Filed under: Good news, Consumer experience, Economic data

The highly improbable may be happening. U.S. gasoline consumption may be arcing downward, The Wall Street Journal reported Monday (subscription required).

Confronted with near-record gasoline prices, an anemic-growth U.S. economy, and rising food costs, among other living expense increases, U.S. gasoline consumption has fallen about 1.1% in the past six weeks, on a year-over-year basis, The Journal reported Monday, citing U.S. Government data. Further, excluding Hurricane Katrina in 2005, which destroyed energy facilities, the six-week drop in demand is the longest drop in 16 years.

If the ‘mini’ trend strengthens or at least holds on a year-over-year basis, experts say it will limit gasoline price increases that typically occur during the summer driving season - - a period when U.S. gasoline consumption historically increases and oil companies increase gasoline prices to take advantage of that higher demand.

Continue reading U.S. drivers cut back on gasoline consumption

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Filed under: Options

Borders (NYSE:BGP) is recently down 29 cents to $8.97, near 12-year low. BGP is expected to report Q4 EPS on March 20. Alex Brown has a Hold rating on BGP. BGP call option volume of 407 contracts compares to put volume of 5,297 contracts. BGP March 10 straddle is priced at $1.90. BGP April option implied volatility of 77 is above its 26-week average of 59 according to Track Data, suggesting hedging for downside price risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Filed under: Private equity, Blackstone Group L.P (BX)

With the severe credit crunch, the private equity world has come to a screeching halt. Sure, there is some dealmaking - but nothing like it was just a year ago.

So, what are the private equity folks doing? Well, they are raising billions of dollars. This is according to a piece in the FT.com (subscription required).

Although, the typical investors in private equity funds - such as pension funds - are actually losing their appetites. There are concerns about lower returns as well as larger concentrations of portfolio risk. Just look at the recent write-downs at KKR.

Yet, the top-tier private equity firms are still having little trouble raising money. TPG plans to snag $15 billion and Apollo should also get the same amount. And, as for Bain and Blackstone(NYSE: BX), it looks like they’ll get $20 billion apiece.

OK, so where is the big money coming from? Yep, it’s the sovereign wealth funds. With bulging coffers - especially from oil - the money needs to go somewhere. And, with lower valuations and distressed companies, it could be spot-on timing for those with a long-term perspective.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: MBIA Inc (MBI)

Well-respected value investor Martin Whitman has invested 2.51% of his famed Third Avenue Value Fun in shares of bond-insurer MBIA (NYSE: MBI), putting him at odds with another great value investor, William Ackman, who has been a vocal critic of the company. Whitman’s position in the company amounts to 1,600,497 shares — a substantial drop from the two million shares he owned when he wrote his third quarter letter to shareholders.

The 82-year old Whitman devoted a substantial chunk of the letter to defending his MBIA stake, saying that the company appears to be “very well financed” — a claim William Ackman has disputed vigorously.

Whitman added that his fund “would probably not lose money if … MBIA were to go into run-off rather than remain going concerns. Run-off, i.e., liquidation, simply is not a likely outcome, however.”

Continue reading Marty Whitman still comfortable with MBIA holding

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Filed under: Forecasts, Consumer experience, Economic data, Commodities, Oil, Housing, Federal Reserve, Recession

Over the past six or eight months we have heard more and more chatter about the dreaded “R” word. The dreaded “R” word being recession, and depending on who you listen to, you have either been laughing at the possibility of America sliding into a recession, or you have been preparing for the inevitable.

Well, now, trusted billionaire Warren Buffett has come out and stated that America is already “essentially” in a recession. Buffett is basing his stance on numbers he has seen from his retail business that show a significant slow down in spending. While he has stated that we have basically already entered into recessionary times, he stopped short of predicting just how bad things would get.

While we may not be technically in a recession period, according to Buffett, we are in the middle of a commonsense recession. Not only does he see retail spending on the decline, but also pointed to the fact that an untold millions of Americans have had the misfortune of watching their homes shrink in value, a scenario that has yet to reverse.

Continue reading According to Buffett, America is already in a recession

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Filed under: Goldcorp Inc (GG), Commodities

Another day, another story on commodities hitting new highs. Yep, oil has done it again today, and so has that most famous metal, gold.

According to a Marketwatch piece, gold has reached a record delivery price of $992 for April delivery (as of this writing). Pretty darn amazing. Of course, the more amazing — or, perhaps, the more sad — thing is that I’ve been ignoring the gold bull run. And I don’t feel good about it whatsoever. The problem is, though, that commodity prices can be quite risky, especially for individual investors. Putting money to work in gold at this point could definitely be a gamble, especially as there are other bets out there that might be more worthy in this environment (to me, at least); for example, I am bullish on certain mortgage real estate investment trusts because of the trend of the Fed; I currently own MFA (NYSE: MFA), for example. (Yes, I did end up finding an acceptable entry point.)

Looking at the one-year chart of GLD (NYSE: GLD), the tracking stock for gold value, it is nearly implausible to deny that gold is in a definitive uptrend. And gold-related stocks such as Goldcorp (NYSE: GG) are following the commodity’s movement. The old adage about trends being friends rings pretty true here. But, I just don’t know if I want to do any inflation-hedging right now, and I don’t know if I want to chase gold at these levels. At the very least, I would wait for a pullback to the 50-day moving average before even considering allocating some of the glittery asset to my portfolio. If you are an individual investor and you do decide that you can’t take it anymore, that you want in on this ride, certainly make sure that you have enough cash on hand after your first purchase to improve your cost basis if it becomes necessary.

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Filed under: Initial public offerings

Something that’s been missing this year? Initial public offerings (IPOs).

In fact, we are seeing only a handful of new filings - and lots of withdrawals of registrations. According to a piece in Reuters, there have been about $21.4 billion in withdrawals so far this year (which involves 61 companies).

Simply put, investors are in fear-mode. Hey, even Warren Buffett is not so optimistic about things.

Yet, the fact remains that many companies still need financing. So, we may see an uptick in later stage venture and hedge fund financings. And yes, expect to see companies looking to sell out (which is not easy - in light of the soft M&A market).

True, we will still some interesting offerings, such as the Visa deal. But such deals will primarily be the exception.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Politics, Presidential elections

Okay, I’m filing this under “things you get to do if you have more money than God.”

On Thursday, Mike Bloomberg, mad genius, obscenely rich guy, and mayor of New York, announced that he would not be pursuing an independent Presidential run in 2008. The next day, he followed that up with a statement that he is considering backing another Presidential candidate (”Backing,” in this context, translates into “roughly a billion dollars in campaign funding”). While everyone has assumed that he is planning on helping one of the three current front-runners, his vague wording opens up another possibility.

You see, when Bloomberg announced that he had decided not to run, he stated that an independent candidate “could win the race,” but that it wouldn’t be him. This makes perfect sense: the relatively poor showing of previous independents, coupled with the fact that being perceived as a “spoiler” tends to make one incredibly unpopular, convinced the big B that he didn’t want to wreck his career on a failed candidacy. However, just because he doesn’t want to be 2008’s Ralph Nader doesn’t mean that he is willing to completely turn his back on the White House. After all, why should he risk his neck when there are so many other people willing to put themselves out there?

Continue reading Help wanted: Crazy billionaire seeks Presidential figurehead

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Filed under: Competitive strategy, Wal-Mart (WMT), Berkshire Hathaway (BRK.A), China, International Business Machines (IBM), Reliance Steel and Aluminum (RS), Valero Energy (VLO), Huaneng Power Intl ADS (HNP), Bargain stocks, Chasing Value, Commodities, Anglo Amer ADR (AAUK), S and P 500, DJIA, Stocks to Buy, Newcastle Investment (NCT), Raytheon Company (RTN), Best Stocks for 2008, Bunge Ltd. (BG), Loews Corporation (LTR), NASDAQ

Two months into the year and investors’ true ‘metal’ was tested, and mine more than most. February showed signs of improvement over January, but the last week ended hopes of any rally. The last day of January saw a 370 point drop in the Dow and February’s last trading day closed with similar results, down 315 points.

The soft stock market did display many points worth noting. The Dow Jones Industrial Average was about break even for the month, indicating investors were showing some signs of support for large cap stocks, prompted in part by news of increased profits at Wal-Mart (NYSE: WMT) and share buy-backs at IBM Corp (NYSE: IBM).

I cannot say the same for the other major indices, NASDAQ Composite Index and Standard & Poor’s 500 Index, which dropped significantly last month.

Some of my picks also sagged a little more, although not as much, while two turned into positive territory. In January, only Raytheon Co. (NYSE: RTN), the high tech, defense contractor, was up. In February, the weak dollar and inflation concerns boosted Anglo American plc (ADR) and Reliance Steel & Aluminum (NYSE: RS) — two commodity plays.

Continue reading Chasing Value: February review — 8 stocks for 2008 — testing my ‘metal’

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Filed under: Good news, Magazines, Options, Technical Analysis

Constellation Energy Group, Inc. (NYSE: CEG) shares are have been rallying today following a report in this week’s Barron’s that indicated a positive outlook on the stock. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CEG.

After hitting a one-year low of $76.40 in March, the stock has risen most of the past year to hit a one-year high of $107.97 in January. CEG opened this morning at $88.42. So far today the stock has hit a low of $88.42 and a high of $91.08. As of 1:00, CEG is trading at $90.42, up $2.07 (2.3%). The chart for CEG looks bearish and steady while S&P gives CEG a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $80 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade will make a 9.9% return in just one and a half months as long as CEG is above $80 at April expiration. Constellation would have to fall by more than 11% before we would start to lose money.

CEG hasn’t been below $80 since August and has shown support around $86 recently. This trade could be risky if the economic slowdown continues, but even if that happens, this position could be protected by the support the stock might find just below $80, which is where CEG bottomed out in the late summer.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in CEG.

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