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Random Thoughts: Cost Inflation, Crude and Microsoft Moves


The next two sessions should be all about posturing in front of the FOMC.


"China's Vice Minister suggested over the weekend that "Hi-tech listings overseas deprive China" and recommended a Nasdaq-style bourse be created so hi-tech firms would list on the Mainland. The point is: "Neither the Chinese government nor the people can share in the growth of these innovative firms". This is one of the main points behind the BIDU thesis. A mainland launch for many of these Chinese tech firms seems inevitable and logical...and bullish."

  • Isn't that Special? Kelloggs (K) CEO David Mackay is talking about the rising costs of commodities weighing on his earnings, as well as cost inflation "likely to remain high and volatile."

  • There are two ways for a company to address this---do nothing, and get whacked on margins, or pass the price increases through to the consumer, which Kelloggs is planning in a "broad based and global" manner. Hey, I didn't much like cereal in the first place. I'm more of an egg-white omelette guy.

  • Sigh. Ugh (finger down throat). Congrats to the Red Sox on winning the World Series.

  • Mitsubishi UFJ Financial Group, Japan's largest bank, said today that it will write down the value of its subprime related investments by as much as 30 bln Yen! 30 bln! Oh wait, that's only $260 million dollars. Whew, carry one.

  • I did a little video ditty for our friends at AOL last week. It's familiar fare to Minyans in the midst and yes-I know-lose the black sweater!

  • Crude continues to lift as the drillers continue to sift. Two thoughts. One, these stocks sure seem like they wanna trade lower. Two, nobody seems to talk about the "strain" on the consumer when stocks are higher and crude is higher. "Asset class deflation or dollar devaluation." Ya dig?

  • Keep Microsoft $32 on your radar as that's the level from which it broke out from. Past resistance is future support and, according to Technical Analysis 101, the proper entry point. Also remember that, if Mr. Softy gets there, there will likely be a reason, systemic or otherwise (which is why defined risk (under that zone) is a schmarty.

  • The way to build a growth company is by surrounding yourself with people who can themselves grow.

  • Absent nutty news, the next two sessions should be all about posturing in front of the FOMC, which is widely expected to slash rates (there are 70% odds that they snip 25 bips and a 20% chance that they slice 50 bips).

  • Either way, the tape is leaning against an accommodative Fed. The question remains 1) whether foreign holders of dollar-denominated assets share stateside enthusiasm and 2) whether this is the catalyst (and what happens if we fail on the heels of the Halloween treat).

  • $30 bln in write-offs so far by financial firms? I will toss out the following thought: $100 bln in write-offs, all told, by the time Baby New Year dances with a lamp shade on her head (granted, some of those admissions could come in January).

  • Still, the question is...would it matter? With conventional wisdom "kitchen sinking" these "one time events," we're left to wonder how many do-overs these firms will get.
  • Over in Tellsville, internals are flattish (slightly positive on the NYSE), the dollar is equally flattish (skewed the udder way), financials are mixed, the semis are trying to bounce (after being beaten with an ugly stick) and the Raiders, yes the Raiders, are that bad.

  • And finally, we're five weeks away from the mighty Minyan Festivus. If you haven't locked your spot to the Critter trot, please do so. This is our annual pilgrimage to do the right thang. (For a recap of last year's fete, please click here!).

Answers I Really Wanna Know…

  • Do you think the toughest nut to swallow is self-conscious?
  • Are we in drift mode until the FOMC announcement on Wednesday?
  • The Titans? Really?
  • What happens if the market trades lower after the rate cut?
  • Is it time to lose that black sweater?
  • Y'all see market breadth is flatter than a sat-on hat?
  • And the dollar again at multi-year lows?
  • Is this slippin finski (5%) in Yahoo a function of there not being weekend (takeover) news?
  • Yet, do you see the continued activity in Yahoo calls (including a customer buying 10,000 November 32.5-35 call spreads for .76 and the rolling of 20,000 Jan 35s to the Jan 40's)?

How do you shoot the devil in the back? What if you miss?

Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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