Thursday, May 17, 2007

My Head is Spinning







To call it merger mania would be an understatement. I guess this is what you get when you combine liquidity with fiction. I have read a lot of books on investing through my lifetime but I have to admit, liquidity was not something I was taught to follow. Sounds a lot to me like an excuse rather than a reason but hey as they say on Wall Street, "we don't pay you to think son, we pay you to sell !" So, Warburg Pincus wants Bausch and Lomb, Cerberus wants Chrysler, and now BCE, the list goes on. Fogive me skepticism but when lifelong car men can't make it work, what makes John Snow, Dan Quayle, et al think they can. Oh yeah, hubris. Almost forgot about that. Now this is the same Cerberus that purchased ResCap from GM and Option One of the subprime mess not too long ago. This from CNN Money, "In Cerberus's defense, "no one when they entered into the deal would have known where nonprime loans would be today," says Brad Rubin, an automotive trading specialist at BNP Paribas. And it's not as if the $23.5 billion private-equity firm didn't vet the deal. The GMAC deal went through a stringent diligence process, the most intense I've ever seen," says Tim Price, the senior operations manager of Cerberus. He says that more than 85 of the roughly 275 Cerberus employees pored over GMAC's books, and that "watching the number of people we had looking at the deal was like watching honeybees on a flower." Maybe they upped the colony numbers on the Chrysler deal.
I noticed Warren Buffett recently announce his stakes in Union Pacific(chart top right) and Norfolk Southern. Not exactly bargain basement priced based on the chart, but Warren definitely gets the benefit of the doubt.

Richard Russell recently through in the towel and went bullish on the Dow Theory, back in late April the big 3 Dow industrials, transports, and utilites all broke out. No problem there except doesn't factor in the Nasdaq and you can slice it any way you want but when the Naz is not leading, ya better watch out !!
The Saudi market more formally called the Tadawul All Share Index (chart top middle) has absolutely tanked since peaking north of 20,000 back in early 2006 to the current 7500 level. I should think that this does not bode well for our markets and is in the least not exactly a vote of confidence by the locals (who by the way are always smarter in any market) in the situation over there. What I find strange is the lack of coverage of this situation by the media over here.
Jumping over to crude it looks like an inverted head and shoulders on the weekly chart(top left) with head being the Jan 07 low. I would feel a lot better to see it take out 67 on the upside. I am a believer in peak oil and its attendant consequences. Cantarell is in decline, Saudi reserves are questionable as are Irans and demand in China is on the rise. Matt Simmons book Twilight in the Desert is a great read on the subject as is Samsam Bakhtiari's writings, He is formerly with the Iranian National oil company. Thats it for today.
Good trading to you all.

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