Monday, December 18, 2006

12/18/2006 Morning Market Comment

As noted last night, until takeovers start becoming fire sale take-unders, these corporate marriages point to potential value that's locked up in the peers and competitors who aren't being acquired. Quality companies continue to go for decent premiums and that's a big pro on the list of pros and cons for buying stocks. The perma bears tick off a dozen fairly ominous reasons for why the end of the world as we know it will happen by tomorrow at 6:52 p.m., but so far no dice on the end of the world. I have a neutral stance listed on my block WRT to the stock market, which means I haven't been adding to long term fund holdings tied to the U.S. market, and remain allocated at 20% U.S. stocks for now. Neutral doesn't mean I think the market is going to crash tomorrow, or the next day. One of these days, I'll go into my long term portfolio allocations, but I haven't even had a cup of coffee yet and don't want to get into that entire subject this morning.

Caremark is up about 10% on word of the Express Scripts' offer. Biomet is being taken out by a private equity group including affiliates of Goldman Sach Capital, KKR and Blackstone. That's nearly a 30% premium to when the company announced that it was exploring strategic alternatives last April. Harrah's is up about 3% on word that Texas Pacific and Apollo are set to strike a deal. Realology is up 21% on a buyout by Apollo, though we wonder if that's the last word on that deal.

No doubt the air may be a little thin for some at this altitude of Dow 12,400+ which could lead to continued choppiness. Low volatility, low put to call has kept some with a wary eye on things - though it has been interesting to observe that while $VIX has slid below 10 the last few sessions it has scooted back above 10 by the end of the session indicating that there isn't a complete lack of complacency out there.

The Financial Times managed to get hold of a memo written by Tony Hayward, the CEO of exploration and production at BP. Hayward who may be in the running to succeed Lord Browne, pulls no punches concerning BPs corporate culture and cost cutting. I find this stuff to be fascinating (click here). I'd love to see a BP organogram and the number of layers between Lord Browne, or even Mr. Hayward and the average bloke with a great idea at, say, the Texas City refinery or a platform on the North Sea. Good luck, Mr. Hayward.

Gold is looking shabby again... to short or not to short, that is the question. I should jump right on this, as the charts are flashing a move down to $600, and the low this morning already below Friday's low. But with black boxes, central banks, COT, Schmot, this, that and the other thing - the gold market is super manipulated, I've got a bullish long term bias - so I'm just going to sit and wait until I can go long again and buy. has a nifty feature on gold today... view the video in the UPPER right column of the blog.

These next few weeks are going to be light trading weeks for me. For much of today, I'll be at the 1 mln+ square foot Palisades shopping mall in West Nyack, NY. First stop will be to the Apple store where the must have item for my daughter is an iPod. My sons are already taken care of with a Playstation3 sitting right under my desk here in a box, which they've seen for weeks and have no idea. That will be fun next Monday morning.

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