OptionPundit

Tag: GM

  • GM Doesn’t Need Money

    AP reports that General Motor’s (GM) CFO says they don’t need $2billions as cost cutting is bearing fruits. Quite interesting, and possibly a good sign for GM’s survival. But I think more than cost cutting, they need to have cutting edge car models and this cutting edge doesn’t mean high tech, but the models that will fit to the pockets and life style of the consumers of tomorrow. It’s not going to be the same world as it was few years back, and before oil reaches to the moon again (i don’t know when), they need to be ahead in the fuel efficient and possibly electric car models and streamline the supply chains. Net, a good news is a good news.

    S&P lowered General Electric (GE) long term rating one notch to AA+ from AAA with a stable outlook. They think GE’s capital is under increasing pressure that will result in rising credit losses. Interesting, but, guess what, the stock is up almost +10%.

    FSYS, AKS and DDUP Puts are active. TYC and DNA Calls are active.

    CAT covered call example that I shared in the free trade section is up +10.9% (as my account uses portfolio margining) and for account without margining it is up +4.5%.

    Have fun, markets are being released from deeply oversold levels. As I mentioned earlier, watch-out for-

    Coming back to Dow, the short term buy signal expects it to move further up, and once it crosses 7,286 (round it off to 7,300), the low that Dow registered on Oct 9, 2002, the next logical resistance level will be 7,470. We need to see if Bulls has what is takes to penetrate that level with sufficient degree of confidence as demonstrated by volume.

    Trade profitable, Trade Carefully, OP

  • Auto Bailout, China and Japan

    The news is not getting better, rather gloomier day after day (which is BTW also one of the contrarian indicator of bottoming markets). According to Wall Street Journal, investors pulled out record amounts $72 billion from stock funds overall in October alone.

    One of the hallmarks of the long market downturns in the 1930s and the 1970s has returned. Rank-and-file investors are losing faith in stocks. In the grinding bear markets of the past, huge stock losses left individual investors feeling burned. Failures of once-trusted firms and institutions further sapped their confidence. Many disenchanted investors stayed away from the stock market, holding back gains for a decade or more. Today’s investors, too, are surveying a stock-market collapse and a wave of Wall Street failures and scandals.

    Alongside housing companies and retailers Auto industry is also suffering badly. GM and Ford are not alone in that battle. Toyota Motor Corp (TM) forecasts a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen in what it said was an emergency unprecedented in its 70-year history. Tata Motors (TTM), the Indian owner of Jaguar Land Rover, has agreed to inject “tens of millions” of pounds into the British car company to prevent an immediate cash flow crisis, while the government continues to consider the case for a taxpayer-funded bail-out.

    China is trying very hard to reduce the extent of deflation. Its Fed equivalent authority cut interest rates for the fifth time in three months to support the world’s fourth-biggest economy after trade growth collapsed because of recessions in the U.S., Europe and Japan. This Christmas, Chinese Toy Industry is having one of the worst impact having increased only 3.7% , 16.7% lower vs comparable period last year.

    World’s 2nd largest economy is experiencing deepening crisis. Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts. Exports fell 26.7 percent from a year earlier. That was more than the 22.3 percent decline estimated by economists and the sharpest since comparable data were made available in 1980.

    Just a few months ago, OIL/Russia was flying high, the confidence was rock solid and folks were talking Oil at $200/barrel, oops, Russian oligarchs are lining up for $78 billion of Kremlin loans to survive the credit squeeze, handing Prime Minister Vladimir Putin the opportunity to increase government control of the nation’s biggest companies.

    Even the residential property market’s woos are not yet done, now U.S. Big property developers are seeking their Own Bailout and are asking to be included in a new $200 billion loan program as a surge in commercial mortgages comes due. For commercial real estate market outlook, download the report here.

    My short term indicators have triggered a short term sell, but markets have been remarkably stable amidst all the gloomy news from around the world.

    Trade Carefully, Trade Profitably, OP