Wednesday, 30 June 2010

some initial thoughts on a busy day..

Its a relatively busy trading day today, given its the end to a rather eventful month and quarter, so BR only has a few comments to make and note, even if it may be slight repetition;

$BP - the Raven has been looking at where he'd want to short this stock again today as he's now flat. News flow on capping the spill and its potential cost seems to be a little quieter, and there is now more speculation on how much its assets are worth. With bullish case EV's of around $200bn you get to a price of 345p or $31.05 (for the US ADR = 6 UK shares *1.5055). He's not a chicken entrail reader, sorry, chartist, but he thinks a pull back up to 382p could happen in the short term, depending on what the short interest is in the stock. So from 365-385p range the Raven will be looking to scale into a short again.

The Raven read quite a good speculative piece today about China by TeamMacroMan; it highlights how hard it is to make any sense of the any of the official numbers, but that if you look at sentiment for financial conditions, its a pretty ugly picture, and that fits with the Hugh Hendry, Chanos type hypothesis that China is a rather large bubble on the cusp of bursting, or perhaps it has already and we're just waiting to hear the pop in the West.

just a quick look at the stocks residual chart pattern is interesting (ie. a chart of the stock performance adjusted for a beta hedge).

Its interesting to the Raven because it appears to have missed out on the rerating that $SNDK has been given over the last few months, conference call yesterday was apparently weak, and the seem pretty cautious about their outlook. It does have an absolutely cheap motivation, but doesn't appear to be going anywhere in a hurry.
The Raven will have a little review of the UK macro position tomorrow when things are quiet, however if one doesn't wish to boil one's blood then perhaps not reading the Guardian is a good idea. Given this "newspaper" supported the LibDems in the election and is "left-wing" it feels justified in running a headline claiming that the Budget is set to destroy over 1 MILLION JOBS! SECRET TREASURY INFORMATION... PANIC, PANIC, THATCHER DUN IT, CUTS, PAIN, HYSTERIA.

All that headline articles such as this show is a distinct amount of prejudice, poor journalism and a lack of understanding of the underlying economics. Several facts that are neglected;
1) nominal cash terms there will be an increase in government spending over the period of the parliament
2) the same report that said that 1.3mm jobs will be lost, also said that it will CREATE 2.5mm jobs, so if the Guardian had chosen it could have reported 1.2mm jobs CREATED BY NEW BUDGET.
Ironic that the last government justified wild economic forecasts with the response that they "didn't want to talk the country down", yet in opposition they use half the facts to create a deliberately misleading picture and use that to undermine consumer confidence.

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