Earnings Thu - Fri & The Road Ahead

Well today was relatively uneventful in retrospect and it's been a quiet week overall for which I am thankful after the hectic past few weeks. Most of the market was simply on hold until the Fed cut; in general the charts for the indexes are looking better after today's rally. Amazingly, through all this at 1550 the S&P500 is only 25 points away from the yearly and all time high; that is only 1.6% away. With M3 growth now hidden from us by the powers that be, but with various reports indicating its running at 15 % annualized (whew!) and the Fed still injecting liquidity weekly (I heard $14 or was it $17 billion last week, I cannot even keep track, it is happening so regularly now) - this is no surprise from a supply/demand dynamic (see 'Buybacks are all the Rage'). And hence why its hard to really be a perma bear on this market when basic economics 101 dictates the market seems destined to go higher - when more money chases limited assets.

Everytime I think bearish thoughts about the market - I have to keep the above in mind. Stocks are supposed to be a leading indicator for the economy (6+ months out) so if you are to believe the market everything should be on good terms by April 2008. Or is more at play here? Whatever the case, it is what it is - all news is good news and there is too much money chasing too few assets. So if the market (which I define as S&P500 in a broad brush instead of the Dow) makes new highs, you just have to forget any downside hedging for the near term and get extremely bullish again. I'll be watching this 1575 level closely.

Fedex (FDX) is raising rates by 4.9% - the highest increase since 2001. This should bite into corporate profits, and a lot of people making a living off Ebay.
Procter & Gamble (PG) (see P&G Whacked by Inflation) is raising prices on 'consumables' by 5%, so you won't just be paying a lot more for groceries but typical household items too. This inflation, while scoffed at by government numbers, is real and either corporate profits have to suffer (which should be bad for the market) or consumers will have to suffer (which should be bad for the market). But again, nothing is bad for the market; not even potential stagflation?

I am not trying to pick little podunk companies to show my economic thesis is correct :) - this is one of the top 2 parcel delivery companies along with the biggest consumer brand in the USA showing real issues and real costs. The market many times ignores issues until a big round number is hit, so let's see what crude $100 brings. Could be tomorrow at this rate. At what price does it matter to the economy? Or is it already mattering to the economy but the supply/demand in the stock market is so weighted to the flood of money coming in, that the economy no longer 'matters'? Somehow? A new era of Paulnanke - a new paradigm?

Earnings on tap

Thursday
Agrium (AGU) - more fertilizer. We know it will be great - just a matter of how the market reacts - how great is good enough to keep moving these stocks.

Cameron International (CAM) - another in the line of oil service companies similar to Smith International (SII) - it has been interesting to see these stocks struggle of late even in the face of record crude.

Central European Media (CETV) - talk about a stock that got away from me. Had this one in a personal account over a year ago, got bored with its lack of movement and of course away it goes once I sold. One of the few ways to play capitalism hitting eastern Europe that is not somehow related to oil/energy.

Cleveland Cliffs (CLF) - an iron ore producer. Iron needed for steel. China gobbling up steel. You get the idea.

ExxonMobil (XOM) - I think they are some small energy outfit....

KBR (KBR) - a larger fund holding in infrastructure which I blogged about earlier today

Oceaneering International (OII) - another oil service play

Pride International (PDE) - this is the driller thats transforming from a mixed type of driller (land and sea) to deep sea - so far a mildly disappointing holding for the fund.

Tesoro (TSO) - one of the refiners - I am just blown away these guys are not raising prices as their margins compress in the face of such high crude prices.

Friday
Chevron (CVX) - another major.

*****
As an aside both Transocean (RIG) and GlobalSantaFe (GSF) reported outstanding quarters but the stock reaction for both has been quite muted. The action in these energy related names either is telegraphing something or have a lot of catching up to do with a world of $90+ crude. Whaetever the case in the near term, these 2 are going to create quite the powerhouse once merged. These companies are putting in 25-35% growth yet being valued at PE ratios of 12. If the market ever comes around to the thesis that these are turning into more secular plays, rather than cyclical since they have so much deep sea exposure - the stock prices could explode. Thus far this has not happened.

"They are saying there are multiple customers looking both for new construction and renewals of existing rigs beyond 2010," Mark Urness analyst with Calyon Securities, said. "There is unprecedented visibility," he said, referring to the outlook for higher-grade rigs.