:

I'm inspired to write a Phil's Law, which will state that if you stop buying so much gas they will stop charging you $3 for it but I think it's called supply and demand.  We, as a nation, have no self control but if occurred to people that, rather than cutting down on spending at the mall to pay for our gas that, if we cut down on our trips to the mall, we could spend more when we get there – then we could make some progress. 

Of course it takes leadership to change the habits of the people and, sadly, we have none but that is changing fast as non-energy companies are starting to shift millions of dollars away from Republicans and giving them to (gasp) the Democrats who are now the lesser of two evils for fiscal conservatives.

Dick Cheney's favorite commodity got a nice boost over $66 on the Saudi Terror news last week and we'll see if they can hold $65 for the week.  Gold ran out of gas at $698 but took a sharp bounce off the 50 dma at $670 so we'll see if that holds but it would take something crazy, like a dollar recovery, to drop gold below that mark.

I can pretty much guarantee an interesting week but if we can't break out on Thursday and Friday I'm going to start selling in May and going away!