Weekend Edition
The Best of The S&A Digest
June 7, 2008
Dan Ferris' Lehman short is getting some serious media coverage... The New York Times ran a story headlined "Lehman Fights Insurgent Investor," positioning the bank as a helpless victim of David Einhorn, who is short Lehman via his hedge fund Greenlight Capital. And another Wall Street Journal article reported the bank is feverishly buying back its own shares...
Could it be a vote of confidence by Lehman's management... or a desperate attempt to stop the bleeding? Lehman shares are down 63% from their February 2007 peak. Extreme Value readers are up more than 20% on their position. Click here to learn more about Extreme Value.
Computer giant Dell's shares jumped 8% after reporting better-than-expected numbers. The company saw huge growth in Brazil, Russia, India, and China (aka the "BRICs") accounting for 9% of overall sales. China led the way with 58% revenue growth over last year.
"Buy GM," Barron's exclaims. "No other car company is running down the green highway as fast as GM." I've never seen a "green highway." But I have seen GM's balance sheet. The article neglects to mention one supremely important fact to equity buyers: The company is extremely unlikely to ever earn enough selling cars to cover the interest on its more than $30 billion in debt. Of course, General Motors buys lots of advertising from Dow Jones. Maybe someone "forgot" to look at the balance sheet.
Toyota, the world's largest car company, is considering downgrading its U.S. sales forecast for pickup trucks and other big vehicles. GM's U.S. market share is expected to fall below 20% this month, its lowest in history. And Ford will start producing the Fiesta, a compact car available outside the U.S., in its Mexican truck-manufacturing plants. Also Cerberus, the private-equity firm, sold "significantly" more than half of its equity in Chrysler, which it bought last year.
And Barron's says buy GM...
This has got to be a housing bottom of some sort... San Diego-based Michael Crews Development is offering "buy one get one free" homes. If you buy one Royal View Estate home in San Pasqual Valley starting at $1.6 million, you get a 2,000 square foot home in Escondido for free. According to one Michael Crews employee, "It's our way of dealing with current market conditions to move some inventory... It's a straight-up legit deal; no prices have been increased, there are no hidden costs."
Billionaire hedge-fund manager George Soros told U.S. lawmakers that there's "a bubble in the making" in oil and other commodities. Soros says institutions buying commodity index funds have driven prices to exorbitant levels. From a draft of the speech:
I find commodity index buying eerily reminiscent of a similar craze for portfolio insurance which led to the stock market crash of 1987. In both cases, the institutions are piling in on one side of the market and they have sufficient weight to unbalance it. If the trend were reversed and the institutions as a group headed for the exit as they did in 1987 there would be a crash.
Hedge-fund managers and speculators have reduced bullish oil bets by 80% since last July as crude prices top $135 a barrel. Net long positions fell to 25,867 contracts on the New York Mercantile Exchange in May from a record 127,491 on July 31, 2007.
The New York Times reported on Cheniere Energy (LNG): "Only a month after Cheniere Energy inaugurated its $1.4 billion liquefied natural gas terminal [in coastal Louisiana], an empty supertanker sat in its berth with no place to go while workers painted empty storage tanks..."
A few years ago, we wrote that if you held a contest for the worst business plan imaginable, Cheniere would win, hands down. The company planned to profit by importing natural gas via tankers. This might make sense for countries like Japan, which has no native hydrocarbons. But the U.S. is the world's second-largest producer of natural gas. With LNG's share price at more than $30, we predicted it would go to zero. It's almost there...
Here's the final Jeopardy question from an episode this week... "In 1951, this company whose origins date back to 1876 became the first U.S. company to have 1 million shareholders." All three contestants answered incorrectly. Anyone know the answer (without Googling it)?
So far this year, Jeff Clark's S&A Short Report readers have made 87% shorting a tech company, 65% selling UltraShort Oil & Gas (DUG) puts, and several more triple- and double-digit gains. If you read the Short Report, you're making lots of money.
In fact, because this service is performing so well, we're going to double the price at midnight on Monday... But Growth Stock Wire readers can get in before the hike. Click here to learn how.
Regards,
S&A Research
The S&A Digest is written by Porter Stansberry, Dan Ferris, and Sean Goldsmith.
