Cramer's Blog: GM News Drives a Short-Term ThesisOriginally published on 06/30/2006 at 9:41 AM Of the stocks I have been most vocal about for a trade on this site, the one that sticks in people's craws the most is General Motors ( GM). I have been talking this stock up hard since $20 and have received tons of grief about it, even though I have been right! Most of the grief comes from short-sellers who tell me that I don't understand the competitive dynamic or longer-term problems with GM. Understand that my positive view on the trade doesn't take in longer-term considerations. More important, the catalyst for my interest to begin with is Kirk Kerkorian's investment firm, Tracinda, and notably, the involvement of Tracinda's Jerry York, who turned around the allegedly hopeless situations of IBM and Chrysler. Longer term, it turns out that IBM and Chrysler had terrible problems. If you counseled longer-term fears, you were right. In the interim, though, you made a lot of money. As I look at GM this morning, with
Rev Shark's Blog: Fed Has Market on Pins and Needles
Originally published on 06/29/2006 at 9:06 AM "Ever notice that 'what the hell' is always the right decision?" -- Marilyn Monroe After what seems like weeks of waiting, we finally hear what the Fed is going to do about interest rates. The decisions are always important, but the one today has taken on particular significance due to the unusual amount of "jawboning" by the Fed and the intense focus by market participants lately on interest rates and inflation. There is little other news of importance affecting the global stock market right now. It is all about interest rates. The consensus opinion is that the Fed is going to say "what the hell," raise rates a quarter point yet again and tell us it will wait to see further data before it makes any decisions about what to do in the future. A Fed that is dependent on future data certainly seems like a good idea if you are trying to make the right decision, but from the market's perspective, it is preferable to have certainty. The market always wants clarity, because it makes it much easier to make investing decisions if you don't have to guess as much about the future. So if the Fed does what the majority thinks and raises rates and leaves the future murky, how will the market react? The good news is that the market has been in a sharp downtrend since the last interest rate decision. The market has been anticipating a continually hawkish Fed. The million-dollar question is, have we already priced in what most are anticipating? I think that we are close enough that there is a good chance that buyers will step up once the news is out. We might see some initial panic-sell on the news, but I would look for quick stabalization. A bounce might not last for long, but there should be something. The likelihood is that we will roll over again fairly soon since we will still be groping for clarity, but there should be some temporary relief. What if the Fed decides to surprise us with a half-point hike? Ultimately, that would probably be seen as a exclamation point putting at least a temporary end to rate hikes. Unless the Fed is truly panicked over inflation, it has to be concerned about the issue of over-tightening, and a half-point hike is very likely to be followed by a pause. The market is showing some early strength, which is probably due to relief that the Fed will be on the back burner shortly. It we run up too much before the decision, that is going to make things very tricky.
Cody Willard's Blog: What To Expect When Expectations Are High
Originally published on 6/27/2006 at 9:29 AM Earnings season is coming up, and it really should be a good one. The results from the second quarter are likely to be at least in line with expectations in most sectors. Tech, in particular, is likely to have have some stellar reports. We know from both Best Buy ( BBY) and Circuit City ( CC) that the consumer has kept right on spending on gadgets and tech even as housing and real estate have fully turned south. Although the bears have been promising a dead consumer since we came out of the tech and telecom and Internet depressions in 2002, it's this current set up that will really put the strength of the developed nations' consumers to the test. Let's keep it real for a moment and acknowledge how the Western Europeans are certainly big consumers too, even if their governments don't report that reality using the same metrics, hedonics and adjustments that we do. This is not a trivial call out either. Isn't it possible that the European consumer accelerates as the communications revolution drives globalized capitalism? As the markets have been trashed and now flounder along at much lower prices than had to be rationalized and justified just six weeks ago, there's a lot of angst about what we'll hear from these companies in regard to channel inventories and guidance. Investors and traders will really scrutinize the forward commentary from the high-momentum names such as Marvell ( MRVL) and SanDisk ( SNDK), and I expect a binary outcome to most of those reports -- either big pops or big crushes depending on whether inventories look clean or ugly. We've got a whole lot of crosscurrents to navigate as this Fed meeting on Thursday will indeed matter, if only because the hype surrounding it has created deeply entrenched expectations. I don't know how one would go about gaming what equity investors are expecting, but my sense is that most everyone seems to expect we'll rally once we get through this meeting. But color me skeptical about the near-term potential for a big rally after the meeting. That said, if the Fed doesn't raise or states explicitly that they'll stop raising after this bump, I'd probably start putting some money to work. Then again, we should certainly acknowledge yet another possibility. The multiples could continue to contract and it could turn out that whatever the primary root of this selloff, it has nothing to do with the issues everyone's blamed -- the Fed's stance, the companies' expectations for the second half of the year, etc. -- and that, simply put, the contraction will continue until it doesn't, regardless of potential so-called catalysts on the horizon. This remains a high-risk market and I remain high-risk averse.
Steven Smith's Blog: Palm, Strategies and Cheat SheetsOriginally published on 6/29/2006 at 2:00 PM Reader Satish requests more "equity option ideas in which you have confidence," specifically in Palm ( PALM) going into earnings tonight, and also "wishes there was a cheat sheet of strategies, how greeks behave with each strategy." First of all, confidence is overrated when it comes to option trading. My approach, especially in terms of the content of this blog, is to offer education rather than a tout sheet. That means I try to highlight situations that present opportunities and discuss a few strategies that I think make sense, while defining their risk/reward and the likely price behavior. For example
Tony Crescenzi's Blog: Bernanke Dons the Fed Cap -- At Last
Originally published on 6/29/2006 at 2:53 PM The Federal Reserve moved closer to ending its interest rate hikes today by both indicating that it felt that economic growth has begun to moderate, and by showing vigilance against what the Fed implicitly said was an unwelcome rise in core inflation. The statement is a success for Fed Chairman Ben Bernanke, who, after several missteps, has found his footing by delivering a balanced statement that should give him the flexibility to let the incoming data take center stage rather than the Fed's frequent public appearances. One of the more important distinctions between today's statement and the May 10 statement was the Fed's assessment of the economy. Whereas in May the Fed said that it felt that growth was "likely to moderate," today the Fed said that economic growth "is" moderating. There is a major difference between the two. If, as the Fed says, the economy has already begun to moderate, the Fed would more likely want to pause to wait and watch for the continued lagged effects of the factors it cited: housing, rate hikes and higher energy prices. Second, by acknowledging that core inflation had accelerated, the Fed more closely aligned itself with the views of the financial markets, which have become more fearful of inflation over the past few months. The use of the word "elevated," which was used to describe the recent data on core inflation, is the equivalent of "unwelcome," a word that the Fed has used in the past to describe its disdain with the inflation situation. By showing such displeasure, the Federal Reserve is showing that it engaged completely in the effort to solve the problem. This particular part of the statement is one in which we see Fed Chairman Bernanke now donning the Fed Chairman's clothing in ways he failed to until early June. This is good news for the markets. The Fed statement was also reassuring, just as Bernanke was on June 16 in a speech that helped the Dow to rally 200 points. The Fed admitted inflation had ticked up, but provided reasons why it would likely moderate, including via the Fed's own vigilance. P.S. Old editors never die either. They just take on new challenges. This will likely be my last post on TheStreet.com sites, at least for now. Good luck and thanks for reading.