GM & Oil Slam Equities!

by Larry Levin


What goes up must come down. After yesterday's dizzying rally from the low, reality set in: nothing had changed! Oil raced to a new record high and could reach $150-barrel tomorrow. The other news today was a downgrade of GM with a twist; the analyst said GM is approaching bankruptcy.

Shares of General Motors Corp. plummeted today to close below $10 for the first time in more than half a century - closing down 15.1%! Investors are worried about the company's cash needs and speculation about a possible bankruptcy protection filing down the road due to a Merrill Lynch downgrade.

Merrill analyst John Murphy said, We believe that the pressure on the industry is extreme enough that it is putting the entire automotive value chain at risk, including even once obvious stalwarts. Large factors are becoming increasingly obvious including declining volumes, deteriorating mix and rising raw materials that are conspiring to compress profits.

You have all undoubtedly heard a portfolio manager or know-it-all relative tell you that you should never time the market, right? The reasons why they say this must be due to the analyst's own historical inaccuracy and your neighbor's inability to think for himself, which is why he actually follows the advice of these idiots. Once again, an analyst proves to us that his timing of the market is simply pathetic. Now that GM's stock is trading below $10-share you are supposed to sell it. Said another way, GM's market cap has fallen 76.8% in only 8-months, and now he recommends a sell. Well done Mr. Murphy, well done.

Is there a way to downgrade an analyst?

In another sign of a looming recession, Americans have said they are cutting back on burnt, bitter flavored, overpriced coffee. Starbucks is closing 600 stores and laying off 12,000 employees. Standard & Poor's Ratings Services placed Starbucks Corp.'s ratings, including its BBB+ long-term corporate credit rating, on CreditWatch with negative implications today.

The trend spares nobody when one chooses to fight it. From Bloomberg we learn today that billionaire Warren Buffett's Berkshire Hathaway Inc. has slumped 20% since December. If we peg Mr. Buffett's net worth at $56-billion, he must be down $11.2-billion in six short months. Ouch. Oh well, easy come easy go. If he wants a challenge, maybe he should buy GM with his pocket change.

Real Time Trading Signals*for

Trade Date: 7/2/08

E-Mini S&P Trades*
(before fees and commissions):

1) B/away buy @ 8:30am at 1290.00 = b/e (1 lot)

2) MD rev buy @ 10:30am at 1283.00 = -1.25 (1 lot)

3) OTF sell @ 1:25pm at 1281.50 = -1.75 (1 lot)

4) Algorithm trades (3)...combined total...-3.25


E-Mini Russell Trades*
(before fees and commissions):

1) Buy @ 10:00am at 685.2 = -.9 (1 lot)

2) Buy @ 12:02pm at 677.2 = -.7 (1 lot)...-$160


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