Interdum stultus opportuna loquitur...

Thursday, December 08, 2005

USRant: Kirk's Ploy Unmasked, OPEC Rocks Oil...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

When Kirk Kerkorian was first touted as GM's saviour (because having bought bucketloads of the stock over the years, he then went and announced that he was going to buy another bucketload at a 5% premium to the prevailing price - i.e., at $31), I declared that he was a nutcase. I also declared that if that was his idea of an 'investment' he was senile (or getting a diviorce and trying to reduce the size of his wealth base to spite his wife). 

But the final point I made was this: 

However dopey the decision is, it doesn't matter - Yanks will follow a celebrity investor that they've never heard of, so long as CNBC can refer to the celebrity as a "billionaire investor".

And guess what? The closing spurt in the Dow yesterday was causd by... the announcement that Kirk Kerkorian is trying to get a seat on the GM board. 

God spare us from idiots - but it sent the shorts scurrying for cover. If you chart short interest in GM, you will notice that it exploded upwards at prices below $25 and ricked up a norch at prices under $23... in other words, people started shorting GM after it became widely known as a basket case. Those same semi-sophisticated news-hound nufnuffs were the ones bailing from short positions yesterday, and I will bet that smart money was ready to re-initiate shorts during the spurt.

Now maybe it's just me, but frankly any time that a corporate board is prepared to offer a seat to a guy who made n investment decision so bad that he's now a laughing stock, is not a board whose stock in which you want to be invested. And of course the first thing that crossed people's minds was not 'Blockbuster' - because most people are morons.

You will remember Blockbuster - when 'billionaire investor' Carl Icahn forced the board to pay $300 million by way of a special copensatory dividend (I can't quite recall the details), thus cementing Blockbuster's demise. If you were Kirk Kerkorian and you just did your balls on a $1 billion stake in GM (losing $300 mill in about three months), why would you want to be on the board? Simple, silly... to get your hands on a chunk of the company's cash.

By today, people had woken up to what Kerkorian's strategy is likely to entail, and they were as vigorous in dumping the stock today as they were in buying it in the last hour yesterday. 

A huge runup in the Energy complex didn't help stock prices - the primary driver was remarks made by Venezuela about how OPEC supply should now be brought back to more normal (cartelised) levels since the effects of Hurricane Katrina on the oil output from the Gulf of Mexico have now abated.

That'll teach the CIA to try to foment a series of coups against Hugo Chavez - now they will probably just have him knocked off the way they did to Salvador Allende and other oil-rich democratically-elected leaders that they didn't like.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations.

  • a $12billion, overnight repurchase with $11.404billion in T-backed collateral undertaken at a 10.6 basis point premium to the Fed Funds Rate (FFR); and
  • a $6billion, 14-day repurchase entirely in T-backed collateral, undertaken at a 15.5 basis point premium to the Fed Funds Rate (FFR).
So any blather about the possibility of the Fed staying its hand at the next FOMC meeting can be shelved right now - they will hike another 25 bps.

Major US Indices

The Dow Jones Industrial Average declined 55.79 points (0.52%), closing out the day at 10755.12 points. The index hit an intraday high of 10847.25 (10850-ish) just before 11:30 a.m. NY time, and then reversed - hard - to fall as low as 10729.67 (10725-ish) just after 2:15 p.m. NY time. 

Within the blue-chip index, 5 stocks rose, the biggest gainers being United Technology (UTX, +0.91% to $55.30) and Exxon Mobil (XOM, +0.68% to $59.42), which accounted for 4 Dow points between them. Losers in the Dow numbered 24 and were led by General Motors (GM, -4.51% to $22.00) and Merck (MRK, -2.01% to $29.68), with these two stocks contributing -13 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 357m shares to 42m.

The broader S&P500 declined 1.53 points (0.12%), to 1255.84. Within the index, gainers numbered 218, while 261 S&P500 stocks fell for the day. Volume was tilted 1.8:1 in favour of the losers with 1276.21 million units traded in the losers as compared with 725.19 million traded in the winners .

Over at Times Square, the Nasdaq Composite lost 5.55 points (0.25%), to close at 2246.46, while larger-cap technology issues fared worse with the Nasdaq100 losing 11.45 points (0.67%), to end at 1685.59 points. Within the tech benchmark, gainers numbered 25, while 71 Nasdaq100 stocks fell for the day. Volume was tilted 2.1:1 in favour of the losers with 627.62 million traded in the losers compared to 304.21 million in the winners .

NYSE Volume was in line with its recent average, with 2.18 billion shares changing hands, while Nasdaq Volume was chunky, with 1.96 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10755.12-55.79-0.52%
Nasdaq Composite2246.46-5.55-0.25%
NYSE Volume2.18bn--
Nasdaq Volume1.96bn--


My 9-stock "bellwethers" group fell by an average of 1.01%

  • General Electric (GE) -$0.22 (0.62%) to $35.35;
  • Citigroup (C) -$0.20 (0.41%) to $48.50;
  • Wal Mart (WMT) -$0.05 (0.1%) to $47.70;
  • I.B.M. (IBM) -$1.22 (1.38%) to $87.50;
  • Intel (INTC) -$0.45 (1.72%) to $25.70;
  • Cisco Systems (CSCO) -$0.14 (0.79%) to $17.64;
  • eBay (EBAY) -$0.86 (1.94%) to $43.47;
  • Fannie Mae (FNM) -$0.32 (0.68%) to $47.04; and
  • Freddie Mac (FRE) -$0.89 (1.41%) to $62.01.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1839 to 1443 for a single-day A/D reading of 396; Nasdaq gainers trumped losers by 1559 to 1483. The 10-day moving average of the A/D line rose to 0.6 on the NYSE, while the 10dma of the Nasdaq A/D rose to -101.9.

NYSE advancing volume exceeded volume in decliners by 1099.4 to 1033.6 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1155 to 773.7 million shares.

138 NYSE-listed stocks rose to new 52-week highs, and 80 posted fresh 52-week lows, while on the Nasdaq there were 106 stocks that hit new 52-week highs, and 38 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1099.35773.68
Declining Volume (m)1033.631155.04
New Highs138106
New Lows8038

Market Sentiment Statistics
CBOE Volatility Index12.210.030.25%
CBOE Nasdaq Volatility Index15.440.322.12%
Equity Put-Call Ratio0.950.2739.71%
10-day PCR0.5800%
SPX-VIX Ratio102.9-0.38-0.37%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 4.7 bps to 4.672%.

The middle of the yield curve was broadly higher: five year yields fell to 4.364%, and ten-year yields fell to 4.464%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps wider at 14.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 65.0 bps for 10-year AAA, and 93.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly wider with the AAA-A spread on 20-years widening 8.0 bps to 19.0 basis points, and the 10-year AAA-A spread 5.0 bps wider at 3.0 bps.

Treasury Yields
UST 13wk (yld)3.845-0.085-2.16%
UST 2Y (yld)4.4100%
UST 5Y (yld)4.364-0.08-1.8%
UST 10Y (yld)4.464-0.053-1.17%
UST 30Y (yld)4.672-0.047-1%

The Banks Index slid 0.26 points (0.25%), ending the day at 103.15; within the index,

  • Fifth Third Bancorp (FITB) -$0.38 (0.96%) to $39.04;
  • Mellon Financial (MEL) -$0.25 (0.75%) to $33.03;
  • Golden West Financial (GDW) -$0.49 (0.75%) to $65.26;
  • BB&T Corp (BBT) -$0.28 (0.67%) to $41.78; and
  • Comerica (CMA) -$0.32 (0.56%) to $56.96.

The Broker-dealer Index dipped 0.57 points (0.29%), closing at 194.15; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) -$0.15 (0.99%) to $14.98;
  • Goldman Sachs (GS) -$1.25 (0.96%) to $128.64;
  • Legg Mason (LM) -$1.11 (0.92%) to $120.06;
  • Jeffries Group (JEF) -$0.30 (0.68%) to $44.00; and
  • Raymond James (RJF) -$0.22 (0.59%) to $37.04.

The Philadelphia SOX (Semiconductor) index dipped 8.49 points (1.71%), ending the day at 488.41

  • Micron Technology (MU) -$0.53 (3.88%) to $13.13;
  • Advanced Micro Devices (AMD) -$1.02 (3.82%) to $25.65;
  • Maxim Integrated (MXIM) -$1.47 (3.75%) to $37.77;
  • Texas Instruments (TXN) -$0.93 (2.77%) to $32.63; and
  • Novellus Systems (NVLS) -$0.60 (2.36%) to $24.79.

Gold & Silver Markets

Gold rose another $4.90 (0.95%) to close at $522.70 per ounce.

The Gold Bugs Index gained 3.97 points (1.52%), to 264.86

  • Harmony Gold (HMY) +$0.41 (3.21%) to $13.18;
  • Goldcorp (GG) +$0.62 (3%) to $21.30;
  • Randgold Resources (GOLD) +$0.47 (2.88%) to $16.77;
  • Gold Fields (GFI) +$0.46 (2.83%) to $16.74; and
  • Agnico Eagle (AEM) +$0.40 (2.33%) to $17.57.

Silver rose $0.11 (1.27%) to close at $8.99 per ounce. 

The Gold and Silver Index (XAU) gained 2.2 points (1.8%), at 124.18 points.

  • Harmony Gold (HMY) +$0.41 (3.21%) to $13.18;
  • Goldcorp (GG) +$0.62 (3%) to $21.30;
  • Gold Fields (GFI) +$0.46 (2.83%) to $16.74; and
  • Anglogold Ashanti (AU) +$1.17 (2.54%) to $47.15.
Precious Metals and Indices
PHLX Gold and Silver Index124.182.21.8%
AMEX Gold BUGS Index264.863.971.52%

Oil Market

Oil was firmer, rising by $1.45 per barrel, closing at $60.66 per barrel as part of a broadly-based surge in the Energy complex.  Part of the reason was that Venezuela's Oil Minister made noises about how OPEC ought to 'defend' the price of oil - i.e., that the Yanks had better get used to oil up above the $50 mark (the Nigerians proposed the $50 target for the OPEC basket recently).

The Oil and Gas Index (XOI) advanced 15.04 points (1.49%), at 1023.95

  • Kerr Mcgee (KMG) +$2.02 (2.2%) to $93.70;
  • TotalFinaElf S.A. (TOT) +$2.60 (2.05%) to $129.42; and
  • BP (BP) +$1.09 (1.62%) to $68.42.

The Oil service stocks (OSX) Index gained 6.32 points (3.44%), ending the day at 190.22

  • Tidewater (TDW) +$2.35 (5.03%) to $49.10;
  • National Oilwells/Varco (NOV) +$2.85 (4.5%) to $66.21; and
  • Nabors Industries (NBR) +$3.25 (4.47%) to $75.98.
Energy Complex
Reuters CRB344.694.241.25%
Crude Oil Light Sweet60.661.452.45%
Heating Oil1.78320.052.68%
Natural Gas14.9941.299.45%
Unleaded Gas1.62660.063.76%
AMEX Oil Index1023.9515.041.49%
Oil Service Index190.226.323.44%

Currency Markets

USD Exchange Rates
US Dollar Index91.24-0.65-0.71%
Australian Dollar0.74950.00230.31%
Swiss Franc1.3001-0.0136-1.04%
Canadian Dollar0.8630.00010.01%