RealMoney's five bloggers dealt with the Fed announcement and the late-week selling in their inimitable style. Once again this weekend, we'd like to share the "Best of the Blogs" with TheStreet.com readers. These posts best captured the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day.
Now, let's take a look at
on General Motors,
on the selloff,
on how cash and Microsoft became his kings,
on London (exchanges) calling; and
on GDP's direction.
here for information on
where you can see all the blogs -- and reader's comments -- in real time.
Cramer's Blog: Get Behind GM's Push to Change
Originally published on 5/12/2006 10:46 AM EDT
People don't believe
can do it. The skeptics just won't relent. That Bank of America sell rating reiteration was beyond stupid.
Here's the deal: I think that when we look back at this era, Kirk Kerkorian's representative Jerome York is going to be perceived as the man who did it again. I know many people continued to bet against him when he came on board with
. Back when I was running my hedge fund, we had the opportunity to talk to the guy, and we covered our short and went long after the meeting. Then he figured out how to fix Chrysler and sold it for a fortune.
Now he is in the mix with GM. Don't forget, the cars aren't the problem; that's a
issue. GM's cars sell. The balance sheet, long a horror, is now good. The GMAC offload gives GM a chance to get a credit upgrade, which allows it to lower its borrowing costs.
Most important, that "No. 1" carmaker mantra is history. That's really important, because it is much better to be a large company that is profitable than to be the largest company that is losing money.
That's where York comes in. Chrysler and IBM were all about trying to be the largest, damn the profitability. York, no egomaniac, rightsized those firms. That's what's happening to GM.
I reiterate that when everyone else figures this stuff out, the stock will be at $40.
Rev Shark's Blog: Just an Old-Fashioned Selloff
Originally published on 05/12/2006 at 1:14 PM
In this difficult market, it is very important that you remind yourself that things are seldom as good or bad as they seem. With two days of ugly selling, the perma-bears who have been wrong about this market for many months are doing high fives and advising us that this is just the beginning of something much nastier. Their arguments, which were ignored for so long, are now taking on great relevance in their minds.
This is just a good old selloff. They occur several times a year and sometimes turn into downtrends that last for a while. You can easily convince yourself that we are in for a reversal like we had in 2000, or even a crash like we had in 1987, but that is a very long shot.
It is particularly important that you stay calm, raise some cash and not be overly anxious to bottom-fish. We should be defensive here, but don't get caught up in the dire predictions, which are going to become increasingly loud.
Cody Willard's Blog: Why Cash, Microsoft Became My Kings
Originally published on 05/12/2006 at 9:27 AM
The captain's in the chartroom, navigating on a star
Can't know where we're going 'cause he don't know where we are
Don't you think I don't know how to tell the time
Can't you see you can't sell me something that is mine.
-- Joe Walsh
It's not any prettier for the bulls this morning than it was last night. In fact, with the futures gapped lower, it's still a bull market in ugliness.
I'd been vocally cautious and raised tons of cash earlier this week, in large part because I decided that the commodity stocks and the parabolic moves that every single one of them that I can think of made in the last few weeks is a giant indicator of speculation run amok. Although I was obviously concerned about the potential for a major selloff across the board, I certainly had no idea that the market was about to tank like this or I would have gone ahead and gone full on to the short side.
We can and will go back and analyze what has happened this week, but this morning, the only thing that really matters is what an investor should do now. I wish I could tell you that I'm putting the cash back to work and that I'm back to being an unfettered bull. But I'm not.
I really don't like what's gone on in the commodity sector lately. I am going to officially start calling the nonprecious metals and their stocks a bubble. The many vocal, emotional and greedy bulls in the sector are no long relying on a healthy fundamental upcycle. That upcycle is about a half-decade old already and most of these stocks are up similar percentages to what the telecom and dot-com stocks were from 1996 to 2000.
If you don't think there's a bunch of Webvans (time to add to that one yet?!) and
in that batch of spiked commodity stocks, you need to get into cash and out of this market -- because there will be many commodity stocks that are going to be down substantially from their current levels, no matter what happens to this global economy and stock market over the next five years.
What are the commodity bulls who are sticking with their longs and/or buying more thinking? They typically think that, as Jim Rogers wrote in his excellent books, commodity cycles last longer than a decade and as long as 20 years or so. Of course, no commodity cycle has ever taken place in a completely networked developed world. You ever heard of Internet time and how it contracts the length of all cycles? There's no way this commodity cycle lasts 20 years with the entire developed world -- billions of people -- already cognizant of the cycle and changing their behavior as consumers and investors as the cycle develops.
The commodity bulls might also be using the old "greater fool" theory of investing.
Who are these guys who readily admit to a double-digit risk premium in the price of oil, but think that oil's a great investment? I guess they're hoping the multiple of that risk premium will keep running. We'll see, but I certainly believe that we'll look back at $75 oil ($50 oil -- whatever!) and wonder who these jokers were who told us that Internet traffic would more than fill up every fiber optic network built and that the supply of communications traffic would never meet demand. I mean, we'll wonder who these jokers were who are currently telling us that the supply of oil and gasoline will never meet demand.
All this takes me back to why I substantially sold down all my positions earlier this week.
Look, cycles aren't smooth. Overinvestment happens. Greed and fear are realities of human nature, and I believe there's a lot of greed out there in the commodities market. And although I'd been expecting a major rotation into tech (and I still believe that might happen), I decided that such a rotation can't possibly be expected to be smooth given the commodity bubble that's finally become overinflated in the past few months.
At some point soon, I expect to take a small amount of speculative capital and buy long-dated puts in the weakest and worst commodity stocks. But as always, I'll cross that bridge when I get to it.
In the meantime, though, cash (and
) remain my kings.
At the time of publication, the firm in which Willard is a partner was net long MSFT, although positions can change at any time and without notice.
Steve Smith's Blog: London Calling
Originally published on 05/12/2006 at 9:20 AM
It seems that U.S. exchanges just can't get enough of all things British.
We know that the
upped its stake in the
London Stock Exchange
to 25% the other day. And that the
has also claimed it is in discussion to merge, partner with or acquire the LSE, although I think raising the cost to the Nasdaq is the genuine interest.
Then on Thursday, the
International Securities Exchange
announced it listed and began trading index options on the FTSE 100. The options, which are structured as a "mini" contract that trades under the ticker UKX, are the first time that FTSE 100 options will be offered on a U.S. exchange. Likewise, this will be ISE's first international, cash-settled index options.
The press release doesn't mention the hours of trading, but I have a call into the ISE to see if these FTSE options will be trading while the London market is open, closed or both.
Tony Crescenzi's Blog: GDP Noses Upward
Originally published on 05/11/2006 at 10:13 AM
Business inventories rose 0.7% in March, two-tenths of a percentage point more than expected. The previous month was revised upward by 0.1%. These data raise the likelihood that GDP for the first quarter will be revised upward from the advance estimate of +4.8% to around 5.1%. Inventories remain extremely lean, however, as evidenced by the inventory-to-sales ratio, which held steady at 1.26 months of supply, just 0.01 above the all-time low.
The lean inventory situation has been one of the major positives for the U.S. economy. With demand for goods and services on the rise, companies must raise their output to avoid any loss of market share. This process requires that businesses raise worker hours via increased employment and lengthier workweeks. This translates into increased income growth, which has been the main fuel for the economic expansion.
Too often the inventory situation is overlooked as a factor in the economic situation. Many forget that inventory swings were once a major influence in economic cycles. The influence of inventory cycles remains very powerful.
George Moriarty is managing editor of RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;
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